<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 21, 2000
REGISTRATION NO. 333-49958
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE GOLDMAN SACHS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-4019460
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
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85 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 902-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GREGORY K. PALM
THE GOLDMAN SACHS GROUP, INC.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 902-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
RICARDO A. MESTRES, JR.
ROBERT W. REEDER III
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box. [
]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share....... 2,394,322 $85.4375 $204,564,886 $54,006(2)
Rights(3).................................... (3) (3) (3) (3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, and based on
the average of the high and low prices of the Common Stock on December 15,
2000 as reported by the Consolidated Tape Association.
(2)Previously paid $22,605 on November 15, 2000 with respect to 1,000,000
shares.
(3) Each share of Common Stock includes one Shareholder Protection Right as
described under "Description of Capital Stock".
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion. Dated December 21, 2000.
2,394,322 Shares
THE GOLDMAN SACHS GROUP, INC.
[GOLDMAN SACHS LOGO] Common Stock
----------------------
This prospectus relates to 2,394,322 shares of common stock of The Goldman
Sachs Group, Inc. to be offered for sale by the charitable organizations
described under the heading "Selling Shareholders". The distribution of the
common stock by these charitable organizations may be effected from time to
time, including:
- in underwritten public offerings;
- in ordinary brokerage transactions on securities exchanges, including the
New York Stock Exchange;
- to or through brokers or dealers who may act as principal or agent; or
- in one or more negotiated transactions.
The brokers or dealers through or to whom the shares of common stock may be
sold may be deemed underwriters of the shares within the meaning of the
Securities Act of 1933, in which event all brokerage commissions or discounts
and other compensation received by those brokers or dealers may be deemed to be
underwriting compensation. To the extent required, the names of any underwriters
and applicable commissions or discounts and any other required information with
respect to any particular sale will be set forth in an accompanying prospectus
supplement. Those underwriters may include affiliates of The Goldman Sachs
Group, Inc., including Goldman, Sachs & Co. See "Plan of Distribution" for a
further description of how the selling shareholders may dispose of the shares
covered by this prospectus.
Goldman Sachs will not receive any of the proceeds from sales of the shares
of common stock made by the selling shareholders pursuant to this prospectus.
Goldman Sachs' common stock is listed on the New York Stock Exchange under
the symbol "GS". The last reported sale price of the common stock on December
20, 2000 was $90.00 per share.
See "Risk Factors" beginning on page 4 to read about factors you should
consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
GOLDMAN, SACHS & CO.
----------------------
Prospectus dated , 2000.
<PAGE> 3
TABLE OF CONTENTS
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Page
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Available Information....................................... 2
Risk Factors................................................ 4
Use of Proceeds............................................. 15
Price Range of Our Common Stock and Dividends............... 15
Selling Shareholders........................................ 16
Description of Capital Stock................................ 18
Plan of Distribution........................................ 24
Validity of Common Stock.................................... 26
Experts..................................................... 26
Cautionary Statement Pursuant to The Private Securities
Litigation Reform Act of 1995............................. 26
</TABLE>
<PAGE> 4
AVAILABLE INFORMATION
The Goldman Sachs Group, Inc. is required to file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any documents filed by us at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our filings
with the SEC are also available to the public through the SEC's Internet site at
http://www.sec.gov and through the NYSE, 20 Broad Street, New York, New York
10005, on which our common stock is listed.
We have filed a registration statement on Form S-3 with the SEC relating to
the shares of common stock covered by this prospectus. This prospectus is a part
of the registration statement and does not contain all of the information in the
registration statement. Whenever a reference is made in this prospectus to a
contract or other document of Goldman Sachs, please be aware that the reference
is only a summary and that you should refer to the exhibits that are a part of
the registration statement for a copy of the contract or other document. You may
review a copy of the registration statement at the SEC's public reference room
in Washington, D.C., as well as through the SEC's Internet site.
The SEC's rules allow us to "incorporate by reference" information into
this prospectus. This means that we can disclose important information to you by
referring you to another document. Any information referred to in this way is
considered part of this prospectus from the date we file that document. Any
reports filed by us with the SEC after the date of this prospectus and before
the date that the offering of the shares of common stock offered through this
prospectus is terminated will automatically update and, where applicable,
supersede any information contained in this prospectus or incorporated by
reference in this prospectus.
The Goldman Sachs Group, Inc. incorporates by reference into this
prospectus the following documents or information filed with the SEC (File No.
001-14965):
(1) Annual Report on Form 10-K for the fiscal year ended November 26,
1999;
(2) Quarterly Report on Form 10-Q for the fiscal quarter ended February
25, 2000;
(3) Quarterly Report on Form 10-Q for the fiscal quarter ended May 26,
2000;
(4) Quarterly Report on Form 10-Q for the fiscal quarter ended August
25, 2000;
(5) Current Report on Form 8-K, dated March 21, 2000;
(6) Current Report on Form 8-K, dated May 4, 2000;
(7) Current Report on Form 8-K, dated May 10, 2000;
(8) Current Report on Form 8-K/A, dated May 12, 2000;
(9) Current Report on Form 8-K, dated June 20, 2000;
(10) Current Report on Form 8-K, dated July 17, 2000;
(11) Current Report on Form 8-K, dated July 31, 2000;
(12) Current Report on Form 8-K, dated September 11, 2000;
(13) Current Report on Form 8-K, dated September 19, 2000;
(14) Current Report on Form 8-K, dated October 31, 2000;
(15)Current Report on Form 8-K, dated December 19, 2000;
(16) The description of common stock contained in the Registration
Statement on Form 8-A, dated April 27, 1999, of The Goldman Sachs
Group, Inc., filed with the SEC under Section 12(b) of the
Securities Exchange Act of 1934; and
(17) All documents filed by The Goldman Sachs Group, Inc. under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of the initial registration statement and before
effectiveness of the registration statement, and after the date of
this prospectus and before the termination of this offering.
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<PAGE> 5
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon his or her written or oral
request, a copy of any or all documents referred to above which have been or may
be incorporated by reference into this prospectus, excluding exhibits to those
documents unless they are specifically incorporated by reference into those
documents. You can request those documents from our Director of Investor
Relations, 10 Hanover Square, New York, New York 10005, telephone (212)
357-2674.
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<PAGE> 6
RISK FACTORS
An investment in the common stock involves a number of risks, some of
which, including market, liquidity, credit, operational, legal and regulatory
risks, could be substantial and are inherent in our businesses. You should
carefully consider the following information about these risks, together with
the other information in this prospectus, before buying shares of common stock.
MARKET FLUCTUATIONS COULD ADVERSELY AFFECT OUR BUSINESSES IN MANY WAYS
As an investment banking and securities firm, our businesses are materially
affected by conditions in the financial markets and economic conditions
generally, both in the United States and elsewhere around the world. In the
event of a market downturn, our businesses could be adversely affected in many
ways, including those described below. Our revenues are likely to decline in
such circumstances and, if we were unable to reduce expenses at the same pace,
our profit margins would erode. For example, in the second half of fiscal 1998,
we recorded negative net revenues from our Trading and Principal Investments
business and from mid-August to mid-October the number of equity underwritings
and announced mergers and acquisitions transactions in which we participated
declined substantially due to adverse economic and market conditions. Even in
the absence of a market downturn, we are exposed to substantial risk of loss due
to market volatility.
We May Incur Significant Losses from Our Trading and Investment Activities Due
to Market Fluctuations and Volatility
We generally maintain large trading and investment positions, including
merchant banking investments, in the fixed income, currency, commodity and
equity markets, and in real estate and other assets. To the extent that we own
assets, i.e., have long positions, in any of those markets, a downturn in those
markets could result in losses from a decline in the value of those long
positions. Conversely, to the extent that we have sold assets we do not own,
i.e., have short positions, in any of those markets, an upturn in those markets
could expose us to potentially unlimited losses as we attempt to cover our short
positions by acquiring assets in a rising market. We may from time to time have
a trading strategy consisting of holding a long position in one asset and a
short position in another, from which we expect to earn revenues based on
changes in the relative value of the two assets. If, however, the relative value
of the two assets changes in a direction or manner that we did not anticipate or
against which we are not hedged, we might realize a loss in those paired
positions. In addition, we maintain substantial trading positions that can be
adversely affected by the level of volatility in the financial markets, i.e.,
the degree to which trading prices fluctuate over a particular period, in a
particular market, regardless of market levels.
Our Investment Banking Revenues May Decline in Adverse Market or Economic
Conditions
Unfavorable financial or economic conditions would likely reduce the number
and size of transactions in which we provide underwriting, mergers and
acquisitions advisory and other services. Our Investment Banking revenues, in
the form of financial advisory and underwriting fees, are directly related to
the number and size of the transactions in which we participate and would
therefore be adversely affected by a sustained market downturn. In particular,
our results of operations would be adversely affected by a significant reduction
in the number or size of mergers and acquisitions transactions.
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<PAGE> 7
We May Generate Lower Revenues from Commissions and Asset Management Fees
A market downturn would likely lead to a decline in the volume of
transactions that we execute for our customers and, therefore, to a decline in
the revenues we receive from commissions and spreads. In addition, because the
fees that we charge for managing our clients' portfolios are in many cases based
on the value of those portfolios, a market downturn that reduces the value of
our clients' portfolios or increases the amount of withdrawals would reduce the
revenue we receive from our asset management business.
Even in the absence of a market downturn, below-market performance by our
mutual funds may result in increased withdrawals and reduced inflows, which
would reduce the revenue we receive from our asset management business.
Holding Large and Concentrated Positions May Expose Us to Large Losses
Concentration of risk in the past has increased the losses that we have
incurred in our arbitrage, market-making, block trading, merchant banking,
underwriting and lending businesses and may continue to do so in the future.
Goldman Sachs has committed substantial amounts of capital to these businesses,
which often require Goldman Sachs to take large positions in the securities of a
particular issuer or issuers in a particular industry, country or region.
Moreover, the trend in all major capital markets is towards larger and more
frequent commitments of capital in many of these activities. In particular, we
are experiencing an increase in the number and size of block trades that we
execute, and we expect this trend to continue.
Our Hedging Strategies May Not Prevent Losses
If any of the variety of instruments and strategies we utilize to hedge our
exposure to various types of risk are not effective, we may incur losses. Many
of our strategies are based on historical trading patterns and correlations. For
example, if we hold a long position in an asset, we may hedge this position by
taking a short position in an asset where the short position has, historically,
moved in a direction that would offset a change in value in the long position.
However, these strategies may not be fully effective in mitigating our risk
exposure in all market environments or against all types of risk. Unexpected
market developments may affect our hedging strategies.
Specialist Rules May Require Us to Make Unprofitable Trades, Refrain from Making
Profitable Trades and Commit Large Amounts of Capital
Our Spear, Leeds & Kellogg subsidiary is a specialist in options and
securities. Our specialists are required to maintain, to the extent practicable,
a fair and orderly market in their specialist securities. This may require our
specialists to purchase securities in a declining market, maintain an inventory
of securities and commit substantial amounts of capital. These activities, in
turn, may result in our incurrence of trading losses, decreases in the value of
our inventory positions and an increase in our need for liquidity. Our
specialists may be required to refrain from trading for their own account in
circumstances in which it may be to their advantage to trade. For example, a
specialist generally may not trade for its own account when public buyers are
meeting public sellers in an orderly fashion and may not compete with public
orders at the same price.
A Prolonged Market Downturn Could Impair Our Operating Results
While we encountered extremely difficult market conditions in mid-August to
mid-October 1998, the financial markets rebounded late in the fourth quarter of
fiscal 1998. At some time in the future, there may be a more sustained period of
market decline or weakness that will leave us operating in a difficult market
environment and subject us to the risks that we describe in this section for a
longer period of time.
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Market Risk May Increase the Other Risks That We Face
In addition to the potentially adverse effects on our businesses described
above, market risk could exacerbate other risks that we face. For example, if we
incur substantial trading losses, our need for liquidity could rise sharply
while our access to liquidity could be impaired. In addition, in conjunction
with a market downturn, our customers and counterparties could incur substantial
losses of their own, thereby weakening their financial condition and increasing
our credit risk to them. Our liquidity risk and credit risk are described below.
OUR RISK MANAGEMENT POLICIES AND PROCEDURES MAY LEAVE US EXPOSED TO
UNIDENTIFIED OR UNANTICIPATED RISK
We have devoted significant resources to developing our risk management
policies and procedures and expect to continue to do so in the future.
Nonetheless, our hedging strategies and other risk management techniques may not
be fully effective in mitigating our risk exposure in all market environments or
against all types of risk, including risks that are unidentified or
unanticipated. Some of our methods of managing risk are based upon our use of
observed historical market behavior. As a result, these methods may not predict
future risk exposures, which could be significantly greater than the historical
measures indicate. For example, the market movements of the late third and early
fourth quarters of fiscal 1998 were larger and involved greater divergences in
relative asset values than we anticipated. This caused us to experience trading
losses that were greater and recurred more frequently than some of our risk
measures indicated were likely to occur.
Other risk management methods depend upon evaluation of information
regarding markets, clients or other matters that is publicly available or
otherwise accessible by Goldman Sachs. This information may not in all cases be
accurate, complete, up-to-date or properly evaluated. Management of operational,
legal and regulatory risk requires, among other things, policies and procedures
to record properly and verify a large number of transactions and events, and
these policies and procedures may not be fully effective.
LIQUIDITY RISK COULD IMPAIR OUR ABILITY TO FUND OPERATIONS AND JEOPARDIZE
OUR FINANCIAL CONDITION
Liquidity, i.e., ready access to funds, is essential to our businesses. In
addition to maintaining a cash position, we rely on three principal sources of
liquidity: borrowing in the debt markets; access to the repurchase and
securities lending markets; and selling securities and other assets.
An Inability to Access the Debt Markets Could Impair Our Liquidity
We depend on continuous access to the debt capital markets to finance our
day-to-day operations. An inability to raise money in the long-term or
short-term debt capital markets, or an inability to access the repurchase and
securities lending markets, could have a substantial negative effect on our
liquidity. Our access to debt in amounts adequate to finance our activities
could be impaired by factors that affect Goldman Sachs in particular or the
financial services industry in general. For example, lenders could develop a
negative perception of our long-term or short-term financial prospects if we
incurred large trading losses, if the level of our business activity decreased
due to a market downturn, if regulatory authorities took significant action
against us or if we discovered that one of our employees had engaged in serious
unauthorized or illegal activity. Our ability to borrow in the debt markets also
could be impaired by factors that are not specific to Goldman Sachs, such as a
severe disruption of the financial markets or negative views about the prospects
for the investment banking, securities or financial services industries
generally.
We also depend on banks to finance our day-to-day operations. As a result
of the recent consolidation in the banking industry, some of our lenders have
merged or consolidated with
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other banks and financial institutions. While we have not been materially
adversely affected to date, it is possible that further consolidation could lead
to a loss of a number of our key banking relationships and a reduction in the
amount of credit extended to us.
An Inability to Access the Short-Term Debt Markets Could Impair Our Liquidity
We depend on the issuance of commercial paper and promissory notes as a
principal source of unsecured short-term funding for our operations. Our
liquidity depends to an important degree on our ability to refinance these
borrowings on a continuous basis. Investors who hold our outstanding commercial
paper and promissory notes have no obligation to purchase new instruments when
the outstanding instruments mature.
Our Liquidity Could Be Adversely Affected If Our Ability to Sell Assets Is
Impaired
If we were unable to borrow in the debt capital markets, we would need to
liquidate assets in order to meet our maturing liabilities. In certain market
environments, such as times of market volatility or uncertainty, overall market
liquidity may decline. In a time of reduced liquidity, we may be unable to sell
some of our assets, or we may have to sell assets at depressed prices, which
could adversely affect our results of operations and financial condition.
Our ability to sell our assets may be impaired if other market participants
are seeking to sell similar assets into the market at the same time. In the late
third and early fourth quarters of fiscal 1998, for example, the markets for
some assets were adversely affected by simultaneous attempts by a number of
institutions to sell similar assets.
A Reduction in Our Credit Ratings Could Adversely Affect Our Liquidity and
Competitive Position and Increase Our Borrowing Costs
Our borrowing costs and our access to the debt capital markets depend
significantly on our credit ratings. These ratings are assigned by rating
agencies, which may reduce or withdraw their ratings or place Goldman Sachs on
"credit watch" with negative implications at any time. Credit ratings are also
important to Goldman Sachs when competing in certain markets and when seeking to
engage in longer-term transactions, including over-the-counter derivatives. A
reduction in our credit ratings could increase our borrowing costs and limit our
access to the capital markets. This, in turn, could reduce our earnings and
adversely affect our liquidity and competitive position.
CREDIT RISK EXPOSES US TO LOSSES CAUSED BY FINANCIAL OR OTHER PROBLEMS
EXPERIENCED BY THIRD PARTIES
We are exposed to the risk that third parties that owe us money, securities
or other assets will not perform their obligations. These parties include our
trading counterparties, customers, clearing agents, exchanges, clearing houses
and other financial intermediaries as well as issuers whose securities we hold.
These parties may default on their obligations to us due to bankruptcy, lack of
liquidity, operational failure or other reasons. This risk may arise, for
example, from holding securities of third parties; entering into swap or other
derivative contracts under which counterparties have long-term obligations to
make payments to us; executing securities, futures, currency or commodity trades
that fail to settle at the required time due to non-delivery by the counterparty
or systems failure by clearing agents, exchanges, clearing houses or other
financial intermediaries; and extending credit to our clients through bridge or
margin loans or other arrangements.
We May Suffer Significant Losses from Our Credit Exposures
In recent years, we have significantly expanded our swaps and other
derivatives businesses and placed a greater emphasis on providing credit and
liquidity to our clients. As a result, our
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credit exposures have increased in amount and in duration. In addition, we have
also experienced, due to competitive factors, pressure to assume longer-term
credit risk, extend credit against less liquid collateral and price more
aggressively the credit risks that we take.
Our Clients and Counterparties May Be Unable to Perform Their Obligations to Us
as a Result of Economic or Political Conditions
Country, regional and political risks are components of credit risk, as
well as market risk. Economic or political pressures in a country or region,
including those arising from local market disruptions or currency crises, may
adversely affect the ability of clients or counterparties located in that
country or region to obtain foreign exchange or credit and, therefore, to
perform their obligations to us. See "-- We Are Exposed to Special Risks in
Emerging and Other Markets" for a further discussion of our exposure to these
risks.
Defaults by a Large Financial Institution Could Adversely Affect Financial
Markets Generally and Us Specifically
The commercial soundness of many financial institutions may be closely
interrelated as a result of credit, trading, clearing or other relationships
between the institutions. As a result, concerns about, or a default by, one
institution could lead to significant liquidity problems, losses or defaults by
other institutions. This is sometimes referred to as "systemic risk" and may
adversely affect financial intermediaries, such as clearing agencies, clearing
houses, banks, securities firms and exchanges, with which we interact on a daily
basis, and could adversely affect Goldman Sachs.
The Information That We Use in Managing Our Credit Risk May Be Inaccurate or
Incomplete
Although we regularly review our credit exposure to specific clients and
counterparties and to specific industries, countries and regions that we believe
may present credit concerns, default risk may arise from events or circumstances
that are difficult to foresee or detect, such as fraud. We may also fail to
receive full information with respect to the trading risks of a counterparty. In
addition, in cases where we have extended credit against collateral, we may find
that we are undersecured, for example, as a result of sudden declines in market
values that reduce the value of collateral.
We May Suffer Losses from Defaults or Misconduct by Our Clearing Customers
As a clearing member firm providing financing and other clearing services
to customers, we are ultimately responsible for our customers' financial
performance of securities and futures transactions. Our clearing operations
require a substantial commitment of capital and we may incur significant losses
due to the failure of our customers to perform their obligations under these
transactions. If our customers default on their obligations, we remain
financially liable for such obligations and, although these obligations are
generally collateralized, we are subject to market risk in the liquidation of
customer collateral to satisfy those obligations.
Also, we face the risk that third parties may seek to hold us responsible
for the activities of our clearing customers. There have been several recent
highly publicized cases involving third parties seeking to hold a clearing firm
liable for the fraudulent activities of a clearing customer.
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No assurance can be given that these types of claims will not be made against us
in our capacity as a clearing firm.
OPERATIONAL RISKS MAY DISRUPT OUR BUSINESSES, RESULT IN REGULATORY ACTION
AGAINST US OR LIMIT OUR GROWTH
We face operational risk arising from mistakes made in the confirmation or
settlement of transactions or from transactions not being properly recorded,
evaluated or accounted for. Our businesses, particularly our clearing business,
are highly dependent on our ability to process, on a daily basis, a large number
of transactions across numerous and diverse markets in many currencies, and the
transactions we process have become increasingly complex. Consequently, we rely
heavily on our financial, accounting and other data processing systems. If any
of these systems do not operate properly or are disabled, we could suffer
financial loss, a disruption of our businesses, liability to clients, regulatory
intervention or reputational damage. The inability of our systems to accommodate
an increasing volume of transactions could also constrain our ability to expand
our businesses. In recent years, we have substantially upgraded and expanded the
capabilities of our data processing systems and other operating technology, and
we expect that we will need to continue to upgrade and expand in the future to
avoid disruption of, or constraints on, our operations.
LEGAL AND REGULATORY RISKS ARE INHERENT AND SUBSTANTIAL IN OUR BUSINESSES
Substantial legal liability or a significant regulatory action against
Goldman Sachs could have a material adverse financial effect or cause
significant reputational harm to Goldman Sachs, which in turn could seriously
harm our business prospects.
Our Exposure to Legal Liability Is Significant
We face significant legal risks in our businesses and the volume and amount
of damages claimed in litigation against financial intermediaries are
increasing. These risks include potential liability under securities or other
laws for materially false or misleading statements made in connection with
securities and other transactions, potential liability for the "fairness
opinions" and other advice we provide to participants in corporate transactions,
potential liability for the actions of clearing customers and disputes over the
terms and conditions of complex trading arrangements. We also face the
possibility that counterparties in complex or risky trading transactions will
claim that we improperly failed to tell them of the risks or that they were not
authorized or permitted to enter into these transactions with us and that their
obligations to Goldman Sachs are not enforceable. Particularly in our rapidly
growing business focused on high-net-worth individuals, we are increasingly
exposed to claims against Goldman Sachs for recommending investments that are
not consistent with a client's investment objectives or engaging in unauthorized
or excessive trading. During a prolonged market downturn, we would expect these
types of claims to increase. We are also subject to claims arising from disputes
with employees for alleged discrimination or harassment, among other things.
These risks often may be difficult to assess or quantify and their existence and
magnitude often remain unknown for substantial periods of time. We incur
significant legal expenses every year in defending against litigation, and we
expect to continue to do so in the future.
Extensive Regulation of Our Businesses Limits Our Activities and May Subject Us
to Significant Penalties
Goldman Sachs, as a participant in the financial services industry, is
subject to extensive regulation by governmental and self-regulatory
organizations in the United States and in virtually all other jurisdictions in
which it operates around the world.
The requirements imposed by our regulators are designed to ensure the
integrity of the financial markets and to protect customers and other third
parties who deal with Goldman Sachs and are not designed to protect our
shareholders. Consequently, these regulations often serve to limit our
activities, including through net capital, customer protection and market
conduct
9
<PAGE> 12
requirements. We face the risk of significant intervention by regulatory
authorities, including extended investigation and surveillance activity,
adoption of costly or restrictive new regulations and judicial or administrative
proceedings that may result in substantial penalties. Among other things, we
could be fined or prohibited from engaging in some of our business activities.
Legal Restrictions on Our Clients May Reduce the Demand for Our Services
New laws or regulations or changes in enforcement of existing laws or
regulations applicable to our clients may also adversely affect our businesses.
For example, changes in antitrust enforcement could affect the level of mergers
and acquisitions activity and changes in regulation could restrict the
activities of our clients and, therefore, the services we provide on their
behalf.
THE COMBINATION OF OUR BUSINESSES WITH THOSE OF SPEAR, LEEDS & KELLOGG MAY NOT
BE SUCCESSFUL
We face numerous risks and challenges in combining the businesses and
systems of Spear, Leeds & Kellogg with our existing businesses and systems. From
an operational perspective, we need to combine accounting and data processing
systems and management controls to ensure transactions are being properly
recorded, evaluated and accounted for. From a business perspective, we need to
maintain relationships with Spear, Leeds & Kellogg's customers and business
partners. No assurance can be given that we will be successful in our
combination efforts. See also "-- Our Businesses May Be Adversely Affected by an
Inability to Recruit, Retain and Motivate Key Employees" for a discussion of our
need to retain employees, including Spear, Leeds & Kellogg employees.
EMPLOYEE MISCONDUCT COULD HARM GOLDMAN SACHS AND IS DIFFICULT TO DETECT AND
DETER
There have been a number of highly publicized cases involving fraud or
other misconduct by employees in the financial services industry in recent
years, and we run the risk that employee misconduct could occur. Misconduct by
employees could include binding Goldman Sachs to transactions that exceed
authorized limits or present unacceptable risks, or hiding from Goldman Sachs
unauthorized or unsuccessful activities, which, in either case, may result in
unknown and unmanaged risks or losses. Employee misconduct could also involve
the improper use or disclosure of confidential information, which could result
in regulatory sanctions and serious reputational or financial harm. It is not
always possible to deter employee misconduct and the precautions we take to
prevent and detect this activity may not be effective in all cases.
THE FINANCIAL SERVICES INDUSTRY IS INTENSELY COMPETITIVE AND RAPIDLY
CONSOLIDATING
The financial services industry -- and all of our businesses -- are
intensely competitive, and we expect them to remain so. We compete on the basis
of a number of factors, including transaction execution, our products and
services, innovation, reputation and price. We have experienced intense price
competition in some of our businesses in recent years, such as underwriting fees
on investment grade debt offerings and privatizations. We believe that we may
experience pricing pressures in these and other areas in the future as some of
our competitors seek to obtain market share by reducing prices.
We Face Increased Competition Due to a Trend Toward Consolidation
In recent years, there has been substantial consolidation and convergence
among companies in the financial services industry. In particular, a number of
large commercial banks, insurance companies and other broad-based financial
services firms have established or acquired broker-dealers or have merged with
other financial institutions. Many of these firms have the ability to offer a
wide range of products, from loans, deposit-taking and insurance to brokerage,
asset management and investment banking services, which may enhance their
competitive position. They also have the ability to support investment banking
and securities products with commercial banking, insurance and other financial
services revenues in an effort to gain market share, which could result in
pricing pressure in our businesses. Recently enacted federal financial reform
legislation significantly expands the activities permissible for firms
affiliated with a U.S. bank. This
10
<PAGE> 13
legislation may accelerate consolidation and increase competition in the
financial services industry and will enable banking organizations to compete
more effectively across a broad range of activities.
Consolidation Has Increased Our Need for Capital
This trend toward consolidation and convergence has significantly increased
the capital base and geographic reach of our competitors. This trend has also
hastened the globalization of the securities and other financial services
markets. As a result, we have had to commit capital to support our international
operations and to execute large global transactions.
Our Ability to Expand Internationally Will Depend on Our Ability to Compete
Successfully with Local Financial Institutions
We believe that some of our most significant challenges and opportunities
will arise outside the United States. In order to take advantage of these
opportunities, we will have to compete successfully with financial institutions
based in important non-U.S. markets, particularly in Europe. Some of these
institutions are larger and better capitalized, and have a stronger local
presence and a longer operating history in these markets.
TECHNOLOGY IS CHANGING OUR BUSINESSES AND PRESENTING US WITH NEW CHALLENGES
Technology is fundamental to our overall business strategy. The rapid
growth of the Internet and e-commerce, and the introduction of new technology,
are changing our businesses and presenting us with new challenges.
Our Revenues May Decline from Volatility or a Downturn in the Technology Sector
We have made a significant commitment to providing investment banking
advisory and underwriting services to the technology and related sectors,
including communications, media and entertainment. If investment banking
activity in these sectors were to decrease, our financial results could be
adversely affected.
In addition to our advisory activities, we have made substantial
investments in technology and related businesses through our merchant banking
activities. Volatility or a downturn in these sectors is likely to affect
adversely the value of these investments. For example, the market declines in
technology and telecommunications stocks in the second and fourth fiscal
quarters of 2000 contributed to negative net revenues in our principal
investments.
Our Revenues May Decline or Expenditures May Increase Due to Competition from
Alternative Trading Systems
Securities and futures transactions are now being conducted through the
Internet and other alternative, non-traditional trading systems, and it appears
that the trend toward alternative trading systems will continue and probably
accelerate. Some of these alternative trading systems compete with our trading
businesses, including our Spear, Leeds & Kellogg specialist businesses. A
dramatic increase in computer-based or other electronic trading may adversely
affect revenues from our specialist businesses and our commission and trading
revenues; disintermediate the firm from certain transaction flows; reduce our
participation in the trading markets and the associated access to market
information; and lead to the creation of new and stronger competitors. We may
also be required to make additional expenditures in order to develop or invest
in new trading systems or otherwise to invest in technology to maintain our
competitive position.
11
<PAGE> 14
WE ARE EXPOSED TO SPECIAL RISKS IN EMERGING AND OTHER MARKETS
In conducting our businesses in major markets around the world, including
many developing markets in Asia, Latin America and Eastern Europe, we are
subject to political, economic, legal, operational and other risks that are
inherent in operating in other countries. These risks range from difficulties in
settling transactions in emerging markets to possible nationalization,
expropriation, price controls and other restrictive governmental actions. We
also face the risk that exchange controls or similar restrictions imposed by
foreign governmental authorities may restrict our ability to convert local
currency received or held by us in their countries into U.S. dollars or other
currencies, or to take those dollars or other currencies out of those countries.
To date, a relatively small part of our businesses has been conducted in
emerging and other markets. As we expand our businesses in these areas, our
exposure to these risks will increase.
Turbulence in Emerging Markets May Adversely Affect Our Businesses
In the last several years, various emerging market countries have
experienced severe economic and financial disruptions, including significant
devaluations of their currencies and low or negative growth rates in their
economies. The possible effects of these conditions include an adverse impact on
our businesses and increased volatility in financial markets generally.
Moreover, economic or market problems in a single country or region are
increasingly affecting other markets generally. For example, the economic crisis
in Russia in August 1998 adversely affected other emerging markets and led to
turmoil in financial markets worldwide. A continuation of these situations could
adversely affect global economic conditions and world markets and, in turn,
could adversely affect our businesses. Among the risks are regional or global
market downturns and, as noted above, increasing liquidity and credit risks.
Compliance with Local Laws and Regulations May Be Difficult
In many countries, the laws and regulations applicable to the securities
and financial services industries are uncertain and evolving, and it may be
difficult for us to determine the exact requirements of local laws in every
market. Our inability to remain in compliance with local laws in a particular
foreign market could have a significant and negative effect not only on our
businesses in that market but also on our reputation generally. We are also
subject to the risk that transactions we structure might not be legally
enforceable in all cases. See "-- Legal and Regulatory Risks Are Inherent and
Substantial in Our Businesses -- Our Exposure to Legal Liability Is Significant"
for additional information concerning these matters.
OUR BUSINESSES MAY BE ADVERSELY AFFECTED BY AN INABILITY TO
RECRUIT, RETAIN AND MOTIVATE KEY EMPLOYEES
Our performance is largely dependent on the talents and efforts of highly
skilled individuals. Competition in the financial services industry for
qualified employees is intense. We also compete for employees with high
technology companies and other companies outside of the financial services
industry. Our continued ability to compete effectively in our businesses depends
on our ability to attract new employees and to retain and motivate our existing
employees.
In connection with our initial public offering and conversion of Goldman
Sachs from partnership to corporate form, employees, other than the managing
directors who were profit participating limited partners, received grants of
restricted stock units, stock options or interests in a defined contribution
plan. Since our initial public offering, we have also made, and anticipate
making in the future, other equity-based awards to our employees. The incentives
to attract, retain and motivate employees provided by these awards may not be
effective.
12
<PAGE> 15
In connection with our initial public offering and the conversion of
Goldman Sachs from partnership to corporate form, the managing directors who
were profit participating limited partners received substantial amounts of
common stock in exchange for their interests in Goldman Sachs. Because these
shares of common stock were received in exchange for partnership interests,
ownership of these shares does not depend upon these managing directors'
continued employment by Goldman Sachs. While substantially all of these shares
are subject to certain restrictions on transfer under a shareholders' agreement
and under our plan of incorporation, the transfer restrictions under the
shareholders' agreement and the plan of incorporation have been waived in the
past and may be waived at any time and from time to time in the future. These
transfer restrictions will be waived to permit the charitable donations. See
"-- Our Share Price May Decline Due to the Large Number of Shares Eligible for
Future Sale" for a discussion of the ability of the shareholders' committee that
administers the shareholders' agreement to waive the transfer restrictions. The
shareholders' committee consists, and is likely to continue to consist, of
persons who are parties to the shareholders' agreement and who are both
employees and members of the board of directors of The Goldman Sachs Group, Inc.
Similarly, in connection with our merger with Spear, Leeds & Kellogg, the
managing directors who were owners of Spear, Leeds & Kellogg and its affiliates
received substantial amounts of common stock in exchange for their ownership
interests. Ownership of these shares of common stock does not depend on these
managing directors' continued employment by Goldman Sachs. While these shares
are subject to certain contractual transfer restrictions, our board of directors
may waive these transfer restrictions at any time and from time to time.
GOLDMAN SACHS IS CONTROLLED BY ITS MANAGING DIRECTORS WHOSE INTERESTS MAY
DIFFER FROM THOSE OF OTHER SHAREHOLDERS
Collectively, our current and former managing directors beneficially own
over 275,000,000 shares of common stock, or in excess of 55% of the total shares
of common stock outstanding. Substantially all of these shares are subject to a
shareholders' agreement, which provides for coordinated voting by the parties.
Further, both Sumitomo Bank Capital Markets, Inc. and Kamehameha Activities
Association, which together own approximately 6% of the total shares of common
stock outstanding, have agreed to vote their shares of common stock in the same
manner as a majority of the shares held by our current and former managing
directors are voted.
As a result of these arrangements, the managing directors currently are
able to elect our entire board of directors, control the management and policies
of Goldman Sachs and, in general, determine, without the consent of the other
shareholders, the outcome of any corporate transaction or other matter submitted
to the shareholders for approval, including mergers, consolidations and the sale
of all or substantially all of the assets of Goldman Sachs. The managing
directors currently are able to prevent or cause a change in control of Goldman
Sachs.
Provisions of Our Organizational Documents May Discourage an Acquisition of
Goldman Sachs
Our organizational documents contain provisions that impede the removal of
directors and may discourage a third party from making a proposal to acquire us.
For example, our board of directors may, without the consent of shareholders,
issue preferred stock with greater voting rights than the common stock. See
"Description of Capital Stock -- Certain Anti-Takeover Matters" for a discussion
of these anti-takeover provisions.
13
<PAGE> 16
OUR SHARE PRICE MAY DECLINE DUE TO THE LARGE NUMBER OF SHARES ELIGIBLE FOR
FUTURE SALE
Future sales of substantial amounts of common stock in the public market or
otherwise, or the perception that such sales may occur, could adversely affect
the prevailing market price of the common stock. A substantial number of shares
of common stock are eligible for future sale as described below:
- Over 260,000,000 shares beneficially owned by our former profit
participating limited partners and the former owners of our Hull and
Spear, Leeds & Kellogg subsidiaries are transferable in three annual
installments beginning in May 2002; earlier sales could occur with the
consent of, in the case of our former profit participating limited
partners, the shareholders' committee and, in the case of the former
owners of our Hull and Spear, Leeds & Kellogg subsidiaries, our board of
directors;
- Sumitomo Bank Capital Markets, Inc. (which beneficially owns 16,243,610
shares) and Kamehameha Activities Association (which beneficially owns
10,987,710 shares) have the right commencing May 8, 2001 to cause Goldman
Sachs to register up to 13,105,596 of their shares of common stock in the
aggregate, plus an additional 9,178,778 shares in the aggregate with the
consent of Goldman Sachs; earlier sales could occur with the consent of
our board of directors;
- Over 15,000,000 shares beneficially owned by the former retired limited
partners are transferable beginning in May 2002; earlier sales could
occur with the consent of our board of directors;
- Approximately 20,000,000 shares are deliverable to our employees pursuant
to restricted stock units granted in connection with our initial public
offering in two annual installments beginning in June 2001, assuming the
relevant conditions are satisfied; and
- Approximately 80,000,000 shares are deliverable to our employees in three
annual installments beginning on or about the third anniversary of our
initial public offering pursuant to restricted stock units and upon
exercise of stock options granted in connection with our initial public
offering and pursuant to contributions made to our defined contribution
plan in connection with our initial public offering, in each case,
assuming the relevant conditions are satisfied.
We also pay a portion of our employees' compensation in equity-based awards
and issue equity-based awards to help retain and motivate our employees. Shares
may be delivered under these awards from time to time, in accordance with the
applicable vesting and delivery provisions.
We established a program, which began in the fourth fiscal quarter of 2000,
to permit our former profit participating limited partners and the former owners
of our Hull subsidiary to sell, in a coordinated manner, a portion of their
shares in accordance with the volume and manner of sale limitations of Rule 144
under the Securities Act of 1933. Up to 7,000,000 shares may be sold under this
program during the first fiscal quarter of 2001. We anticipate permitting sales
under this program in future quarters.
On July 31, 2000, the shareholders' committee permitted certain of our
former profit participating limited partners to pledge a portion of their shares
to obtain approximately $400,000,000 in loan commitments to make investments
from time to time in certain of Goldman Sachs' merchant banking funds. The loan
commitments are for five years, may be drawn upon from time to time and
generally require that any loans be collateralized by shares of common stock
with a market value four times that of the amount borrowed.
We may decide in the future to waive the transfer restrictions to permit
our former profit participating limited partners or the former owners of our
Hull or Spear, Leeds & Kellogg subsidiaries to pledge, donate, sell or otherwise
transfer their shares of common stock. Any decision by our board of directors or
the shareholders' committee to waive the transfer restrictions would be based on
market conditions and other factors.
14
<PAGE> 17
USE OF PROCEEDS
All of the shares of our common stock offered by this prospectus will be
sold by charitable organizations. As a result, we will not receive any of the
proceeds from the sale of these shares.
PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS
Our common stock commenced trading on the New York Stock Exchange under the
symbol "GS" on May 4, 1999. Prior to that date, there was no public market for
our common stock. The following table sets forth, for the periods indicated, the
high and low closing prices per share for our common stock as reported by the
Consolidated Tape Association and the dividend declared per share of common
stock and nonvoting common stock:
<TABLE>
<CAPTION>
DIVIDEND
DECLARED
FISCAL YEAR 1999 HIGH LOW PER SHARE
---------------- ------- ------ ---------
<S> <C> <C> <C>
Second fiscal quarter (from May 4, 1999 to May 28, 1999).... $ 74.13 $64.50 --
Third fiscal quarter (May 29, 1999 to August 27, 1999)...... 72.25 55.81 $0.12
Fourth fiscal quarter (August 28, 1999 to November 26,
1999)..................................................... 82.81 57.69 0.12
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR 2000
----------------
<S> <C> <C> <C>
First fiscal quarter (November 27, 1999 to February 25,
2000)..................................................... 94.19 74.50 0.12
Second fiscal quarter (February 26, 2000 to May 26, 2000)... 121.31 69.81 0.12
Third fiscal quarter (May 27, 2000 to August 25, 2000)...... 120.75 72.00 0.12
Fourth fiscal quarter (August 26, 2000 to November 24,
2000)..................................................... 132.00 79.94 0.12
FISCAL YEAR 2001
------------------------------------------------------------
First fiscal quarter (November 25, 2000 through December 20,
2000)..................................................... 96.00 80.50 0.12(1)
</TABLE>
---------------
(1) This dividend is payable on February 22, 2001 to common stockholders of
record on January 22, 2001.
On December 20, 2000, the last reported sales price for our common stock on
the New York Stock Exchange was $90.00 per share. As of December 19, 2000, there
were 1,908 holders of record of our common stock.
The holders of our common stock share proportionately on a per share basis
in all dividends and other distributions declared by our board of directors.
The declaration of dividends by Goldman Sachs is subject to the discretion
of our board of directors. Our board of directors will take into account such
matters as general business conditions, our financial results, capital
requirements, contractual, legal and regulatory restrictions on the payment of
dividends by us to our shareholders or by our subsidiaries to us, the effect on
our debt ratings and such other factors as our board of directors may deem
relevant.
On March 20, 2000, our board of directors approved a common stock
repurchase program authorizing the repurchase of up to 15 million shares of our
common stock. The repurchase program will be effected from time to time,
depending on market conditions and other factors, through open market purchases
and privately negotiated transactions.
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<PAGE> 18
SELLING SHAREHOLDERS
Our board of directors and, in the case of our former profit participating
limited partners and their successors in interest, the shareholders' committee
under the shareholders' agreement will waive certain transfer restrictions in
order to permit our former profit participating limited partners and the former
owners of our Hull subsidiary and their respective successors in interest to
make charitable contributions of shares of common stock. See "Risk
Factors -- Our Share Price May Decline Due to the Large Number of Shares
Eligible for Future Sale" for a discussion of the transfer restrictions to be
waived by our board of directors and the shareholders' committee. These
charitable contributions may be made only to charitable foundations and public
charities that are charitable organizations as described in the Internal Revenue
Code, whether or not organized in the United States, and only after the date of
this prospectus. The charitable organizations that receive the contributions of
shares of common stock may sell some or all of those shares under this
prospectus from time to time and the charitable organizations making such sales
are the selling shareholders under this prospectus. See "Plan of Distribution"
for a description of the various ways in which those sales may occur.
The following table sets forth, as of the date of this prospectus, the
names of the charitable organizations that may be selling shareholders under
this prospectus and the maximum number of donated shares of common stock that
each such charitable organization may sell using this prospectus. To the best of
Goldman Sachs' knowledge, no charitable organization listed below beneficially
owns more than one percent of the outstanding shares of common stock either
before or after the sales contemplated by this prospectus. Each sale of shares
by any selling shareholder may, if required, be accompanied by a supplement to
this prospectus setting forth the name of the selling shareholder using that
prospectus supplement, the number of shares being sold and a supplemental plan
of distribution describing the specific manner of sale of those shares.
<TABLE>
<CAPTION>
SHARES COVERED
NAME OF SELLING SHAREHOLDER BY THIS PROSPECTUS
--------------------------- ------------------
<S> <C>
Brown University............................................ 4,150
Brunswick School, Inc. ..................................... 5,500
CAF Nominees Ltd. .......................................... 83,999
Carnegie Mellon University.................................. 3,000
Columbia University......................................... 5,500
Convent of the Sacred Heart................................. 1,000
Cornell University.......................................... 1,000
Dartmouth College........................................... 6,944
Deerfield Academy........................................... 8,049
Duke University............................................. 11,112
Fidelity Investments Charitable Gift Fund................... 104,758
First Presbyterian Church................................... 1,728
The Friends of The Indian School of Business (ISB), Inc. ... 3,000
Hamilton College............................................ 2,000
Harvard University.......................................... 5,222
Harvard-Westlake School..................................... 7,800
Horace Mann-Barnard School.................................. 2,000
The Institute for Contemporary Art, PS 1 Contemporary Art
Center, and the Clocktower Gallery........................ 3,150
Jewish Communal Fund of New York............................ 19,000
Keewaydin Foundation........................................ 2,000
Massachusetts Institute of Technology....................... 12,200
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
SHARES COVERED
NAME OF SELLING SHAREHOLDER BY THIS PROSPECTUS
--------------------------- ------------------
<S> <C>
Metropolitan Opera Association, Inc. ....................... 2,500
National Audubon Society, Inc. ............................. 2,000
Nature Conservancy, Inc. ................................... 20,333
New York City Ballet, Inc. ................................. 1,000
New York Presbyterian Hospital.............................. 10,000
Peregrine Fund, Inc. ....................................... 5,556
Pomona College.............................................. 1,250
Professional Children's School, Inc. ....................... 1,000
Riverdale Country School, Inc. ............................. 2,000
Sacred Heart Schools Atherton............................... 9,000
Salvation Army.............................................. 1,728
SHINE TRUST................................................. 10,000
Stanbridge Academy.......................................... 1,729
Stanford University......................................... 4,621
Summit School............................................... 2,500
Taft School Corp. .......................................... 1,000
Union College............................................... 2,500
Union of American Hebrew Congregations (UAHC)............... 1,000
United Jewish Appeal Federation -- Federation of Jewish
Philanthropies of New York, Inc. ......................... 1,000
University of Chicago....................................... 2,500
University of Virginia Darden School Foundation............. 3,150
Vanguard Charitable Endowment Program....................... 4,000
Private foundations established by directors and executive
officers of Goldman Sachs, as a group..................... 185,530
Other private foundations(1)................................ 1,825,313
---------
Total............................................. 2,394,322
=========
</TABLE>
---------------
(1)Includes 113 private foundations established by certain former profit
participating limited partners of The Goldman Sachs Group, L.P. and certain
former owners of our Hull subsidiary, some of whom are currently managing
directors of Goldman Sachs. Each of these foundations received a donation of
no more than 76,000 shares, and these foundations in the aggregate
beneficially own less than 1% of the outstanding shares of common stock.
17
<PAGE> 20
DESCRIPTION OF CAPITAL STOCK
Pursuant to our amended and restated certificate of incorporation, our
authorized capital stock consists of 4,350,000,000 shares, each with a par value
of $0.01 per share, of which:
- 150,000,000 shares are designated as preferred stock, none of which are
outstanding;
- 4,000,000,000 shares are designated as common stock, 483,474,693 shares
of which were outstanding as of November 24, 2000; and
- 200,000,000 shares are designated as nonvoting common stock, none of
which are outstanding.
All outstanding shares of common stock are validly issued, fully paid and
nonassessable.
The shareholders' agreement contains provisions relating to the voting and
disposition of certain shares of common stock. See "Risk Factors -- Our
Businesses May Be Adversely Affected by an Inability to Recruit, Retain and
Motivate Key Employees" and "-- Goldman Sachs Is Controlled by Its Managing
Directors Whose Interests May Differ from Those of Other Shareholders" for a
discussion of those provisions.
PREFERRED STOCK
Our authorized capital stock includes 150,000,000 shares of preferred
stock. Our board of directors is authorized to divide the preferred stock into
series and, with respect to each series, to determine the designations and the
powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, including the dividend rights, conversion or exchange
rights, voting rights, redemption rights and terms, liquidation preferences,
sinking fund provisions and the number of shares constituting the series. Our
board of directors could, without shareholder approval, issue preferred stock
with voting and other rights that could adversely affect the voting power of the
holders of common stock and which could have certain anti-takeover effects.
Subject to the rights of the holders of any series of preferred stock, the
number of authorized shares of any series of preferred stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
resolution adopted by our board of directors and approved by the affirmative
vote of the holders of a majority of the voting power of all outstanding shares
of capital stock entitled to vote on the matter, voting together as a single
class.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share owned of
record on all matters submitted to a vote of shareholders. There are no
cumulative voting rights. Accordingly, the holders of a plurality of the shares
of common stock voting for the election of directors can elect all the directors
if they choose to do so, subject to any voting rights of holders of preferred
stock to elect directors. For a discussion of the ability of the parties to the
shareholders' agreement to elect all of our directors, see "Risk
Factors -- Goldman Sachs Is Controlled by Its Managing Directors Whose Interests
May Differ from Those of Other Shareholders".
Subject to the preferential rights of any holders of any outstanding series
of preferred stock, the holders of common stock, together with the holders of
the nonvoting common stock, are entitled to such dividends and distributions,
whether payable in cash or otherwise, as may be declared from time to time by
our board of directors from legally available funds. Subject to the preferential
rights of holders of any outstanding series of preferred stock, upon our
liquidation, dissolution or winding-up and after payment of all prior claims,
the holders of common stock, with the shares of the common stock and the
nonvoting common stock being considered as a single class for this purpose, will
be entitled to receive pro rata all our assets. Any dividend in shares of common
stock paid on or with respect to shares of common stock may be paid only
18
<PAGE> 21
with shares of common stock. Other than the shareholder protection rights
discussed below, holders of common stock have no redemption or conversion rights
or preemptive rights to purchase or subscribe for securities of Goldman Sachs.
NONVOTING COMMON STOCK
The nonvoting common stock has the same rights and privileges as, ranks
equally and shares proportionately with, and is identical in all respects as to
all matters to, the common stock, except that the nonvoting common stock has no
voting rights other than those voting rights required by law.
SHAREHOLDER PROTECTION RIGHTS
Each share of common stock has attached to it a shareholder protection
right. The shareholder protection rights are currently represented only by the
certificates for the shares and will not trade separately from the shares unless
and until:
- it is announced by Goldman Sachs that a person or group has become the
beneficial owner of 15% or more of the outstanding common stock (other
than persons deemed to beneficially own common stock solely because they
are parties to the shareholders' agreement, members of the shareholders'
committee or certain other persons)(an "acquiring person"); or
- ten business days (or such later date as our board of directors may fix
by resolution) after the date a person or group commences a tender or
exchange offer that would result in such person or group becoming an
acquiring person.
If and when the shareholder protection rights separate and prior to the date of
the announcement by Goldman Sachs that any person has become an acquiring
person, each shareholder protection right will entitle the holder to purchase
1/100 of a share of Series A participating preferred stock for an exercise price
of $250. Each 1/100 of a share of Series A participating preferred stock would
have economic and voting terms equivalent to one share of common stock.
Upon the date of the announcement by Goldman Sachs that any person or group
has become an acquiring person, each shareholder protection right (other than
shareholder protection rights beneficially owned by the acquiring person or
their transferees, which shareholder protection rights become void) will entitle
its holder to purchase, for the exercise price, a number of shares of common
stock having a market value of twice the exercise price. Also, if, after the
date of the announcement by Goldman Sachs that any person has become an
acquiring person, the acquiring person controls our board of directors and:
- Goldman Sachs is involved in a merger or similar form of business
combination and (i) any term of the transaction provides for different
treatment of the shares of capital stock held by the acquiring person as
compared to the shares of capital stock held by all other shareholders or
(ii) the person with whom such transaction occurs is the acquiring person
or an affiliate thereof; or
- Goldman Sachs sells or transfers assets representing more than 50% of its
assets or generating more than 50% of its operating income or cash flow
to any person other than Goldman Sachs or its wholly owned subsidiaries,
then each shareholder protection right will entitle its holder to purchase, for
the exercise price, a number of shares of capital stock with the greatest voting
power in respect of the election of directors of either the acquiring person or
the other party to such transaction, depending on the circumstances of the
transaction, having a market value of twice the exercise price. If any person or
group acquires from 15% to and including 50% of the common stock, our board of
directors
19
<PAGE> 22
may, at its option, exchange each outstanding shareholder protection right,
except for those held by an acquiring person or their transferees, for one share
of common stock.
The shareholder protection rights may be redeemed by our board of directors
for $0.01 per shareholder protection right prior to the date of the announcement
by Goldman Sachs that any person has become an acquiring person. Our charter
permits this redemption right to be exercised by our board of directors (or
certain directors specified or qualified by the terms of the instrument
governing the shareholder protection rights).
The shareholder protection rights will not prevent a takeover of Goldman
Sachs. However, these rights may cause substantial dilution to a person or group
that acquires 15% or more of the common stock unless the shareholder protection
rights are first redeemed by our board of directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our charter provides that a director of Goldman Sachs will not be liable to
Goldman Sachs or its shareholders for monetary damages for breach of fiduciary
duty as a director, except in certain cases where liability is mandated by the
Delaware General Corporation Law. Our by-laws provide for indemnification, to
the fullest extent permitted by law, of any person made or threatened to be made
a party to any action, suit or proceeding by reason of the fact that such person
is or was a director or officer of Goldman Sachs, or is or was a director of a
subsidiary of Goldman Sachs, or is or was a member of the shareholders'
committee acting under the shareholders' agreement or, at the request of Goldman
Sachs, serves or served as a director or officer of or in any other capacity
for, or in relation to, any other enterprise, against all expenses, liabilities,
losses and claims actually incurred or suffered by such person in connection
with the action, suit or proceeding. Our by-laws also provide that, to the
extent authorized from time to time by our board of directors, Goldman Sachs may
provide to any one or more employees and other agents of Goldman Sachs or any
subsidiary or other enterprise, rights of indemnification and to receive payment
or reimbursement of expenses, including attorneys' fees, that are similar to the
rights conferred by the by-laws on directors and officers of Goldman Sachs or
any subsidiary or other enterprise.
CHARTER PROVISIONS APPROVING CERTAIN ACTIONS
Our charter provides that our board of directors may determine to take the
following actions, in its sole discretion, and Goldman Sachs and each
shareholder of Goldman Sachs will, to the fullest extent permitted by law, be
deemed to have approved and ratified, and waived any claim relating to, the
taking of any of these actions:
- causing Goldman Sachs to register with the SEC for resale shares of
common stock held by our directors, employees and former directors and
employees and our subsidiaries and affiliates and former partners and
employees of The Goldman Sachs Group, L.P. and its subsidiaries and
affiliates as discussed under "Risk Factors -- Our Share Price May
Decline Due to the Large Number of Shares Eligible for Future Sale"; and
- making payments to, and other arrangements with, certain former limited
partners of Goldman Sachs, including managing directors who were profit
participating limited partners, in order to compensate them for, or to
prevent, significantly disproportionate adverse tax or other consequences
arising out of our incorporation.
Our board of directors has exercised its authority under the charter
provision discussed above to grant registration rights to the selling
shareholders as described under "Plan of Distribution".
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<PAGE> 23
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Goldman Sachs is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or a transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who, together with affiliates and associates, owns (or, in certain
cases, within the preceding three years, did own) 15% or more of the
corporation's outstanding voting stock. Under Section 203, a business
combination between Goldman Sachs and an interested stockholder is prohibited
unless it satisfies one of the following conditions:
- prior to the time the stockholder became an interested stockholder, the
board of directors of Goldman Sachs must have previously approved either
the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- on consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of Goldman Sachs outstanding at the time
the transaction commenced (excluding, for purposes of determining the
number of shares outstanding, shares owned by persons who are directors
and officers); or
- the business combination is approved by the board of directors of Goldman
Sachs and authorized at an annual or special meeting of the stockholders
by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
Our board of directors has adopted a resolution providing that neither the
shareholders' agreement nor the voting agreements of Sumitomo Bank Capital
Markets, Inc. and Kamehameha Activities Association will create an "interested
stockholder".
CERTAIN ANTI-TAKEOVER MATTERS
Our charter and by-laws include a number of provisions that may have the
effect of encouraging persons considering unsolicited tender offers or other
unilateral takeover proposals to negotiate with our board of directors rather
than pursue non-negotiated takeover attempts. These provisions include:
CLASSIFIED BOARD OF DIRECTORS
Our charter provides for a board of directors divided into three classes,
with one class to be elected each year to serve for a three-year term. As a
result, at least two annual meetings of shareholders may be required for the
shareholders to change a majority of our board of directors. In addition, the
shareholders of Goldman Sachs can only remove directors for cause by the
affirmative vote of the holders of not less than 80% of the outstanding shares
of capital stock of Goldman Sachs entitled to vote in the election of directors.
Vacancies on our board of directors may be filled only by our board of
directors. The classification of directors and the inability of shareholders to
remove directors without cause or to fill vacancies on the board of directors
makes it more difficult to change the composition of our board of directors, but
promotes a continuity of existing management.
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<PAGE> 24
CONSTITUENCY PROVISION
In accordance with our charter, a director of Goldman Sachs may (but is not
required to) in taking any action (including an action that may involve or
relate to a change or potential change in control of Goldman Sachs) consider,
among other things, the effects that Goldman Sachs' actions may have on other
interests or persons (including its employees, former partners of The Goldman
Sachs Group, L.P. and the community) in addition to our shareholders.
ADVANCE NOTICE REQUIREMENTS
Our by-laws establish advance notice procedures with regard to shareholder
proposals relating to the nomination of candidates for election as directors or
new business to be brought before meetings of shareholders of Goldman Sachs.
These procedures provide that notice of such shareholder proposals must be
timely given in writing to the Secretary of Goldman Sachs prior to the meeting
at which the action is to be taken. Generally, to be timely, notice must be
received at the principal executive offices of Goldman Sachs not less than 90
days nor more than 120 days prior to the first anniversary date of the annual
meeting for the preceding year. The notice must contain certain information
specified in the by-laws.
NO ABILITY OF SHAREHOLDERS TO CALL SPECIAL MEETINGS
Our charter and by-laws deny shareholders the right to call a special
meeting of shareholders. Our charter and by-laws provide that special meetings
of the shareholders may be called only by a majority of the board of directors.
NO WRITTEN CONSENT OF SHAREHOLDERS
Our charter requires all shareholder actions to be taken by a vote of the
shareholders at an annual or special meeting, and does not permit our
shareholders to act by written consent, without a meeting.
MAJORITY VOTE NEEDED FOR SHAREHOLDER PROPOSALS
Our by-laws require that any shareholder proposal be approved by a majority
of all of the outstanding shares of common stock and not by only a majority of
the shares present at the meeting and entitled to vote. This requirement may
make it more difficult to approve shareholder resolutions.
AMENDMENT OF BY-LAWS AND CHARTER
Our charter requires the approval of not less than 80% of the voting power
of all outstanding shares of Goldman Sachs' capital stock entitled to vote to
amend any by-law by shareholder action or the charter provisions described in
this section. Those provisions make it more difficult to dilute the
anti-takeover effects of our by-laws and our charter.
BLANK CHECK PREFERRED STOCK
Our charter provides for 150,000,000 authorized shares of preferred stock.
The existence of authorized but unissued shares of preferred stock may enable
the board of directors to render more difficult or to discourage an attempt to
obtain control of Goldman Sachs by means of a merger, tender offer, proxy
contest or otherwise. For example, if in the due exercise of its fiduciary
obligations, the board of directors were to determine that a takeover proposal
is not in the best interests of Goldman Sachs, the board of directors could
cause shares of preferred stock to be issued without shareholder approval in one
or more private offerings or other transactions that might dilute the voting or
other rights of the proposed acquiror or insurgent shareholder or shareholder
group. In this regard, the charter grants our board of directors broad
22
<PAGE> 25
power to establish the rights and preferences of authorized and unissued shares
of preferred stock. The issuance of shares of preferred stock could decrease the
amount of earnings and assets available for distribution to holders of shares of
common stock. The issuance may also adversely affect the rights and powers,
including voting rights, of such holders and may have the effect of delaying,
deterring or preventing a change in control of Goldman Sachs.
LISTING
The common stock is listed on the NYSE.
TRANSFER AGENT
The transfer agent for the common stock is Mellon Investor Services, L.L.C.
23
<PAGE> 26
PLAN OF DISTRIBUTION
The selling shareholders, and their pledgees, donees, transferees or other
successors in interest, may offer and sell, from time to time, some or all of
the shares of common stock covered by this prospectus. We have registered the
shares of common stock covered by this prospectus for offer and sale by the
selling shareholders so that those shares may be freely sold to the public by
them. Registration of the shares of common stock covered by this prospectus does
not mean, however, that those shares necessarily will be offered or sold. We
will not receive any proceeds from any sale by the selling shareholders of the
securities. See "Use of Proceeds". We will pay all costs, expenses and fees in
connection with the registration of the shares of common stock, including fees
of our counsel and accountants, fees payable to the SEC and listing fees. We
estimate those fees and expenses to be approximately $400,000. The selling
shareholders will pay all underwriting discounts and commissions and similar
selling expenses, if any, attributable to the sale of the shares of common stock
covered by this prospectus.
The selling shareholders, including their pledgees, donees, transferees or
other successors in interest, may sell the shares of common stock covered by
this prospectus from time to time, at market prices prevailing at the time of
sale, at prices related to market prices, at a fixed price or prices subject to
change or at negotiated prices, by a variety of methods including the following:
- in privately negotiated transactions;
- through broker-dealers, who may act as agents or principals;
- in a block trade in which a broker-dealer will attempt to sell a block of
shares of common stock as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
- through one or more underwriters on a firm commitment or best-efforts
basis;
- directly to one or more purchasers;
- through agents; or
- in any combination of the above.
In effecting sales, brokers or dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate. Broker-dealer
transactions may include:
- purchases of the shares of common stock by a broker-dealer as principal
and resales of the shares of common stock by the broker-dealer for its
account pursuant to this prospectus;
- ordinary brokerage transactions; or
- transactions in which the broker-dealer solicits purchasers.
At any time a particular offer of the shares of common stock covered by
this prospectus is made, a revised prospectus or prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of
shares of common stock covered by this prospectus being offered and the terms of
the offering, including the name or names of any underwriters, dealers, brokers
or agents, any discounts, commissions, concessions and other items constituting
compensation from the selling shareholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such prospectus supplement,
and, if necessary, a post-effective amendment to the registration statement of
which this prospectus is a part, will be filed with the SEC to reflect the
disclosure of additional information with respect to the distribution of the
shares of common stock covered by this prospectus.
In connection with the sale of the shares of common stock covered by this
prospectus through underwriters, underwriters may receive compensation in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of shares of common stock for whom they may act as agent.
Underwriters may sell to or through dealers, and
24
<PAGE> 27
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent. Goldman, Sachs & Co., a subsidiary of The Goldman
Sachs Group, Inc., may be one such underwriter.
The common stock is listed on the NYSE under the symbol "GS".
Because Goldman, Sachs & Co. is a member of the NYSE and because of its
relationship to The Goldman Sachs Group, Inc., it is not permitted under the
rules of the NYSE to make markets in or recommendations regarding the purchase
or sale of the common stock.
Goldman, Sachs & Co. is a subsidiary of The Goldman Sachs Group, Inc., and
The Goldman Sachs Group, Inc. is the parent of Goldman, Sachs & Co. Rule 2720 of
the Conduct Rules of the National Association of Securities Dealers, Inc.
imposes certain requirements when an NASD member, such as Goldman, Sachs & Co.,
distributes an affiliated company's securities. Goldman, Sachs & Co. has advised
The Goldman Sachs Group, Inc. that each particular offering of securities in
which it participates will comply with the applicable requirements of Rule 2720,
including the requirement that no sales may be made to discretionary accounts by
any NASD member without the prior specific written approval of the customer.
Any underwriters, broker-dealers or agents participating in the
distribution of the shares of common stock covered by this prospectus may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions received by any of those underwriters, broker-dealers or
agents may be deemed to be underwriting commissions under the Securities Act of
1933.
In connection with the proposed donation of shares of common stock to
charitable foundations and public charities, our board of directors has
exercised its authority under our plan of incorporation and charter to adopt a
supplement to our existing registration rights instrument. The following is a
description of the material terms of the registration rights instrument, as so
supplemented. You should, however, refer to the exhibits that are a part of the
registration statement for a copy of the registration rights instrument and the
supplemental registration rights instrument. See "Available Information".
Pursuant to the registration rights instrument, as supplemented, we have
agreed to register the shares of common stock covered by this prospectus for
resale by charitable foundations and public charities. We have also agreed in
the registration rights instrument, as supplemented, to pay all of the fees and
expenses relating to the offering by the charitable organizations, other than
any agency fees and commissions or underwriting commissions or discounts or any
transfer taxes incurred by the charitable organizations in connection with their
resales, and have agreed to indemnify the charitable organizations against
certain liabilities, including those arising under the Securities Act of 1933.
We may amend the registration rights instrument and the supplemental
registration rights instrument in any manner we deem appropriate, without the
consent of any charitable organization. However, we may not make any amendment
that would cause the shares of common stock covered by this prospectus to fail
to be "qualified appreciated stock" within the meaning of Section 170 of the
Internal Revenue Code. In addition, we may not make any amendment that would
materially and adversely affect the rights of any charitable organization
without the consent of a majority of the materially and adversely affected
charitable organizations.
Some of the shares of common stock covered by this prospectus may be sold
in private transactions or under Rule 144 under the Securities Act of 1933
rather than pursuant to this prospectus.
25
<PAGE> 28
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby has been passed upon for
The Goldman Sachs Group, Inc. by Sullivan & Cromwell, New York, New York.
EXPERTS
The financial statements of Goldman Sachs as of November 26, 1999 and
November 27, 1998 and for each of the three years in the period ended November
26, 1999 incorporated by reference in this prospectus and the financial
statement schedule incorporated by reference in the registration statement have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The historical income statement, balance sheet and common share data
included in "Selected Consolidated Financial Data" for each of the five fiscal
years in the period ended November 26, 1999 incorporated by reference in this
prospectus have been so incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
With respect to the unaudited condensed consolidated financial statements
of Goldman Sachs as of and for the three and nine months ended August 25, 2000,
the three and six months ended May 26, 2000 and the three months ended February
25, 2000 and for the three and nine months ended August 27, 1999, the three and
six months ended May 28, 1999 and the three months ended February 26, 1999,
incorporated by reference in this prospectus, PricewaterhouseCoopers LLP
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports dated October 9, 2000, June 30, 2000 and April 5, 2000, respectively,
incorporated by reference herein state that they did not audit and they do not
express an opinion on the unaudited condensed consolidated financial statements.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their reports on the unaudited condensed
consolidated financial statements because each of these reports is not a
"report" or a "part" of the registration statement prepared or certified by
PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the
Securities Act of 1933.
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
We have included or incorporated by reference in this prospectus statements
that may constitute "forward-looking statements" within the meaning of the safe
harbor provisions of The Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts but instead represent only
our belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of our control. It is possible that our actual
results may differ, possibly materially, from the anticipated results indicated
in these forward-looking statements.
Information regarding important factors that could cause actual results to
differ, perhaps materially, from those in our forward-looking statements is
contained under the caption "Risk Factors" in this prospectus.
26
<PAGE> 29
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-------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................. 2
Risk Factors........................... 4
Use of Proceeds........................ 15
Price Range of Our Common Stock and
Dividends............................ 15
Selling Shareholders................... 16
Description of Capital Stock........... 18
Plan of Distribution................... 24
Validity of Common Stock............... 26
Experts................................ 26
Cautionary Statement Pursuant to The
Private Securities Litigation Reform
Act of 1995.......................... 26
</TABLE>
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2,394,322 Shares
THE GOLDMAN SACHS
GROUP, INC.
Common Stock
----------------------
[GOLDMAN SACHS LOGO]
----------------------
GOLDMAN, SACHS & CO.
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<PAGE> 30
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses to be incurred by
the Registrant in connection with the distribution of the securities registered
under this registration statement:
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 54,006
NASD fees................................................... 20,957
Legal fees and expenses..................................... 150,000
Fees and expenses of qualification under state securities
laws (including legal fees)............................... 10,000
Accounting fees and expenses................................ 10,000
Printing and engraving fees................................. 100,000
Miscellaneous............................................... 55,037
--------
Total............................................. $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee of or agent to the Registrant. The
statute provides that it is not exclusive of other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. Section 6.4 of the
Registrant's by-laws provides for indemnification by the Registrant of any
director or officer (as such term is defined in the by-laws) of the Registrant
who is or was a director of any of its subsidiaries, is or was a member of the
shareholders' committee (the composition of which is described in the prospectus
included in this registration statement) acting pursuant to the shareholders'
agreement (as defined in the prospectus included in this registration statement)
or, at the request of the Registrant, is or was serving as a director or officer
of, or in any other capacity for, any other enterprise, to the fullest extent
permitted by law. The by-laws also provide that the Registrant shall advance
expenses to a director or officer and, if reimbursement of such expenses is
demanded in advance of the final disposition of the matter with respect to which
such demand is being made, upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it is ultimately determined
that the director or officer is not entitled to be indemnified by the
Registrant. To the extent authorized from time to time by the board of directors
of the Registrant, the Registrant may provide to any one or more employees of
the Registrant, one or more officers, employees and other agents of any
subsidiary or one or more directors, officers, employees and other agents of any
other enterprise, rights of indemnification and to receive payment or
reimbursement of expenses, including attorneys' fees, that are similar to the
rights conferred in the by-laws of the Registrant on directors and officers of
the Registrant or any subsidiary or other enterprise. The by-laws do not limit
the power of the Registrant or its board of directors to provide other
indemnification and expense reimbursement rights to directors, officers,
employees, agents and other persons otherwise than pursuant to the by-laws. The
Registrant has entered into agreements with certain directors, officers and
employees who are asked to serve in specified capacities at subsidiaries and
other entities.
II-1
<PAGE> 31
The Registrant has entered into an agreement that provides indemnification
to its directors and officers and to the directors and certain officers of the
general partner of The Goldman Sachs Group, L.P., members of its Management
Committee or its Partnership Committee or the former Executive Committee of The
Goldman Sachs Group, L.P. and all other persons requested or authorized by the
Registrant's board of directors or the board of directors of the general partner
of The Goldman Sachs Group, L.P. to take actions on behalf of the Registrant,
The Goldman Sachs Group, L.P. or the general partner of The Goldman Sachs Group,
L.P. in connection with the plan of incorporation and certain registration
statements for all losses, damages, costs and expenses incurred by the
indemnified person arising out of the relevant registration statements or the
transactions contemplated by the plan of incorporation. The Registrant has also
entered into a similar indemnification agreement with its directors, some of its
officers and all other persons requested or authorized by the Registrant's board
of directors or any committee thereof to take actions on behalf of the
Registrant or as an attorney-in-fact in connection with this registration
statement, certain other registration statements and certain unregistered
offerings of securities. These agreements are in addition to the Registrant's
indemnification obligations under its by-laws.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payments of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant's amended and restated certificate of incorporation
provides for such limitation of liability.
Policies of insurance are maintained by the Registrant under which its
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
2.1 Plan of Incorporation.*
2.2 Agreement and Plan of Merger of The Goldman Sachs
Corporation into The Goldman Sachs Group, Inc.**
2.3 Agreement and Plan of Merger of The Goldman Sachs Group,
L.P. into The Goldman Sachs Group, Inc.**
2.4 Amended and Restated Agreement and Plan of Merger, dated as
of September 10, 2000, and amended and restated as of
October 31, 2000, among The Goldman Sachs Group, Inc., SLK
LLC and SLK Acquisition L.L.C.***
4.1 Specimen of certificate representing The Goldman Sachs
Group, Inc.'s common stock, par value $0.01 per share.*
4.2 Stockholder Protection Rights Agreement, dated as of April
5, 1999, between The Goldman Sachs Group, Inc. and
ChaseMellon Shareholder Services, L.L.C., as Rights
Agent.****
4.3 Registration Rights Instrument, dated as of December 10,
1999.*****
4.4 Form of Supplemental Registration Rights Instrument.******
5.1 Opinion of Sullivan & Cromwell, counsel to The Goldman Sachs
Group, Inc.
15.1 Letter re Unaudited Interim Financial Information.******
</TABLE>
II-2
<PAGE> 32
<TABLE>
<C> <S>
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Sullivan & Cromwell (included in Exhibit 5.1
above).
24.1 Power of Attorney.******
</TABLE>
---------------
* Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-1 (File No. 333-74449).
** Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-1 (File No. 333-75213).
*** Incorporated by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K (File No. 001-14965), filed on November 15, 2000.
**** Incorporated by reference to Exhibit 5 to the Registrant's registration
statement on Form 8-A (File No. 001-14965), filed on June 29, 1999.
***** Incorporated by reference to Exhibit G to Amendment No. 1 to Schedule 13D
(File No. 005-56295), filed on December 17, 1999, relating to the
Registrant's common stock.
****** Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) may be
reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if the change in volume represents no
more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities
II-3
<PAGE> 33
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement (No. 333-49958) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York on the
20th day of December, 2000.
THE GOLDMAN SACHS GROUP, INC.
By: /s/ GREGORY K. PALM
------------------------------------
Name: Gregory K. Palm
Title: General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement (No. 333-49958) has been signed by the
following persons in the capacities indicated on the 20th day of December, 2000:
<TABLE>
<CAPTION>
TITLE SIGNATURE
----- ---------
<S> <C>
Director, Chairman of the Board and
Chief Executive Officer (Principal Executive
Officer) *
----------------------------------------------
Henry M. Paulson, Jr.
Director and Vice Chairman *
----------------------------------------------
Robert J. Hurst
Director, President and Co-Chief Operating Officer *
----------------------------------------------
John A. Thain
Director, President and Co-Chief Operating Officer *
----------------------------------------------
John L. Thornton
Director *
----------------------------------------------
Sir John Browne
Director *
----------------------------------------------
John H. Bryan
Director *
----------------------------------------------
James A. Johnson
Director *
----------------------------------------------
Ruth J. Simmons
Director *
----------------------------------------------
John L. Weinberg
Chief Financial Officer (Principal Financial Officer) *
----------------------------------------------
David A. Viniar
Principal Accounting Officer *
----------------------------------------------
Sarah G. Smith
</TABLE>
* By: /s/ GREGORY K. PALM
----------------------------------------------------
Name:Gregory K. Palm
Attorney-in-Fact
II-5
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ------------------------------------------------------------ ------------
<C> <S> <C>
2.1 Plan of Incorporation.*
2.2 Agreement and Plan of Merger of The Goldman Sachs
Corporation into The Goldman Sachs Group, Inc.**
2.3 Agreement and Plan of Merger of The Goldman Sachs Group,
L.P. into The Goldman Sachs Group, Inc.**
2.4 Amended and Restated Agreement and Plan of Merger, dated as
of September 10, 2000, and amended and restated as of
October 31, 2000, among The Goldman Sachs Group, Inc., SLK
LLC and SLK Acquisition L.L.C.***
4.1 Specimen of certificate representing The Goldman Sachs
Group, Inc.'s common stock, par value $0.01 per share.*
4.2 Stockholder Protection Rights Agreement, dated as of April
5, 1999, between The Goldman Sachs Group, Inc. and
ChaseMellon Shareholder Services, L.L.C., as Rights
Agent.****
4.3 Registration Rights Instrument, dated as of December 10,
1999.*****
4.4 Form of Supplemental Registration Rights Instrument.******
5.1 Opinion of Sullivan & Cromwell, counsel to The Goldman Sachs
Group, Inc.
15.1 Letter re Unaudited Interim Financial Information.******
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Sullivan & Cromwell (included in Exhibit 5.1
above).
24.1 Power of Attorney.******
</TABLE>
---------------
* Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-1 (File No. 333-74449).
** Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-1 (File No. 333-75213).
*** Incorporated by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K (File No. 001-14965), filed on November 15, 2000.
**** Incorporated by reference to Exhibit 5 to the Registrant's registration
statement on Form 8-A (File No. 001-14965), filed on June 29, 1999.
***** Incorporated by reference to Exhibit G to Amendment No. 1 to Schedule 13D
(File No. 005-56295), filed on December 17, 1999, relating to the
Registrant's common stock.
****** Previously filed.
