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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-36178
Prospectus Supplement No. 157 to the Prospectus dated May 8, 2000
and the Prospectus Supplement dated May 10, 2000
[Goldman Sachs Logo]
$11,999,996.25
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
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5% Mandatory Exchangeable Note due 2001
(Subject to Mandatory Exchange for Common Stock of
EchoStar Communications Corporation)
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Each note being offered has the terms described beginning on page S-6, including
the following:
SUMMARY OF TERMS
ISSUER: The Goldman Sachs Group, Inc.
INDEX STOCK AND INDEX STOCK ISSUER: common stock of EchoStar Communications
Corporation.
FACE AMOUNT: Each note will have a face amount equal to $38.125, which is the
initial index stock price; $11,999,996.25 in the aggregate for all the offered
notes.
ORIGINAL ISSUE PRICE: 100% of the face amount
TRADE DATE: November 14, 2000
ORIGINAL ISSUE DATE (SETTLEMENT DATE): November 21, 2000
STATED MATURITY DATE: November 22, 2001, unless extended for up to six business
days
INTEREST RATE (COUPON): 5% each year
- interest payment dates: each February 22, May 22, August 22 and November 22,
beginning on February 22, 2001
- regular record dates: each February 7, May 7, August 7 and November 7
PRINCIPAL AMOUNT: on the stated maturity date, Goldman Sachs will exchange the
note for the index stock at the exchange rate or, at the option of Goldman
Sachs, for the cash value of that stock based on the final index stock price
EXCHANGE RATE: this rate will equal either:
- if the final index stock price equals or exceeds the threshold appreciation
price, a number of shares of the index stock equal to the threshold fraction
or
- if the final index stock price is less than the threshold appreciation price,
one share of the index stock,
for each $38.125 of the outstanding face amount, subject to antidilution
adjustment
INITIAL INDEX STOCK PRICE: $38.125 for one share of the index stock
FINAL INDEX STOCK PRICE: the closing price of one share of the index stock on
the determination date, subject to antidilution adjustment
THRESHOLD APPRECIATION PRICE: the initial index stock price times 2.20, which
equals $83.875
THRESHOLD FRACTION: the threshold appreciation price divided by the final index
stock price
LISTING: the note will not be listed on any securities exchange or quotation
system
NET PROCEEDS TO THE GOLDMAN SACHS GROUP, INC.: 99.90% of the face amount
CALCULATION AGENT: Goldman, Sachs & Co.
BUSINESS DAY: as described in the accompanying prospectus, but not a day on
which the principal securities market for the index stock is closed for
trading.
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See "Additional Risk Factors Specific to Your Note" beginning on page S-2 to
read about investment risks relating to the offered notes. The principal of the
offered notes is not protected.
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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 SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Goldman Sachs may use this prospectus supplement in the initial sale of the
offered notes. In addition, Goldman, Sachs & Co. or any other affiliate of
Goldman Sachs may use this prospectus supplement in a market-making transaction
in an offered note after its initial sale. UNLESS GOLDMAN SACHS OR ITS AGENT
INFORMS THE PURCHASER OTHERWISE IN THE CONFIRMATION OF SALE, THIS PROSPECTUS
SUPPLEMENT IS BEING USED IN A MARKET-MAKING TRANSACTION.
GOLDMAN, SACHS & CO.
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Prospectus Supplement dated November 14, 2000.
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ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTE
An investment in your note is subject to the risks described below, as well as
the risks described under "Considerations Relating to Indexed Securities" in the
accompanying prospectus dated May 8, 2000. Your note is a riskier investment
than ordinary debt securities. Also, your note is not equivalent to investing
directly in the stock to which your note is indexed. You should carefully
consider whether the offered notes are suited to your particular circumstances.
THE PRINCIPAL OF YOUR NOTE IS NOT PROTECTED
The principal of your note is not protected. Our payment to you on the
stated maturity date will be a number of shares of index stock, or its cash
equivalent, based on the final index stock price. Thus, you may lose your entire
investment in your note, depending on the closing price of the index stock on
the determination date.
THE POTENTIAL FOR THE VALUE OF YOUR NOTE TO
INCREASE IS LIMITED
Your ability to participate in any rise in the market value of the index
stock is limited. Because of the formula that we will use to determine the
payment amount, the amount you receive on the stated maturity date may result in
a lower return on your note than you would have received had you invested in the
index stock directly. In addition, the payment amount that you receive on the
stated maturity date will not exceed 220% of the face amount of your note, no
matter how high the market price of the index stock may rise.
THE MARKET PRICE OF YOUR NOTE MAY BE
INFLUENCED BY MANY UNPREDICTABLE FACTORS
The following factors, many of which are beyond our control, will
influence the value of your note:
- the market price of the index stock;
- the volatility -- i.e., the frequency and magnitude of changes in the market
price of the index stock;
-- As indicated under "EchoStar Communications Corporation -- Historical
Trading Price Information", the market price of the index stock has been
highly volatile during recent periods. It is impossible to predict whether
the price of the index stock will rise or fall;
- the dividend rate on the index stock;
- economic, financial, regulatory and political events that affect stock markets
generally and the market segment of which the index stock is a part, and which
may affect the market price of the index stock;
- interest and yield rates in the market;
- the time remaining until your note matures; and
- our creditworthiness.
These factors will influence the price you will receive if you sell your note
prior to maturity. You cannot predict the future performance of the index stock
based on its historical performance.
TRADING AND OTHER TRANSACTIONS BY
GOLDMAN SACHS IN THE INDEX STOCK MAY
IMPAIR THE VALUE OF YOUR NOTE
As we describe under "Use of Proceeds and Hedging" below, we, through
Goldman, Sachs & Co. or one or more of our other affiliates, have hedged our
obligations under the offered notes by purchasing the index stock or listed and
over-the-counter options on the index stock and may adjust the hedge by, among
other things, purchasing or selling the index stock or listed and
over-the-counter options on the index stock, at any time and from time to time.
Any of these hedging activities may adversely affect the price of the index
stock and, therefore, the value of your note. It is possible that we, through
our affiliates, could receive substantial returns with respect to our hedging
activities while the value of your note may decline. See "Use of Proceeds and
Hedging" for a further
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discussion of securities transactions in which we or one or more of our
affiliates may engage.
Goldman, Sachs & Co. and our other affiliates may also engage in trading
in the index stock for their proprietary accounts, for other accounts under
their management and to facilitate transactions, including block transactions,
on behalf of customers. Any of these activities of Goldman, Sachs & Co. or our
other affiliates could adversely affect the price of the index stock and,
therefore, the value of your note. Goldman, Sachs & Co. and our other affiliates
may also issue or underwrite other securities or financial or derivative
instruments with returns linked or related to changes in the value of the index
stock. By introducing competing products into the marketplace in this manner,
our affiliates could adversely affect the value of your note.
The indenture governing your note does not contain any restriction on our
ability or the ability of any of our affiliates to sell, pledge or otherwise
convey all or any portion of the index stock acquired by us or them. Neither we
nor our affiliates will pledge or otherwise hold shares of the index stock for
your benefit in order to enable you to exchange your note for shares under any
circumstances. Consequently, in the event of our bankruptcy, insolvency or
liquidation, any index stock owned by us will be subject to the claims of our
creditors generally and will not be available for your benefit specifically.
IF THE MARKET PRICE OF THE INDEX STOCK CHANGES, THE MARKET VALUE OF YOUR NOTE
MAY NOT CHANGE IN THE SAME MANNER
Your note may trade quite differently from the index stock. Changes in the
market price of the index stock may not result in comparable changes in the
market value of your note. Even if the market price of the index stock equals or
exceeds the threshold appreciation price specified on the front cover page, the
market value of your note will usually be less than the threshold appreciation
price prior to the stated maturity date.
YOU HAVE NO SHAREHOLDER RIGHTS
Investing in your note will not make you a holder of the index stock.
Neither you nor any other holder or owner of your note will have any voting
rights, any right to receive dividends or other distributions or any other
rights with respect to the index stock.
OUR BUSINESS ACTIVITIES MAY CREATE CONFLICTS OF INTEREST BETWEEN YOU AND US
As we have noted above, Goldman, Sachs & Co. and our other affiliates
expect to engage in trading activities related to the index stock that are not
for your account or on your behalf. These trading activities may present a
conflict between your interest in your note and the interests Goldman, Sachs &
Co. and our other affiliates will have in their proprietary accounts, in
facilitating transactions, including block trades, for their customers and in
accounts under their management. These trading activities, if they influence the
price of the index stock, could be adverse to your interests as a beneficial
owner of your note.
Goldman, Sachs & Co. and our other affiliates may, at present or in the
future, engage in business with the issuer of the index stock, including making
loans to or equity investments in that company or providing advisory services to
that company. These services could include merger and acquisition advisory
services. These activities may present a conflict between the obligations of
Goldman, Sachs & Co. or another affiliate of Goldman Sachs and your interests as
a beneficial owner of a note. Moreover, one or more of our affiliates have
published and in the future expect to publish research reports with respect to
the issuer of the index stock. Any of these activities by any of our affiliates
may affect the price of the index stock and, therefore, the value of your note.
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AS CALCULATION AGENT, GOLDMAN, SACHS & CO.
WILL HAVE THE AUTHORITY TO MAKE DETERMINATIONS THAT COULD AFFECT THE MARKET
VALUE OF YOUR NOTE, WHEN YOUR NOTE
MATURES AND THE AMOUNT YOU
RECEIVE AT MATURITY
As calculation agent for your note, Goldman, Sachs & Co. will have
discretion in making various determinations that affect your note, including
determining whether and how to make antidilution adjustments to the exchange
rate; determining the closing price of the index stock, which will be used to
calculate the exchange rate and the amount of cash we must pay at the stated
maturity if we choose not to deliver index stock; and determining whether to
postpone the stated maturity date because of a market disruption event. See
"Specific Terms of Your Note -- Antidilution Adjustments" and "-- Special
Calculation Provisions" below. The exercise of this discretion by Goldman, Sachs
& Co. could adversely affect the value of your note and may present Goldman,
Sachs & Co. with a conflict of interest of the kind described above under
"-- Our Business Activities May Create Conflicts of Interest Between You and Us"
above.
THERE IS NO AFFILIATION BETWEEN THE INDEX
STOCK ISSUER AND US, AND WE ARE NOT
RESPONSIBLE FOR THE INDEX STOCK
ISSUER'S DISCLOSURE
Goldman Sachs is not affiliated with the issuer of the index stock. As we
have told you above, however, we or our affiliates may currently or from time to
time in the future engage in business with the index stock issuer. Nevertheless,
neither we nor any of our affiliates assumes any responsibility for the adequacy
or accuracy of the information about the index stock issuer contained in this
prospectus supplement or in any of the index stock issuer's publicly available
filings. You, as an investor in your note, should make your own investigation
into the index stock issuer. See "EchoStar Communications Corporation" below for
additional information about the index stock issuer.
The index stock issuer has not authorized or approved your note in any way
and has no financial or legal obligation with respect to your note. Thus, the
index stock issuer has no obligation to take your interests into consideration
for any reason, including in taking any corporate actions that might affect the
value of your note.
YOUR NOTE MAY NOT HAVE
AN ACTIVE TRADING MARKET
We do not plan to have your note listed on any securities exchange or
included in any quotation system, and there may be little or no secondary market
for your note. Even if a secondary market for your note develops, it may not
provide significant liquidity and we expect that transaction costs in any
secondary market would be high. As a result, the difference between bid and
asked prices for your note in any secondary market could be substantial.
YOU HAVE LIMITED ANTIDILUTION PROTECTION
Goldman, Sachs & Co., as calculation agent for your note, will adjust the
exchange rate for stock splits, reverse stock splits, stock dividends,
extraordinary dividends and other events that affect the index stock issuer's
capital structure, but only in the situations we describe in "Specific Terms of
Your Note -- Antidilution Adjustments". The calculation agent is not required to
make an adjustment for every corporate event that may affect the index stock.
For example, the calculation agent will not adjust the exchange rate for events
such as an offering of the index stock for cash by the index stock issuer, a
tender or exchange offer for the index stock at a premium to its then-current
market price by the index stock issuer or a tender or exchange offer for less
than all the outstanding index stock by a third party. Those events may
nevertheless adversely affect the market price of the index stock and,
therefore, adversely affect the value of your note. The index stock issuer or a
third party could make an offering or a tender or exchange offer, or the index
stock issuer could take any other action, that adversely affects the value of
the index stock and your note but does not result in an antidilution adjustment
for your benefit.
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WE CAN POSTPONE THE STATED MATURITY DATE
IF A MARKET DISRUPTION EVENT OCCURS
If the calculation agent determines that, on the determination date, a
market disruption event has occurred or is continuing, the determination date
will be postponed until the first business day on which no market disruption
event occurs or is continuing. As a result, the stated maturity date for your
note will also be postponed, although not by more than five business days. Thus,
you may not receive the cash or the index stock that we are obligated to deliver
on the stated maturity date until several days after the originally scheduled
due date. Moreover, if the closing price of the index stock is not available on
the determination date because of a continuing market disruption event or for
any other reason, the calculation agent will nevertheless determine the final
index stock price based on its assessment, made in its sole discretion, of the
market value of the index stock at that time.
THE TAX CONSEQUENCES OF AN INVESTMENT
IN YOUR NOTE ARE HIGHLY UNCERTAIN
The tax consequences of an investment in your note are highly uncertain,
both as to the timing and character of any inclusion in income in respect of
your note. We discuss these matters below under "Supplemental Discussion of
Federal Income Tax Consequences" below.
CERTAIN CONSIDERATIONS FOR INSURANCE
COMPANIES AND EMPLOYEE BENEFIT PLANS
Any insurance company or fiduciary of a pension plan or other employee
benefit plan that is subject to the prohibited transaction rules of the Employee
Retirement Income Security Act of 1974, as amended, which we call "ERISA", or
the Internal Revenue Code of 1986, as amended, including an IRA or a Keogh plan
(or a governmental plan to which similar prohibitions apply), and that is
considering purchasing the offered notes with the assets of the insurance
company or the assets of such a plan, should consult with its counsel regarding
whether the purchase or holding of the offered notes could become a "prohibited
transaction" under ERISA, the Internal Revenue Code or any substantially similar
prohibition in light of the representations a purchaser or holder in any of the
above categories is deemed to make by purchasing and holding the offered notes.
This is discussed in more detail under "Employee Retirement Income Security Act"
below.
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SPECIFIC TERMS OF YOUR NOTE
Please note that in this section entitled "Specific Terms of Your Note",
references to "The Goldman Sachs Group, Inc.", "we", "our" and "us" mean only
The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries,
while references to "Goldman Sachs" mean The Goldman Sachs Group, Inc. together
with its consolidated subsidiaries. References to "holders" mean those who own
notes registered in their own names, on the books that we or the trustee
maintain for this purpose, and not indirect holders who own beneficial interests
in notes registered in street name or in notes issued in book-entry form through
The Depository Trust Company. Please review the special considerations that
apply to indirect holders in the accompanying prospectus, under "Legal Ownership
and Book-Entry Issuance". Also, references to the "accompanying prospectus" mean
the accompanying Prospectus dated May 8, 2000, as supplemented by the
accompanying Prospectus Supplement dated May 10, 2000, of The Goldman Sachs
Group, Inc.
We refer to the notes offered in this prospectus supplement, including
your note, as the offered notes. The offered notes are part of a series of debt
securities, entitled "Medium-Term Notes, Series B", that we may issue under the
indenture from time to time. This prospectus supplement summarizes specific
financial and other terms that apply to the offered notes, including your note;
terms that apply generally to all Series B medium-term notes are described in
"Description of Notes We May Offer" in the accompanying prospectus. The terms
described here supplement those described in the accompanying prospectus and, if
the terms described here are inconsistent with those described there, the terms
described here are controlling.
In addition to those described on the front cover page, the following
terms will apply to your note:
SPECIFIED CURRENCY:
- principal: U.S. dollars
- interest: U.S. dollars
NO LISTING: your note will not be listed on any securities exchange or
quotation system
FORM OF NOTE:
- global form only: yes, at DTC
- non-global form available: no
DENOMINATIONS: the face amount of each note will be the initial index
stock price
DEFEASANCE APPLIES AS FOLLOWS:
- full defeasance: no
- covenant defeasance: no
OTHER TERMS:
- the default amount will be payable on any acceleration of the maturity of your
note as described below under "-- Special Calculation Provisions"
- antidilution provisions will apply to your note as described below under
"-- Antidilution Adjustments"
- a business day for your note will not be the same as a business day for our
other Series B medium-term notes, as described below under "-- Special
Calculation Provisions"
In this prospectus supplement, when we refer to the index stock, we mean the
common stock of EchoStar Communications Corporation and, when we refer to the
index stock issuer, we mean that company, except as noted below under
"-- Antidilution Adjustments -- Reorganization Events -- Distribution Property".
Please note that the information about the original issue date, original
issue price and net proceeds to The Goldman Sachs Group, Inc. on the front cover
page relates only to the initial sale of the notes. If you have purchased your
note in a market-making transaction after the initial sale, information
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about the price and date of sale to you will be provided in a separate
confirmation of sale.
We describe the terms of your note in more detail below.
PAYMENT OF PRINCIPAL ON STATED MATURITY DATE
On the stated maturity date, we will exchange your note for shares of the
index stock at the exchange rate. Alternatively, at our sole option, we may pay
cash in an amount equal to the number of shares of the index stock we would
otherwise be obligated to deliver in exchange for your note, multiplied by the
final index stock price. If we choose to deliver cash, we will notify the holder
of our election at least one business day prior to the determination date; IF WE
DO NOT NOTIFY THE HOLDER, WE WILL DELIVER SHARES OF THE INDEX STOCK, EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED UNDER "-- CONSEQUENCES OF A MARKET
DISRUPTION EVENT".
EXCHANGE RATE
The exchange rate will equal either:
- if the final index stock price equals or exceeds the threshold appreciation
price, a number of shares of index stock equal to the threshold fraction for
each $38.125 of the outstanding face amount of your note; or
- if the final index stock price is less than the threshold appreciation price,
one share of index stock for each $38.125 of the outstanding face amount of
your note.
We specify the initial index stock price, final index stock price, threshold
appreciation price and threshold fraction on the front cover of this prospectus
supplement.
The exchange rate may be adjusted, with respect to both the amount and
type of consideration, as a result of dilution events, as we describe below
under "-- Antidilution Adjustments". In addition, if an exchange would otherwise
involve a fractional share of the index stock, we will pay cash instead of the
fractional share, in an amount equal to that fraction multiplied by the final
index stock price.
The shares of the index stock, together with any cash payable for a
fractional share and after giving effect to any antidilution adjustments, that
we must deliver on the stated maturity date in exchange for your note represent
the principal amount of your note, unless we elect to deliver cash. In that
event, the cash we must pay in exchange for your note on the stated maturity
date represents the principal amount of your note.
STATED MATURITY DATE
The stated maturity date will be November 22, 2001, unless that day is not
a business day, in which case the stated maturity date will be the next
following business day. If the fifth business day before this applicable day is
not the determination date referred to below, however, then the stated maturity
date will be the fifth business day following the determination date, provided
that the stated maturity date will never be later than the fifth business day
after November 22, 2001 or, if November 22, 2001 is not a business day, later
than the sixth business day after November 22, 2001. The calculation agent may
postpone the determination date -- and therefore the stated maturity date -- if
a market disruption event occurs or is continuing on a day that would otherwise
be the determination date. We describe market disruption events below under
"-- Special Calculation Provisions".
DETERMINATION DATE
The determination date will be the fifth business day prior to November
22, 2001, unless the calculation agent determines that a market disruption event
occurs or is continuing on that fifth prior business day. In that event, the
determination date will be the first following business day on which the
calculation agent determines that a market disruption event does not occur and
is not continuing. In no event, however, will the determination date be later
than November 22, 2001 or, if November 22, 2001 is not a business day, later
than the first business day after November 22, 2001.
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CONSEQUENCES OF A MARKET DISRUPTION EVENT
As indicated above, if a market disruption event occurs or is continuing
on a day that would otherwise be the determination date, then the determination
date will be postponed to the next following business day on which a market
disruption event does not occur and is not continuing. In no event, however,
will the determination date be postponed by more than five business days. If the
determination date is postponed to the last possible day but a market disruption
event occurs or is continuing on that day, that day will nevertheless be the
determination date. If the final index stock price that must be used to
determine the exchange rate (and, if we elect not to deliver index stock on the
stated maturity date, the cash value of that stock) is not available on the
determination date, either because of a market disruption event or for any other
reason, the calculation agent will nevertheless determine the final index stock
price based on its assessment, made in its sole discretion, of the market value
of the index stock on that day.
In addition, if a market disruption event occurs or is continuing on the
determination date or on any later day through and including the stated maturity
date, we may choose to pay cash instead of delivering index stock on the stated
maturity date, even if we have not notified the holder of our election to pay
cash as described above in this section entitled "-- Payment of Principal on
Stated Maturity Date".
INTEREST PAYMENTS
Interest will accrue on the outstanding face amount of your note and will
be calculated and paid as described in the accompanying prospectus with regard
to fixed rate notes, except that the interest payment and regular record dates
will be those specified on the front cover of this prospectus supplement.
If the stated maturity date does not occur on November 22, 2001, however,
the interest payment date scheduled for November 22, 2001 will instead occur on
the stated maturity date.
ANTIDILUTION ADJUSTMENTS
The calculation agent will adjust the exchange rate as described below,
but only if an event described under one of the six subsections beginning with
"-- Stock Splits" below occurs and only if the relevant event occurs during the
period described under the applicable subsection.
The adjustments described below do not cover all events that could affect
the exchange rate, such as an issuer tender or exchange offer for the index
stock at a premium to its market price or a tender or exchange offer made by a
third party for less than all outstanding shares of the index stock. We describe
the risks relating to dilution above under "Additional Risk Factors Specific to
Your Note -- You Have Limited Antidilution Protection".
HOW ADJUSTMENTS WILL BE MADE
In this prospectus supplement, we refer to antidilution adjustment of the
exchange rate. If an event requiring antidilution adjustment occurs, the
calculation agent will make the adjustment by taking the following steps:
- STEP ONE. The calculation agent will adjust the reference amount. This term
refers to the amount of the index stock or other property for which the final
index stock price is to be determined on the determination date. For example,
if no adjustment is required, the final index stock price will be the closing
price of one share of the index stock on the determination date. In that case,
the reference amount will be one share of the index stock. We describe how the
closing price will be determined below under "-- Special Calculation
Provisions".
If an adjustment is required because of one of the dilution events described in
the first five subsections below -- these involve stock splits, reverse stock
splits, stock dividends, other dividends and distributions and issuances of
transferable rights and warrants -- then the final index stock price might
instead be, for example, the closing price, on the determination date, of two
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shares of the index stock or a half share of the index stock, depending on the
event. In that example, the adjusted reference amount would be two shares of the
index stock or one half share of the index stock, as applicable.
If an adjustment is required because of one of the reorganization events
described in "-- Reorganization Events" below -- these involve events in which
cash, securities or other property is distributed in respect of the index
stock -- then the final index stock price will be as follows, assuming there has
been no prior antidilution adjustment: the value, on the determination date, of
the property distributed in the reorganization event in respect of one share of
the index stock, plus one share of the index stock if the index stock remains
outstanding. In that case, the adjusted reference amount will be the property so
distributed plus one share of the index stock, if applicable. In addition, on
the stated maturity date, your note will be exchangeable for the kind or kinds
of property comprising the adjusted reference amount, or the cash value of that
property, as described in more detail below under "-- Reorganization Events".
The manner in which the calculation agent adjusts the reference amount in step
one will depend on the type of dilution event requiring adjustment. These events
and the nature of the required adjustments are described in the six subsections
that follow.
- STEP TWO. Having adjusted the reference amount in step one, the calculation
agent will determine the final index stock price, which will be the closing
price of the adjusted reference amount on the determination date. If a
reorganization event occurs, the final index stock price will be the value of
the adjusted reference amount as determined by the calculation agent in the
manner described below under "-- Reorganization Events".
- STEP THREE. Having determined the final index stock price in step two, the
calculation agent will use this price to calculate the threshold fraction and
will use this fraction to calculate the exchange rate.
- STEP FOUR. Having calculated the exchange rate in step three, the calculation
agent will multiply this rate by the reference amount as adjusted in step one.
The resulting rate will be the number of shares of the index stock that will
be exchangeable on the stated maturity date for each $38.125 of the
outstanding face amount of your note.
- STEP FIVE. If we elect to deliver cash to the holder on the stated maturity
date, the amount we deliver will equal the cash value of the index stock that
we would otherwise deliver, based on the adjusted rate calculated in step
four. The calculation agent will determine the cash value of that stock by
multiplying the number of shares involved by the closing price for one share
on the determination date, rather than by the final index stock price, which
will be the closing price for the adjusted reference amount. If your note
would be exchangeable for property other than the index stock because of a
reorganization event, then the calculation agent will determine the cash value
of that property in the manner described below under "-- Reorganization
Events".
If more than one event requiring adjustment occurs, the calculation agent
will first adjust the reference amount as described in step one above for each
event, sequentially, in the order in which the events occur, and on a cumulative
basis. Thus, having adjusted the reference amount for the first event, the
calculation agent will repeat step one for the second event, applying the
required adjustment to the reference amount as already adjusted for the first
event, and so on for each event. Having adjusted the reference amount for all
events, the calculation agent will then take the remaining applicable steps in
the process described above, determining the final index stock price, the
threshold fraction and the adjusted exchange rate using the reference amount as
sequentially and cumulatively adjusted for all the relevant events. The
calculation agent will make all required determinations and adjustments no later
than the determination date.
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The calculation agent will adjust the exchange rate for each
reorganization event described in "-- Reorganization Events" below. For any
other dilution event described below, however, the calculation agent will not
have to adjust the exchange rate unless the adjustment would result in a change
of at least 0.1% in the exchange rate that would apply without the adjustment.
The exchange rate resulting from any adjustment will be rounded up or down, as
appropriate, to the nearest ten-thousandth, with five hundred-thousandths being
rounded upward -- e.g., 0.12344 will be rounded down to 0.1234 and 0.12345 will
be rounded up to 0.1235.
If an event requiring antidilution adjustment occurs, the calculation
agent will make the adjustment with a view to offsetting, to the extent
practical, any change in the economic position of the holder and The Goldman
Sachs Group, Inc., relative to your note, that results solely from that event.
The calculation agent may, in its sole discretion, modify the antidilution
adjustments as necessary to ensure an equitable result.
The calculation agent will make all determinations with respect to
antidilution adjustments, including any determination as to whether an event
requiring adjustment has occurred, as to the nature of the adjustment required
and how it will be made or as to the value of any property distributed in a
reorganization event, and will do so in its sole discretion. In the absence of
manifest error, those determinations will be conclusive for all purposes and
will be binding on you and us, without any liability on the part of the
calculation agent. The calculation agent will provide information about the
adjustments it makes upon written request by the holder.
In this prospectus supplement, when we say that the calculation agent will
adjust the exchange rate for one or more dilution events, we mean that the
calculation agent will take all the applicable steps described above with
respect to those events.
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Regardless of the antidilution adjustments that may apply to your note,
the cash or index stock you receive on the stated maturity date, valued as
of the determination date, will not under any circumstances exceed the
threshold appreciation price for each $38.125 of the outstanding face
amount of your note.
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The following six subsections describe the dilution events for which the
exchange rate is to be adjusted. Each subsection describes the manner in which
the calculation agent will adjust the reference amount -- the first step in the
adjustment process described above -- for the relevant event.
STOCK SPLITS
A stock split is an increase in the number of a corporation's outstanding
shares of stock without any change in its stockholders' equity. Each outstanding
share will be worth less as a result of a stock split.
If the index stock is subject to a stock split, then the calculation agent
will adjust the reference amount to equal the sum of the prior reference amount
-- i.e., the reference amount before that adjustment -- plus the product of (1)
the number of new shares issued in the stock split with respect to one share of
the index stock times (2) the prior reference amount. The reference amount --
and thus the exchange rate -- will not be adjusted, however, unless the first
day on which the index stock trades without the right to receive the stock split
occurs after the date of this prospectus supplement and on or before the
determination date.
REVERSE STOCK SPLITS
A reverse stock split is a decrease in the number of a corporation's
outstanding shares of stock without any change in its stockholders' equity. Each
outstanding share will be worth more as a result of a reverse stock split.
If the index stock is subject to a reverse stock split, then once the
reverse stock split becomes effective, the calculation agent will
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<PAGE> 11
adjust the reference amount to equal the product of the prior reference amount
and the quotient of (1) the number of shares of the index stock outstanding
immediately after the reverse stock split becomes effective divided by (2) the
number of shares of the index stock outstanding immediately before the reverse
stock split becomes effective. The reference amount -- and thus the exchange
rate -- will not be adjusted, however, unless the reverse stock split becomes
effective after the date of this prospectus supplement and on or before the
determination date.
STOCK DIVIDENDS
In a stock dividend, a corporation issues additional shares of its stock
to all holders of its outstanding stock in proportion to the shares they own.
Each outstanding share will be worth less as a result of a stock dividend.
If the index stock is subject to a stock dividend, then the calculation
agent will adjust the reference amount to equal the sum of the prior reference
amount plus the product of (1) the number of shares issued in the stock dividend
with respect to one share of the index stock times (2) the prior reference
amount. The reference amount -- and thus the exchange rate -- will not be
adjusted, however, unless the ex-dividend date occurs after the date of this
prospectus supplement and on or before the determination date.
The ex-dividend date for any dividend or other distribution is the first
day on which the index stock trades without the right to receive that dividend
or other distribution.
OTHER DIVIDENDS AND DISTRIBUTIONS
The reference amount will not be adjusted to reflect dividends or other
distributions paid with respect to the index stock, other than:
- stock dividends described above,
- issuances of transferable rights and warrants as described in "-- Transferable
Rights and Warrants" below,
- distributions that are spin-off events described in "-- Reorganization Events"
below, and
- extraordinary dividends described below.
A dividend or other distribution with respect to the index stock will be
deemed to be an extraordinary dividend if its per share value exceeds that of
the immediately preceding non-extraordinary dividend, if any, for the index
stock by an amount equal to at least 10% of the closing price of the index stock
on the first business day before the ex-dividend date.
If an extraordinary dividend occurs, the calculation agent will adjust the
reference amount to equal the product of (1) the prior reference amount times
(2) a fraction, the numerator of which is the closing price of the index stock
on the business day before the ex-dividend date and the denominator of which is
the amount by which that closing price exceeds the extraordinary dividend
amount. The reference amount -- and thus the exchange rate -- will not be
adjusted, however, unless the ex-dividend date occurs after the date of this
prospectus supplement and on or before the determination date.
The extraordinary dividend amount with respect to an extraordinary
dividend for the index stock equals:
- for an extraordinary dividend that is paid in lieu of a regular quarterly
dividend, the amount of the extraordinary dividend per share of the index
stock minus the amount per share of the immediately preceding dividend, if
any, that was not an extraordinary dividend for the index stock, or
- for an extraordinary dividend that is not paid in lieu of a regular quarterly
dividend, the amount per share of the extraordinary dividend.
To the extent an extraordinary dividend is not paid in cash, the value of
the non-cash component will be determined by the calculation agent. A
distribution on the index stock that is a stock dividend, an issuance of
transferable rights or warrants or a spin-off event and also an extraordinary
dividend will result in an adjust-ment to the exchange rate only as described in
"-- Stock Dividends" above, "-- Transferable Rights and Warrants" below or
"-- Reorganization
S-11
<PAGE> 12
Events" below, as the case may be, and not as described here.
TRANSFERABLE RIGHTS AND WARRANTS
If the index stock issuer issues transferable rights or warrants to all
holders of the index stock to subscribe for or purchase index stock at an
exercise price per share that is less than the closing price of the index stock
on the business day before the ex-dividend date for the issuance, then the
reference amount will be adjusted by multiplying the prior reference amount by
the following fraction:
- the numerator will be the number of shares of the index stock outstanding at
the close of business on the day before that ex-dividend date plus the number
of additional shares of the index stock offered for subscription or purchase
under those transferable rights or warrants, and
- the denominator will be the number of shares of the index stock outstanding at
the close of business on the day before that ex-dividend date plus the number
of additional shares of the index stock that the aggregate offering price of
the total number of shares of the index stock so offered for subscription or
purchase would purchase at the closing price of the index stock on the
business day before that ex-dividend date, with that number of additional
shares being determined by multiplying the total number of shares so offered
by the exercise price of those transferable rights or warrants and dividing
the resulting product by the closing price on the business day before that ex-
dividend date.
The reference amount -- and thus the exchange rate -- will not be adjusted,
however, unless the ex-dividend date described above occurs after the date of
this prospectus supplement and on or before the determination date.
REORGANIZATION EVENTS
Each of the following is a reorganization event:
- the index stock is reclassified or changed,
- the index stock issuer has been subject to a merger, consolidation or other
combination and either is not the surviving entity or is the surviving entity
but all the outstanding index stock is exchanged for or converted into other
property,
- a statutory share exchange involving the outstanding index stock and the
securities of another entity occurs, other than as part of an event described
above,
- the index stock issuer sells or otherwise transfers its property and assets as
an entirety or substantially as an entirety to another entity,
- the index stock issuer effects a spin-off -- that is, issues to all holders of
the index stock equity securities of another issuer, other than as part of an
event described above,
- the index stock issuer is liquidated, dissolved or wound up or is subject to a
proceeding under any applicable bankruptcy, insolvency or other similar law,
or
- another entity completes a tender or exchange offer for all the outstanding
index stock.
ADJUSTMENTS FOR REORGANIZATION EVENTS. If a reorganization event occurs,
then the calculation agent will adjust the reference amount so that it consists
of each type of distribution property distributed in respect of one share of the
index stock -- or in respect of whatever the prior reference amount may be -- in
the reorganization event, taken together. We define the term "distribution
property" below. For purposes of the five-step adjustment process described
above under "-- How Adjustments Will Be Made", the distribution property so
distributed will be the adjusted reference amount described in step one, the
value of that property on the determination date will be the final index stock
price described in step two and the calculation agent will determine and adjust
the exchange rate based on these items as described in steps three and four.
Consequently, if a reorganization event occurs, your note will be
exchangeable on the stated maturity date as follows:
- If we do not elect to exchange your note for cash, we will deliver to the
holder, for
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<PAGE> 13
each $38.125 of the outstanding face amount, each type of distribution
property distributed in the reorganization event in respect of the prior
reference amount.
- If we elect to exchange your note for cash, we will pay the holder, for every
$38.125 of the outstanding face amount, cash in an amount equal to the value
of each type of distribution property distributed in the reorganization event
in respect of the prior reference amount.
For the purpose of making an adjustment required by a reorganization
event, the calculation agent will determine the value of each type of
distribution property, in its sole discretion. For any distribution property
consisting of a security, the calculation agent will use the closing price for
the security on the determination date. The calculation agent may value other
types of property in any manner it determines, in its sole discretion, to be
appropriate. If more than one type of distribution property is involved, the
reference amount will be adjusted so that your note is exchangeable for each
type, or for the cash value of each type, in the same proportion as the value of
each type bears to the total value of the distribution property distributed in
respect of the prior reference amount. If a holder of the index stock may elect
to receive different types or combinations of types of distribution property in
the reorganization event, the distribution property will consist of the types
and amounts of each type distributed to a holder that makes no election, as
determined by the calculation agent in its sole discretion.
If a reorganization event occurs and the calculation agent adjusts the
reference amount to consist of the distribution property distributed in the
event, as described above, the calculation agent will make further antidilution
adjustments for later events that affect the distribution property, or any
component of the distribution property, comprising the new reference amount. The
calculation agent will do so to the same extent that it would make adjustments
if the index stock were outstanding and were affected by the same kinds of
events. If a subsequent reorganization event affects only a particular component
of the reference amount, the required adjustment will be made with respect to
that component, as if it alone were the reference amount.
For example, if the index stock issuer merges into another company and
each share of the index stock is converted into the right to receive two common
shares of the surviving company and a specified amount of cash, the reference
amount will be adjusted to consist of two common shares and the specified amount
of cash. The calculation agent will adjust the common share component of the new
reference amount to reflect any later stock split or other event, including any
later reorganization event, that affects the common shares of the surviving
company, to the extent described in this subsection entitled "-- Antidilution
Adjustments" as if the common shares were the index stock. In that event, the
cash component will not be adjusted but will continue to be a component of the
reference amount. Consequently, the final index stock price used to calculate
the adjusted exchange rate will be the total value, as determined by the
calculation agent on the determination date, of all components of the reference
amount, with each component having been adjusted on a sequential and cumulative
basis for all relevant events requiring adjustment on or before the
determination date.
The calculation agent will not make any adjustment for a reorganization
event, how-ever, unless the event becomes effective -- or, if the event is a
spin-off, unless the ex-dividend date for the spin-off occurs -- after the date
of this prospectus supplement and on or before the determination date.
DISTRIBUTION PROPERTY. When we refer to distribution property, we mean
the cash, securities and other property or assets distributed in a
reorganization event in respect of one outstanding share of the index
stock -- or in respect of whatever the applicable reference amount may then be
if any antidilution adjustment has been made in respect of a prior event. In the
case of a spin-off, the distribution property also includes one share of the
index stock -- or other applicable reference amount -- in respect of which the
distribution is made.
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<PAGE> 14
If a reorganization event occurs, the distribution property distributed in
the event will be substituted for the index stock as described above.
Consequently, in this prospectus supplement, when we refer to the index stock,
we mean any distribution property that is distributed in a reorganization event
and comprises the adjusted reference amount. Similarly, when we refer to the
index stock issuer, we mean any successor entity in a reorganization event.
DEFAULT AMOUNT ON ACCELERATION
If an event of default occurs and the maturity of your note is
accelerated, we will pay the default amount in respect of the principal of your
note at the maturity. We describe the default amount below under "-- Special
Calculation Provisions".
For the purpose of determining whether the holders of our Series B
medium-term notes, which include the offered notes, are entitled to take any
action under the indenture, we will treat the outstanding face amount of each
offered note as the outstanding principal amount of that note. Although the
terms of the offered notes differ from those of the other Series B medium-term
notes, holders of specified percentages in principal amount of all Series B
medium-term notes, together in some cases with other series of our debt
securities, will be able to take action affecting all the Series B medium-term
notes, including the offered notes. This action may involve changing some of the
terms that apply to the Series B medium-term notes, accelerating the maturity of
the Series B medium-term notes after a default or waiving some of our
obligations under the indenture. We discuss these matters in the accompanying
prospectus under "Description of Debt Securities We May Offer -- Default,
Remedies and Waiver of Default" and "-- Modification of the Indentures and
Waiver of Covenants".
MANNER OF PAYMENT AND DELIVERY
Any payment or delivery on your note at maturity will be made to an
account designated by the holder of your note and approved by us, or at the
office of the trustee in New York City, but only when your note is surrendered
to the trustee at that office. We may pay interest due on any interest payment
date by check mailed to the person who is the holder on the regular record date.
We also may make any payment or delivery in accordance with the applicable
procedures of the depositary. We may make any delivery of index stock or
distribution property ourselves or cause our agent to do so on our behalf.
MODIFIED BUSINESS DAY
As described in the accompanying prospectus, any payment on your note that
would otherwise be due on a day that is not a business day may instead be paid
on the next day that is a business day, with the same effect as if paid on the
original due date. The same will apply to any delivery of the index stock that
would otherwise be due on a day that is not a business day. For your note,
however, the term business day has a different meaning than it does for other
Series B medium-term notes. We discuss this term under "-- Special Calculation
Provisions" below.
ROLE OF CALCULATION AGENT
The calculation agent will make all determinations regarding the exchange
rate, antidilution adjustments, market disruption events, the final stock index
price or other value of the index stock, the default amount and the amount of
the index stock, cash or distribution property to be delivered in exchange for
your note. Absent manifest error, all determinations of the calculation agent
will be final and binding on you and us, without any liability on the part of
the calculation agent.
Please note that the firm named as the calculation agent in this
prospectus supplement is the firm serving in that role as of the original issue
date of your note. We may change the calculation agent after the original issue
date without notice.
SPECIAL CALCULATION PROVISIONS
BUSINESS DAY
When we refer to a business day with respect to your note, we mean a day
that is a business day of the kind described in the accompanying prospectus but
that is not a
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<PAGE> 15
day on which the principal securities market for the index stock is authorized
by law or executive order to close.
CLOSING PRICE
The closing price for any security on any day will equal the closing sale
price or last reported sale price, regular way, for the security, on a per-share
or other unit basis:
- on the principal national securities exchange on which that security is listed
for trading on that day, or
- if that security is not listed on any national securities exchange, on the
Nasdaq National Market System on that day, or
- if that security is not quoted in the Nasdaq National Market System on that
day, on any other U.S. national market system that is the primary market for
the trading of that security.
If that security is not listed or traded as described above, then the closing
price for that security on any day will be the average, as determined by the
calculation agent, of the bid prices for the security obtained from as many
dealers in that security selected by the calculation agent as will make those
bid prices available to the calculation agent. The number of dealers need not
exceed three and may include the calculation agent or any of its or our
affiliates.
DEFAULT AMOUNT
The default amount for your note on any day will be an amount, in the
specified currency for the principal of your note, equal to the cost of having a
qualified financial institution, of the kind and selected as described below,
expressly assume all our payment and other obligations with respect to your note
as of that day and as if no default or acceleration had occurred, or to
undertake other obligations providing substantially equivalent economic value to
you with respect to your note. That cost will equal:
- the lowest amount that a qualified financial institution would charge to
effect this assumption or undertaking, plus
- the reasonable expenses, including reasonable attorneys' fees, incurred by the
holder of your note in preparing any documentation necessary for this
assumption or undertaking.
During the default quotation period for your note, which we describe below, the
holder and/or we may request a qualified financial institution to provide a
quotation of the amount it would charge to effect this assumption or
undertaking. If either party obtains a quotation, it must notify the other party
in writing of the quotation. The amount referred to in the first bullet point
above will equal the lowest -- or, if there is only one, the only -- quotation
obtained, and as to which notice is so given, during the default quotation
period. With respect to any quotation, however, the party not obtaining the
quotation may object, on reasonable and significant grounds, to the assumption
or undertaking by the qualified financial institution providing the quotation
and notify the other party in writing of those grounds within two business days
after the last day of the default quotation period, in which case that quotation
will be disregarded in determining the default amount.
DEFAULT QUOTATION PERIOD. The default quotation period is the period
beginning on the day the default amount first becomes due and ending on the
third business day after that day, unless:
- no quotation of the kind referred to above is obtained or
- every quotation of that kind obtained is objected to within five business days
after the due day as described above.
If either of these two events occurs, the default quotation period will continue
until the third business day after the first business day on which prompt notice
of a quotation is given as described above. If that quotation is objected to as
described above within five business days after that first business day,
however, the default quotation period will continue as described in the prior
sentence and this sentence.
In any event, if the default quotation period and the subsequent two
business day objection period have not ended before the determination date, then
the default amount will equal the principal amount of your note.
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<PAGE> 16
QUALIFIED FINANCIAL INSTITUTIONS. For the purpose of determining the
default amount at any time, a qualified financial institution must be a
financial institution organized under the laws of any jurisdiction in the United
States of America, Europe or Japan, which at that time has outstanding debt
obligations with a stated maturity of one year or less from the date of issue
and rated either:
- A-1 or higher by Standard & Poor's Ratings Group or any successor, or any
other comparable rating then used by that rating agency, or
- P-1 or higher by Moody's Investors Service, Inc. or any successor, or any
other comparable rating then used by that rating agency.
MARKET DISRUPTION EVENT
Any of the following will be a market disruption event:
- a suspension, absence or material limitation of trading in the index stock on
its primary market for more than two hours of trading or during the one-half
hour before the close of trading in that market, as determined by the
calculation agent in its sole discretion, or
- a suspension, absence of trading or material limitation of trading in option
contracts relating to the index stock, if available, in the primary market for
those contracts for more than two hours of trading or during the one-half hour
before the close of trading in that market, as determined by the calculation
agent in its sole discretion, or
- the index stock does not trade on what was the primary market for the index
stock, as determined by the calculation agent in its sole discretion,
and, in any of these events, the calculation agent determines in its sole
discretion that the event materially interferes with the ability of The Goldman
Sachs Group, Inc. or any of its affiliates to unwind all or a material portion
of a hedge with respect to the offered notes that we or our affiliates have
effected or may effect as described under "Use of Proceeds and Hedging" below.
The following events will not be market disruption events:
- a limitation on the hours or numbers of days of trading, but only if the
limitation results from an announced change in the regular business hours of
the relevant market, and
- a decision to permanently discontinue trading in the option contracts relating
to the index stock.
For this purpose, an "absence of trading" in the primary securities market
on which option contracts related to the index stock are traded will not include
any time when that market is itself closed for trading under ordinary
circumstances. In contrast, a suspension or limitation of trading in option
contracts related to the index stock, if available, in the primary market for
those contracts, by reason of:
- a price change exceeding limits set by that market, or
- an imbalance of orders relating to those contracts, or
- a disparity in bid and ask quotes relating to those contracts
will constitute a suspension or material limitation of trading in option
contracts related to the index stock in the primary market for those contracts.
In this subsection about market disruption events, references to the index
stock include securities that are part of any adjusted reference amount, as
determined by the calculation agent in its sole discretion.
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<PAGE> 17
HYPOTHETICAL RETURNS ON YOUR NOTE
The table below sets forth the number of shares of index stock that would
be delivered (or the cash value of which would be delivered) for each $38.125
face amount of your note on the stated maturity date if the final index stock
price were one of the hypothetical prices set forth below. For this purpose, we
have assumed that there will be no antidilution adjustments to the exchange rate
and no market disruption events.
The table below assumes that no dividends will be paid on the index stock.
We do not know, however, whether or to what extent the issuer of the index stock
will pay dividends in the future. These are matters that will be determined by
the issuer of the index stock and not by us. Consequently, the amount of
dividends actually paid on the index stock by its issuer, and, therefore, the
rate of return on the index stock, during the life of the offered notes may
differ substantially from the information reflected in the table below.
The following table is provided for purposes of illustration only. It
should not be taken as an indication or prediction of future investment results
and is intended merely to illustrate the impact that various hypothetical market
prices on the determination date could have on the exchange rate.
<TABLE>
<CAPTION>
HYPOTHETICAL FINAL NUMBER OF SHARES
INDEX STOCK PRICE OF INDEX STOCK
------------------ ----------------
<S> <C>
98.125 0.8548
93.125 0.9007
88.125 0.9518
83.125 1.0000
78.125 1.0000
73.125 1.0000
68.125 1.0000
63.125 1.0000
58.125 1.0000
53.125 1.0000
48.125 1.0000
43.125 1.0000
38.125 1.0000
33.125 1.0000
28.125 1.0000
23.125 1.0000
18.125 1.0000
</TABLE>
For information about the market price of the index stock in recent periods, see
"EchoStar Communications Corporation -- Historical Trading Price Information"
below.
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We cannot predict the market price of the index stock or, therefore, the
final index stock price or the exchange rate. Consequently, the number of
shares that will be delivered (or the cash value of which will be
delivered) in respect of your note on the stated maturity date may be very
different from the information reflected in the table above.
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<PAGE> 18
USE OF PROCEEDS AND HEDGING
We will use the net proceeds we receive from the sale of the offered notes
for the purposes we describe in the accompanying prospectus under "Use of
Proceeds". We or our affiliates may also use those proceeds in transactions
intended to hedge our obligations under the offered notes as described below.
In anticipation of the sale of the offered notes, we and/or our affiliates
entered into hedging transactions involving purchases of the index stock or
listed and over-the-counter options on the index stock. From time to time, we
and/or our affiliates may enter into additional hedging transactions or unwind
those we have entered into. In this regard, we and/or our affiliates may:
- acquire or dispose of the index stock or other securities of the index stock
issuer,
- take short positions in the index stock or other securities of the index stock
issuer -- i.e., we and/or our affiliates may sell securities of the kind that
we do not own or that we borrow for delivery to purchaser,
- take or dispose of positions in listed or over-the-counter options or other
instruments based on the index stock, and/or
- take or dispose of positions in listed or over-the-counter options or other
instruments based on indices designed to track the performance of the New York
Stock Exchange or other components of the U.S. equity market.
We and/or our affiliates may acquire a long or short position in securities
similar to your note from time to time and may, in our or their sole discretion,
hold or resell those securities.
We and/or our affiliates may close out our or their hedge on or before the
determination date. That step may involve sales or purchases of the index stock,
listed or over-the-counter options on the index stock or listed or
over-the-counter options or other instruments based on indices designed to track
the performance of the New York Stock Exchange or other components of the U.S.
equity market.
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The hedging activity discussed above may adversely affect the market value
of your note from time to time. See "Additional Risk Factors Specific to
Your Note -- Trading and Other Transactions by Goldman Sachs in the Index
Stock May Impair the Value of Your Note" and "-- Our Business Activities
May Create Conflicts of Interest Between You and Us" for a discussion of
these adverse effects.
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ECHOSTAR COMMUNICATIONS CORPORATION
According to publicly available documents, EchoStar Communications
Corporation operates a direct broadcast satellite subscription television
service in the United States. It also designs, manufactures, distributes, and
sells set-top boxes, antennae, and other digital equipment, and delivers video,
audio, and data services to business television customers and other satellite
users.
WHERE INFORMATION ABOUT THE INDEX STOCK ISSUER CAN BE OBTAINED
The index stock is registered under the Securities Exchange Act of 1934.
Companies with securities registered under the Exchange Act are required to file
financial and other information specified by the SEC periodically. Information
filed with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at:
- Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
- Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661,
and
- Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of this material can also be obtained from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, information filed by the index stock issuer with the SEC
electronically can be reviewed through a web site maintained by the SEC. The
address of the SEC's web site is http://www.sec.gov. Information filed with the
SEC by the index stock issuer under the Exchange Act can be located by reference
to its SEC file number: 0-26176.
Information about the index stock issuer may also be obtained from other
sources such as press releases, newspaper articles and other publicly
disseminated documents.
We do not make any representation or warranty as to the accuracy or
completeness of any materials referred to above, including any filings made by
the index stock issuer with the SEC.
WE OBTAINED THE INFORMATION ABOUT THE INDEX STOCK ISSUER IN THIS PROSPECTUS
SUPPLEMENT FROM THE INDEX STOCK ISSUER'S PUBLIC FILINGS
This prospectus supplement relates only to your note and does not relate
to the index stock or other securities of the index stock issuer. We have
derived all information about the index stock issuer in this prospectus
supplement from the publicly available documents referred to in the preceding
subsection. We have not participated in the preparation of any of those
documents or made any "due diligence" investigation or any inquiry of the index
stock issuer with respect to the index stock issuer in connection with the
offering of your note. We do not make any representation that the publicly
available documents or any other publicly available information about the index
stock issuer are accurate or complete. Furthermore, we do not know whether all
events occurring before the date of this prospectus supplement -- including
events that would affect the accuracy or completeness of the publicly available
documents referred to above, the trading price of the index stock and,
therefore, the exchange rate -- have been publicly disclosed. Subsequent
disclosure of any events of this kind or the disclosure of or failure to
disclose material future events concerning the index stock issuer could affect
the value you will receive at maturity and, therefore, the market value of your
note.
Neither we nor any of our affiliates make any representation to you as to
the performance of the index stock.
We or any of our affiliates may currently or from time to time engage in
business with the index stock issuer, including making loans to or equity
investments in the index stock issuer or providing advisory services to the
index stock issuer, including merger and acquisition advisory services. In the
course of that business, we or any of our affiliates may acquire non-public
information about the index stock issuer and, in addition, one or more of our
affiliates may publish research reports about the index stock issuer. As an
investor in a note, you should undertake such
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<PAGE> 20
independent investigation of the index stock issuer as in your judgment is
appropriate to make an informed decision with respect to an investment in a
note.
HISTORICAL TRADING PRICE INFORMATION
The index stock is traded on the Nasdaq National Market under the symbol
"DISH". The following table sets forth the quarterly high, low and closing bid
quotations for the index stock as reported on the Nasdaq National Market. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and do not necessarily represent actual transactions. The
information given below is for the four calendar quarters of each of 1998 and
1999 and for the four calendar quarters in 2000, through November 14, 2000. We
obtained the trading price information set forth below from Bloomberg Financial
Services, without independent verification.
You should not take the historical prices of the index stock as an
indication of future performance. We cannot give you any assurance that the
price of the index stock will increase sufficiently for you to receive an amount
in excess of, or even equal to, the face amount of your note at maturity. As
discussed above under "Additional Risk Factors Specific to Your Note", the
principal of your note is not protected.
Because the payment amount on your note is linked to the price of the
index stock on the determination date and is to be determined under a formula
that caps the rate of return, the principal of your note is not protected and
the rate of return on your note may be less than that on the index stock over a
comparable period. See "Additional Risk Factors Specific to Your Note -- The
Principal of Your Note Is Not Protected."
<TABLE>
<CAPTION>
HIGH LOW CLOSE
------- ------- -------
<S> <C> <C> <C>
1998
Quarter ended March 31.................................... 2.8906 2.0625 2.7344
Quarter ended June 30..................................... 3.8516 2.8281 3.0000
Quarter ended September 30................................ 3.6875 2.1875 2.9531
Quarter ended December 31................................. 6.0391 2.4688 6.0391
1999
Quarter ended March 31.................................... 10.1719 5.7344 10.1719
Quarter ended June 30..................................... 19.7656 10.0000 19.1797
Quarter ended September 30................................ 24.2344 14.1719 22.7031
Quarter ended December 31................................. 48.6250 22.2500 48.6250
2000
Quarter ending March 31................................... 79.0000 40.6875 79.0000
Quarter ended June 30..................................... 74.1875 31.1875 33.1094
Quarter ended September 30................................ 53.4219 31.6250 52.7500
Quarter ended December 31 (through November 14, 2000)..... 54.1250 36.0625 36.0625
Closing Bid Price on November 14, 2000.................... 36.0625
</TABLE>
S-20
<PAGE> 21
SUPPLEMENTAL DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
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The following section supplements the discussion of U.S. federal income
taxation in the accompanying prospectus with respect to United States
holders.
The following section is the opinion of Sullivan & Cromwell, counsel to
The Goldman Sachs Group, Inc. In addition, it is the opinion of Sullivan &
Cromwell that the characterization of the note for U.S. federal income tax
purposes that will be required under the terms of the note, as discussed
below, is a reasonable interpretation of current law. No statutory,
judicial or administrative authority directly discusses how your note
should be treated for U.S. federal income tax purposes and, as a result,
the U.S. federal income tax consequences of your investment in your note
are highly uncertain. Because of the uncertainty, you should consult your
tax advisor in determining the U.S. federal income tax and other tax
consequences of your investment in the note, including the application of
state, local or other tax laws and the possible effects of changes in
federal or other tax laws.
--------------------------------------------------------------------------------
You will be obligated pursuant to the terms of the note -- in the absence
of an administrative determination or judicial ruling to the contrary -- to
characterize your note for all tax purposes as a forward contract to purchase
the index stock at the stated maturity date, under the terms of which contract:
(1) at the time of issuance of your note you deposit irrevocably with us a
fixed amount of cash equal to the purchase price of your note to assure the
fulfillment of your purchase obligation described in clause (3) below,
which deposit will unconditionally and irrevocably be applied at the stated
maturity date to satisfy that obligation,
(2) until the stated maturity date we will be obligated to pay interest on the
deposit at a rate equal to the stated rate of interest on your note as
compensation to you for our use of the cash deposit during the term of the
note, and
(3) at the stated maturity date the cash deposit unconditionally and
irrevocably will be applied by us in full satisfaction of your obligation
under the forward purchase contract, and we will deliver to you the number
of shares of the index stock -- or, at our option, an amount of cash equal
to the value of the shares of the index stock -- that you are entitled to
receive at that time pursuant to the terms of your note.
Although you will be obligated to treat the payment of the purchase price for
your note as a deposit for U.S. federal income tax purposes, the cash proceeds
that we receive from this offering will not be segregated by us during the term
of your note, but instead will be commingled with our other assets.
Consistent with the above characterization, amounts paid to us in respect
of the original issue of your note will be treated as allocable in their
entirety to the amount of the cash deposit attributable to your note, and
amounts denominated as interest that are payable with respect to your note will
be characterized as interest payable on the amount of the deposit, includible
annually in your income in accordance with your method of accounting.
If your note is characterized as described above, your tax basis in your
note generally would equal your cost for your note. Upon the sale or exchange of
your note, you would recognize gain or loss equal to the difference between the
amount realized on the sale or exchange and your tax basis in your note. The
gain or loss generally will be long-term capital gain or loss, except to the
extent attributable to accrued but unpaid interest, if you hold the note for
more than one year. If we elect to deliver shares of the index stock at the
stated maturity date, you will not recognize gain or loss on the purchase of the
stock. You would have a tax basis in the index stock equal to your tax basis in
your note, less the portion of the tax
S-21
<PAGE> 22
basis of your note allocable to any fractional share, as described in the next
sentence, and would have a holding period in the index stock beginning on the
date after the stated maturity date. You would recognize short-term capital gain
or loss with respect to cash received in lieu of fractional shares, in an amount
equal to the difference between the cash received and the portion of the basis
of your note allocable to fractional shares. If we deliver cash at the stated
maturity date, you will generally recognize long-term capital gain or loss equal
to the difference between the amount of cash received and your tax basis in the
note.
There is no judicial or administrative authority discussing how your note
should be treated for U.S. federal income tax purposes. Therefore, the Internal
Revenue Service might assert that treatment other than that described above is
more appropriate. For example, the Internal Revenue Service could treat your
note as a single debt instrument subject to special rules governing contingent
payment obligations. Under those rules, the amount of interest you are required
to take into account for each accrual period would be determined by constructing
a projected payment schedule for the note and applying rules similar to those
for accruing original issue discount on a hypothetical noncontingent debt
instrument with that projected payment schedule. This method is applied by first
determining the comparable yield -- i.e., the yield at which we would issue a
noncontingent fixed rate debt instrument with terms and conditions similar to
your note -- and then determining a payment schedule as of the issue date that
would produce the comparable yield. These rules may have the effect of requiring
you to include interest in income in respect of your note prior to your receipt
of cash attributable to that income.
If the rules governing contingent payment obligations apply, you will
recognize gain or loss upon the sale or maturity of your note -- including if
you receive index stock at that time -- in an amount equal to the difference, if
any, between the fair market value of the amount you receive at that
time -- which, in the case of the index stock, will equal the fair market value
of the index stock at the stated maturity date -- and your adjusted basis in
your note. In general, your adjusted basis in your note will equal the amount
you paid for your note, increased by the amount of interest you previously
accrued with respect to your note, in accordance with the comparable yield and
the projected payment schedule for your note, and decreased by the amount of
interest payments you received with respect to your note. Your holding period in
any index stock you receive upon the maturity of your note will begin on the day
after the stated maturity date.
If the rules governing contingent payment obligations apply, any gain you
recognize upon the sale or maturity of your note will be ordinary interest
income. Any loss you recognize at that time will be ordinary loss to the extent
of interest you included as income in the current or previous taxable years in
respect of your note, and thereafter, as capital loss.
It is possible that the Internal Revenue Service could seek to
characterize your note in a manner that results in tax consequences to you
different from those described above. For example, the Internal Revenue Service
could seek to allocate less than all the amounts you paid for your note to the
cash deposit described above and treat the cash deposit as a debt instrument
acquired at a discount. In that case, you would be required to include such
original issue discount in income as it accrues in addition to stated interest
on your note. You should consult your tax advisors as to possible alternative
characterizations of your note for U.S. federal income tax purposes.
S-22
<PAGE> 23
EMPLOYEE RETIREMENT INCOME SECURITY ACT
This section is only relevant to you if you are an insurance company or
the fiduciary of a pension plan or an employee benefit plan (including a
governmental plan, an IRA or a Keogh Plan) proposing to invest in the offered
notes.
The Employee Retirement Income Security Act of 1974, as amended, which we
call "ERISA" and the Internal Revenue Code of 1986, as amended, prohibit certain
transactions involving the assets of an employee benefit plan and certain
persons who are "parties in interest" (within the meaning of ERISA) or
"disqualified persons" (within the meaning of the Internal Revenue Code) with
respect to the plan; governmental plans may be subject to similar prohibitions.
Therefore, a plan fiduciary considering purchasing notes should consider whether
the purchase or holding of such instruments might constitute a "prohibited
transaction".
The Goldman Sachs Group, Inc. and certain of its affiliates each may be
considered a "party in interest" or a "disqualified person" with respect to many
employee benefit plans by reason of, for example, The Goldman Sachs Group, Inc.
(or its affiliate) providing services to such plans. Prohibited transactions
within the meaning of ERISA or the Internal Revenue Code may arise, for example,
if notes are acquired by or with the assets of a pension or other employee
benefit plan that is subject to the fiduciary responsibility provisions of ERISA
or Section 4975 of the Internal Revenue Code (including individual retirement
accounts and other plans described in Section 4975(e)(1) of the Internal Revenue
Code), which we call a "Plan", and with respect to which The Goldman Sachs
Group, Inc. or any of its affiliates is a "party in interest" or a "disqualified
person", unless those notes are acquired under an exemption for transactions
effected on behalf of that plan by a "qualified professional asset manager" or
an "in-house asset manager", for transactions involving insurance company
general accounts or under another available exemption. The person making the
decision on behalf of a Plan or a governmental plan shall be deemed, on behalf
of itself and the Plan, by purchasing and holding the offered notes, to
represent that such purchase and holding of the offered notes will not result in
a non-exempt prohibited transaction under ERISA or the Internal Revenue Code
(or, with respect to a governmental plan, under any similar applicable law or
regulation).
--------------------------------------------------------------------------------
If you are an insurance company or the fiduciary of a pension plan or an
employee benefit plan, and propose to invest in the offered notes, you
should consult your legal counsel.
--------------------------------------------------------------------------------
S-23
<PAGE> 24
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Goldman Sachs Group, Inc. has agreed to sell to Goldman, Sachs & Co.,
and Goldman, Sachs & Co. has agreed to purchase from The Goldman Sachs Group,
Inc., the face amount of the offered notes specified on the front cover of this
prospectus supplement. Goldman, Sachs & Co. intends to resell the offered notes
at the original issue price. In the future, Goldman, Sachs & Co. or other
affiliates of The Goldman Sachs Group, Inc. may repurchase and resell the
offered notes in market-making transactions, with resales being made at prices
related to prevailing market prices at the time of resale or at negotiated
prices. For more information about the plan of distribution and possible
market-making activities, see "Plan of Distribution" in the accompanying
prospectus.
NOTICE TO INVESTORS IN SINGAPORE
Notes may not be offered or sold, nor may any document or other material
in connection with the notes be issued, circulated or distributed, either
directly or indirectly, to persons in Singapore other than (i) under
circumstances in which the offer or sale does not constitute an offer or sale of
the notes to the public in Singapore or (ii) to persons whose ordinary business
it is to buy or sell shares or debentures, whether as principal or agent.
S-24
<PAGE> 25
------------------------------------------------------------
------------------------------------------------------------
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 or a solicitation of an offer to buy the securities it describes, 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
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Risk Factors Specific to Your
Note......................................... S-2
Specific Terms of Your Note.................... S-6
Hypothetical Returns on Your Note.............. S-17
Use of Proceeds and Hedging.................... S-18
EchoStar Communications Corporation............ S-19
Supplemental Discussion of Federal Income Tax
Consequences................................. S-21
Employee Retirement Income Security Act........ S-23
Supplemental Plan of Distribution.............. S-24
Prospectus Supplement dated May 10, 2000
Use of Proceeds................................ S-2
Description of Notes We May Offer.............. S-3
United States Taxation......................... S-20
Employee Retirement Income Security Act........ S-20
Supplement Plan of Distribution................ S-20
Validity of the Notes.......................... S-21
Prospectus
Available Information.......................... ii
Prospectus Summary............................. 1
Ratio of Earnings to Fixed Charges............. 4
Description of Debt Securities We May Offer.... 5
Description of Warrants We May Offer........... 27
Description of Purchase Contracts We May
Offer........................................ 33
Description of Units We May Offer.............. 38
Description of Preferred Stock We May Offer.... 43
Legal Ownership and Book-Entry Issuance........ 50
Considerations Relating to Securities Issued in
Bearer Form.................................. 56
Considerations Relating to Indexed
Securities................................... 60
Considerations Relating to Securities
Denominated or Payable in or Linked to a Non-
U.S. Dollar Currency......................... 62
United States Taxation......................... 65
Plan of Distribution........................... 83
Employee Retirement Income Security Act........ 86
Validity of the Securities..................... 86
Experts........................................ 86
Cautionary Statement Pursuant to the Private
Securities Litigation Reform Act of 1995..... 87
</TABLE>
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$11,999,996.25
THE GOLDMAN SACHS
GROUP, INC.
5% Mandatory Exchangeable
Note due 2001
(Subject to Mandatory Exchange for
Common Stock of EchoStar
Communications Corporation)
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[GOLDMAN SACHS LOGO]
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GOLDMAN, SACHS & CO.
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