Agreement Relating to Noncompetition and Other Covenants - Goldman Sachs Group Inc.
AGREEMENT RELATING TO
NONCOMPETITION AND OTHER COVENANTS
AGREEMENT, dated as of May _____, 1999 (this 'Agreement'), by and
between The Goldman Sachs Group, Inc., a Delaware corporation ('GS Inc.'), on
its behalf and on behalf of its subsidiaries and affiliates (collectively with
GS Inc., and its and their predecessors and successors, the 'Firm'), and the
individual whose name appears at the end of this Agreement (the 'Executive').
WHEREAS, prior to the completion of the transactions contemplated
by the Plan of Incorporation (the 'Plan') of The Goldman Sachs Group, L.P.
('Group'), Executive was a Schedule II Limited Partner of Group; and
WHEREAS, as a Schedule II Limited Partner, Executive was subject
to certain requirements relating to competition, confidentiality, solicitation
and cooperation pursuant to the Memorandum of Agreement of Group; and
WHEREAS, in connection with Executive's participation in the
Plan, Executive has agreed to enter into an agreement with GS Inc., on its
behalf and on behalf of its subsidiaries and affiliates, in respect of certain
obligations, inter alia, to keep information concerning the Firm confidential,
not to engage in competitive activities, not to solicit the Firm's clients or
employees and to cooperate with the Firm in maintaining certain relationships
following the termination of Executive's employment.
NOW, THEREFORE, in consideration of the premises contained herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Executive and the Firm agree as follows:
1. Confidential Information. In the course of involvement in the
Firm's activities or otherwise, Executive has obtained or may obtain
confidential information concerning the Firm's businesses, strategies,
operations, financial affairs, organizational and personnel matters (including
information regarding any aspect of the Executive's tenure as a partner or an
employee of the Firm or of the termination of such partnership or employment),
policies, procedures and other non-public matters, or concerning those of third
parties. Such information ('Confidential Information') may have been or be
provided in written or electronic form or orally. In consideration of, and as a
condition to, continued access to Confidential Information, and without
prejudice to or limitation on any other confidentiality obligations imposed by
agreement or by law, Executive hereby undertakes to use and protect Confidential
Information in accordance with any restrictions placed on its use or disclosure.
Without limiting the foregoing, except as authorized by the Firm or as required
by law, Executive may not disclose or allow disclosure of any Confidential
Information, or of any information derived therefrom, in whatever form, to any
person unless such person is a director, officer, partner, employee,
attorney or agent of the Firm and, in Executive's reasonable good faith
judgment, has a need to know the Confidential Information or information derived
therefrom in furtherance of the business of the Firm. The foregoing obligations
will survive, and remain binding and enforceable notwithstanding, any
termination of Executive's employment and any settlement of the financial rights
and obligations arising from Executive's employment. Without limiting the
foregoing, the existence of, and any information concerning, any dispute between
Executive and the Firm shall constitute Confidential Information except that
Executive may disclose information concerning such dispute to the arbitrator or
court that is considering such dispute, or to Executive's legal counsel
(provided that such counsel agrees not to disclose any such information other
than as necessary to the prosecution or defense of the dispute).
2. Noncompetition. (a) In view of Executive's importance to the
Firm, Executive hereby agrees that the Firm would likely suffer significant harm
from Executive's competing with the Firm during Executive's Employment Period
(as defined in the employment agreement between Executive and GS Inc., dated the
date hereof (the 'Employment Agreement')) and for some period of time thereafter
or, if Executive has separated from the Firm on or prior to the date of
consummation of the initial public offering of the common stock of GS Inc. (the
'IPO Date'), for some time after the IPO Date. Accordingly, Executive hereby
agrees that Executive will not, without the written consent of GS Inc., during
the Employment Period, if any, and for twelve months following the Date of
(1) form, or acquire a 5% or greater equity ownership, voting or
profit participation interest in, any Competitive Enterprise; or
(2) associate (including, but not limited to, association as an
officer, employee, partner, director, consultant, agent or advisor) with
any Competitive Enterprise and in connection with such association
engage in, or directly or indirectly manage or supervise personnel
engaged in, any activity
(i) which is similar or substantially related to any
activity in which Executive was engaged, in whole or in part, at
(ii) for which Executive had direct or indirect
managerial or supervisory responsibility at the Firm, or
(iii) which calls for the application of the same or
similar specialized knowledge or skills as those utilized by
Executive in Executive's activities with the Firm,
at any time during the one-year period immediately prior to the Date of
Termination (or, in the case of an action taken during the Employment
Period, during the one-year period immediately prior to such action),
and, in any such case, irrespective of the purpose of the activity or
whether the activity is or was in furtherance of advisory, agency,
proprietary or fiduciary business of either the Firm or the Competitive
(By way of example only, this provision precludes an 'advisory'
investment banker from joining a leveraged-buyout firm or a research
analyst from becoming a proprietary trader or joining a hedge fund, in
each case without the written consent of GS Inc.)
(b) For purposes of this Agreement, a 'Competitive Enterprise' is
a business enterprise that (1) engages in any activity, or (2) owns or controls
a significant interest in any entity that engages in any activity, that, in
either case, competes anywhere with any activity in which the Firm is engaged.
The activities covered by the previous sentence include, without limitation,
financial services such as investment banking, public or private finance,
lending, financial advisory services, private investing (for anyone other than
Executive and members of Executive's family), merchant banking, asset or hedge
fund management, insurance or reinsurance underwriting or brokerage, property
management, or securities, futures, commodities, energy, derivatives or currency
brokerage, sales, lending, custody, clearance, settlement or trading.
(c) For purposes of this Agreement, 'Date of Termination' means
Executive's Date of Termination (as defined in the Employment Agreement) or, if
the Executive is not a party to an Employment Agreement, the IPO Date.
3. Nonsolicitation of Clients. (a) Executive hereby agrees that
during the Employment Period, if any, and for eighteen months following the Date
of Termination, Executive will not, in any manner, directly or indirectly, (1)
Solicit a Client to transact business with a Competitive Enterprise or to reduce
or refrain from doing any business with the Firm, or (2) interfere with or
damage (or attempt to interfere with or damage) any relationship between the
Firm and a Client.
(b) For purposes of this Agreement, the term 'Solicit' means any
direct or indirect communication of any kind whatsoever, regardless of by whom
initiated, inviting, advising, encouraging or requesting any person or entity,
in any manner, to take or refrain from taking any action.
(c) For purposes of this Agreement, the term 'Client' means any
client or prospective client of the Firm to whom Executive provided services, or
Executive transacted business, or whose identity became known to Executive in
connection with Executive's relationship with or employment by the Firm.
4. Nonsolicitation of Employees. Executive hereby agrees that
during the Employment Period, if any, and for eighteen months following the Date
of Termination, Executive will not, in any manner, directly or indirectly,
Solicit any person who is an employee of the Firm to resign from the Firm or to
apply for or accept employment with any Competitive Enterprise.
5. Transfer of Client Relationships. (a) During the Coverage
Period, Executive hereby agrees to take all actions and do all such things as
may be reasonably requested by the Firm from time to time to maintain for the
Firm the business, goodwill, and business relationships with any of the Firm's
Clients with whom Executive worked during the term of Executive's employment.
(b) For purposes of this Agreement, the term 'Coverage Period'
means, (1) if Executive is a party to an Employment Agreement, the 90-day period
beginning on the date on which notice of Executive's termination of employment
is delivered to or by the Firm, or in the case of termination for Cause or on
account of Extended Absence (each as defined in the Employment Agreement), the
90-day period beginning on the Date of Termination or (2) if Executive is not a
party to an Employment Agreement, the 90-day period beginning on the IPO Date.
6. Prior Notice Required. Executive hereby agrees that prior to
accepting employment with any other person or entity during the Employment
Period, if any, or during the eighteen months following the Date of Termination,
Executive will provide such prospective employer with written notice of the
provisions of this Agreement, with a copy of such notice delivered
simultaneously to the General Counsel of GS Inc.
7. Covenants Generally. (a) Executive's covenants as set forth in
the preceding paragraphs of this Agreement are from time to time referred to
herein as the 'Covenants.' If any of the Covenants is finally held to be
invalid, illegal or unenforceable (whether in whole or in part), such Covenant
shall be deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability and the remaining such Covenants
shall not be affected thereby; provided, however, that if any of such Covenants
is finally held to be invalid, illegal or unenforceable because it exceeds the
maximum scope determined to be acceptable to permit such provision to be
enforceable, such Covenant will be deemed to be modified to the minimum extent
necessary to modify such scope in order to make such provision enforceable
(b) Executive understands that the provisions of the Covenants
may limit Executive's ability to earn a livelihood in a business similar to the
business of the Firm.
(c) Executive acknowledges that a violation on Executive's part
of any of the Covenants would cause irreparable damage to the Firm. Accordingly,
Executive agrees that the Firm will be entitled to injunctive relief for any
actual or threatened violation of any of the Covenants in addition to any other
remedies it may have.
8. Damages. (a) Executive acknowledges that Executive's
compliance with the Covenants is an important factor to the continued success of
the Firm's operations and its future prospects. Executive and GS Inc. agree that
if at any time prior to the fifth anniversary of the date of this Agreement,
Executive were to breach any of the Covenants set forth in Sections 2, 3 and 4
hereof, the damages to the Firm would be material, but that the amount of such
damages would be uncertain and not readily ascertainable. Accordingly, Executive
and GS Inc. agree that, if, prior to the fifth anniversary of the date of this
Agreement, Executive breaches any of such Covenants, as determined by the Board
of Directors of GS Inc. (the 'Board') in its good faith judgment, GS Inc. will
be entitled to receive immediately following such determination and written
demand therefor, and Executive will make, a cash payment as and for liquidated
damages (the 'Liquidated Damages') as follows:
(1) if, on April 12, 1999, Executive was a member of the Board
and/or a management committee (as defined below) of the Firm (and
whether or not such membership continues), the Liquidated Damages shall
be $15,000,000; and
(2) if, on April 12, 1999, Executive was not a member of either
the Board or a management committee of the Firm (and whether or not
Executive later has any such membership), the Liquidated Damages shall
A 'management committee' means each of the Management Committee and the
Partnership Committee. The payment of any amount as liquidated damages will not
be construed as a release or waiver by the Firm of the right to prevent the
continuation of any such violation of such Covenants in equity or otherwise. In
addition, Executive and GS Inc. agree that it would be too speculative to
attempt to determine any amount of liquidated damages that would be applicable
following the fifth anniversary of the date of this Agreement, and that any
damages payable as a result of any breach following such date shall be
determined without regard to this Section 8.
(b) Executive and GS Inc. agree that the Liquidated Damages are
reasonable in proportion to the probable damages likely to be sustained by the
Firm if Executive breaches at any time prior to the fifth anniversary of this
Agreement any of the Covenants set forth in Sections 2, 3 and 4 hereof, that the
amount of actual damages to be sustained by the Firm in the event of such breach
is incapable of precise estimation and that such cash payments are not intended
to constitute a penalty or punitive damages for any purposes.
(c) Executive acknowledges and agrees that Executive's payment
obligations under this Section 8 will be full recourse obligations and will be
secured pursuant to a Pledge Agreement, in substantially the form set forth as
Exhibit A hereto (the 'Pledge Agreement').
(d) Executive acknowledges and agrees that any cash payment of
Liquidated Damages pursuant to this Section 8 shall be in addition to, and not
in lieu of, any forfeitures of awards (required pursuant to the terms of any
such awards) that may be granted to Executive in the future under one or more of
the Firm's compensation and benefit plans.
9. Arbitration. Subject to the provisions of Sections 10 and 11
hereof, any dispute, controversy or claim between Executive and the Firm arising
out of or relating to or concerning the provisions of this Agreement, the Pledge
Agreement, any agreement between Executive and the Firm relating to or arising
out of Executive's employment with the Firm or otherwise concerning any rights,
obligations or other aspects of Executive's employment relationship in respect
of the Firm ('Employment Related Matters'), shall be finally settled by
arbitration in New York City before, and in accordance with the rules then
obtaining of, the New York Stock Exchange, Inc. (the 'NYSE') or, if the NYSE
declines to arbitrate the matter, the American Arbitration Association (the
'AAA') in accordance with the commercial arbitration rules of the AAA.
10. Injunctive Relief; Submission to Jurisdiction.
Notwithstanding the provisions of Section 9, and in addition to its right to
submit any dispute or controversy to arbitration, the Firm may bring an action
or special proceeding in a state or federal court of competent jurisdiction
sitting in the City of New York, whether or not an arbitration proceeding has
theretofore been or is ever initiated, for the purpose of temporarily,
preliminarily, or permanently enforcing the provisions of the Covenants, the
Employment Agreement or the Pledge Agreement, or to enforce an arbitration
award, and, for the purposes of this Section 10, Executive (i) expressly
consents to the application of Section 11 to any such action or proceeding, (ii)
agrees that proof will not be required that monetary damages for breach of the
provisions of the Covenants, the Employment Agreement or the Pledge Agreement
would be difficult to calculate and that remedies at law would be inadequate and
(iii) irrevocably appoints the General Counsel of GS Inc. as Executive's agent
for service of process in connection with any such action or proceeding, who
shall promptly advise Executive of any such service of process.
11. Choice of Forum. (a) EXECUTIVE AND THE FIRM HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO OR CONCERNING THIS AGREEMENT, THE EMPLOYMENT AGREEMENT, THE
PLEDGE AGREEMENT, OR ANY EMPLOYMENT
RELATED MATTERS THAT IS NOT OTHERWISE ARBITRATED OR RESOLVED ACCORDING TO THE
PROVISIONS OF SECTION 9 HEREOF. This includes any suit, action or proceeding to
compel arbitration or to enforce an arbitration award. This also includes any
suit, action, or proceeding arising out of or relating to any post-employment
Employment Related Matters. Executive and the Firm acknowledge that the forum
designated by this Section 11 has a reasonable relation to this Agreement, and
to Executive's relationship to the Firm. Notwithstanding the foregoing, nothing
herein shall preclude the Firm from bringing any action or proceeding in any
other court for the purpose of enforcing the provisions of Sections 9, 10 or 11.
(b) The agreement of Executive and the Firm as to forum is
independent of the law that may be applied in the action, and Executive and the
Firm agree to such forum even if the forum may under applicable law choose to
apply non-forum law. Executive and the Firm hereby waive, to the fullest extent
permitted by applicable law, any objection which Executive or the Firm now or
hereafter may have to personal jurisdiction or to the laying of venue of any
such suit, action or proceeding in any court referred to in Section 11(a).
Executive and the Firm undertake not to commence any action arising out of or
relating to or concerning this Agreement in any forum other than a forum
described in this Section 11. Executive and the Firm agree that, to the fullest
extent permitted by applicable law, a final and non-appealable judgment in any
such suit, action or proceeding in any such court shall be conclusive and
binding upon Executive and the Firm.
12. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.
13. Miscellaneous. (a) This Agreement shall not supersede any
other agreement, written or oral, pertaining to the matters covered herein,
except to the extent of any inconsistency between this Agreement and any prior
agreement, in which case this Agreement shall prevail.
(b) Notices hereunder shall be delivered to GS Inc. at its
principal executive office directed to the attention of its General Counsel, and
to Executive at Executive's last address appearing in the Firm's employment
(c) This Agreement may not be amended or modified, other than by
a written agreement executed by Executive and GS Inc. or its successors, nor may
any provision hereof be waived other than by a writing executed by Executive or
GS Inc. or its successors; provided, that any waiver, consent, amendment or
modification of any of the provisions of this Agreement will not be effective
against the Firm without the written consent of the Chief Executive Officer of
GS Inc. or its successors, or such individual's
designee. Executive may not, directly or indirectly (including by operation of
law), assign Executive's rights or obligations hereunder without the prior
written consent of the Chief Executive Officer of GS Inc. or its successors, or
such individual's designee, and any such assignment by Executive in violation of
this Agreement shall be void. This Agreement shall be binding upon Executive's
permitted successors and assigns. Without impairing Executive's obligations
hereunder, GS Inc. may at any time and from time to time assign its rights and
obligations hereunder to any of its subsidiaries or affiliates (and have such
rights and obligations reassigned to it or to any other subsidiary or
affiliate). This Agreement shall be binding upon and inure to the benefit of the
Firm and its assigns.
(d) Without limiting the provisions of Section 7(a) hereof, if
any provision of this Agreement is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability and the remaining provisions shall not be affected thereby.
(e) Except as expressly provided herein, this Agreement shall not
confer on any person other than the Firm and the Executive any rights or
(f) The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
IN WITNESS WHEREOF, Executive and the Firm hereto have caused
this Agreement to be executed and delivered on the date first above written.
THE GOLDMAN SACHS GROUP, INC.
(on its behalf, and on behalf of its
subsidiaries and affiliates)