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0000950123-09-001278.txt : 20090127
0000950123-09-001278.hdr.sgml : 20090127
20090127060328
ACCESSION NUMBER: 0000950123-09-001278
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 40
CONFORMED PERIOD OF REPORT: 20081128
FILED AS OF DATE: 20090127
DATE AS OF CHANGE: 20090127
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GOLDMAN SACHS GROUP INC
CENTRAL INDEX KEY: 0000886982
STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211]
IRS NUMBER: 134019460
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1225
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-14965
FILM NUMBER: 09546636
BUSINESS ADDRESS:
STREET 1: 85 BROAD ST
CITY: NEW YORK
STATE: NY
ZIP: 10004
BUSINESS PHONE: 2129021000
MAIL ADDRESS:
STREET 1: 85 BROAD ST
CITY: NEW YORK
STATE: NY
ZIP: 10004
FORMER COMPANY:
FORMER CONFORMED NAME: GOLDMAN SACHS GROUP INC/
DATE OF NAME CHANGE: 20010104
10-K
1
y74032e10vk.htm
FORM 10-K
10-K
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended November 28, 2008
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Commission File Number: 001-14965
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The Goldman Sachs Group,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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13-4019460
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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85 Broad Street
New York, N.Y.
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10004
(Zip Code)
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(Address of principal executive
offices)
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(212) 902-1000
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class:
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Name of each exchange on which registered:
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Common stock, par value $.01 per share, and attached
Shareholder Protection Rights
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New York Stock Exchange
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Depositary Shares, Each Representing 1/1,000th Interest in a
Share of Floating Rate
Non-Cumulative
Preferred Stock, Series A
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New York Stock Exchange
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Depositary Shares, Each Representing 1/1,000th Interest in a
Share of 6.20%
Non-Cumulative
Preferred Stock, Series B
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New York Stock Exchange
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Depositary Shares, Each Representing 1/1,000th Interest in a
Share of Floating Rate
Non-Cumulative
Preferred Stock, Series C
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New York Stock Exchange
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Depositary Shares, Each Representing 1/1,000th Interest in a
Share of Floating Rate
Non-Cumulative
Preferred Stock, Series D
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New York Stock Exchange
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5.793%
Fixed-to-Floating
Rate Normal Automatic Preferred Enhanced Capital Securities of
Goldman Sachs Capital II (and Registrants guarantee with
respect thereto)
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New York Stock Exchange
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Floating Rate Normal Automatic Preferred Enhanced Capital
Securities of Goldman Sachs Capital III (and Registrants
guarantee with respect thereto)
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New York Stock Exchange
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Medium-Term
Notes, Series B, Index-Linked Notes due February 2013;
Index-Linked Notes due April 2013; Index-Linked Notes due
May 2013; Index-Linked Notes due 2010; and Index-Linked
Notes due 2011
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NYSE Alternext US
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Medium-Term
Notes, Series B, 7.35% Notes due 2009; 7.80% Notes due
2010; and Floating Rate Notes due 2011
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New York Stock Exchange
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Medium-Term
Notes, Series A, Index-Linked Notes due 2037 of GS Finance
Corp. (and Registrants guarantee with respect thereto)
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NYSE Arca
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Medium-Term
Notes, Series B, Index-Linked Notes due 2037
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NYSE Arca
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes x No o
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act.
Yes o No x
Indicate
by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No o
Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of the Annual Report on
Form 10-K
or any amendment to the Annual Report on
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act.
Large accelerated
filer x Accelerated
filer o Non-accelerated
filer (Do not check if a smaller reporting
company) o Smaller
reporting
company o
Indicate
by check mark whether the registrant is a shell company (as
defined in
Rule 12b-2
of the Exchange Act).
Yes o No x
As of
May 30, 2008, the aggregate market value of the common
stock of the registrant held by
non-affiliates
of the registrant was approximately $68.2 billion.
As of
January 16, 2009, there were 461,784,433 shares
of the registrants common stock outstanding.
Documents
incorporated by reference: Portions of The
Goldman Sachs Group, Inc.s Proxy Statement for its 2009
Annual Meeting of Shareholders to be held on
May 8, 2009 are incorporated by reference in the
Annual Report on
Form 10-K
in response to Part III, Items 10, 11, 12, 13 and 14.
THE GOLDMAN SACHS
GROUP, INC.
ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 28, 2008
INDEX
PART I
Introduction
Goldman Sachs is a bank holding company and a leading global
investment banking, securities and investment management firm
that provides a wide range of services worldwide to a
substantial and diversified client base that includes
corporations, financial institutions, governments and
high-net-worth
individuals. Goldman Sachs is the successor to a commercial
paper business founded in 1869 by Marcus Goldman. On
May 7, 1999, we converted from a partnership to a
corporation and completed an initial public offering of our
common stock. On September 21, 2008, The Goldman Sachs
Group, Inc. (Group Inc.) became a bank holding company regulated
by the Board of Governors of the Federal Reserve System (Federal
Reserve Board) under the U.S. Bank Holding Company Act of
1956 (BHC Act). Our depository institution subsidiary, Goldman
Sachs Bank USA (GS Bank USA), became a New York State-chartered
bank on November 28, 2008.
Our activities are divided into three segments:
(i) Investment Banking, (ii) Trading and Principal
Investments and (iii) Asset Management and Securities
Services.
All references to 2008, 2007 and 2006 refer to our fiscal years
ended, or the dates, as the context requires,
November 28, 2008, November 30, 2007 and
November 24, 2006, respectively. When we use the terms
Goldman Sachs, the firm, we,
us and our, we mean The Goldman Sachs
Group, Inc., a Delaware corporation, and its consolidated
subsidiaries. References herein to our Annual Report on
Form 10-K
are to our Annual Report on
Form 10-K
for the fiscal year ended November 28, 2008.
On December 15, 2008, our Board of Directors approved
a change in our fiscal year-end from the last Friday of November
to the last Friday of December. The change is effective for our
2009 fiscal year. Our 2009 fiscal year began
December 27, 2008 and will end
December 25, 2009, resulting in a
one-month
transition period that began November 29, 2008 and
ended December 26, 2008. Information on this
one-month
transition period will be included in our Quarterly Report on
Form 10-Q
for the three months ended March 27, 2009.
Financial information concerning our business segments and
geographic regions for each of 2008, 2007 and 2006 is set forth
in Managements Discussion and Analysis of Financial
Condition and Results of Operations, the consolidated
financial statements and the notes thereto, and the supplemental
financial information, which are in Part II, Items 7,
7A and 8 of our Annual Report on
Form 10-K.
Our internet address is www.gs.com and the investor
relations section of our web site is located at
www.gs.com/shareholders. We make available free of
charge, on or through the investor relations section of our web
site, annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the U.S. Securities Exchange
Act of 1934 (Exchange Act), as well as proxy statements, as soon
as reasonably practicable after we electronically file such
material with, or furnish it to, the U.S. Securities and
Exchange Commission. Also posted on our web site, and available
in print upon request of any shareholder to our Investor
Relations Department, are our certificate of incorporation and
by-laws, charters for our Audit Committee, Compensation
Committee, and Corporate Governance and Nominating Committee,
our Policy Regarding Director Independence Determinations, our
Policy on Reporting of Concerns Regarding Accounting and Other
Matters, our Corporate Governance Guidelines and our Code of
Business Conduct and Ethics governing our directors, officers
and employees. Within the time period required by the SEC and
the New York Stock Exchange, we will post on our web site any
amendment to the Code of Business Conduct and Ethics and any
waiver applicable to any executive officer, director or senior
financial officer (as defined in the Code). In addition, our web
site includes information concerning purchases and sales of our
equity securities by our executive officers and directors, as
well as disclosure relating to certain
non-GAAP
financial measures (as defined in the SECs
Regulation G) that we may make public orally,
telephonically, by webcast, by broadcast or by similar means
from time to time.
Our Investor Relations Department can be contacted at The
Goldman Sachs Group, Inc., 85 Broad Street, 17th Floor, New
York, New York 10004, Attn: Investor Relations, telephone:
212-902-0300,
e-mail:
gs-investor-relations@gs.com.
1
Cautionary
Statement Pursuant to the U.S. Private Securities
Litigation Reform Act of 1995
We have included or incorporated by reference in our Annual
Report on
Form 10-K,
and from time to time our management may make, statements that
may constitute forward-looking statements within the
meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are not historical facts but instead represent only
our beliefs regarding future events, many of which, by their
nature, are inherently uncertain and outside our control. These
statements include statements other than historical information
or statements of current condition and may relate to our future
plans and objectives and results, among other things, and may
also include our belief regarding the effect of various legal
proceedings, as set forth under Legal Proceedings in
Part I, Item 3 of our Annual Report on
Form 10-K,
as well as statements about the objectives and effectiveness of
our risk management and liquidity policies, statements about
trends in or growth opportunities for our businesses, statements
about our future status, activities or reporting under
U.S. banking regulation, and statements about our
investment banking transaction backlog, in Part II,
Item 7 of our Annual Report on
Form 10-K.
By identifying these statements for you in this manner, we are
alerting you to the possibility that our actual results and
financial condition may differ, possibly materially, from the
anticipated results and financial condition indicated in these
forward-looking statements. Important factors that could cause
our actual results and financial condition to differ from those
indicated in the forward-looking statements include, among
others, those discussed below and under Risk Factors
in Part I, Item 1A of our Annual Report on
Form 10-K.
In the case of statements about our investment banking
transaction backlog, such statements are subject to the risk
that the terms of these transactions may be modified or that
they may not be completed at all; therefore, the net revenues,
if any, that we actually earn from these transactions may
differ, possibly materially, from those currently expected.
Important factors that could result in a modification of the
terms of a transaction or a transaction not being completed
include, in the case of underwriting transactions, a decline or
continued weakness in general economic conditions, outbreak of
hostilities, volatility in the securities markets generally or
an adverse development with respect to the issuer of the
securities and, in the case of financial advisory transactions,
a decline in the securities markets, an inability to obtain
adequate financing, an adverse development with respect to a
party to the transaction or a failure to obtain a required
regulatory approval. For a discussion of other important factors
that could adversely affect our investment banking transactions,
see Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K.
2
Segment Operating
Results
(in
millions)
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Year Ended November
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2008
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2007
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2006
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Investment
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Net revenues
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$
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5,185
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$
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7,555
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$
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5,629
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Banking
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Operating expenses
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3,143
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4,985
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4,062
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Pre-tax earnings
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$
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2,042
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$
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2,570
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$
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1,567
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Trading and Principal
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Net revenues
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$
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9,063
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$
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31,226
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$
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25,562
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Investments
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Operating expenses
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11,808
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17,998
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14,962
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Pre-tax
earnings/(loss)
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$
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(2,745
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)
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$
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13,228
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$
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10,600
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Asset Management and
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Net revenues
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$
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7,974
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$
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7,206
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$
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6,474
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Securities Services
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Operating expenses
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4,939
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5,363
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4,036
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Pre-tax earnings
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$
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3,035
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$
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1,843
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$
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2,438
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Total
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Net revenues
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$
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22,222
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$
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45,987
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$
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37,665
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Operating
expenses (1)
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19,886
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28,383
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23,105
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Pre-tax
earnings
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$
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2,336
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$
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17,604
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$
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14,560
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(1) |
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Operating expenses include net
provisions for a number of litigation and regulatory proceedings
of $(4) million, $37 million and $45 million for the
years ended November 2008, November 2007 and
November 2006, respectively, that have not been allocated
to our segments.
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3
Where We Conduct
Business
As of November 28, 2008, we operated offices in over
30 countries and 43% of our 30,067 employees were based outside
the Americas (which includes the countries in North and South
America). In 2008, we derived 30% of our net revenues outside of
the Americas. See geographic information in Note 18 to the
consolidated financial statements in Part II, Item 8
of our Annual Report on
Form 10-K.
Our clients are located worldwide, and we are an active
participant in financial markets around the world. We have
developed and continue to build strong investment banking
relationships in new and developing markets. We also continue to
expand our presence throughout these markets to invest
strategically when opportunities arise and to work more closely
with our private wealth and asset management clients in these
regions. Our global reach is illustrated by the following:
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we are a member of and an active participant in most of the
worlds major stock, options and futures exchanges and
marketplaces;
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we are a primary dealer in many of the largest government bond
markets around the world;
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we have interbank dealer status in currency markets around the
world;
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we are a member of or have relationships with major commodities
exchanges worldwide; and
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we have commercial banking or deposit-taking institutions
organized or operating in the United States, the United Kingdom,
Ireland, Brazil, Switzerland, Germany, France, Russia and South
Korea.
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Our businesses are supported by our Global Investment Research
division, which, as of November 2008, provided research
coverage of over 3,250 companies worldwide and over 45 national
economies, and maintained a presence in locations around the
world.
We continue to expand our geographic reach. For example, in
recent years we have opened offices in Mumbai, Moscow, Sao
Paulo, Dubai, Qatar, Riyadh and Tel Aviv, become licensed as a
broker-dealer
in Russia, India and China, opened banks in Brazil, Ireland and
Russia and entered into the asset management business in South
Korea and India.
4
Business
Segments
The primary products and activities of our business segments are
set forth in the following chart:
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Business
Segment/Component
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Primary Products and
Activities
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Investment Banking:
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Financial Advisory
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Mergers and acquisitions advisory services
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Financial restructuring advisory services
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Underwriting
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Equity and debt underwriting
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Trading and Principal Investments:
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Fixed Income, Currency and Commodities
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Commodities and commodity derivatives,
including power generation and related activities
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Credit products, including trading and
investing in credit derivatives, investment-grade corporate
securities, high-yield securities, bank and secured loans,
municipal securities, emerging market and distressed debt,
public and private equity securities and real estate
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Currencies and currency derivatives
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Interest rate products, including interest
rate derivatives, global government securities and money market
instruments, including matched book positions
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Mortgage-related securities and loan products
and other asset-backed instruments
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Equities
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Equity securities and derivatives
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Securities, futures and options clearing
services
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Market-making and specialist activities in
equity securities and options
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Insurance activities
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Principal Investments
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Principal investments in connection with
merchant banking activities
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Investment in the ordinary shares of
Industrial and Commercial Bank of China Limited
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Asset Management and Securities Services:
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Asset Management
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Investment advisory services, financial
planning and investment products (primarily through separately
managed accounts and commingled vehicles) across all major asset
classes, including money markets, fixed income, equities and
alternative investments (including hedge funds, private equity,
real estate, currencies, commodities and asset allocation
strategies), for institutional and individual investors
(including
high-net-worth
clients, as well as retail clients through third-party channels)
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Management of merchant banking funds
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Securities Services
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Prime brokerage
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Financing services
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Securities lending
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5
Investment
Banking
Investment Banking represented 23% of 2008 net revenues. We
provide a broad range of investment banking services to a
diverse group of corporations, financial institutions,
investment funds, governments and individuals and seek to
develop and maintain
long-term
relationships with these clients as their lead investment bank.
Our current structure, which is organized by regional, industry
and product groups, seeks to combine client-focused investment
bankers with execution and industry expertise. We continually
assess and adapt our organization to meet the demands of our
clients in each geographic region. Through our commitment to
teamwork, we believe that we provide services in an integrated
fashion for the benefit of our clients.
Our goal is to make available to our clients the entire
resources of the firm in a seamless fashion, with investment
banking serving as front of the house. To accomplish
this objective, we focus on coordination among our equity and
debt underwriting activities and our corporate risk and
liability management activities. This coordination is intended
to assist our investment banking clients in managing their asset
and liability exposures and their capital.
Our Investment Banking segment is divided into two components:
Financial Advisory and Underwriting.
Financial
Advisory
Financial Advisory includes advisory assignments with respect to
mergers and acquisitions, divestitures, corporate defense
activities, restructurings and
spin-offs.
Our mergers and acquisitions capabilities are evidenced by our
significant share of assignments in large, complex transactions
for which we provide multiple services, including
one-stop
acquisition financing and cross-border structuring expertise, as
well as services in other areas of the firm, such as interest
rate and currency hedging. In particular, a significant number
of the loan commitments and bank and bridge loan facilities that
we enter into arise in connection with our advisory assignments.
Underwriting
Underwriting includes public offerings and private placements of
a wide range of securities and other financial instruments,
including common and preferred stock, convertible and
exchangeable securities,
investment-grade
debt,
high-yield
debt, sovereign and emerging market debt, municipal debt, bank
loans,
asset-backed
securities and real estate-related securities, such as
mortgage-related
securities and the securities of real estate investment trusts.
Equity Underwriting. Equity underwriting has
been a
long-term
core strength of Goldman Sachs. As with mergers and
acquisitions, we have been particularly successful in winning
mandates for large, complex transactions. We believe our
leadership in worldwide initial public offerings and worldwide
public common stock offerings reflects our expertise in complex
transactions, prior experience and distribution capabilities.
Debt Underwriting. We engage in the
underwriting and origination of various types of debt
instruments, including
investment-grade
debt securities,
high-yield
debt securities, bank and bridge loans and emerging market debt
securities, which may be issued by, among others, corporate,
sovereign and agency issuers. In addition, we underwrite and
originate structured securities, which include
mortgage-related
securities and other
asset-backed
securities and collateralized debt obligations.
6
Trading and
Principal Investments
Trading and Principal Investments represented 41% of 2008 net
revenues. Trading and Principal Investments facilitates client
transactions with a diverse group of corporations, financial
institutions, investment funds, governments and individuals and
takes proprietary positions through market making in, trading of
and investing in fixed income and equity products, currencies,
commodities and derivatives on these products. In addition, we
engage in
market-making
and specialist activities on equities and options exchanges, and
we clear client transactions on major stock, options and futures
exchanges worldwide. In connection with our merchant banking and
other investing activities, we make principal investments
directly and through funds that we raise and manage.
To meet the needs of our clients, Trading and Principal
Investments is diversified across a wide range of products. We
believe our willingness and ability to take risk to facilitate
client transactions distinguishes us from many of our
competitors and substantially enhances our client relationships.
Our Trading and Principal Investments segment is divided into
three components: Fixed Income, Currency and Commodities;
Equities; and Principal Investments.
Fixed Income,
Currency and Commodities and Equities
Fixed Income, Currency and Commodities (FICC) and Equities are
large and diversified operations through which we engage in a
variety of client-driven and proprietary trading and investing
activities.
In our client-driven businesses, FICC and Equities strive to
deliver
high-quality
service by offering broad
market-making
and market knowledge to our clients on a global basis. In
addition, we use our expertise to take positions in markets, by
committing capital and taking risk, to facilitate client
transactions and to provide liquidity. Our willingness to make
markets, commit capital and take risk in a broad range of fixed
income, currency, commodity and equity products and their
derivatives is crucial to our client relationships and to
support our underwriting business by providing secondary market
liquidity.
We generate trading net revenues from our client-driven
businesses in three ways:
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First, in large, highly liquid markets, we undertake a high
volume of transactions for modest spreads and fees.
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Second, by capitalizing on our strong relationships and capital
position, we undertake transactions in less liquid markets where
spreads and fees are generally larger.
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Finally, we structure and execute transactions that address
complex client needs.
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Our FICC and Equities businesses operate in close coordination
to provide clients with services and cross-market knowledge and
expertise.
In our proprietary activities in both FICC and Equities, we
assume a variety of risks and devote resources to identify,
analyze and benefit from these exposures. We capitalize on our
analytical models to analyze information and make informed
trading judgments, and we seek to benefit from perceived
disparities in the value of assets in the trading markets and
from macroeconomic and issuer-specific trends.
7
FICC
We make markets in and trade interest rate and credit products,
mortgage-related
securities and loan products and other
asset-backed
instruments, currencies and commodities, structure and enter
into a wide variety of derivative transactions, and engage in
proprietary trading and investing. FICC has five principal
businesses: commodities; credit products; currencies; interest
rate products, including money market instruments; and
mortgage-related
securities and loan products and other
asset-backed
instruments.
Commodities. We enter into trades with our
clients in, make markets in, and trade for our own account a
wide variety of commodities, commodity derivatives and interests
in commodity-related assets, including oil and oil products,
metals, natural gas and electricity, and forest products. As
part of our commodities business, we acquire and dispose of
interests in, and engage in the development and operation of,
electric power generation facilities and related activities.
Credit Products. We offer to and trade for our
clients a broad array of credit and
credit-linked
products all over the world, including credit derivatives,
investment-grade
corporate securities,
high-yield
securities, bank and secured loans (origination and trading),
municipal securities, and emerging market and distressed debt.
For example, we enter, as principal, into complex structured
transactions designed to meet client needs.
In addition, we provide credit through bridge and other loan
facilities to a broad range of clients. Commitments that are
extended for contingent acquisition financing are often intended
to be
short-term
in nature, as borrowers often seek to replace them with other
funding sources. As part of our ongoing credit origination
activities, we may seek to reduce our credit risk on commitments
by syndicating all or substantial portions of commitments to
other investors or, upon funding, by securitizing the positions
through investment vehicles sold to other investors.
Underwriting fees from syndications of these commitments are
recorded in debt underwriting in our Investment Banking segment.
However, to the extent that we recognize losses on these
commitments, such losses are recorded within our Trading and
Principal Investments segment, net of any related underwriting
fees. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Contractual Obligations and Commitments in Part II,
Item 7 of our Annual Report on
Form 10-K
for additional information on our commitments.
Our credit products business includes making significant
long-term
and
short-term
investments for our own account (sometimes investing together
with our merchant banking funds) in a broad array of asset
classes (including distressed debt) globally. We
opportunistically invest in debt and equity securities and
secured loans, and in private equity, real estate and other
assets.
Currencies. We act as a dealer in foreign
exchange and trade for our clients and ourselves in most
currencies on exchanges and in cash and derivative markets
globally.
Interest Rate Products. We trade and make
markets in a variety of interest rate products, including
interest rate swaps, options and other derivatives, and
government bonds, as well as money market instruments, such as
commercial paper, treasury bills, repurchase agreements and
other highly liquid securities and instruments. This business
includes our matched book, which consists of
short-term
collateralized financing transactions.
Mortgage Business. We make markets in and
trade for our clients and ourselves commercial and residential
mortgage-related
securities and loan products (including agency prime and
non-agency prime,
Alt-A and
subprime mortgages) and other
asset-backed
and derivative instruments. We acquire positions in these
products for proprietary trading purposes as well as for
securitization or syndication. We also originate and service
commercial and residential mortgages.
8
Equities
We make markets in and trade equities and
equity-related
products, structure and enter into equity derivative
transactions, and engage in proprietary trading. We generate
commissions from executing and clearing client transactions on
major stock, options and futures exchanges worldwide through our
Equities client franchise and clearing activities.
Equities includes two principal businesses: our client franchise
business and principal strategies. We also engage in specialist
and insurance activities.
Client Franchise Business. Our client
franchise business includes primarily client-driven activities
in the shares, equity derivatives and convertible securities
markets. These activities also include clearing client
transactions on major stock, options and futures exchanges
worldwide, as well as our options specialist and
market-making
businesses. Our client franchise business increasingly involves
providing our clients with access to electronic
low-touch
equity trading platforms, and electronic trades account for the
majority of our client trading activity in this business.
However, a majority of our net revenues in this business
continues to be derived from our traditional
high-touch
handling of more complex trades. We expect both types of trading
activities to remain important components of our client
franchise business.
We trade equity securities and
equity-related
products, including convertible securities, options, futures and
over-the-counter
(OTC) derivative instruments, on a global basis as an agent, as
a market maker or otherwise as a principal. As a principal, we
facilitate client transactions, often by committing capital and
taking risk, to provide liquidity to clients with large blocks
of stocks or options. For example, we are active in the
execution of large block trades. We also execute transactions as
agent and offer clients direct electronic access to trading
markets.
In the options and futures markets, we structure, distribute and
execute derivatives on market indices, industry groups,
financial measures and individual company stocks to facilitate
client transactions and our proprietary activities. We develop
strategies and render advice with respect to portfolio hedging
and restructuring and asset allocation transactions. We also
create specially tailored instruments to enable sophisticated
investors to undertake hedging strategies and to establish or
liquidate investment positions. We are one of the leading
participants in the trading and development of equity derivative
instruments. In options, we are a specialist
and/or
market maker on the International Securities Exchange, the
Chicago Board Options Exchange, NYSE Arca, the Boston Options
Exchange, the Philadelphia Stock Exchange, NYSE Alternext US and
the Chicago Mercantile Exchange.
Principal Strategies. Our principal strategies
business is a multi-strategy investment business that invests
and trades our capital across global markets. Investment
strategies include fundamental equities and relative value
trading (which involves trading strategies designed to take
advantage of perceived discrepancies in the relative value of
financial instruments, including equity,
equity-related
and debt instruments), event-driven investments (which focus on
event-oriented special situations such as corporate
restructurings, bankruptcies, recapitalizations, mergers and
acquisitions, and legal and regulatory events), convertible bond
trading, various types of volatility trading and principal
finance.
At the start of our first fiscal quarter of 2008, we reassigned
approximately
one-half of
the traders and other personnel and transferred approximately
one-half of
the firms assets comprising our principal strategies
business to our asset management business in an effort to
strengthen and diversify our asset management offerings. These
assets are invested in an alternative investment fund managed by
our asset management business.
9
Specialist Activities. Our specialist
activities business consists of our stock and
exchange-traded
funds (ETF) specialist and
market-making
businesses. We engage in specialist and
market-making
activities on equities exchanges. In the United States, we are
one of the leading designated market makers for stocks traded on
the NYSE. For ETFs, we are registered market makers on NYSE Arca.
Insurance Activities. Through our insurance
subsidiaries, we engage in a range of insurance and reinsurance
businesses, including buying, originating
and/or
reinsuring variable annuity and life insurance contracts,
reinsuring property catastrophe and residential homeowner risks
and providing power interruption coverage to power generating
facilities.
Principal
Investments
Principal Investments primarily represents net revenues from
three primary sources: returns on corporate and real estate
investments; overrides on corporate and real estate investments
made by merchant banking funds that we manage; and our
investment in the ordinary shares of Industrial and Commercial
Bank of China Limited (ICBC).
Returns on Corporate and Real Estate
Investments. As of November 2008, the
aggregate carrying value of our principal investments held
directly or through our merchant banking funds, excluding our
investment in the ordinary shares of ICBC, was
$15.13 billion, comprised of corporate principal
investments with an aggregate carrying value of
$12.16 billion and real estate investments with an
aggregate carrying value of $2.97 billion. In addition, as
of November 2008, we had outstanding unfunded equity
capital commitments of up to $13.47 billion, comprised of
corporate principal investment commitments of
$10.39 billion and real estate investment commitments of
$3.08 billion.
Overrides. Consists of the increased share of
the income and gains derived from our merchant banking funds
when the return on a funds investments over the life of
the fund exceeds certain threshold returns (typically referred
to as an override). Overrides are recognized in net revenues
when all material contingencies have been resolved.
ICBC. Our investment in the ordinary shares of
ICBC was acquired on April 28, 2006. The ordinary
shares acquired from ICBC are subject to transfer restrictions
that, among other things, prohibit any sale, disposition or
other transfer until April 28, 2009. From
April 28, 2009 to October 20, 2009, we may
transfer up to 50% of the aggregate ordinary shares of ICBC that
we owned as of October 20, 2006. We may transfer the
remaining shares after October 20, 2009. As of
November 2008, the fair value of our investment in the
ordinary shares of ICBC was $5.50 billion. A portion of our
interest is held by investment funds managed by Goldman Sachs.
For further information regarding our investment in the ordinary
shares of ICBC, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Critical Accounting Policies
Fair Value Cash Instruments in Part II,
Item 7 of our Annual Report on
Form 10-K.
10
Asset Management
and Securities Services
Asset Management and Securities Services represented 36% of 2008
net revenues. Our asset management business provides investment
advisory and financial planning services and offers investment
products (primarily through separately managed accounts and
commingled vehicles) across all major asset classes to a diverse
group of institutions and individuals worldwide and primarily
generates revenues in the form of management and incentive fees.
Securities Services provides prime brokerage services, financing
services and securities lending services to institutional
clients, including hedge funds, mutual funds, pension funds and
foundations, and to
high-net-worth
individuals worldwide, and generates revenues primarily in the
form of interest rate spreads or fees.
Our Asset Management and Securities Services segment is divided
into two components: Asset Management and Securities Services.
Asset
Management
We offer a broad array of investment strategies, advice and
planning. We provide asset management services and offer
investment products (primarily through separately managed
accounts and commingled vehicles, such as mutual funds and
private investment funds) across all major asset classes: money
markets, fixed income, equities and alternative investments
(including hedge funds, private equity, real estate, currencies,
commodities and asset allocation strategies). Through our
subsidiary, The Ayco Company, L.P., we also provide fee-based
financial counseling and financial education in the United
States.
Assets under management (AUM) typically generate fees as a
percentage of asset value, which is affected by investment
performance and by inflows and redemptions. The fees that we
charge vary by asset class, as do our related expenses. In
certain circumstances, we are also entitled to receive incentive
fees based on a percentage of a funds return or when the
return on assets under management exceeds specified benchmark
returns or other performance targets. Incentive fees are
recognized when the performance period ends and they are no
longer subject to adjustment. We have numerous incentive fee
arrangements, many of which have annual performance periods that
end on December 31. For that reason, incentive fees have
been seasonally weighted to our first quarter.
AUM includes our mutual funds, alternative investment funds and
separately managed accounts for institutional and individual
investors. Alternative investments include our merchant banking
funds, which generate revenues as described below under
Management
of Merchant Banking Funds. AUM includes assets in
clients brokerage accounts to the extent that they
generate fees based on the assets in the accounts rather than
commissions on transactional activity in the accounts.
AUM does not include assets in brokerage accounts that generate
commissions,
mark-ups and
spreads based on transactional activity, or our own investments
in funds that we manage. Net revenues from these assets are
included in our Trading and Principal Investments segment. AUM
also does not include
non-fee-paying
assets, including interest-bearing deposits held through our
bank depository institution subsidiaries.
11
The amount of AUM is set forth in the graph below. In the
following graph, as well as in the following tables,
substantially all assets under management are valued as of
November 30:
Assets Under
Management
(in
billions)
The following table sets forth AUM by asset class:
Assets Under
Management by Asset Class
(in
billions)
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As of November 30
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2008
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2007
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2006
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Alternative
investments (1)
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$
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146
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$
|
151
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$
|
145
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Equity
|
|
|
112
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|
|
|
255
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|
|
|
215
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Fixed income
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|
|
248
|
|
|
|
256
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|
|
|
198
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|
|
|
|
|
|
|
|
|
|
|
|
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Total
non-money
market assets
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506
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|
|
|
662
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|
|
|
558
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Money markets
|
|
|
273
|
|
|
|
206
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|
|
|
118
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|
|
|
|
|
|
|
|
|
|
|
|
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Total assets under management
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$
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779
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$
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868
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$
|
676
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|
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(1) |
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Primarily includes hedge funds,
private equity, real estate, currencies, commodities and asset
allocation strategies.
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12
Clients. Our clients are institutions and
individuals, including both
high-net-worth
and retail investors. We access institutional and
high-net-worth
clients through both direct and
third-party
channels and retail clients primarily through
third-party
channels. Our institutional clients include pension funds,
governmental organizations, corporations, insurance companies,
banks, foundations and endowments. In
third-party
distribution channels, we distribute our mutual funds,
alternative investment funds and separately managed accounts
through brokerage firms, banks, insurance companies and other
financial intermediaries. Our clients are located worldwide.
The table below sets forth the amount of AUM by distribution
channel and client category:
Assets Under
Management by Distribution Channel
(in
billions)
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|
|
|
|
|
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|
|
|
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As of November 30
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2008
|
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2007
|
|
2006
|
Directly Distributed
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional
|
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$
|
273
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|
|
$
|
354
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|
|
$
|
296
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High-net-worth
individuals
|
|
|
215
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|
|
|
219
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|
|
|
177
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|
|
|
|
|
|
|
|
|
|
|
|
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|
Third-Party
Distributed
|
|
|
|
|
|
|
|
|
|
|
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Institutional,
high-net-worth
individuals and retail
|
|
|
291
|
|
|
|
295
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|
|
|
203
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
779
|
|
|
$
|
868
|
|
|
$
|
676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Management of Merchant Banking Funds. Goldman
Sachs sponsors numerous corporate and real estate private
investment funds. As of November 2008, the amount of AUM in
these funds (including both funded amounts and unfunded
commitments on which we earn fees) was $93 billion.
Our strategy with respect to these funds generally is to invest
opportunistically to build a portfolio of investments that is
diversified by industry, product type, geographic region, and
transaction structure and type. Our corporate investment funds
pursue, on a global basis,
long-term
investments in equity and debt securities in privately
negotiated transactions, leveraged buyouts, acquisitions and
investments in funds managed by external parties. Our real
estate investment funds invest in real estate operating
companies, debt and equity interests in real estate assets, and
other real estate-related investments. In addition, our merchant
banking funds include funds that invest in infrastructure and
infrastructure-related assets and companies on a global basis.
Merchant banking activities generate three primary revenue
streams. First, we receive a management fee that is generally a
percentage of a funds committed capital, invested capital,
total gross acquisition cost or asset value. These annual
management fees are included in our Asset Management net
revenues. Second, Goldman Sachs, as a substantial investor in
some of these funds, is allocated its proportionate share of the
funds unrealized appreciation or depreciation arising from
changes in fair value as well as gains and losses upon
realization. Third, after a fund has achieved a minimum return
for fund investors, we receive an increased share of the
funds income and gains that is a percentage of the income
and gains from the funds investments. The second and third
of these revenue streams are included in Principal Investments
within our Trading and Principal Investments segment.
13
Securities
Services
Securities Services provides prime brokerage services, financing
services and securities lending services to institutional
clients, including hedge funds, mutual funds, pension funds and
foundations, and to
high-net-worth
individuals worldwide.
Prime brokerage services. We offer prime
brokerage services to our clients, allowing them the flexibility
to trade with most brokers while maintaining a single source for
financing and consolidated portfolio reports. Our prime
brokerage business provides clearing and custody in 53 markets
globally and provides consolidated multi-currency accounting and
reporting, fund administration and other ancillary services.
Financing services. A central element of our
prime brokerage business involves providing financing to our
clients for their securities trading activities through margin
and securities loans that are collateralized by securities, cash
or other acceptable collateral.
Securities lending services. Securities
lending services principally involve the borrowing and lending
of securities to cover clients and Goldman Sachs
short sales and otherwise to make deliveries into the market. In
addition, we are an active participant in the
broker-to-broker
securities lending business and the
third-party
agency lending business. Net revenues in securities lending
services are, as a general matter, weighted toward our second
and third quarters each year due to seasonally higher activity
levels in Europe.
Global Investment
Research
Global Investment Research provides fundamental research on
companies, industries, economies, currencies and commodities and
macro strategy research on a worldwide basis.
Global Investment Research employs a team approach that as of
November 2008 provided research coverage of over 3,250
companies worldwide and over 45 national economies. This is
accomplished by the following departments:
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The Equity Research Departments provide fundamental analysis,
earnings forecasts and investment opinions for equity securities;
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The Credit Research Department provides fundamental analysis,
forecasts and investment opinions as to
investment-grade
and
high-yield
corporate bonds and credit derivatives; and
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The Global ECS Department (formed in December 2008 through
a consolidation of the Economic, Commodities and Strategy
Research Departments) formulates macroeconomic forecasts for
economic activity, foreign exchange and interest rates, provides
research on the commodity markets, and provides equity market
forecasts, opinions on both asset and industry sector
allocation, equity trading strategies, credit trading strategies
and options research.
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Further information regarding research at Goldman Sachs is
provided below under Regulation
Regulations Applicable in and Outside the United States
and Legal Proceedings Research Independence
Matters in Part I, Item 3 of our Annual Report
on
Form 10-K.
14
Business
Continuity and Information Security
Business continuity and information security are high priorities
for Goldman Sachs. Our Business Continuity Program has been
developed to provide reasonable assurance of business continuity
in the event of disruptions at the firms critical
facilities and to comply with the regulatory requirements of the
Financial Industry Regulatory Authority (FINRA). Because we are
a bank holding company, our Business Continuity Program will be
subject to review by the Federal Reserve Board. The key elements
of the program are crisis management, people recovery
facilities, business recovery, systems and data recovery, and
process improvement. In the area of information security, we
have developed and implemented a framework of principles,
policies and technology to protect the information assets of the
firm and our clients. Safeguards are applied to maintain the
confidentiality, integrity and availability of information
resources.
Employees
Management believes that a major strength and principal reason
for the success of Goldman Sachs is the quality and dedication
of our people and the shared sense of being part of a team. We
strive to maintain a work environment that fosters
professionalism, excellence, diversity, cooperation among our
employees worldwide and high standards of business ethics.
Instilling the Goldman Sachs culture in all employees is a
continuous process, in which training plays an important part.
All employees are offered the opportunity to participate in
education and periodic seminars that we sponsor at various
locations throughout the world. Another important part of
instilling the Goldman Sachs culture is our employee review
process. Employees are reviewed by supervisors, co-workers and
employees they supervise in a
360-degree
review process that is integral to our team approach.
As of November 2008, we had 30,067 employees, excluding
4,671 employees of certain consolidated entities that are held
for investment purposes only. Consolidated entities held for
investment purposes are entities that are held strictly for
capital appreciation, have a defined exit strategy and are
engaged in activities that are not closely related to our
principal businesses.
Competition
The financial services industry and all of our
businesses are intensely competitive, and we expect
them to remain so. Our competitors are other entities that
provide investment banking, securities and investment management
services, as well as those entities that make investments in
securities, commodities, derivatives, real estate, loans and
other financial assets. These entities include brokers and
dealers, investment banking firms, commercial banks, insurance
companies, investment advisers, mutual funds, hedge funds,
private equity funds and merchant banks. We compete with some of
our competitors globally and with others on a regional, product
or niche basis. Our competition is based on a number of factors,
including transaction execution, our products and services,
innovation, reputation and price.
We also face intense competition in attracting and retaining
qualified employees. Our ability to continue to compete
effectively in our businesses will depend upon our ability to
attract new employees and retain and motivate our existing
employees.
15
Over time, there has been substantial consolidation and
convergence among companies in the financial services industry.
This trend accelerated over the course of the past year as the
credit crisis caused numerous mergers and asset acquisitions
among industry participants. Many commercial banks and other
broad-based
financial services firms have had the ability for some time 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 had 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 has resulted in pricing pressure in our investment banking
and trading businesses and could result in pricing pressure in
other of our businesses.
Moreover, we have faced, and expect to continue to face,
pressure to retain market share by committing capital to
businesses or transactions on terms that offer returns that may
not be commensurate with their risks. In particular, corporate
clients seek such commitments (such as agreements to participate
in their commercial paper backstop or other loan facilities)
from financial services firms in connection with investment
banking and other assignments.
We provide these commitments primarily through GS Bank USA and
its subsidiaries, including our William Street entities and
Goldman Sachs Credit Partners L.P. With respect to most of the
William Street commitments, Sumitomo Mitsui Financial Group,
Inc. (SMFG) provides us with credit loss protection that is
generally limited to 95% of the first loss we realize on
approved loan commitments, up to a maximum of
$1.00 billion. In addition, subject to the satisfaction of
certain conditions, upon our request, SMFG will provide
protection for 70% of additional losses on such commitments, up
to a maximum of $1.13 billion, of which $375 million
of protection has been provided as of November 2008. We
also use other financial instruments to mitigate credit risks
related to certain William Street commitments not covered by
SMFG. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Contractual Obligations and Commitments in Part II,
Item 7 of our Annual Report on
Form 10-K
and Note 8 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for more information regarding the William Street entities and
for a description of the credit loss protection provided by
SMFG. An increasing number of our commitments in connection with
investment banking and other assignments do not meet the
criteria established for the William Street entities and do not
benefit from the SMFG loss protection. These commitments are
issued through GS Bank USA and its subsidiaries or our other
subsidiaries.
The trend toward consolidation and convergence has significantly
increased the capital base and geographic reach of some 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. To take advantage of some of our most significant
challenges and opportunities, we will have to compete
successfully with financial institutions that are larger and
better capitalized and that may have a stronger local presence
and longer operating history outside the United States.
We have experienced intense price competition in some of our
businesses in recent years. There has been considerable pressure
in the pricing of block trades. Also, equity and debt
underwriting discounts, as well as trading spreads, have been
under pressure for a number of years and the ability to execute
trades electronically, through the internet and through
alternative trading systems, has increased the pressure on
trading commissions. It appears that this trend toward
electronic and other
low-touch,
low-commission
trading will continue. We believe that we will continue to
experience competitive pressures in these and other areas in the
future as some of our competitors seek to obtain market share by
reducing prices.
16
Regulation
Goldman Sachs, as a participant in the banking, securities,
commodity futures and options and insurance industries, is
subject to extensive regulation in the United States and the
other countries in which we operate. See Risk
Factors Our businesses and those of our clients are
subject to extensive and pervasive regulation around the
world in Part I, Item 1A of our Annual Report on
Form 10-K
for a further discussion of the effect that regulation may have
on our businesses. As a matter of public policy, regulatory
bodies around the world are charged with safeguarding the
integrity of the securities and other financial markets and with
protecting the interests of clients participating in those
markets, including depositors in U.S. depository
institutions such as GS Bank USA. They are not, however,
generally charged with protecting the interests of Goldman
Sachs shareholders or creditors.
On September 21, 2008, Group Inc. became a bank
holding company under the BHC Act. As of that date, the Federal
Reserve Board became the primary U.S. regulator of Group
Inc., as a consolidated entity. Prior to
September 21, 2008, Group Inc. was subject to
regulation by the SEC as a Consolidated Supervised Entity (CSE)
and was subject to
group-wide
supervision and examination by the SEC and to minimum capital
standards on a consolidated basis. On
September 26, 2008, the SEC announced that it was
ending the CSE program. Our principal
U.S. broker-dealer,
Goldman, Sachs & Co. (GS&Co.) remains subject to
regulation by the SEC.
Banking
Regulation
Supervision
and Regulation
As a bank holding company under the BHC Act, Group Inc. is now
subject to supervision and examination by the Federal Reserve
Board. Under the system of functional regulation
established under the BHC Act, the Federal Reserve Board
supervises Group Inc., including all of its nonbank
subsidiaries, as an umbrella regulator of the
consolidated organization and generally defers to the primary
U.S. regulators of Group Inc.s U.S. depository
institution subsidiary, as applicable, and to the other
U.S. regulators of Group Inc.s
U.S. non-depository
institution subsidiaries that regulate certain activities of
those subsidiaries. Such functionally regulated
non-depository
institution subsidiaries include
broker-dealers
registered with the SEC, insurance companies regulated by state
insurance authorities, investment advisors registered with the
SEC with respect to their investment advisory activities and
entities regulated by the U.S. Commodity Futures Trading
Commission (CFTC) with respect to certain futures-related
activities.
Activities
The BHC Act generally restricts us from engaging in business
activities other than the business of banking and certain
closely related activities. However, the BHC Act also grants a
new bank holding company, such as Group Inc., two years from the
date the entity becomes a bank holding company to comply with
the restrictions on its activities imposed by the BHC Act with
respect to any activities that it was engaged in when it became
a bank holding company. We expect that this
grandfather right will allow us to continue to
conduct our business substantially as we have in the past until
at least September 22, 2010. In addition, under the
BHC Act, we can apply to the Federal Reserve Board for up to
three
one-year
extensions.
Under the
U.S. Gramm-Leach-Bliley
Act of 1999 (GLB Act), an eligible bank holding company may
elect to become a financial holding company.
Financial holding companies may engage in a broader range of
financial and related activities than are permissible for bank
holding companies as long as they continue to meet the
eligibility requirements for financial holding companies. These
activities include underwriting, dealing and making markets in
securities, insurance underwriting and making merchant banking
investments in nonfinancial companies. In addition, the GLB Act
also allows a company that was not a bank holding company and
becomes a financial holding company after
November 12, 1999 to continue to engage in certain
commodities activities that are otherwise
17
impermissible for bank holding companies if the company was
engaged in any of these activities in the United States as of
September 30, 1997 and if the assets held pursuant to
these activities do not equal 5% or more of the consolidated
assets of the bank holding company.
We intend to apply to elect to become a financial holding
company under the GLB Act as soon as practicable. Our ability to
achieve and maintain financial holding company status is
dependent on a number of factors, including our
U.S. depository institution subsidiaries continuing to
qualify as well capitalized as described under
Prompt
Corrective Action below. We do not believe that any
activities that are material to our current or currently
proposed business would be impermissible activities for us as a
financial holding company.
As a bank holding company, Group Inc. is required to obtain
prior Federal Reserve Board approval before directly or
indirectly acquiring more than 5% of any class of voting shares
of any unaffiliated depository institution. In addition, as a
bank holding company, we may generally engage in banking and
other financial activities abroad, including investing in and
owning
non-U.S. banks,
if those activities and investments do not exceed certain limits
and, in some cases, if we have obtained the prior approval of
the Federal Reserve Board.
Capital
Requirements
We are subject to regulatory capital requirements administered
by the U.S. federal banking agencies. Our bank depository
institution subsidiaries, including GS Bank USA, are subject to
similar capital guidelines. Under the Federal Reserve
Boards capital adequacy guidelines and the regulatory
framework for prompt corrective action (PCA) that is applicable
to GS Bank USA, Goldman Sachs and its bank depository
institution subsidiaries must meet specific capital guidelines
that involve quantitative measures of assets, liabilities and
certain
off-balance-sheet
items as calculated under regulatory reporting practices.
Goldman Sachs and its bank depository institution
subsidiaries capital amounts, as well as GS Bank
USAs PCA classification, are also subject to qualitative
judgments by the regulators about components, risk weightings
and other factors. We anticipate reporting capital ratios as
follows:
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Before we became a bank holding company, we were subject to
capital guidelines by the SEC as a CSE that were generally
consistent with those set out in the Revised Framework for the
International Convergence of Capital Measurement and Capital
Standards issued by the Basel Committee on Banking Supervision
(Basel II). We currently compute and report our firmwide capital
ratios in accordance with the Basel II requirements as
applicable to us when we were regulated as a CSE for the purpose
of assessing the adequacy of our capital. We expect to continue
to report to investors for a period of time our Basel II capital
ratios as applicable to us when we were regulated as a CSE.
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The regulatory capital guidelines currently applicable to bank
holding companies are based on the Capital Accord of the Basel
Committee on Banking Supervision (Basel I), with Basel II to be
phased in over time. We are currently working with the Federal
Reserve Board to put in place the appropriate reporting and
compliance mechanisms and methodologies to allow reporting of
the Basel I capital ratios as of the end of March 2009.
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In addition, we are currently working to implement the Basel II
framework as applicable to us as a bank holding company (as
opposed to as a CSE). U.S. banking regulators have
incorporated the Basel II framework into the existing
risk-based
capital requirements by requiring that internationally active
banking organizations, such as Group Inc., transition to Basel
II over the next several years.
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Under the Basel II framework as it applied to us when we were
regulated as a CSE, we evaluate our Tier 1 Capital and
Total Allowable Capital as a percentage of
Risk-Weighted
Assets (RWAs). RWAs are calculated based on the level of market
risk, credit risk and operational risk associated with our
business activities, using methodologies generally consistent
with those set out in Basel II. Our
18
Tier 1 Capital consists of common shareholders
equity, qualifying preferred stock (including the cumulative
preferred stock issued by Group Inc. to the U.S. Department
of the Treasurys (U.S. Treasury) TARP Capital
Purchase Program and our junior subordinated debt issued to
trusts, less deductions for goodwill, disallowed intangible
assets and other items. Our Total Allowable Capital consists of
our Tier 1 Capital and our qualifying subordinated debt,
less certain deductions. Additional information on the
calculation of our Tier 1 Capital, Total Allowable Capital
and RWAs under the Basel II framework as it applied to us
as a CSE is set forth in Managements Discussion and
Analysis of Financial Condition and Results of
Operations Equity Capital Consolidated
Capital Requirements, and in Note 17 to the
consolidated financial statements, which are in Part II,
Items 7 and 8 of our Annual Report on
Form 10-K.
As of November 2008, our Total Capital Ratio (Total
Allowable Capital as a percentage of RWAs) was 18.9% and our
Tier 1 Ratio (Tier 1 Capital as a percentage of RWAs)
was 15.6%, in each case calculated under the Basel II framework
as it applied to us when we were regulated as a CSE.
As noted above, we are currently working to implement the Basel
II framework as applicable to us as a bank holding company (as
opposed to as a CSE). During a parallel period, we anticipate
that Group Inc.s capital calculations computed under both
the Basel I rules and the Basel II rules will be reported to the
Federal Reserve Board for examination and compliance for at
least four consecutive quarterly periods. Once the parallel
period and subsequent three-year transition period are
successfully completed, Group Inc. will utilize the Basel II
framework as its means of capital adequacy assessment,
measurement and reporting and will discontinue use of Basel I.
Internationally, the Basel II framework was implemented in
several countries during the second half of 2007 and in 2008,
while others will begin implementation in 2009. The Basel II
rules therefore also apply to certain of our operations in
non-U.S. jurisdictions.
The Federal Reserve Board also has established minimum leverage
ratio guidelines. We were not subject to these guidelines before
becoming a bank holding company and, accordingly, we are
currently working with the Federal Reserve Board to finalize our
methodology for calculating this ratio. The Tier 1 leverage
ratio is defined as Tier 1 capital (as applicable to us as
a bank holding company) divided by adjusted average total assets
(which includes adjustments for disallowed goodwill and certain
intangible assets). The minimum Tier 1 leverage ratio is 3%
for bank holding companies that have received the highest
supervisory rating under Federal Reserve Board guidelines or
that have implemented the Federal Reserve Boards
risk-based
capital measure for market risk. Other bank holding companies
must have a minimum Tier 1 leverage ratio of 4%. Bank
holding companies may be expected to maintain ratios well above
the minimum levels, depending upon their particular condition,
risk profile and growth plans. As of November 2008, our
estimated Tier 1 leverage ratio was 6.1%. This ratio
represents a preliminary estimate and may be revised in
subsequent filings as we continue to work with the Federal
Reserve Board to finalize the methodology for the calculation.
GS&Co. will continue to calculate its regulatory capital
requirements in accordance with the market and credit risk
standards of Appendix E of
Rule 15c3-1
under the Exchange Act, which are consistent with Basel II.
Payment of
Dividends
Federal and state law imposes limitations on the payment of
dividends by our bank depository institution subsidiaries. The
amount of dividends that may be paid by a state-chartered bank
that is a member of the Federal Reserve System, such as GS Bank
USA or our national bank trust company subsidiary, is limited to
the lesser of the amounts calculated under a recent
earnings test and an undivided profits test.
Under the recent earnings test, a dividend may not be paid if
the total of all dividends declared by a bank in any calendar
year is in excess of the current years net income combined
with the retained net income of the two preceding years, unless
the bank obtains the approval of its chartering authority. Under
the undivided profits test, a dividend may not be paid in excess
of a banks undivided profits. New York law
imposes similar limitations on New York State-
19
chartered banks. As a result of these restrictions, GS Bank USA
was not able to declare dividends to Group Inc. without
regulatory approval as of November 2008.
In addition to the dividend restrictions described above, the
banking regulators have authority to prohibit or to limit the
payment of dividends by the banking organizations they supervise
if, in the banking regulators opinion, payment of a
dividend would constitute an unsafe or unsound practice in light
of the financial condition of the banking organization.
It is also the policy of the Federal Reserve Board that a bank
holding company generally only pay dividends on common stock out
of net income available to common shareholders over the past
year and only if the prospective rate of earnings retention
appears consistent with the bank holding companys capital
needs, asset quality, and overall financial condition. In the
current financial and economic environment, the Federal Reserve
Board has indicated that bank holding companies should carefully
review their dividend policy and has discouraged dividend
pay-out ratios that are at the 100% level unless both asset
quality and capital are very strong. A bank holding company also
should not maintain a dividend level that places undue pressure
on the capital of bank depository institution subsidiaries, or
that may undermine the bank holding companys ability to
serve as a source of strength for such bank depository
institution subsidiaries. See
U.S. Treasurys
TARP Capital Purchase Program below for a discussion of
additional restrictions on Group Inc.s ability to pay
dividends. In addition, certain of Group Inc.s nonbank
subsidiaries are subject to separate regulatory limitations on
dividends and distributions, including our
broker-dealer
and our insurance subsidiaries as described below.
Source of
Strength
Under Federal Reserve Board policy, Group Inc. is expected to
act as a source of strength to GS Bank USA and to commit capital
and financial resources to support this subsidiary. The required
support may be needed at times when, absent that Federal Reserve
Board policy, we may not find ourselves able to provide it.
Capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary banks. In the
event of a bank holding companys bankruptcy, any
commitment by the bank holding company to a federal bank
regulator to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and entitled to a priority of
payment.
However, because the BHC Act provides for functional regulation
of bank holding company activities by various regulators, the
BHC Act prohibits the Federal Reserve Board from requiring
payment by a holding company or subsidiary to a depository
institution if the functional regulator of the payor objects to
such payment. In such a case, the Federal Reserve Board could
instead require the divestiture of the depository institution
and impose operating restrictions pending the divestiture.
Cross-guarantee
Provisions
Each insured depository institution controlled (as
defined in the BHC Act) by the same bank holding company can be
held liable to the U.S. Federal Deposit Insurance
Corporation (FDIC) for any loss incurred, or reasonably expected
to be incurred, by the FDIC due to the default of any other
insured depository institution controlled by that holding
company and for any assistance provided by the FDIC to any of
those banks that is in danger of default. Such a
cross-guarantee claim against a depository
institution is generally superior in right of payment to claims
of the holding company and its affiliates against that
depository institution. At this time, we control only one
insured depository institution for this purpose, namely GS Bank
USA. However, if, in the future, we were to control other
insured depository institutions, such cross-guarantee would
apply to all such insured depository institutions.
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U.S. Treasurys
TARP Capital Purchase Program
On October 28, 2008, Group Inc. issued preferred stock
and a warrant to purchase its common stock to the
U.S. Treasury as a participant in the TARP Capital Purchase
Program. Prior to October 28, 2011, unless we have
redeemed all of this preferred stock or the U.S. Treasury
has transferred all of this preferred stock to a third party,
the consent of the U.S. Treasury will be required for us
to, among other things, increase our common stock dividend above
the current quarterly cash dividend of $0.35 per share or
repurchase our common stock or outstanding preferred stock
except in limited circumstances. In addition, until the
U.S. Treasury ceases to own any Group Inc. securities sold
under the TARP Capital Purchase Program, the compensation
arrangements for our senior executive officers must comply in
all respects with the U.S. Emergency Economic Stabilization
Act of 2008 and the rules and regulations thereunder. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Equity
Capital Equity Capital Management in
Part II, Item 7 of our Annual Report on
Form 10-K
for a further discussion of our participation in the
U.S. Treasurys TARP Capital Purchase Program.
FDIC Temporary
Liquidity Guarantee Program
Group Inc. and GS Bank USA have chosen to participate in the
FDICs Temporary Liquidity Guarantee Program (TLGP), which
applies to, among others, all U.S. depository institutions
insured by the FDIC and all U.S. bank holding companies,
unless they have opted out of the TLGP or the FDIC has
terminated their participation. Under the TLGP, the FDIC
guarantees certain senior unsecured debt of Group Inc. and GS
Bank USA, as well as noninterest-bearing transaction account
deposits at GS Bank USA, and in return for these guarantees the
FDIC is paid a fee based on the amount of the deposit or the
amount and maturity of the debt. Under the debt guarantee
component of the TLGP, the FDIC will pay the unpaid principal
and interest on an FDIC-guaranteed debt instrument upon the
uncured failure of the participating entity to make a timely
payment of principal or interest in accordance with the terms of
the instrument. Under the transaction account guarantee
component of the TLGP, all noninterest-bearing transaction
accounts maintained at GS Bank USA are insured in full by the
FDIC until December 31, 2009, regardless of the
standard maximum deposit insurance amount. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Funding Risk Conservative Liability Structure
in Part II, Item 7 of our Annual Report on
Form 10-K
for a further discussion of our participation in the TLGP.
GS Bank
USA
Our U.S. depository institution subsidiary, GS Bank USA, a New
York State-chartered bank and a member of the Federal Reserve
System and the FDIC, is regulated by the Federal Reserve Board
and the New York State Banking Department and is subject to
minimum capital requirements that (subject to certain
exceptions) are similar to those applicable to bank holding
companies. GS Bank USA was formed in November 2008 through
the merger of our existing Utah industrial bank (named GS Bank
USA) into our New York limited purpose trust company, with the
surviving company taking the name GS Bank USA. Concurrently with
this merger, we contributed subsidiaries with an aggregate of
$117.16 billion of assets into GS Bank USA (which brought
total assets in GS Bank USA to $145.06 billion as of
November 2008). As a result, a number of our businesses are now
conducted partially or entirely through GS Bank USA, including:
bank loan trading and origination; interest rate, credit,
currency and other derivatives; leveraged finance; commercial
and residential mortgage origination, trading and servicing;
structured finance; and agency lending, custody and hedge fund
administration services. The businesses conducted through GS
Bank USA are now subject to regulation by the Federal Reserve
Board, the New York State Banking Department and the FDIC.
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Deposit
Insurance
GS Bank USA accepts deposits, and those deposits have the
benefit of FDIC insurance up to the applicable limits. The
FDICs Deposit Insurance Fund is funded by assessments on
insured depository institutions, which depend on the risk
category of an institution and the amount of insured deposits
that it holds. The FDIC may increase or decrease the assessment
rate schedule on a
semi-annual
basis. We are also participants in the TLGP as discussed above
under
FDIC
Temporary Liquidity Guarantee Program.
Prompt
Corrective Action
The U.S. Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA), among other things, requires the federal
banking agencies to take prompt corrective action in
respect of depository institutions that do not meet specified
capital requirements. FDICIA establishes five capital categories
for FDIC-insured banks: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized
and critically undercapitalized. A depository institution is
deemed to be well capitalized, the highest category,
if it has a total capital ratio of 10% or greater, a Tier 1
capital ratio of 6% or greater and a Tier 1 leverage ratio
of 5% or greater and is not subject to any order or written
directive by any such regulatory authority to meet and maintain
a specific capital level for any capital measure. In connection
with the November 2008 asset transfer described below, GS Bank
USA agreed with the Federal Reserve Board to minimum capital
ratios in excess of these well capitalized levels.
Accordingly, for a period of time, GS Bank USA is expected to
maintain a Tier 1 capital ratio of at least 8%, a total
capital ratio of at least 11% and a Tier 1 leverage ratio
of at least 6%. We contributed subsidiaries with an aggregate of
$117.16 billion in assets into GS Bank USA in November 2008
(which brought total assets in GS Bank USA to
$145.06 billion as of November 2008). As a result, we are
currently working with the Federal Reserve Board to finalize our
methodology for the Basel I calculations. As of November
2008, under Basel I, GS Bank USAs estimated
Tier 1 capital ratio was 8.9% and estimated total capital
ratio was 11.6%. In addition, GS Bank USAs estimated
Tier 1 leverage ratio was 9.1%. An institution may be
downgraded to, or deemed to be in, a capital category that is
lower than is indicated by its capital ratios if it is
determined to be in an unsafe or unsound condition or if it
receives an unsatisfactory examination rating with respect to
certain matters.
FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, as the capital
category of an institution declines. Failure to meet the capital
guidelines could also subject a depository institution to
capital raising requirements. Ultimately, critically
undercapitalized institutions are subject to the appointment of
a receiver or conservator.
The prompt corrective action regulations apply only to
depository institutions and not to bank holding companies such
as Group Inc. However, the Federal Reserve Board is authorized
to take appropriate action at the holding company level, based
upon the undercapitalized status of the holding companys
depository institution subsidiaries. In certain instances
relating to an undercapitalized depository institution
subsidiary, the bank holding company would be required to
guarantee the performance of the undercapitalized
subsidiarys capital restoration plan and might be liable
for civil money damages for failure to fulfill its commitments
on that guarantee. Furthermore, in the event of the bankruptcy
of the parent holding company, the guarantee would take priority
over the parents general unsecured creditors.
Insolvency of
an Insured Depository Institution
If the FDIC is appointed the conservator or receiver of an
insured depository institution such as GS Bank USA, upon its
insolvency or in certain other events, the FDIC has the power:
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to transfer any of the depository institutions assets and
liabilities to a new obligor without the approval of the
depository institutions creditors;
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to enforce the terms of the depository institutions
contracts pursuant to their terms; or
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to repudiate or disaffirm any contract or lease to which the
depository institution is a party, the performance of which is
determined by the FDIC to be burdensome and the disaffirmance or
repudiation of which is determined by the FDIC to promote the
orderly administration of the depository institution.
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In addition, under federal law, the claims of holders of deposit
liabilities and certain claims for administrative expenses
against an insured depository institution would be afforded a
priority over other general unsecured claims against such an
institution, including claims of debt holders of the
institution, in the liquidation or other resolution
of such an institution by any receiver. As a result, whether or
not the FDIC ever sought to repudiate any debt obligations of GS
Bank USA, the debt holders would be treated differently from,
and could receive, if anything, substantially less than, the
depositors of the depository institution.
Transactions
with Affiliates
Transactions between GS Bank USA and Group Inc. and its
subsidiaries and affiliates are regulated by the Federal Reserve
Board. These regulations limit the types and amounts of
transactions (including loans to and credit extensions from GS
Bank USA) that may take place and generally require those
transactions to be on an arms-length basis. These regulations
generally do not apply to transactions between GS Bank USA and
its subsidiaries. In November 2008, Group Inc. transferred
assets and operations to GS Bank USA as described above under
GS
Bank USA. In connection with this transfer, Group Inc.
entered into a guarantee agreement with GS Bank USA whereby
Group Inc. agreed to (i) purchase from GS Bank USA certain
transferred assets (other than derivatives and mortgage
servicing rights) or reimburse GS Bank USA for certain losses
relating to those assets; (ii) reimburse GS Bank USA for
credit-related
losses from assets transferred to GS Bank USA; and
(iii) protect GS Bank USA or reimburse it for certain
losses arising from derivatives and mortgage servicing rights
transferred to GS Bank USA. Group Inc. also agreed to pledge to
GS Bank USA collateral with an aggregate value at any time not
less than 5% of the face amount of committed but unfunded credit
lines plus the original transfer value of the assets transferred
to GS Bank USA, which amounted to a required collateral value of
approximately $7.1 billion as of November 2008.
Trust Companies
Group Inc.s two limited purpose trust company subsidiaries
operate under state or federal law. They are not permitted to
and do not accept deposits (other than as incidental to their
trust activities) or make loans and, as a result, are not
insured by the FDIC. The Goldman Sachs Trust Company, N.A.,
a national banking association that is limited to fiduciary
activities, is regulated by the Office of the Comptroller of the
Currency and is a member bank of the Federal Reserve System. The
Goldman Sachs Trust Company of Delaware, a Delaware limited
purpose trust company, is regulated by the Office of the
Delaware State Bank Commissioner.
U.S. Securities
and Commodities Regulation
Goldman Sachs
broker-dealer
subsidiaries are subject to regulations that cover all aspects
of the securities business, including sales methods, trade
practices, use and safekeeping of clients funds and
securities, capital structure, recordkeeping, the financing of
clients purchases, and the conduct of directors, officers
and employees.
In the United States, the SEC is the federal agency responsible
for the administration of the federal securities laws.
GS&Co. is registered as a
broker-dealer
and as an investment adviser with the SEC and as a
broker-dealer
in all 50 states and the District of Columbia. Self-regulatory
organizations, such as FINRA and the NYSE, adopt rules that
apply to, and examine,
broker-dealers
such as GS&Co. In addition, state securities and other
regulators also have regulatory or oversight
23
authority over GS&Co. Similarly, our businesses are also
subject to regulation by various
non-U.S. governmental
and regulatory bodies and self-regulatory authorities in
virtually all countries where we have offices. Goldman Sachs
Execution & Clearing, L.P. (GSEC) and two of its
subsidiaries are registered
U.S. broker-dealers
and are regulated by the SEC, the NYSE and FINRA. Goldman Sachs
Financial Markets, L.P. is registered with the SEC as an OTC
derivatives dealer and conducts certain OTC derivatives
businesses.
The commodity futures and commodity options industry in the
United States is subject to regulation under the
U.S. Commodity Exchange Act (CEA). The CFTC is the federal
agency charged with the administration of the CEA. Several of
Goldman Sachs subsidiaries, including GS&Co. and
GSEC, are registered with the CFTC and act as futures commission
merchants, commodity pool operators or commodity trading
advisors and are subject to the CEA. The rules and regulations
of various self-regulatory organizations, such as the Chicago
Board of Trade and the Chicago Mercantile Exchange, other
futures exchanges and the National Futures Association, also
govern the commodity futures and commodity options businesses of
these entities.
GS&Co. and GSEC are subject to
Rule 15c3-1
of the SEC and Rule 1.17 of the CFTC, which specify uniform
minimum net capital requirements and also effectively require
that a significant part of the registrants assets be kept
in relatively liquid form. GS&Co. and GSEC have elected to
compute their minimum capital requirements in accordance with
the Alternative Net Capital Requirement as permitted
by
Rule 15c3-1.
As of November 2008, GS&Co. had regulatory net
capital, as defined by
Rule 15c3-1,
of $10.92 billion, which exceeded the amounts required by
$8.87 billion. As of November 2008, GSEC had
regulatory net capital, as defined by
Rule 15c3-1,
of $1.38 billion, which exceeded the amounts required by
$1.29 billion. In addition to its alternative minimum net
capital requirements, GS&Co. is also required to hold
tentative net capital in excess of $1 billion and net
capital in excess of $500 million in accordance with the
market and credit risk standards of Appendix E of
Rule 15c3-1.
GS&Co. is also required to notify the SEC in the event that
its tentative net capital is less than $5 billion. As of
November 2008, GS&Co. had tentative net capital and
net capital in excess of both the minimum and the notification
requirements. These net capital requirements may have the effect
of prohibiting these entities from distributing or withdrawing
capital and may require prior notice to the SEC for certain
withdrawals of capital. See Note 17 to the consolidated
financial statements in Part II, Item 8 of our Annual
Report on
Form 10-K.
Our specialist businesses are subject to extensive regulation by
a number of securities exchanges. As a Designated Market Maker
on the NYSE and as a specialist on other exchanges, we are
required to maintain orderly markets in the securities to which
we are assigned. Under the NYSEs new Designated Market
Maker rules, this may require us to supply liquidity to these
markets in certain circumstances.
J. Aron & Company is authorized by the
U.S. Federal Energy Regulatory Commission (FERC) to sell
wholesale physical power at
market-based
rates. As a FERC-authorized power marketer, J. Aron &
Company is subject to regulation under the U.S. Federal
Power Act and FERC regulations and to the oversight of FERC. As
a result of our investing activities, GS&Co. is also an
exempt holding company under the U.S. Public
Utility Holding Company Act of 2005 and applicable FERC rules.
In addition, as a result of our power-related activities, we are
subject to extensive and evolving energy, environmental and
other governmental laws and regulations, as discussed under
Risk Factors Our power generation interests
and related activities subject us to extensive regulation, as
well as environmental and other risks associated with power
generation activities in Part I, Item 1A of our
Annual Report on
Form 10-K.
Other Regulation
in the United States
Our U.S. insurance subsidiaries are subject to state
insurance regulation and oversight in the states in which they
are domiciled and in the other states in which they are
licensed, and we are subject to oversight as an insurance
holding company in states where our insurance subsidiaries are
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domiciled. State insurance regulations limit the ability of our
insurance subsidiaries to pay dividends to Group Inc. in certain
circumstances, and could require regulatory approval for any
change in control of Group Inc., which may include
control of 10% or more of our voting stock. In addition, a
number of our other businesses, including our lending and
mortgage businesses, require us to obtain licenses, adhere to
applicable regulations and be subject to the oversight of
various regulators in the states in which we conduct these
businesses.
The U.S. Bank Secrecy Act (BSA), as amended by the USA
PATRIOT Act of 2001 (PATRIOT Act), contains anti-money
laundering and financial transparency laws and mandated the
implementation of various regulations applicable to all
financial institutions, including standards for verifying client
identification at account opening, and obligations to monitor
client transactions and report suspicious activities. Through
these and other provisions, the BSA and the PATRIOT Act seek to
promote the identification of parties that may be involved in
terrorism, money laundering or other suspicious activities.
Anti-money laundering laws outside the United States contain
some similar provisions. The obligation of financial
institutions, including Goldman Sachs, to identify their
clients, to monitor for and report suspicious transactions, to
respond to requests for information by regulatory authorities
and law enforcement agencies, and to share information with
other financial institutions, has required the implementation
and maintenance of internal practices, procedures and controls
that have increased, and may continue to increase, our costs,
and any failure with respect to our programs in this area could
subject us to substantial liability and regulatory fines.
Regulation Outside
the United States
Goldman Sachs provides investment services in and from the
United Kingdom under the regulation of the Financial Services
Authority (FSA). Goldman Sachs International (GSI), our
regulated U.K.
broker-dealer,
is subject to the capital requirements imposed by the FSA. As of
November 2008, GSI was in compliance with the FSA capital
requirements. Other subsidiaries, including Goldman Sachs
International Bank, are also regulated by the FSA.
Goldman Sachs Bank (Europe) PLC (GS Bank Europe), our regulated
Irish bank, is subject to minimum capital requirements imposed
by the Irish Financial Services Regulatory Authority. As of
November 2008, this bank was in compliance with all
regulatory capital requirements. Group Inc. has issued a general
guarantee of the obligations of this bank.
Various other Goldman Sachs entities are regulated by the
banking, insurance and securities regulatory authorities of the
European countries in which they operate, including, among
others, the Federal Financial Supervisory Authority (BaFin) and
the Bundesbank in Germany, Banque de France and the
Autorité des Marchés Financiers in France, Banca
dItalia and the Commissione Nazionale per le Società
e la Borsa (CONSOB) in Italy, the Federal Financial Markets
Service in Russia and the Swiss Federal Banking Commission.
Certain Goldman Sachs entities are also regulated by the
European securities, derivatives and commodities exchanges of
which they are members.
The investment services that are subject to oversight by the FSA
and other regulators within the European Union (EU) are
regulated in accordance with national laws, many of which
implement EU directives requiring, among other things,
compliance with certain capital adequacy standards, customer
protection requirements and market conduct and trade reporting
rules. These standards, requirements and rules are similarly
implemented, under the same directives, throughout the EU.
Goldman Sachs Japan Co., Ltd. (GSJCL), our regulated Japanese
broker-dealer,
is subject to the capital requirements imposed by Japans
Financial Services Agency. As of November 2008, GSJCL was
in compliance with its capital adequacy requirements. GSJCL is
also regulated by the Tokyo Stock Exchange, the Osaka Securities
Exchange, the Tokyo Financial Exchange, the Japan Securities
Dealers Association, the Tokyo Commodity Exchange and the
Ministry of Economy, Trade and Industry in Japan.
25
Also in Asia, the Securities and Futures Commission in Hong
Kong, the Monetary Authority of Singapore, the China Securities
Regulatory Commission, the Korean Financial Supervisory Service,
the Reserve Bank of India and the Securities and Exchange Board
of India, among others, regulate various of our subsidiaries and
also have capital standards and other requirements comparable to
the rules of the SEC.
Various Goldman Sachs entities are regulated by the banking and
regulatory authorities in other
non-U.S. countries
in which Goldman Sachs operates, including, among others, Brazil
and Dubai. In addition, certain of our insurance subsidiaries
are regulated by Lloyds (which is, in turn, regulated by
the FSA) and by the Bermuda Monetary Authority.
Regulations
Applicable in and Outside the United States
The U.S. and
non-U.S. government
agencies, regulatory bodies and self-regulatory organizations,
as well as state securities commissions and other state
regulators in the United States, are empowered to conduct
administrative proceedings that can result in censure, fine, the
issuance of cease and desist orders, or the suspension or
expulsion of a
broker-dealer
or its directors, officers or employees. From time to time, our
subsidiaries have been subject to investigations and
proceedings, and sanctions have been imposed for infractions of
various regulations relating to our activities, none of which
has had a material adverse effect on us or our businesses.
The research areas of investment banks have been and remain the
subject of regulatory scrutiny. The SEC and FINRA have rules
governing research analysts, including rules imposing
restrictions on the interaction between equity research analysts
and investment banking personnel at member securities firms.
Various
non-U.S. jurisdictions
have imposed both substantive and disclosure-based requirements
with respect to research and may impose additional regulations.
In 2003, GS&Co. agreed to a global settlement with certain
federal and state securities regulators and self-regulatory
organizations to resolve investigations into equity research
analysts alleged conflicts of interest. The global
settlement includes certain restrictions and undertakings that
have imposed additional costs and limitations on the conduct of
our businesses, including restrictions on the interaction
between research and investment banking areas.
In connection with the research settlement, we have also
subscribed to a voluntary initiative imposing restrictions on
the allocation of shares in initial public offerings to
executives and directors of public companies. The FSA in the
United Kingdom has imposed requirements on the conduct of the
allocation process in equity and fixed income securities
offerings (including initial public offerings and secondary
distributions). The SEC, the FSA, FINRA and other U.S. or
non-U.S. regulators
may in the future adopt additional and more stringent rules with
respect to offering procedures and the management of conflicts
of interest, and we cannot fully predict the effect that any new
requirements will have on our business.
Our investment management businesses are subject to significant
regulation in numerous jurisdictions around the world relating
to, among other things, the safeguarding of client assets and
our management of client funds.
As discussed above, many of our subsidiaries are subject to
regulatory capital requirements in jurisdictions throughout the
world. Subsidiaries not subject to separate regulation may hold
capital to satisfy local tax guidelines, rating agency
requirements or internal policies, including policies concerning
the minimum amount of capital a subsidiary should hold based
upon its underlying risk.
Certain of our businesses are subject to compliance with
regulations enacted by U.S. federal and state governments,
the European Union or other jurisdictions
and/or
enacted by various regulatory organizations or exchanges
relating to the privacy of the information of clients, employees
or others, and any failure to comply with these regulations
could expose us to liability
and/or
reputational damage.
26
Item 1A. Risk
Factors
We face a variety of risks that are substantial and inherent in
our businesses, including market, liquidity, credit,
operational, legal and regulatory risks. The following are some
of the more important factors that could affect our businesses.
Our businesses
have been and may continue to be adversely affected by
conditions in the global financial markets and economic
conditions generally.
Our businesses, by their nature, do not produce predictable
earnings, and all of our businesses are materially affected by
conditions in the global financial markets and economic
conditions generally. In the past twelve months, these
conditions have changed suddenly and negatively.
Since mid-2007, and particularly during the second half of 2008,
the financial services industry and the securities markets
generally were materially and adversely affected by significant
declines in the values of nearly all asset classes and by a
serious lack of liquidity. This was initially triggered by
declines in the values of subprime mortgages, but spread to all
mortgage and real estate asset classes, to leveraged bank loans
and to nearly all asset classes, including equities. The global
markets have been characterized by substantially increased
volatility and
short-selling
and an overall loss of investor confidence, initially in
financial institutions, but more recently in companies in a
number of other industries and in the broader markets. The
decline in asset values has caused increases in margin calls for
investors, requirements that derivatives counterparties post
additional collateral and redemptions by mutual and hedge fund
investors, all of which have increased the downward pressure on
asset values and outflows of client funds across the financial
services industry. In addition, the increased redemptions and
unavailability of credit have required hedge funds and others to
rapidly reduce leverage, which has increased volatility and
further contributed to the decline in asset values.
Market conditions have also led to the failure or merger of a
number of prominent financial institutions. Financial
institution failures or near-failures have resulted in further
losses as a consequence of defaults on securities issued by them
and defaults under bilateral derivatives and other contracts
entered into with such entities as counterparties. Furthermore,
declining asset values, defaults on mortgages and consumer
loans, and the lack of market and investor confidence, as well
as other factors, have all combined to increase credit default
swap spreads, to cause rating agencies to lower credit ratings,
and to otherwise increase the cost and decrease the availability
of liquidity, despite very significant declines in central bank
borrowing rates and other government actions. Banks and other
lenders have suffered significant losses and have become
reluctant to lend, even on a secured basis, due to the increased
risk of default and the impact of declining asset values on the
value of collateral. The markets for securitized debt offerings
backed by mortgages, loans, credit card receivables and other
assets have for the most part been closed.
In 2008, governments, regulators and central banks in the United
States and worldwide have taken numerous steps to increase
liquidity and to restore investor confidence, but asset values
have continued to decline and access to liquidity continues to
be very limited.
We have long proprietary positions in a number of
our businesses. These positions are accounted for at fair value,
and the declines in the values of assets have had a direct and
large negative impact on our earnings in fiscal 2008. Revenues
from our asset management and merchant banking businesses were
also negatively impacted by declines in the values of assets
managed for our clients.
The ongoing liquidity crisis and the loss of confidence in
financial institutions has increased our cost of funding and
limited our access to some of our traditional sources of
liquidity, including both secured and unsecured borrowings.
While the numerous steps taken by governments, regulators and
central banks have helped reduce these funding costs somewhat
and increase our access to traditional and new sources of
liquidity, increases in funding costs and limitations on our
access to liquidity have
27
negatively impacted our earnings and our ability to engage in
certain activities. In particular, in the latter half of 2008,
we were unable to raise significant amounts of
long-term
unsecured debt in the public markets, other than as a result of
the issuance of securities guaranteed by the FDIC under the
TLGP. We are able to have outstanding approximately
$35 billion of debt under the TLGP that is issued prior to
June 30, 2009. It is unclear when we will regain
access to the public
long-term
unsecured debt markets on customary terms or whether any similar
program will be available after the TLGPs scheduled
June 2009 expiration. However, we continue to have access
to
short-term
funding and to a number of sources of secured funding, both in
the private markets and through various government and central
bank sponsored initiatives. In December 2008, Moodys
Investors Service downgraded our
long-term
debt credit rating and Standard & Poors
downgraded both our
long-term
and
short-term
debt credit ratings, in each case with an outlook of
negative.
We have been able to fund our operations during fiscal 2008. Our
global core excess (our cash and cash equivalent positions
maintained to ensure
short-term
liquidity) and our capital ratios are at levels significantly
higher than in the past. Nevertheless, our credit spreads have
widened and the average maturity of our new funding has
decreased. Recently, we have relied to a significant extent for
our
long-term
unsecured funding on emergency funding programs implemented by
governments and central banks. It is unclear whether or for how
long these facilities will be extended and what impact
termination of these facilities could have on our ability to
access funding. See Managements Discussion and
Analysis of Financial Condition and Results of
Operations Liquidity and Funding Risk in
Part II, Item 7 of our Annual Report on
Form 10-K.
Furthermore, the increased riskiness of assets due to increases
in the volatility of asset prices, coupled with market concerns
about the levels of financial institution leverage ratios, as
well as fewer attractive business opportunities, have caused us
to significantly decrease the size of our balance sheet and to
increase the size of our global core excess. Both of these steps
may have a negative effect on our profitability, until reversed.
Concerns about financial institution profitability and solvency
as a result of general market conditions, particularly in the
credit markets, together with the forced merger or failure of a
number of major commercial and investment banks, have at times
caused a number of our clients to reduce the level of business
that they do with us, either because of concerns about the
safety of their assets held by us or simply arising from a
desire to diversify their risk or for other reasons. Some
clients have withdrawn some of the funds held at our firm or
transferred them from deposits with GS Bank USA to other types
of assets (in many cases leaving those assets in their brokerage
accounts held with us). Some counterparties have at times
refused to enter into certain derivatives and other
long-term
transactions with us or have requested additional collateral.
These instances were more prevalent during periods when the lack
of confidence in financial institutions was most widespread and
have become significantly less frequent in recent months in the
wake of government and central bank actions, greater
understanding of client account protections and higher limits of
FDIC insurance. In addition, we have acquired some new clients
as a result of the difficulties experienced by other financial
institutions.
During the fourth quarter of 2008, we raised $20.75 billion
in equity, comprised of a $5.75 billion public common stock
offering, a $5 billion preferred stock and warrant issuance
to Berkshire Hathaway Inc. and certain affiliates and a
$10 billion preferred stock and warrant issuance under the
U.S. Treasurys TARP Capital Purchase Program. While this
additional capital provides further funding to our business and
we believe has improved investor perceptions with regard to our
financial position, it has increased our equity and the number
of actual and diluted outstanding shares of our common stock as
well as our preferred dividend requirements, which will reduce
our earnings per share and the return on our equity unless our
earnings increase sufficiently.
In addition, as of the end of 2008, the United States, Europe
and Japan are all in a recession. Business activity across a
wide range of industries and regions is greatly reduced and
local governments and many companies are in serious difficulty
due to the lack of consumer spending and
28
the lack of liquidity in the credit markets. Unemployment has
increased significantly. While lower interest rates, increased
volatility and substantial increases in trading volumes have
positively impacted earnings in a number of our trading
businesses, declines in asset values, the lack of liquidity,
general uncertainty about economic and market activities and a
lack of consumer, investor and CEO confidence have negatively
impacted many of our other businesses, particularly our
investment banking, merchant banking, asset management, credit
products, mortgage, leveraged lending and equity principal
strategies businesses. In particular, our investment banking
business has been affected during the last twelve months by the
decrease in equity and debt underwritings and the decline in
both announced and completed mergers and acquisitions.
Our financial performance is highly dependent on the environment
in which our businesses operate. A favorable business
environment is generally characterized by, among other factors,
high global gross domestic product growth, transparent, liquid
and efficient capital markets, low inflation, high business and
investor confidence, stable geopolitical conditions, and strong
business earnings. Unfavorable or uncertain economic and market
conditions can be caused by: declines in economic growth,
business activity or investor or business confidence;
limitations on the availability or increases in the cost of
credit and capital; increases in inflation, interest rates,
exchange rate volatility, default rates or the price of basic
commodities; outbreaks of hostilities or other geopolitical
instability; corporate, political or other scandals that reduce
investor confidence in capital markets; natural disasters or
pandemics; or a combination of these or other factors.
Overall, during fiscal 2008, the business environment has been
extremely adverse for many of our businesses and there can be no
assurance that these conditions will improve in the near term.
Until they do, we expect our results of operations to be
adversely affected.
Our businesses
have been and may continue to be adversely affected by declining
asset values.
Many of our businesses, such as our merchant banking businesses,
our mortgages, leveraged loan and credit products businesses in
our FICC segment, and our equity principal strategies business,
have net long positions in debt securities, loans,
derivatives, mortgages, equities (including private equity) and
most other asset classes. In addition, many of our
market-making
and other businesses in which we act as a principal to
facilitate our clients activities, including our
specialist businesses, commit large amounts of capital to
maintain trading positions in interest rate and credit products,
as well as currencies, commodities and equities. Because nearly
all of these investing and trading positions are
marked-to-market
on a daily basis, declines in asset values directly and
immediately impact our earnings, unless we have effectively
hedged our exposures to such declines. In certain
circumstances (particularly in the case of leveraged loans and
private equities or other securities that are not freely
tradable or lack established and liquid trading markets), it may
not be possible or economic to hedge such exposures and to the
extent that we do so the hedge may be ineffective or may greatly
reduce our ability to profit from increases in the values of the
assets. Sudden declines and significant volatility in the prices
of assets may substantially curtail or eliminate the trading
markets for certain assets, which may make it very difficult to
sell, hedge or value such assets. The inability to sell or
effectively hedge assets reduces our ability to limit losses in
such positions and the difficulty in valuing assets may increase
our
risk-weighted
assets which requires us to maintain additional capital and
increases our funding costs.
In our specialist businesses, we are obligated by stock exchange
rules to maintain an orderly market, including by purchasing
shares in a declining market. In markets where asset values are
declining and in volatile markets, this results in trading
losses and an increased need for liquidity.
We receive
asset-based
management fees based on the value of our clients
portfolios or investment in funds managed by us and, in some
cases, we also receive incentive fees based on increases in the
value of such investments. Declines in asset values reduce the
value of our clients portfolios or fund assets, which in
turn reduce the fees we earn for managing such assets.
29
We post collateral to support our obligations and receive
collateral to support the obligations of our clients and
counterparties in connection with our trading businesses. When
the value of the assets posted as collateral declines, the party
posting the collateral may need to provide additional collateral
or, if possible, reduce its trading position. A classic example
of such a situation is a margin call in connection
with a brokerage account. Therefore, declines in the value of
asset classes used as collateral mean that either the cost of
funding trading positions is increased or the size of trading
positions is decreased. If we are the party providing collateral
this can increase our costs and reduce our profitability and if
we are the party receiving collateral this can also reduce our
profitability by reducing the level of business done with our
clients and counterparties. In addition, volatile or less liquid
markets increase the difficulty of valuing assets which can lead
to costly and time-consuming disputes over asset values and the
level of required collateral, as well as increased credit risk
to the recipient of the collateral due to delays in receiving
adequate collateral.
Our businesses
have been and may continue to be adversely affected by
disruptions in the credit markets, including reduced access to
credit and higher costs of obtaining credit.
Widening credit spreads, as well as significant declines in the
availability of credit, have adversely affected our ability to
borrow on a secured and unsecured basis and may continue to do
so. We fund ourselves on an unsecured basis by issuing
commercial paper, promissory notes and
long-term
debt, or by obtaining bank loans or lines of credit. We seek to
finance many of our assets, including our less liquid assets, on
a secured basis, including by entering into repurchase
agreements. Disruptions in the credit markets make it harder and
more expensive to obtain funding for our businesses. If our
available funding is limited or we are forced to fund our
operations at a higher cost, these conditions may require us to
curtail our business activities and increase our cost of
funding, both of which could reduce our profitability,
particularly in our businesses that involve investing, lending
and taking principal positions, including market making.
Our clients engaging in mergers and acquisitions often rely on
access to the secured and unsecured credit markets to finance
their transactions. The lack of available credit and the
increased cost of credit can adversely affect the size, volume
and timing of our clients merger and acquisition
transactions particularly large
transactions and adversely affect our financial
advisory and underwriting businesses.
In addition, we may incur significant unrealized gains or losses
due solely to changes in our credit spreads or those of third
parties, as these changes may affect the fair value of our
derivative instruments and the debt securities that we hold or
issue.
Our businesses
have been and may continue to be affected by changes in the
levels of market volatility.
Certain of our trading businesses depend on market volatility to
provide trading and arbitrage opportunities, and decreases in
volatility may reduce these opportunities and adversely affect
the results of these businesses. On the other hand, increased
volatility, while it can increase trading volumes and spreads,
also increases risk as measured by VaR and may expose us to
increased risks in connection with our
market-making
and proprietary businesses or cause us to reduce the size of
these businesses in order to avoid increasing our VaR. Limiting
the size of our
market-making
positions and investing businesses can adversely affect our
profitability, even though spreads are widening and we may earn
more on each trade. In periods when volatility is increasing,
but asset values are declining significantly (as has been the
case recently), it may not be possible to sell assets at all or
it may only be possible to do so at steep discounts. In such
circumstances we may be forced to either take on additional risk
or to incur losses in order to decrease our VaR. In addition,
increases in volatility increase the level of our risk weighted
assets and increase our capital requirements which increases our
funding costs.
30
Our businesses
have been adversely affected and may continue to be adversely
affected by market uncertainty or lack of confidence among
investors and CEOs due to general declines in economic activity
and other unfavorable economic, geopolitical or market
conditions.
Our investment banking business has been and may continue to be
adversely affected by market conditions. Poor economic
conditions and other adverse geopolitical conditions can
adversely affect and have adversely affected investor and CEO
confidence, resulting in significant
industry-wide
declines in the size and number of underwritings and of
financial advisory transactions, which could continue to have an
adverse effect on our revenues and our profit margins. In
particular, because a significant portion of our investment
banking revenues are derived from our participation in large
transactions, a decline in the number of large transactions
would adversely affect our investment banking business.
In certain circumstances, market uncertainty or general declines
in market or economic activity may affect our trading businesses
by decreasing levels of overall activity or by decreasing
volatility, but at other times market uncertainty and even
declining economic activity may result in higher trading volumes
or higher spreads or both.
Market uncertainty, volatility and adverse economic conditions,
as well as declines in asset values, may cause our clients to
transfer their assets out of our funds or other products or
their brokerage accounts and result in reduced net revenues,
principally in our asset management business. To the extent that
clients do not withdraw their funds, they may invest them in
products that generate less fee income.
Our investing
businesses may be affected by the poor investment performance of
our investment products.
Poor investment returns in our asset management business, due to
either general market conditions or underperformance (against
the performance of benchmarks or of our competitors) by funds or
accounts that we manage or investment products that we design or
sell, affects our ability to retain existing assets and to
attract new clients or additional assets from existing clients.
This could affect the asset management and incentive fees that
we earn on assets under management or the commissions that we
earn for selling other investment products, such as structured
notes or derivatives.
We have in the past provided financial support to certain of our
investment products in difficult market circumstances and, at
our discretion, we may decide to do so in the future for
reputational or business reasons, including through equity
investments or cash infusions.
We may incur
losses as a result of ineffective risk management processes and
strategies.
We seek to monitor and control our risk exposure through a risk
and control framework encompassing a variety of separate but
complementary financial, credit, operational, compliance and
legal reporting systems, internal controls, management review
processes and other mechanisms. Our trading risk management
process seeks to balance our ability to profit from trading
positions with our exposure to potential losses. While we employ
a broad and diversified set of risk monitoring and risk
mitigation techniques, those techniques and the judgments that
accompany their application cannot anticipate every economic and
financial outcome or the specifics and timing of such outcomes.
Thus, we may, in the course of our activities, incur losses.
Recent market conditions have involved unprecedented
dislocations and highlight the limitations inherent in using
historical data to manage risk.
The models that we use to assess and control our risk exposures
reflect assumptions about the degrees of correlation or lack
thereof among prices of various asset classes or other market
indicators. In times of market stress or other unforeseen
circumstances, such as occurred during 2008, previously
uncorrelated indicators may become correlated, or conversely
previously correlated indicators may move in different
directions. These types of market movements have at times
limited the effectiveness of our hedging strategies and have
caused us to incur significant losses, and they
31
may do so in the future. These changes in correlation can be
exacerbated where other market participants are using risk or
trading models with assumptions or algorithms that are similar
to ours. In these and other cases, it may be difficult to reduce
our risk positions due to the activity of other market
participants or widespread market dislocations, including
circumstances where asset values are declining significantly or
no market exists for certain assets. To the extent that we make
investments directly through various of our businesses in
securities, including private equity, that do not have an
established liquid trading market or are otherwise subject to
restrictions on sale or hedging, we may not be able to reduce
our positions and therefore reduce our risk associated with such
positions. In addition, we invest our own capital in our
merchant banking, alternative investment and infrastructure
funds, and limitations on our ability to withdraw some or all of
our investments in these funds, whether for legal, reputational
or other reasons, may make it more difficult for us to control
the risk exposures relating to these investments.
For a further discussion of our risk management policies and
procedures, see Managements Discussion and Analysis
of Financial Condition and Results of Operations
Risk Management in Part II, Item 7 of our Annual
Report on
Form 10-K.
Our liquidity,
profitability and businesses may be adversely affected by an
inability to access the debt capital markets or to sell assets
or by a reduction in our credit ratings or by an increase in our
credit spreads.
Liquidity is essential to our businesses. Our liquidity may be
impaired by an inability to access secured
and/or
unsecured debt markets, an inability to access funds from our
subsidiaries, an inability to sell assets or redeem our
investments, or unforeseen outflows of cash or collateral. This
situation may arise due to circumstances that we may be unable
to control, such as a general market disruption or an
operational problem that affects third parties or us, or even by
the perception among market participants that we, or other
market participants, are experiencing greater liquidity risk.
The financial instruments that we hold and the contracts to
which we are a party are increasingly complex, as we employ
structured products to benefit our clients and ourselves, and
these complex structured products often do not have readily
available markets to access in times of liquidity stress. Our
investing activities may lead to situations where the holdings
from these activities represent a significant portion of
specific markets, which could restrict liquidity for our
positions. Further, our ability to sell assets may be impaired
if other market participants are seeking to sell similar assets
at the same time, as is likely to occur in a liquidity or other
market crisis. In addition, financial institutions with which we
interact may exercise set-off rights or the right to require
additional collateral, including in difficult market conditions,
which could further impair our access to liquidity.
Our credit ratings are important to our liquidity. A reduction
in our credit ratings could adversely affect our liquidity and
competitive position, increase our borrowing costs, limit our
access to the capital markets or trigger our obligations under
certain bilateral provisions in some of our trading and
collateralized financing contracts. Under these provisions,
counterparties could be permitted to terminate contracts with
Goldman Sachs or require us to post additional collateral.
Termination of our trading and collateralized financing
contracts could cause us to sustain losses and impair our
liquidity by requiring us to find other sources of financing or
to make significant cash payments or securities movements.
Our cost of obtaining
long-term
unsecured funding is directly related to our credit spreads (the
amount in excess of the interest rate of U.S. Treasury
securities (or other benchmark securities) of the same maturity
that we need to pay to our debt investors). Increases in our
credit spreads can significantly increase our cost of this
funding. Changes in credit spreads are continuous,
market-driven,
and subject at times to unpredictable and highly volatile
movements. Credit spreads are influenced by market perceptions
of our creditworthiness. In addition, our credit spreads may be
influenced by movements in the costs to purchasers of credit
default swaps referenced to our
32
long-term
debt. The market for credit default swaps is relatively new,
although very large, and it has proven to be extremely volatile
and currently lacks a high degree of structure or transparency.
Group Inc. is
a holding company and is dependent for liquidity on payments
from its subsidiaries, which are subject to
restrictions.
Group Inc. is a holding company and, therefore, depends on
dividends, distributions and other payments from its
subsidiaries to fund dividend payments and to fund all payments
on its obligations, including debt obligations. Many of our
subsidiaries, including our
broker-dealer,
bank and insurance subsidiaries, are subject to laws that
restrict dividend payments or authorize regulatory bodies to
block or reduce the flow of funds from those subsidiaries to
Group Inc. Restrictions or regulatory action of that kind could
impede access to funds that Group Inc. needs to make payments on
its obligations, including debt obligations, or dividend
payments. In addition, Group Inc.s right to participate in
a distribution of assets upon a subsidiarys liquidation or
reorganization is subject to the prior claims of the
subsidiarys creditors.
Furthermore, Group Inc. has guaranteed the payment obligations
of GS&Co., GS Bank USA and GS Bank Europe, subject to
certain exceptions, and has pledged significant assets to GS
Bank USA to support obligations to GS Bank USA. These guarantees
may require Group Inc. to provide substantial funds or assets to
its subsidiaries or their creditors and counterparties at a time
when Group Inc. is in need of liquidity to fund its own
obligations. See Business Regulation in
Part I, Item 1 of our Annual Report on
Form 10-K.
Our
businesses, profitability and liquidity may be adversely
affected by deterioration in the credit quality of, or defaults
by, third parties who owe us money, securities or other assets
or whose securities or obligations we hold.
The amount and duration of our credit exposures have been
increasing over the past several years, as have the breadth and
size of the entities to which we have credit exposures. We are
exposed to the risk that third parties that owe us money,
securities or other assets will not perform their obligations.
These parties may default on their obligations to us due to
bankruptcy, lack of liquidity, operational failure or other
reasons. A failure of a significant market participant, or even
concerns about a default by such an institution, could lead to
significant liquidity problems, losses or defaults by other
institutions, which in turn could adversely affect us.
We are also subject to the risk that our rights against third
parties may not be enforceable in all circumstances. In
addition, deterioration in the credit quality of third parties
whose securities or obligations we hold could result in losses
and/or
adversely affect our ability to rehypothecate or otherwise use
those securities or obligations for liquidity purposes. A
significant downgrade in the credit ratings of our
counterparties could also have a negative impact on our results.
While in many cases we are permitted to require additional
collateral from counterparties that experience financial
difficulty, disputes may arise as to the amount of collateral we
are entitled to receive and the value of pledged assets. The
termination of contracts and the foreclosure on collateral may
subject us to claims for the improper exercise of our rights.
Default rates, downgrades and disputes with counterparties as to
the valuation of collateral increase significantly in times of
market stress and illiquidity.
As part of our clearing business, we finance our client
positions, and we could be held responsible for the defaults or
misconduct of our clients. Although we regularly review credit
exposures 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 detect or foresee.
33
Concentration
of risk increases the potential for significant
losses.
Concentration of risk increases the potential for significant
losses in our
market-making,
proprietary trading, investing, block trading, merchant banking,
underwriting and lending businesses. This risk may increase to
the extent we expand our proprietary trading and investing
businesses or commit capital to facilitate client-driven
business. The number and size of such transactions may affect
our results of operations in a given period. Moreover, because
of concentration of risk, we may suffer losses even when
economic and market conditions are generally favorable for our
competitors. Disruptions in the credit markets can make it
difficult to hedge these credit exposures effectively or
economically. In addition, we extend large commitments as part
of our credit origination activities. Our inability to reduce
our credit risk by selling, syndicating or securitizing these
positions, including during periods of market stress, could
negatively affect our results of operations due to a decrease in
the fair value of the positions, including due to the insolvency
or bankruptcy of the borrower, as well as the loss of revenues
associated with selling such securities or loans.
In the ordinary course of business, we may be subject to a
concentration of credit risk to a particular counterparty,
borrower or issuer, and a failure or downgrade of, or default
by, such entity could negatively impact our businesses, perhaps
materially, and the systems by which we set limits and monitor
the level of our credit exposure to individual entities,
industries and countries may not function as we have
anticipated. While our activities expose us to many different
industries and counterparties, we routinely execute a high
volume of transactions with counterparties in the financial
services industry, including brokers and dealers, commercial
banks, and investment funds. This has resulted in significant
credit concentration with respect to this industry.
The financial
services industry is highly competitive.
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, creditworthiness and price.
Over time, there has been substantial consolidation and
convergence among companies in the financial services industry.
This trend accelerated over the course of the past year as a
result of numerous mergers and asset acquisitions among industry
participants. 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. To the extent we expand into new business areas
and new geographic regions, we will face competitors with more
experience and more established relationships with clients,
regulators and industry participants in the relevant market,
which could adversely affect our ability to expand.
Pricing and other competitive pressures in our investment
banking business, as well as our other businesses, have
continued to increase, particularly in situations where some of
our competitors may seek to increase market share by reducing
prices. For example, in connection with investment banking and
other assignments, we have experienced pressure to extend and
price credit at levels that may not always fully compensate us
for the risks we take.
We face
enhanced risks as new business initiatives lead us to transact
with a broader array of clients and counterparties and expose us
to new asset classes and new markets.
A number of our recent and planned business initiatives and
expansions of existing businesses may bring us into contact,
directly or indirectly, with individuals and entities that are
not within our traditional client and counterparty base and
expose us to new asset classes and new markets. These business
activities expose us to new and enhanced risks, including risks
associated with dealing with governmental entities, reputational
concerns arising from dealing with less sophisticated
counterparties and investors, greater regulatory scrutiny of
these activities, increased
credit-related,
sovereign and operational risks, risks arising from accidents or
acts of terrorism, and reputational concerns with the manner in
which these assets are being operated or held.
34
Derivative
transactions may expose us to unexpected risk and potential
losses.
We are party to a large number of derivative transactions,
including credit derivatives. Many of these derivative
instruments are individually negotiated and
non-standardized,
which can make exiting, transferring or settling the position
difficult. Many credit derivatives require that we deliver to
the counterparty the underlying security, loan or other
obligation in order to receive payment. In a number of cases, we
do not hold the underlying security, loan or other obligation
and may not be able to obtain, the underlying security, loan or
other obligation. This could cause us to forfeit the payments
due to us under these contracts or result in settlement delays
with the attendant credit and operational risk as well as
increased costs to the firm.
Derivative contracts and other transactions entered into with
third parties are not always confirmed by the counterparties on
a timely basis. While the transaction remains unconfirmed, we
are subject to heightened credit and operational risk and in the
event of a default may find it more difficult to enforce the
contract. In addition, as new and more complex derivative
products are created, covering a wider array of underlying
credit and other instruments, disputes about the terms of the
underlying contracts could arise, which could impair our ability
to effectively manage our risk exposures from these products and
subject us to increased costs. Any regulatory effort to create
an exchange or trading platform for credit derivatives and other
OTC derivative contracts, or a market shift toward standardized
derivatives, could reduce the risk associated with such
transactions, but under certain circumstances could also limit
our ability to develop derivatives that best suit the needs of
our clients and ourselves and adversely affect our profitability.
A failure in
our operational systems or infrastructure, or those of third
parties, could impair our liquidity, disrupt our businesses,
result in the disclosure of confidential information, damage our
reputation and cause losses.
Our businesses are highly dependent on our ability to process
and monitor, on a daily basis, a very large number of
transactions, many of which are highly complex, across numerous
and diverse markets in many currencies. These transactions, as
well as the information technology services we provide to
clients, often must adhere to client-specific guidelines, as
well as legal and regulatory standards. As our client base and
our geographical reach expands, developing and maintaining our
operational systems and infrastructure becomes increasingly
challenging. Our financial, accounting, data processing or other
operating systems and facilities may fail to operate properly or
become disabled as a result of events that are wholly or
partially beyond our control, such as a spike in transaction
volume, adversely affecting our ability to process these
transactions or provide these services. In addition, we also
face the risk of operational failure, termination or capacity
constraints of any of the clearing agents, exchanges, clearing
houses or other financial intermediaries we use to facilitate
our securities transactions, and as our interconnectivity with
our clients grows, we increasingly face the risk of operational
failure with respect to our clients systems. In recent
years, there has been significant consolidation among clearing
agents, exchanges and clearing houses, which has increased our
exposure to operational failure, termination or capacity
constraints of the particular financial intermediaries that we
use and could affect our ability to find adequate and
cost-effective
alternatives in the event of any such failure, termination or
constraint. Industry consolidation, whether among market
participants or financial intermediaries, increases the risk of
operational failure as disparate complex systems need to be
integrated, often on an accelerated basis. Furthermore, the
interconnectivity of multiple financial institutions with
central agents, exchanges and clearing houses increases the risk
that an operational failure at one institution may cause an
industry-wide
operational failure that could materially impact our ability to
conduct business. Any such failure, termination or constraint
could adversely affect our ability to effect transactions,
service our clients, manage our exposure to risk or expand our
businesses or result in financial loss or liability to our
clients, impairment of our liquidity, disruption of our
businesses, regulatory intervention or reputational damage.
35
Despite the resiliency plans and facilities we have in place,
our ability to conduct business may be adversely impacted by a
disruption in the infrastructure that supports our businesses
and the communities in which we are located. This may include a
disruption involving electrical, communications, internet,
transportation or other services used by us or third parties
with which we conduct business. These disruptions may occur as a
result of events that affect only our buildings or the buildings
of such third parties, or as a result of events with a broader
impact globally, regionally or in the cities where those
buildings are located. Nearly all of our employees in our
primary locations, including the New York metropolitan area,
London, Frankfurt, Hong Kong, Tokyo and Bangalore, work in close
proximity to one another, in one or more buildings.
Notwithstanding our efforts to maintain business continuity,
given that our headquarters and the largest concentration of our
employees are in the New York metropolitan area, depending on
the intensity and longevity of the event, a catastrophic event
impacting our New York metropolitan area offices could very
negatively affect our business. If a disruption occurs in one
location and our employees in that location are unable to occupy
our offices or communicate with or travel to other locations,
our ability to service and interact with our clients may suffer,
and we may not be able to successfully implement contingency
plans that depend on communication or travel.
Our operations rely on the secure processing, storage and
transmission of confidential and other information in our
computer systems and networks. Although we take protective
measures and endeavor to modify them as circumstances warrant,
our computer systems, software and networks may be vulnerable to
unauthorized access, computer viruses or other malicious code
and other events that could have a security impact. If one or
more of such events occur, this potentially could jeopardize our
or our clients or counterparties confidential and
other information processed and stored in, and transmitted
through, our computer systems and networks, or otherwise cause
interruptions or malfunctions in our, our clients, our
counterparties or third parties operations, which
could result in significant losses or reputational damage. We
may be required to expend significant additional resources to
modify our protective measures or to investigate and remediate
vulnerabilities or other exposures, and we may be subject to
litigation and financial losses that are either not insured
against or not fully covered through any insurance maintained by
us.
We routinely transmit and receive personal, confidential and
proprietary information by email and other electronic means. We
have discussed and worked with clients, vendors, service
providers, counterparties and other third parties to develop
secure transmission capabilities, but we do not have, and may be
unable to put in place, secure capabilities with all of our
clients, vendors, service providers, counterparties and other
third parties and we may not be able to ensure that these third
parties have appropriate controls in place to protect the
confidentiality of the information. An interception, misuse or
mishandling of personal, confidential or proprietary information
being sent to or received from a client, vendor, service
provider, counterparty or other third party could result in
legal liability, regulatory action and reputational harm.
Conflicts of
interest are increasing and a failure to appropriately identify
and deal with conflicts of interest could adversely affect our
businesses.
As we have expanded the scope of our businesses and our client
base, we increasingly must address potential conflicts of
interest, including situations where our services to a
particular client or our own investments or other interests
conflict, or are perceived to conflict, with the interests of
another client, as well as situations where one or more of our
businesses have access to material
non-public
information that may not be shared with other businesses within
the firm and situations where we may be a creditor of an entity
with which we also have an advisory or other relationship.
Our regulators have the ability to scrutinize our activities for
potential conflicts of interest, including through detailed
examinations of specific transactions. Our status as a bank
holding company subjects us to heightened regulation and
increased regulatory scrutiny by the Federal Reserve Board with
respect to transactions between GS Bank USA and entities that
are or could be seen as affiliates of ours.
36
We have extensive procedures and controls that are designed to
identify and address conflicts of interest, including those
designed to prevent the improper sharing of information among
our businesses. However, appropriately identifying and dealing
with conflicts of interest is complex and difficult, and our
reputation, which is one of our most important assets, could be
damaged and the willingness of clients to enter into
transactions in which such a conflict might arise may be
affected if we fail, or appear to fail, to identify and deal
appropriately with conflicts of interest. In addition, potential
or perceived conflicts could give rise to litigation or
enforcement actions.
Our businesses
and those of our clients are subject to extensive and pervasive
regulation around the world.
As a participant in the financial services industry, we are
subject to extensive regulation in jurisdictions around the
world. We face the risk of significant intervention by
regulatory authorities in all jurisdictions in which we conduct
our businesses. Among other things, we could be fined,
prohibited from engaging in some of our business activities or
subject to limitations or conditions on our business activities.
In recent years, firms in the financial services industry have
been operating in a difficult regulatory environment. The
industry has experienced increased scrutiny from a variety of
regulators, both within and outside the United States. Penalties
and fines sought by regulatory authorities have increased
substantially over the last several years, and certain
regulators have been more likely in recent years to commence
enforcement actions.
In addition, new laws or regulations or changes in enforcement
of existing laws or regulations applicable to our businesses or
those of our clients may adversely affect our businesses. Recent
market disruptions have led to numerous proposals for changes in
the regulation of the financial services industry, including
significant additional regulation. Regulatory changes could lead
to business disruptions, could impact the value of assets that
we hold or the scope or profitability of our business
activities, could require us to change certain of our business
practices and could expose us to additional costs (including
compliance costs) and liabilities as well as reputational harm,
and, to the extent the regulations strictly control the
activities of financial services firms, make it more difficult
for us to distinguish ourselves from competitors. For a
discussion of the extensive regulation to which our businesses
are subject, see Business Regulation in
Part I, Item 1 of our Annual Report on
Form 10-K.
Our status as a bank holding company and the operation of our
lending and other businesses through GS Bank USA subject us to
additional regulation and limitations on our activities, as
described in Business Regulation
Banking Regulation in Part I, Item 1 of our
Annual Report on
Form 10-K,
as well as some regulatory uncertainty as we apply banking
regulations and practices to many of our businesses. The
application of these regulations and practices may present us
and our regulators with new or novel issues.
Our firm is subject to regulatory capital requirements at a
number of levels, as described above under
Business Regulation in Part I,
Item 1 of our Annual Report on
Form 10-K.
As a bank holding company, we will be subject to capital
requirements based on Basel I as opposed to the requirements
based on Basel II that applied to us as a CSE. Complying with
these requirements may require us to liquidate assets or raise
capital in a manner that adversely increases our funding costs
or otherwise adversely affects our shareholders and creditors.
In addition, failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material adverse effect on our financial condition.
Our agreements
with the U.S. Treasury and Berkshire Hathaway Inc. impose
restrictions and obligations on us that limit our ability to
increase dividends, repurchase our common stock or preferred
stock and access the equity capital markets.
In October 2008, we issued preferred stock and a warrant to
purchase our common stock to the U.S. Treasury as part of
its TARP Capital Purchase Program. Prior to
October 28, 2011, unless we have redeemed all of the
preferred stock or the U.S. Treasury has transferred all of
the preferred stock to a third party, the consent of the
U.S. Treasury will be required for us to, among other
things,
37
increase our common stock dividend or repurchase our common
stock or other preferred stock (with certain exceptions,
including the repurchase of our common stock to offset share
dilution from
equity-based
employee compensation awards). We have also granted registration
rights and offering facilitation rights to the
U.S. Treasury and to Berkshire Hathaway Inc. pursuant to
which we have agreed to
lock-up
periods during which we would be unable to issue equity
securities.
Substantial
legal liability or significant regulatory action against us
could have material adverse financial effects or cause us
significant reputational harm, which in turn could seriously
harm our business prospects.
We face significant legal risks in our businesses, and the
volume of claims and amount of damages and penalties claimed in
litigation and regulatory proceedings against financial
institutions remain high. See Legal Proceedings in
Part I, Item 3 of our Annual Report on
Form 10-K
for a discussion of certain legal proceedings in which we are
involved. Our experience has been that legal claims by customers
and clients increase in a market downturn. In addition,
employment-related claims typically increase in periods when we
have reduced the total number of employees.
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. It is not always possible to deter or
prevent employee misconduct and the precautions we take to
prevent and detect this activity may not be effective in all
cases.
The growth of
electronic trading and the introduction of new technology may
adversely affect our business and may increase
competition.
Technology is fundamental to our business and our industry. The
growth of electronic trading and the introduction of new
technologies is changing our businesses and presenting us with
new challenges. Securities, futures and options transactions are
increasingly occurring electronically, both on our own systems
and through other alternative 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
specialist businesses, and we may experience continued
competitive pressures in these and other areas. In addition, the
increased use by our clients of
low-cost
electronic trading systems and direct electronic access to
trading markets could cause a reduction in commissions and
spreads. As our clients increasingly use our systems to trade
directly in the markets, we may incur liabilities as a result of
their use of our order routing and execution infrastructure. The
NYSEs adoption and continued refinement of its hybrid
market for trading securities may increase pressure on our
Equities business as clients execute more of their NYSE-related
trades electronically. We have invested significant resources
into the development of electronic trading systems and expect to
continue to do so, but there is no assurance that the revenues
generated by these systems will yield an adequate return on our
investment, particularly given the relatively lower commissions
arising from electronic trades.
Our businesses
may be adversely affected if we are unable to hire and retain
qualified employees.
Our performance is largely dependent on the talents and efforts
of highly skilled individuals; therefore, our continued ability
to compete effectively in our businesses, to manage our
businesses effectively and to expand into new businesses and
geographic areas depends on our ability to attract new employees
and to retain and motivate our existing employees. Competition
from within the financial services industry and from businesses
outside the financial services industry for qualified employees
has often been intense. This is particularly the case in
emerging markets, where we are often competing for qualified
employees with entities that have a significantly greater
presence or more extensive experience in the region.
38
In fiscal 2008, we significantly reduced compensation levels. In
addition, the market price of our shares of our common stock
declined very significantly during the year. A substantial
portion of our annual bonus compensation paid to our senior
employees has in recent years been paid in the form of
equity-based
awards. In addition, we reduced the number of employees across
nearly all of our businesses during the latter portion of the
year. The combination of these events could adversely affect our
ability to hire and retain qualified employees.
Our power
generation interests and related activities subject us to
extensive regulation, as well as environmental and other risks
associated with power generation activities.
The power generation facilities that we own and those that we
operate, as well as our other power-related activities, are
subject to extensive and evolving federal, state and local
energy, environmental and other governmental laws and
regulations, including environmental laws and regulations
relating to, among others, air quality, water quality, waste
management, natural resources, site remediation and health and
safety.
We may incur substantial costs (including being required to
cease or curtail operations of one or more of our power
generation facilities) in complying with current or future laws
and regulations relating to electric power generation and
wholesale sales and trading of electricity and natural gas,
including having to commit significant capital toward
environmental monitoring, installation of pollution control
equipment, payment of emission fees and carbon or other taxes,
and application for, and holding of, permits and licenses at our
power generation facilities. Our power generation facilities are
also subject to the risk of unforeseen or catastrophic events,
many of which are outside of our control, including breakdown or
failure of power generation equipment, transmission lines or
other equipment or processes or other mechanical malfunctions,
performance below expected levels of output or efficiency,
terrorist attacks, natural disasters or other hostile or
catastrophic events. In addition, these facilities could be
adversely affected by the failure of any of our third party
suppliers or service providers to perform their contractual
obligations, including the failure to obtain raw materials
necessary for operation at reasonable prices. Market conditions
or other factors could cause a failure to satisfy or obtain
waivers under agreements with third parties, including lenders
and utilities, which impose significant obligations on our
subsidiaries that own such facilities. In addition, we may not
have insurance against the risks that such facilities face or
the insurance that we have may be inadequate to cover our losses.
The occurrence of any of such events may prevent the affected
facilities from performing under applicable power sales
agreements, may impair their operations or financial results and
may result in litigation or other reputational harm.
In conducting
our businesses around the world, we are subject to political,
economic, legal, operational and other risks that are inherent
in operating in many countries.
In conducting our businesses and maintaining and supporting our
global operations, we are subject to risks of possible
nationalization, expropriation, price controls, capital
controls, exchange controls and other restrictive governmental
actions, as well the outbreak of hostilities or acts of
terrorism. In many countries, the laws and regulations
applicable to the securities and financial services industries
and many of the transactions in which we are involved are
uncertain and evolving, and it may be difficult for us to
determine the exact requirements of local laws in every market.
Any determination by local regulators that we have not acted in
compliance with the application of local laws in a particular
market or our failure to develop effective working relationships
with local regulators 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 enhanced risk
that transactions we structure might not be legally enforceable
in all cases.
Our businesses and operations are increasingly expanding into
new regions throughout the world, including emerging markets,
and we expect this trend to continue. Various emerging market
39
countries have experienced severe economic and financial
disruptions, including significant devaluations of their
currencies, defaults or threatened defaults on sovereign debt,
capital and currency exchange controls, and low or negative
growth rates in their economies, as well as military activity or
acts of terrorism. The possible effects of any of these
conditions include an adverse impact on our businesses and
increased volatility in financial markets generally.
We may incur
losses as a result of unforeseen or catastrophic events,
including the emergence of a pandemic, terrorist attacks or
natural disasters.
The occurrence of unforeseen or catastrophic events, including
the emergence of a pandemic or other widespread health emergency
(or concerns over the possibility of such an emergency),
terrorist attacks or natural disasters, could create economic
and financial disruptions, could lead to operational
difficulties (including travel limitations) that could impair
our ability to manage our businesses, and could expose our
insurance subsidiaries to significant losses.
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Item 1B.
|
Unresolved
Staff Comments
|
There are no material unresolved written comments that were
received from the SEC staff 180 days or more before the end
of our fiscal year relating to our periodic or current reports
under the Exchange Act.
Our principal executive offices are located at 85 Broad
Street, New York, New York, and comprise approximately one
million rentable square feet of leased space, pursuant to a
lease agreement expiring in June 2011. We also occupy over
680,000 rentable square feet at One New York Plaza under lease
agreements expiring primarily in 2010 (with options to renew for
up to five additional years), and we lease space at various
other locations in the New York metropolitan area. In total, we
lease approximately 3.7 million rentable square feet in the
New York metropolitan area.
In August 2005, we leased from Battery Park City Authority
a parcel of land in lower Manhattan, pursuant to a ground lease.
We are currently constructing a 2.1 million gross square
foot office building on the site that will serve as our
headquarters. Under the lease, Battery Park City Authority holds
title to all improvements, including the office building,
subject to Goldman Sachs right of exclusive possession and
use until June 2069, the expiration date of the lease.
Under the terms of the ground lease, we made a lump-sum ground
rent payment in June 2007 of $161 million, which was
paid into escrow, to be released to the Battery Park City
Authority pending performance of specified state and city
obligations. We are required to make additional periodic
payments during the term of the lease. We are obligated under
the ground lease to construct the office building by 2011
(subject to extensions in the case of force majeure) in
accordance with certain
pre-approved
design standards. Construction began on the building in
November 2005, and we expect construction completion and
initial occupancy of the building during 2009. The building is
projected to cost between $2.1 billion and
$2.3 billion, including acquisition, development, fitout
and furnishings, financing and other related costs.
We are receiving significant benefits from the City and State of
New York based on our agreement to construct our headquarters in
lower Manhattan. These benefits are subject to recoupment or
recapture if we do not satisfy our obligations under these
agreements with the City and State of New York.
We have offices at 30 Hudson Street in Jersey City, New Jersey,
which we own and which include approximately 1.6 million
gross square feet of office space, and we own over 575,000
square feet of additional office space spread among four
locations in New York and New Jersey. We have additional offices
in the U.S. and elsewhere in the Americas, which together
comprise approximately 2.9 million rentable square feet of
leased space.
40
In Europe, the Middle East and Africa, we have offices that
total approximately 2.2 million rentable square feet. Our
European headquarters is located in London at Peterborough
Court, pursuant to a lease expiring in 2026. In total, we lease
approximately 1.6 million rentable square feet in London
through various leases, relating to various properties.
In Asia, we have offices that total approximately
1.5 million rentable square feet. Our headquarters in this
region are in Tokyo, at the Roppongi Hills Mori Tower, and in
Hong Kong, at the Cheung Kong Center. In Tokyo, we currently
lease approximately 415,000 rentable square feet, the majority
of which will expire in 2018. In Hong Kong, we currently lease
approximately 295,000 rentable square feet under lease
agreements, the majority of which will expire in 2011.
Our occupancy expenses include costs associated with office
space held in excess of our current requirements. This excess
space, the cost of which is charged to earnings as incurred, is
being held for potential growth or to replace currently occupied
space that we may exit in the future. We regularly evaluate our
current and future space capacity in relation to current and
projected staffing levels. In 2008, we incurred exit costs of
$80 million related to our office space. We may incur exit
costs in the future to the extent we (i) reduce our space
capacity or (ii) commit to, or occupy, new properties in
the locations in which we operate and, consequently, dispose of
existing space that had been held for potential growth. These
exit costs may be material to our results of operations in a
given period.
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Item 3.
|
Legal
Proceedings
|
We are involved in a number of judicial, regulatory and
arbitration proceedings (including those described below)
concerning matters arising in connection with the conduct of our
businesses. We believe, based on currently available
information, that the results of such proceedings, in the
aggregate, will not have a material adverse effect on our
financial condition, but might be material to our operating
results for any particular period, depending, in part, upon the
operating results for such period. Given the range of litigation
and investigations presently under way, our litigation expenses
can be expected to remain high.
IPO Process
Matters
Group Inc. and GS&Co. are among the numerous financial
services companies that have been named as defendants in a
variety of lawsuits alleging improprieties in the process by
which those companies participated in the underwriting of public
offerings in recent years.
GS&Co. has, together with other underwriters in certain
offerings as well as the issuers and certain of their officers
and directors, been named as a defendant in a number of related
lawsuits filed in the U.S. District Court for the Southern
District of New York alleging, among other things, that the
prospectuses for the offerings violated the federal securities
laws by failing to disclose the existence of alleged
arrangements tying allocations in certain offerings to higher
customer brokerage commission rates as well as purchase orders
in the aftermarket, and that the alleged arrangements resulted
in market manipulation. The federal district court denied a
motion to dismiss in all material respects relating to the
underwriter defendants and generally granted plaintiffs
motion for class certification in six focus cases.
The U.S. Court of Appeals for the Second Circuit reversed
the district courts order granting class certification,
denied plaintiffs applications for rehearing and rehearing
en banc, and remanded. On August 14, 2007, plaintiffs
amended their complaints in the six focus cases as
well as their master allegations for all such cases to reflect
new class related allegations. On September 27, 2007,
plaintiffs filed a new motion for class certification in the
district court, and on November 14, 2007, GS&Co.
and the other defendants moved to dismiss the amended
complaints. Following a mediation, a settlement in principle has
been reached, subject to negotiation of definitive documentation
and court approval.
GS&Co. is among numerous underwriting firms named as
defendants in a number of complaints filed commencing
October 3, 2007, in the U.S. District Court for
the Western District of Washington alleging violations of the
federal securities laws in connection with offerings of
securities for 16 issuers
41
during 1999 and 2000. The complaints generally assert that the
underwriters, together with each issuers directors,
officers and principal shareholders, entered into purported
agreements to tie allocations in the offerings to increased
brokerage commissions and aftermarket purchase orders. The
complaints further allege that, based upon these and other
purported agreements, the underwriters violated the reporting
provisions of, and are subject to
short-swing
profit recovery under, Section 16 of the Exchange Act. On
October 29, 2007, the cases were reassigned to a
single district judge. On July 25, 2008, defendants
moved to dismiss the various complaints.
GS&Co. has been named as a defendant in an action commenced
on May 15, 2002 in New York Supreme Court, New York
County, by an official committee of unsecured creditors on
behalf of eToys, Inc., alleging that the firm intentionally
underpriced eToys, Inc.s initial public offering. The
action seeks, among other things, unspecified compensatory
damages resulting from the alleged lower amount of offering
proceeds. The court granted GS&Co.s motion to dismiss
as to five of the claims; plaintiff appealed from the dismissal
of the five claims, and GS&Co. appealed from the denial of
its motion as to the remaining claim. The New York Appellate
Division, First Department affirmed in part and reversed in part
the lower courts ruling on the firms motion to
dismiss, permitting all claims to proceed except the claim for
fraud, as to which the appellate court granted leave to replead,
and the New York Court of Appeals affirmed in part and reversed
in part, dismissing claims for breach of contract, professional
malpractice and unjust enrichment, but permitting claims for
breach of fiduciary duty and fraud to continue. On remand to the
lower court, GS&Co. moved to dismiss the surviving claims
or, in the alternative, for summary judgment, but the motion was
denied by a decision dated March 21, 2006. Plaintiff
has moved for leave to amend the complaint again, and
GS&Co. has cross-moved to dismiss.
Group Inc. and certain of its affiliates have, together with
various underwriters in certain offerings, received subpoenas
and requests for documents and information from various
governmental agencies and self-regulatory organizations in
connection with investigations relating to the public offering
process. Goldman Sachs has cooperated with these investigations.
Iridium
Securities Litigation
GS&Co. has been named as a defendant in two purported class
action lawsuits commenced, beginning on May 26, 1999,
in the U.S. District Court for the District of Columbia
brought on behalf of purchasers of Class A common stock of
Iridium World Communications, Ltd. in a January 1999
underwritten secondary offering of 7,500,000 shares of
Class A common stock. All parties entered into settlement
agreements, with the underwriter defendants contributing
$8.25 million to a settlement fund. The settlement was
approved by the Court by order dated October 23, 2008
and has become final.
World Online
Litigation
Several lawsuits have been commenced in the Netherlands courts
based on alleged misstatements and omissions relating to the
initial public offering of World Online in March 2000.
Goldman Sachs and ABN AMRO Rothschild served as joint global
coordinators of the approximately 2.9 billion
offering. GSI underwrote 20,268,846 shares and GS&Co.
underwrote 6,756,282 shares for a total offering price of
approximately 1.16 billion.
On September 11, 2000, several Dutch World Online
shareholders as well as a Dutch entity purporting to represent
the interests of certain World Online shareholders commenced a
proceeding in Amsterdam District Court against ABN AMRO
Bank N.V., also acting under the name of ABN AMRO
Rothschild, alleging misrepresentations and omissions
relating to the initial public offering of World Online. The
lawsuit seeks, among other things, the return of the purchase
price of the shares purchased by the plaintiffs or unspecified
damages. The court held that the claims failed and dismissed the
complaint and the Amsterdam Court of Appeal affirmed dismissal
of the complaint.
In March 2001, a Dutch shareholders association initiated
legal proceedings for an unspecified amount of damages against
GSI in Amsterdam District Court in connection with the World
Online
42
offering. The court rejected the claims against GSI, but found
World Online liable in an amount to be determined. The Dutch
shareholders association appealed from the dismissal of their
claims against GSI. By a decision dated May 3, 2007,
the Netherlands Court of Appeals affirmed in part and reversed
in part the decision of the district court dismissing the
complaint, holding that certain of the alleged disclosure
deficiencies were actionable. On July 24, 2007, the
shareholder association appealed from the Netherlands Court of
Appeals decision to the extent that it affirmed the decision of
the district court dismissing the complaint. On
November 2, 2007, GSI joined the other defendants in
appealing from the Court of Appeals decision to the extent that
it reversed the district courts dismissal.
Research
Independence Matters
GS&Co. is one of several investment firms that have been
named as defendants in substantively identical purported class
actions filed in the U.S. District Court for the Southern
District of New York alleging violations of the federal
securities laws in connection with research coverage of certain
issuers and seeking compensatory damages. In one such action,
relating to coverage of RSL Communications, Inc. commenced on
July 15, 2003, GS&Co.s motion to dismiss
the complaint was denied. The district court granted the
plaintiffs motion for class certification and the
U.S. Court of Appeals for the Second Circuit, by an order
dated January 26, 2007, vacated the district courts
class certification and remanded for reconsideration.
GS&Co. is also a defendant in several actions relating to
research coverage of Exodus Communications, Inc. that commenced
beginning in May 2003. The actions were consolidated,
Goldman, Sachs & Co.s motion to dismiss was
granted with leave to replead, and plaintiff filed a second
amended complaint. The defendants motion to dismiss the
second amended complaint was granted by order dated
December 4, 2007, and plaintiffs motion for
reconsideration was denied by order dated
June 3, 2008. Plaintiff appealed the dismissal, and
while the appeal was pending, the parties entered into a
settlement agreement on a
non-class
basis, disposing of the case.
A purported shareholder derivative action was filed in New York
Supreme Court, New York County on June 13, 2003
against Group Inc. and its board of directors, which, as amended
on March 3, 2004 and June 14, 2005, alleges
that the directors breached their fiduciary duties in connection
with the firms research as well as the firms IPO
allocations practices.
Group Inc., GS&Co. and Henry M. Paulson, Jr., the former
Chairman and Chief Executive Officer of Group Inc., have been
named as defendants in a purported class action filed originally
on July 18, 2003 in the U.S. District Court for
the District of Nevada on behalf of purchasers of Group Inc.
stock from July 1, 1999 through May 7, 2002.
The complaint alleges that defendants breached their fiduciary
duties and violated the federal securities laws in connection
with the firms research activities. The complaint seeks,
among other things, unspecified compensatory damages
and/or
rescission. The action was transferred on consent to the
U.S. District Court for the Southern District of New York,
and the district court granted the defendants motion to
dismiss with leave to amend. Plaintiffs filed a second amended
complaint, and defendants filed a motion to dismiss. In a
decision dated September 29, 2006, the federal
district court granted Mr. Paulsons motion to dismiss
with leave to replead but otherwise denied the motion.
Plaintiffs motion for class certification was granted by a
decision dated September 15, 2008, and on
September 26, 2008, the Goldman Sachs defendants filed
a petition in the U.S. Court of Appeals for the Second
Circuit seeking review of the certification ruling.
Group Inc. and its affiliates, together with other financial
services firms, have received requests for information from
various governmental agencies and self-regulatory organizations
in connection with their review of research independence issues.
Goldman Sachs has cooperated with these requests. See
Business Regulation Regulations
Applicable in and Outside the United States in
Part I, Item 1 of our Annual Report on
Form 10-K
for a discussion of our global research settlement.
43
Enron Litigation
Matters
Goldman Sachs affiliates are defendants in certain actions
relating to Enron Corp., which filed for protection under the
U.S. bankruptcy laws on December 2, 2001.
GS&Co. and co-managing underwriters have been named as
defendants in certain purported securities class and individual
actions commenced beginning on December 14, 2001 in
the U.S. District Court for the Southern District of Texas
and California Superior Court brought by purchasers of
$255,875,000, (including
over-allotments)
of Exchangeable Notes of Enron Corp. in August 1999. The
notes were mandatorily exchangeable in 2002 into shares of Enron
Oil & Gas Company held by Enron Corp. or their cash
equivalent. The complaints also name as defendants Group Inc. as
well as certain past and present officers and directors of Enron
Corp. and the companys outside accounting firm. The
complaints generally allege violations of the disclosure
requirements of the federal securities laws
and/or state
law, and seek compensatory damages. GS&Co. underwrote
$127,937,500 (including
over-allotments)
principal amount of the notes. Group Inc. and GS&Co. moved
to dismiss the class action complaint in the Texas federal court
and the motion was granted as to Group Inc. but denied as to
GS&Co. One of the plaintiffs has moved for class
certification. GS&Co. has moved for judgment on the
pleadings against all plaintiffs. On October 18, 2007,
the parties reached a settlement agreement in principle pursuant
to which GS&Co. has contributed $11.5 million to a
settlement fund, subject to definitive documentation and court
approval. Plaintiffs in various consolidated actions relating to
Enron entered into a settlement with Banc of America Securities
LLC on July 2, 2004 and with Citigroup, Inc. on
June 10, 2005, including with respect to claims
relating to the Exchangeable Notes offering, as to which
affiliates of those settling defendants were two of the three
underwriters (together with GS&Co.).
Several funds which allegedly sustained investment losses of
approximately $125 million in connection with secondary
market purchases of the Exchangeable Notes as well as Zero
Coupon Convertible Notes of Enron Corp. commenced an action in
the U.S. District Court for the Southern District of New
York on January 16, 2002. As amended, the lawsuit
names as defendants the underwriters of the August 1999
offering and the companys outside accounting firm, and
alleges violations of the disclosure requirements of the federal
securities laws, fraud and misrepresentation. The Judicial Panel
on Multidistrict Litigation has transferred that action to the
Texas federal district court for purposes of coordinated or
consolidated pretrial proceedings with other matters relating to
Enron Corp. GS&Co. moved to dismiss the complaint and the
motion was granted in part and denied in part. The district
court granted the funds motion for leave to file a second
amended complaint on January 22, 2007.
GS&Co. is among numerous defendants in two substantively
identical actions filed by Enron Corp.s bankruptcy trustee
in the U.S. Bankruptcy Court for the Southern District of
New York beginning in November 2003 seeking to recover as
fraudulent transfers
and/or
preferences payments made by Enron Corp. in repurchasing its
commercial paper shortly before its bankruptcy filing.
GS&Co., which had acted as a commercial paper dealer for
Enron Corp., resold to Enron Corp. approximately
$30 million of commercial paper as principal, and as an
agent facilitated Enron Corp.s repurchase of approximately
$340 million additional commercial paper from various
customers who have also been named as defendants. The bankruptcy
court denied GS&Co.s motion to dismiss as well as
similar motions by other defendants. On
August 1, 2005, various defendants including
GS&Co. petitioned to have the denial of their motion to
dismiss reviewed by the U.S. District Court for the
Southern District of New York. On March 10, 2008, the
district court denied GS&Co.s motion to remove the
standing reference at the present time. On
April 29, 2008, GS&Co. moved for summary
judgment. On January 6, 2009, GS&Co. entered into
a settlement with the trustee pursuant to which it will pay
$6.95 million in exchange for a release and a bar order
against any third party claims. The settlement was approved by
the bankruptcy court on January 21, 2009.
44
Exodus Securities
Litigation
By an amended complaint dated July 11, 2002,
GS&Co. and the other lead underwriters for the
February 2001 offering of 13,000,000 shares of common
stock and $575,000,000 of
51/4%
convertible subordinated notes of Exodus Communications, Inc.
were added as defendants in a purported class action pending in
the U.S. District Court for the Northern District of
California. The complaint, which also names as defendants
certain officers and directors of Exodus Communications, Inc.,
alleged violations of the disclosure requirements of the federal
securities laws and seeks compensatory damages. The parties
entered into a settlement agreement, with the underwriter
defendants contributing $1 million toward a settlement
fund. The settlement was approved by the district court on
October 31, 2008 and has become final.
Montana Power
Litigation
GS&Co. and Group Inc. have been named as defendants in a
purported class action commenced originally on
October 1, 2001 in Montana District Court, Second
Judicial District on behalf of former shareholders of Montana
Power Company. The complaint generally alleges that Montana
Power Company violated Montana law by failing to procure
shareholder approval of certain corporate strategies and
transactions, that the companys board breached its
fiduciary duties in pursuing those strategies and transactions,
and that GS&Co. aided and abetted the boards breaches
and rendered negligent advice in its role as financial advisor
to the company. The complaint seeks, among other things,
compensatory damages. In addition to GS&Co. and Group Inc.,
the defendants include Montana Power Company, certain of its
officers and directors, an outside law firm for the Montana
Power Company, and certain companies that purchased assets from
Montana Power Company and its affiliates. The Montana state
court denied the Goldman Sachs defendants motions to
dismiss. Following the bankruptcies of certain defendants in the
action, defendants removed the action to federal court, the
U.S. District Court for the District of Montana, Butte
Division.
On October 26, 2004, a creditors committee of Touch
America Holdings, Inc. brought an action against GS&Co.,
Group Inc., and a former outside law firm for Montana Power
Company in Montana District Court, Second Judicial District. The
complaint asserts that Touch America Holdings, Inc. is the
successor to Montana Power Corporation and alleges substantially
the same claims as in the purported class action. Defendants
removed the action to federal court. Defendants moved to dismiss
the complaint, but the motion was denied by a decision dated
June 10, 2005.
Adelphia
Communications Fraudulent Conveyance Litigation
GS&Co. is among numerous entities named as defendants in
two adversary proceedings commenced in the U.S. Bankruptcy
Court for the Southern District of New York, one on
July 6, 2003 by a creditors committee, and the second
on or about July 31, 2003 by an equity committee of
Adelphia Communications, Inc. Those proceedings have now been
consolidated in a single amended complaint filed by the Adelphia
Recovery Trust on October 31, 2007. The complaint
seeks, among other things, to recover, as fraudulent
conveyances, payments made allegedly by Adelphia Communications,
Inc. and its affiliates to certain brokerage firms, including
approximately $62.9 million allegedly paid to GS&Co.,
in respect of margin calls made in the ordinary course of
business on accounts owned by members of the family that
formerly controlled Adelphia Communications, Inc. GS&Co.
moved to dismiss the claim related to such margin payments on
December 21, 2007.
Specialist
Matters
Spear, Leeds & Kellogg Specialists LLC (SLKS) and
certain affiliates have received requests for information from
various governmental agencies and self-regulatory organizations
as part of an
industry-wide
investigation relating to activities of floor specialists in
recent years. Goldman Sachs has cooperated with the requests.
45
On March 30, 2004, certain specialist firms on the
NYSE, including SLKS, without admitting or denying the
allegations, entered into a final global settlement with the SEC
and the NYSE covering certain activities during the years 1999
through 2003. The SLKS settlement involves, among other things,
(i) findings by the SEC and the NYSE that SLKS violated
certain federal securities laws and NYSE rules, and in some
cases failed to supervise certain individual specialists, in
connection with trades that allegedly disadvantaged customer
orders, (ii) a cease and desist order against SLKS,
(iii) a censure of SLKS, (iv) SLKS agreement to
pay an aggregate of $45.3 million in disgorgement and a
penalty to be used to compensate customers, (v) certain
undertakings with respect to SLKS systems and procedures,
and (v) SLKS retention of an independent consultant
to review and evaluate certain of SLKS compliance systems,
policies and procedures. Comparable findings were made and
sanctions imposed in the settlements with other specialist
firms. The settlement did not resolve the related private civil
actions against SLKS and other firms or regulatory
investigations involving individuals or conduct on other
exchanges.
SLKS, Spear, Leeds & Kellogg, L.P. and Group Inc. are
among numerous defendants named in purported class actions
brought beginning in October 2003 on behalf of investors in
the U.S. District Court for the Southern District of New
York alleging violations of the federal securities laws and
state common law in connection with NYSE floor specialist
activities. The actions seek unspecified compensatory damages,
restitution and disgorgement on behalf of purchasers and sellers
of unspecified securities between October 17, 1998 and
October 15, 2003. Plaintiffs filed a consolidated
amended complaint on September 16, 2004. The
defendants motion to dismiss the amended complaint was
granted in part and denied in part by a decision dated
December 13, 2005. On June 28, 2007,
plaintiffs filed a motion seeking to certify a class.
Treasury
Matters
On September 4, 2003, the SEC announced that
GS&Co. had settled an administrative proceeding arising
from certain trading in U.S. Treasury bonds over an
approximately eight-minute period after GS&Co. received an
October 31, 2001 telephone call from a Washington,
D.C.-based political consultant concerning a forthcoming
Treasury refunding announcement. Without admitting or denying
the allegations, GS&Co. consented to the entry of an order
that, among other things, (i) censured GS&Co.;
(ii) directed GS&Co. to cease and desist from
committing or causing any violations of
Sections 15(c)(1)(A) and (C) and 15(f) of, and
Rule 15c1-2
under, the Exchange Act; (iii) ordered GS&Co. to pay
disgorgement and prejudgment interest in the amount of
$1,742,642, and a civil monetary penalty of $5 million; and
(iv) directed GS&Co. to conduct a review of its
policies and procedures and adopt, implement and maintain
policies and procedures consistent with the order and that
review. GS&Co. also undertook to pay $2,562,740 in
disgorgement and interest relating to certain trading in
U.S. Treasury bond futures during the same eight-minute
period.
GS&Co. has been named as a defendant in a purported class
action filed on March 10, 2004 in the
U.S. District Court for the Northern District of Illinois
on behalf of holders of short positions in
30-year
U.S. Treasury futures and options on the morning of
October 31, 2001. The complaint alleges that the firm
purchased
30-year
bonds and futures prior to the Treasurys refunding
announcement that morning based on
non-public
information about that announcement, and that such purchases
increased the costs of covering such short positions. The
complaint also names as defendants the Washington, D.C.-based
political consultant who allegedly was the source of the
information, a former GS&Co. economist who allegedly
received the information, and another company and one of its
employees who also allegedly received and traded on the
information prior to its public announcement. The complaint
alleges violations of the federal commodities and antitrust
laws, as well as Illinois statutory and common law, and seeks,
among other things, unspecified damages including treble damages
under the antitrust laws. The district court dismissed the
antitrust and Illinois state law claims but permitted the
federal commodities law claims to proceed. Plaintiffs
motion for class certification was denied by a decision dated
August 22, 2008. GS&Co. moved for summary
judgment, and by a decision dated July 30, 2008, the
district court granted the motion insofar as the remaining
46
claim relates to the trading of treasury bonds, but denied the
motion without prejudice to the extent the claim relates to
trading of treasury futures.
Mutual
Fund Matters
GS&Co. and certain mutual fund affiliates have received
subpoenas and requests for information from various governmental
agencies and self-regulatory organizations including the SEC as
part of the
industry-wide
investigation relating to the practices of mutual funds and
their customers. GS&Co. and its affiliates have cooperated
with such requests.
Refco Securities
Litigation
GS&Co. and the other lead underwriters for the
August 2005 initial public offering of
26,500,000 shares of common stock of Refco Inc. are among
the defendants in various putative class actions filed in the
U.S. District Court for the Southern District of New York
beginning in October 2005 by investors in Refco Inc. in
response to certain publicly reported events that culminated in
the October 17, 2005 filing by Refco Inc. and certain
affiliates for protection under U.S. bankruptcy laws. The
actions, which have been consolidated, allege violations of the
disclosure requirements of the federal securities laws and seek
compensatory damages. In addition to the underwriters, the
consolidated complaint names as defendants Refco Inc. and
certain of its affiliates, certain officers and directors of
Refco Inc., Thomas H. Lee Partners, L.P. (which held a majority
of Refco Inc.s equity through certain funds it manages),
Grant Thornton (Refco Inc.s outside auditor), and BAWAG
P.S.K. Bank fur Arbeit und Wirtschaft und Osterreichische
Postsparkasse Aktiengesellschaft (BAWAG). Lead plaintiffs
entered into a settlement with BAWAG, which was approved
following certain amendments on June 29, 2007.
GS&Co. underwrote 5,639,200 shares of common stock at
a price of $22 per share for a total offering price of
approximately $124 million.
A purported shareholder derivative action was filed in the
U.S. District Court for the Southern District of New York
on November 2, 2005 on behalf of Group Inc. against
certain of its officers and directors. The complaint alleges
that the individual defendants breached their fiduciary duties
by failing to ensure that adequate due diligence was conducted
in connection with the Refco Inc. initial public offering. The
parties subsequently stipulated to the actions dismissal,
and the action was dismissed by the district court by order
dated January 7, 2009.
GS&Co. has, together with other underwriters of the Refco
Inc. initial public offering, received requests for information
from various governmental agencies and self-regulatory
organizations. GS&Co. is cooperating with those requests.
Short-Selling
Litigation
Group Inc., GS&Co. and Goldman Sachs Execution &
Clearing, L.P. are among the numerous financial services firms
that have been named as defendants in a purported class action
filed on April 12, 2006 in the U.S. District
Court for the Southern District of New York by customers who
engaged in
short-selling
transactions in equity securities since
April 12, 2000. The amended complaint generally
alleges that the customers were charged fees in connection with
the short sales but that the applicable securities were not
necessarily borrowed to effect delivery, resulting in failed
deliveries, and that the defendants conspired to set a minimum
threshold borrowing rate for securities designated as hard to
borrow. The complaint asserts a claim under the federal
antitrust laws, as well as claims under the New York Business
Law and common law, and seeks treble damages as well as
injunctive relief. Defendants motion to dismiss the
complaint was granted by a decision dated
December 20, 2007. On January 18, 2008,
plaintiffs appealed from this decision.
Fannie Mae
Litigation
GS&Co. was added as a defendant in an amended complaint
filed on August 14, 2006 in a purported class action
pending in the U.S. District Court for the District of
Columbia. The complaint
47
asserts violations of the federal securities laws generally
arising from allegations concerning Fannie Maes accounting
practices in connection with certain Fannie Mae-sponsored REMIC
transactions that were allegedly arranged by GS&Co. The
other defendants include Fannie Mae, certain of its past and
present officers and directors, and accountants. By a decision
dated May 8, 2007, the district court granted
GS&Co.s motion to dismiss the claim against it. The
time for an appeal will not begin to run until disposition of
the claims against other defendants.
Beginning in September 2006, Group Inc.
and/or
GS&Co. were added named as defendants in four Fannie Mae
shareholder derivative actions in the U.S. District Court
for the District of Columbia. The complaints generally allege
that the Goldman Sachs defendants aided and abetted a breach of
fiduciary duty by Fannie Maes directors and officers in
connection with certain Fannie Mae-sponsored REMIC transactions
and one of the complaints also asserts a breach of contract
claim. The complaints also name as defendants certain former
officers and directors of Fannie Mae as well as an outside
accounting firm. The complaints seek, inter alia,
unspecified damages. The Goldman Sachs defendants were dismissed
without prejudice from the first filed of these actions, and the
remaining claims in that action were dismissed for failure to
make a demand on Fannie Maes board of directors. That
dismissal has been affirmed on appeal. The remaining three
actions have been stayed by the district court.
General American
Litigation
On February 13, 2007, the liquidators of General
American Mutual Holding Corporation filed a complaint in
Missouri Circuit Court against one of the companys former
officers to assert claims against Group Inc. and GS&Co. The
amended complaint asserted that the Goldman Sachs defendants
breached certain duties and violated Missouri law in the course
of acting as the companys financial advisor during
1998-1999 in
connection with the exploration of a potential demutualization
and initial public offering, and the ensuing sale of certain
company assets. The complaint sought compensatory and punitive
damages. The parties settled the action, with the Goldman Sachs
defendants paying $99.975 million. The settlement was
approved by order dated November 6, 2008.
Executive
Compensation Litigation
On March 16, 2007, Group Inc., its board of directors,
executive officers and members of its management committee were
named as defendants in a purported shareholder derivative action
in the U.S. District Court for the Eastern District of New
York challenging the sufficiency of the firms
February 21, 2007 Proxy Statement and the compensation
of certain employees. The complaint generally alleges that the
Proxy Statement undervalues stock option awards disclosed
therein, that the recipients received excessive awards because
the proper methodology was not followed, and that the
firms senior management received excessive compensation,
constituting corporate waste. The complaint seeks, among other
things, an injunction against the 2007 Annual Meeting of
Shareholders, the voiding of any election of directors in the
absence of an injunction and an equitable accounting for the
allegedly excessive compensation. On July 20, 2007,
defendants moved to dismiss the complaint, the motion was
granted by an order dated December 18, 2008 and
plaintiff appealed on January 13, 2009.
On January 17, 2008, Group Inc., its board of
directors, executive officers and members of its management
committee were named as defendants in a related purported
shareholder derivative action brought by the same plaintiff in
the same court predicting that the firms 2008 Proxy
Statement will violate the federal securities laws by
undervaluing certain stock option awards and alleging that
senior management received excessive compensation for 2007. The
complaint seeks, among other things, an injunction against the
distribution of the 2008 Proxy Statement, the voiding of any
election
48
of directors in the absence of an injunction and an equitable
accounting for the allegedly excessive compensation. On
January 25, 2008, the plaintiff moved for a
preliminary injunction to prevent the 2008 Proxy Statement from
using options valuations that the plaintiff alleges are
incorrect and to require the amendment of SEC Form 4s filed
by certain of the executive officers named in the complaint to
reflect the stock option valuations alleged by the plaintiff.
Plaintiffs motion for a preliminary injunction was denied
by order dated February 14, 2008, plaintiff appealed
and twice moved to expedite the appeal, with the motions being
denied by orders dated February 29, 2008 and
April 3, 2008.
Mortgage-Related
Matters
GS&Co. and certain of its affiliates, together with other
financial services firms, have received requests for information
from various governmental agencies and self-regulatory
organizations relating to subprime mortgages, and
securitizations, collateralized debt obligations and synthetic
products related to subprime mortgages. GS&Co. and its
affiliates are cooperating with the requests.
GS&Co., along with numerous other financial institutions,
is a defendant in an action brought by the City of Cleveland
alleging that the defendants activities in connection with
securitizations of subprime mortgages created a public
nuisance in Cleveland. The action is pending in the
U.S. District Court for the Northern District of Ohio, and
the complaint seeks, among other things, unspecified
compensatory damages. Defendants moved to dismiss on
November 24, 2008.
GS&Co., Goldman Sachs Mortgage Company and GS Mortgage
Securities Corp. are among the defendants in a purported class
action commenced on December 11, 2008 in the U.S. District
Court for the Southern District of New York brought on behalf of
purchasers of various mortgage pass-through certificates and
asset-backed certificates issued by various securitization
trusts in 2007 and underwritten by GS&Co. The other
defendants include the various issuer trusts that issued the
securities as well as certain officers and directors of certain
of the entity defendants. The complaint generally alleges that
the registration statement and prospectus supplements for the
certificates violated the federal securities laws. The complaint
asserts claims against the issuer trusts and GS&Co. under
Section 11 of the U.S. Securities Act of 1933 (Securities
Act), and a related controlling person claim against
the other defendants under Section 15 of the Securities
Act, and seeks unspecified compensatory damages and rescission
or recessionary damages.
Auction Products
Matters
On August 21, 2008, GS&Co. entered into a
settlement in principle with the Office of Attorney General of
the State of New York and the Illinois Securities Department (on
behalf of the North American Securities Administrators
Association) regarding auction rate securities. Under the
agreement, Goldman Sachs agreed, among other things, (i) to
offer to repurchase at par the outstanding auction rate
securities that its private wealth management clients purchased
through the firm prior to February 11, 2008, with the
exception of those auction rate securities where auctions are
clearing, (ii) to continue to work with issuers and other
interested parties, including regulatory and governmental
entities, to expeditiously provide liquidity solutions for
institutional investors, and (iii) to pay a
$22.5 million fine. The settlement, which is subject to
definitive documentation and approval by the various states,
does not resolve any potential regulatory action by the SEC.
On August 28, 2008, a putative shareholder derivative
action was filed in the U.S. District Court for the
Southern District of New York naming as defendants Group Inc.,
its board of directors, and certain senior officers. The
complaint alleges generally that the board breached its
fiduciary duties and committed mismanagement in connection with
its oversight of auction rate securities marketing and trading
operations, that certain individual defendants engaged in
insider selling by selling shares of Group Inc., and that the
firms public filings were false and misleading in
violation of the federal securities laws by failing to
accurately disclose the alleged practices involving auction rate
securities. The complaint seeks damages, injunctive and
declaratory relief, restitution, and an order requiring the firm
to adopt corporate reforms. Defendants moved to dismiss on
January 23, 2009.
49
On September 4, 2008, Group Inc. was named as a
defendant, together with numerous other financial services
firms, in two complaints filed in the U.S. District Court
for the Southern District of New York alleging that the
defendants engaged in a conspiracy to manipulate the auction
securities market in violation of federal antitrust laws. The
actions were filed, respectively, on behalf of putative classes
of issuers of and investors in auction rate securities and seek,
among other things, treble damages. Defendants moved to dismiss
on January 15, 2009.
Private
Equity-Sponsored
Acquisitions Litigation
Group Inc. and GS Capital Partners are among
numerous private equity firms and investment banks named as
defendants in a federal antitrust action filed in the
U.S. District Court for the District of Massachusetts in
December 2007. As amended, the complaint generally alleges
that the defendants have colluded to limit competition in
bidding for private
equity-sponsored
acquisitions of public companies, thereby resulting in lower
prevailing bids and, by extension, less consideration for
shareholders of those companies in violation of Section 1
of the U.S. Sherman Antitrust Act and common law.
Defendants moved to dismiss on August 27, 2008. By an
order dated November 19, 2008, the district court
dismissed claims relating to certain transactions that were the
subject of releases as part of the settlement of shareholder
actions challenging such transactions, and by an order dated
December 15, 2008 otherwise denied the motion to
dismiss.
Washington Mutual
Securities Litigation
GS&Co. is among numerous underwriters named as defendants
in a putative securities class action amended complaint filed on
August 5, 2008 in the U.S. District Court for the
Western District of Washington. As to the underwriters,
plaintiffs allege that the offering documents in connection with
various securities offerings by Washington Mutual, Inc. failed
to describe accurately the companys exposure to
mortgage-related
activities in violation of the disclosure requirements of the
federal securities laws. The defendants include past and present
directors and officers of Washington Mutual, the companys
former outside auditors, and numerous underwriters. The
underwriter defendants moved to dismiss on
December 8, 2008. GS&Co. underwrote $788,500,000
principal amount of securities in the offerings at issue.
On September 25, 2008, the FDIC took over the primary
banking operations of Washington Mutual, Inc. and then sold
them. On September 27, 2008, Washington Mutual, Inc.
filed for Chapter 11 bankruptcy in the U.S. bankruptcy
court in Delaware.
Britannia Bulk
Securities Litigation
GS&Co. is among the underwriters named as defendants in
numerous putative securities class actions filed beginning on
November 6, 2008 in the U.S. District Court for
the Southern District of New York arising from the
June 17, 2008 $125 million initial public
offering of common stock of Britannia Bulk Holdings, Inc. The
complaints name as defendants the company, certain of its
directors and officers, and the underwriters for the offering.
Plaintiffs allege that the offering materials violated the
disclosure requirements of the federal securities laws and seek
compensatory damages. Defendants have yet to respond.
GS&Co. underwrote 3.75 million shares of common stock
for a total offering price of $56.25 million. The principal
operating subsidiary of Britannia Bulk Holdings, Inc. is subject
to an insolvency proceeding in the U.K. courts.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
There were no matters submitted to a vote of security holders
during the fourth quarter of our fiscal year ended
November 28, 2008.
50
EXECUTIVE
OFFICERS OF THE GOLDMAN SACHS GROUP, INC.
Set forth below are the name, age, present title, principal
occupation and certain biographical information as of
January 26, 2009 for our executive officers. All of
our executive officers have been appointed by and serve at the
pleasure of our board of directors.
Lloyd C.
Blankfein, 54
Mr. Blankfein has been our Chairman and Chief Executive
Officer since June 2006, and a director since
April 2003. Previously, he had been our President and Chief
Operating Officer since January 2004. Prior to that, from
April 2002 until January 2004, he was a Vice Chairman
of Goldman Sachs, with management responsibility for Goldman
Sachs Fixed Income, Currency and Commodities Division
(FICC) and Equities Division (Equities). Prior to becoming a
Vice Chairman, he had served as co-head of FICC since its
formation in 1997. From 1994 to 1997, he headed or co-headed the
Currency and Commodities Division. Mr. Blankfein is not on
the board of any public company other than Goldman Sachs. He is
affiliated with certain
non-profit
organizations, including as a member of the Harvard University
Committee on University Resources, the Advisory Board of the
Tsinghua University School of Economics and Management and the
Governing Board of the Indian School of Business, an overseer of
the Weill Medical College of Cornell University, and a director
of the Partnership for New York City and Catalyst.
Alan M. Cohen,
58
Mr. Cohen has been an Executive Vice President of Goldman
Sachs and our Global Head of Compliance since
February 2004. From 1991 until January 2004, he was a
partner in the law firm of OMelveny & Myers LLP.
He is affiliated with certain
non-profit
organizations, including as a board member of the New York Stem
Cell Foundation.
Gary D. Cohn,
48
Mr. Cohn has been our President and Co-Chief Operating
Officer and a director since June 2006. Previously, he had
been the co-head of Goldman Sachs global securities
businesses since January 2004. He also had been the co-head
of Equities since 2003 and the co-head of FICC since
September 2002. From March 2002 to
September 2002, he served as co-chief operating officer of
FICC. Prior to that, beginning in 1999, Mr. Cohn managed
the FICC macro businesses. From 1996 to 1999, he was the global
head of Goldman Sachs commodities business. Mr. Cohn
is not on the board of any public company other than Goldman
Sachs. He is affiliated with certain
non-profit
organizations, including as a trustee of the Gilmour Academy,
the NYU Child Study Center, the NYU Hospital, the NYU Medical
School, the Harlem Childrens Zone and American University.
J. Michael Evans,
51
Mr. Evans has been a Vice Chairman of Goldman Sachs since
February 2008 and chairman of Goldman Sachs Asia since
2004. Prior to becoming a Vice Chairman, he had served as global
co-head of Goldman Sachs securities business since 2003.
Previously, he had been co-head of the Equities Division since
2001. Mr. Evans is a board member of CASPER (Center for
Advancement of Standards-based Physical Education Reform). He
also serves as a trustee of the Bendheim Center for Finance at
Princeton University.
Gregory K. Palm,
60
Mr. Palm has been an Executive Vice President of Goldman
Sachs since May 1999, and our General Counsel and head or
co-head of the Legal Department since May 1992.
51
Michael S.
Sherwood, 43
Mr. Sherwood has been a Vice Chairman of Goldman Sachs
since February 2008 and co-chief executive officer of
Goldman Sachs International since 2005. Prior to becoming a Vice
Chairman, he had served as global co-head of Goldman Sachs
securities business since 2003. Prior to that, he had been head
of the Fixed Income, Currency and Commodities Division in Europe
since 2001.
Esta E. Stecher,
51
Ms. Stecher has been an Executive Vice President of Goldman
Sachs and our General Counsel and co-head of the Legal
Department since December 2000. From 1994 to 2000, she was
head of the firms Tax Department, over which she continues
to have senior oversight responsibility. She is also a trustee
of Columbia University.
David A. Viniar,
53
Mr. Viniar has been an Executive Vice President of Goldman
Sachs and our Chief Financial Officer since May 1999. He
has been the head of Operations, Technology, Finance and
Services Division since December 2002. He was head of the
Finance Division and co-head of Credit Risk Management and
Advisory and Firmwide Risk from December 2001 to
December 2002. Mr. Viniar was co-head of Operations,
Finance and Resources from March 1999 to
December 2001. He was Chief Financial Officer of The
Goldman Sachs Group, L.P. from March 1999 to May 1999.
From July 1998 until March 1999, he was Deputy Chief
Financial Officer and from 1994 until July 1998, he was
head of Finance, with responsibility for Controllers and
Treasury. From 1992 to 1994, he was head of Treasury and prior
to that was in the Structured Finance Department of Investment
Banking. He also serves on the Board of Trustees of Union
College.
John S. Weinberg,
51
Mr. Weinberg has been a Vice Chairman of Goldman Sachs
since June 2006. He has been co-head of Goldman Sachs
Investment Banking Division since December 2002. From
January 2002 to December 2002, he was co-head of the
Investment Banking Division in the Americas. Prior to that, he
served as co-head of the Investment Banking Services Department
since 1997. He is affiliated with certain
non-profit
organizations, including as a board member at
NewYork-Presbyterian Hospital, The Steppingstone Foundation, the
Greenwich Country Day School and Community Anti-Drug Coalitions
of America. Mr. Weinberg also serves on the Visiting
Committee for Harvard Business School.
Jon Winkelried,
49
Mr. Winkelried has been our President and Co-Chief
Operating Officer and a director since June 2006.
Previously, he had been the co-head of Goldman Sachs
Investment Banking Division since January 2005. From 2000
to 2005, he was co-head of FICC. From 1999 to 2000, he was head
of FICC in Europe. From 1995 to 1999, he was responsible for
Goldman Sachs leveraged finance business.
Mr. Winkelried is not on the board of any public company
other than Goldman Sachs. He is also a trustee of the University
of Chicago.
52
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
The principal market on which our common stock is traded is the
NYSE. Information relating to the high and low sales prices per
share of our common stock, as reported by the Consolidated Tape
Association, for each full quarterly period during fiscal 2007
and 2008 is set forth under the heading Supplemental
Financial Information Common Stock Price Range
in Part II, Item 8 of our Annual Report on
Form 10-K.
As of January 16, 2009, there were 9,909 holders of
record of our common stock.
During fiscal 2008 and 2007, dividends of $0.35 per share of
common stock were declared on December 11, 2007,
March 12, 2008, June 13, 2007,
September 19, 2007, December 17, 2007,
March 17, 2008, June 16, 2008 and
September 15, 2008. The holders of our common stock
share proportionately on a per share basis in all dividends and
other distributions on common stock 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. See
Business Regulation in Part I,
Item 1 of our Annual Report on
Form 10-K
for a discussion of potential regulatory limitations on our
receipt of funds from our regulated subsidiaries and our payment
of dividends to shareholders of Group Inc.
Prior to October 28, 2011, unless we have redeemed all
the preferred stock issued to the U.S. Treasury on
October 28, 2008 or unless the U.S. Treasury has
transferred all the preferred stock to a third party, the
consent of the U.S. Treasury will be required for us to
declare or pay any dividend or make any distribution on common
stock other than (i) regular quarterly cash dividends of
not more than $0.35 per share, as adjusted for any stock split,
stock dividend, reverse stock split, reclassification or similar
transaction, (ii) dividends payable solely in shares of
common stock and (iii) dividends or distributions of rights
or junior stock in connection with a stockholders rights
plan.
53
The table below sets forth the information with respect to
purchases made by or on behalf of Group Inc. or any
affiliated purchaser (as defined in
Rule 10b-18(a)(3)
under the Exchange Act), of our common stock during the fourth
quarter of our fiscal year ended November 28, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
Maximum Number
|
|
|
|
|
Average
|
|
Shares Purchased
|
|
of Shares That May
|
|
|
Total Number
|
|
Price
|
|
as Part of Publicly
|
|
Yet Be Purchased
|
|
|
of Shares
|
|
Paid per
|
|
Announced Plans
|
|
Under the Plans or
|
Period
|
|
Purchased
|
|
Share
|
|
or
Programs (2)
|
|
Programs (2)
|
Month #1
(August 30, 2008 to September 26, 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,859,203
|
|
Month #2
(September 27, 2008 to
October 31, 2008)
|
|
|
2,025
|
|
|
$
|
121.35
|
|
|
|
2,025
|
|
|
|
60,857,178
|
|
Month #3
(November 1, 2008 to
November 28, 2008)
|
|
|
4,700
|
|
|
$
|
53.31
|
|
|
|
4,700
|
|
|
|
60,852,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (1)
|
|
|
6,725
|
|
|
$
|
73.80
|
|
|
|
6,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Goldman Sachs generally does not
repurchase shares of its common stock as part of the repurchase
program during self-imposed black-out periods, which
run from the last two weeks of a fiscal quarter through and
including the date of the earnings release for such quarter.
|
|
(2) |
|
On March 21, 2000, we
announced that our board of directors had approved a repurchase
program, pursuant to which up to 15 million shares of our
common stock may be repurchased. This repurchase program was
increased by an aggregate of 280 million shares by
resolutions of our board of directors adopted on
June 18, 2001, March 18, 2002,
November 20, 2002, January 30, 2004,
January 25, 2005, September 16, 2005,
September 11, 2006 and December 17, 2007. We
use our share repurchase program to help maintain the
appropriate level of common equity and to substantially offset
increases in share count over time resulting from employee
share-based
compensation. Prior to October 28, 2011, unless we
have redeemed all the preferred stock issued to the
U.S. Treasury on October 28, 2008 or unless the
U.S. Treasury has transferred all the preferred stock to a
third party, the consent of the U.S. Treasury will be
required for us to repurchase our common stock in an aggregate
amount greater than the increase in the number of diluted shares
outstanding (as reported in our Quarterly Report on
Form 10-Q
for the three months ended
August 29, 2008) resulting from the grant,
vesting or exercise of
equity-based
compensation to employees and equitably adjusted for any stock
split, stock dividend, reverse stock split, reclassification or
similar transaction.
|
The repurchase program is effected
primarily through regular
open-market
purchases, the amounts and timing of which are determined
primarily by our current and projected capital positions
(i.e., comparisons of our desired level of capital to our
actual level of capital) but which may also be influenced by
general market conditions and the prevailing price and trading
volumes of our common stock, in each case subject to the limit
imposed under the U.S. Treasurys TARP Capital
Purchase Program. The total remaining authorization under the
repurchase program was 60,852,478 shares as of
January 16, 2009; the repurchase program has no set
expiration or termination date.
Information relating to compensation plans under which our
equity securities are authorized for issuance is set forth in
Part III, Item 12 of our Annual Report on
Form 10-K.
|
|
Item 6.
|
Selected
Financial Data
|
The Selected Financial Data table is set forth under
Part II, Item 8 of our Annual Report on
Form 10-K.
54
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
INDEX
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|
|
|
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Page
|
|
|
No.
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
126
|
|
55
Introduction
The Goldman Sachs Group, Inc. (Group Inc.) is a bank holding
company and a leading global investment banking, securities and
investment management firm that provides a wide range of
services worldwide to a substantial and diversified client base
that includes corporations, financial institutions, governments
and
high-net-worth
individuals.
Our activities are divided into three segments:
|
|
|
|
|
Investment Banking. We provide a broad range
of investment banking services to a diverse group of
corporations, financial institutions, investment funds,
governments and individuals.
|
|
|
|
Trading and Principal Investments. We
facilitate client transactions with a diverse group of
corporations, financial institutions, investment funds,
governments and individuals and take proprietary positions
through market making in, trading of and investing in fixed
income and equity products, currencies, commodities and
derivatives on these products. In addition, we engage in
market-making and specialist activities on equities and options
exchanges, and we clear client transactions on major stock,
options and futures exchanges worldwide. In connection with our
merchant banking and other investing activities, we make
principal investments directly and through funds that we raise
and manage.
|
|
|
|
Asset Management and Securities Services. We
provide investment advisory and financial planning services and
offer investment products (primarily through separately managed
accounts and commingled vehicles, such as mutual funds and
private investment funds) across all major asset classes to a
diverse group of institutions and individuals worldwide and
provide prime brokerage services, financing services and
securities lending services to institutional clients, including
hedge funds, mutual funds, pension funds and foundations, and to
high-net-worth
individuals worldwide.
|
Unless specifically stated otherwise, all references to 2008,
2007 and 2006 refer to our fiscal years ended, or the dates, as
the context requires, November 28, 2008,
November 30, 2007 and November 24, 2006,
respectively, and any reference to a future year refers to a
fiscal year ending on the last Friday in November of that year.
On December 15, 2008, the Board of Directors of Group
Inc. (Board) approved a change in our fiscal year-end from the
last Friday of November to the last Friday of December. The
change is effective for our 2009 fiscal year. The firms
2009 fiscal year began December 27, 2008 and will end
December 25, 2009, resulting in a
one-month
transition period that began November 29, 2008 and
ended December 26, 2008.
When we use the terms Goldman Sachs, the
firm, we, us and our,
we mean Group Inc., a Delaware corporation, and its consolidated
subsidiaries. References herein to our Annual Report on
Form 10-K
are to our Annual Report on
Form 10-K
for the fiscal year ended November 28, 2008.
In this discussion, we have included statements that may
constitute forward-looking statements within the
meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are not historical facts but instead represent only
our beliefs regarding future events, many of which, by their
nature, are inherently uncertain and outside our control. These
statements include statements other than historical information
or statements of current condition and may relate to our future
plans and objectives and results, among other things, and may
also include statements about the objectives and effectiveness
of our risk management and liquidity policies, statements about
trends in or growth opportunities for our businesses, statements
about our future status, activities or reporting under
U.S. banking regulation, and statements about our
investment banking transaction backlog. By identifying these
statements for you in this manner, we are alerting you to the
possibility that our actual results and financial condition may
differ, possibly materially, from the anticipated results and
financial condition indicated in these forward-looking
statements. Important factors that could cause our actual
results and financial condition to differ from those indicated
in these forward-looking statements include, among others, those
discussed below under
Certain
Risk Factors That May Affect Our Businesses as well as
Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K
and Cautionary Statement Pursuant to the U.S. Private
Securities Litigation Reform Act of 1995 in Part I,
Item 1 of our Annual Report on
Form 10-K.
56
Executive
Overview
Our diluted earnings per common share were $4.47 for 2008,
compared with $24.73 for 2007. Return on average tangible common
shareholders equity
(1) was
5.5% and return on average common shareholders equity was
4.9% for 2008. As of November 2008, book value per common
share was $98.68, an increase of 9.1% compared with the end of
2007, and our Tier 1 Ratio
(2) was
15.6%. During the fourth quarter of 2008, we raised
$20.75 billion in equity, comprised of a $5.75 billion
public common stock sale, a $5 billion preferred stock and
warrant issuance to Berkshire Hathaway Inc. and certain
affiliates and a $10 billion preferred stock and warrant
issuance under the U.S. Department of the Treasurys
(U.S. Treasury) TARP Capital Purchase Program. Total assets
were $885 billion at the end of the year, a decrease of 21%
compared with the end of 2007. During the fourth quarter of
2008, the firm became a bank holding company regulated by the
Board of Governors of the Federal Reserve System (Federal
Reserve Board).
Our results for 2008 reflected a particularly difficult
operating environment, including significant asset price
declines, high levels of volatility and reduced levels of
liquidity, particularly in the fourth quarter. In addition,
credit markets experienced significant dislocation between
prices for cash instruments and the related derivative contracts
and between credit indices and underlying single names. Net
revenues in Trading and Principal Investments were significantly
lower compared with 2007, reflecting significant declines in
Fixed Income, Currency and Commodities (FICC), Principal
Investments and Equities. The decrease in FICC primarily
reflected losses in credit products, which included a loss of
approximately $3.1 billion (net of hedges) related to
non-investment-grade
credit origination activities and losses from investments,
including corporate debt and private and public equities.
Results in mortgages included net losses of approximately
$1.7 billion on residential mortgage loans and securities
and approximately $1.4 billion on commercial mortgage loans
and securities. Interest rate products, currencies and
commodities each produced particularly strong results and net
revenues were higher compared with 2007. During 2008, although
client-driven activity was generally solid, FICC operated in a
challenging environment characterized by
broad-based
declines in asset values, wider mortgage and corporate credit
spreads, reduced levels of liquidity and
broad-based
investor deleveraging, particularly in the second half of the
year. The decline in Principal Investments primarily reflected
net losses of $2.53 billion from corporate principal
investments and $949 million from real estate principal
investments, as well as a $446 million loss from our
investment in the ordinary shares of Industrial and Commercial
Bank of China Limited (ICBC). In Equities, the decrease compared
with particularly strong net revenues in 2007 reflected losses
in principal strategies, partially offset by higher net revenues
in our client franchise businesses. Commissions were
particularly strong and were higher than 2007. During 2008,
Equities operated in an environment characterized by a
significant decline in global equity prices,
broad-based
investor deleveraging and very high levels of volatility,
particularly in the second half of the year.
|
|
(1)
|
Return on average tangible common
shareholders equity (ROTE) is computed by dividing net
earnings applicable to common shareholders by average monthly
tangible common shareholders equity. See
Results
of Operations Financial Overview below for
further information regarding our calculation of ROTE.
|
|
(2)
|
Before we became a bank holding
company, we were subject to capital guidelines as a Consolidated
Supervised Entity (CSE) that were generally consistent with
those set out in the Revised Framework for the International
Convergence of Capital Measurement and Capital Standards issued
by the Basel Committee on Banking Supervision (Basel II). We
currently compute and report our consolidated capital ratios in
accordance with the Basel II requirements, as applicable to us
when we were regulated as a CSE, for the purpose of assessing
the adequacy of our capital. Under the Basel II framework as it
applied to us when we were regulated as a CSE, our Tier 1
Ratio equals Tier 1 Capital divided by Total
Risk-Weighted
Assets (RWAs). We are currently working with the Federal Reserve
Board to put in place the appropriate reporting and compliance
mechanisms and methodologies to allow reporting of the
Basel I capital ratios as of the end of March 2009. See
Equity
Capital below for a further discussion of our Tier 1
Ratio.
|
57
Net revenues in Investment Banking also declined significantly
compared with 2007, reflecting significantly lower net revenues
in both Financial Advisory and Underwriting. In Financial
Advisory, the decrease compared with particularly strong net
revenues in 2007 reflected a decline in
industry-wide
completed mergers and acquisitions. The decrease in Underwriting
primarily reflected significantly lower net revenues in debt
underwriting, primarily due to a decline in leveraged finance
and
mortgage-related
activity, reflecting difficult market conditions. Net revenues
in equity underwriting were slightly lower compared with 2007,
reflecting a decrease in
industry-wide
equity and
equity-related
offerings. Our investment banking transaction backlog at the end
of 2008 was significantly lower than it was at the end of 2007.
(3)
Net revenues in Asset Management and Securities Services
increased compared with 2007. Securities Services net revenues
were higher, reflecting the impact of changes in the composition
of securities lending customer balances, as well as higher total
average customer balances. Asset Management net revenues
increased slightly compared with 2007. During the year, assets
under management decreased $89 billion to
$779 billion, due to $123 billion of market
depreciation, primarily in equity assets, partially offset by
$34 billion of net inflows.
Given the difficult market conditions, and in particular, the
challenging liquidity and funding environment during 2008, we
focused on reducing concentrated risk positions, including our
exposure to leveraged loans and real estate-related loans. We
believe that the strength of our capital position will enable us
to take advantage of market opportunities as they arise in 2009.
Our business, by its nature, does not produce predictable
earnings. Our results in any given period can be materially
affected by conditions in global financial markets and economic
conditions generally. For a further discussion of the factors
that may affect our future operating results, see
Certain
Risk Factors That May Affect Our Businesses below as well
as Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K.
(3) Our
investment banking transaction backlog represents an estimate of
our future net revenues from investment banking transactions
where we believe that future revenue realization is more likely
than not.
58
Business
Environment
Our financial performance is highly dependent on the environment
in which our businesses operate. During the first half of 2008,
global economic growth slowed as the U.S. entered a
recession. Despite the weakness in the U.S. and other major
economies, growth in most emerging markets remained solid, which
contributed to a dramatic increase in commodity prices as well
as increased inflation. However, during the second half of 2008,
the downturn in global economic growth became
broad-based,
which coincided with significant weakness and sharply reduced
liquidity across global financial markets. For a further
discussion of how market conditions affect our businesses, see
Certain
Risk Factors That May Affect Our Businesses below as well
as Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K.
A further discussion of the business environment in 2008 is set
forth below.
Global. Growth in the global economy weakened
substantially over the course of 2008, particularly in the major
economies. Economic growth in emerging markets also generally
declined in 2008, but remained high relative to the major
economies. Fixed income and equity markets experienced high
levels of volatility,
broad-based
declines in asset prices and reduced levels of liquidity,
particularly during the fourth quarter of our fiscal year. In
addition, mortgage and corporate credit spreads widened and
credit markets experienced significant dislocation between
prices for cash instruments and the related derivative contracts
and between credit indices and underlying single names. The
U.S. Federal Reserve lowered its federal funds target rate
over the course of our fiscal year, while central banks in the
Eurozone, United Kingdom, Japan and China also lowered interest
rates towards the end of the year. Oil prices exhibited
significant volatility during our fiscal year, rising to over
$140 per barrel in July before declining to under $60 per barrel
by the end of our fiscal year. In currency markets, the
U.S. dollar initially weakened against most major
currencies, particularly against the Euro, but subsequently
recovered as the pace of decline in global economic growth began
to accelerate in the second half of the year. Investment banking
activity was generally subdued during our fiscal year,
reflecting a significant decline in
industry-wide
announced and completed mergers and acquisitions and equity and
equity-related
offerings compared with 2007.
United States. Real gross domestic product
growth in the U.S. economy slowed to an estimated 1.2% in
calendar year 2008, down from 2.0% in 2007. The economy entered
a recession near the beginning of our fiscal year, with the
downturn intensifying in our fourth quarter. Much of the
slowdown was attributable to weakness in credit markets brought
on by the contraction in the housing market and the associated
increase in mortgage delinquencies and defaults. Growth in
industrial production slowed from 2007 levels, reflecting
reduced growth in domestic demand and exports. Both business and
consumer confidence declined over the course of the year. Growth
in consumer expenditure was supported in the first half of the
year by the federal governments stimulus package but
declined thereafter, as the housing market continued to weaken
and the rate of unemployment rose significantly. The rate of
inflation increased during the first half of our fiscal year, as
energy and food prices increased significantly, but declined
sharply towards the end of the year. Measures of core inflation,
which remained elevated in the first half of the year, also
declined towards the end of the year as the labor market
continued to weaken and capacity utilization decreased. The
U.S. Federal Reserve reduced its federal funds target rate
by a total of 350 basis points to 1.00% during our fiscal year,
its lowest level since 2003. U.S. regulatory agencies have
also taken additional measures to address reduced levels of
liquidity in credit markets and the U.S. Treasury took
measures to strengthen the capital adequacy of financial
institutions. The yield on the
10-year
U.S. Treasury note declined by 104 basis points to 2.93%
during our fiscal year. The Dow Jones Industrial Average, the
S&P 500 Index and the NASDAQ Composite Index ended our
fiscal year lower by 34%, 39% and 42%, respectively.
Europe. Real gross domestic product growth in
the Eurozone economies slowed to an estimated 0.8% in calendar
year 2008, down from 2.6% in 2007. Growth in industrial
production, fixed investment and consumer expenditure weakened
throughout the year. In addition, surveys of business and
consumer confidence declined. Although the labor market remained
solid in the first half of the
59
year, the unemployment rate began to increase in the second half
of the year. The rate of inflation increased during the first
three quarters of the year. In response to inflationary
pressures, the European Central Bank (ECB) raised interest rates
in July, increasing its main refinancing operations rate by 25
basis points to 4.25%. However, during the fourth quarter of our
fiscal year, the ECB lowered its main refinancing operations
rate by a total of 100 basis points to 3.25%, as financial
markets and the outlook for growth weakened considerably and
inflationary pressures appeared to decline. In the United
Kingdom, real gross domestic product growth fell to an estimated
0.9% for calendar year 2008, down from 3.0% in 2007. The decline
in growth accelerated in the second half of the year as credit
market conditions deteriorated and the slowdown in the U.K.
housing market intensified. The rate of inflation increased
during the year, although inflationary pressures appeared to
moderate in our fourth quarter. The Bank of England lowered its
official bank rate over the course of our fiscal year by a total
of 275 basis points to 3.00%.
Long-term
government bond yields in both the Eurozone and the U.K. ended
our fiscal year lower. The Euro and British pound depreciated by
13% and 25%, respectively, against the U.S. dollar during
our fiscal year. Major European equity markets ended our fiscal
year significantly lower.
Asia. In Japan, real gross domestic product
decreased by an estimated 0.2% in calendar year 2008 compared
with an increase of 2.4% in 2007. Measures of investment
activity in the housing sector and growth in consumption
declined during the year. Export growth remained solid in the
first half of the year but deteriorated notably towards year-end
as the environment outside of Japan worsened. The rate of
inflation increased from the near-zero levels seen in recent
years, but remained moderate. The Bank of Japan lowered its
target overnight call rate by 20 basis points in October,
bringing it to 0.30%, while the yield on
10-year
Japanese government bonds declined by 23 basis points during our
fiscal year. The yen appreciated by 14% against the
U.S. dollar. The Nikkei 225 ended our fiscal year down 46%.
In China, real gross domestic product growth declined to an
estimated 9.0% in calendar year 2008 from 13.0% in 2007. Export
growth and industrial production decelerated rapidly toward the
end of the year, while consumer spending softened but remained
solid. Rising food prices contributed to a higher rate of
inflation in the first half of the year but inflation fell
sharply in the second half of the year. The Peoples Bank
of China raised its
one-year
benchmark lending rate by 18 basis points to 7.47% at the
beginning of our fiscal year, but reduced the lending rate by
189 basis points during our fourth quarter and took additional
measures to increase liquidity in the financial system. The
Chinese government continued to allow the steady appreciation of
its currency against the U.S. dollar in the first half of
the year, after which the exchange rate remained broadly
unchanged. Real gross domestic product growth in India slowed to
an estimated 6.7% in calendar year 2008 from 9.0% in 2007. While
export growth remained solid for most of the year, growth in
consumer expenditure and fixed investment declined. The rate of
wholesale inflation increased sharply in the first half of the
year and then subsequently declined. The Indian rupee, along
with other currencies in the region, generally depreciated
against the U.S. dollar. Equity markets experienced
substantial declines across the region, with the Shanghai
Composite Index down 62%, and markets in Hong Kong, India and
South Korea also ending the year significantly lower.
Other Markets. Real gross domestic product
growth in Brazil declined to an estimated 5.4% in calendar year
2008 from 5.7% in 2007. For most of the year, growth was
supported by strong capital inflows, high demand for commodity
exports, and strong domestic demand. Towards the end of the
year, however, the economic outlook deteriorated, as the
Brazilian currency depreciated against the U.S. dollar and
commodity prices fell. In Russia, real gross domestic product
growth declined to an estimated 6.2% in calendar year 2008 from
8.1% in 2007. Growth was supported by strong household
consumption and increased capital investment, particularly in
the first half of the year. However, in the fourth quarter, the
pace of growth declined sharply, as capital outflows intensified
and the Russian currency depreciated against the
U.S. dollar. Brazilian and Russian equity prices ended our
fiscal year significantly lower.
60
Certain Risk
Factors That May Affect Our Businesses
We face a variety of risks that are substantial and inherent in
our businesses, including market, liquidity, credit,
operational, legal and regulatory risks. For a discussion of how
management seeks to manage some of these risks, see
Risk
Management below. A summary of the more important factors
that could affect our businesses follows below. For a further
discussion of these and other important factors that could
affect our businesses, see Risk Factors in
Part I, Item 1A of our Annual Report on
Form 10-K.
Market Conditions and Market Risk. Our
financial performance is highly dependent on the environment in
which our businesses operate. Overall, during fiscal 2008, the
business environment has been extremely adverse for many of our
businesses and there can be no assurance that these conditions
will improve in the near term.
A favorable business environment is generally characterized by,
among other factors, high global gross domestic product growth,
transparent, liquid and efficient capital markets, low
inflation, high business and investor confidence, stable
geopolitical conditions and strong business earnings.
Unfavorable or uncertain economic and market conditions can be
caused by: declines in economic growth, business activity or
investor or business confidence; limitations on the availability
or increases in the cost of credit and capital; increases in
inflation, interest rates, exchange rate volatility, default
rates or the price of basic commodities; outbreaks of
hostilities or other geopolitical instability; corporate,
political or other scandals that reduce investor confidence in
capital markets; natural disasters or pandemics; or a
combination of these or other factors. Our businesses and
profitability have been and may continue to become adversely
affected by market conditions in many ways, including the
following:
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Many of our businesses, such as our merchant banking businesses,
our mortgages, leveraged loan and credit products businesses in
our FICC segment, and our equity principal strategies business,
have net long positions in debt securities, loans,
derivatives, mortgages, equities (including private equity) and
most other asset classes. In addition, many of our
market-making
and other businesses in which we act as a principal to
facilitate our clients activities, including our
specialist businesses, commit large amounts of capital to
maintain trading positions in interest rate and credit products,
as well as currencies, commodities and equities. Because nearly
all of these investing and trading positions are
marked-to-market
on a daily basis, declines in asset values directly and
immediately impact our earnings, unless we have effectively
hedged our exposures to such declines. In certain
circumstances (particularly in the case of leveraged loans and
private equities or other securities that are not freely
tradable or lack established and liquid trading markets), it may
not be possible or economic to hedge such exposures and to the
extent that we do so the hedge may be ineffective or may greatly
reduce our ability to profit from increases in the values of the
assets. Sudden declines and significant volatility in the prices
of assets may substantially curtail or eliminate the trading
markets for certain assets, which may make it very difficult to
sell, hedge or value such assets. The inability to sell or
effectively hedge assets reduces our ability to limit losses in
such positions and the difficulty in valuing assets may increase
our
risk-weighted
assets which requires us to maintain additional capital and
increases our funding costs.
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Our cost of obtaining
long-term
unsecured funding is directly related to our credit spreads.
Credit spreads are influenced by market perceptions of our
creditworthiness. Widening credit spreads, as well as
significant declines in the availability of credit, have
adversely affected our ability to borrow on a secured and
unsecured basis and may continue to do so. We fund ourselves on
an unsecured basis by issuing commercial paper, promissory notes
and
long-term
debt, or by obtaining bank loans or lines of credit. We seek to
finance many of our assets, including our less liquid assets, on
a secured basis, including by entering into repurchase
agreements. Disruptions in the credit markets make it harder and
more expensive to obtain funding for our businesses. If our
available funding is limited or we are forced to fund
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61
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our operations at a higher cost, these conditions may require us
to curtail our business activities and increase our cost of
funding, both of which could reduce our profitability,
particularly in our businesses that involve investing, lending
and taking principal positions, including market making.
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Our investment banking business has been and may continue to be
adversely affected by market conditions. Poor economic
conditions and other adverse geopolitical conditions can
adversely affect and have adversely affected investor and CEO
confidence, resulting in significant
industry-wide
declines in the size and number of underwritings and of
financial advisory transactions, which could continue to have an
adverse effect on our revenues and our profit margins. In
addition, our clients engaging in mergers and acquisitions often
rely on access to the secured and unsecured credit markets to
finance their transactions. The lack of available credit and the
increased cost of credit can adversely affect the size, volume
and timing of our clients merger and acquisition
transactions particularly large transactions.
Because a significant portion of our investment banking revenues
are derived from our participation in large transactions, a
decline in the number of large transactions would adversely
affect our investment banking business.
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Certain of our trading businesses depend on market volatility to
provide trading and arbitrage opportunities, and decreases in
volatility may reduce these opportunities and adversely affect
the results of these businesses. On the other hand, increased
volatility, while it can increase trading volumes and spreads,
also increases risk as measured by VaR and may expose us to
increased risks in connection with our
market-making
and proprietary businesses or cause us to reduce the size of
these businesses in order to avoid increasing our VaR. Limiting
the size of our
market-making
positions and investing businesses can adversely affect our
profitability.
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We receive
asset-based
management fees based on the value of our clients
portfolios or investment in funds managed by us and, in some
cases, we also receive incentive fees based on increases in the
value of such investments. Declines in asset values reduce the
value of our clients portfolios or fund assets, which in
turn reduce the fees we earn for managing such assets. Market
uncertainty, volatility and adverse economic conditions, as well
as declines in asset values, may cause our clients to transfer
their assets out of our funds or other products or their
brokerage accounts or affect our ability to attract new clients
or additional assets from existing clients and result in reduced
net revenues, principally in our asset management business. To
the extent that clients do not withdraw their funds, they may
invest them in products that generate less fee income.
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Concentration of risk increases the potential for significant
losses in our
market-making,
proprietary trading, investing, block trading, merchant banking,
underwriting and lending businesses. This risk may increase to
the extent we expand our proprietary trading and investing
businesses or commit capital to facilitate customer-driven
business.
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Concerns about financial institution profitability and solvency
as a result of general market conditions, particularly in the
credit markets, together with the forced merger or failure of a
number of major commercial and investment banks have at times
caused a number of our clients to reduce the level of business
that they do with us, either because of concerns about the
safety of their assets held by us or simply arising from a
desire to diversify their risk or for other reasons. Some
clients have withdrawn some of the funds held at our firm or
transferred them from deposits with GS Bank USA to other types
of assets (in many cases leaving those assets in their brokerage
accounts held with us). Some counterparties have at times
refused to enter into certain derivatives and other
long-term
transactions with us or have requested additional collateral.
These instances were more prevalent during periods when the lack
of confidence in financial institutions was most widespread and
have become significantly less frequent in recent months.
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62
Liquidity Risk. Liquidity is essential to our
businesses. Our liquidity may be impaired by an inability to
access secured
and/or
unsecured debt markets, an inability to access funds from our
subsidiaries, an inability to sell assets or redeem our
investments, or unforeseen outflows of cash or collateral. This
situation may arise due to circumstances that we may be unable
to control, such as a general market disruption or an
operational problem that affects third parties or us, or even by
the perception among market participants that we, or other
market participants, are experiencing greater liquidity risk.
The ongoing liquidity crisis and the loss of confidence in
financial institutions has increased our cost of funding and
limited our access to some of our traditional sources of
liquidity, including both secured and unsecured borrowings. In
particular, in the latter half of 2008, we were unable to raise
significant amounts of
long-term
unsecured debt in the public markets, other than as a result of
the issuance of securities guaranteed by the Federal Deposit
Insurance Corporation (FDIC) under the FDICs Temporary
Liquidity Guarantee Program (TLGP). It is unclear when we will
regain access to the public long-term unsecured debt markets on
customary terms or whether any similar program will be available
after the TLGPs scheduled June 2009 expiration.
The financial instruments that we hold and the contracts to
which we are a party are increasingly complex, as we employ
structured products to benefit our clients and ourselves, and
these complex structured products often do not have readily
available markets to access in times of liquidity stress. Our
investing activities may lead to situations where the holdings
from these activities represent a significant portion of
specific markets, which could restrict liquidity for our
positions. Further, our ability to sell assets may be impaired
if other market participants are seeking to sell similar assets
at the same time, as is likely to occur in a liquidity or other
market crisis. In addition, financial institutions with which we
interact may exercise set-off rights or the right to require
additional collateral, including in difficult market conditions,
which could further impair our access to liquidity.
Our credit ratings are important to our liquidity. A reduction
in our credit ratings could adversely affect our liquidity and
competitive position, increase our borrowing costs, limit our
access to the capital markets or trigger our obligations under
certain bilateral provisions in some of our trading and
collateralized financing contracts. Under these provisions,
counterparties could be permitted to terminate contracts with
Goldman Sachs or require us to post additional collateral.
Termination of our trading and collateralized financing
contracts could cause us to sustain losses and impair our
liquidity by requiring us to find other sources of financing or
to make significant cash payments or securities movements. For a
discussion of downgrades to our ratings that occurred in
December 2008 and of the potential impact on Goldman Sachs
of a further reduction in our credit ratings, see
Liquidity
and Funding Risk Credit Ratings below.
Group Inc. has guaranteed the payment obligations of Goldman,
Sachs & Co. (GS&Co.), Goldman Sachs Bank USA (GS
Bank USA) and Goldman Sachs Bank (Europe) PLC (GS Bank Europe),
subject to certain exceptions, and has pledged significant
assets to GS Bank USA to support its obligations to GS Bank USA.
These guarantees may require Group Inc. to provide substantial
funds or assets to its subsidiaries or their creditors or
counterparties at a time when Group Inc. is in need of liquidity
to fund its own obligations.
63
Credit Risk. The amount and duration of
our credit exposures have been increasing over the past several
years, as have the breadth and size of the entities to which we
have credit exposures. We are exposed to the risk that third
parties that owe us money, securities or other assets will not
perform their obligations. These parties may default on their
obligations to us due to bankruptcy, lack of liquidity,
operational failure or other reasons. A failure of a significant
market participant, or even concerns about a default by such an
institution, could lead to significant liquidity problems,
losses or defaults by other institutions, which in turn could
adversely affect us. We are also subject to the risk that our
rights against third parties may not be enforceable in all
circumstances. In addition, deterioration in the credit quality
of third parties whose securities or obligations we hold could
result in losses
and/or
adversely affect our ability to rehypothecate or otherwise use
those securities or obligations for liquidity purposes. A
significant downgrade in the credit ratings of our
counterparties could also have a negative impact on our results.
While in many cases we are permitted to require additional
collateral for counterparties that experience financial
difficulty, disputes may arise as to the amount of collateral we
are entitled to receive and the value of pledged assets. Default
rates, downgrades and disputes with counterparties as to the
valuation of collateral increase significantly in times of
market stress and illiquidity.
As part of our clearing business, we finance our client
positions, and we could be held responsible for the defaults or
misconduct of our clients. Although we regularly review credit
exposures 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 detect or foresee,
particularly as new business initiatives lead us to transact
with a broader array of clients and counterparties and expose us
to new asset classes and new markets.
We have experienced, due to competitive factors, pressure to
extend and price credit at levels that may not always fully
compensate us for the risks we take. In particular, corporate
clients sometimes seek to require credit commitments from us in
connection with investment banking and other assignments.
Operational Risk. Our businesses are highly
dependent on our ability to process and monitor, on a daily
basis, a very large number of transactions, many of which are
highly complex, across numerous and diverse markets in many
currencies. These transactions, as well as the information
technology services we provide to clients, often must adhere to
client-specific guidelines, as well as legal and regulatory
standards. Despite the resiliency plans and facilities we have
in place, our ability to conduct business may be adversely
impacted by a disruption in the infrastructure that supports our
businesses and the communities in which we are located. This may
include a disruption involving electrical, communications,
internet, transportation or other services used by us or third
parties with which we conduct business.
Industry consolidation, whether among market participants or
financial intermediaries, increases the risk of operational
failure as disparate complex systems need to be integrated,
often on an accelerated basis. Furthermore, the
interconnectivity of multiple financial institutions with
central agents, exchanges and clearing houses increases the risk
that an operational failure at one institution may cause an
industry-wide
operational failure that could materially impact our ability to
conduct business.
64
Legal and Regulatory Risk. We are subject to
extensive and evolving regulation in jurisdictions around the
world. Several of our subsidiaries are subject to regulatory
capital requirements and, as a bank holding company, we are
subject to minimum capital standards and a minimum Tier 1
leverage ratio on a consolidated basis. Firms in the financial
services industry have been operating in a difficult regulatory
environment. Recent market disruptions have led to numerous
proposals for significant additional regulation of the financial
services industry. These regulations could limit our business
activities, increase compliance costs and, to the extent the
regulations strictly control the activities of financial
services firms, make it more difficult for us to distinguish
ourselves from competitors. Substantial legal liability or a
significant regulatory action against us could have material
adverse financial effects or cause significant reputational harm
to us, which in turn could seriously harm our business
prospects. As a bank holding company, we will be subject to
capital requirements based on Basel I as opposed to the
requirements based on Basel II that applied to us as a CSE.
Complying with these requirements may require us to liquidate
assets or raise capital in a manner that adversely increases our
funding costs or otherwise adversely affects our shareholders
and creditors. In addition, failure to meet minimum capital
requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if
undertaken, could have a direct material adverse effect on our
financial condition. Our status as a bank holding company and
the operation of our lending and other businesses through GS
Bank USA subject us to additional regulation and limitations on
our activities, as described in Regulation
Banking Regulation in Part I, Item 1 of our
Annual Report on
Form 10-K,
as well as some regulatory uncertainty as we apply banking
regulations and practices to many of our businesses. The
application of these regulations and practices may present us
and our regulators with new or novel issues. We face significant
legal risks in our businesses, and the volume of claims and
amount of damages and penalties claimed in litigation and
regulatory proceedings against financial institutions remain
high. Our experience has been that legal claims by customers and
clients increase in a market downturn. In addition,
employment-related claims typically increase in periods when we
have reduced the total number of employees. For a discussion of
how we account for our legal and regulatory exposures, see
Use
of Estimates below.
65
Critical
Accounting Policies
Fair
Value
The use of fair value to measure financial instruments, with
related unrealized gains or losses generally recognized in
Trading and principal investments in our
consolidated statements of earnings, is fundamental to our
financial statements and our risk management processes and is
our most critical accounting policy. The fair value of a
financial instrument is the amount that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date
(the exit price). Financial assets are marked to bid prices and
financial liabilities are marked to offer prices.
During the fourth quarter of 2008, both the Financial Accounting
Standards Board (FASB) and the staff of the SEC re-emphasized
the importance of sound fair value measurement in financial
reporting. In October 2008, the FASB issued FASB Staff
Position No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset is Not Active. This statement
clarifies that determining fair value in an inactive or
dislocated market depends on facts and circumstances and
requires significant management judgment. This statement
specifies that it is acceptable to use inputs based on
management estimates or assumptions, or for management to make
adjustments to observable inputs to determine fair value when
markets are not active and relevant observable inputs are not
available. Our fair value measurement policies are consistent
with the guidance in
FSP No. FAS 157-3.
Substantially all trading assets and trading liabilities are
reflected in our consolidated statements of financial condition
at fair value, pursuant principally to:
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Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities;
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specialized industry accounting for
broker-dealers
and investment companies;
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SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities; or
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the fair value option under either SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140, or SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities (i.e., the fair value option).
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Upon becoming a bank holding company in September 2008, we
could no longer apply specialized
broker-dealer
industry accounting to those subsidiaries not regulated as
broker-dealers.
Therefore, within our
non-broker-dealer
subsidiaries, we designated as held for trading those
instruments within the scope of SFAS No. 115
(i.e., debt securities and marketable equity securities),
and elected the fair value option for other cash instruments
(specifically loans, loan commitments and certain private equity
and restricted public equity securities) which we historically
had carried at fair value. These fair value elections were in
addition to previous elections made for certain corporate loans,
loan commitments and certificates of deposit issued by GS Bank
USA. There was no impact on earnings from these initial
elections because all of these instruments were already recorded
at fair value in Trading assets, at fair value or
Trading liabilities, at fair value in the
consolidated statements of financial condition prior to Group
Inc. becoming a bank holding company.
66
In determining fair value, we separate our Trading assets,
at fair value and Trading liabilities, at fair
value into two categories: cash instruments and derivative
contracts, as set forth in the following table:
Trading
Instruments by Category
(in
millions)
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As of November
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2008
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2007
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Trading
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Trading
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Trading
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Trading
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Assets, at
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Liabilities, at
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Assets, at
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Liabilities, at
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Fair Value
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Fair Value
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Fair Value
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Fair Value
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Cash trading instruments
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$
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186,231
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$
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57,143
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$
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324,181
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$
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112,018
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ICBC
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5,496
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(1)
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6,807
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(1)
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SMFG
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1,135
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1,134
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(4)
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4,060
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3,627
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(4)
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Other principal investments
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15,126
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(2)
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11,933
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(2)
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|
Principal investments
|
|
|
21,757
|
|
|
|
1,134
|
|
|
|
22,800
|
|
|
|
3,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
207,988
|
|
|
|
58,277
|
|
|
|
346,981
|
|
|
|
115,645
|
|
Exchange-traded
|
|
|
6,164
|
|
|
|
8,347
|
|
|
|
13,541
|
|
|
|
12,280
|
|
Over-the-counter
|
|
|
124,173
|
|
|
|
109,348
|
|
|
|
92,073
|
|
|
|
87,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
130,337
|
(3)
|
|
|
117,695
|
(5)
|
|
|
105,614
|
(3)
|
|
|
99,378
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
338,325
|
|
|
$
|
175,972
|
|
|
$
|
452,595
|
|
|
$
|
215,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes interests of
$3.48 billion and $4.30 billion as of
November 2008 and November 2007, respectively, held by
investment funds managed by Goldman Sachs. The fair value of our
investment in the ordinary shares of ICBC, which trade on The
Stock Exchange of Hong Kong, includes the effect of foreign
exchange revaluation for which we maintain an economic currency
hedge.
|
|
(2) |
|
The following table sets forth the
principal investments (in addition to our investments in ICBC
and Sumitomo Mitsui Financial Group, Inc. (SMFG)) included
within the Principal Investments component of our Trading and
Principal Investments segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
Corporate
|
|
Real Estate
|
|
Total
|
|
Corporate
|
|
Real Estate
|
|
Total
|
|
|
(in millions)
|
|
Private
|
|
$
|
10,726
|
|
|
$
|
2,935
|
|
|
$
|
13,661
|
|
|
$
|
7,297
|
|
|
$
|
2,361
|
|
|
$
|
9,658
|
|
Public
|
|
|
1,436
|
|
|
|
29
|
|
|
|
1,465
|
|
|
|
2,208
|
|
|
|
67
|
|
|
|
2,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,162
|
|
|
$
|
2,964
|
|
|
$
|
15,126
|
|
|
$
|
9,505
|
|
|
$
|
2,428
|
|
|
$
|
11,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Net of cash received pursuant to
credit support agreements of $137.16 billion and
$59.05 billion as of November 2008 and
November 2007, respectively.
|
|
(4) |
|
Represents an economic hedge on the
shares of common stock underlying our investment in the
convertible preferred stock of SMFG.
|
|
(5) |
|
Net of cash paid pursuant to credit
support agreements of $34.01 billion and
$27.76 billion as of November 2008 and
November 2007, respectively.
|
67
Cash Instruments. Cash instruments include
cash trading instruments, public principal investments and
private principal investments.
|
|
|
|
|
Cash Trading Instruments. Our cash trading
instruments are generally valued using quoted market prices,
broker or dealer quotations, or alternative pricing sources with
reasonable levels of price transparency. The types of
instruments valued based on quoted market prices in active
markets include most U.S. government and sovereign
obligations, active listed equities and certain money market
securities.
|
The types of instruments that trade in markets that are not
considered to be active, but are valued based on quoted market
prices, broker or dealer quotations, or alternative pricing
sources with reasonable levels of price transparency include
most government agency securities,
investment-grade
corporate bonds, certain mortgage products, certain bank loans
and bridge loans, less liquid listed equities, state, municipal
and provincial obligations and certain money market securities
and loan commitments.
Certain cash trading instruments trade infrequently and
therefore have little or no price transparency. Such instruments
include private equity and real estate fund investments, certain
bank loans and bridge loans (including certain mezzanine
financing, leveraged loans arising from capital market
transactions and other corporate bank debt), less liquid
corporate debt securities and other debt obligations (including
less liquid
high-yield
corporate bonds, distressed debt instruments and collateralized
debt obligations (CDOs) backed by corporate obligations), less
liquid mortgage whole loans and securities (backed by either
commercial or residential real estate), and acquired portfolios
of distressed loans. The transaction price is initially used as
the best estimate of fair value. Accordingly, when a pricing
model is used to value such an instrument, the model is adjusted
so that the model value at inception equals the transaction
price. This valuation is adjusted only when changes to inputs
and assumptions are corroborated by evidence such as
transactions in similar instruments, completed or pending
third-party transactions in the underlying investment or
comparable entities, subsequent rounds of financing,
recapitalizations and other transactions across the capital
structure, offerings in the equity or debt capital markets, and
changes in financial ratios or cash flows.
For positions that are not traded in active markets or are
subject to transfer restrictions, valuations are adjusted to
reflect illiquidity
and/or
non-transferability.
Such adjustments are generally based on available market
evidence. In the absence of such evidence, managements
best estimate is used.
|
|
|
|
|
Public Principal Investments. Our public
principal investments held within the Principal Investments
component of our Trading and Principal Investments segment tend
to be large, concentrated holdings resulting from initial public
offerings or other corporate transactions, and are valued based
on quoted market prices. For positions that are not traded in
active markets or are subject to transfer restrictions,
valuations are adjusted to reflect illiquidity
and/or
non-transferability.
Such adjustments are generally based on available market
evidence. In the absence of such evidence, managements
best estimate is used.
|
Our most significant public principal investment is our
investment in the ordinary shares of ICBC. Our investment in
ICBC is valued using the quoted market price adjusted for
transfer restrictions. The ordinary shares acquired from ICBC
are subject to transfer restrictions that, among other things,
prohibit any sale, disposition or other transfer until
April 28, 2009. From April 28, 2009 to
October 20, 2009, we may transfer up to 50% of the
aggregate ordinary shares of ICBC that we owned as of
October 20, 2006. We may transfer the remaining shares
after October 20, 2009. A portion of our interest is
held by investment funds managed by Goldman Sachs.
68
We also have an investment in the convertible preferred stock of
SMFG. This investment is valued using a model that is
principally based on SMFGs common stock price. During our
second quarter of 2008, we converted
one-third of
our SMFG preferred stock investment into SMFG common stock, and
delivered the common stock to close out
one-third of
our hedge position. As of November 2008, we remained hedged
on the common stock underlying our remaining investment in SMFG.
|
|
|
|
|
Private Principal Investments. Our private
principal investments held within the Principal Investments
component of our Trading and Principal Investments segment
include investments in private equity, debt and real estate,
primarily held through investment funds. By their nature, these
investments have little or no price transparency. We value such
instruments initially at transaction price and adjust valuations
when evidence is available to support such adjustments. Such
evidence includes transactions in similar instruments, completed
or pending third-party transactions in the underlying investment
or comparable entities, subsequent rounds of financing,
recapitalizations and other transactions across the capital
structure, offerings in the equity or debt capital markets, and
changes in financial ratios or cash flows.
|
Derivative Contracts. Derivative contracts can
be
exchange-traded
or
over-the-counter
(OTC). We generally value
exchange-traded
derivatives using models which calibrate to
market-clearing
levels and eliminate timing differences between the closing
price of the
exchange-traded
derivatives and their underlying instruments.
OTC derivatives are valued using market transactions and other
market evidence whenever possible, including
market-based
inputs to models, model calibration to
market-clearing
transactions, broker or dealer quotations, or alternative
pricing sources with reasonable levels of price transparency.
Where models are used, the selection of a particular model to
value an OTC derivative depends upon the contractual terms of,
and specific risks inherent in, the instrument as well as the
availability of pricing information in the market. We generally
use similar models to value similar instruments. Valuation
models require a variety of inputs, including contractual terms,
market prices, yield curves, credit curves, measures of
volatility, prepayment rates and correlations of such inputs.
For OTC derivatives that trade in liquid markets, such as
generic forwards, swaps and options, model inputs can generally
be verified and model selection does not involve significant
management judgment.
Certain OTC derivatives trade in less liquid markets with
limited pricing information, and the determination of fair value
for these derivatives is inherently more difficult. Where we do
not have corroborating market evidence to support significant
model inputs and cannot verify the model to market transactions,
the transaction price is initially used as the best estimate of
fair value. Accordingly, when a pricing model is used to value
such an instrument, the model is adjusted so that the model
value at inception equals the transaction price. Subsequent to
initial recognition, we only update valuation inputs when
corroborated by evidence such as similar market transactions,
third-party
pricing services
and/or
broker or dealer quotations, or other empirical market data. In
circumstances where we cannot verify the model value to market
transactions, it is possible that a different valuation model
could produce a materially different estimate of fair value. See
Derivatives below for further
information on our OTC derivatives.
When appropriate, valuations are adjusted for various factors
such as liquidity, bid/offer spreads and credit considerations.
Such adjustments are generally based on available market
evidence. In the absence of such evidence, managements
best estimate is used.
Controls Over Valuation of Financial
Instruments. A control infrastructure,
independent of the trading and investing functions, is
fundamental to ensuring that our financial instruments are
appropriately valued at
market-clearing
levels (exit price) and that fair value measurements are
reliable and consistently determined.
69
We employ an oversight structure that includes appropriate
segregation of duties. Senior management, independent of the
trading and investing functions, is responsible for the
oversight of control and valuation policies and for reporting
the results of these policies to our Audit Committee. We seek to
maintain the necessary resources to ensure that control
functions are performed appropriately. We employ procedures for
the approval of new transaction types and markets, price
verification, review of daily profit and loss, and review of
valuation models by personnel with appropriate technical
knowledge of relevant products and markets. These procedures are
performed by personnel independent of the trading and investing
functions. For financial instruments where prices or valuations
that require inputs are less observable, we employ, where
possible, procedures that include comparisons with similar
observable positions, analysis of actual to projected cash
flows, comparisons with subsequent sales, reviews of valuations
used for collateral management purposes and discussions with
senior business leaders. See
Market
Risk and
Credit
Risk below for a further discussion of how we manage the
risks inherent in our trading and principal investing businesses.
Fair Value Hierarchy
Level 3. SFAS No. 157 establishes
a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The objective of a fair
value measurement is to determine the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date (the exit price). The hierarchy gives the
highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements)
and the lowest priority to unobservable inputs (level 3
measurements). Assets and liabilities are classified in their
entirety based on the lowest level of input that is significant
to the fair value measurement.
Instruments that trade infrequently and therefore have little or
no price transparency are classified within level 3 of the
fair value hierarchy. We determine which instruments are
classified within level 3 based on the results of our price
verification process. This process is performed by personnel
independent of our trading and investing functions who
corroborate valuations to external market data
(e.g., quoted market prices, broker or dealer quotations,
third-party
pricing vendors, recent trading activity and comparative
analyses to similar instruments). When broker or dealer
quotations or third-party pricing vendors are used for valuation
or price verification, greater priority is given to executable
quotes. As part of our price verification process, valuations
based on quotes are corroborated by comparison both to other
quotes and to recent trading activity in the same or similar
instruments. The number of quotes obtained varies by instrument
and depends on the liquidity of the particular instrument. See
Notes 2 and 3 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding SFAS No. 157.
Recent market conditions, particularly in the fourth quarter of
2008 (characterized by dislocations between asset classes,
elevated levels of volatility, and reduced price transparency),
have increased the level of management judgment required to
value cash trading instruments classified within level 3 of
the fair value hierarchy. In particular, managements
judgment is required to determine the appropriate
risk-adjusted
discount rate for cash trading instruments with little or no
price transparency as a result of decreased volumes and lower
levels of trading activity. In such situations, our valuation is
adjusted to approximate rates which market participants would
likely consider appropriate for relevant credit and liquidity
risks.
Valuation Methodologies for Level 3
Assets. Instruments classified within
level 3 of the fair value hierarchy are initially valued at
transaction price, which is considered to be the best initial
estimate of fair value. As time passes, transaction price
becomes less reliable as an estimate of fair value and
accordingly, we use other methodologies to determine fair value,
which vary based on the type of instrument, as described below.
Regardless of the methodology, valuation inputs and assumptions
are only changed when corroborated by substantive evidence.
Senior management in control functions, independent of the
trading and investing functions, reviews all significant
unrealized gains/losses, including the primary drivers of the
change in value. Valuations are further corroborated by values
realized upon
70
sales of our level 3 assets. An overview of methodologies
used to value our level 3 assets subsequent to the
transaction date is as follows:
|
|
|
|
|
Private equity and real estate fund
investments. Investments are generally held at
cost for the first year. Recent
third-party
investments or pending transactions are considered to be the
best evidence for any change in fair value. In the absence of
such evidence, valuations are based on third-party independent
appraisals, transactions in similar instruments, discounted cash
flow techniques, valuation multiples and public comparables.
Such evidence includes pending reorganizations
(e.g., merger proposals, tender offers or debt
restructurings); and significant changes in financial metrics
(e.g., operating results as compared to previous
projections, industry multiples, credit ratings and balance
sheet ratios).
|
|
|
|
Bank loans and bridge loans and Corporate debt securities and
other debt obligations. Valuations are generally based on
discounted cash flow techniques, for which the key inputs are
the amount and timing of expected future cash flows, market
yields for such instruments and recovery assumptions. Inputs are
generally determined based on relative value analyses, which
incorporate comparisons both to credit default swaps that
reference the same underlying credit risk and to other debt
instruments for the same issuer for which observable prices or
broker quotes are available.
|
|
|
|
Loans and securities backed by commercial real estate.
Loans and securities backed by commercial real estate are
collateralized by specific assets and are generally tranched
into varying levels of subordination. Due to the nature of these
instruments, valuation techniques vary by instrument.
Methodologies include relative value analyses across different
tranches, comparisons to transactions in both the underlying
collateral and instruments with the same or substantially the
same underlying collateral, market indices (such as the CMBX
(1)), and
credit default swaps, as well as discounted cash flow techniques.
|
|
|
|
Loans and securities backed by residential real estate.
Valuations are based on both proprietary and industry recognized
models (including Intex and Bloomberg), discounted cash flow
techniques and hypothetical securitization analyses. In the
recent market environment, the most significant inputs to the
valuation of these instruments are rates of delinquency, default
and loss expectations, which are driven in part by housing
prices. Inputs are determined based on relative value analyses,
which incorporate comparisons to instruments with similar
collateral and risk profiles, including relevant indices such as
the ABX
(1).
|
|
|
|
Loan portfolios. Valuations are based on
discounted cash flow techniques, for which the key inputs are
the amount and timing of expected future cash flows and market
yields for such instruments. Inputs are determined based on
relative value analyses which incorporate comparisons to recent
auction data for other similar loan portfolios.
|
|
|
|
Derivative contracts. Valuation models are
calibrated to initial transaction price. Subsequent changes in
valuations are based on observable inputs to the valuation
models (e.g., interest rates, credit spreads, volatilities,
etc.). Inputs are changed only when corroborated by market data.
Valuations of less liquid OTC derivatives are typically based on
level 1 or level 2 inputs that can be observed in the
market, as well as unobservable inputs, such as correlations and
volatilities.
|
Total level 3 assets were $66.19 billion and
$69.15 billion as of November 2008 and
November 2007, respectively. The decrease in level 3
assets for the year ended November 2008 primarily reflected
(i) unrealized losses on loans and securities backed by
commercial real estate, bank loans and bridge loans, and private
equity and real estate fund investments, and (ii) sales and
paydowns on bank loans and bridge loans and loan portfolios.
These decreases were partially offset by transfers to
level 3 of certain loans and securities backed by
commercial real estate due to reduced price transparency.
(1) The
CMBX and ABX are indices that track the performance of
commercial mortgage bonds and subprime residential mortgage
bonds, respectively.
71
The following table sets forth the fair values of financial
assets classified as level 3 within the fair value
hierarchy:
Level 3
Financial Assets at Fair Value
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
As of November
|
Description
|
|
2008
|
|
2007
|
Private equity and real estate fund
investments (1)
|
|
$
|
16,006
|
|
|
$
|
18,006
|
|
Bank loans and bridge
loans (2)
|
|
|
11,957
|
|
|
|
13,334
|
|
Corporate debt securities and other debt
obligations (3)
|
|
|
7,596
|
|
|
|
6,111
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
|
|
|
|
|
|
Loans and securities backed by commercial real estate
|
|
|
9,340
|
|
|
|
7,410
|
|
Loans and securities backed by residential real estate
|
|
|
2,049
|
|
|
|
2,484
|
|
Loan
portfolios (4)
|
|
|
4,118
|
|
|
|
6,106
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
51,066
|
|
|
|
53,451
|
|
Derivative contracts
|
|
|
15,124
|
|
|
|
15,700
|
|
|
|
|
|
|
|
|
|
|
Total level 3 assets at fair value
|
|
|
66,190
|
|
|
|
69,151
|
|
Level 3 assets for which we do not bear economic
exposure (5)
|
|
|
(6,616
|
)
|
|
|
(14,437
|
)
|
|
|
|
|
|
|
|
|
|
Level 3 assets for which we bear economic exposure
|
|
$
|
59,574
|
|
|
$
|
54,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $1.18 billion and $7.06 billion as of
November 2008 and November 2007, respectively, of
assets for which we do not bear economic exposure. Also includes
$2.62 billion and $2.02 billion as of
November 2008 and November 2007, respectively, of real
estate fund investments.
|
|
|
(2)
|
Includes mezzanine financing, leveraged loans arising from
capital market transactions and other corporate bank debt.
|
|
|
(3)
|
Includes $804 million and $2.49 billion as of
November 2008 and November 2007, respectively, of CDOs
backed by corporate obligations.
|
|
|
(4)
|
Consists of acquired portfolios of distressed loans, primarily
backed by commercial and residential real estate collateral.
|
|
|
(5)
|
We do not bear economic exposure to these level 3 assets as
they are financed by nonrecourse debt, attributable to minority
investors or attributable to employee interests in certain
consolidated funds.
|
72
Loans and securities backed by residential real
estate. We securitize, underwrite and make
markets in various types of residential mortgages, including
prime, Alt-A
and subprime. At any point in time, we may use cash instruments
as well as derivatives to manage our long or short risk position
in residential real estate. The following table sets forth the
fair value of our long positions in prime,
Alt-A and
subprime mortgage cash instruments:
Long Positions in
Loans and Securities Backed by Residential Real Estate
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
Prime (1)
|
|
$
|
1,494
|
|
|
$
|
7,135
|
|
Alt-A
|
|
|
1,845
|
|
|
|
6,358
|
|
Subprime (2)
|
|
|
1,906
|
|
|
|
2,109
|
|
|
|
|
|
|
|
|
|
|
Total (3)
|
|
$
|
5,245
|
|
|
$
|
15,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes U.S. government
agency-issued
collateralized mortgage obligations of $4.27 billion and
$7.24 billion as of November 2008 and
November 2007, respectively. Also excludes
U.S. government
agency-issued
mortgage-pass
through certificates.
|
|
|
(2)
|
Includes $228 million and $316 million of CDOs backed
by subprime mortgages as of November 2008 and
November 2007, respectively.
|
|
|
(3)
|
Includes $2.05 billion and $2.48 billion of financial
instruments (primarily loans and
investment-grade
securities, the majority of which were issued during 2006 and
2007) classified as level 3 under the fair value
hierarchy as of November 2008 and November 2007,
respectively.
|
Loans and securities backed by commercial real
estate. We originate, securitize and syndicate
fixed and floating rate commercial mortgages globally. At any
point in time, we may use cash instruments as well as
derivatives to manage our risk position in the commercial
mortgage market. The following table sets forth the fair value
of our long positions in loans and securities backed by
commercial real estate by geographic region. The decrease in
loans and securities backed by commercial real estate from
November 2007 to November 2008 was primarily due to
dispositions.
Long Positions in
Loans and Securities Backed by
Commercial Real Estate by Geographic Region
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
Americas (1)
|
|
$
|
7,433
|
|
|
$
|
12,361
|
|
EMEA (2)
|
|
|
3,304
|
|
|
|
6,607
|
|
Asia
|
|
|
157
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
Total (3)
|
|
$
|
10,894
|
(4)
|
|
$
|
19,020
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Substantially all relates to the U.S.
|
|
|
(2)
|
EMEA (Europe, Middle East and Africa).
|
|
|
(3)
|
Includes $9.34 billion and $7.41 billion of financial
instruments classified as level 3 under the fair value
hierarchy as of November 2008 and November 2007,
respectively.
|
|
|
(4)
|
Comprised of loans of $9.23 billion and commercial
mortgage-backed
securities of $1.66 billion as of November 2008, of
which $9.78 billion was floating rate and
$1.11 billion was fixed rate.
|
|
|
(5)
|
Comprised of loans of $16.27 billion and commercial
mortgage-backed
securities of $2.75 billion as of November 2007, of
which $16.52 billion was floating rate and
$2.50 billion was fixed rate.
|
73
Other Financial Assets and Financial Liabilities at Fair
Value. In addition to Trading assets, at
fair value and Trading liabilities, at fair
value, we have elected to account for certain of our other
financial assets and financial liabilities at fair value under
the fair value option. The primary reasons for electing the fair
value option are to reflect economic events in earnings on a
timely basis, to mitigate volatility in earnings from using
different measurement attributes and to address simplification
and
cost-benefit
considerations.
Such financial assets and financial liabilities accounted for at
fair value include:
|
|
|
|
|
certain unsecured
short-term
borrowings, consisting of all promissory notes and commercial
paper and certain hybrid financial instruments;
|
|
|
|
certain other secured financings, primarily transfers accounted
for as financings rather than sales under
SFAS No. 140, debt raised through our William Street
program and certain other nonrecourse financings;
|
|
|
|
certain unsecured
long-term
borrowings, including prepaid physical commodity transactions;
|
|
|
|
resale and repurchase agreements;
|
|
|
|
securities borrowed and loaned within Trading and Principal
Investments, consisting of our matched book and certain firm
financing activities;
|
|
|
|
certain corporate loans, loan commitments and certificates of
deposit issued by GS Bank USA as well as securities held by GS
Bank USA;
|
|
|
|
receivables from customers and counterparties arising from
transfers accounted for as secured loans rather than purchases
under SFAS No. 140;
|
|
|
|
certain insurance and reinsurance contracts; and
|
|
|
|
in general, investments acquired after the adoption of
SFAS No. 159 where we have significant influence over
the investee and would otherwise apply the equity method of
accounting. In certain cases, we may apply the equity method of
accounting to new investments that are strategic in nature or
closely related to our principal business activities, where we
have a significant degree of involvement in the cash flows or
operations of the investee, or where
cost-benefit
considerations are less significant.
|
Goodwill and
Identifiable Intangible Assets
As a result of our acquisitions, principally SLK LLC (SLK) in
2000, The Ayco Company, L.P. (Ayco) in 2003 and our variable
annuity and life insurance business in 2006, we have acquired
goodwill and identifiable intangible assets. Goodwill is the
cost of acquired companies in excess of the fair value of net
assets, including identifiable intangible assets, at the
acquisition date.
Goodwill. We test the goodwill in each of our
operating segments, which are components one level below our
three business segments, for impairment at least annually in
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets, by comparing the estimated fair value
of each operating segment with its estimated net book value. We
derive the fair value of each of our operating segments based on
valuation techniques we believe market participants would use
for each segment (observable average price-to-earnings multiples
of our competitors in these businesses and price-to-book
multiples). We derive the net book value of our operating
segments by estimating the amount of shareholders equity
required to support the activities of each operating segment.
Our last annual impairment test was performed during our 2008
fourth quarter and no impairment was identified. Substantially
all of our goodwill is in our Equities component of our Trading
and Principal Investments segment and in our Asset Management
and Securities Services segment. Our Asset Management and
Securities Services segment generated record net revenues in
2008 and our Equities component of our Trading and Principal
Investments segment had its second best year following its
record net revenues in 2007.
74
During 2008, particularly during the fourth quarter, the
financial services industry and the securities markets generally
were materially and adversely affected by significant declines
in the values of nearly all asset classes and by a serious lack
of liquidity. Our stock price, consistent with stock prices in
the broader financial services sector, declined significantly
during this period of time. During the fourth quarter of 2008,
our market capitalization fell below recorded book value,
principally during the last five weeks of the quarter. With
respect to the testing of our goodwill for impairment, we
believe that it is reasonable to consider market capitalization
as an indicator of fair value over a reasonable period of time.
If the current economic market conditions persist and if there
is a prolonged period of weakness in the business environment
and financial markets, our businesses may be adversely affected,
which could result in an impairment of goodwill in the future.
The following table sets forth the carrying value of our
goodwill by operating segment:
Goodwill by
Operating Segment
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
Investment Banking
|
|
|
|
|
|
|
|
|
Underwriting
|
|
$
|
125
|
|
|
$
|
125
|
|
Trading and Principal Investments
|
|
|
|
|
|
|
|
|
FICC
|
|
|
247
|
|
|
|
123
|
|
Equities (1)
|
|
|
2,389
|
|
|
|
2,381
|
|
Principal Investments
|
|
|
80
|
|
|
|
11
|
|
Asset Management and Securities Services
|
|
|
|
|
|
|
|
|
Asset
Management (2)
|
|
|
565
|
|
|
|
564
|
|
Securities Services
|
|
|
117
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,523
|
|
|
$
|
3,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily related to SLK.
|
|
(2) |
|
Primarily related to Ayco.
|
Identifiable Intangible Assets. We amortize
our identifiable intangible assets over their estimated lives in
accordance with SFAS No. 142 or, in the case of
insurance contracts, in accordance with SFAS No. 60,
Accounting and Reporting by Insurance Enterprises,
and SFAS No. 97, Accounting and Reporting by
Insurance Enterprises for Certain
Long-Duration
Contracts and for Realized Gains and Losses from the Sale of
Investments. Identifiable intangible assets are tested for
impairment whenever events or changes in circumstances suggest
that an assets or asset groups carrying value may
not be fully recoverable in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of
Long-Lived
Assets, or SFAS No. 60 and
SFAS No. 97. An impairment loss, generally calculated
as the difference between the estimated fair value and the
carrying value of an asset or asset group, is recognized if the
sum of the estimated undiscounted cash flows relating to the
asset or asset group is less than the corresponding carrying
value.
75
The following table sets forth the carrying value and range of
remaining lives of our identifiable intangible assets by major
asset class:
Identifiable
Intangible Assets by Asset Class
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
|
|
Range of Estimated
|
|
|
|
|
Carrying
|
|
Remaining Lives
|
|
Carrying
|
|
|
Value
|
|
(in years)
|
|
Value
|
Customer
lists (1)
|
|
$
|
724
|
|
|
|
2 - 17
|
|
|
$
|
732
|
|
New York Stock Exchange (NYSE) Designated Market Maker
(DMM) rights
|
|
|
462
|
|
|
|
13
|
|
|
|
502
|
|
Insurance-related
assets (2)
|
|
|
303
|
|
|
|
7
|
|
|
|
372
|
|
Exchange-traded
fund (ETF) lead market maker rights
|
|
|
95
|
|
|
|
19
|
|
|
|
100
|
|
Other (3)
|
|
|
93
|
|
|
|
1 - 17
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,677
|
|
|
|
|
|
|
$
|
1,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily includes our clearance
and execution and NASDAQ customer lists related to SLK and
financial counseling customer lists related to Ayco.
|
|
(2) |
|
Consists of the value of business
acquired (VOBA) and deferred acquisition costs (DAC). VOBA
represents the present value of estimated future gross profits
of acquired variable annuity and life insurance businesses. DAC
results from commissions paid by Goldman Sachs to the primary
insurer (ceding company) on life and annuity reinsurance
agreements as compensation to place the business with us and to
cover the ceding companys acquisition expenses. VOBA and
DAC are amortized over the estimated life of the underlying
contracts based on estimated gross profits, and amortization is
adjusted based on actual experience. The
seven-year
estimated life represents the weighted average remaining
amortization period of the underlying contracts (certain of
which extend for approximately 30 years).
|
|
(3) |
|
Primarily includes
marketing-related assets and power contracts.
|
A prolonged period of weakness in global equity markets and the
trading of securities in multiple markets and on multiple
exchanges could adversely impact our businesses and impair the
value of our identifiable intangible assets. In addition,
certain events could indicate a potential impairment of our
identifiable intangible assets, including (i) changes in
market structure that could adversely affect our specialist
businesses (see discussion below), (ii) an adverse action
or assessment by a regulator, or (iii) adverse actual
experience on the contracts in our variable annuity and life
insurance business.
In October 2008, the SEC approved the NYSEs proposal
to create a new market model and redefine the role of NYSE DMMs.
This new rule set further aligns the NYSEs model with
investor requirements for speed and efficiency of execution and
establishes specialists as DMMs. While DMMs still have an
obligation to commit capital, they are now able to trade on
parity with other market participants. In addition, in
November 2008 the NYSE introduced a reserve order type that
allows for anonymous trade execution, which is expected to allow
the NYSE to recapture liquidity and market share from other
venues in which anonymous reserve orders have been available for
some time. The new rule set and the launch of the reserve order
type, in combination with technology improvements to increase
execution speed, are expected to bolster the NYSEs
competitive position.
76
In 2007, we tested our NYSE DMM rights for impairment in
accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of
Long-Lived
Assets. Under SFAS No. 144, an impairment loss
is recognized if the carrying amount of our NYSE DMM rights
exceeds the projected undiscounted cash flows of the business
over the estimated remaining life of our NYSE DMM rights.
Projected undiscounted cash flows exceeded the carrying amount
of our NYSE DMM rights, and accordingly we did not record an
impairment loss. In projecting the undiscounted cash flows of
the business, we made several important assumptions about the
potential beneficial effects of the rule and market structure
changes described above. Specifically, we assumed that:
|
|
|
|
|
total equity trading volumes in NYSE-listed companies will
continue to grow at a rate consistent with recent historical
trends;
|
|
|
|
the NYSE will be able to recapture approximately
one-half of
the market share that it lost in 2007; and
|
|
|
|
we will increase our market share of the NYSE DMM business and,
as a DMM, the profitability of each share traded.
|
We also assumed that the rule changes would be implemented in
our fiscal fourth quarter of 2008 (as noted above, such rule
changes were approved in October 2008) and that
projected cash flow increases related to the implementation of
the rule set would begin in 2009, consistent with the
assumptions above. Subsequently, there have been no events or
changes in circumstances indicating that NYSE DMM rights
intangible asset may not be recoverable. However, there can be
no assurance that the assumptions, rule or structure changes
described above will result in sufficient cash flows to avoid
impairment of our NYSE DMM rights in the future. We will
continue to evaluate the performance of the specialist business
under the new market model. As of November 2008, the
carrying value of our NYSE DMM rights was $462 million. To
the extent that there were to be an impairment in the future, it
could result in a significant writedown in the carrying value of
these DMM rights.
Use of
Estimates
The use of generally accepted accounting principles requires
management to make certain estimates and assumptions. In
addition to the estimates we make in connection with fair value
measurements and the accounting for goodwill and identifiable
intangible assets, the use of estimates and assumptions is also
important in determining provisions for potential losses that
may arise from litigation and regulatory proceedings and tax
audits.
We estimate and provide for potential losses that may arise out
of litigation and regulatory proceedings to the extent that such
losses are probable and can be estimated, in accordance with
SFAS No. 5, Accounting for Contingencies.
We estimate and provide for potential liabilities that may arise
out of tax audits to the extent that uncertain tax positions
fail to meet the recognition standard of FIN 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109. See
Note 16 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information on FIN 48.
Significant judgment is required in making these estimates and
our final liabilities may ultimately be materially different.
Our total estimated liability in respect of litigation and
regulatory proceedings is determined on a
case-by-case
basis and represents an estimate of probable losses after
considering, among other factors, the progress of each case or
proceeding, our experience and the experience of others in
similar cases or proceedings, and the opinions and views of
legal counsel. Given the inherent difficulty of predicting the
outcome of our litigation and regulatory matters, particularly
in cases or proceedings in which substantial or indeterminate
damages or fines are sought, we cannot estimate losses or ranges
of losses for cases or proceedings where there is only a
reasonable possibility that a loss may be incurred. See
Legal
Proceedings in Part I, Item 3 of our Annual
Report on
Form 10-K
for information on our judicial, regulatory and arbitration
proceedings.
77
Results of
Operations
The composition of our net revenues has varied over time as
financial markets and the scope of our operations have changed.
The composition of net revenues can also vary over the shorter
term due to fluctuations in U.S. and global economic and
market conditions. See
Certain
Risk Factors That May Affect Our Businesses above and
Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K
for a further discussion of the impact of economic and market
conditions on our results of operations.
Financial
Overview
The following table sets forth an overview of our financial
results:
Financial
Overview
($ in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Net revenues
|
|
$
|
22,222
|
|
|
$
|
45,987
|
|
|
$
|
37,665
|
|
Pre-tax
earnings
|
|
|
2,336
|
|
|
|
17,604
|
|
|
|
14,560
|
|
Net earnings
|
|
|
2,322
|
|
|
|
11,599
|
|
|
|
9,537
|
|
Net earnings applicable to common shareholders
|
|
|
2,041
|
|
|
|
11,407
|
|
|
|
9,398
|
|
Diluted earnings per common share
|
|
|
4.47
|
|
|
|
24.73
|
|
|
|
19.69
|
|
Return on average common shareholders
equity (1)
|
|
|
4.9
|
%
|
|
|
32.7
|
%
|
|
|
32.8
|
%
|
Return on average tangible common shareholders
equity (2)
|
|
|
5.5
|
%
|
|
|
38.2
|
%
|
|
|
39.8
|
%
|
|
|
|
(1) |
|
Return on average common
shareholders equity (ROE) is computed by dividing net
earnings applicable to common shareholders by average monthly
common shareholders equity.
|
|
(2) |
|
Tangible common shareholders
equity equals total shareholders equity less preferred
stock, goodwill and identifiable intangible assets, excluding
power contracts. Identifiable intangible assets associated with
power contracts are not deducted from total shareholders
equity because, unlike other intangible assets, less than 50% of
these assets are supported by common shareholders equity.
|
We believe that return on average tangible common
shareholders equity (ROTE) is meaningful because it
measures the performance of businesses consistently, whether
they were acquired or developed internally. ROTE is computed by
dividing net earnings applicable to common shareholders by
average monthly tangible common shareholders equity.
The following table sets forth the reconciliation of average
total shareholders equity to average tangible common
shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average for the
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Total shareholders equity
|
|
$
|
47,167
|
|
|
$
|
37,959
|
|
|
$
|
31,048
|
|
Preferred stock
|
|
|
(5,157
|
)
|
|
|
(3,100
|
)
|
|
|
(2,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
|
42,010
|
|
|
|
34,859
|
|
|
|
28,648
|
|
Goodwill and identifiable intangible assets, excluding power
contracts
|
|
|
(5,220
|
)
|
|
|
(4,971
|
)
|
|
|
(5,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common shareholders equity
|
|
$
|
36,790
|
|
|
$
|
29,888
|
|
|
$
|
23,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
Net
Revenues
2008 versus 2007. Our net revenues were
$22.22 billion in 2008, a decrease of 52% compared with
2007, reflecting a particularly difficult operating environment,
including significant asset price declines, high levels of
volatility and reduced levels of liquidity, particularly in the
fourth quarter. In addition, credit markets experienced
significant dislocation between prices for cash instruments and
the related derivative contracts and between credit indices and
underlying single names. Net revenues in Trading and Principal
Investments were significantly lower compared with 2007,
reflecting significant declines in FICC, Principal Investments
and Equities. The decrease in FICC primarily reflected losses in
credit products, which included a loss of approximately
$3.1 billion (net of hedges) related to
non-investment-grade
credit origination activities and losses from investments,
including corporate debt and private and public equities.
Results in mortgages included net losses of approximately
$1.7 billion on residential mortgage loans and securities
and approximately $1.4 billion on commercial mortgage loans
and securities. Interest rate products, currencies and
commodities each produced particularly strong results and net
revenues were higher compared with 2007. During 2008, although
client-driven activity was generally solid, FICC operated in a
challenging environment characterized by
broad-based
declines in asset values, wider mortgage and corporate credit
spreads, reduced levels of liquidity and
broad-based
investor deleveraging, particularly in the second half of the
year. The decline in Principal Investments primarily reflected
net losses of $2.53 billion from corporate principal
investments and $949 million from real estate principal
investments, as well as a $446 million loss from our
investment in the ordinary shares of ICBC. In Equities, the
decrease compared with particularly strong net revenues in 2007
reflected losses in principal strategies, partially offset by
higher net revenues in our client franchise businesses.
Commissions were particularly strong and were higher than 2007.
During 2008, Equities operated in an environment characterized
by a significant decline in global equity prices,
broad-based
investor deleveraging and very high levels of volatility,
particularly in the second half of the year.
Net revenues in Investment Banking also declined significantly
compared with 2007, reflecting significantly lower net revenues
in both Financial Advisory and Underwriting. In Financial
Advisory, the decrease compared with particularly strong net
revenues in 2007 reflected a decline in
industry-wide
completed mergers and acquisitions. The decrease in Underwriting
primarily reflected significantly lower net revenues in debt
underwriting, primarily due to a decline in leveraged finance
and
mortgage-related
activity, reflecting difficult market conditions. Net revenues
in equity underwriting were slightly lower compared with 2007,
reflecting a decrease in
industry-wide
equity and
equity-related
offerings.
Net revenues in Asset Management and Securities Services
increased compared with 2007. Securities Services net revenues
were higher, reflecting the impact of changes in the composition
of securities lending customer balances, as well as higher total
average customer balances. Asset Management net revenues
increased slightly compared with 2007. During the year, assets
under management decreased $89 billion to
$779 billion, due to $123 billion of market
depreciation, primarily in equity assets, partially offset by
$34 billion of net inflows.
79
2007 versus 2006. Our net revenues were
$45.99 billion in 2007, an increase of 22% compared with
2006, reflecting significantly higher net revenues in Trading
and Principal Investments and Investment Banking, and higher net
revenues in Asset Management and Securities Services. The
increase in Trading and Principal Investments reflected higher
net revenues in Equities, FICC and Principal Investments. Net
revenues in Equities increased 33% compared with 2006,
reflecting significantly higher net revenues in both our client
franchise businesses and principal strategies. During 2007,
Equities operated in an environment characterized by strong
client-driven activity, generally higher equity prices and
higher levels of volatility, particularly during the second half
of the year. The increase in FICC reflected significantly higher
net revenues in currencies and interest rate products. In
addition, net revenues in mortgages were higher despite a
significant deterioration in the mortgage market throughout the
year, while net revenues in credit products were strong, but
slightly lower compared with 2006. Credit products included
substantial gains from equity investments, including a gain of
approximately $900 million related to the disposition of
Horizon Wind Energy L.L.C., as well as a loss of approximately
$1 billion (net of hedges) related to
non-investment-grade
credit origination activities. During 2007, FICC operated in an
environment generally characterized by strong client-driven
activity and favorable market opportunities. However, during the
year, the mortgage market experienced significant deterioration
and, in the second half of the year, the broader credit markets
were characterized by wider spreads and reduced levels of
liquidity. The increase in Principal Investments reflected
strong results in both corporate and real estate investing.
The increase in Investment Banking reflected a 64% increase in
Financial Advisory net revenues and a strong performance in our
Underwriting business. The increase in Financial Advisory
primarily reflected growth in
industry-wide
completed mergers and acquisitions. The increase in Underwriting
reflected higher net revenues in debt underwriting, as leveraged
finance activity was strong during the first half of our fiscal
year, while net revenues in equity underwriting were strong but
essentially unchanged from 2006.
Net revenues in Asset Management and Securities Services also
increased. The increase in Securities Services primarily
reflected significant growth in global customer balances. The
increase in Asset Management reflected significantly higher
asset management fees, partially offset by significantly lower
incentive fees. During the year, assets under management
increased $192 billion, or 28%, to $868 billion,
including net inflows of $161 billion.
80
Operating
Expenses
Our operating expenses are primarily influenced by compensation,
headcount and levels of business activity. A substantial portion
of our compensation expense represents discretionary bonuses
which are significantly impacted by, among other factors, the
level of net revenues, prevailing labor markets, business mix
and the structure of our
share-based
compensation programs. For 2008, our ratio of compensation and
benefits (excluding severance costs of approximately
$275 million in the fourth quarter of 2008) to net
revenues was 48.0%. Our ratio of compensation and benefits to
net revenues was 43.9% for 2007.
The following table sets forth our operating expenses and number
of employees:
Operating
Expenses and Employees
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Compensation and
benefits (1)
|
|
$
|
10,934
|
|
|
$
|
20,190
|
|
|
$
|
16,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage, clearing, exchange and distribution fees
|
|
|
2,998
|
|
|
|
2,758
|
|
|
|
1,985
|
|
Market development
|
|
|
485
|
|
|
|
601
|
|
|
|
492
|
|
Communications and technology
|
|
|
759
|
|
|
|
665
|
|
|
|
544
|
|
Depreciation and amortization
|
|
|
1,022
|
|
|
|
624
|
|
|
|
521
|
|
Amortization of identifiable intangible assets
|
|
|
240
|
|
|
|
195
|
|
|
|
173
|
|
Occupancy
|
|
|
960
|
|
|
|
975
|
|
|
|
850
|
|
Professional fees
|
|
|
779
|
|
|
|
714
|
|
|
|
545
|
|
Other
expenses (2)
|
|
|
1,709
|
|
|
|
1,661
|
|
|
|
1,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-compensation
expenses
|
|
|
8,952
|
|
|
|
8,193
|
|
|
|
6,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
19,886
|
|
|
$
|
28,383
|
|
|
$
|
23,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees at
year-end (3)
|
|
|
30,067
|
|
|
|
30,522
|
|
|
|
26,467
|
|
|
|
|
(1) |
|
Compensation and benefits includes
$262 million, $168 million and $259 million for
the years ended November 2008, November 2007 and
November 2006, respectively, attributable to consolidated
entities held for investment purposes. Consolidated entities
held for investment purposes are entities that are held strictly
for capital appreciation, have a defined exit strategy and are
engaged in activities that are not closely related to our
principal businesses.
|
|
(2) |
|
Beginning in the first quarter of
2008, Cost of power generation was reclassified into
Other expenses in the consolidated statements of
earnings. Prior periods have been reclassified to conform to the
current presentation.
|
|
(3) |
|
Excludes 4,671, 4,572 and 3,868
employees as of November 2008, November 2007 and
November 2006, respectively, of consolidated entities held
for investment purposes (see footnote 1 above).
|
81
The following table sets forth
non-compensation
expenses of consolidated entities held for investment purposes
and our remaining
non-compensation
expenses by line item:
Non-Compensation
Expenses
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Non-compensation
expenses of consolidated
investments (1)
|
|
$
|
779
|
|
|
$
|
446
|
|
|
$
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-compensation
expenses excluding consolidated investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage, clearing, exchange and distribution fees
|
|
|
2,998
|
|
|
|
2,758
|
|
|
|
1,985
|
|
Market development
|
|
|
475
|
|
|
|
593
|
|
|
|
461
|
|
Communications and technology
|
|
|
754
|
|
|
|
661
|
|
|
|
537
|
|
Depreciation and amortization
|
|
|
631
|
|
|
|
509
|
|
|
|
444
|
|
Amortization of identifiable intangible assets
|
|
|
233
|
|
|
|
189
|
|
|
|
169
|
|
Occupancy
|
|
|
861
|
|
|
|
892
|
|
|
|
738
|
|
Professional fees
|
|
|
770
|
|
|
|
711
|
|
|
|
534
|
|
Other
expenses (2)
|
|
|
1,451
|
|
|
|
1,434
|
|
|
|
1,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
8,173
|
|
|
|
7,747
|
|
|
|
6,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-compensation
expenses, as reported
|
|
$
|
8,952
|
|
|
$
|
8,193
|
|
|
$
|
6,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consolidated entities held for
investment purposes are entities that are held strictly for
capital appreciation, have a defined exit strategy and are
engaged in activities that are not closely related to our
principal businesses. For example, these investments include
consolidated entities that hold real estate assets, such as
hotels, but exclude investments in entities that primarily hold
financial assets. We believe that it is meaningful to review
non-compensation
expenses excluding expenses related to these consolidated
entities in order to evaluate trends in
non-compensation
expenses related to our principal business activities. Revenues
related to such entities are included in Trading and
principal investments in the consolidated statements of
earnings.
|
|
(2) |
|
Beginning in the first quarter of
2008, Cost of power generation was reclassified into
Other expenses in the consolidated statements of
earnings. Prior periods have been reclassified to conform to the
current presentation.
|
2008 versus 2007. Operating expenses were
$19.89 billion for 2008, 30% lower than 2007. Compensation
and benefits expenses (including salaries, bonuses, amortization
of prior year equity awards and other items such as payroll
taxes and benefits) of $10.93 billion decreased 46%
compared with 2007, reflecting lower levels of discretionary
compensation due to lower net revenues. For 2008, our ratio of
compensation and benefits (excluding severance costs of
approximately $275 million in the fourth quarter of
2008) to net revenues was 48.0%. Our ratio of compensation
and benefits to net revenues was 43.9% for 2007. Employment
levels decreased 1% compared with November 2007, reflecting
an 8% decrease during the fourth quarter.
Non-compensation
expenses of $8.95 billion for 2008 increased 9% compared
with 2007. Excluding consolidated entities held for investment
purposes,
non-compensation
expenses increased 5% compared with 2007. The majority of this
increase was attributable to higher brokerage, clearing,
exchange and distribution fees, principally reflecting higher
activity levels in Equities and FICC. The increase in
non-compensation
expenses related to consolidated entities held for investment
purposes primarily reflected the impact of impairment on certain
real estate assets during 2008.
2007 versus 2006. Operating expenses were
$28.38 billion for 2007, 23% higher than 2006. Compensation
and benefits expenses of $20.19 billion increased 23%
compared with 2006, reflecting increased discretionary
compensation and growth in employment levels. The ratio of
compensation and benefits to net revenues for 2007 was 43.9%
compared with 43.7% for 2006. Employment levels increased 15%
compared with November 2006.
82
Non-compensation
expenses of $8.19 billion for 2007 increased 23% compared
with 2006, primarily attributable to higher levels of business
activity and continued geographic expansion.
One-half of
this increase was attributable to brokerage, clearing, exchange
and distribution fees, principally reflecting higher transaction
volumes in Equities. Professional fees, other expenses and
communications and technology expenses also increased, primarily
due to higher levels of business activity. Occupancy and
depreciation and amortization expenses in 2007 included exit
costs of $128 million related to our office space.
Provision for
Taxes
The effective income tax rate was approximately 1% for 2008,
down from 34.1% for 2007. The decrease in the effective income
tax rate was primarily due to an increase in permanent benefits
as a percentage of lower earnings and changes in geographic
earnings mix. The effective income tax rate was 34.1% for 2007,
down from 34.5% for 2006, primarily due to changes in the
geographic mix of earnings.
Our effective income tax rate can vary from period to period
depending on, among other factors, the geographic and business
mix of our earnings, the level of our
pre-tax
earnings, the level of our tax credits and the effect of tax
audits. Certain of these and other factors, including our
history of
pre-tax
earnings, are taken into account in assessing our ability to
realize our net deferred tax assets. See Note 16 to the
consolidated financial statements in Part II, Item 8
of our Annual Report on
Form 10-K
for further information regarding our provision for taxes.
83
Segment Operating
Results
The following table sets forth the net revenues, operating
expenses and
pre-tax
earnings of our segments:
Segment Operating
Results
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Investment
|
|
Net revenues
|
|
$
|
5,185
|
|
|
$
|
7,555
|
|
|
$
|
5,629
|
|
Banking
|
|
Operating expenses
|
|
|
3,143
|
|
|
|
4,985
|
|
|
|
4,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax earnings
|
|
$
|
2,042
|
|
|
$
|
2,570
|
|
|
$
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading and Principal
|
|
Net revenues
|
|
$
|
9,063
|
|
|
$
|
31,226
|
|
|
$
|
25,562
|
|
Investments
|
|
Operating expenses
|
|
|
11,808
|
|
|
|
17,998
|
|
|
|
14,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings/(loss)
|
|
$
|
(2,745
|
)
|
|
$
|
13,228
|
|
|
$
|
10,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Management and
|
|
Net revenues
|
|
$
|
7,974
|
|
|
$
|
7,206
|
|
|
$
|
6,474
|
|
Securities Services
|
|
Operating expenses
|
|
|
4,939
|
|
|
|
5,363
|
|
|
|
4,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax earnings
|
|
$
|
3,035
|
|
|
$
|
1,843
|
|
|
$
|
2,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Net revenues
|
|
$
|
22,222
|
|
|
$
|
45,987
|
|
|
$
|
37,665
|
|
|
|
Operating
expenses (1)
|
|
|
19,886
|
|
|
|
28,383
|
|
|
|
23,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
$
|
2,336
|
|
|
$
|
17,604
|
|
|
$
|
14,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Operating expenses include net
provisions for a number of litigation and regulatory proceedings
of $(4) million, $37 million and $45 million for the
years ended November 2008, November 2007 and
November 2006, respectively, that have not been allocated
to our segments.
|
Net revenues in our segments include allocations of interest
income and interest expense to specific securities, commodities
and other positions in relation to the cash generated by, or
funding requirements of, such underlying positions. See
Note 18 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our business segments.
The cost drivers of Goldman Sachs taken as a whole
compensation, headcount and levels of business
activity are broadly similar in each of our business
segments. Compensation and benefits expenses within our segments
reflect, among other factors, the overall performance of Goldman
Sachs as well as the performance of individual business units.
Consequently,
pre-tax
margins in one segment of our business may be significantly
affected by the performance of our other business segments. A
discussion of segment operating results follows.
84
Investment
Banking
Our Investment Banking segment is divided into two components:
|
|
|
|
|
Financial Advisory. Financial Advisory
includes advisory assignments with respect to mergers and
acquisitions, divestitures, corporate defense activities,
restructurings and
spin-offs.
|
|
|
|
Underwriting. Underwriting includes public
offerings and private placements of a wide range of securities
and other financial instruments.
|
The following table sets forth the operating results of our
Investment Banking segment:
Investment
Banking Operating Results
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Financial Advisory
|
|
$
|
2,656
|
|
|
$
|
4,222
|
|
|
$
|
2,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity underwriting
|
|
|
1,353
|
|
|
|
1,382
|
|
|
|
1,365
|
|
Debt underwriting
|
|
|
1,176
|
|
|
|
1,951
|
|
|
|
1,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Underwriting
|
|
|
2,529
|
|
|
|
3,333
|
|
|
|
3,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
5,185
|
|
|
|
7,555
|
|
|
|
5,629
|
|
Operating expenses
|
|
|
3,143
|
|
|
|
4,985
|
|
|
|
4,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
$
|
2,042
|
|
|
$
|
2,570
|
|
|
$
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth our financial advisory and
underwriting transaction volumes:
Goldman Sachs
Global Investment Banking Volumes
(1)
(in
billions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Announced mergers and acquisitions
|
|
$
|
927
|
|
|
$
|
1,249
|
|
|
$
|
1,101
|
|
Completed mergers and acquisitions
|
|
|
823
|
|
|
|
1,443
|
|
|
|
863
|
|
Equity and
equity-related
offerings (2)
|
|
|
61
|
|
|
|
66
|
|
|
|
74
|
|
Debt
offerings (3)
|
|
|
185
|
|
|
|
345
|
|
|
|
320
|
|
|
|
|
(1) |
|
Source: Thomson Reuters. Announced
and completed mergers and acquisitions volumes are based on full
credit to each of the advisors in a transaction. Equity and
equity-related
offerings and debt offerings are based on full credit for single
book managers and equal credit for joint book managers.
Transaction volumes may not be indicative of net revenues in a
given period. In addition, transaction volumes for prior periods
may vary from amounts previously reported due to the subsequent
withdrawal or a change in the value of a previously announced
transaction.
|
|
(2) |
|
Includes Rule 144A and public
common stock offerings, convertible offerings and rights
offerings.
|
|
(3) |
|
Includes
non-convertible
preferred stock,
mortgage-backed
securities,
asset-backed
securities and taxable municipal debt. Includes publicly
registered and Rule 144A issues.
|
85
2008 versus 2007. Net revenues in Investment Banking of
$5.19 billion for 2008 decreased 31% compared with 2007.
Net revenues in Financial Advisory of $2.66 billion
decreased 37% compared with particularly strong net revenues in
2007, primarily reflecting a decline in
industry-wide
completed mergers and acquisitions. Net revenues in our
Underwriting business of $2.53 billion decreased 24%
compared with 2007, principally due to significantly lower net
revenues in debt underwriting. The decrease in debt underwriting
was primarily due to a decline in leveraged finance and
mortgage-related
activity, reflecting difficult market conditions. Net revenues
in equity underwriting were slightly lower compared with 2007,
reflecting a decrease in
industry-wide
equity and
equity-related
offerings. Our investment banking transaction backlog ended the
year significantly lower than at the end of 2007.
(1)
Operating expenses of $3.14 billion for 2008 decreased 37%
compared with 2007, due to decreased compensation and benefits
expenses, resulting from lower levels of discretionary
compensation.
Pre-tax
earnings of $2.04 billion in 2008 decreased 21% compared
with 2007.
2007 versus 2006. Net revenues in Investment
Banking of $7.56 billion for 2007 increased 34% compared
with 2006.
Net revenues in Financial Advisory of $4.22 billion
increased 64% compared with 2006, primarily reflecting growth in
industry-wide
completed mergers and acquisitions. Net revenues in our
Underwriting business of $3.33 billion increased 9%
compared with 2006, due to higher net revenues in debt
underwriting, primarily reflecting strength in leveraged finance
during the first half of 2007. Net revenues in equity
underwriting were also strong, but essentially unchanged from
2006. Our investment banking transaction backlog at the end of
2007 was higher than at the end of 2006.
(1)
Operating expenses of $4.99 billion for 2007 increased 23%
compared with 2006, primarily due to increased compensation and
benefits expenses, resulting from higher discretionary
compensation and growth in employment levels.
Pre-tax
earnings of $2.57 billion in 2007 increased 64% compared
with 2006.
Trading and
Principal Investments
Our Trading and Principal Investments segment is divided into
three components:
|
|
|
|
|
FICC. We make markets in and trade interest
rate and credit products,
mortgage-related
securities and loan products and other
asset-backed
instruments, currencies and commodities, structure and enter
into a wide variety of derivative transactions, and engage in
proprietary trading and investing.
|
|
|
|
Equities. We make markets in and trade
equities and
equity-related
products, structure and enter into equity derivative
transactions and engage in proprietary trading. We generate
commissions from executing and clearing client transactions on
major stock, options and futures exchanges worldwide through our
Equities client franchise and clearing activities. We also
engage in specialist and insurance activities.
|
|
|
|
Principal Investments. We make real estate and
corporate principal investments, including our investment in the
ordinary shares of ICBC. We generate net revenues from returns
on these investments and from the increased share of the income
and gains derived from our merchant banking funds when the
return on a funds investments over the life of the fund
exceeds certain threshold returns (typically referred to as an
override).
|
(1) Our
investment banking transaction backlog represents an estimate of
our future net revenues from investment banking transactions
where we believe that future revenue realization is more likely
than not.
86
Substantially all of our inventory is
marked-to-market
daily and, therefore, its value and our net revenues are subject
to fluctuations based on market movements. In addition, net
revenues derived from our principal investments, including those
in privately held concerns and in real estate, may fluctuate
significantly depending on the revaluation of these investments
in any given period. We also regularly enter into large
transactions as part of our trading businesses. The number and
size of such transactions may affect our results of operations
in a given period.
Net revenues from Principal Investments do not include
management fees generated from our merchant banking funds. These
management fees are included in the net revenues of the Asset
Management and Securities Services segment.
The following table sets forth the operating results of our
Trading and Principal Investments segment:
Trading and
Principal Investments Operating Results
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
FICC
|
|
$
|
3,713
|
|
|
$
|
16,165
|
|
|
$
|
14,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities trading
|
|
|
4,208
|
|
|
|
6,725
|
|
|
|
4,965
|
|
Equities commissions
|
|
|
4,998
|
|
|
|
4,579
|
|
|
|
3,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equities
|
|
|
9,206
|
|
|
|
11,304
|
|
|
|
8,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICBC
|
|
|
(446
|
)
|
|
|
495
|
|
|
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross gains
|
|
|
1,335
|
|
|
|
3,728
|
|
|
|
2,061
|
|
Gross losses
|
|
|
(4,815
|
)
|
|
|
(943
|
)
|
|
|
(585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other corporate and real estate investments
|
|
|
(3,480
|
)
|
|
|
2,785
|
|
|
|
1,476
|
|
Overrides
|
|
|
70
|
|
|
|
477
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Principal Investments
|
|
|
(3,856
|
)
|
|
|
3,757
|
|
|
|
2,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
9,063
|
|
|
|
31,226
|
|
|
|
25,562
|
|
Operating expenses
|
|
|
11,808
|
|
|
|
17,998
|
|
|
|
14,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings/(loss)
|
|
$
|
(2,745
|
)
|
|
$
|
13,228
|
|
|
$
|
10,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 versus 2007. Net revenues in Trading and
Principal Investments of $9.06 billion for 2008 decreased
71% compared with 2007.
Net revenues in FICC of $3.71 billion for 2008 decreased
77% compared with 2007, primarily reflecting losses in credit
products, which included a loss of approximately
$3.1 billion (net of hedges) related to
non-investment-grade
credit origination activities and losses from investments,
including corporate debt and private and public equities.
Results in mortgages included net losses of approximately
$1.7 billion on residential mortgage loans and securities
and approximately $1.4 billion on commercial mortgage loans
and securities. Interest rate products, currencies and
commodities each produced particularly strong results and net
revenues were higher compared with 2007. During 2008, although
client-driven activity was generally solid, FICC operated in a
challenging environment characterized by
broad-based
declines in asset values, wider mortgage and corporate credit
spreads, reduced levels of liquidity and
broad-based
investor deleveraging, particularly in the second half of the
year.
87
Net revenues in Equities of $9.21 billion for 2008
decreased 19% compared with a particularly strong 2007,
reflecting losses in principal strategies, partially offset by
higher net revenues in the client franchise businesses.
Commissions were particularly strong and were higher than 2007.
During 2008, Equities operated in an environment characterized
by a significant decline in global equity prices,
broad-based
investor deleveraging and very high levels of volatility,
particularly in the second half of the year.
Principal Investments recorded a net loss of $3.86 billion
for 2008. These results included net losses of
$2.53 billion from corporate principal investments and
$949 million from real estate principal investments, as
well as a $446 million loss related to our investment in
the ordinary shares of ICBC.
Operating expenses of $11.81 billion for 2008 decreased 34%
compared with 2007, due to decreased compensation and benefits
expenses, resulting from lower levels of discretionary
compensation. This decrease was partially offset by higher
non-compensation expenses. Excluding consolidated entities held
for investment purposes, the majority of this increase was
attributable to higher brokerage, clearing, exchange and
distribution fees, principally reflecting higher activity levels
in Equities and FICC. The increase in non-compensation expenses
related to consolidated entities held for investment purposes
primarily reflected the impact of impairment on certain real
estate assets during 2008.
Pre-tax loss
was $2.75 billion in 2008 compared with
pre-tax
earnings of $13.23 billion in 2007.
2007 versus 2006. Net revenues in Trading and
Principal Investments of $31.23 billion for 2007 increased
22% compared with 2006.
Net revenues in FICC of $16.17 billion for 2007 increased
13% compared with 2006, reflecting significantly higher net
revenues in currencies and interest rate products. In addition,
net revenues in mortgages were higher despite a significant
deterioration in the mortgage market throughout 2007, while net
revenues in credit products were strong, but slightly lower
compared with 2006. Credit products included substantial gains
from equity investments, including a gain of approximately
$900 million related to the disposition of Horizon Wind
Energy L.L.C., as well as a loss of approximately
$1 billion (net of hedges) related to
non-investment-grade
credit origination activities. Net revenues in commodities were
also strong but lower compared with 2006. During 2007, FICC
operated in an environment generally characterized by strong
client-driven activity and favorable market opportunities.
However, during 2007, the mortgage market experienced
significant deterioration and, in the second half of the year,
the broader credit markets were characterized by wider spreads
and reduced levels of liquidity.
Net revenues in Equities of $11.30 billion for 2007
increased 33% compared with 2006, reflecting significantly
higher net revenues in both our client franchise businesses and
principal strategies. The client franchise businesses benefited
from significantly higher commission volumes. During 2007,
Equities operated in an environment characterized by strong
client-driven activity, generally higher equity prices and
higher levels of volatility, particularly during the second half
of the year.
Principal Investments recorded net revenues of
$3.76 billion for 2007, reflecting gains and overrides from
corporate and real estate principal investments. Results in
Principal Investments included a $495 million gain related
to our investment in the ordinary shares of ICBC and a
$129 million loss related to our investment in the
convertible preferred stock of SMFG.
Operating expenses of $18.00 billion for 2007 increased 20%
compared with 2006, primarily due to increased compensation and
benefits expenses, resulting from higher discretionary
compensation and growth in employment levels.
Non-compensation
expenses increased due to the impact of higher levels of
business activity and continued geographic expansion. The
majority of this increase was in brokerage, clearing, exchange
and distribution fees, which primarily reflected higher
transaction volumes in Equities. Professional fees also
increased, reflecting increased business activity.
Pre-tax
earnings of $13.23 billion in 2007 increased 25% compared
with 2006.
88
Asset
Management and Securities Services
Our Asset Management and Securities Services segment is divided
into two components:
|
|
|
|
|
Asset Management. Asset Management provides
investment advisory and financial planning services and offers
investment products (primarily through separately managed
accounts and commingled vehicles, such as mutual funds and
private investment funds) across all major asset classes to a
diverse group of institutions and individuals worldwide and
primarily generates revenues in the form of management and
incentive fees.
|
|
|
|
Securities Services. Securities Services
provides prime brokerage services, financing services and
securities lending services to institutional clients, including
hedge funds, mutual funds, pension funds and foundations, and to
high-net-worth
individuals worldwide, and generates revenues primarily in the
form of interest rate spreads or fees.
|
Assets under management typically generate fees as a percentage
of asset value, which is affected by investment performance and
by inflows and redemptions. The fees that we charge vary by
asset class, as do our related expenses. In certain
circumstances, we are also entitled to receive incentive fees
based on a percentage of a funds return or when the return
on assets under management exceeds specified benchmark returns
or other performance targets. Incentive fees are recognized when
the performance period ends and they are no longer subject to
adjustment. We have numerous incentive fee arrangements, many of
which have annual performance periods that end on
December 31. For that reason, incentive fees have been
seasonally weighted to our first quarter.
The following table sets forth the operating results of our
Asset Management and Securities Services segment:
Asset Management
and Securities Services Operating Results
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Management and other fees
|
|
$
|
4,321
|
|
|
$
|
4,303
|
|
|
$
|
3,332
|
|
Incentive fees
|
|
|
231
|
|
|
|
187
|
|
|
|
962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asset Management
|
|
|
4,552
|
|
|
|
4,490
|
|
|
|
4,294
|
|
Securities Services
|
|
|
3,422
|
|
|
|
2,716
|
|
|
|
2,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
7,974
|
|
|
|
7,206
|
|
|
|
6,474
|
|
Operating expenses
|
|
|
4,939
|
|
|
|
5,363
|
|
|
|
4,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
$
|
3,035
|
|
|
$
|
1,843
|
|
|
$
|
2,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management include our mutual funds, alternative
investment funds and separately managed accounts for
institutional and individual investors. Substantially all assets
under management are valued as of calendar month-end. Assets
under management do not include:
|
|
|
|
|
assets in brokerage accounts that generate commissions,
mark-ups and
spreads based on transactional activity,
|
|
|
|
our own investments in funds that we manage;
|
|
|
|
or
non-fee-paying
assets, including interest-bearing deposits held through our
depository institution subsidiaries.
|
89
The following table sets forth our assets under management by
asset class:
Assets Under
Management by Asset Class
(in
billions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30
|
|
|
2008
|
|
2007
|
|
2006
|
Alternative
investments (1)
|
|
$
|
146
|
|
|
$
|
151
|
|
|
$
|
145
|
|
Equity
|
|
|
112
|
|
|
|
255
|
|
|
|
215
|
|
Fixed income
|
|
|
248
|
|
|
|
256
|
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-money
market assets
|
|
|
506
|
|
|
|
662
|
|
|
|
558
|
|
Money markets
|
|
|
273
|
|
|
|
206
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
779
|
|
|
$
|
868
|
|
|
$
|
676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Primarily includes hedge funds, private equity, real estate,
currencies, commodities and asset allocation strategies.
The following table sets forth a summary of the changes in our
assets under management:
Changes in Assets
Under Management
(in
billions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30
|
|
|
2008
|
|
2007
|
|
2006
|
Balance, beginning of year
|
|
$
|
868
|
|
|
$
|
676
|
|
|
$
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net inflows/(outflows)
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments
|
|
|
8
|
|
|
|
9
|
|
|
|
32
|
|
Equity
|
|
|
(55
|
)
|
|
|
26
|
|
|
|
16
|
|
Fixed income
|
|
|
14
|
|
|
|
38
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-money
market net inflows/(outflows)
|
|
|
(33
|
)
|
|
|
73
|
(1)
|
|
|
77
|
|
Money markets
|
|
|
67
|
|
|
|
88
|
|
|
|
17
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net inflows/(outflows)
|
|
|
34
|
|
|
|
161
|
|
|
|
94
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net market appreciation/(depreciation)
|
|
|
(123
|
)
|
|
|
31
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
779
|
|
|
$
|
868
|
|
|
$
|
676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $7 billion in net
asset inflows in connection with our acquisition of
Macquarie IMM Investment Management.
|
|
(2) |
|
Net of the transfer of
$8 billion of money market assets under management to
interest-bearing deposits at GS Bank USA.
|
|
(3) |
|
Includes $3 billion of net
asset inflows in connection with the acquisition of our variable
annuity and life insurance business.
|
2008 versus 2007. Net revenues in Asset
Management and Securities Services of $7.97 billion for
2008 increased 11% compared with 2007.
Asset Management net revenues of $4.55 billion for 2008
increased 1% compared with 2007. During 2008, assets under
management decreased $89 billion to $779 billion, due
to $123 billion of market depreciation, primarily in equity
assets, partially offset by $34 billion of net inflows. Net
inflows reflected inflows in money market, fixed income and
alternative investment assets, partially offset by outflows in
equity assets.
90
Securities Services net revenues of $3.42 billion for 2008
increased 26% compared with 2007, reflecting the impact of
changes in the composition of securities lending customer
balances, as well as higher total average customer balances.
Operating expenses of $4.94 billion for 2008 decreased 8%
compared with 2007, due to decreased compensation and benefits
expenses, resulting from lower levels of discretionary
compensation.
Pre-tax
earnings of $3.04 billion in 2008 increased 65% compared
with 2007.
2007 versus 2006. Net revenues in Asset
Management and Securities Services of $7.21 billion for
2007 increased 11% compared with 2006.
Asset Management net revenues of $4.49 billion for 2007
increased 5% compared with 2006, reflecting a 29% increase in
management and other fees, partially offset by significantly
lower incentive fees. Incentive fees were $187 million for
2007 compared with $962 million for 2006. During 2007,
assets under management increased $192 billion, or 28%, to
$868 billion, reflecting
non-money
market net inflows of $73 billion
(1),
primarily in fixed income and equity assets, money market net
inflows of $88 billion, and net market appreciation of
$31 billion, reflecting appreciation in fixed income and
equity assets, partially offset by depreciation in alternative
investment assets.
Securities Services net revenues of $2.72 billion for 2007
increased 25% compared with 2006, as our prime brokerage
business continued to generate strong results, primarily
reflecting significantly higher customer balances in securities
lending and margin lending.
Operating expenses of $5.36 billion for 2007 increased 33%
compared with 2006, primarily due to increased compensation and
benefits expenses, resulting from higher discretionary
compensation and growth in employment levels, and higher
distribution fees (included in brokerage, clearing, exchange and
distribution fees).
Pre-tax
earnings of $1.84 billion in 2007 decreased 24% compared
with 2006.
Geographic
Data
See Note 18 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for a summary of our total net revenues,
pre-tax
earnings and net earnings by geographic region.
Off-Balance-Sheet
Arrangements
We have various types of
off-balance-sheet
arrangements that we enter into in the ordinary course of
business. Our involvement in these arrangements can take many
different forms, including purchasing or retaining residual and
other interests in
mortgage-backed
and other
asset-backed
securitization vehicles; holding senior and subordinated debt,
interests in limited and general partnerships, and preferred and
common stock in other nonconsolidated vehicles; entering into
interest rate, foreign currency, equity, commodity and credit
derivatives, including total return swaps; entering into
operating leases; and providing guarantees, indemnifications,
loan commitments, letters of credit and representations and
warranties.
We enter into these arrangements for a variety of business
purposes, including the securitization of commercial and
residential mortgages, home equity and auto loans, government
and corporate bonds, and other types of financial assets. Other
reasons for entering into these arrangements include
underwriting client securitization transactions; providing
secondary market liquidity; making investments in performing and
nonperforming debt, equity, real estate and other assets;
providing investors with
credit-linked
and
asset-repackaged
notes; and receiving or providing letters of credit to satisfy
margin requirements and to facilitate the clearance and
settlement process.
(1) Includes
$7 billion in net asset inflows in connection with our
acquisition of Macquarie IMM Investment Management.
91
We engage in transactions with variable interest entities (VIEs)
and qualifying
special-purpose
entities (QSPEs). Such vehicles are critical to the functioning
of several significant investor markets, including the
mortgage-backed
and other
asset-backed
securities markets, since they offer investors access to
specific cash flows and risks created through the securitization
process. Our financial interests in, and derivative transactions
with, such nonconsolidated entities are accounted for at fair
value, in the same manner as our other financial instruments,
except in cases where we apply the equity method of accounting.
We did not have
off-balance-sheet
commitments to purchase or finance any CDOs held by structured
investment vehicles as of November 2008 or
November 2007.
In December 2007, the American Securitization Forum (ASF)
issued the Streamlined Foreclosure and Loss Avoidance
Framework for Securitized Subprime Adjustable Rate Mortgage
Loans (ASF Framework). The ASF Framework provides guidance
for servicers to streamline borrower evaluation procedures and
to facilitate the use of foreclosure and loss prevention
measures for securitized subprime residential mortgages that
meet certain criteria. For certain eligible loans as defined in
the ASF Framework, servicers may presume default is reasonably
foreseeable and apply a
fast-track
loan modification plan, under which the loan interest rate will
be kept at the introductory rate for a period of five years
following the upcoming reset date. Mortgage loan modifications
of these eligible loans will not affect our accounting treatment
for QSPEs that hold the subprime loans.
The following table sets forth where a discussion of
off-balance-sheet
arrangements may be found in Part II, Items 7 and 8 of
our Annual Report on
Form 10-K:
|
|
|
Type of Off-Balance-Sheet Arrangement
|
|
Disclosure in our Annual Report on Form 10-K
|
|
|
|
|
|
Retained interests or contingent interests in assets transferred
by us to nonconsolidated entities
|
|
See Note 4 to the consolidated financial statements in Part II,
Item 8 of our Annual Report on Form 10-K.
|
|
|
|
Leases, letters of credit, and loans and other commitments
|
|
See
Contractual
Obligations and Commitments below and Note 8 to the
consolidated financial statements in Part II, Item 8 of our
Annual Report on Form 10-K.
|
|
|
|
Guarantees
|
|
See Note 8 to the consolidated financial statements in Part II,
Item 8 of our Annual Report on Form 10-K.
|
|
|
|
Other obligations, including contingent obligations, arising out
of variable interests we have in nonconsolidated entities
|
|
See Note 4 to the consolidated financial statements in Part
II, Item 8 of our Annual Report on Form 10-K.
|
|
|
|
Derivative contracts
|
|
See
Critical
Accounting Policies above, and
Risk
Management and
Derivatives
below and Notes 3 and 7 to the consolidated financial statements
in Part II, Item 8 of our Annual Report on Form 10-K.
|
|
|
|
|
|
|
|
|
In addition, see Note 2 to the consolidated financial
statements in Part II, Item 8 of our Annual Report on
Form 10-K
for a discussion of our consolidation policies.
92
Equity
Capital
The level and composition of our equity capital are principally
determined by our consolidated regulatory capital requirements
but may also be influenced by rating agency guidelines,
subsidiary capital requirements, the business environment,
conditions in the financial markets and assessments of potential
future losses due to extreme and adverse changes in our business
and market environments. As of November 2008, our total
shareholders equity was $64.37 billion (consisting of
common shareholders equity of $47.90 billion and
preferred stock of $16.47 billion) compared with total
shareholders equity of $42.80 billion as of
November 2007 (consisting of common shareholders
equity of $39.70 billion and preferred stock of
$3.10 billion). In addition to total shareholders
equity, we consider the $5.00 billion of junior
subordinated debt issued to trusts (see discussion below) to be
part of our equity capital, as it qualifies as capital for
regulatory and certain rating agency purposes.
Consolidated
Capital Requirements
We are subject to regulatory capital requirements administered
by the U.S. federal banking agencies. Our bank depository
institution subsidiaries, including GS Bank USA, are subject to
similar capital guidelines. Under the Federal Reserve
Boards capital adequacy guidelines and the regulatory
framework for prompt corrective action (PCA) that is applicable
to GS Bank USA, Goldman Sachs and its bank depository
institution subsidiaries must meet specific capital guidelines
that involve quantitative measures of assets, liabilities and
certain
off-balance-sheet
items as calculated under regulatory reporting practices.
Goldman Sachs and its bank depository institution
subsidiaries capital amounts, as well as GS Bank
USAs PCA classification, are also subject to qualitative
judgments by the regulators about components, risk weightings
and other factors. We anticipate reporting capital ratios as
follows:
|
|
|
|
|
Before we became a bank holding company, we were subject to
capital guidelines by the SEC as a Consolidated Supervised
Entity (CSE) that were generally consistent with those set out
in the Revised Framework for the International Convergence of
Capital Measurement and Capital Standards issued by the Basel
Committee on Banking Supervision (Basel II). We currently
compute and report our firmwide capital ratios in accordance
with the Basel II requirements as applicable to us when we were
regulated as a CSE for the purpose of assessing the adequacy of
our capital. Under the Basel II framework as it applied to us
when we were regulated as a CSE, we evaluate our Tier 1
Capital and Total Allowable Capital as a percentage of RWAs. As
of November 2008, our Total Capital Ratio (Total Allowable
Capital as a percentage of RWAs) was 18.9% and our Tier 1
Ratio (Tier 1 Capital as a percentage of RWAs) was 15.6%,
in each case calculated under the Basel II framework as it
applied to us when we were regulated as a CSE. See
Consolidated Capital Ratios below for
further information. We expect to continue to report to
investors for a period of time our Basel II capital ratios
as applicable to us when we were regulated as a CSE.
|
|
|
|
The regulatory capital guidelines currently applicable to bank
holding companies are based on the Capital Accord of the Basel
Committee on Banking Supervision (Basel I), with Basel II to be
phased in over time. We are currently working with the Federal
Reserve Board to put in place the appropriate reporting and
compliance mechanisms and methodologies to allow reporting of
the Basel I capital ratios as of the end of March 2009.
|
|
|
|
In addition, we are currently working to implement the Basel II
framework as applicable to us as a bank holding company (as
opposed to as a CSE). U.S. banking regulators have
incorporated the Basel II framework into the existing
risk-based
capital requirements by requiring that internationally active
banking organizations, such as Group Inc., transition to Basel
II over the next several years.
|
The Federal Reserve Board also has established minimum leverage
ratio guidelines. We were not subject to these guidelines before
becoming a bank holding company and, accordingly, we are
currently working with the Federal Reserve Board to finalize our
methodology for calculating this ratio.
93
The Tier 1 leverage ratio is defined as Tier 1 capital
(as applicable to us as a bank holding company) divided by
adjusted average total assets (which includes adjustments for
disallowed goodwill and certain intangible assets). The minimum
Tier 1 leverage ratio is 3% for bank holding companies that
have received the highest supervisory rating under Federal
Reserve Board guidelines or that have implemented the Federal
Reserve Boards
risk-based
capital measure for market risk. Other bank holding companies
must have a minimum leverage ratio of 4%. Bank holding companies
may be expected to maintain ratios well above the minimum
levels, depending upon their particular condition, risk profile
and growth plans. As of November 2008, our estimated
Tier 1 leverage ratio was 6.1%. This ratio represents a
preliminary estimate and may be revised in subsequent filings as
we continue to work with the Federal Reserve Board to finalize
the methodology for the calculation.
Consolidated
Capital Ratios
The following table sets forth additional information on our
capital ratios as of November 2008 calculated in the same
manner (generally consistent with Basel II) as when the
firm was regulated by the SEC as a CSE:
|
|
|
|
|
|
|
As of
|
|
|
November
|
|
|
2008
|
|
|
($ in millions)
|
I. Tier 1 and Total Allowable Capital
|
|
|
|
|
Common shareholders equity
|
|
$
|
47,898
|
|
Preferred stock
|
|
|
16,471
|
|
Junior subordinated debt issued to trusts
|
|
|
5,000
|
|
Less: Goodwill
|
|
|
(3,523
|
)
|
Less: Disallowable intangible assets
|
|
|
(1,386
|
)
|
Less: Other
deductions (1)
|
|
|
(1,823
|
)
|
|
|
|
|
|
Tier 1 Capital
|
|
|
62,637
|
|
Other components of Total Allowable Capital
|
|
|
|
|
Qualifying subordinated
debt (2)
|
|
|
13,703
|
|
Less: Other
deductions (1)
|
|
|
(690
|
)
|
|
|
|
|
|
Total Allowable Capital
|
|
$
|
75,650
|
|
|
|
|
|
|
II.
Risk-Weighted
Assets
|
|
|
|
|
Market risk
|
|
$
|
176,646
|
|
Credit risk
|
|
|
184,055
|
|
Operational risk
|
|
|
39,675
|
|
|
|
|
|
|
Total
Risk-Weighted
Assets
|
|
$
|
400,376
|
|
|
|
|
|
|
III. Tier 1 Ratio
|
|
|
15.6
|
%
|
IV. Total Capital Ratio
|
|
|
18.9
|
%
|
|
|
|
(1) |
|
Principally included investments in
regulated insurance entities and certain financial service
entities (50% was deducted from both Tier 1 Capital and
Total Allowable Capital).
|
|
(2) |
|
Substantially all of our existing
subordinated debt qualified as Total Allowable Capital for CSE
purposes.
|
Our RWAs are driven by the amount of market risk, credit risk
and operational risk associated with our business activities in
a manner generally consistent with methodologies set out in
Basel II. The methodologies used to compute RWAs for each of
market risk, credit risk and operational risk are closely
aligned with our risk management practices. See
Market
Risk and Credit Risk below for a
discussion of how we manage risks in our trading and principal
investing businesses. Further details on the methodologies used
to calculate RWAs are set forth below.
94
Risk-Weighted
Assets for Market Risk
For positions captured in VaR, RWAs are calculated using VaR and
other
model-based
measures, including requirements for incremental default risk
and other event risks. VaR is the potential loss in value of
trading positions due to adverse market movements over a defined
time horizon with a specified confidence level. Market risk RWAs
are calculated consistent with the specific conditions set out
in the Basel II framework (based on VaR calibrated to a 99%
confidence level, over a
10-day
holding period, multiplied by a factor). Additional RWAs are
calculated with respect to incremental default risk and other
event risks, in a manner generally consistent with our internal
risk management methodologies.
For positions not included in VaR because VaR is not the most
appropriate measure of risk, we calculate RWAs based on
alternative methodologies, including sensitivity analyses.
Risk-Weighted
Assets for Credit Risk
RWAs for credit risk are calculated for on- and
off-balance-sheet exposures that are not captured in our market
risk RWAs, with the exception of OTC derivatives for which both
market risk and credit risk RWAs are calculated. The
calculations are consistent with the Advanced Internal Ratings
Based (AIRB) approach and the Internal Models Method
(IMM) of Basel II, and were based on Exposure at Default
(EAD), which is an estimate of the amount that would be owed to
us at the time of a default, multiplied by each
counterpartys risk weight.
Under the Basel II AIRB approach, a counterpartys risk
weight is generally derived from a combination of the
Probability of Default (PD), the Loss Given Default (LGD) and
the maturity of the trade or portfolio of trades, where:
|
|
|
|
|
PD is an estimate of the probability that an obligor will
default over a
one-year
horizon. PD is derived from the use of internally determined
equivalents of public rating agency ratings.
|
|
|
|
LGD is an estimate of the economic loss rate if a default occurs
during economic downturn conditions. LGD is determined based on
industry data.
|
For OTC derivatives and funding trades (such as repurchase and
reverse repurchase transactions), we use the Basel II IMM
approach, which allows EAD to be calculated using
model-based
measures to determine potential exposure, consistent with models
and methodologies that we use for internal risk management
purposes. For commitments, EAD is calculated as a percentage of
the outstanding notional balance. For other credit exposures,
EAD is generally the carrying value of the exposure.
Risk-Weighted
Assets for Operational Risk
RWAs for operational risk are calculated using a
risk-based
methodology consistent with the qualitative and quantitative
criteria for the Advanced Measurement Approach (AMA), as defined
in Basel II. The methodology incorporates internal loss events,
relevant external loss events, results of scenario analyses and
managements assessment of our business environment and
internal controls. We estimate capital requirements for both
expected and unexpected losses, seeking to capture the major
drivers of operational risk over a
one-year
time horizon, at a 99.9% confidence level. Operational risk
capital is allocated among our businesses and is regularly
reported to senior management and key risk and oversight
committees.
Rating Agency
Guidelines
The credit rating agencies assign credit ratings to the
obligations of Group Inc., which directly issues or guarantees
substantially all of the firms senior unsecured
obligations. The level and composition of our equity capital are
among the many factors considered in determining our credit
ratings. Each agency has its own definition of eligible capital
and methodology for evaluating capital
95
adequacy, and assessments are generally based on a combination
of factors rather than a single calculation. See
Liquidity
and Funding Risk Credit Ratings below for
further information regarding our credit ratings.
Subsidiary
Capital Requirements
Many of our subsidiaries are subject to separate regulation and
capital requirements in the
U.S. and/or
elsewhere. GS&Co. and Goldman Sachs Execution &
Clearing, L.P. are registered
U.S. broker-dealers
and futures commissions merchants, and are subject to regulatory
capital requirements, including those imposed by the SEC, the
Commodity Futures Trading Commission, the Chicago Board of
Trade, the Financial Industry Regulatory Authority, Inc. (FINRA)
and the National Futures Association.
Our depository institution subsidiary, GS Bank USA, a New York
State-chartered bank and a member of the Federal Reserve System
and the FDIC, is regulated by the Federal Reserve Board and the
New York State Banking Department and is subject to minimum
capital requirements that (subject to certain exceptions) are
similar to those applicable to bank holding companies. GS Bank
USA was formed in November 2008 through the merger of our
existing Utah industrial bank (named GS Bank USA) into our New
York limited purpose trust company, with the surviving company
taking the name GS Bank USA. As of November 2007, GS Bank
USAs predecessor was a wholly owned industrial bank
regulated by the Utah Department of Financial Institutions, was
a member of the FDIC and was subject to minimum capital
requirements. We compute the capital ratios for GS Bank USA in
accordance with the Basel I framework for purposes of assessing
the adequacy of its capital. In order to be considered a
well capitalized depository institution under the
Federal Reserve Board guidelines, GS Bank USA must maintain a
Tier 1 capital ratio of at least 6%, a total capital ratio
of at least 10%, and a Tier 1 leverage ratio of at least
5%. In connection with the November 2008 asset transfer
described below, GS Bank USA agreed with the Federal
Reserve Board to minimum capital ratios in excess of these
well capitalized levels. Accordingly, for a period
of time, GS Bank USA is expected to maintain a Tier 1
capital ratio of at least 8%, a total capital ratio of at least
11% and a Tier 1 leverage ratio of at least 6%. In
November 2008, we contributed subsidiaries with an
aggregate of $117.16 billion of assets into GS Bank
USA (which brought total assets in GS Bank USA to
$145.06 billion as of November 2008). As a result, we are
currently working with the Federal Reserve Board to finalize our
methodology for the Basel I calculations. As of November
2008, under Basel I, GS Bank USAs estimated
Tier 1 capital ratio was 8.9% and estimated total capital
ratio was 11.6%. In addition, GS Bank USAs estimated
Tier 1 leverage ratio was 9.1%.
Group Inc. has guaranteed the payment obligations of
GS&Co., GS Bank USA and GS Bank Europe, subject to certain
exceptions. In November 2008, as noted above, we
contributed subsidiaries, with an aggregate of
$117.16 billion of assets, into GS Bank USA and Group Inc.
agreed to guarantee certain losses, including
credit-related
losses, relating to assets held by the contributed entities. In
connection with this guarantee, Group Inc. also agreed to pledge
to GS Bank USA certain collateral, including interests in
subsidiaries and other illiquid assets.
GS Bank Europe, our regulated Irish bank, is subject to minimum
capital requirements imposed by the Irish Financial Services
Regulatory Authority. Several other subsidiaries of Goldman
Sachs are regulated by securities, investment advisory, banking,
insurance, and other regulators and authorities around the
world. Goldman Sachs International (GSI), our regulated U.K.
broker-dealer,
is subject to minimum capital requirements imposed by the
Financial Services Authority (FSA). Goldman Sachs Japan Co.,
Ltd., our regulated Japanese
broker-dealer,
is subject to minimum capital requirements imposed by
Japans Financial Services Agency. As of November 2008
and November 2007, these subsidiaries were in compliance
with their local capital requirements.
As discussed above, many of our subsidiaries are subject to
regulatory capital requirements in jurisdictions throughout the
world. Subsidiaries not subject to separate regulation may hold
capital to satisfy local tax guidelines, rating agency
requirements (for entities with assigned credit ratings) or
96
internal policies, including policies concerning the minimum
amount of capital a subsidiary should hold based on its
underlying level of risk. See
Liquidity
and Funding Risk Conservative Liability
Structure below for a discussion of our potential
inability to access funds from our subsidiaries.
Equity investments in subsidiaries are generally funded with
parent company equity capital. As of November 2008, Group
Inc.s equity investment in subsidiaries was
$51.70 billion compared with its total shareholders
equity of $64.37 billion.
Our capital invested in
non-U.S. subsidiaries
is generally exposed to foreign exchange risk, substantially all
of which is managed through a combination of derivative
contracts and
non-U.S. denominated
debt. In addition, we generally manage the
non-trading
exposure to foreign exchange risk that arises from transactions
denominated in currencies other than the transacting
entitys functional currency.
See Note 17 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our regulated subsidiaries.
Equity Capital
Management
Our objective is to maintain a sufficient level and optimal
composition of equity capital. We manage our capital through
repurchases of our common stock, as permitted, and issuances of
common and preferred stock, junior subordinated debt issued to
trusts and other subordinated debt. We manage our capital
requirements principally by setting limits on balance sheet
assets
and/or
limits on risk, in each case at both the consolidated and
business unit levels. We attribute capital usage to each of our
business units based upon our regulatory capital framework and
manage the levels of usage based upon the balance sheet and risk
limits established.
Share Repurchase Program. Subject to the
limitations of the U.S. Treasurys TARP Capital
Purchase Program described below under
Equity
Capital Equity Capital Management
Preferred Stock, we seek to use our share repurchase
program to substantially offset increases in share count over
time resulting from employee
share-based
compensation. The repurchase program is effected primarily
through regular
open-market
purchases, the amounts and timing of which are determined
primarily by our current and projected capital positions
(i.e., comparisons of our desired level of capital to our
actual level of capital) but which may also be influenced by
general market conditions and the prevailing price and trading
volumes of our common stock, in each case subject to the limit
imposed under the U.S. Treasurys TARP Capital
Purchase Program. See
Equity
Capital Equity Capital Management
Preferred Stock below for information regarding
restrictions on our ability to repurchase common stock.
The following table sets forth the level of share repurchases
for the years ended November 2008 and November 2007:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions, except
|
|
|
per share amounts)
|
Number of shares repurchased
|
|
|
10.54
|
|
|
|
41.22
|
|
Total cost
|
|
$
|
2,037
|
|
|
$
|
8,956
|
|
Average cost per share
|
|
$
|
193.18
|
|
|
$
|
217.29
|
|
As of November 2008, we were authorized to repurchase up to
60.9 million additional shares of common stock pursuant to
our repurchase program. See Market for Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities in Part II, Item 5 of our
Annual Report on
Form 10-K
for additional information on our repurchase program.
Stock Offerings. In September 2008, we
completed a public offering of 46.7 million shares of
common stock at $123.00 per share for proceeds of
$5.75 billion.
97
In October 2008, we issued to Berkshire Hathaway Inc. and
certain affiliates 50,000 shares of 10% Cumulative
Perpetual Preferred Stock, Series G (Series G
Preferred Stock), and a five-year warrant to purchase up to
43.5 million shares of common stock at an exercise price of
$115.00 per share, for aggregate proceeds of $5.00 billion.
The allocated carrying values of the warrant and the
Series G Preferred Stock on the date of issuance (based on
their relative fair values) were $1.14 billion and
$3.86 billion, respectively. The warrant is exercisable at
any time until October 1, 2013 and the number of
shares of common stock underlying the warrant and the exercise
price are subject to adjustment for certain dilutive events.
In October 2008, under the U.S. Treasurys TARP
Capital Purchase Program, we issued to the U.S. Treasury
10.0 million shares of Fixed Rate Cumulative Perpetual
Preferred Stock, Series H (Series H Preferred Stock),
and a
10-year
warrant to purchase up to 12.2 million shares of common
stock at an exercise price of $122.90 per share, for aggregate
proceeds of $10.00 billion. The allocated carrying values
of the warrant and the Series H Preferred Stock on the date
of issuance (based on their relative fair values) were
$490 million and $9.51 billion, respectively.
Cumulative dividends on the Series H Preferred Stock are
payable at 5% per annum through November 14, 2013 and
at a rate of 9% per annum thereafter. The Series H
Preferred Stock will be accreted to the redemption price of
$10.00 billion over five years. The warrant is exercisable
at any time until October 28, 2018 and the number of
shares of common stock underlying the warrant and the exercise
price are subject to adjustment for certain dilutive events. If,
on or prior to December 31, 2009, we receive aggregate
gross cash proceeds of at least $10 billion from sales of
Tier 1 qualifying perpetual preferred stock or common
stock, the number of shares of common stock issuable upon
exercise of the warrant will be reduced by
one-half of
the original number of shares of common stock.
Preferred Stock. As of November 2008,
Goldman Sachs had 10.2 million shares of perpetual
preferred stock issued and outstanding as set forth in the
following table:
Preferred Stock
by Series
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
Shares
|
|
Shares
|
|
|
|
Earliest
|
|
Redemption Value
|
Series
|
|
Preference
|
|
Issued
|
|
Authorized
|
|
Dividend Rate
|
|
Redemption Date
|
|
(in millions)
|
A
|
|
Non-cumulative
|
|
|
30,000
|
|
|
|
50,000
|
|
|
3 month LIBOR + 0.75%,
with floor of 3.75% per annum
|
|
April 25, 2010
|
|
$
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
Non-cumulative
|
|
|
32,000
|
|
|
|
50,000
|
|
|
6.20% per annum
|
|
October 31, 2010
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C
|
|
Non-cumulative
|
|
|
8,000
|
|
|
|
25,000
|
|
|
3 month LIBOR + 0.75%,
with floor of 4.00% per annum
|
|
October 31, 2010
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D
|
|
Non-cumulative
|
|
|
54,000
|
|
|
|
60,000
|
|
|
3 month LIBOR + 0.67%,
with floor of 4.00% per annum
|
|
May 24, 2011
|
|
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G
|
|
Cumulative
|
|
|
50,000
|
|
|
|
50,000
|
|
|
10.00% per annum
|
|
Date of issuance
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Cumulative
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
5.00% per annum through
November 14, 2013 and
9.00% per annum thereafter
|
|
Date of issuance
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,174,000
|
|
|
|
10,235,000
|
|
|
|
|
|
|
$
|
18,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each share of
non-cumulative
preferred stock issued and outstanding has a par value of $0.01,
has a liquidation preference of $25,000, is represented by 1,000
depositary shares and is redeemable at our option, subject to
the approval of the Federal Reserve Board, at a redemption price
equal to $25,000 plus declared and unpaid dividends.
Each share of Series G Preferred Stock issued and
outstanding has a par value of $0.01, has a liquidation
preference of $100,000 and is redeemable at our option, subject
to the approval of the Federal Reserve Board, at a redemption
price equal to $110,000 plus accrued and unpaid dividends.
Each share of Series H Preferred Stock issued and
outstanding has a par value of $0.01, has a liquidation
preference of $1,000 and is redeemable at our option, subject to
the approval of the
98
Federal Reserve Board, at a redemption price equal to $1,000
plus accrued and unpaid dividends, provided that through
November 14, 2011 the Series H Preferred Stock is
redeemable only in an amount up to the aggregate net cash
proceeds received from sales of Tier 1 qualifying perpetual
preferred stock or common stock, and only once such sales have
resulted in aggregate gross proceeds of at least
$2.5 billion.
All series of preferred stock are pari passu and have a
preference over our common stock upon liquidation. Dividends on
each series of preferred stock, if declared, are payable
quarterly in arrears. Our ability to declare or pay dividends
on, or purchase, redeem or otherwise acquire, our common stock
is subject to certain restrictions in the event that we fail to
pay or set aside full dividends on our preferred stock for the
latest completed dividend period. In addition, pursuant to the
U.S. Treasurys TARP Capital Purchase Program, until
the earliest of October 28, 2011, the redemption of
all of the Series H Preferred Stock or transfer by the
U.S. Treasury of all of the Series H Preferred Stock
to third parties, we must obtain the consent of the
U.S. Treasury to raise our common stock dividend or to
repurchase any shares of common stock or other preferred stock,
with certain exceptions (including repurchases of our common
stock under our share repurchase program to offset dilution from
equity-based
compensation). For as long as the Series H Preferred Stock
remains outstanding, due to the limitations pursuant to the U.S.
Treasurys TARP Capital Purchase Program, we will
repurchase our common stock through our share repurchase program
only for the purpose of offsetting dilution from
equity-based
compensation, to the extent permitted.
Junior Subordinated Debt Issued to Trusts in Connection with
Normal Automatic Preferred Enhanced Capital
Securities. In 2007, we issued $1.75 billion
of fixed rate junior subordinated debt to Goldman Sachs Capital
II and $500 million of floating rate junior subordinated
debt to Goldman Sachs Capital III, Delaware statutory trusts
that, in turn, issued $2.25 billion of guaranteed perpetual
Automatic Preferred Enhanced Capital Securities (APEX) to third
parties and a de minimis amount of common securities to Goldman
Sachs. The junior subordinated debt is included in
Unsecured
long-term
borrowings in the consolidated statements of financial
condition. In connection with the APEX issuance, we entered into
stock purchase contracts with Goldman Sachs Capital II and III
under which we will be obligated to sell and these entities will
be obligated to purchase $2.25 billion of perpetual
non-cumulative
preferred stock that we will issue in the future. Goldman Sachs
Capital II and III are required to remarket the junior
subordinated debt in order to fund their purchase of the
preferred stock, but in the event that a remarketing is
unsuccessful, they will relinquish the subordinated debt to us
in exchange for the preferred stock. Because of certain
characteristics of the junior subordinated debt (and the
associated APEX), including its
long-term
nature, the future issuance of perpetual
non-cumulative
preferred stock under the stock purchase contracts, our ability
to defer payments due on the debt and the subordinated nature of
the debt in our capital structure, it qualifies as Tier 1
and Total Allowable Capital and is included as part of our
equity capital.
Junior Subordinated Debt Issued to a Trust in Connection with
Trust Preferred Securities. We issued
$2.84 billion of junior subordinated debentures in 2004 to
Goldman Sachs Capital I, a Delaware statutory trust that, in
turn, issued $2.75 billion of guaranteed preferred
beneficial interests to third parties and $85 million of
common beneficial interests to Goldman Sachs. The junior
subordinated debentures are included in Unsecured
long-term
borrowings in the consolidated statements of financial
condition. Because of certain characteristics of the junior
subordinated debt (and the associated trust preferred
securities), including its
long-term
nature, our ability to defer coupon interest for up to ten
consecutive
semi-annual
periods and the subordinated nature of the debt in our capital
structure, it qualifies as Tier 1 and Total Allowable
Capital and is included as part of our equity capital.
Subordinated Debt. In addition to junior
subordinated debt issued to trusts, we had other subordinated
debt outstanding of $14.17 billion as of
November 2008. Although not part of our shareholders
equity, substantially all of our subordinated debt qualifies as
Total Allowable Capital.
99
Other Capital
Ratios and Metrics
The following table sets forth information on our assets,
shareholders equity, leverage ratios and book value per
common share:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
($ in millions, except
|
|
|
per share amounts)
|
Total assets
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
Adjusted
assets (1)
|
|
|
528,161
|
|
|
|
745,700
|
|
Total shareholders equity
|
|
|
64,369
|
|
|
|
42,800
|
|
Tangible equity
capital (2)
|
|
|
64,186
|
|
|
|
42,728
|
|
Leverage
ratio (3)
|
|
|
13.7
|
x
|
|
|
26.2
|
x
|
Adjusted leverage
ratio (4)
|
|
|
8.2
|
x
|
|
|
17.5
|
x
|
Debt to equity
ratio (5)
|
|
|
2.6
|
x
|
|
|
3.8
|
x
|
Common shareholders equity
|
|
$
|
47,898
|
|
|
$
|
39,700
|
|
Tangible common shareholders
equity (6)
|
|
|
42,715
|
|
|
|
34,628
|
|
Book value per common
share (7)
|
|
$
|
98.68
|
|
|
$
|
90.43
|
|
Tangible book value per common
share (8)
|
|
|
88.00
|
|
|
|
78.88
|
|
|
|
|
(1) |
|
Adjusted assets excludes
(i) low-risk
collateralized assets generally associated with our matched book
and securities lending businesses and federal funds sold,
(ii) cash and securities we segregate for regulatory and
other purposes and (iii) goodwill and identifiable
intangible assets, excluding power contracts. We do not deduct
identifiable intangible assets associated with power contracts
from total assets in order to be consistent with the calculation
of tangible equity capital and the adjusted leverage ratio (see
footnote 2 below).
|
The following table sets forth the reconciliation of total
assets to adjusted assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(in millions)
|
Total assets
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
Deduct:
|
|
Securities borrowed
|
|
|
(180,795
|
)
|
|
|
(277,413
|
)
|
|
|
Securities purchased under agreements to resell, at fair value
and federal funds sold
|
|
|
(122,021
|
)
|
|
|
(87,317
|
)
|
Add:
|
|
Trading liabilities, at fair value
|
|
|
175,972
|
|
|
|
215,023
|
|
|
|
Less derivative liabilities
|
|
|
(117,695
|
)
|
|
|
(99,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
58,277
|
|
|
|
115,645
|
|
Deduct:
|
|
Cash and securities segregated for regulatory and other purposes
|
|
|
(106,664
|
)
|
|
|
(119,939
|
)
|
|
|
Goodwill and identifiable intangible assets, excluding power
contracts
|
|
|
(5,183
|
)
|
|
|
(5,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted assets
|
|
$
|
528,161
|
|
|
$
|
745,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Tangible equity capital equals
total shareholders equity and junior subordinated debt
issued to trusts less goodwill and identifiable intangible
assets, excluding power contracts. We do not deduct identifiable
intangible assets associated with power contracts from total
shareholders equity because, unlike other intangible
assets, less than 50% of these assets are supported by common
shareholders equity. We consider junior subordinated debt
issued to trusts to be a component of our tangible equity
capital base due to certain characteristics of the debt,
including its
long-term
nature, our ability to defer payments due on the debt and the
subordinated nature of the debt in our capital structure.
|
The following table sets forth the reconciliation of total
shareholders equity to tangible equity capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(in millions)
|
Total shareholders equity
|
|
$
|
64,369
|
|
|
$
|
42,800
|
|
Add:
|
|
Junior subordinated debt issued to trusts
|
|
|
5,000
|
|
|
|
5,000
|
|
Deduct:
|
|
Goodwill and identifiable intangible assets, excluding power
contracts
|
|
|
(5,183
|
)
|
|
|
(5,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity capital
|
|
$
|
64,186
|
|
|
$
|
42,728
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
(3) |
|
The leverage ratio equals total
assets divided by total shareholders equity. This ratio is
different from the Tier 1 leverage ratios included in
Equity
Capital Consolidated Capital Requirements and
Equity Capital Subsidiary Capital
Requirements above.
|
|
(4) |
|
The adjusted leverage ratio equals
adjusted assets divided by tangible equity capital. We believe
that the adjusted leverage ratio is a more meaningful measure of
our capital adequacy than the leverage ratio because it excludes
certain
low-risk
collateralized assets that are generally supported with little
or no capital and reflects the tangible equity capital deployed
in our businesses.
|
|
(5) |
|
The debt to equity ratio equals
unsecured
long-term
borrowings divided by total shareholders equity.
|
|
(6) |
|
Tangible common shareholders
equity equals total shareholders equity less preferred
stock, goodwill and identifiable intangible assets, excluding
power contracts. We do not deduct identifiable intangible assets
associated with power contracts from total shareholders
equity because, unlike other intangible assets, less than 50% of
these assets are supported by common shareholders equity.
|
The following table sets forth the reconciliation of total
shareholders equity to tangible common shareholders
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(in millions)
|
Total shareholders equity
|
|
$
|
64,369
|
|
|
$
|
42,800
|
|
Deduct:
|
|
Preferred stock
|
|
|
(16,471
|
)
|
|
|
(3,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity
|
|
|
47,898
|
|
|
|
39,700
|
|
Deduct:
|
|
Goodwill and identifiable intangible assets, excluding power
contracts
|
|
|
(5,183
|
)
|
|
|
(5,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common shareholders equity
|
|
$
|
42,715
|
|
|
$
|
34,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
Book value per common share is
based on common shares outstanding, including restricted stock
units granted to employees with no future service requirements,
of 485.4 million and 439.0 million as of
November 2008 and November 2007, respectively.
|
|
(8) |
|
Tangible book value per common
share is computed by dividing tangible common shareholders
equity by the number of common shares outstanding, including
restricted stock units granted to employees with no future
service requirements.
|
101
Contractual
Obligations and Commitments
Goldman Sachs has contractual obligations to make future
payments related to our unsecured
long-term
borrowings, secured
long-term
financings,
long-term
noncancelable lease agreements and purchase obligations and has
commitments under a variety of commercial arrangements.
The following table sets forth our contractual obligations by
fiscal maturity date as of November 2008:
Contractual
Obligations
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010-
|
|
2012-
|
|
2014-
|
|
|
|
|
2009
|
|
2011
|
|
2013
|
|
Thereafter
|
|
Total
|
Unsecured
long-term
borrowings (1)(2)(3)
|
|
$
|
|
|
|
$
|
25,122
|
|
|
$
|
38,750
|
|
|
$
|
104,348
|
|
|
$
|
168,220
|
|
Secured
long-term
financings (1)(2)(4)
|
|
|
|
|
|
|
6,735
|
|
|
|
4,417
|
|
|
|
6,306
|
|
|
|
17,458
|
|
Contractual interest
payments (5)
|
|
|
8,145
|
|
|
|
14,681
|
|
|
|
11,947
|
|
|
|
34,399
|
|
|
|
69,172
|
|
Insurance
liabilities (6)
|
|
|
642
|
|
|
|
951
|
|
|
|
791
|
|
|
|
4,879
|
|
|
|
7,263
|
|
Minimum rental payments
|
|
|
494
|
|
|
|
800
|
|
|
|
535
|
|
|
|
1,664
|
|
|
|
3,493
|
|
Purchase obligations
|
|
|
569
|
|
|
|
132
|
|
|
|
21
|
|
|
|
21
|
|
|
|
743
|
|
|
|
|
(1) |
|
Obligations maturing within one
year of our financial statement date or redeemable within one
year of our financial statement date at the option of the holder
are excluded from this table and are treated as
short-term
obligations. See Note 3 to the consolidated financial
statements in Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our secured financings.
|
|
(2) |
|
Obligations that are repayable
prior to maturity at the option of Goldman Sachs are reflected
at their contractual maturity dates. Obligations that are
redeemable prior to maturity at the option of the holder are
reflected at the dates such options become exercisable.
|
|
(3) |
|
Includes $17.45 billion
accounted for at fair value under SFAS No. 155 or SFAS
No. 159, primarily consisting of hybrid financial
instruments and prepaid physical commodity transactions.
|
|
(4) |
|
These obligations are reported
within Other secured financings in the consolidated
statements of financial condition and include $7.85 billion
accounted for at fair value under SFAS No. 159.
|
|
(5) |
|
Represents estimated future
interest payments related to unsecured
long-term
borrowings and secured
long-term
financings based on applicable interest rates as of
November 2008. Includes stated coupons, if any, on
structured notes.
|
|
(6) |
|
Represents estimated undiscounted
payments related to future benefits and unpaid claims arising
from policies associated with our insurance activities,
excluding separate accounts and estimated recoveries under
reinsurance contracts.
|
As of November 2008, our unsecured
long-term
borrowings were $168.22 billion, with maturities extending
to 2043, and consisted principally of senior borrowings. See
Note 7 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our unsecured
long-term
borrowings.
As of November 2008, our future minimum rental payments,
net of minimum sublease rentals, under noncancelable leases were
$3.49 billion. These lease commitments, principally for
office space, expire on various dates through 2069. Certain
agreements are subject to periodic escalation provisions for
increases in real estate taxes and other charges. See
Note 8 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our leases.
Our occupancy expenses include costs associated with office
space held in excess of our current requirements. This excess
space, the cost of which is charged to earnings as incurred, is
being held for potential growth or to replace currently occupied
space that we may exit in the future. We regularly evaluate our
current and future space capacity in relation to current and
projected staffing levels. In 2008, we incurred exit costs of
$80 million related to our office space (included in
102
Occupancy and Depreciation and
Amortization in the consolidated statement of earnings).
We may incur exit costs in the future to the extent we
(i) reduce our space capacity or (ii) commit to, or
occupy, new properties in the locations in which we operate and,
consequently, dispose of existing space that had been held for
potential growth. These exit costs may be material to our
results of operations in a given period.
As of November 2008, included in purchase obligations was
$483 million of
construction-related
obligations. Our
construction-related
obligations include commitments of $388 million related to
our new headquarters in New York City, which is expected to cost
between $2.1 billion and $2.3 billion. We have
partially financed this construction project with
$1.65 billion of
tax-exempt
Liberty Bonds.
Due to the uncertainty of the timing and amounts that will
ultimately be paid, our liability for unrecognized tax benefits
has been excluded from the above contractual obligations table.
See Note 16 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information on FIN 48.
The following table sets forth our commitments as of
November 2008:
Commitments
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment Amount by Fiscal Period of Expiration
|
|
|
|
|
2010-
|
|
2012-
|
|
2014-
|
|
|
|
|
2009
|
|
2011
|
|
2013
|
|
Thereafter
|
|
Total
|
Commitments to extend credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lending:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-grade
|
|
$
|
3,587
|
|
|
$
|
2,705
|
|
|
$
|
1,538
|
|
|
$
|
177
|
|
|
$
|
8,007
|
|
Non-investment-grade
|
|
|
1,188
|
|
|
|
1,767
|
|
|
|
5,708
|
|
|
|
655
|
|
|
|
9,318
|
|
William Street program
|
|
|
3,300
|
|
|
|
6,715
|
|
|
|
12,178
|
|
|
|
417
|
|
|
|
22,610
|
|
Warehouse financing
|
|
|
604
|
|
|
|
497
|
|
|
|
|
|
|
|
|
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments to extend
credit (1)
|
|
|
8,679
|
|
|
|
11,684
|
|
|
|
19,424
|
|
|
|
1,249
|
|
|
|
41,036
|
|
Forward starting resale and securities borrowing agreements
|
|
|
61,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,455
|
|
Forward starting repurchase and securities lending agreements
|
|
|
6,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,948
|
|
Commitments under letters of credit issued by banks to
counterparties
|
|
|
6,953
|
|
|
|
101
|
|
|
|
197
|
|
|
|
|
|
|
|
7,251
|
|
Investment commitments
|
|
|
6,398
|
|
|
|
7,144
|
|
|
|
101
|
|
|
|
623
|
|
|
|
14,266
|
|
Underwriting commitments
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90,674
|
|
|
$
|
18,929
|
|
|
$
|
19,722
|
|
|
$
|
1,872
|
|
|
$
|
131,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Commitments to extend credit are
net of amounts syndicated to third parties.
|
Our commitments to extend credit are agreements to lend to
counterparties that have fixed termination dates and are
contingent on the satisfaction of all conditions to borrowing
set forth in the contract. In connection with our lending
activities, we had outstanding commitments to extend credit of
$41.04 billion as of November 2008. Since these
commitments may expire unused or be reduced or cancelled at the
counterpartys request, the total commitment amount does
not necessarily reflect the actual future cash flow
requirements. Our commercial lending commitments are generally
extended in connection with contingent acquisition financing and
other types of corporate lending as well as commercial real
estate financing. We may seek to reduce our credit risk on these
commitments by syndicating all or substantial portions of
commitments to other investors in the future. In addition,
103
commitments that are extended for contingent acquisition
financing are often intended to be
short-term
in nature, as borrowers often seek to replace them with other
funding sources.
Included within
non-investment-grade
commitments as of November 2008 was $2.07 billion of
exposure to leveraged lending capital market transactions,
$164 million related to commercial real estate transactions
and $7.09 billion arising from other unfunded credit
facilities. Including funded loans, our total exposure to
leveraged lending capital market transactions was
$7.97 billion as of November 2008.
The following table sets forth our exposure to leveraged lending
capital market transactions by geographic region:
Leveraged Lending
Capital Market Exposure by Geographic Region
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
Funded
|
|
Unfunded
|
|
Total
|
Americas (1)
|
|
$
|
3,036
|
|
|
$
|
1,735
|
|
|
$
|
4,771
|
|
EMEA (2)
|
|
|
2,294
|
|
|
|
259
|
|
|
|
2,553
|
|
Asia
|
|
|
568
|
|
|
|
73
|
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,898
|
|
|
$
|
2,067
|
|
|
$
|
7,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Substantially all relates to the
U.S.
|
|
(2) |
|
EMEA (Europe, Middle East and
Africa).
|
Substantially all of the commitments provided under the William
Street credit extension program are to
investment-grade
corporate borrowers. Commitments under the program are
principally extended by William Street Commitment Corporation
(Commitment Corp.), a consolidated wholly owned subsidiary of GS
Bank USA, and also by William Street Credit Corporation, GS Bank
USA or Goldman Sachs Credit Partners L.P. The commitments
extended by Commitment Corp. are supported, in part, by funding
raised by William Street Funding Corporation (Funding Corp.),
another consolidated wholly owned subsidiary of GS Bank USA. The
assets and liabilities of Commitment Corp. and Funding Corp. are
legally separated from other assets and liabilities of the firm.
With respect to most of the William Street commitments, SMFG
provides us with credit loss protection that is generally
limited to 95% of the first loss we realize on approved loan
commitments, up to a maximum of $1.00 billion. In addition,
subject to the satisfaction of certain conditions, upon our
request, SMFG will provide protection for 70% of additional
losses on such commitments, up to a maximum of
$1.13 billion, of which $375 million of protection has
been provided as of November 2008. We also use other
financial instruments to mitigate credit risks related to
certain William Street commitments not covered by SMFG.
Our commitments to extend credit also include financing for the
warehousing of financial assets. These arrangements are secured
by the warehoused assets, primarily consisting of commercial
mortgages as of November 2008.
See Note 8 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our commitments, contingencies
and guarantees.
104
Risk
Management
Management believes that effective risk management is of primary
importance to the success of Goldman Sachs. Accordingly, we have
a comprehensive risk management process to monitor, evaluate and
manage the principal risks we assume in conducting our
activities. These risks include market, credit, liquidity,
operational, legal and reputational exposures.
Risk Management
Structure
We seek to monitor and control our risk exposure through a
variety of separate but complementary financial, credit,
operational, compliance and legal reporting systems. In
addition, a number of committees are responsible for monitoring
risk exposures and for general oversight of our risk management
process, as described further below. These committees (including
their subcommittees), meet regularly and consist of senior
members of both our revenue-producing units and departments that
are independent of our revenue-producing units.
Segregation of duties and management oversight are fundamental
elements of our risk management process. In addition to the
committees described below, functions that are independent of
the revenue-producing units, such as Compliance, Finance, Legal,
Management Controls (Internal Audit) and Operations, perform
risk management functions, which include monitoring, analyzing
and evaluating risk.
Management Committee. All risk control
functions ultimately report to our Management Committee. Through
both direct and delegated authority, the Management Committee
approves all of our operating activities and trading risk
parameters.
Risk Committees. The Firmwide Risk Committee
reviews the activities of existing trading businesses, approves
new businesses and products, approves firmwide market risk
limits, reviews business unit market risk limits, approves
market risk limits for selected sovereign markets and business
units, approves sovereign credit risk limits and credit risk
limits by ratings group, and reviews scenario analyses based on
abnormal or catastrophic market movements.
The Securities Divisional Risk Committee sets market risk limits
for our trading activities subject to overall firmwide risk
limits, based on a number of measures, including VaR, stress
tests and scenario analyses.
Business unit risk limits are established by the appropriate
risk committee and may be further allocated by the business unit
managers to individual trading desks. Trading desk managers have
the first line of responsibility for managing risk within
prescribed limits. These managers have
in-depth
knowledge of the primary sources of risk in their respective
markets and the instruments available to hedge their exposures.
Market risk limits are monitored by the Finance Division and are
reviewed regularly by the appropriate risk committee. Limit
violations are reported to the appropriate risk committee and
business unit managers and addressed, as necessary. Credit risk
limits are also monitored by the Finance Division and reviewed
by the appropriate risk committee.
The Asset Management Divisional Risk Committee oversees various
risk, valuation and credit issues related to our asset
management business.
Business Practices Committee. The Business
Practices Committee assists senior management in its oversight
of compliance and operational risks and related reputational
concerns, seeks to ensure the consistency of our policies,
practices and procedures with our Business Principles, and makes
recommendations on ways to mitigate potential risks.
105
Firmwide Capital Committee. The Firmwide
Capital Committee reviews and approves transactions involving
commitments of our capital. Such capital commitments include,
but are not limited to, extensions of credit, alternative
liquidity commitments, certain bond underwritings and certain
distressed debt and principal finance activities. The Firmwide
Capital Committee is also responsible for establishing business
and reputational standards for capital commitments and seeking
to ensure that they are maintained on a global basis.
Commitments Committee. The Commitments
Committee reviews and approves underwriting and distribution
activities, primarily with respect to offerings of equity and
equity-related
securities, and sets and maintains policies and procedures
designed to ensure that legal, reputational, regulatory and
business standards are maintained in conjunction with these
activities. In addition to reviewing specific transactions, the
Commitments Committee periodically conducts strategic reviews of
industry sectors and products and establishes policies in
connection with transaction practices.
Credit Policy Committee. The Credit Policy
Committee establishes and reviews broad credit policies and
parameters that are implemented by the Credit Department.
Finance Committee. The Finance Committee
establishes and oversees our liquidity policies, sets certain
inventory position limits and has oversight responsibility for
liquidity risk, the size and composition of our balance sheet
and capital base, and our credit ratings. The Finance Committee
regularly reviews our funding position and capitalization and
makes adjustments in light of current events, risks and
exposures.
New Products Committee. The New Products
Committee, under the oversight of the Firmwide Risk Committee,
is responsible for reviewing and approving new products and
businesses globally.
Operational Risk Committee. The Operational
Risk Committee provides oversight of the ongoing development and
implementation of our operational risk policies, framework and
methodologies, and monitors the effectiveness of operational
risk management.
Structured Products Committee. The Structured
Products Committee reviews and approves structured product
transactions entered into with our clients that raise legal,
regulatory, tax or accounting issues or present reputational
risk to Goldman Sachs.
Market
Risk
The potential for changes in the market value of our trading and
investing positions is referred to as market risk. Such
positions result from
market-making,
proprietary trading, underwriting, specialist and investing
activities. Substantially all of our inventory positions are
marked-to-market
on a daily basis and changes are recorded in net revenues.
Categories of market risk include exposures to interest rates,
equity prices, currency rates and commodity prices. A
description of each market risk category is set forth below:
|
|
|
|
|
Interest rate risks primarily result from exposures to changes
in the level, slope and curvature of the yield curve, the
volatility of interest rates, mortgage prepayment speeds and
credit spreads.
|
|
|
|
Equity price risks result from exposures to changes in prices
and volatilities of individual equities, equity baskets and
equity indices.
|
|
|
|
Currency rate risks result from exposures to changes in spot
prices, forward prices and volatilities of currency rates.
|
|
|
|
Commodity price risks result from exposures to changes in spot
prices, forward prices and volatilities of commodities, such as
electricity, natural gas, crude oil, petroleum products, and
precious and base metals.
|
106
We seek to manage these risks by diversifying exposures,
controlling position sizes and establishing economic hedges in
related securities or derivatives. For example, we may seek to
hedge a portfolio of common stocks by taking an offsetting
position in a related
equity-index
futures contract. The ability to manage an exposure may,
however, be limited by adverse changes in the liquidity of the
security or the related hedge instrument and in the correlation
of price movements between the security and related hedge
instrument.
In addition to applying business judgment, senior management
uses a number of quantitative tools to manage our exposure to
market risk for Trading assets, at fair value and
Trading liabilities, at fair value in the
consolidated statements of financial condition. These tools
include:
|
|
|
|
|
risk limits based on a summary measure of market risk exposure
referred to as VaR;
|
|
|
|
scenario analyses, stress tests and other analytical tools that
measure the potential effects on our trading net revenues of
various market events, including, but not limited to, a large
widening of credit spreads, a substantial decline in equity
markets and significant moves in selected emerging markets; and
|
|
|
|
inventory position limits for selected business units.
|
VaR
VaR is the potential loss in value of trading positions due to
adverse market movements over a defined time horizon with a
specified confidence level.
For the VaR numbers reported below, a
one-day time
horizon and a 95% confidence level were used. This means that
there is a 1 in 20 chance that daily trading net revenues will
fall below the expected daily trading net revenues by an amount
at least as large as the reported VaR. Thus, shortfalls from
expected trading net revenues on a single trading day greater
than the reported VaR would be anticipated to occur, on average,
about once a month. Shortfalls on a single day can exceed
reported VaR by significant amounts. Shortfalls can also occur
more frequently or accumulate over a longer time horizon such as
a number of consecutive trading days.
The modeling of the risk characteristics of our trading
positions involves a number of assumptions and approximations.
While we believe that these assumptions and approximations are
reasonable, there is no standard methodology for estimating VaR,
and different assumptions
and/or
approximations could produce materially different VaR estimates.
We use historical data to estimate our VaR and, to better
reflect current asset volatilities, we generally weight
historical data to give greater importance to more recent
observations. Given its reliance on historical data, VaR is most
effective in estimating risk exposures in markets in which there
are no sudden fundamental changes or shifts in market
conditions. An inherent limitation of VaR is that the
distribution of past changes in market risk factors may not
produce accurate predictions of future market risk. Different
VaR methodologies and distributional assumptions could produce a
materially different VaR. Moreover, VaR calculated for a
one-day time
horizon does not fully capture the market risk of positions that
cannot be liquidated or offset with hedges within one day.
107
The following tables set forth the daily VaR:
Average Daily VaR
(1)
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
Risk Categories
|
|
2008
|
|
2007
|
|
2006
|
Interest rates
|
|
$
|
142
|
|
|
$
|
85
|
|
|
$
|
49
|
|
Equity prices
|
|
|
72
|
|
|
|
100
|
|
|
|
72
|
|
Currency rates
|
|
|
30
|
|
|
|
23
|
|
|
|
21
|
|
Commodity prices
|
|
|
44
|
|
|
|
26
|
|
|
|
30
|
|
Diversification
effect (2)
|
|
|
(108
|
)
|
|
|
(96
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
180
|
|
|
$
|
138
|
|
|
$
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain portfolios and individual
positions are not included in VaR, where VaR is not the most
appropriate measure of risk (e.g., due to transfer
restrictions
and/or
illiquidity). See
Other
Market Risk Measures below.
|
|
(2) |
|
Equals the difference between total
VaR and the sum of the VaRs for the four risk categories. This
effect arises because the four market risk categories are not
perfectly correlated.
|
Our average daily VaR increased to $180 million in 2008
from $138 million in 2007, principally due to increases in
the interest rate, commodity price and currency rate categories,
partially offset by a decrease in the equity price category. The
increase in interest rates was primarily due to higher levels of
volatility and wider spreads, partially offset by position
reductions, and the increases in commodity prices and currency
rates were primarily due to higher levels of volatility. The
decrease in equity prices was principally due to position
reductions, partially offset by higher levels of volatility.
Our average daily VaR increased to $138 million in 2007
from $101 million in 2006. The increase was primarily due
to higher levels of exposure and volatility in interest rates
and equity prices.
VaR excludes the impact of changes in counterparty and our own
credit spreads on derivatives as well as changes in our own
credit spreads on unsecured borrowings for which the fair value
option was elected. The estimated sensitivity of our net
revenues to a one basis point increase in credit spreads
(counterparty and our own) on derivatives was $1 million as
of November 2008. In addition, the estimated sensitivity of
our net revenues to a one basis point increase in our own credit
spreads on unsecured borrowings for which the fair value option
was elected was $1 million (including hedges) as of
November 2008.
Daily VaR
(1)
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
As of November
|
|
November 2008
|
Risk Categories
|
|
2008
|
|
2007
|
|
High
|
|
Low
|
Interest rates
|
|
$
|
228
|
|
|
$
|
105
|
|
|
$
|
228
|
|
|
$
|
93
|
|
Equity prices
|
|
|
38
|
|
|
|
82
|
|
|
|
234
|
|
|
|
36
|
|
Currency rates
|
|
|
36
|
|
|
|
35
|
|
|
|
55
|
|
|
|
17
|
|
Commodity prices
|
|
|
33
|
|
|
|
33
|
|
|
|
68
|
|
|
|
25
|
|
Diversification
effect (2)
|
|
|
(91
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
244
|
|
|
$
|
134
|
|
|
$
|
246
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain portfolios and individual
positions are not included in VaR, where VaR is not the most
appropriate measure of risk (e.g., due to transfer
restrictions
and/or
illiquidity). See
Other
Market Risk Measures below.
|
|
(2) |
|
Equals the difference between total
VaR and the sum of the VaRs for the four risk categories. This
effect arises because the four market risk categories are not
perfectly correlated.
|
108
Our daily VaR increased to $244 million as of
November 2008 from $134 million as of
November 2007, primarily due to an increase in the interest
rate category and a reduction in the diversification benefit
across risk categories, partially offset by a decrease in the
equity price category. The increase in interest rates was
principally due to higher levels of volatility and wider
spreads, partially offset by position reductions. The decrease
in equity prices was primarily due to position reductions,
partially offset by higher levels of volatility.
The following chart presents our daily VaR during 2008:
Daily VaR
($ in millions)
109
Trading Net
Revenues Distribution
The following chart sets forth the frequency distribution of our
daily trading net revenues for substantially all inventory
positions included in VaR for the year ended November 2008:
Daily Trading Net
Revenues
($ in millions)
As part of our overall risk control process, daily trading net
revenues are compared with VaR calculated as of the end of the
prior business day. Trading losses incurred on a single day
exceeded our 95%
one-day VaR
on 13 and 10 occasions during 2008 and 2007, respectively.
Other Market
Risk Measures
Certain portfolios and individual positions are not included in
VaR, where VaR is not the most appropriate measure of risk
(e.g., due to transfer restrictions
and/or
illiquidity). The market risk related to our investment in the
ordinary shares of ICBC, excluding interests held by investment
funds managed by Goldman Sachs, is measured by estimating the
potential reduction in net revenues associated with a 10%
decline in the ICBC ordinary share price. The market risk
related to the remaining positions is measured by estimating the
potential reduction in net revenues associated with a 10%
decline in asset values.
The sensitivity analyses for equity and debt positions in our
trading portfolio and equity, debt (primarily mezzanine
instruments) and real estate positions in our
non-trading
portfolio are measured by the impact of a decline in the asset
values (including the impact of leverage in the underlying
investments for real estate positions in our
non-trading
portfolio) of such positions. The fair value of the underlying
positions may be impacted by factors such as transactions in
similar instruments, completed or pending
third-party
transactions in the underlying investment or comparable
entities, subsequent rounds of financing, recapitalizations and
other transactions across the capital structure, offerings in
the equity or debt capital markets, and changes in financial
ratios or cash flows.
110
The following table sets forth market risk for positions not
included in VaR. These measures do not reflect diversification
benefits across asset categories and, given the differing
likelihood of the potential declines in asset categories, these
measures have not been aggregated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% Sensitivity
|
|
|
|
|
Amount as of November
|
Asset Categories
|
|
10% Sensitivity Measure
|
|
2008
|
|
2007
|
|
|
|
|
(in millions)
|
|
Trading Risk
(1)
|
|
|
|
|
|
|
|
|
|
|
Equity (2)
|
|
Underlying asset value
|
|
$
|
790
|
|
|
$
|
1,325
|
|
Debt (3)
|
|
Underlying asset value
|
|
|
808
|
|
|
|
1,020
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-trading
Risk
|
|
|
|
|
|
|
|
|
|
|
ICBC
|
|
ICBC ordinary share price
|
|
|
202
|
|
|
|
250
|
|
Other
Equity (4)
|
|
Underlying asset value
|
|
|
1,155
|
|
|
|
1,054
|
|
Debt (5)
|
|
Underlying asset value
|
|
|
694
|
|
|
|
500
|
|
Real
Estate (6)
|
|
Underlying asset value
|
|
|
1,330
|
|
|
|
1,108
|
|
|
|
|
(1) |
|
In addition to the positions in
these portfolios, which are accounted for at fair value, we make
investments accounted for under the equity method and we also
make direct investments in real estate, both of which are
included in Other assets in the consolidated
statements of financial condition. Direct investments in real
estate are accounted for at cost less accumulated depreciation.
See Note 12 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for information on Other assets.
|
|
(2) |
|
Relates to private and restricted
public equity securities held within the FICC and Equities
components of our Trading and Principal Investments segment.
|
|
(3) |
|
Relates to acquired portfolios of
distressed loans (primarily backed by commercial and residential
real estate collateral), bank loans and bridge loans, and loans
backed by commercial real estate and held within the FICC
component of our Trading and Principal Investments segment.
|
|
(4) |
|
Primarily relates to interests in
our merchant banking funds that invest in corporate equities.
|
|
(5) |
|
Primarily relates to interests in
our merchant banking funds that invest in corporate mezzanine
debt instruments.
|
|
(6) |
|
Primarily relates to interests in
our merchant banking funds that invest in real estate. Such
funds typically employ leverage as part of the investment
strategy. This sensitivity measure is based on our percentage
ownership of the underlying asset values in the funds and
unfunded commitments to the funds.
|
The decrease in our 10% sensitivity measures as of
November 2008 from November 2007 for equity and debt
positions in our trading portfolio was due to dispositions and a
decrease in the fair value of the portfolio, partially offset by
new investments. The increase in our 10% sensitivity measures as
of November 2008 from November 2007 for our
non-trading
portfolio (excluding ICBC) was due to new investments, partially
offset by a decrease in the fair value of the portfolio.
In addition to the positions included in VaR and the other risk
measures described above, as of November 2008, we held
approximately $10.39 billion of financial instruments in
our bank and insurance subsidiaries, primarily consisting of
$3.08 billion of U.S. government, federal agency and
sovereign obligations, $2.87 billion of corporate debt
securities and other debt obligations, $2.86 billion of
money market instruments, and $1.22 billion of mortgage and
other
asset-backed
loans and securities. As of November 2007, we held
approximately $10.58 billion of financial instruments in
our bank and insurance subsidiaries, primarily consisting of
$4.70 billion of mortgage and other
asset-backed
loans and securities, $2.93 billion of corporate debt
securities and other debt obligations and $2.77 billion of
U.S. government, federal agency and sovereign obligations.
In addition, as of November 2008 and November 2007, we
held commitments and loans under the William Street credit
extension program. See
Contractual
Obligations and Commitments Commitments above
for information on our William Street program.
111
Credit
Risk
Credit risk represents the loss that we would incur if a
counterparty or an issuer of securities or other instruments we
hold fails to perform under its contractual obligations to us,
or upon a deterioration in the credit quality of third parties
whose securities or other instruments, including OTC
derivatives, we hold. Our exposure to credit risk principally
arises through our trading, investing and financing activities.
To reduce our credit exposures, we seek to enter into netting
agreements with counterparties that permit us to offset
receivables and payables with such counterparties. In addition,
we attempt to further reduce credit risk with certain
counterparties by (i) entering into agreements that enable
us to obtain collateral from a counterparty on an upfront or
contingent basis, (ii) seeking
third-party
guarantees of the counterpartys obligations,
and/or
(iii) transferring our credit risk to third parties using
credit derivatives
and/or other
structures and techniques.
To measure and manage our credit exposures, we use a variety of
tools, including credit limits referenced to both current
exposure and potential exposure. Potential exposure is an
estimate of exposure, within a specified confidence level, that
could be outstanding over the life of a transaction based on
market movements. In addition, as part of our market risk
management process, for positions measured by changes in credit
spreads, we use VaR and other sensitivity measures. To
supplement our primary credit exposure measures, we also use
scenario analyses, such as credit spread widening scenarios,
stress tests and other quantitative tools.
Our global credit management systems monitor credit exposure to
individual counterparties and on an aggregate basis to
counterparties and their affiliates. These systems also provide
management, including the Firmwide Risk and Credit Policy
Committees, with information regarding credit risk by product,
industry sector, country and region.
While our activities expose us to many different industries and
counterparties, we routinely execute a high volume of
transactions with counterparties in the financial services
industry, including brokers and dealers, commercial banks and
investment funds, resulting in significant credit concentration
with respect to this industry. In the ordinary course of
business, we may also be subject to a concentration of credit
risk to a particular counterparty, borrower or issuer.
As of November 2008 and November 2007, we held
$53.98 billion (6% of total assets) and $45.75 billion
(4% of total assets), respectively, of U.S. government and
federal agency obligations included in Trading assets, at
fair value and Cash and securities segregated for
regulatory and other purposes in the consolidated
statements of financial condition. As of November 2008 and
November 2007, we held $21.13 billion (2% of total
assets) and $31.65 billion (3% of total assets),
respectively, of other sovereign obligations, principally
consisting of securities issued by the governments of Japan and
the United Kingdom. In addition, as of November 2008 and
November 2007, $126.27 billion and
$144.92 billion of our securities purchased under
agreements to resell and securities borrowed (including those in
Cash and securities segregated for regulatory and other
purposes), respectively, were collateralized by
U.S. government and federal agency obligations. As of
November 2008 and November 2007, $65.37 billion
and $41.26 billion of our securities purchased under
agreements to resell and securities borrowed, respectively, were
collateralized by other sovereign obligations. As of
November 2008 and November 2007, we did not have
credit exposure to any other counterparty that exceeded 2% of
our total assets. However, over the past several years, the
amount and duration of our credit exposures with respect to OTC
derivatives has been increasing, due to, among other factors,
the growth of our OTC derivative activities and market evolution
toward longer-dated transactions. A further discussion of our
derivative activities follows below.
112
Derivatives
Derivative contracts are instruments, such as futures, forwards,
swaps or option contracts, that derive their value from
underlying assets, indices, reference rates or a combination of
these factors. Derivative instruments may be privately
negotiated contracts, which are often referred to as OTC
derivatives, or they may be listed and traded on an exchange.
Substantially all of our derivative transactions are entered
into to facilitate client transactions, to take proprietary
positions or as a means of risk management. In addition to
derivative transactions entered into for trading purposes, we
enter into derivative contracts to manage currency exposure on
our net investment in
non-U.S. operations
and to manage the interest rate and currency exposure on our
long-term
borrowings and certain
short-term
borrowings.
Derivatives are used in many of our businesses, and we believe
that the associated market risk can only be understood relative
to all of the underlying assets or risks being hedged, or as
part of a broader trading strategy. Accordingly, the market risk
of derivative positions is managed together with our
nonderivative positions.
The fair value of our derivative contracts is reflected net of
cash paid or received pursuant to credit support agreements and
is reported on a
net-by-counterparty
basis in our consolidated statements of financial condition when
we believe a legal right of setoff exists under an enforceable
netting agreement. For an OTC derivative, our credit exposure is
directly with our counterparty and continues until the maturity
or termination of such contract.
113
The following tables set forth the fair values of our OTC
derivative assets and liabilities by product and by remaining
contractual maturity:
OTC
Derivatives
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
As of November 2008
|
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
Contract Type
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Interest rates
|
|
$
|
16,220
|
|
|
$
|
43,864
|
|
|
$
|
35,050
|
|
|
$
|
40,649
|
|
|
$
|
135,783
|
|
Credit derivatives
|
|
|
10,364
|
|
|
|
45,596
|
|
|
|
20,110
|
|
|
|
13,788
|
|
|
|
89,858
|
|
Currencies
|
|
|
28,056
|
|
|
|
12,191
|
|
|
|
5,980
|
|
|
|
4,137
|
|
|
|
50,364
|
|
Commodities
|
|
|
13,660
|
|
|
|
12,717
|
|
|
|
1,175
|
|
|
|
1,681
|
|
|
|
29,233
|
|
Equities
|
|
|
17,830
|
|
|
|
4,742
|
|
|
|
3,927
|
|
|
|
1,061
|
|
|
|
27,560
|
|
Netting across contract
types (1)
|
|
|
(6,238
|
)
|
|
|
(9,160
|
)
|
|
|
(3,515
|
)
|
|
|
(3,802
|
)
|
|
|
(22,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
79,892
|
(4)
|
|
$
|
109,950
|
|
|
$
|
62,727
|
|
|
$
|
57,514
|
|
|
$
|
310,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross maturity
netting (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,750
|
)
|
Cash collateral
netting (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
124,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
Contract Type
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Interest rates
|
|
$
|
8,004
|
|
|
$
|
16,152
|
|
|
$
|
17,456
|
|
|
$
|
26,399
|
|
|
$
|
68,011
|
|
Credit derivatives
|
|
|
6,591
|
|
|
|
20,958
|
|
|
|
10,301
|
|
|
|
13,610
|
|
|
|
51,460
|
|
Currencies
|
|
|
29,130
|
|
|
|
13,755
|
|
|
|
4,109
|
|
|
|
2,051
|
|
|
|
49,045
|
|
Commodities
|
|
|
12,685
|
|
|
|
10,391
|
|
|
|
1,575
|
|
|
|
827
|
|
|
|
25,478
|
|
Equities
|
|
|
14,016
|
|
|
|
4,741
|
|
|
|
1,751
|
|
|
|
320
|
|
|
|
20,828
|
|
Netting across contract
types (1)
|
|
|
(6,238
|
)
|
|
|
(9,160
|
)
|
|
|
(3,515
|
)
|
|
|
(3,802
|
)
|
|
|
(22,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
64,188
|
(4)
|
|
$
|
56,837
|
|
|
$
|
31,677
|
|
|
$
|
39,405
|
|
|
$
|
192,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross maturity
netting (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,750
|
)
|
Cash collateral
netting (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the netting of
receivable balances with payable balances for the same
counterparty across contract types within a maturity category,
pursuant to credit support agreements.
|
|
(2) |
|
Represents the netting of
receivable balances with payable balances for the same
counterparty across maturity categories, pursuant to credit
support agreements.
|
|
(3) |
|
Represents the netting of cash
collateral received and posted on a counterparty basis pursuant
to credit support agreements.
|
|
(4) |
|
Includes fair values of OTC
derivative assets and liabilities, maturing within six months,
of $56.72 billion and $51.26 billion, respectively.
|
114
OTC
Derivatives
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
As of November 2007
|
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
Contract Type
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Interest rates
|
|
$
|
8,703
|
|
|
$
|
10,965
|
|
|
$
|
17,176
|
|
|
$
|
28,388
|
|
|
$
|
65,232
|
|
Credit derivatives
|
|
|
11,168
|
|
|
|
13,006
|
|
|
|
6,501
|
|
|
|
20,163
|
|
|
|
50,838
|
|
Currencies
|
|
|
20,586
|
|
|
|
9,275
|
|
|
|
5,106
|
|
|
|
2,127
|
|
|
|
37,094
|
|
Commodities
|
|
|
6,264
|
|
|
|
12,064
|
|
|
|
1,766
|
|
|
|
899
|
|
|
|
20,993
|
|
Equities
|
|
|
13,845
|
|
|
|
5,312
|
|
|
|
4,273
|
|
|
|
1,603
|
|
|
|
25,033
|
|
Netting across contract
types (1)
|
|
|
(3,355
|
)
|
|
|
(5,665
|
)
|
|
|
(3,132
|
)
|
|
|
(2,066
|
)
|
|
|
(14,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
57,211
|
(4)
|
|
$
|
44,957
|
|
|
$
|
31,690
|
|
|
$
|
51,114
|
|
|
$
|
184,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross maturity
netting (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,849
|
)
|
Cash collateral
netting (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
92,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
Contract Type
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Interest rates
|
|
$
|
10,234
|
|
|
$
|
10,802
|
|
|
$
|
9,816
|
|
|
$
|
10,287
|
|
|
$
|
41,139
|
|
Credit derivatives
|
|
|
7,085
|
|
|
|
11,842
|
|
|
|
5,084
|
|
|
|
16,077
|
|
|
|
40,088
|
|
Currencies
|
|
|
16,560
|
|
|
|
9,815
|
|
|
|
1,446
|
|
|
|
1,772
|
|
|
|
29,593
|
|
Commodities
|
|
|
8,752
|
|
|
|
9,690
|
|
|
|
2,757
|
|
|
|
506
|
|
|
|
21,705
|
|
Equities
|
|
|
17,460
|
|
|
|
7,723
|
|
|
|
3,833
|
|
|
|
1,382
|
|
|
|
30,398
|
|
Netting across contract
types (1)
|
|
|
(3,355
|
)
|
|
|
(5,665
|
)
|
|
|
(3,132
|
)
|
|
|
(2,066
|
)
|
|
|
(14,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
56,736
|
(4)
|
|
$
|
44,207
|
|
|
$
|
19,804
|
|
|
$
|
27,958
|
|
|
$
|
148,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross maturity
netting (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,849
|
)
|
Cash collateral
netting (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
87,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the netting of
receivable balances with payable balances for the same
counterparty across contract types within a maturity category,
pursuant to credit support agreements.
|
|
(2) |
|
Represents the netting of
receivable balances with payable balances for the same
counterparty across maturity categories, pursuant to credit
support agreements.
|
|
(3) |
|
Represents the netting of cash
collateral received and posted on a counterparty basis pursuant
to credit support agreements.
|
|
(4) |
|
Includes fair values of OTC
derivative assets and liabilities, maturing within six months,
of $41.80 billion and $41.12 billion, respectively.
|
In the tables above, for option contracts that require
settlement by delivery of an underlying derivative instrument,
the remaining contractual maturity is generally classified based
upon the maturity date of the underlying derivative instrument.
In those instances where the underlying instrument does not have
a maturity date or either counterparty has the right to settle
in cash, the remaining contractual maturity is generally based
upon the option expiration date.
115
The following tables set forth the distribution, by credit
rating, of our exposure with respect to OTC derivatives by
remaining contractual maturity, both before and after
consideration of the effect of collateral and netting
agreements. The categories shown reflect our internally
determined public rating agency equivalents:
OTC Derivative
Credit Exposure
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure
|
Credit Rating
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
|
|
|
|
|
Net of
|
Equivalent
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Netting (2)
|
|
Exposure
|
|
Collateral
|
|
AAA/Aaa
|
|
$
|
5,700
|
|
|
$
|
7,000
|
|
|
$
|
4,755
|
|
|
$
|
2,726
|
|
|
$
|
20,181
|
|
|
$
|
(6,765
|
)
|
|
$
|
13,416
|
|
|
$
|
12,328
|
|
AA/Aa2
|
|
|
26,040
|
|
|
|
37,378
|
|
|
|
30,293
|
|
|
|
18,084
|
|
|
|
111,795
|
|
|
|
(78,085
|
)
|
|
|
33,710
|
|
|
|
29,438
|
|
A/A2
|
|
|
22,374
|
|
|
|
34,796
|
|
|
|
15,317
|
|
|
|
20,498
|
|
|
|
92,985
|
|
|
|
(58,744
|
)
|
|
|
34,241
|
|
|
|
28,643
|
|
BBB/Baa2
|
|
|
11,844
|
|
|
|
19,200
|
|
|
|
7,635
|
|
|
|
13,302
|
|
|
|
51,981
|
|
|
|
(29,791
|
)
|
|
|
22,190
|
|
|
|
16,155
|
|
BB/Ba2 or lower
|
|
|
13,161
|
|
|
|
10,403
|
|
|
|
4,035
|
|
|
|
2,711
|
|
|
|
30,310
|
|
|
|
(12,515
|
)
|
|
|
17,795
|
|
|
|
11,212
|
|
Unrated
|
|
|
773
|
|
|
|
1,173
|
|
|
|
692
|
|
|
|
193
|
|
|
|
2,831
|
|
|
|
(10
|
)
|
|
|
2,821
|
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
79,892
|
(1)
|
|
$
|
109,950
|
|
|
$
|
62,727
|
|
|
$
|
57,514
|
|
|
$
|
310,083
|
|
|
$
|
(185,910
|
)
|
|
$
|
124,173
|
|
|
$
|
99,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure
|
Credit Rating
|
|
0-12
|
|
1 - 5
|
|
5 - 10
|
|
10 Years
|
|
|
|
|
|
|
|
Net of
|
Equivalent
|
|
Months
|
|
Years
|
|
Years
|
|
or Greater
|
|
Total
|
|
Netting (2)
|
|
Exposure
|
|
Collateral
|
|
AAA/Aaa
|
|
$
|
6,018
|
|
|
$
|
3,354
|
|
|
$
|
2,893
|
|
|
$
|
7,875
|
|
|
$
|
20,140
|
|
|
$
|
(3,600
|
)
|
|
$
|
16,540
|
|
|
$
|
14,453
|
|
AA/Aa2
|
|
|
19,331
|
|
|
|
14,339
|
|
|
|
13,184
|
|
|
|
22,708
|
|
|
|
69,562
|
|
|
|
(40,661
|
)
|
|
|
28,901
|
|
|
|
24,758
|
|
A/A2
|
|
|
14,491
|
|
|
|
13,380
|
|
|
|
10,012
|
|
|
|
15,133
|
|
|
|
53,016
|
|
|
|
(32,453
|
)
|
|
|
20,563
|
|
|
|
16,010
|
|
BBB/Baa2
|
|
|
4,059
|
|
|
|
5,774
|
|
|
|
1,707
|
|
|
|
2,777
|
|
|
|
14,317
|
|
|
|
(4,437
|
)
|
|
|
9,880
|
|
|
|
6,542
|
|
BB/Ba2 or lower
|
|
|
6,854
|
|
|
|
5,676
|
|
|
|
3,347
|
|
|
|
2,541
|
|
|
|
18,418
|
|
|
|
(4,834
|
)
|
|
|
13,584
|
|
|
|
7,366
|
|
Unrated
|
|
|
6,458
|
|
|
|
2,434
|
|
|
|
547
|
|
|
|
80
|
|
|
|
9,519
|
|
|
|
(6,914
|
)
|
|
|
2,605
|
|
|
|
1,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
57,211
|
(1)
|
|
$
|
44,957
|
|
|
$
|
31,690
|
|
|
$
|
51,114
|
|
|
$
|
184,972
|
|
|
$
|
(92,899
|
)
|
|
$
|
92,073
|
|
|
$
|
70,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes fair values of OTC derivative assets, maturing within
six months, of $56.72 billion and $41.80 billion as of
November 2008 and November 2007, respectively.
|
|
(2)
|
Represents the netting of receivable balances with payable
balances for the same counterparty across maturity categories
and the netting of cash collateral received, pursuant to credit
support agreements. Receivable and payable balances with the
same counterparty in the same maturity category are netted
within such maturity category, where appropriate.
|
Derivative transactions may also involve legal risks including
the risk that they are not authorized or appropriate for a
counterparty, that documentation has not been properly executed
or that executed agreements may not be enforceable against the
counterparty. We attempt to minimize these risks by obtaining
advice of counsel on the enforceability of agreements as well as
on the authority of a counterparty to effect the derivative
transaction. In addition, certain derivative transactions
(e.g., credit derivative contracts) involve the risk that
we may have difficulty obtaining, or be unable to obtain, the
underlying security or obligation in order to satisfy any
physical settlement requirement.
116
Liquidity and
Funding Risk
Liquidity is of critical importance to companies in the
financial services sector. Most failures of financial
institutions have occurred in large part due to insufficient
liquidity resulting from adverse circumstances. Accordingly,
Goldman Sachs has in place a comprehensive set of liquidity and
funding policies that are intended to maintain significant
flexibility to address both Goldman Sachs-specific and broader
industry or market liquidity events. Our principal objective is
to be able to fund Goldman Sachs and to enable our core
businesses to continue to generate revenues, even under adverse
circumstances.
We have implemented a number of policies according to the
following liquidity risk management framework:
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Excess Liquidity We maintain substantial excess
liquidity to meet a broad range of potential cash outflows in a
stressed environment, including financing obligations.
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Asset-Liability
Management We seek to maintain secured and unsecured
funding sources that are sufficiently
long-term in
order to withstand a prolonged or severe liquidity-stressed
environment without having to rely on asset sales.
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Conservative Liability Structure We seek to access
funding across a diverse range of markets, products and
counterparties, emphasize less
credit-sensitive
sources of funding and conservatively manage the distribution of
funding across our entity structure.
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Crisis Planning We base our liquidity and funding
management on
stress-scenario
planning and maintain a crisis plan detailing our response to a
liquidity-threatening event.
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Excess
Liquidity
Our most important liquidity policy is to
pre-fund
what we estimate will be our likely cash needs during a
liquidity crisis and hold such excess liquidity in the form of
unencumbered, highly liquid securities that may be sold or
pledged to provide
same-day
liquidity. This Global Core Excess is intended to
allow us to meet immediate obligations without needing to sell
other assets or depend on additional funding from
credit-sensitive
markets. We believe that this pool of excess liquidity provides
us with a resilient source of funds and gives us significant
flexibility in managing through a difficult funding environment.
Our Global Core Excess reflects the following principles:
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The first days or weeks of a liquidity crisis are the most
critical to a companys survival.
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Focus must be maintained on all potential cash and collateral
outflows, not just disruptions to financing flows. Goldman
Sachs businesses are diverse, and its cash needs are
driven by many factors, including market movements, collateral
requirements and client commitments, all of which can change
dramatically in a difficult funding environment.
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During a liquidity crisis,
credit-sensitive
funding, including unsecured debt and some types of secured
financing agreements, may be unavailable, and the terms or
availability of other types of secured financing may change.
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As a result of our policy to
pre-fund
liquidity that we estimate may be needed in a crisis, we hold
more unencumbered securities and have larger unsecured debt
balances than our businesses would otherwise require. We believe
that our liquidity is stronger with greater balances of highly
liquid unencumbered securities, even though it increases our
unsecured liabilities and our funding costs.
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117
The size of our Global Core Excess is based on an internal
liquidity model together with a qualitative assessment of the
condition of the financial markets and of Goldman Sachs. Our
liquidity model identifies and estimates cash and collateral
outflows over a
short-term
horizon in a liquidity crisis, including, but not limited to:
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upcoming maturities of unsecured debt and letters of credit;
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potential buybacks of a portion of our outstanding negotiable
unsecured debt and potential withdrawals of client deposits;
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adverse changes in the terms or availability of secured funding;
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derivatives and other margin and collateral outflows, including
those due to market moves;
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potential cash outflows associated with our prime brokerage
business;
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additional collateral that could be called in the event of a
two-notch
downgrade in our credit ratings;
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draws on our unfunded commitments not supported by William
Street Funding
Corporation (1);
and
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upcoming cash outflows, such as tax and other large payments.
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The following table sets forth the average loan value (the
estimated amount of cash that would be advanced by
counterparties against these securities), as well as overnight
cash deposits, of our Global Core Excess:
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Year Ended November
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2008
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2007
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(in millions)
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U.S. dollar-denominated
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$
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78,048
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$
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52,115
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Non-U.S. dollar-denominated
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18,677
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11,928
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Total Global Core Excess
(2)
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$
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96,725
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$
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64,043
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The
U.S. dollar-denominated
excess is comprised of only unencumbered U.S. government
securities, U.S. agency securities and highly liquid
U.S. agency
mortgage-backed
securities, all of which are eligible as collateral in Federal
Reserve open market operations, as well as overnight cash
deposits. Our
non-U.S. dollar-denominated
excess is comprised of only unencumbered French, German, United
Kingdom and Japanese government bonds and overnight cash
deposits in highly liquid currencies. We strictly limit our
Global Core Excess to this narrowly defined list of securities
and cash because we believe they are highly liquid, even in a
difficult funding environment. We do not believe other potential
sources of excess liquidity, such as lower-quality unencumbered
securities or committed credit facilities, are as reliable in a
liquidity crisis.
We maintain our Global Core Excess to enable us to meet current
and potential liquidity requirements of our parent company,
Group Inc., and all of its subsidiaries. The amount of our
Global Core Excess is driven by our assessment of potential cash
and collateral outflows, regulatory obligations and the currency
and timing requirements of our global business model. In
addition, we recognize that our Global Core Excess held in a
regulated entity may not be available to our parent company or
other subsidiaries and therefore may only be available to meet
the potential liquidity requirements of that entity.
(1) The
Global Core Excess excludes liquid assets of $4.40 billion
held separately by William Street Funding Corporation. See
Contractual
Obligations and Commitments above for a further discussion
of the William Street credit extension program.
(2) Beginning
in 2008, our Global Core Excess as presented includes the Global
Core Excess of GS Bank USA and GS Bank Europe. The 2007 amounts
include $3.48 billion of Global Core Excess at GS Bank USA.
118
In addition to our Global Core Excess, we have a significant
amount of other unencumbered securities as a result of our
business activities. These assets, which are located in the U.
S., Europe and Asia, include other government bonds,
high-grade
money market securities, corporate bonds and marginable
equities. We do not include these securities in our Global Core
Excess.
We maintain our Global Core Excess and other unencumbered assets
in an amount that, if pledged or sold, would provide the funds
necessary to replace at least 110% of our unsecured obligations
that are scheduled to mature (or where holders have the option
to redeem) within the next 12 months. We assume
conservative loan values that are based on
stress-scenario
borrowing capacity and we regularly review these assumptions
asset class by asset class. The estimated aggregate loan value
of our Global Core Excess, as well as overnight cash deposits,
and our other unencumbered assets averaged $163.41 billion
and $156.74 billion for the fiscal years ended
November 2008 and November 2007, respectively.
Asset-Liability
Management
We seek to maintain a highly liquid balance sheet and
substantially all of our inventory is
marked-to-market
daily. We utilize aged inventory limits for certain financial
instruments as a disincentive to our businesses to hold
inventory over longer periods of time. We believe that these
limits provide a complementary mechanism for ensuring
appropriate balance sheet liquidity in addition to our standard
position limits. Although our balance sheet fluctuates due to
client activity, market conventions and periodic market
opportunities in certain of our businesses, our total assets and
adjusted assets at financial statement dates are typically not
materially different from those occurring within our reporting
periods.
We seek to manage the maturity profile of our secured and
unsecured funding base such that we should be able to liquidate
our assets prior to our liabilities coming due, even in times of
prolonged or severe liquidity stress. We do not rely on
immediate sales of assets (other than our Global Core Excess) to
maintain liquidity in a distressed environment, although we
recognize orderly asset sales may be prudent or necessary in a
severe or persistent liquidity crisis.
In order to avoid reliance on asset sales, our goal is to ensure
that we have sufficient total capital (unsecured
long-term
borrowings plus total shareholders equity) to fund our
balance sheet for at least one year. The target amount of our
total capital is based on an internal liquidity model, which
incorporates, among other things, the following
long-term
financing requirements:
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the portion of trading assets that we believe could not be
funded on a secured basis in periods of market stress, assuming
conservative loan values;
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goodwill and identifiable intangible assets, property, leasehold
improvements and equipment, and other illiquid assets;
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derivative and other margin and collateral requirements;
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anticipated draws on our unfunded loan commitments; and
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capital or other forms of financing in our regulated
subsidiaries that are in excess of their
long-term
financing requirements. See
Conservative
Liability Structure below for a further discussion of how
we fund our subsidiaries.
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119
Certain financial instruments may be more difficult to fund on a
secured basis during times of market stress. Accordingly, we
generally hold higher levels of total capital for these assets
than more liquid types of financial instruments. The following
table sets forth our aggregate holdings in these categories of
financial instruments:
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As of November
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2008
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2007
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(in millions)
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Mortgage and other
asset-backed
loans and securities
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$
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22,393
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$
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46,436
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(6)
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Bank loans and bridge
loans (1)
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21,839
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49,154
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Emerging market debt securities
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2,827
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3,343
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High-yield
and other debt obligations
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9,998
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12,807
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Private equity and real estate fund
investments (2)
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18,171
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16,244
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Emerging market equity securities
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2,665
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8,014
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ICBC ordinary
shares (3)
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5,496
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6,807
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SMFG convertible preferred
stock (4)
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1,135
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4,060
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Other restricted public equity securities
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568
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3,455
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Other investments in
funds (5)
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2,714
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3,437
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(1) |
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Includes funded commitments and
inventory held in connection with our origination and secondary
trading activities.
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(2) |
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Includes interests in our merchant
banking funds. Such amounts exclude assets related to
consolidated investment funds of $1.16 billion and
$8.13 billion as of November 2008 and
November 2007, respectively, for which Goldman Sachs does
not bear economic exposure.
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(3) |
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Includes interests of
$3.48 billion and $4.30 billion as of
November 2008 and November 2007, respectively, held by
investment funds managed by Goldman Sachs.
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(4) |
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During our second quarter of 2008,
we converted
one-third of
our SMFG preferred stock investment into SMFG common stock, and
delivered the common stock to close out
one-third of
our hedge position.
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(5) |
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Includes interests in other
investment funds that we manage.
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(6) |
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Excludes $7.64 billion as of
November 2007 of mortgage whole loans that were transferred
to securitization vehicles where such transfers were accounted
for as secured financings rather than sales under
SFAS No. 140. We distributed to investors the
securities that were issued by the securitization vehicles and
therefore did not bear economic exposure to the underlying
mortgage whole loans.
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A large portion of these assets are funded through secured
funding markets or nonrecourse financing. We focus on funding
these assets on a secured basis with long contractual maturities
to reduce refinancing risk in periods of market stress.
See Note 3 to the consolidated financial statements in
Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding the financial instruments we
hold.
Conservative
Liability Structure
We seek to structure our liabilities conservatively to reduce
refinancing risk and the risk that we may be required to redeem
or repurchase certain of our borrowings prior to their
contractual maturity.
We fund a substantial portion of our inventory on a secured
basis, which we believe provides Goldman Sachs with a more
stable source of liquidity than unsecured financing, as it is
less sensitive to changes in our credit due to the underlying
collateral. However, we recognize that the terms or availability
of secured funding, particularly overnight funding, can
deteriorate rapidly in a difficult environment. To help mitigate
this risk, we raise the majority of our funding for durations
longer than overnight. We seek longer terms for secured funding
collateralized by lower-quality assets, as we believe these
funding transactions may pose greater refinancing risk. The
weighted average life of our secured funding, excluding funding
collateralized by highly liquid securities, such as U.S.,
French, German, United Kingdom and Japanese government bonds,
and U.S. agency securities, exceeded 100 days as of
November 2008.
120
Our liquidity also depends to an important degree on the
stability of our
short-term
unsecured financing base. Accordingly, we prefer the use of
promissory notes (in which Goldman Sachs does not make a market)
over commercial paper, which we may repurchase prior to maturity
through the ordinary course of business as a market maker. As of
November 2008 and November 2007, our unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings, were $52.66 billion and $71.56 billion,
respectively. See Note 6 to the consolidated financial
statements in Part II, Item 8 of our Annual Report on
Form 10-K
for further information regarding our unsecured
short-term
borrowings.
We issue
long-term
borrowings as a source of total capital in order to meet our
long-term
financing requirements. The following table sets forth our
quarterly unsecured
long-term
borrowings maturity profile through 2014:
Unsecured
Long-Term
Borrowings Maturity Profile
($ in millions)
The weighted average maturity of our unsecured
long-term
borrowings as of November 2008 was approximately eight
years. To mitigate refinancing risk, we seek to limit the
principal amount of debt maturing on any one day or during any
week or year. We swap a substantial portion of our
long-term
borrowings into U.S. dollar obligations with
short-term
floating interest rates in order to minimize our exposure to
interest rates and foreign exchange movements.
We issue substantially all of our unsecured debt without
provisions that would, based solely upon an adverse change in
our credit ratings, financial ratios, earnings, cash flows or
stock price, trigger a requirement for an early payment,
collateral support, change in terms, acceleration of maturity or
the creation of an additional financial obligation.
As of November 2008, our bank depository institution
subsidiaries had $27.64 billion in customer deposits,
including $19.15 billion of deposits from our bank sweep
programs and $8.49 billion of brokered certificates of
deposit with a weighted average maturity of three years. In
addition, we are pursuing a number of strategies to raise
additional deposits as a source of funding for the firm. As of
121
September 2008, GS Bank USA has access to funding through
the Federal Reserve Bank discount window. While we do not rely
on funding through the Federal Reserve Bank discount window in
our liquidity modeling and stress testing, we maintain policies
and procedures necessary to access this funding.
We seek to maintain broad and diversified funding sources
globally for both secured and unsecured funding. We make
extensive use of the repurchase agreement and securities lending
markets, as well as other secured funding markets. In addition,
we issue debt through syndicated U.S. registered offerings,
U.S. registered and 144A
medium-term
note programs, offshore
medium-term
note offerings and other bond offerings, U.S. and
non-U.S. commercial
paper and promissory note issuances and other methods. We also
arrange for letters of credit to be issued on our behalf.
We seek to distribute our funding products through our own sales
force to a large, diverse global creditor base and we believe
that our relationships with our creditors are critical to our
liquidity. Our creditors include banks, governments, securities
lenders, pension funds, insurance companies, mutual funds and
individuals. We access funding in a variety of markets in the
Americas, Europe and Asia. We have imposed various internal
guidelines on creditor concentration, including the amount of
our commercial paper and promissory notes that can be owned and
letters of credit that can be issued by any single creditor or
group of creditors.
In the latter half of 2008, we were unable to raise significant
amounts of long-term unsecured debt in the public markets, other
than as a result of the issuance of securities guaranteed by the
FDIC under the TLGP. It is unclear when we will regain access to
the public long-term unsecured debt markets on customary terms
or whether any similar program will be available after the
TLGPs scheduled June 2009 expiration. However, we continue
to have access to short-term funding and to a number of sources
of secured funding, both in the private markets and through
various government and central bank sponsored initiatives.
Over the past year, a number of U.S. regulatory agencies
have taken steps to enhance the liquidity support available to
financial services companies such as Group Inc., GS&Co.,
GSI and GS Bank USA. Some of these steps include:
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The Federal Reserve Bank of New York established the Primary
Dealer Credit Facility in March 2008 to provide overnight
funding to primary dealers in exchange for a specified range of
collateral. In September 2008, the eligible collateral was
expanded to include all collateral eligible in tri-party
repurchase arrangements with the major clearing banks, and the
facility was made available to GSI. This facility is scheduled
to expire on April 30, 2009.
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The Federal Reserve Board introduced a new Term Securities
Lending Facility (TSLF) in March 2008, which extended the
term for which the Federal Reserve Board will lend Treasury
securities to primary dealers from overnight to 28 days
and, in September 2008, expanded the types of assets that
can be used as collateral under the TSLF to include all
investment-grade
debt securities (rather than just Treasury, agency and certain
AAA-rated asset-backed securities). This facility is scheduled
to expire on April 30, 2009.
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In October 2008, the Federal Reserve Board established the
Commercial Paper Funding Facility (CPFF) to serve as a funding
backstop to facilitate the issuance of term commercial paper by
eligible issuers. Through the CPFF, the Federal Reserve Bank of
New York will finance the purchase of unsecured and
asset-backed
highly rated,
U.S. dollar-denominated,
three-month
commercial paper from eligible issuers through its primary
dealers. The facility is scheduled to expire on
April 30, 2009. Our available funding under the CPFF
is approximately $11 billion, of which a de minimis amount
was utilized as of January 22, 2009.
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122
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The FDICs TLGP, which was established in
October 2008, provides a guarantee of certain newly issued
senior unsecured debt issued by eligible entities, including
Group Inc. and GS Bank USA, as well as funds over $250,000 in
non-interest-bearing
transaction deposit accounts held by FDIC-insured banks (such as
GS Bank USA). The debt guarantee is available, subject to
limitations, for debt issued through June 30, 2009 and
the deposit coverage lasts through December 31, 2009.
We are able to have outstanding approximately $35 billion
of debt under the TLGP that is issued prior to
June 30, 2009. As of November 2008 and
January 22, 2009, we had outstanding $4.18 billion of
senior unsecured
short-term
borrowings and $25.54 billion of senior unsecured debt
(comprised of $11.57 billion of short-term and $13.97 billion of
long-term), respectively, under the TLGP.
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See
Certain
Risk Factors That May Affect Our Businesses above, and
Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K
for a discussion of factors that could impair our ability to
access the capital markets.
Subsidiary Funding Policies. Substantially all
of our unsecured funding is raised by our parent company, Group
Inc. The parent company then lends the necessary funds to its
subsidiaries, some of which are regulated, to meet their asset
financing and capital requirements. In addition, the parent
company provides its regulated subsidiaries with the necessary
capital to meet their regulatory requirements. The benefits of
this approach to subsidiary funding include enhanced control and
greater flexibility to meet the funding requirements of our
subsidiaries. Funding is also raised at the subsidiary level
through secured funding and deposits.
Our intercompany funding policies are predicated on an
assumption that, unless legally provided for, funds or
securities are not freely available from a subsidiary to its
parent company or other subsidiaries. In particular, many of our
subsidiaries are subject to laws that authorize regulatory
bodies to block or limit the flow of funds from those
subsidiaries to Group Inc. Regulatory action of that kind could
impede access to funds that Group Inc. needs to make payments on
obligations, including debt obligations. As such, we assume that
capital or other financing provided to our regulated
subsidiaries is not available to our parent company or other
subsidiaries until the maturity of such financing. In addition,
we recognize that the Global Core Excess held in our regulated
entities may not be available to our parent company or other
subsidiaries and therefore may only be available to meet the
potential liquidity requirements of those entities.
We also manage our liquidity risk by requiring senior and
subordinated intercompany loans to have maturities equal to or
shorter than the maturities of the aggregate borrowings of the
parent company. This policy ensures that the subsidiaries
obligations to the parent company will generally mature in
advance of the parent companys
third-party
borrowings. In addition, many of our subsidiaries and affiliates
maintain unencumbered assets to cover their unsecured
intercompany borrowings (other than subordinated debt) in order
to mitigate parent company liquidity risk.
Group Inc. has provided substantial amounts of equity and
subordinated indebtedness, directly or indirectly, to its
regulated subsidiaries; for example, as of November 2008,
Group Inc. had $26.01 billion of such equity and
subordinated indebtedness invested in GS&Co., its principal
U.S. registered
broker-dealer;
$22.06 billion invested in GSI, a regulated U.K.
broker-dealer;
$2.48 billion invested in Goldman Sachs
Execution & Clearing, L.P., a U.S. registered
broker-dealer;
$3.79 billion invested in Goldman Sachs Japan Co., Ltd., a
regulated Japanese
broker-dealer;
and $17.32 billion invested in GS Bank USA, a regulated New
York State-chartered bank. Group Inc. also had
$62.81 billion of unsubordinated loans to these entities as
of November 2008, as well as significant amounts of capital
invested in and loans to its other regulated subsidiaries.
123
Crisis
Planning
In order to be prepared for a liquidity event, or a period of
market stress, we base our liquidity risk management framework
and our resulting funding and liquidity policies on conservative
stress-scenario
assumptions. Our planning incorporates several
market-based
and operational stress scenarios. We also periodically conduct
liquidity crisis drills to test our lines of communication and
backup funding procedures.
In addition, we maintain a liquidity crisis plan that specifies
an approach for analyzing and responding to a
liquidity-threatening event. The plan provides the framework to
estimate the likely impact of a liquidity event on Goldman Sachs
based on some of the risks identified above and outlines which
and to what extent liquidity maintenance activities should be
implemented based on the severity of the event.
Credit
Ratings
We rely upon the
short-term
and
long-term
debt capital markets to fund a significant portion of our
day-to-day
operations. The cost and availability of debt financing is
influenced by our credit ratings. Credit ratings are important
when we are competing in certain markets and when we seek to
engage in longer-term transactions, including OTC derivatives.
We believe our credit ratings are primarily based on the credit
rating agencies assessment of our liquidity, market,
credit and operational risk management practices, the level and
variability of our earnings, our capital base, our franchise,
reputation and management, our corporate governance and the
external operating environment. See
Certain
Risk Factors That May Affect Our Businesses above, and
Risk Factors in Part I, Item 1A of our
Annual Report on
Form 10-K
for a discussion of the risks associated with a reduction in our
credit ratings.
On December 16, 2008, Moodys Investors Service
affirmed Group Inc.s
Short-Term
Debt rating and lowered Group Inc.s ratings on
Long-Term
Debt (from Aa3 to A1), Subordinated Debt (from A1 to A2) and
Preferred Stock (from A2 to A3), and retained its outlook of
negative. Also on December 16, 2008,
Dominion Bond Rating Service Limited affirmed Group Inc.s
credit ratings but revised its outlook from negative
to under review with negative implications. On
December 17, 2008, Rating and Investment Information,
Inc. affirmed Group Inc.s
Short-Term
Debt rating at
a-1+,
lowered Group Inc.s
Long-Term
Debt ratings from AA to AA- and retained its outlook of
negative. On December 19, 2008,
Standard & Poors Ratings Services lowered Group
Inc.s ratings on
Short-Term
Debt (from
A-1+ to
A-1),
Long-Term
Debt (from AA- to A), Subordinated Debt (from A+ to A-) and
Preferred Stock (from A to BBB) and retained its outlook of
negative. On January 23, 2009, Dominion Bond
Rating Service Limited lowered Group Inc.s ratings on
Long-Term Debt (from AA (low) to A (high)), Subordinated Debt
(from A (high) to A) and Preferred Stock (from A to
A (low)).
The following table sets forth our unsecured credit ratings as
of January 23, 2009:
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Short-Term Debt
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Long-Term Debt
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Subordinated Debt
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Preferred Stock
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Dominion Bond Rating Service Limited
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R-1 (middle)
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A (high)
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A
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A (low)
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Fitch, Inc.
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F1+
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AA-
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A+
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A+
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Moodys Investors Service
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P-1
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A1
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A2
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A3
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Standard & Poors Ratings Services
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|
A-1
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A
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A-
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BBB
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Rating and Investment Information, Inc.
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a-1+
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AA-
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Not Applicable
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Not Applicable
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124
Based on our credit ratings as of November 2008, additional
collateral or termination payments pursuant to bilateral
agreements with certain counterparties of approximately
$1.11 billion and $1.51 billion would have been
required in the event of a
one-notch
and
two-notch
reduction, respectively, in our
long-term
credit ratings. Based on our credit ratings reflected in the
above table, additional collateral or termination payments
pursuant to bilateral agreements with certain counterparties of
approximately $897 million and $2.14 billion would
have been required in the event of a one-notch and two-notch
reduction, respectively, in our long-term credit ratings as of
December 26, 2008. In evaluating our liquidity
requirements, we consider additional collateral or termination
payments that would be required in the event of a
two-notch
reduction in our
long-term
credit ratings, as well as collateral that has not been called
by counterparties, but is available to them.
Cash
Flows
As a global financial institution, our cash flows are complex
and interrelated and bear little relation to our net earnings
and net assets and, consequently, we believe that traditional
cash flow analysis is less meaningful in evaluating our
liquidity position than the excess liquidity and
asset-liability
management policies described above. Cash flow analysis may,
however, be helpful in highlighting certain macro trends and
strategic initiatives in our business.
Year Ended November 2008. Our cash and
cash equivalents increased by $5.46 billion to
$15.74 billion at the end of 2008. We raised
$9.80 billion in net cash from operating and financing
activities, primarily from common and preferred stock issuances
and deposits, partially offset by repayments of
short-term
borrowings. We used net cash of $4.34 billion in our
investing activities.
Year Ended November 2007. Our cash and
cash equivalents increased by $4.34 billion to
$10.28 billion at the end of 2007. We raised
$73.79 billion in net cash from financing and investing
activities, primarily through the issuance of unsecured
borrowings, partially offset by common stock repurchases. We
used net cash of $69.45 billion in our operating
activities, primarily to capitalize on trading and investing
opportunities for our clients and ourselves.
Operational
Risk
Operational risk relates to the risk of loss arising from
shortcomings or failures in internal processes, people or
systems, or from external events. Operational risk can arise
from many factors ranging from routine processing errors to
potentially costly incidents related to, for example, major
systems failures. Operational risk may also cause reputational
harm. Thus, efforts to identify, manage and mitigate operational
risk must be equally sensitive to the risk of reputational
damage as well as the risk of financial loss.
We manage operational risk through the application of
long-standing,
but continuously evolving, firmwide control standards which are
supported by the training, supervision and development of our
people; the active participation and commitment of senior
management in a continuous process of identifying and mitigating
key operational risks across Goldman Sachs; and a framework of
strong and independent control departments that monitor
operational risk on a daily basis. Together, these elements form
a strong firmwide control culture that serves as the foundation
of our efforts to minimize operational risk exposure.
Operational Risk Management & Analysis, a risk
management function independent of our revenue-producing units,
is responsible for developing and implementing a formalized
framework to identify, measure, monitor, and report operational
risks to support active risk management across Goldman Sachs.
This framework, which evolves with the changing needs of our
businesses and regulatory guidance, incorporates analysis of
internal and external operational risk events, business
environment and internal control factors, and scenario analysis.
The framework also provides regular reporting of our operational
risk exposures to our Board, risk committees and senior
management. For a further discussion of operational risk see
Certain
Risk Factors That May Affect Our Businesses above, and
Risk
Factors in Part I, Item 1A of our Annual Report
on
Form 10-K.
125
Recent Accounting
Developments
EITF Issue
No. 06-11. In
June 2007, the Emerging Issues Task Force (EITF) reached
consensus on Issue
No. 06-11,
Accounting for Income Tax Benefits of Dividends on
Share-Based
Payment Awards. EITF Issue
No. 06-11
requires that the tax benefit related to dividend equivalents
paid on restricted stock units, which are expected to vest, be
recorded as an increase to additional
paid-in
capital. We currently account for this tax benefit as a
reduction to income tax expense. EITF Issue
No. 06-11
is to be applied prospectively for tax benefits on dividends
declared in fiscal years beginning after
December 15, 2007. We do not expect the adoption of
EITF Issue
No. 06-11
to have a material effect on our financial condition, results of
operations or cash flows.
FASB Staff Position No. FAS
140-3. In
February 2008, the FASB issued FASB Staff Position (FSP)
No. FAS 140-3,
Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions.
FSP No. FAS 140-3
requires an initial transfer of a financial asset and a
repurchase financing that was entered into contemporaneously or
in contemplation of the initial transfer to be evaluated as a
linked transaction under SFAS No. 140 unless certain
criteria are met, including that the transferred asset must be
readily obtainable in the marketplace.
FSP No. FAS 140-3
is effective for fiscal years beginning after
November 15, 2008, and is applicable to new
transactions entered into after the date of adoption. Early
adoption is prohibited. We do not expect adoption of
FSP No. FAS 140-3
to have a material effect on our financial condition and cash
flows. Adoption of
FSP No. FAS 140-3
will have no effect on our results of operations.
SFAS No. 161. In March 2008,
the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities an
amendment of FASB Statement No. 133.
SFAS No. 161 requires enhanced disclosures about an
entitys derivative and hedging activities, and is
effective for financial statements issued for reporting periods
beginning after November 15, 2008, with early
application encouraged. Since SFAS No. 161 requires
only additional disclosures concerning derivatives and hedging
activities, adoption of SFAS No. 161 will not affect
our financial condition, results of operations or cash flows.
FASB Staff Position No. EITF
03-6-1. In
June 2008, the FASB issued FSP No. EITF
03-6-1,
Determining Whether Instruments Granted in
Share-Based
Payment Transactions Are Participating Securities. The FSP
addresses whether instruments granted in
share-based
payment transactions are participating securities prior to
vesting and therefore need to be included in the earnings
allocation in calculating earnings per share under the two-class
method described in SFAS No. 128, Earnings per
Share. The FSP requires companies to treat unvested
share-based
payment awards that have
non-forfeitable
rights to dividend or dividend equivalents as a separate class
of securities in calculating earnings per share. The FSP is
effective for fiscal years beginning after
December 15, 2008; earlier application is not
permitted. We do not expect adoption of FSP
No. EITF 03-6-1
to have a material effect on our results of operations or
earnings per share.
FASB Staff Position
No. FAS 133-1
and
FIN 45-4. In
September 2008, the FASB issued
FSP No. FAS 133-1
and
FIN 45-4,
Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161.
FSP No. FAS 133-1
and
FIN 45-4
requires enhanced disclosures about credit derivatives and
guarantees and amends FIN 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others to exclude
credit derivative instruments accounted for at fair value under
SFAS No. 133. The FSP is effective for financial
statements issued for reporting periods ending after
November 15, 2008. Since
FSP No. FAS 133-1
and
FIN 45-4
only requires additional disclosures concerning credit
derivatives and guarantees, adoption of
FSP No. FAS 133-1
and
FIN 45-4
did not have an effect on our financial condition, results of
operations or cash flows.
126
FASB Staff Position
No. FAS 157-3. In
October 2008, the FASB issued
FSP No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active.
FSP No. FAS 157-3
clarifies the application of SFAS No. 157 in an
inactive market, without changing its existing principles. The
FSP was effective immediately upon issuance. The adoption of
FSP No. FAS 157-3
did not have an effect on our financial condition, results of
operations or cash flows.
SFAS No. 141(R). In
December 2007, the FASB issued a revision to
SFAS No. 141, Business Combinations.
SFAS No. 141(R) requires changes to the accounting for
transaction costs, certain contingent assets and liabilities,
and other balances in a business combination. In addition, in
partial acquisitions, when control is obtained, the acquiring
company must measure and record all of the targets assets
and liabilities, including goodwill, at fair value as if the
entire target company had been acquired. We will apply the
provisions of SFAS No. 141(R) to business combinations
occurring after December 26, 2008. Adoption of
SFAS No. 141(R) will not affect our financial
condition, results of operations or cash flows, but may have an
effect on accounting for future business combinations.
SFAS No. 160. In December 2007,
the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements an
amendment of ARB No. 51. SFAS No. 160
requires that ownership interests in consolidated subsidiaries
held by parties other than the parent (noncontrolling interests)
be accounted for and presented as equity, rather than as a
liability or mezzanine equity. SFAS No. 160 is
effective for fiscal years beginning on or after
December 15, 2008, but the presentation and disclosure
requirements are to be applied retrospectively. We do not expect
adoption of the statement to have a material effect on our
financial condition, results of operations or cash flows.
FASB Staff Position
No. FAS 140-4
and FIN 46(R)-8. In December 2008, the
FASB issued
FSP No. FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities.
FSP No. FAS 140-4
and FIN 46(R)-8 requires enhanced disclosures about
transfers of financial assets and interests in variable interest
entities. The FSP is effective for interim and annual periods
ending after December 15, 2008. Since the FSP requires
only additional disclosures concerning transfers of financial
assets and interests in variable interest entities, adoption of
the FSP will not affect our financial condition, results of
operations or cash flows.
EITF Issue
No. 07-5. In
June 2008, the EITF reached consensus on Issue
No. 07-5,
Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock. EITF Issue
No. 07-5
provides guidance about whether an instrument (such as our
outstanding common stock warrants) should be classified as
equity and not marked to market for accounting purposes. EITF
Issue
No. 07-5
is effective for fiscal years beginning after December 15,
2008. Adoption of EITF Issue
No. 07-5
will not affect our financial condition, results of operations
or cash flows.
Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk
Quantitative and qualitative disclosure about market risk is set
forth under Managements Discussion and Analysis of
Financial Condition and Results of Operations Risk
Management in Part II, Item 7 of our Annual
Report on
Form 10-K.
127
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX
|
|
|
|
|
|
|
Page
|
|
|
No.
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
131
|
|
|
|
|
132
|
|
|
|
|
133
|
|
|
|
|
134
|
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
|
136
|
|
|
|
|
149
|
|
|
|
|
163
|
|
|
|
|
168
|
|
|
|
|
169
|
|
|
|
|
170
|
|
|
|
|
173
|
|
|
|
|
179
|
|
|
|
|
182
|
|
|
|
|
183
|
|
|
|
|
185
|
|
|
|
|
187
|
|
|
|
|
192
|
|
|
|
|
195
|
|
|
|
|
196
|
|
|
|
|
199
|
|
|
|
|
202
|
|
|
|
|
206
|
|
|
|
|
207
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
209
|
|
|
|
|
210
|
|
|
|
|
211
|
|
|
|
|
212
|
|
128
Managements
Report on Internal Control over
Financial Reporting
Management of The Goldman Sachs Group, Inc., together with its
consolidated subsidiaries (the firm), is responsible for
establishing and maintaining adequate internal control over
financial reporting. The firms internal control over
financial reporting is a process designed under the supervision
of the firms principal executive and principal financial
officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the
firms financial statements for external reporting purposes
in accordance with U.S. generally accepted accounting
principles.
As of the end of the firms 2008 fiscal year, management
conducted an assessment of the effectiveness of the firms
internal control over financial reporting based on the framework
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management has determined that the firms
internal control over financial reporting as of
November 28, 2008 was effective.
Our internal control over financial reporting includes policies
and procedures that pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect transactions
and dispositions of assets; provide reasonable assurances that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and
expenditures are being made only in accordance with
authorizations of management and the directors of the firm; and
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
firms assets that could have a material effect on our
financial statements.
The firms internal control over financial reporting as of
November 28, 2008 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report appearing on
page 130, which expresses an unqualified opinion on the
effectiveness of the firms internal control over financial
reporting as of November 28, 2008.
129
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and the Shareholders of
The Goldman Sachs Group, Inc.:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of The Goldman Sachs Group, Inc. and its
subsidiaries (the Company) at November 28, 2008 and
November 30, 2007, and the results of its operations
and its cash flows for each of the three fiscal years in the
period ended November 28, 2008 in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of November 28, 2008, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in
Managements Report on Internal Control over Financial
Reporting appearing on page 129. Our responsibility is to
express opinions on these financial statements and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial
statements, as of the beginning of 2007 the Company adopted
SFAS No. 157, Fair Value Measurements and
SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
New York, New York
January 22, 2009
130
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions, except per
|
|
|
share amounts)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
5,179
|
|
|
$
|
7,555
|
|
|
$
|
5,613
|
|
Trading and principal investments
|
|
|
8,095
|
|
|
|
29,714
|
|
|
|
24,027
|
|
Asset management and securities services
|
|
|
4,672
|
|
|
|
4,731
|
|
|
|
4,527
|
|
Interest income
|
|
|
35,633
|
|
|
|
45,968
|
|
|
|
35,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
53,579
|
|
|
|
87,968
|
|
|
|
69,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
31,357
|
|
|
|
41,981
|
|
|
|
31,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net of interest expense
|
|
|
22,222
|
|
|
|
45,987
|
|
|
|
37,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
10,934
|
|
|
|
20,190
|
|
|
|
16,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage, clearing, exchange and distribution fees
|
|
|
2,998
|
|
|
|
2,758
|
|
|
|
1,985
|
|
Market development
|
|
|
485
|
|
|
|
601
|
|
|
|
492
|
|
Communications and technology
|
|
|
759
|
|
|
|
665
|
|
|
|
544
|
|
Depreciation and amortization
|
|
|
1,022
|
|
|
|
624
|
|
|
|
521
|
|
Amortization of identifiable intangible assets
|
|
|
240
|
|
|
|
195
|
|
|
|
173
|
|
Occupancy
|
|
|
960
|
|
|
|
975
|
|
|
|
850
|
|
Professional fees
|
|
|
779
|
|
|
|
714
|
|
|
|
545
|
|
Other expenses
|
|
|
1,709
|
|
|
|
1,661
|
|
|
|
1,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-compensation
expenses
|
|
|
8,952
|
|
|
|
8,193
|
|
|
|
6,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
19,886
|
|
|
|
28,383
|
|
|
|
23,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
|
2,336
|
|
|
|
17,604
|
|
|
|
14,560
|
|
Provision for taxes
|
|
|
14
|
|
|
|
6,005
|
|
|
|
5,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2,322
|
|
|
|
11,599
|
|
|
|
9,537
|
|
Preferred stock dividends
|
|
|
281
|
|
|
|
192
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings applicable to common shareholders
|
|
$
|
2,041
|
|
|
$
|
11,407
|
|
|
$
|
9,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
4.67
|
|
|
$
|
26.34
|
|
|
$
|
20.93
|
|
Diluted
|
|
|
4.47
|
|
|
|
24.73
|
|
|
|
19.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
437.0
|
|
|
|
433.0
|
|
|
|
449.0
|
|
Diluted
|
|
|
456.2
|
|
|
|
461.2
|
|
|
|
477.4
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
131
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions, except share
|
|
|
and per share amounts)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,740
|
|
|
$
|
10,282
|
|
Cash and securities segregated for regulatory and other purposes
(includes $78,830 and $94,018 at fair value as of
November 2008 and November 2007, respectively)
|
|
|
106,664
|
|
|
|
119,939
|
|
Collateralized agreements:
|
|
|
|
|
|
|
|
|
Securities purchased under agreements to resell, at fair value,
and federal funds sold (includes $116,671 and $85,717 at fair
value as of November 2008 and November 2007,
respectively)
|
|
|
122,021
|
|
|
|
87,317
|
|
Securities borrowed (includes $59,810 and $83,277 at fair value
as of November 2008 and November 2007, respectively)
|
|
|
180,795
|
|
|
|
277,413
|
|
Receivables from brokers, dealers and clearing organizations
|
|
|
25,899
|
|
|
|
19,078
|
|
Receivables from customers and counterparties (includes $1,598
and $1,950 at fair value as of November 2008 and
November 2007, respectively)
|
|
|
64,665
|
|
|
|
129,105
|
|
Trading assets, at fair value (includes $26,313 and $46,138
pledged as collateral as of November 2008 and
November 2007, respectively)
|
|
|
338,325
|
|
|
|
452,595
|
|
Other assets
|
|
|
30,438
|
|
|
|
24,067
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Deposits (includes $4,224 and $463 at fair value as of
November 2008 and November 2007, respectively)
|
|
$
|
27,643
|
|
|
$
|
15,370
|
|
Collateralized financings:
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase, at fair value
|
|
|
62,883
|
|
|
|
159,178
|
|
Securities loaned (includes $7,872 and $5,449 at fair value as
of November 2008 and November 2007, respectively)
|
|
|
17,060
|
|
|
|
28,624
|
|
Other secured financings (includes $20,249 and $33,581 at fair
value as of November 2008 and November 2007,
respectively)
|
|
|
38,683
|
|
|
|
65,710
|
|
Payables to brokers, dealers and clearing organizations
|
|
|
8,585
|
|
|
|
8,335
|
|
Payables to customers and counterparties
|
|
|
245,258
|
|
|
|
310,118
|
|
Trading liabilities, at fair value
|
|
|
175,972
|
|
|
|
215,023
|
|
Unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings (includes $23,075 and $48,331 at fair value as of
November 2008 and November 2007, respectively)
|
|
|
52,658
|
|
|
|
71,557
|
|
Unsecured
long-term
borrowings (includes $17,446 and $15,928 at fair value as of
November 2008 and November 2007, respectively)
|
|
|
168,220
|
|
|
|
164,174
|
|
Other liabilities and accrued expenses (includes $978 at fair
value as of November 2008)
|
|
|
23,216
|
|
|
|
38,907
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
820,178
|
|
|
|
1,076,996
|
|
|
|
|
|
|
|
|
|
|
Commitments, contingencies and guarantees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share; aggregate
liquidation preference of $18,100 and $3,100 as of
November 2008 and November 2007, respectively
|
|
|
16,471
|
|
|
|
3,100
|
|
Common stock, par value $0.01 per share;
4,000,000,000 shares authorized, 680,953,836 and
618,707,032 shares issued as of November 2008 and
November 2007, respectively, and 442,537,317 and
390,682,013 shares outstanding as of November 2008 and
November 2007, respectively
|
|
|
7
|
|
|
|
6
|
|
Restricted stock units and employee stock options
|
|
|
9,284
|
|
|
|
9,302
|
|
Nonvoting common stock, par value $0.01 per share;
200,000,000 shares authorized, no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
|
31,071
|
|
|
|
22,027
|
|
Retained earnings
|
|
|
39,913
|
|
|
|
38,642
|
|
Accumulated other comprehensive income/(loss)
|
|
|
(202
|
)
|
|
|
(118
|
)
|
Common stock held in treasury, at cost, par value $0.01 per
share; 238,416,519 and 228,025,019 shares as of
November 2008 and November 2007, respectively
|
|
|
(32,175
|
)
|
|
|
(30,159
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
64,369
|
|
|
|
42,800
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
132
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions, except per share amounts)
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
3,100
|
|
|
$
|
3,100
|
|
|
$
|
1,750
|
|
Issued
|
|
|
13,367
|
|
|
|
|
|
|
|
1,350
|
|
Preferred stock accretion
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
16,471
|
|
|
|
3,100
|
|
|
|
3,100
|
|
Common stock, par value $0.01 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Issued
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
7
|
|
|
|
6
|
|
|
|
6
|
|
Restricted stock units and employee stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
9,302
|
|
|
|
6,290
|
|
|
|
3,415
|
|
Issuance and amortization of restricted stock units and employee
stock options
|
|
|
2,254
|
|
|
|
4,684
|
|
|
|
3,787
|
|
Delivery of common stock underlying restricted stock units
|
|
|
(1,995
|
)
|
|
|
(1,548
|
)
|
|
|
(781
|
)
|
Forfeiture of restricted stock units and employee stock options
|
|
|
(274
|
)
|
|
|
(113
|
)
|
|
|
(129
|
)
|
Exercise of employee stock options
|
|
|
(3
|
)
|
|
|
(11
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
9,284
|
|
|
|
9,302
|
|
|
|
6,290
|
|
Additional
paid-in
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
22,027
|
|
|
|
19,731
|
|
|
|
17,159
|
|
Issuance of common stock warrants
|
|
|
1,633
|
|
|
|
|
|
|
|
|
|
Issuance of common stock, including the delivery of common stock
underlying restricted stock units and proceeds from the exercise
of employee stock options
|
|
|
8,081
|
|
|
|
2,338
|
|
|
|
2,432
|
|
Cancellation of restricted stock units in satisfaction of
withholding tax requirements
|
|
|
(1,314
|
)
|
|
|
(929
|
)
|
|
|
(375
|
)
|
Stock purchase contract fee related to automatic preferred
enhanced capital securities
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
Preferred and common stock issuance costs
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Excess net tax benefit related to
share-based
compensation
|
|
|
645
|
|
|
|
908
|
|
|
|
653
|
|
Cash settlement of
share-based
compensation
|
|
|
|
|
|
|
(1
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
31,071
|
|
|
|
22,027
|
|
|
|
19,731
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year, as previously reported
|
|
|
38,642
|
|
|
|
27,868
|
|
|
|
19,085
|
|
Cumulative effect of adjustment from adoption of FIN 48
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
Cumulative effect of adjustment from adoption of
SFAS No. 157, net of tax
|
|
|
|
|
|
|
51
|
|
|
|
|
|
Cumulative effect of adjustment from adoption of
SFAS No. 159, net of tax
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year, after cumulative effect of
adjustments
|
|
|
38,441
|
|
|
|
27,874
|
|
|
|
19,085
|
|
Net earnings
|
|
|
2,322
|
|
|
|
11,599
|
|
|
|
9,537
|
|
Dividends and dividend equivalents declared on common stock and
restricted stock units
|
|
|
(642
|
)
|
|
|
(639
|
)
|
|
|
(615
|
)
|
Dividends declared on preferred stock
|
|
|
(204
|
)
|
|
|
(192
|
)
|
|
|
(139
|
)
|
Preferred stock accretion
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
39,913
|
|
|
|
38,642
|
|
|
|
27,868
|
|
Accumulated other comprehensive income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
(118
|
)
|
|
|
21
|
|
|
|
|
|
Adjustment from adoption of SFAS No. 158, net of tax
|
|
|
|
|
|
|
(194
|
)
|
|
|
|
|
Currency translation adjustment, net of tax
|
|
|
(98
|
)
|
|
|
39
|
|
|
|
45
|
|
Pension and postretirement liability adjustment, net of tax
|
|
|
69
|
|
|
|
38
|
|
|
|
(27
|
)
|
Net gains/(losses) on cash flow hedges, net of tax
|
|
|
|
|
|
|
(2
|
)
|
|
|
(7
|
)
|
Net unrealized gains/(losses) on
available-for-sale
securities, net of tax
|
|
|
(55
|
)
|
|
|
(12
|
)
|
|
|
10
|
|
Reclassification to retained earnings from adoption of
SFAS No. 159, net of tax
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
(202
|
)
|
|
|
(118
|
)
|
|
|
21
|
|
Common stock held in treasury, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
(30,159
|
)
|
|
|
(21,230
|
)
|
|
|
(13,413
|
)
|
Repurchased
|
|
|
(2,037
|
)
|
|
|
(8,956
|
)
|
|
|
(7,817
|
)
|
Reissued
|
|
|
21
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
(32,175
|
)
|
|
|
(30,159
|
)
|
|
|
(21,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$
|
64,369
|
|
|
$
|
42,800
|
|
|
$
|
35,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
133
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2,322
|
|
|
$
|
11,599
|
|
|
$
|
9,537
|
|
Non-cash
items included in net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,385
|
|
|
|
916
|
|
|
|
749
|
|
Amortization of identifiable intangible assets
|
|
|
240
|
|
|
|
251
|
|
|
|
246
|
|
Deferred income taxes
|
|
|
(1,763
|
)
|
|
|
129
|
|
|
|
(1,505
|
)
|
Share-based
compensation
|
|
|
1,611
|
|
|
|
4,465
|
|
|
|
3,654
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and securities segregated for regulatory and other purposes
|
|
|
12,995
|
|
|
|
(39,079
|
)
|
|
|
(21,044
|
)
|
Net receivables from brokers, dealers and clearing organizations
|
|
|
(6,587
|
)
|
|
|
(3,811
|
)
|
|
|
(1,794
|
)
|
Net payables to customers and counterparties
|
|
|
(50
|
)
|
|
|
53,857
|
|
|
|
9,823
|
|
Securities borrowed, net of securities loaned
|
|
|
85,054
|
|
|
|
(51,655
|
)
|
|
|
(28,666
|
)
|
Securities sold under agreements to repurchase, net of
securities purchased under agreements to resell and federal
funds sold
|
|
|
(130,999
|
)
|
|
|
6,845
|
|
|
|
5,825
|
|
Trading assets, at fair value
|
|
|
97,723
|
|
|
|
(118,864
|
)
|
|
|
(48,479
|
)
|
Trading liabilities, at fair value
|
|
|
(39,051
|
)
|
|
|
57,938
|
|
|
|
6,384
|
|
Other, net
|
|
|
(20,986
|
)
|
|
|
7,962
|
|
|
|
12,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used for) operating activities
|
|
|
1,894
|
|
|
|
(69,447
|
)
|
|
|
(52,447
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, leasehold improvements and equipment
|
|
|
(2,027
|
)
|
|
|
(2,130
|
)
|
|
|
(1,744
|
)
|
Proceeds from sales of property, leasehold improvements and
equipment
|
|
|
121
|
|
|
|
93
|
|
|
|
69
|
|
Business acquisitions, net of cash acquired
|
|
|
(2,613
|
)
|
|
|
(1,900
|
)
|
|
|
(1,661
|
)
|
Proceeds from sales of investments
|
|
|
624
|
|
|
|
4,294
|
|
|
|
2,114
|
|
Purchase of
available-for-sale
securities
|
|
|
(3,851
|
)
|
|
|
(872
|
)
|
|
|
(12,922
|
)
|
Proceeds from sales of
available-for-sale
securities
|
|
|
3,409
|
|
|
|
911
|
|
|
|
4,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used for) investing activities
|
|
|
(4,337
|
)
|
|
|
396
|
|
|
|
(9,748
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
short-term
borrowings, net
|
|
|
(19,295
|
)
|
|
|
12,262
|
|
|
|
(4,031
|
)
|
Other secured financings
(short-term),
net
|
|
|
(8,727
|
)
|
|
|
2,780
|
|
|
|
16,856
|
|
Proceeds from issuance of other secured financings
(long-term)
|
|
|
12,509
|
|
|
|
21,703
|
|
|
|
14,451
|
|
Repayment of other secured financings
(long-term),
including the current portion
|
|
|
(20,653
|
)
|
|
|
(7,355
|
)
|
|
|
(7,420
|
)
|
Proceeds from issuance of unsecured
long-term
borrowings
|
|
|
37,758
|
|
|
|
57,516
|
|
|
|
48,839
|
|
Repayment of unsecured
long-term
borrowings, including the current portion
|
|
|
(25,579
|
)
|
|
|
(14,823
|
)
|
|
|
(13,510
|
)
|
Derivative contracts with a financing element, net
|
|
|
781
|
|
|
|
4,814
|
|
|
|
3,494
|
|
Deposits, net
|
|
|
12,273
|
|
|
|
4,673
|
|
|
|
10,697
|
|
Common stock repurchased
|
|
|
(2,034
|
)
|
|
|
(8,956
|
)
|
|
|
(7,817
|
)
|
Dividends and dividend equivalents paid on common stock,
preferred stock and restricted stock units
|
|
|
(850
|
)
|
|
|
(831
|
)
|
|
|
(754
|
)
|
Proceeds from issuance of common stock
|
|
|
6,105
|
|
|
|
791
|
|
|
|
1,613
|
|
Proceeds from issuance of preferred stock, net of issuance costs
|
|
|
13,366
|
|
|
|
|
|
|
|
1,349
|
|
Proceeds from issuance of common stock warrants
|
|
|
1,633
|
|
|
|
|
|
|
|
|
|
Excess tax benefit related to
share-based
compensation
|
|
|
614
|
|
|
|
817
|
|
|
|
464
|
|
Cash settlement of
share-based
compensation
|
|
|
|
|
|
|
(1
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
7,901
|
|
|
|
73,390
|
|
|
|
64,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
5,458
|
|
|
|
4,339
|
|
|
|
1,899
|
|
Cash and cash equivalents, beginning of year
|
|
|
10,282
|
|
|
|
5,943
|
|
|
|
4,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
15,740
|
|
|
$
|
10,282
|
|
|
$
|
5,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of capitalized interest, were
$32.37 billion, $40.74 billion and $30.98 billion
for the years ended November 2008, November 2007 and
November 2006, respectively.
Cash payments for income taxes, net of refunds, were
$3.47 billion, $5.78 billion and $4.56 billion
for the years ended November 2008, November 2007 and
November 2006, respectively.
Non-cash
activities:
The firm assumed $790 million, $409 million and
$498 million of debt in connection with business
acquisitions for the years ended November 2008,
November 2007 and November 2006, respectively.
The accompanying notes are an integral part of these
consolidated financial statements.
134
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Net earnings
|
|
$
|
2,322
|
|
|
$
|
11,599
|
|
|
$
|
9,537
|
|
Currency translation adjustment, net of tax
|
|
|
(98
|
)
|
|
|
39
|
|
|
|
45
|
|
Pension and postretirement liability adjustment, net of tax
|
|
|
69
|
|
|
|
38
|
|
|
|
(27
|
)
|
Net gains/(losses) on cash flow hedges, net of tax
|
|
|
|
|
|
|
(2
|
)
|
|
|
(7
|
)
|
Net unrealized gains/(losses) on
available-for-sale
securities,
net of tax
|
|
|
(55
|
)
|
|
|
(12
|
)
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
2,238
|
|
|
$
|
11,662
|
|
|
$
|
9,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
135
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
|
|
Note 1.
|
Description
of Business
|
The Goldman Sachs Group, Inc. (Group Inc.), a Delaware
corporation, is a bank holding company and, together with its
consolidated subsidiaries (collectively, the firm), a leading
global investment banking, securities and investment management
firm that provides a wide range of services worldwide to a
substantial and diversified client base that includes
corporations, financial institutions, governments and
high-net-worth
individuals.
The firms activities are divided into three segments:
|
|
|
|
|
Investment Banking. The firm provides a broad range
of investment banking services to a diverse group of
corporations, financial institutions, investment funds,
governments and individuals.
|
|
|
|
Trading and Principal Investments. The firm
facilitates client transactions with a diverse group of
corporations, financial institutions, investment funds,
governments and individuals and takes proprietary positions
through market making in, trading of and investing in fixed
income and equity products, currencies, commodities and
derivatives on these products. In addition, the firm engages in
market-making and specialist activities on equities and options
exchanges, and the firm clears client transactions on major
stock, options and futures exchanges worldwide. In connection
with the firms merchant banking and other investing
activities, the firm makes principal investments directly and
through funds that the firm raises and manages.
|
|
|
|
Asset Management and Securities Services. The firm
provides investment advisory and financial planning services and
offers investment products (primarily through separately managed
accounts and commingled vehicles, such as mutual funds and
private investment funds) across all major asset classes to a
diverse group of institutions and individuals worldwide and
provides prime brokerage services, financing services and
securities lending services to institutional clients, including
hedge funds, mutual funds, pension funds and foundations, and to
high-net-worth
individuals worldwide.
|
|
|
Note 2.
|
Significant
Accounting Policies
|
Basis of
Presentation
These consolidated financial statements include the accounts of
Group Inc. and all other entities in which the firm has a
controlling financial interest. All material intercompany
transactions and balances have been eliminated.
The firm determines whether it has a controlling financial
interest in an entity by first evaluating whether the entity is
a voting interest entity, a variable interest entity (VIE) or a
qualifying
special-purpose
entity (QSPE) under generally accepted accounting principles.
|
|
|
|
|
Voting Interest Entities. Voting interest entities
are entities in which (i) the total equity investment at
risk is sufficient to enable the entity to finance its
activities independently and (ii) the equity holders have
the obligation to absorb losses, the right to receive residual
returns and the right to make decisions about the entitys
activities. Voting interest entities are consolidated in
accordance with Accounting Research Bulletin No. 51,
Consolidated Financial Statements, as amended. The
usual condition for a controlling financial interest in an
entity is ownership of a majority voting interest. Accordingly,
the firm consolidates voting interest entities in which it has a
majority voting interest.
|
|
|
|
Variable Interest Entities. VIEs are entities that
lack one or more of the characteristics of a voting interest
entity. A controlling financial interest in a VIE is present
when an enterprise has a variable interest, or a combination of
variable interests, that will absorb a majority of the
VIEs expected losses, receive a majority of the VIEs
expected residual returns, or both. The
|
136
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
enterprise with a controlling financial interest, known as the
primary beneficiary, consolidates the VIE. In accordance with
Financial Accounting Standards Board (FASB) Interpretation
(FIN) 46-R,
Consolidation of Variable Interest Entities, the
firm consolidates VIEs for which it is the primary beneficiary.
The firm determines whether it is the primary beneficiary of a
VIE by first performing a qualitative analysis of the VIEs
expected losses and expected residual returns. This analysis
includes a review of, among other factors, the VIEs
capital structure, contractual terms, which interests create or
absorb variability, related party relationships and the design
of the VIE. Where qualitative analysis is not conclusive, the
firm performs a quantitative analysis. For purposes of
allocating a VIEs expected losses and expected residual
returns to its variable interest holders, the firm utilizes the
top down method. Under that method, the firm
calculates its share of the VIEs expected losses and
expected residual returns using the specific cash flows that
would be allocated to it, based on contractual arrangements
and/or the
firms position in the capital structure of the VIE, under
various probability-weighted scenarios. The firm reassesses its
initial evaluation of an entity as a VIE and its initial
determination of whether the firm is the primary beneficiary of
a VIE upon the occurrence of certain reconsideration events as
defined in
FIN 46-R.
|
|
|
|
|
|
QSPEs. QSPEs are passive entities that are commonly
used in mortgage and other securitization transactions.
Statement of Financial Accounting Standards (SFAS) No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, sets forth the
criteria an entity must satisfy to be a QSPE. These criteria
include the types of assets a QSPE may hold, limits on asset
sales, the use of derivatives and financial guarantees, and the
level of discretion a servicer may exercise in attempting to
collect receivables. These criteria may require management to
make judgments about complex matters, such as whether a
derivative is considered passive and the level of discretion a
servicer may exercise, including, for example, determining when
default is reasonably foreseeable. In accordance with
SFAS No. 140 and
FIN 46-R,
the firm does not consolidate QSPEs.
|
|
|
|
Equity-Method
Investments. When the firm does not have a controlling
financial interest in an entity but exerts significant influence
over the entitys operating and financial policies
(generally defined as owning a voting interest of 20% to 50%)
and has an investment in common stock or
in-substance
common stock, the firm accounts for its investment either in
accordance with Accounting Principles Board Opinion (APB)
No. 18, The Equity Method of Accounting for
Investments in Common Stock or at fair value in accordance
with SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. In general,
the firm accounts for investments acquired subsequent to the
adoption of SFAS No. 159 at fair value. In certain cases,
the firm may apply the equity method of accounting to new
investments that are strategic in nature or closely related to
the firms principal business activities, where the firm
has a significant degree of involvement in the cash flows or
operations of the investee, or where
cost-benefit
considerations are less significant. See
Revenue
Recognition Other Financial Assets and Financial
Liabilities at Fair Value below for a discussion of the
firms application of SFAS No. 159.
|
|
|
|
Other. If the firm does not consolidate an entity or
apply the equity method of accounting, the firm accounts for its
investment at fair value. The firm also has formed numerous
nonconsolidated investment funds with
third-party
investors that are typically organized as limited partnerships.
The firm acts as general partner for these funds and generally
does not hold a majority of the economic interests in these
funds. The firm has generally provided the
third-party
investors with rights to terminate the funds or to remove the
firm as the general partner. As a result, the firm does not
consolidate these funds. These fund investments are included in
Trading assets, at fair value in the consolidated
statements of financial condition.
|
137
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unless otherwise stated herein, all references to 2008, 2007 and
2006 refer to the firms fiscal years ended, or the dates,
as the context requires, November 28, 2008,
November 30, 2007 and November 24, 2006,
respectively. Certain reclassifications have been made to
previously reported amounts to conform to the current
presentation.
Use of
Estimates
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles that
require management to make certain estimates and assumptions.
The most important of these estimates and assumptions relate to
fair value measurements, the accounting for goodwill and
identifiable intangible assets and the provision for potential
losses that may arise from litigation and regulatory proceedings
and tax audits. Although these and other estimates and
assumptions are based on the best available information, actual
results could be materially different from these estimates.
Revenue
Recognition
Investment Banking. Underwriting revenues and fees
from mergers and acquisitions and other financial advisory
assignments are recognized in the consolidated statements of
earnings when the services related to the underlying transaction
are completed under the terms of the engagement. Expenses
associated with such transactions are deferred until the related
revenue is recognized or the engagement is otherwise concluded.
Underwriting revenues are presented net of related expenses.
Expenses associated with financial advisory transactions are
recorded as
non-compensation
expenses, net of client reimbursements.
Trading Assets and Trading
Liabilities. Substantially all trading assets and
trading liabilities are reflected in the consolidated statements
of financial condition at fair value, pursuant principally to:
|
|
|
|
|
SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities;
|
|
|
|
specialized industry accounting for
broker-dealers
and investment companies;
|
|
|
|
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities; or
|
|
|
|
the fair value option under either SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140, or SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities, (i.e., the fair value option).
|
Related unrealized gains or losses are generally recognized in
Trading and principal investments in the
consolidated statements of earnings.
Upon becoming a bank holding company in September 2008, the
firm could no longer apply specialized
broker-dealer
industry accounting to those subsidiaries not regulated as
broker-dealers.
Therefore, within the firms
non-broker-dealer
subsidiaries, the firm designated as held for trading those
instruments within the scope of SFAS No. 115 (i.e.,
debt securities and marketable equity securities), and elected
the fair value option for other cash instruments (specifically
loans, loan commitments and certain private equity and
restricted public equity securities) which the firm historically
had carried at fair value. These fair value elections were in
addition to previous elections made for certain corporate loans,
loan commitments and certificates of deposit issued by Goldman
Sachs Bank USA (GS Bank USA). There was no impact on earnings
from these initial elections because all of these instruments
were already recorded at fair value in Trading assets, at
fair value or Trading liabilities, at fair
value in the consolidated statements of financial
condition prior to Group Inc. becoming a bank holding company.
138
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Financial Assets and Financial Liabilities at Fair
Value. In addition to Trading assets, at fair
value and Trading liabilities, at fair value,
the firm has elected to account for certain of its other
financial assets and financial liabilities at fair value under
the fair value option. The primary reasons for electing the fair
value option are to reflect economic events in earnings on a
timely basis, to mitigate volatility in earnings from using
different measurement attributes and to address simplification
and
cost-benefit
considerations.
Such financial assets and financial liabilities accounted for at
fair value include:
|
|
|
|
|
certain unsecured
short-term
borrowings, consisting of all promissory notes and commercial
paper and certain hybrid financial instruments;
|
|
|
|
certain other secured financings, primarily transfers accounted
for as financings rather than sales under
SFAS No. 140, debt raised through the firms
William Street program and certain other nonrecourse financings;
|
|
|
|
certain unsecured
long-term
borrowings, including prepaid physical commodity transactions;
|
|
|
|
resale and repurchase agreements;
|
|
|
|
securities borrowed and loaned within Trading and Principal
Investments, consisting of the firms matched book and
certain firm financing activities;
|
|
|
|
certain corporate loans, loan commitments and certificates of
deposit issued by GS Bank USA as well as securities held by GS
Bank USA;
|
|
|
|
receivables from customers and counterparties arising from
transfers accounted for as secured loans rather than purchases
under SFAS No. 140;
|
|
|
|
certain insurance and reinsurance contracts; and
|
|
|
|
in general, investments acquired after the adoption of
SFAS No. 159 where the firm has significant influence
over the investee and would otherwise apply the equity method of
accounting.
|
Fair Value Measurements. The fair value of a
financial instrument is the amount that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date
(the exit price). Financial assets are marked to bid prices and
financial liabilities are marked to offer prices. Fair value
measurements do not include transaction costs.
The firm adopted SFAS No. 157, Fair Value
Measurements, as of the beginning of 2007.
SFAS No. 157 establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest
priority to unobservable inputs (level 3 measurements). The
three levels of the fair value hierarchy under
SFAS No. 157 are described below:
Basis of Fair Value
Measurement
|
|
|
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities;
|
|
|
Level 2
|
Quoted prices in markets that are not considered to be active or
financial instruments for which all significant inputs are
observable, either directly or indirectly;
|
|
|
Level 3
|
Prices or valuations that require inputs that are both
significant to the fair value measurement and unobservable.
|
139
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A financial instruments level within the fair value
hierarchy is based on the lowest level of any input that is
significant to the fair value measurement.
The firm defines active markets for equity instruments based on
the average daily trading volume both in absolute terms and
relative to the market capitalization for the instrument. The
firm defines active markets for debt instruments based on both
the average daily trading volume and the number of days with
trading activity.
During the fourth quarter of 2008, both the FASB and the staff
of the SEC re-emphasized the importance of sound fair value
measurement in financial reporting. In October 2008, the
FASB issued FASB Staff Position
No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset is Not Active. This statement
clarifies that determining fair value in an inactive or
dislocated market depends on facts and circumstances and
requires significant management judgment. This statement
specifies that it is acceptable to use inputs based on
management estimates or assumptions, or for management to make
adjustments to observable inputs to determine fair value when
markets are not active and relevant observable inputs are not
available. The firms fair value measurement policies are
consistent with the guidance in
FSP No. FAS 157-3.
Credit risk is an essential component of fair value. Cash
products (e.g., bonds and loans) and derivative instruments
(particularly those with significant future projected cash
flows) trade in the market at levels which reflect credit
considerations. The firm calculates the fair value of derivative
assets by discounting future cash flows at a rate which
incorporates counterparty credit spreads and the fair value of
derivative liabilities by discounting future cash flows at a
rate which incorporates the firms own credit spreads. In
doing so, credit exposures are adjusted to reflect mitigants,
namely collateral agreements which reduce exposures based on
triggers and contractual posting requirements. The firm manages
its exposure to credit risk as it does other market risks and
will price, economically hedge, facilitate and intermediate
trades which involve credit risk. The firm records liquidity
valuation adjustments to reflect the cost of exiting
concentrated risk positions, including exposure to the
firms own credit spreads.
In determining fair value, the firm separates its Trading
assets, at fair value and its Trading liabilities,
at fair value into two categories: cash instruments and
derivative contracts.
|
|
|
|
|
Cash Instruments. The firms cash instruments
are generally classified within level 1 or level 2 of
the fair value hierarchy because they are valued using quoted
market prices, broker or dealer quotations, or alternative
pricing sources with reasonable levels of price transparency.
The types of instruments valued based on quoted market prices in
active markets include most U.S. government and sovereign
obligations, active listed equities and certain money market
securities. Such instruments are generally classified within
level 1 of the fair value hierarchy. In accordance with
SFAS No. 157, the firm does not adjust the quoted
price for such instruments, even in situations where the firm
holds a large position and a sale could reasonably impact the
quoted price.
|
The types of instruments that trade in markets that are not
considered to be active, but are valued based on quoted market
prices, broker or dealer quotations, or alternative pricing
sources with reasonable levels of price transparency include
most government agency securities,
investment-grade
corporate bonds, certain mortgage products, certain bank loans
and bridge loans, less liquid listed equities, state, municipal
and provincial obligations and certain money market securities
and loan commitments. Such instruments are generally classified
within level 2 of the fair value hierarchy.
Certain cash instruments are classified within level 3 of
the fair value hierarchy because they trade infrequently and
therefore have little or no price transparency. Such instruments
include private equity and real estate fund investments, certain
bank loans and bridge loans (including
140
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
certain mezzanine financing, leveraged loans arising from
capital market transactions and other corporate bank debt), less
liquid corporate debt securities and other debt obligations
(including less liquid
high-yield
corporate bonds, distressed debt instruments and collateralized
debt obligations (CDOs) backed by corporate obligations), less
liquid mortgage whole loans and securities (backed by either
commercial or residential real estate), and acquired portfolios
of distressed loans. The transaction price is initially used as
the best estimate of fair value. Accordingly, when a pricing
model is used to value such an instrument, the model is adjusted
so that the model value at inception equals the transaction
price. This valuation is adjusted only when changes to inputs
and assumptions are corroborated by evidence such as
transactions in similar instruments, completed or pending
third-party
transactions in the underlying investment or comparable
entities, subsequent rounds of financing, recapitalizations and
other transactions across the capital structure, offerings in
the equity or debt capital markets, and changes in financial
ratios or cash flows.
For positions that are not traded in active markets or are
subject to transfer restrictions, valuations are adjusted to
reflect illiquidity
and/or
non-transferability.
Such adjustments are generally based on available market
evidence. In the absence of such evidence, managements
best estimate is used.
Recent market conditions, particularly in the fourth quarter of
2008 (characterized by dislocations between asset classes,
elevated levels of volatility, and reduced price transparency),
have increased the level of management judgment required to
value cash trading instruments classified within level 3 of
the fair value hierarchy. In particular, managements
judgment is required to determine the appropriate
risk-adjusted
discount rate for cash trading instruments with little or no
price transparency as a result of decreased volumes and lower
levels of trading activity. In such situations, the firms
valuation is adjusted to approximate rates which market
participants would likely consider appropriate for relevant
credit and liquidity risks.
|
|
|
|
|
Derivative Contracts. Derivative contracts can be
exchange-traded
or
over-the-counter
(OTC).
Exchange-traded
derivatives typically fall within level 1 or level 2
of the fair value hierarchy depending on whether they are deemed
to be actively traded or not. The firm generally values
exchange-traded
derivatives using models which calibrate to
market-clearing
levels and eliminate timing differences between the closing
price of the
exchange-traded
derivatives and their underlying instruments. In such cases,
exchange-traded
derivatives are classified within level 2 of the fair value
hierarchy.
|
OTC derivatives are valued using market transactions and other
market evidence whenever possible, including
market-based
inputs to models, model calibration to
market-clearing
transactions, broker or dealer quotations, or alternative
pricing sources with reasonable levels of price transparency.
Where models are used, the selection of a particular model to
value an OTC derivative depends upon the contractual terms of,
and specific risks inherent in, the instrument as well as the
availability of pricing information in the market. The firm
generally uses similar models to value similar instruments.
Valuation models require a variety of inputs, including
contractual terms, market prices, yield curves, credit curves,
measures of volatility, prepayment rates and correlations of
such inputs. For OTC derivatives that trade in liquid markets,
such as generic forwards, swaps and options, model inputs can
generally be verified and model selection does not involve
significant management judgment. OTC derivatives are classified
within level 2 of the fair value hierarchy when all of the
significant inputs can be corroborated to market evidence.
Certain OTC derivatives trade in less liquid markets with
limited pricing information, and the determination of fair value
for these derivatives is inherently more difficult. Such
instruments
141
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
are classified within level 3 of the fair value hierarchy.
Where the firm does not have corroborating market evidence to
support significant model inputs and cannot verify the model to
market transactions, the transaction price is initially used as
the best estimate of fair value. Accordingly, when a pricing
model is used to value such an instrument, the model is adjusted
so that the model value at inception equals the transaction
price. The valuations of these less liquid OTC derivatives are
typically based on level 1
and/or
level 2 inputs that can be observed in the market, as well
as unobservable level 3 inputs. Subsequent to initial
recognition, the firm updates the level 1 and level 2
inputs to reflect observable market changes, with resulting
gains and losses reflected within level 3. Level 3
inputs are only changed when corroborated by evidence such as
similar market transactions,
third-party
pricing services
and/or
broker or dealer quotations, or other empirical market data. In
circumstances where the firm cannot verify the model value to
market transactions, it is possible that a different valuation
model could produce a materially different estimate of fair
value.
When appropriate, valuations are adjusted for various factors
such as liquidity, bid/offer spreads and credit considerations.
Such adjustments are generally based on available market
evidence. In the absence of such evidence, managements
best estimate is used.
Collateralized Agreements and
Financings. Collateralized agreements consist of resale
agreements and securities borrowed. Collateralized financings
consist of repurchase agreements, securities loaned and other
secured financings. Interest on collateralized agreements and
collateralized financings is recognized in Interest
income and Interest expense, respectively,
over the life of the transaction.
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Resale and Repurchase Agreements. Securities
purchased under agreements to resell and securities sold under
agreements to repurchase, principally U.S. government,
federal agency and
investment-grade
sovereign obligations, represent collateralized financing
transactions. The firm receives securities purchased under
agreements to resell, makes delivery of securities sold under
agreements to repurchase, monitors the market value of these
securities on a daily basis and delivers or obtains additional
collateral as appropriate. As noted above, resale and repurchase
agreements are carried in the consolidated statements of
financial condition at fair value under SFAS No. 159.
Resale and repurchase agreements are generally valued based on
inputs with reasonable levels of price transparency and are
classified within level 2 of the fair value hierarchy.
Resale and repurchase agreements are presented on a
net-by-counterparty
basis when the requirements of FIN 41, Offsetting of
Amounts Related to Certain Repurchase and Reverse Repurchase
Agreements, or FIN 39, Offsetting of Amounts
Related to Certain Contracts, are satisfied.
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Securities Borrowed and Loaned. Securities borrowed
and loaned are generally collateralized by cash, securities or
letters of credit. The firm receives securities borrowed, makes
delivery of securities loaned, monitors the market value of
securities borrowed and loaned, and delivers or obtains
additional collateral as appropriate. Securities borrowed and
loaned within Securities Services, relating to both customer
activities and, to a lesser extent, certain firm financing
activities, are recorded based on the amount of cash collateral
advanced or received plus accrued interest. As these
arrangements generally can be terminated on demand, they exhibit
little, if any, sensitivity to changes in interest rates. As
noted above, securities borrowed and loaned within Trading and
Principal Investments, which are related to the firms
matched book and certain firm financing activities, are recorded
at fair value under SFAS No. 159. These securities
borrowed and loaned transactions are generally valued based on
inputs with reasonable levels of price transparency and are
classified within level 2 of the fair value hierarchy.
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142
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Other Secured Financings. In addition to repurchase
agreements and securities loaned, the firm funds assets through
the use of other secured financing arrangements and pledges
financial instruments and other assets as collateral in these
transactions. As noted above, the firm has elected to apply
SFAS No. 159 to transfers accounted for as financings
rather than sales under SFAS No. 140, debt raised
through the firms William Street program and certain other
nonrecourse financings, for which the use of fair value
eliminates
non-economic
volatility in earnings that would arise from using different
measurement attributes. These other secured financing
transactions are generally valued based on inputs with
reasonable levels of price transparency and are generally
classified within level 2 of the fair value hierarchy.
Other secured financings that are not recorded at fair value are
recorded based on the amount of cash received plus accrued
interest. See Note 3 for further information regarding
other secured financings.
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Hybrid Financial Instruments. Hybrid financial
instruments are instruments that contain bifurcatable embedded
derivatives under SFAS No. 133 and do not require
settlement by physical delivery of
non-financial
assets (e.g., physical commodities). If the firm elects to
bifurcate the embedded derivative, it is accounted for at fair
value and the host contract is accounted for at amortized cost,
adjusted for the effective portion of any fair value hedge
accounting relationships. If the firm does not elect to
bifurcate, the entire hybrid financial instrument is accounted
for at fair value under SFAS No. 155. See Notes 3
and 6 for further information regarding hybrid financial
instruments.
Transfers of Financial Assets. In general, transfers
of financial assets are accounted for as sales under
SFAS No. 140 when the firm has relinquished control
over the transferred assets. For transfers accounted for as
sales, any related gains or losses are recognized in net
revenues. Transfers that are not accounted for as sales are
accounted for as collateralized financings, with the related
interest expense recognized in net revenues over the life of the
transaction.
Commissions. Commission revenues from executing and
clearing client transactions on stock, options and futures
markets are recognized in Trading and principal
investments in the consolidated statements of earnings on
a trade-date
basis.
Insurance Activities. Certain of the firms
insurance and reinsurance contracts are accounted for at fair
value under SFAS No. 159, with changes in fair value
included in Trading and principal investments in the
consolidated statements of earnings.
Revenues from variable annuity and life insurance and
reinsurance contracts not accounted for at fair value under
SFAS No. 159 generally consist of fees assessed on
contract holder account balances for mortality charges, policy
administration fees and surrender charges, and are recognized
within Trading and principal investments in the
consolidated statements of earnings in the period that services
are provided.
Interest credited to variable annuity and life insurance and
reinsurance contracts account balances and changes in reserves
are recognized in Other expenses in the consolidated
statements of earnings.
Premiums earned for underwriting property catastrophe
reinsurance are recognized within Trading and principal
investments in the consolidated statements of earnings
over the coverage period, net of premiums ceded for the cost of
reinsurance. Expenses for liabilities related to property
catastrophe reinsurance claims, including estimates of losses
that have been incurred but not reported, are recognized within
Other expenses in the consolidated statements of
earnings.
Merchant Banking Overrides. The firm is entitled to
receive merchant banking overrides (i.e., an increased
share of a funds income and gains) when the return on the
funds investments
143
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
exceeds certain threshold returns. Overrides are based on
investment performance over the life of each merchant banking
fund, and future investment underperformance may require amounts
of override previously distributed to the firm to be returned to
the funds. Accordingly, overrides are recognized in the
consolidated statements of earnings only when all material
contingencies have been resolved. Overrides are included in
Trading and principal investments in the
consolidated statements of earnings.
Asset Management. Management fees are recognized
over the period that the related service is provided based upon
average net asset values. In certain circumstances, the firm is
also entitled to receive incentive fees based on a percentage of
a funds return or when the return on assets under
management exceeds specified benchmark returns or other
performance targets. Incentive fees are generally based on
investment performance over a
12-month
period and are subject to adjustment prior to the end of the
measurement period. Accordingly, incentive fees are recognized
in the consolidated statements of earnings when the measurement
period ends. Asset management fees and incentive fees are
included in Asset management and securities services
in the consolidated statements of earnings.
Share-Based
Compensation
The firm accounts for
share-based
compensation in accordance with
SFAS No. 123-R,
Share-Based
Payment. The cost of employee services received in
exchange for a
share-based
award is generally measured based on the grant-date fair value
of the award.
Share-based
awards that do not require future service (i.e., vested
awards, including awards granted to retirement-eligible
employees) are expensed immediately.
Share-based
employee awards that require future service are amortized over
the relevant service period. Expected forfeitures are included
in determining
share-based
employee compensation expense. In the first quarter of 2006, the
firm adopted
SFAS No. 123-R
under the modified prospective adoption method. Under that
method of adoption, the provisions of
SFAS No. 123-R
are generally applied only to
share-based
awards granted subsequent to adoption.
Share-based
awards held by employees that were retirement-eligible on the
date of adoption of
SFAS No. 123-R
must continue to be amortized over the stated service period of
the award (and accelerated if the employee actually retires).
The firm pays cash dividend equivalents on outstanding
restricted stock units. Dividend equivalents paid on restricted
stock units are generally charged to retained earnings. Dividend
equivalents paid on restricted stock units expected to be
forfeited are included in compensation expense. The tax benefit
related to dividend equivalents paid on restricted stock units
is accounted for as a reduction of income tax expense. See
Recent
Accounting Developments for a discussion of Emerging
Issues Task Force (EITF) Issue
No. 06-11,
Accounting for Income Tax Benefits of Dividends on
Share-Based
Payment Awards.
In certain cases, primarily related to the death of an employee
or conflicted employment (as outlined in the applicable award
agreements), the firm may cash settle
share-based
compensation awards. For awards accounted for as equity
instruments, Additional
paid-in
capital is adjusted to the extent of the difference
between the current value of the award and the grant-date value
of the award.
Goodwill
Goodwill is the cost of acquired companies in excess of the fair
value of identifiable net assets at acquisition date. In
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets, goodwill is tested at least annually
for impairment. An impairment loss is recognized if the
estimated fair value of an operating segment, which is a
component one level below the firms three business
segments, is
144
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
less than its estimated net book value. Such loss is calculated
as the difference between the estimated fair value of goodwill
and its carrying value.
Identifiable
Intangible Assets
Identifiable intangible assets, which consist primarily of
customer lists, Designated Market Maker (DMM) rights and
the value of business acquired (VOBA) and deferred acquisition
costs (DAC) in the firms insurance subsidiaries, are
amortized over their estimated lives in accordance with
SFAS No. 142 or, in the case of insurance contracts,
in accordance with SFAS No. 60, Accounting and
Reporting by Insurance Enterprises, and
SFAS No. 97, Accounting and Reporting by
Insurance Enterprises for Certain
Long-Duration
Contracts and for Realized Gains and Losses from the Sale of
Investments. Identifiable intangible assets are tested for
impairment whenever events or changes in circumstances suggest
that an assets or asset groups carrying value may
not be fully recoverable in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of
Long-Lived
Assets, or SFAS No. 60 and
SFAS No. 97. An impairment loss, generally calculated
as the difference between the estimated fair value and the
carrying value of an asset or asset group, is recognized if the
sum of the estimated undiscounted cash flows relating to the
asset or asset group is less than the corresponding carrying
value.
Property,
Leasehold Improvements and Equipment
Property, leasehold improvements and equipment, net of
accumulated depreciation and amortization, are recorded at cost
and included in Other assets in the consolidated
statements of financial condition.
Substantially all property and equipment are depreciated on a
straight-line basis over the useful life of the asset. Leasehold
improvements are amortized on a straight-line basis over the
useful life of the improvement or the term of the lease,
whichever is shorter. Certain costs of software developed or
obtained for internal use are capitalized and amortized on a
straight-line basis over the useful life of the software.
Property, leasehold improvements and equipment are tested for
impairment whenever events or changes in circumstances suggest
that an assets or asset groups carrying value may
not be fully recoverable in accordance with
SFAS No. 144. An impairment loss, calculated as the
difference between the estimated fair value and the carrying
value of an asset or asset group, is recognized if the sum of
the expected undiscounted cash flows relating to the asset or
asset group is less than the corresponding carrying value.
The firms operating leases include office space held in
excess of current requirements. Rent expense relating to space
held for growth is included in Occupancy in the
consolidated statements of earnings. In accordance with
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, the firm records a
liability, based on the fair value of the remaining lease
rentals reduced by any potential or existing sublease rentals,
for leases where the firm has ceased using the space and
management has concluded that the firm will not derive any
future economic benefits. Costs to terminate a lease before the
end of its term are recognized and measured at fair value upon
termination.
Foreign
Currency Translation
Assets and liabilities denominated in
non-U.S. currencies
are translated at rates of exchange prevailing on the date of
the consolidated statement of financial condition, and revenues
and expenses are translated at average rates of exchange for the
period. Gains or losses on translation of the financial
statements of a
non-U.S. operation,
when the functional currency is other than the U.S. dollar,
are included, net of hedges and taxes, in the consolidated
statements of comprehensive
145
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
income. The firm seeks to reduce its net investment exposure to
fluctuations in foreign exchange rates through the use of
foreign currency forward contracts and foreign
currency-denominated
debt. For foreign currency forward contracts, hedge
effectiveness is assessed based on changes in forward exchange
rates; accordingly, forward points are reflected as a component
of the currency translation adjustment in the consolidated
statements of comprehensive income. For foreign
currency-denominated debt, hedge effectiveness is assessed based
on changes in spot rates. Foreign currency remeasurement gains
or losses on transactions in nonfunctional currencies are
included in the consolidated statements of earnings.
Income
Taxes
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting and tax bases of the
firms assets and liabilities. Valuation allowances are
established to reduce deferred tax assets to the amount that
more likely than not will be realized. The firms tax
assets and liabilities are presented as a component of
Other assets and Other liabilities and accrued
expenses, respectively, in the consolidated statements of
financial condition. Tax provisions are computed in accordance
with SFAS No. 109, Accounting for Income
Taxes.
The firm adopted the provisions of FIN 48, Accounting
for Uncertainty in Income Taxes an Interpretation of
FASB Statement No. 109, as of
December 1, 2007, and recorded a transition adjustment
resulting in a reduction of $201 million to beginning
retained earnings. See Note 16 for further information
regarding the firms adoption of FIN 48. A tax
position can be recognized in the financial statements only when
it is more likely than not that the position will be sustained
upon examination by the relevant taxing authority based on the
technical merits of the position. A position that meets this
standard is measured at the largest amount of benefit that will
more likely than not be realized upon settlement. A liability is
established for differences between positions taken in a tax
return and amounts recognized in the financial statements.
FIN 48 also provides guidance on derecognition,
classification, interim period accounting and accounting for
interest and penalties. Prior to the adoption of FIN 48,
contingent liabilities related to income taxes were recorded
when the criteria for loss recognition under
SFAS No. 5, Accounting for Contingencies,
as amended, had been met.
Earnings Per
Common Share (EPS)
Basic EPS is calculated by dividing net earnings applicable to
common shareholders by the weighted average number of common
shares outstanding. Common shares outstanding includes common
stock and restricted stock units for which no future service is
required as a condition to the delivery of the underlying common
stock. Diluted EPS includes the determinants of basic EPS and,
in addition, reflects the dilutive effect of the common stock
deliverable pursuant to stock warrants and options and to
restricted stock units for which future service is required as a
condition to the delivery of the underlying common stock.
Cash and Cash
Equivalents
The firm defines cash equivalents as highly liquid overnight
deposits held in the ordinary course of business. As of
November 2008, Cash and cash equivalents on the
consolidated statements of financial condition included
$5.60 billion of cash and due from banks and
$10.14 billion of interest-bearing deposits with banks. As
of November 2007, Cash and cash equivalents on
the consolidated statements of financial condition included
$4.29 billion of cash and due from banks and
$5.99 billion of interest-bearing deposits with banks.
146
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Recent
Accounting Developments
EITF Issue
No. 06-11. In
June 2007, the EITF reached consensus on Issue
No. 06-11,
Accounting for Income Tax Benefits of Dividends on
Share-Based
Payment Awards. EITF Issue
No. 06-11
requires that the tax benefit related to dividend equivalents
paid on restricted stock units, which are expected to vest, be
recorded as an increase to additional
paid-in
capital. The firm currently accounts for this tax benefit as a
reduction to income tax expense. EITF Issue
No. 06-11
is to be applied prospectively for tax benefits on dividends
declared in fiscal years beginning after
December 15, 2007. The firm does not expect the
adoption of EITF Issue
No. 06-11
to have a material effect on its financial condition, results of
operations or cash flows.
FASB Staff Position
No. FAS 140-3. In
February 2008, the FASB issued FASB Staff Position (FSP)
No. FAS 140-3,
Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions.
FSP No. FAS 140-3
requires an initial transfer of a financial asset and a
repurchase financing that was entered into contemporaneously or
in contemplation of the initial transfer to be evaluated as a
linked transaction under SFAS No. 140 unless certain
criteria are met, including that the transferred asset must be
readily obtainable in the marketplace.
FSP No. FAS 140-3
is effective for fiscal years beginning after
November 15, 2008, and is applicable to new
transactions entered into after the date of adoption. Early
adoption is prohibited. The firm does not expect adoption of
FSP No. FAS 140-3
to have a material effect on its financial condition and cash
flows. Adoption of
FSP No. FAS 140-3
will have no effect on the firms results of operations.
SFAS No. 161. In March 2008, the FASB
issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities an
amendment of FASB Statement No. 133.
SFAS No. 161 requires enhanced disclosures about an
entitys derivative and hedging activities, and is
effective for financial statements issued for reporting periods
beginning after November 15, 2008, with early
application encouraged. Since SFAS No. 161 requires
only additional disclosures concerning derivatives and hedging
activities, adoption of SFAS No. 161 will not affect
the firms financial condition, results of operations or
cash flows.
FASB Staff Position
No. EITF 03-6-1. In
June 2008, the FASB issued FSP No.
EITF 03-6-1,
Determining Whether Instruments Granted in
Share-Based
Payment Transactions Are Participating Securities. The FSP
addresses whether instruments granted in
share-based
payment transactions are participating securities prior to
vesting and therefore need to be included in the earnings
allocation in calculating earnings per share under the two-class
method described in SFAS No. 128, Earnings per
Share. The FSP requires companies to treat unvested
share-based
payment awards that have
non-forfeitable
rights to dividend or dividend equivalents as a separate class
of securities in calculating earnings per share. The FSP is
effective for fiscal years beginning after
December 15, 2008; earlier application is not
permitted. The firm does not expect adoption of FSP No.
EITF 03-6-1
to have a material effect on its results of operations or
earnings per share.
FASB Staff Position
No. FAS 133-1
and
FIN 45-4. In
September 2008, the FASB issued
FSP No. FAS 133-1
and
FIN 45-4,
Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161.
FSP No. FAS 133-1
and
FIN 45-4
requires enhanced disclosures about credit derivatives and
guarantees and amends FIN 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others to exclude
credit derivative instruments accounted for at fair value under
SFAS No. 133. The FSP is effective for financial
statements issued for reporting periods ending after
November 15, 2008. Since
FSP No. FAS 133-1
and
FIN 45-4
only requires additional disclosures concerning credit
derivatives and guarantees, adoption of
FSP No. FAS 133-1
and
FIN 45-4
did not have an effect on the firms financial condition,
results of operations or cash flows.
147
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FASB Staff Position
No. FAS 157-3. In
October 2008, the FASB issued
FSP No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active.
FSP No. FAS 157-3
clarifies the application of SFAS No. 157 in an
inactive market, without changing its existing principles. The
FSP was effective immediately upon issuance. The adoption of
FSP No. FAS 157-3
did not have an effect on the firms financial condition,
results of operations or cash flows.
SFAS No. 141(R). In December 2007,
the FASB issued a revision to SFAS No. 141,
Business Combinations. SFAS No. 141(R)
requires changes to the accounting for transaction costs,
certain contingent assets and liabilities, and other balances in
a business combination. In addition, in partial acquisitions,
when control is obtained, the acquiring company must measure and
record all of the targets assets and liabilities,
including goodwill, at fair value as if the entire target
company had been acquired. The firm will apply the provisions of
SFAS No. 141(R) to business combinations occurring
after December 26, 2008. Adoption of
SFAS No. 141(R) will not affect the firms
financial condition, results of operations or cash flows, but
may have an effect on accounting for future business
combinations.
SFAS No. 160. In December 2007, the
FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements an
amendment of ARB No. 51. SFAS No. 160
requires that ownership interests in consolidated subsidiaries
held by parties other than the parent (noncontrolling interests)
be accounted for and presented as equity, rather than as a
liability or mezzanine equity. SFAS No. 160 is
effective for fiscal years beginning on or after
December 15, 2008, but the presentation and disclosure
requirements are to be applied retrospectively. The firm does
not expect adoption of the statement to have a material effect
on its financial condition, results of operations or cash flows.
FASB Staff Position
No. FAS 140-4
and FIN 46(R)-8. In December 2008, the FASB
issued
FSP No. FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities.
FSP No. FAS 140-4
and FIN 46(R)-8 requires enhanced disclosures about
transfers of financial assets and interests in variable interest
entities. The FSP is effective for interim and annual periods
ending after December 15, 2008. Since the FSP requires
only additional disclosures concerning transfers of financial
assets and interests in variable interest entities, adoption of
the FSP will not affect the firms financial condition,
results of operations or cash flows.
EITF Issue
No. 07-5. In
June 2008, the EITF reached consensus on Issue
No. 07-5,
Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock. EITF Issue
No. 07-5
provides guidance about whether an instrument (such as the
firms outstanding common stock warrants) should be
classified as equity and not marked to market for accounting
purposes. EITF Issue
No. 07-5
is effective for fiscal years beginning after December 15,
2008. Adoption of EITF Issue
No. 07-5
will not affect the firms financial condition, results of
operations or cash flows.
148
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Note 3.
|
Financial
Instruments
|
Fair Value of
Financial Instruments
The following table sets forth the firms trading assets,
at fair value, including those pledged as collateral, and
trading liabilities, at fair value. At any point in time, the
firm may use cash instruments as well as derivatives to manage a
long or short risk position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
(in millions)
|
Commercial paper, certificates of deposit,
time deposits and other money market instruments
|
|
$
|
8,662
|
(1)
|
|
$
|
|
|
|
$
|
8,985
|
(1)
|
|
$
|
|
|
U.S. government, federal agency and sovereign obligations
|
|
|
69,653
|
|
|
|
37,000
|
|
|
|
70,774
|
|
|
|
58,637
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
22,393
|
|
|
|
340
|
|
|
|
54,073
|
(6)
|
|
|
|
|
Bank loans and bridge loans
|
|
|
21,839
|
|
|
|
3,108
|
(4)
|
|
|
49,154
|
|
|
|
3,563
|
(4)
|
Corporate debt securities and other debt obligations
|
|
|
27,879
|
|
|
|
5,711
|
|
|
|
39,219
|
|
|
|
8,280
|
|
Equities and convertible debentures
|
|
|
57,049
|
|
|
|
12,116
|
|
|
|
122,205
|
|
|
|
45,130
|
|
Physical commodities
|
|
|
513
|
|
|
|
2
|
|
|
|
2,571
|
|
|
|
35
|
|
Derivative contracts
|
|
|
130,337
|
(2)
|
|
|
117,695
|
(5)
|
|
|
105,614
|
(2)
|
|
|
99,378
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
338,325
|
(3)
|
|
$
|
175,972
|
|
|
$
|
452,595
|
(3)
|
|
$
|
215,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes $4.40 billion and $6.17 billion as of
November 2008 and November 2007, respectively, of
money market instruments held by William Street Funding
Corporation (Funding Corp.) to support the William Street credit
extension program. See Note 8 for further information
regarding the William Street program.
|
(2)
|
|
Net of cash received pursuant to credit support agreements of
$137.16 billion and $59.05 billion as of
November 2008 and November 2007, respectively.
|
(3)
|
|
Includes $1.68 billion and $1.17 billion as of
November 2008 and November 2007, respectively, of
securities held within the firms insurance subsidiaries
which are accounted for as
available-for-sale
under SFAS No. 115.
|
(4)
|
|
Includes the fair value of commitments to extend credit.
|
(5)
|
|
Net of cash paid pursuant to credit support agreements of
$34.01 billion and $27.76 billion as of
November 2008 and November 2007, respectively.
|
(6)
|
|
Includes $7.64 billion as of November 2007 of mortgage
whole loans that were transferred to securitization vehicles
where such transfers were accounted for as secured financings
rather than sales under SFAS No. 140. The firm
distributed to investors the securities that were issued by the
securitization vehicles and therefore did not bear economic
exposure to the underlying mortgage whole loans.
|
149
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value
Hierarchy
The firms financial assets at fair value classified within
level 3 of the fair value hierarchy are summarized below:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
($ in millions)
|
Total level 3 assets
|
|
$
|
66,190
|
|
|
$
|
69,151
|
|
Level 3 assets for which the firm bears economic
exposure (1)
|
|
|
59,574
|
|
|
|
54,714
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
884,547
|
|
|
|
1,119,796
|
|
Total financial assets at fair value
|
|
|
595,234
|
|
|
|
717,557
|
|
|
|
|
|
|
|
|
|
|
Total level 3 assets as a percentage of Total assets
|
|
|
7.5
|
%
|
|
|
6.2
|
%
|
Level 3 assets for which the firm bears economic exposure
as a percentage of Total assets
|
|
|
6.7
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
Total level 3 assets as a percentage of Total financial
assets at fair value
|
|
|
11.1
|
|
|
|
9.6
|
|
Level 3 assets for which the firm bears economic exposure
as a percentage of Total financial assets at fair value
|
|
|
10.0
|
|
|
|
7.6
|
|
|
|
|
(1) |
|
Excludes assets which are financed
by nonrecourse debt, attributable to minority investors or
attributable to employee interests in certain consolidated funds.
|
The following tables set forth by level within the fair value
hierarchy Trading assets, at fair value,
Trading liabilities, at fair value and other
financial assets and financial liabilities accounted for at fair
value under SFAS No. 155 and SFAS No. 159 as
of November 2008 and November 2007. See Note 2
for further information on the fair value hierarchy. As required
by SFAS No. 157, assets and liabilities are classified
in their entirety based on the lowest level of input that is
significant to the fair value measurement.
150
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets at Fair Value as of November 2008
|
|
|
|
|
|
|
|
|
Netting and
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Collateral
|
|
Total
|
|
|
(in millions)
|
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
|
$
|
5,205
|
|
|
$
|
3,457
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,662
|
|
U.S. government, federal agency and sovereign obligations
|
|
|
35,069
|
|
|
|
34,584
|
|
|
|
|
|
|
|
|
|
|
|
69,653
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
|
|
|
|
6,886
|
|
|
|
15,507
|
|
|
|
|
|
|
|
22,393
|
|
Bank loans and bridge loans
|
|
|
|
|
|
|
9,882
|
|
|
|
11,957
|
|
|
|
|
|
|
|
21,839
|
|
Corporate debt securities and other debt obligations
|
|
|
14
|
|
|
|
20,269
|
|
|
|
7,596
|
|
|
|
|
|
|
|
27,879
|
|
Equities and convertible debentures
|
|
|
25,068
|
|
|
|
15,975
|
|
|
|
16,006
|
(6)
|
|
|
|
|
|
|
57,049
|
|
Physical commodities
|
|
|
|
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
65,356
|
|
|
|
91,566
|
|
|
|
51,066
|
|
|
|
|
|
|
|
207,988
|
|
Derivative contracts
|
|
|
24
|
|
|
|
256,412
|
|
|
|
15,124
|
|
|
|
(141,223
|
) (7)
|
|
|
130,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets, at fair value
|
|
|
65,380
|
|
|
|
347,978
|
|
|
|
66,190
|
|
|
|
(141,223
|
)
|
|
|
338,325
|
|
Securities segregated for regulatory and other purposes
|
|
|
20,030
|
(4)
|
|
|
58,800
|
(5)
|
|
|
|
|
|
|
|
|
|
|
78,830
|
|
Receivables from customers and
counterparties (1)
|
|
|
|
|
|
|
1,598
|
|
|
|
|
|
|
|
|
|
|
|
1,598
|
|
Securities
borrowed (2)
|
|
|
|
|
|
|
59,810
|
|
|
|
|
|
|
|
|
|
|
|
59,810
|
|
Securities purchased under agreements to resell, at fair value
|
|
|
|
|
|
|
116,671
|
|
|
|
|
|
|
|
|
|
|
|
116,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value
|
|
$
|
85,410
|
|
|
$
|
584,857
|
|
|
$
|
66,190
|
|
|
$
|
(141,223
|
)
|
|
$
|
595,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets for which the firm does not bear economic
exposure (3)
|
|
|
|
|
|
|
|
|
|
|
(6,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets for which the firm bears economic exposure
|
|
|
|
|
|
|
|
|
|
$
|
59,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Principally consists of transfers accounted for as secured loans
rather than purchases under SFAS No. 140 and prepaid
variable share forwards.
|
|
(2)
|
Consists of securities borrowed within Trading and Principal
Investments. Excludes securities borrowed within Securities
Services, which are accounted for based on the amount of cash
collateral advanced plus accrued interest.
|
|
(3)
|
Consists of level 3 assets which are financed by
nonrecourse debt, attributable to minority investors or
attributable to employee interests in certain consolidated funds.
|
|
(4)
|
Consists of U.S. Treasury securities and money market
instruments as well as insurance separate account assets
measured at fair value under AICPA
SOP 03-1,
Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional
Long-Duration
Contracts and for Separate Accounts.
|
|
(5)
|
Principally consists of securities borrowed and resale
agreements. The underlying securities have been segregated to
satisfy certain regulatory requirements.
|
|
(6)
|
Consists of private equity and real estate fund investments.
|
|
(7)
|
Represents cash collateral and the impact of netting across the
levels of the fair value hierarchy. Netting among positions
classified within the same level is included in that level.
|
151
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities at Fair Value as of November 2008
|
|
|
|
|
|
|
|
|
Netting and
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Collateral
|
|
Total
|
|
|
(in millions)
|
U.S. government, federal agency and sovereign obligations
|
|
$
|
36,385
|
|
|
$
|
615
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
37,000
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
|
|
|
|
320
|
|
|
|
20
|
|
|
|
|
|
|
|
340
|
|
Bank loans and bridge loans
|
|
|
|
|
|
|
2,278
|
|
|
|
830
|
|
|
|
|
|
|
|
3,108
|
|
Corporate debt securities and other debt obligations
|
|
|
11
|
|
|
|
5,185
|
|
|
|
515
|
|
|
|
|
|
|
|
5,711
|
|
Equities and convertible debentures
|
|
|
11,928
|
|
|
|
174
|
|
|
|
14
|
|
|
|
|
|
|
|
12,116
|
|
Physical commodities
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
48,326
|
|
|
|
8,572
|
|
|
|
1,379
|
|
|
|
|
|
|
|
58,277
|
|
Derivative contracts
|
|
|
21
|
|
|
|
145,777
|
|
|
|
9,968
|
|
|
|
(38,071
|
) (8)
|
|
|
117,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities, at fair value
|
|
|
48,347
|
|
|
|
154,349
|
|
|
|
11,347
|
|
|
|
(38,071
|
)
|
|
|
175,972
|
|
Unsecured
short-term
borrowings (1)
|
|
|
|
|
|
|
17,916
|
|
|
|
5,159
|
|
|
|
|
|
|
|
23,075
|
|
Deposits (2)
|
|
|
|
|
|
|
4,224
|
|
|
|
|
|
|
|
|
|
|
|
4,224
|
|
Securities
loaned (3)
|
|
|
|
|
|
|
7,872
|
|
|
|
|
|
|
|
|
|
|
|
7,872
|
|
Securities sold under agreements to repurchase, at fair value
|
|
|
|
|
|
|
62,883
|
|
|
|
|
|
|
|
|
|
|
|
62,883
|
|
Other secured
financings (4)
|
|
|
|
|
|
|
16,429
|
|
|
|
3,820
|
|
|
|
|
|
|
|
20,249
|
|
Other
liabilities (5)
|
|
|
|
|
|
|
978
|
|
|
|
|
|
|
|
|
|
|
|
978
|
|
Unsecured
long-term
borrowings (6)
|
|
|
|
|
|
|
15,886
|
|
|
|
1,560
|
|
|
|
|
|
|
|
17,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value
|
|
$
|
48,347
|
|
|
$
|
280,537
|
|
|
$
|
21,886
|
(7)
|
|
$
|
(38,071
|
)
|
|
$
|
312,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of promissory notes, commercial paper and hybrid
financial instruments.
|
|
(2)
|
Consists of certain certificates of deposit issued by GS Bank
USA.
|
|
(3)
|
Consists of securities loaned within Trading and Principal
Investments. Excludes securities loaned within Securities
Services, which are accounted for based on the amount of cash
collateral received plus accrued interest.
|
|
(4)
|
Primarily includes transfers accounted for as financings rather
than sales under SFAS No. 140, debt raised through the
firms William Street program and certain other nonrecourse
financings.
|
|
(5)
|
Consists of liabilities related to insurance contracts.
|
|
(6)
|
Primarily includes hybrid financial instruments and prepaid
physical commodity transactions.
|
|
(7)
|
Level 3 liabilities were 7.0% of Total liabilities at fair
value.
|
|
(8)
|
Represents cash collateral and the impact of netting across the
levels of the fair value hierarchy. Netting among positions
classified within the same level is included in that level.
|
152
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets at Fair Value as of November 2007
|
|
|
|
|
|
|
|
|
Netting and
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Collateral
|
|
Total
|
|
|
(in millions)
|
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
|
$
|
6,237
|
|
|
$
|
2,748
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,985
|
|
U.S. government, federal agency and sovereign obligations
|
|
|
37,966
|
|
|
|
32,808
|
|
|
|
|
|
|
|
|
|
|
|
70,774
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
|
|
|
|
38,073
|
|
|
|
16,000
|
|
|
|
|
|
|
|
54,073
|
|
Bank loans and bridge loans
|
|
|
|
|
|
|
35,820
|
|
|
|
13,334
|
|
|
|
|
|
|
|
49,154
|
|
Corporate debt securities and other debt obligations
|
|
|
915
|
|
|
|
32,193
|
|
|
|
6,111
|
|
|
|
|
|
|
|
39,219
|
|
Equities and convertible debentures
|
|
|
68,727
|
|
|
|
35,472
|
|
|
|
18,006
|
(6)
|
|
|
|
|
|
|
122,205
|
|
Physical commodities
|
|
|
|
|
|
|
2,571
|
|
|
|
|
|
|
|
|
|
|
|
2,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
113,845
|
|
|
|
179,685
|
|
|
|
53,451
|
|
|
|
|
|
|
|
346,981
|
|
Derivative contracts
|
|
|
286
|
|
|
|
153,065
|
|
|
|
15,700
|
|
|
|
(63,437
|
) (7)
|
|
|
105,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets, at fair value
|
|
|
114,131
|
|
|
|
332,750
|
|
|
|
69,151
|
|
|
|
(63,437
|
)
|
|
|
452,595
|
|
Securities segregated for regulatory and other purposes
|
|
|
24,078
|
(4)
|
|
|
69,940
|
(5)
|
|
|
|
|
|
|
|
|
|
|
94,018
|
|
Receivables from customers and
counterparties (1)
|
|
|
|
|
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
|
1,950
|
|
Securities
borrowed (2)
|
|
|
|
|
|
|
83,277
|
|
|
|
|
|
|
|
|
|
|
|
83,277
|
|
Securities purchased under agreements to resell, at fair value
|
|
|
|
|
|
|
85,717
|
|
|
|
|
|
|
|
|
|
|
|
85,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value
|
|
$
|
138,209
|
|
|
$
|
573,634
|
|
|
$
|
69,151
|
|
|
$
|
(63,437
|
)
|
|
$
|
717,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets for which the firm does not bear economic
exposure (3)
|
|
|
|
|
|
|
|
|
|
|
(14,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets for which the firm bears economic exposure
|
|
|
|
|
|
|
|
|
|
$
|
54,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of transfers accounted for as secured loans rather than
purchases under SFAS No. 140 and prepaid variable
share forwards.
|
|
(2)
|
Consists of securities borrowed within Trading and Principal
Investments. Excludes securities borrowed within Securities
Services, which are accounted for based on the amount of cash
collateral advanced plus accrued interest.
|
|
(3)
|
Consists of level 3 assets which are financed by
nonrecourse debt, attributable to minority investors or
attributable to employee interests in certain consolidated funds.
|
|
(4)
|
Consists of U.S. Treasury securities and money market
instruments as well as insurance separate account assets
measured at fair value under AICPA
SOP 03-1,
Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional
Long-Duration
Contracts and for Separate Accounts.
|
|
(5)
|
Principally consists of securities borrowed and resale
agreements. The underlying securities have been segregated to
satisfy certain regulatory requirements.
|
|
(6)
|
Consists of private equity and real estate fund investments.
|
|
(7)
|
Represents cash collateral and the impact of netting across the
levels of the fair value hierarchy. Netting among positions
classified within the same level is included in that level.
|
153
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities at Fair Value as of November 2007
|
|
|
|
|
|
|
|
|
Netting and
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Collateral
|
|
Total
|
|
|
(in millions)
|
U.S. government, federal agency and sovereign obligations
|
|
$
|
57,714
|
|
|
$
|
923
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
58,637
|
|
Bank loans and bridge loans
|
|
|
|
|
|
|
3,525
|
|
|
|
38
|
|
|
|
|
|
|
|
3,563
|
|
Corporate debt securities and other debt obligations
|
|
|
|
|
|
|
7,764
|
|
|
|
516
|
|
|
|
|
|
|
|
8,280
|
|
Equities and convertible debentures
|
|
|
44,076
|
|
|
|
1,054
|
|
|
|
|
|
|
|
|
|
|
|
45,130
|
|
Physical commodities
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash instruments
|
|
|
101,790
|
|
|
|
13,301
|
|
|
|
554
|
|
|
|
|
|
|
|
115,645
|
|
Derivative contracts
|
|
|
212
|
|
|
|
117,794
|
|
|
|
13,644
|
|
|
|
(32,272
|
) (7)
|
|
|
99,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading liabilities, at fair value
|
|
|
102,002
|
|
|
|
131,095
|
|
|
|
14,198
|
|
|
|
(32,272
|
)
|
|
|
215,023
|
|
Unsecured
short-term
borrowings (1)
|
|
|
|
|
|
|
44,060
|
|
|
|
4,271
|
|
|
|
|
|
|
|
48,331
|
|
Deposits (2)
|
|
|
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
463
|
|
Securities
loaned (3)
|
|
|
|
|
|
|
5,449
|
|
|
|
|
|
|
|
|
|
|
|
5,449
|
|
Securities sold under agreements to repurchase, at fair value
|
|
|
|
|
|
|
159,178
|
|
|
|
|
|
|
|
|
|
|
|
159,178
|
|
Other secured
financings (4)
|
|
|
|
|
|
|
33,581
|
|
|
|
|
|
|
|
|
|
|
|
33,581
|
|
Unsecured
long-term
borrowings (5)
|
|
|
|
|
|
|
15,161
|
|
|
|
767
|
|
|
|
|
|
|
|
15,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value
|
|
$
|
102,002
|
|
|
$
|
388,987
|
|
|
$
|
19,236
|
(6)
|
|
$
|
(32,272
|
)
|
|
$
|
477,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of promissory notes, commercial paper and hybrid
financial instruments.
|
|
(2)
|
Consists of certain certificates of deposit issued by GS Bank
USA.
|
|
(3)
|
Consists of securities loaned within Trading and Principal
Investments. Excludes securities loaned within Securities
Services, which are accounted for based on the amount of cash
collateral received plus accrued interest.
|
|
(4)
|
Primarily includes transfers accounted for as financings rather
than sales under SFAS No. 140, debt raised through the
firms William Street program and certain other nonrecourse
financings.
|
|
(5)
|
Primarily includes hybrid financial instruments and prepaid
physical commodity transactions.
|
|
(6)
|
Level 3 liabilities were 4.0% of Total liabilities at fair
value.
|
|
(7)
|
Represents cash collateral and the impact of netting across the
levels of the fair value hierarchy. Netting among positions
classified within the same level is included in that level.
|
154
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Level 3
Unrealized Gains/(Losses)
The table below sets forth a summary of unrealized
gains/(losses) on the firms level 3 financial assets
and financial liabilities still held at the reporting date for
the years ended November 2008 and November 2007.
|
|
|
|
|
|
|
|
|
|
|
Level 3 Unrealized
|
|
|
Gains/(Losses)
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Cash Instruments Assets
|
|
$
|
(11,485
|
)
|
|
$
|
(2,292
|
)
|
Cash Instruments Liabilities
|
|
|
(871
|
)
|
|
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized gains/(losses) on level 3 cash instruments
|
|
|
(12,356
|
)
|
|
|
(2,586
|
)
|
Derivative Contracts Net
|
|
|
5,577
|
|
|
|
4,543
|
|
Unsecured
Short-Term
Borrowings
|
|
|
737
|
|
|
|
(666
|
)
|
Other Secured Financings
|
|
|
838
|
|
|
|
|
|
Unsecured
Long-Term
Borrowings
|
|
|
657
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Total level 3 unrealized gains/(losses)
|
|
$
|
(4,547
|
)
|
|
$
|
1,313
|
|
|
|
|
|
|
|
|
|
|
Cash
Instruments
The net unrealized loss on level 3 cash instruments of
$12.36 billion for the year ended November 2008
primarily consisted of unrealized losses on loans and securities
backed by commercial real estate, certain bank loans and bridge
loans, private equity and real estate fund investments. Losses
during the year reflected the significant weakness in the global
credit and equity markets.
Level 3 cash instruments are frequently economically hedged
with instruments classified within level 1 and
level 2, and accordingly, gains or losses that have been
reported in level 3 can be offset by gains or losses
attributable to instruments classified within level 1 or
level 2 or by gains or losses on derivative contracts classified
in level 3 of the fair value hierarchy.
Derivative
Contracts
The net unrealized gain on level 3 derivative contracts of
$5.58 billion for the year ended November 2008 was
primarily attributable to changes in observable credit spreads
(which are level 2 inputs) on the underlying instruments.
Level 3 gains and losses on derivative contracts should be
considered in the context of the following:
|
|
|
|
|
A derivative contract with level 1
and/or
level 2 inputs is classified as a level 3 financial
instrument in its entirety if it has at least one significant
level 3 input.
|
|
|
|
If there is one significant level 3 input, the entire gain
or loss from adjusting only observable inputs
(i.e., level 1 and level 2) is still
classified as level 3.
|
|
|
|
Gains or losses that have been reported in level 3
resulting from changes in level 1 or level 2 inputs
are frequently offset by gains or losses attributable to
instruments classified within level 1 or level 2 or by
cash instruments reported in level 3 of the fair value
hierarchy.
|
155
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The tables below set forth a summary of changes in the fair
value of the firms level 3 financial assets and
financial liabilities for the years ended November 2008 and
November 2007. The tables reflect gains and losses,
including gains and losses on financial assets and financial
liabilities that were transferred to level 3 during the
year, for all financial assets and financial liabilities
categorized as level 3 as of November 2008 and
November 2007, respectively. The tables do not include
gains or losses that were reported in level 3 in prior
periods for instruments that were sold or transferred out of
level 3 prior to the end of the period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Financial Assets and Financial Liabilities
|
|
|
Year Ended November 2008
|
|
|
Cash
|
|
Cash
|
|
Derivative
|
|
Unsecured
|
|
Other
|
|
Unsecured
|
|
|
Instruments
|
|
Instruments
|
|
Contracts
|
|
Short-Term
|
|
Secured
|
|
Long-Term
|
|
|
- Assets
|
|
- Liabilities
|
|
- Net
|
|
Borrowings
|
|
Financings
|
|
Borrowings
|
|
|
(in millions)
|
Balance, beginning of year
|
|
$
|
53,451
|
|
|
$
|
(554
|
)
|
|
$
|
2,056
|
|
|
$
|
(4,271
|
)
|
|
$
|
|
|
|
$
|
(767
|
)
|
Realized gains/(losses)
|
|
|
1,930
|
(1)
|
|
|
28
|
(3)
|
|
|
267
|
(3)
|
|
|
354
|
(3)
|
|
|
87
|
(3)
|
|
|
(20
|
) (3)
|
Unrealized gains/(losses) relating to instruments still held at
the reporting date
|
|
|
(11,485
|
) (1)
|
|
|
(871
|
) (3)
|
|
|
5,577
|
(3)(4)
|
|
|
737
|
(3)
|
|
|
838
|
(3)
|
|
|
657
|
(3)
|
Purchases, issuances and settlements
|
|
|
3,955
|
|
|
|
55
|
|
|
|
(1,813
|
)
|
|
|
(1,353
|
)
|
|
|
416
|
|
|
|
(1,314
|
)
|
Transfers in
and/or out
of level 3
|
|
|
3,215
|
(2)
|
|
|
(37
|
)
|
|
|
(931
|
) (5)
|
|
|
(626
|
)
|
|
|
(5,161
|
) (6)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
51,066
|
|
|
$
|
(1,379
|
)
|
|
$
|
5,156
|
|
|
$
|
(5,159
|
)
|
|
$
|
(3,820
|
)
|
|
$
|
(1,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Financial Assets and Financial Liabilities
|
|
|
Year Ended November 2007
|
|
|
Cash
|
|
Cash
|
|
Derivative
|
|
Unsecured
|
|
Other
|
|
Unsecured
|
|
|
Instruments
|
|
Instruments
|
|
Contracts
|
|
Short-Term
|
|
Secured
|
|
Long-Term
|
|
|
- Assets
|
|
- Liabilities
|
|
- Net
|
|
Borrowings
|
|
Financings
|
|
Borrowings
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Balance, beginning of year
|
|
$
|
29,905
|
|
|
$
|
(223
|
)
|
|
$
|
580
|
|
|
$
|
(3,253
|
)
|
|
$
|
|
|
|
$
|
(135
|
)
|
Realized gains/(losses)
|
|
|
2,232
|
(1)
|
|
|
(9
|
) (3)
|
|
|
1,713
|
(3)
|
|
|
167
|
(3)
|
|
|
|
|
|
|
(7
|
) (3)
|
Unrealized gains/(losses) relating to instruments still held at
the reporting date
|
|
|
(2,292
|
) (1)
|
|
|
(294
|
) (3)
|
|
|
4,543
|
(3)(4)
|
|
|
(666
|
) (3)
|
|
|
|
|
|
|
22
|
(3)
|
Purchases, issuances and settlements
|
|
|
22,561
|
|
|
|
(30
|
)
|
|
|
(1,365
|
)
|
|
|
(1,559
|
)
|
|
|
|
|
|
|
(567
|
)
|
Transfers in
and/or out
of level 3
|
|
|
1,045
|
(7)
|
|
|
2
|
|
|
|
(3,415
|
) (8)
|
|
|
1,040
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
53,451
|
|
|
$
|
(554
|
)
|
|
$
|
2,056
|
|
|
$
|
(4,271
|
)
|
|
$
|
|
|
|
$
|
(767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate amounts include approximately $(11.54) billion and
$1.98 billion reported in Trading and principal
investments and Interest income, respectively,
in the consolidated statements of earnings for the year ended
November 2008. The aggregate amounts include approximately
$(1.77) billion and $1.71 billion reported in Trading
and principal investments and Interest income,
respectively, in the consolidated statements of earnings for the
year ended November 2007.
|
|
(2)
|
Principally reflects transfers from level 2 within the fair
value hierarchy of loans and securities backed by commercial
real estate, reflecting reduced price transparency for these
financial instruments.
|
|
(3)
|
Substantially all is reported in Trading and principal
investments in the consolidated statements of earnings.
|
|
(4)
|
Principally resulted from changes in level 2 inputs.
|
|
(5)
|
Principally reflects transfers to level 2 within the fair
value hierarchy of
mortgage-related
derivative assets, as recent trading activity provided improved
transparency of correlation inputs. This decrease was partially
offset by transfers from level 2 within the fair value
hierarchy of credit and
equity-linked
derivatives due to reduced price transparency.
|
|
(6)
|
Consists of transfers from level 2 within the fair value
hierarchy.
|
|
(7)
|
Principally reflects transfers from level 2 within the fair
value hierarchy of loans and securities backed by commercial and
residential real estate and certain bank loans and bridge loans,
reflecting reduced price transparency for these financial
instruments.
|
|
(8)
|
Principally reflects transfers from level 2 within the fair
value hierarchy of structured credit derivative liabilities, due
to reduced transparency of correlation inputs.
|
156
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impact of
Credit Spreads
On an ongoing basis, the firm realizes gains or losses relating
to changes in credit risk on derivative contracts through
changes in credit mitigants or the sale or unwind of the
contracts. The net gain/(loss) attributable to the impact of
changes in credit exposure and credit spreads on derivative
contracts was $(137) million and $86 million for the
years ended November 2008 and November 2007,
respectively.
The following table sets forth the net gains attributable to the
impact of changes in the firms own credit spreads on
unsecured borrowings for which the fair value option was
elected. The firm calculates the fair value of unsecured
borrowings by discounting future cash flows at a rate which
incorporates the firms observable credit spreads.
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Net gains including hedges
|
|
$
|
1,127
|
|
|
$
|
203
|
|
Net gains excluding hedges
|
|
|
1,196
|
|
|
|
216
|
|
The impact of changes in instrument-specific credit spreads on
loans and loan commitments for which the fair value option was
elected was a loss of $4.61 billion for the year ended
November 2008 and not material for the year ended
November 2007. The firm attributes changes in the fair
value of floating rate loans and loan commitments to changes in
instrument-specific credit spreads. For fixed rate loans and
loan commitments, the firm allocates changes in fair value
between interest rate-related changes and credit spread-related
changes based on changes in interest rates. See below for
additional details regarding the fair value option.
The Fair Value
Option
Gains/Losses
The following table sets forth the gains/(losses) included in
earnings for the years ended November 2008 and
November 2007 as a result of the firm electing to apply the
fair value option to certain financial assets and financial
liabilities, as described in Note 2. The table excludes
gains and losses related to trading assets and trading
liabilities, as well as gains and losses that would have been
recognized under other generally accepted accounting principles
if the firm had not elected the fair value option or that are
economically hedged with instruments accounted for at fair value
under other generally accepted accounting principles.
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Unsecured
long-term
borrowings (1)
|
|
$
|
915
|
|
|
$
|
202
|
|
Other secured
financings (2)
|
|
|
894
|
|
|
|
(293
|
)
|
Unsecured
short-term
borrowings (3)
|
|
|
266
|
|
|
|
6
|
|
Other (4)
|
|
|
(20
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Total (5)
|
|
$
|
2,055
|
|
|
$
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes gains of
$2.42 billion and losses of $2.18 billion for the
years ended November 2008 and November 2007,
respectively, related to the derivative component of hybrid
financial instruments. Such gains and losses would have been
recognized pursuant to SFAS No. 133 if the firm had
not elected to account for the entire hybrid instrument at fair
value under the fair value option.
|
157
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
(2) |
|
Excludes gains of
$1.29 billion and $2.19 billion for the years ended
November 2008 and November 2007, respectively, related
to financings recorded as a result of securitization-related
transactions that were accounted for as secured financings
rather than sales under SFAS No. 140. Changes in the
fair value of these secured financings are offset by changes in
the fair value of the related financial instruments included
within the firms Trading assets, at fair value
in the consolidated statements of financial condition.
|
|
(3) |
|
Excludes gains of
$6.37 billion and losses of $1.07 billion for the
years ended November 2008 and November 2007,
respectively, related to the derivative component of hybrid
financial instruments. Such gains and losses would have been
recognized pursuant to SFAS No. 133 if the firm had
not elected to account for the entire hybrid instrument at fair
value under the fair value option.
|
|
(4) |
|
Primarily consists of certain
insurance and reinsurance contracts, resale and repurchase
agreements and securities borrowed and loaned within Trading and
Principal Investments.
|
|
(5) |
|
Reported within Trading and
principal investments within the consolidated statements
of earnings. The amounts exclude contractual interest, which is
included in Interest income and Interest
expense, for all instruments other than hybrid financial
instruments.
|
All trading assets and trading liabilities are accounted for at
fair value either under the fair value option or as required by
other accounting pronouncements. Excluding equities commissions
of $5.00 billion and $4.58 billion for the years ended
November 2008 and November 2007, respectively, and the gains and
losses on the instruments accounted for under the fair value
option described above, the firms Trading and
principal investments revenues in the consolidated
statements of earnings primarily represent gains and losses on
Trading assets, at fair value and Trading
liabilities, at fair value in the consolidated statements
of financial condition.
Loans and Loan
Commitments
As of November 2008, the aggregate contractual principal
amount of loans and long-term receivables for which the fair
value option was elected exceeded the related fair value by
$50.21 billion, including a difference of
$37.46 billion related to loans with an aggregate fair
value of $3.77 billion that were on nonaccrual status
(including loans more than 90 days past due). The aggregate
contractual principal exceeds the related fair value primarily
because the firm regularly purchases loans, such as distressed
loans, at values significantly below contractual principal
amounts.
As of November 2008, the fair value of unfunded lending
commitments for which the fair value option was elected was a
liability of $3.52 billion and the related total
contractual amount of these lending commitments was
$39.49 billion.
As of November 2007, substantially all of the firms
loans and unfunded lending commitments were recorded at fair
value in accordance with specialized industry accounting for
broker-dealers, and not pursuant to the fair value option. As a
result, the difference between the aggregate fair value and
related contractual principal amounts of loans and long-term
receivables accounted for under the fair value option was not
material as of November 2007. See Note 2 for further
information related to fair value option elections made by the
firm upon becoming a bank holding company in September 2008.
Long-term Debt
Instruments
The aggregate contractual principal amount of long-term debt
instruments (principal and non-principal protected) for which
the fair value option was elected exceeded the related fair
value by $2.42 billion as of November 2008, while the
difference between the fair value and the aggregate contractual
principal amount was not material to the carrying value as of
November 2007.
158
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Credit
Concentrations
Credit concentrations may arise from trading, investing,
underwriting and securities borrowing activities and may be
impacted by changes in economic, industry or political factors.
The firm seeks to mitigate credit risk by actively monitoring
exposures and obtaining collateral as deemed appropriate. While
the firms activities expose it to many different
industries and counterparties, the firm routinely executes a
high volume of transactions with counterparties in the financial
services industry, including brokers and dealers, commercial
banks, investment funds and other institutional clients,
resulting in significant credit concentration with respect to
this industry. In the ordinary course of business, the firm may
also be subject to a concentration of credit risk to a
particular counterparty, borrower or issuer.
As of November 2008 and November 2007, the firm held
$53.98 billion (6% of total assets) and $45.75 billion
(4% of total assets), respectively, of U.S. government and
federal agency obligations included in Trading assets, at
fair value and Cash and securities segregated for
regulatory and other purposes in the consolidated
statements of financial condition. As of November 2008 and
November 2007, the firm held $21.13 billion (2% of
total assets) and $31.65 billion (3% of total assets),
respectively, of other sovereign obligations, principally
consisting of securities issued by the governments of Japan and
the United Kingdom. In addition, as of November 2008 and
November 2007, $126.27 billion and
$144.92 billion of the firms securities purchased
under agreements to resell and securities borrowed (including
those in Cash and securities segregated for regulatory and
other purposes), respectively, were collateralized by
U.S. government and federal agency obligations. As of
November 2008 and November 2007, $65.37 billion
and $41.26 billion of the firms securities purchased
under agreements to resell and securities borrowed,
respectively, were collateralized by other sovereign
obligations. As of November 2008 and November 2007,
the firm did not have credit exposure to any other counterparty
that exceeded 2% of the firms total assets.
Derivative
Activities
Derivative contracts are instruments, such as futures, forwards,
swaps or option contracts, that derive their value from
underlying assets, indices, reference rates or a combination of
these factors. Derivative instruments may be privately
negotiated contracts, which are often referred to as OTC
derivatives, or they may be listed and traded on an exchange.
Derivatives may involve future commitments to purchase or sell
financial instruments or commodities, or to exchange currency or
interest payment streams. The amounts exchanged are based on the
specific terms of the contract with reference to specified
rates, securities, commodities, currencies or indices.
Certain cash instruments, such as
mortgage-backed
securities, interest-only and principal-only obligations, and
indexed debt instruments, are not considered derivatives even
though their values or contractually required cash flows are
derived from the price of some other security or index. However,
certain commodity-related contracts are included in the
firms derivatives disclosure, as these contracts may be
settled in cash or the assets to be delivered under the contract
are readily convertible into cash.
The firm enters into derivative transactions to facilitate
client transactions, to take proprietary positions and as a
means of risk management. Risk exposures are managed through
diversification, by controlling position sizes and by entering
into offsetting positions. For example, the firm may manage the
risk related to a portfolio of common stock by entering into an
offsetting position in a related
equity-index
futures contract.
The firm applies hedge accounting under SFAS No. 133
to certain derivative contracts. The firm uses these derivatives
to manage certain interest rate and currency exposures,
including the firms net investment in
non-U.S. operations.
The firm designates certain interest rate swap contracts as fair
value hedges. These interest rate swap contracts hedge changes
in the relevant benchmark interest
159
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
rate (e.g., London Interbank Offered Rate (LIBOR)),
effectively converting a substantial portion of the firms
unsecured
long-term
and certain unsecured
short-term
borrowings into floating rate obligations. See Note 2 for
information regarding the firms accounting policy for
foreign currency forward contracts used to hedge its net
investment in
non-U.S. operations.
The firm applies a
long-haul
method to all of its hedge accounting relationships to perform
an ongoing assessment of the effectiveness of these
relationships in achieving offsetting changes in fair value or
offsetting cash flows attributable to the risk being hedged. The
firm utilizes a
dollar-offset
method, which compares the change in the fair value of the
hedging instrument to the change in the fair value of the hedged
item, excluding the effect of the passage of time, to
prospectively and retrospectively assess hedge effectiveness.
The firms prospective
dollar-offset
assessment utilizes scenario analyses to test hedge
effectiveness via simulations of numerous parallel and slope
shifts of the relevant yield curve. Parallel shifts change the
interest rate of all maturities by identical amounts. Slope
shifts change the curvature of the yield curve. For both the
prospective assessment, in response to each of the simulated
yield curve shifts, and the retrospective assessment, a hedging
relationship is deemed to be effective if the fair value of the
hedging instrument and the hedged item change inversely within a
range of 80% to 125%.
For fair value hedges, gains or losses on derivative
transactions are recognized in Interest expense in
the consolidated statements of earnings. The change in fair
value of the hedged item attributable to the risk being hedged
is reported as an adjustment to its carrying value and is
subsequently amortized into interest expense over its remaining
life. Gains or losses related to hedge ineffectiveness for all
hedges are generally included in Interest expense.
These gains or losses and the component of gains or losses on
derivative transactions excluded from the assessment of hedge
effectiveness (e.g., the effect of the passage of time on
fair value hedges of the firms borrowings) were not
material to the firms results of operations for the years
ended November 2008, November 2007 and
November 2006. Gains and losses on derivatives used for
trading purposes are included in Trading and principal
investments in the consolidated statements of earnings.
The fair value of the firms derivative contracts is
reflected net of cash paid or received pursuant to credit
support agreements and is reported on a
net-by-counterparty
basis in the firms consolidated statements of financial
condition when management believes a legal right of setoff
exists under an enforceable netting agreement. The fair value of
derivative financial instruments, presented in accordance with
the firms netting policy, is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
(in millions)
|
Contract Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward settlement contracts
|
|
$
|
35,997
|
|
|
$
|
35,778
|
|
|
$
|
22,561
|
|
|
$
|
27,138
|
|
Swap agreements
|
|
|
175,153
|
|
|
|
82,189
|
|
|
|
104,793
|
|
|
|
62,697
|
|
Option contracts
|
|
|
81,077
|
|
|
|
58,467
|
|
|
|
53,056
|
|
|
|
53,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
292,227
|
|
|
|
176,434
|
|
|
|
180,410
|
|
|
|
142,882
|
|
Netting across contract
types (1)
|
|
|
(24,730
|
)
|
|
|
(24,730
|
)
|
|
|
(15,746
|
)
|
|
|
(15,746
|
)
|
Cash collateral
netting (2)
|
|
|
(137,160
|
)
|
|
|
(34,009
|
)
|
|
|
(59,050
|
)
|
|
|
(27,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
130,337
|
|
|
$
|
117,695
|
|
|
$
|
105,614
|
|
|
$
|
99,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the netting of
receivable balances with payable balances for the same
counterparty across contract types pursuant to legally
enforceable netting agreements.
|
|
(2) |
|
Represents the netting of cash
collateral received and posted on a counterparty basis pursuant
to credit support agreements.
|
160
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of derivatives accounted for as qualifying hedges
under SFAS No. 133 consisted of $20.40 billion
and $5.15 billion in assets as of November 2008 and
November 2007, respectively, and $128 million and
$355 million in liabilities as of November 2008 and
November 2007, respectively.
The firm also has embedded derivatives that have been bifurcated
from related borrowings under SFAS No. 133. Such
derivatives, which are classified in unsecured
short-term
and unsecured
long-term
borrowings, had a carrying value of $(774) million and
$463 million (excluding the debt host contract) as of
November 2008 and November 2007, respectively. See
Notes 6 and 7 for further information regarding the
firms unsecured borrowings.
The firm enters into various derivative transactions that are
considered credit derivatives under FSP No.
FAS 133-1
and
FIN 45-4.
The firms written and purchased credit derivatives include
credit default swaps, credit spread options, credit index
products and total return swaps. As of November 2008, the
firms written and purchased credit derivatives had total
gross notional amounts of $3.78 trillion and
$4.03 trillion, respectively, for total net purchased
protection of $255.24 billion in notional value.
The following table sets forth certain information related to
the firms credit derivatives. Fair values in the table
below exclude the effects of both netting under enforceable
netting agreements and netting of cash paid pursuant to credit
support agreements, and therefore are not representative of the
firms net exposure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
Maximum Payout/Notional Amount by Period of Expiration
|
|
Maximum Payout/Notional Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting
|
|
Other
|
|
Written
|
|
|
|
|
|
|
|
|
Written
|
|
Purchased
|
|
Purchased
|
|
Credit
|
|
|
|
|
|
|
10 Years
|
|
Credit
|
|
Credit
|
|
Credit
|
|
Derivatives at
|
|
|
0 - 5 Years
|
|
5 - 10 Years
|
|
or Greater
|
|
Derivatives
|
|
Derivatives (1)
|
|
Derivatives (2)
|
|
Fair Value
|
|
|
($ in millions)
|
Credit spread on underlying
(basis points) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0-250
|
|
$
|
1,194,228
|
|
|
$
|
609,056
|
|
|
$
|
22,866
|
|
|
$
|
1,826,150
|
|
|
$
|
1,632,681
|
|
|
$
|
347,573
|
|
|
$
|
77,836
|
|
251-500
|
|
|
591,813
|
|
|
|
184,763
|
|
|
|
12,494
|
|
|
|
789,070
|
|
|
|
784,149
|
|
|
|
26,316
|
|
|
|
94,278
|
|
501-1,000
|
|
|
430,801
|
|
|
|
140,782
|
|
|
|
15,886
|
|
|
|
587,469
|
|
|
|
538,251
|
|
|
|
67,958
|
|
|
|
75,079
|
|
Greater than 1,000
|
|
|
383,626
|
|
|
|
120,866
|
|
|
|
71,690
|
|
|
|
576,182
|
|
|
|
533,816
|
|
|
|
103,362
|
|
|
|
222,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,600,468
|
(4)
|
|
$
|
1,055,467
|
|
|
$
|
122,936
|
|
|
$
|
3,778,871
|
|
|
$
|
3,488,897
|
(4)
|
|
$
|
545,209
|
|
|
$
|
469,539
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Offsetting purchased credit derivatives represent the notional
amount of purchased credit derivatives to the extent they hedge
written credit derivatives with identical underlyings.
|
|
(2)
|
Comprised of purchased protection in excess of the amount of
written protection on identical underlyings and purchased
protection on other underlyings on which the firm has not
written protection.
|
|
(3)
|
Credit spread on the underlying, together with the period of
expiration, are indicators of payment/performance risk. For
example, the firm is least likely to pay or otherwise be
required to perform where the credit spread on the underlying is
0-250
basis points and the period of expiration is 0-5
Years. The likelihood of payment or performance is
generally greater as the credit spread on the underlying and
period of expiration increase.
|
|
(4)
|
Includes a maximum payout/notional amount for written credit
derivatives of $208.44 billion expiring within one year as
of November 2008.
|
|
(5)
|
This liability excludes the effects of both netting under
enforceable netting agreements and netting of cash collateral
paid pursuant to credit support agreements. Including the
effects of netting receivable balances with payable balances for
the same counterparty pursuant to enforceable netting
agreements, the firms net liability related to credit
derivatives in the firms statement of financial condition
as of November 2008 was $33.76 billion. This net
amount excludes the netting of cash collateral paid pursuant to
credit support agreements.
|
161
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Collateralized
Transactions
The firm receives financial instruments as collateral, primarily
in connection with resale agreements, securities borrowed,
derivative transactions and customer margin loans. Such
financial instruments may include obligations of the
U.S. government, federal agencies, sovereigns and
corporations, as well as equities and convertibles.
In many cases, the firm is permitted to deliver or repledge
these financial instruments in connection with entering into
repurchase agreements, securities lending agreements and other
secured financings, collateralizing derivative transactions and
meeting firm or customer settlement requirements. As of
November 2008 and November 2007, the fair value of
financial instruments received as collateral by the firm that it
was permitted to deliver or repledge was $578.72 billion
and $891.05 billion, respectively, of which the firm
delivered or repledged $445.11 billion and
$785.62 billion, respectively.
The firm also pledges assets that it owns to counterparties who
may or may not have the right to deliver or repledge them.
Trading assets pledged to counterparties that have the right to
deliver or repledge are included in Trading assets, at
fair value in the consolidated statements of financial
condition and were $26.31 billion and $46.14 billion
as of November 2008 and November 2007, respectively.
Trading assets, pledged in connection with repurchase
agreements, securities lending agreements and other secured
financings to counterparties that did not have the right to sell
or repledge are included in Trading assets, at fair
value in the consolidated statements of financial
condition and were $80.85 billion and $156.92 billion
as of November 2008 and November 2007, respectively.
Other assets (primarily real estate and cash) owned and pledged
in connection with other secured financings to counterparties
that did not have the right to sell or repledge were
$9.24 billion and $5.86 billion as of
November 2008 and November 2007, respectively.
In addition to repurchase agreements and securities lending
agreements, the firm obtains secured funding through the use of
other arrangements. Other secured financings include
arrangements that are nonrecourse, that is, only the subsidiary
that executed the arrangement or a subsidiary guaranteeing the
arrangement is obligated to repay the financing. Other secured
financings consist of liabilities related to the firms
William Street program, consolidated VIEs, collateralized
central bank financings, transfers of financial assets that are
accounted for as financings rather than sales under
SFAS No. 140 (primarily pledged bank loans and
mortgage whole loans) and other structured financing
arrangements.
162
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other secured financings by maturity are set forth in the table
below:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Other secured financings
(short-term) (1)(2)
|
|
$
|
21,225
|
|
|
$
|
32,410
|
|
Other secured financings
(long-term):
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
2,903
|
|
2010
|
|
|
2,157
|
|
|
|
2,301
|
|
2011
|
|
|
4,578
|
|
|
|
2,427
|
|
2012
|
|
|
3,040
|
|
|
|
4,973
|
|
2013
|
|
|
1,377
|
|
|
|
702
|
|
2014-thereafter
|
|
|
6,306
|
|
|
|
19,994
|
|
|
|
|
|
|
|
|
|
|
Total other secured financings
(long-term) (3)(4)
|
|
|
17,458
|
|
|
|
33,300
|
|
|
|
|
|
|
|
|
|
|
Total other secured
financings (5)
|
|
$
|
38,683
|
|
|
$
|
65,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of November 2008, consists
of
U.S. dollar-denominated
financings of $12.53 billion with a weighted average
interest rate of 2.98% and
non-U.S. dollar-denominated
financings of $8.70 billion with a weighted average
interest rate of 0.95%, after giving effect to hedging
activities. As of November 2007, consists of
U.S. dollar-denominated
financings of $18.47 billion with a weighted average
interest rate of 5.32% and
non-U.S. dollar-denominated
financings of $13.94 billion with a weighted average
interest rate of 0.91%, after giving effect to hedging
activities. The weighted average interest rates as of
November 2008 and November 2007 excluded financial
instruments accounted for at fair value under
SFAS No. 159.
|
|
(2) |
|
Includes other secured financings
maturing within one year of the financial statement date and
other secured financings that are redeemable within one year of
the financial statement date at the option of the holder.
|
|
(3) |
|
As of November 2008, consists
of
U.S. dollar-denominated
financings of $9.55 billion with a weighted average
interest rate of 4.62% and
non-U.S. dollar-denominated
financings of $7.91 billion with a weighted average
interest rate of 4.39%, after giving effect to hedging
activities. As of November 2007, consists of
U.S. dollar-denominated
financings of $22.13 billion with a weighted average
interest rate of 5.73% and
non-U.S. dollar-denominated
financings of $11.17 billion with a weighted average
interest rate of 4.28%, after giving effect to hedging
activities. The weighted average interest rates as of
November 2008 and November 2007 excluded financial
instruments accounted for at fair value under
SFAS No. 159.
|
|
(4) |
|
Secured
long-term
financings that are repayable prior to maturity at the option of
the firm are reflected at their contractual maturity dates.
Secured
long-term
financings that are redeemable prior to maturity at the option
of the holder are reflected at the dates such options become
exercisable.
|
|
(5) |
|
As of November 2008,
$31.54 billion of these financings were collateralized by
financial instruments and $7.14 billion by other assets
(primarily real estate and cash). As of November 2007,
$61.34 billion of these financings were collateralized by
financial instruments and $4.37 billion by other assets
(primarily real estate and cash). Other secured financings
include $13.74 billion and $25.37 billion of
nonrecourse obligations as of November 2008 and
November 2007, respectively.
|
|
|
Note 4.
|
Securitization
Activities and Variable Interest Entities
|
Securitization
Activities
The firm securitizes commercial and residential mortgages, home
equity and auto loans, government and corporate bonds and other
types of financial assets. The firm acts as underwriter of the
beneficial interests that are sold to investors. The firm
derecognizes financial assets transferred in securitizations,
provided it has relinquished control over such assets.
Transferred assets are accounted for at fair value prior to
securitization. Net revenues related to these underwriting
activities are recognized in connection with the sales of the
underlying beneficial interests to investors.
163
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The firm may retain interests in securitized financial assets,
primarily in the form of senior or subordinated securities,
including residual interests. Retained interests are accounted
for at fair value and are included in Trading assets, at
fair value in the consolidated statements of financial
condition.
The following table sets forth the amount of financial assets
the firm securitized, as well as cash flows received on retained
interests:
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Residential mortgages
|
|
$
|
6,671
|
|
|
$
|
24,954
|
|
Commercial mortgages
|
|
|
773
|
|
|
|
19,498
|
|
Other financial assets
|
|
|
7,014
|
(1)
|
|
|
36,948
|
(2)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,458
|
|
|
$
|
81,400
|
|
|
|
|
|
|
|
|
|
|
Cash flows received on retained interests
|
|
$
|
505
|
|
|
$
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily in connection with
collateralized loan obligations (CLOs).
|
|
(2) |
|
Primarily in connection with CDOs
and CLOs.
|
As of November 2008 and November 2007, the firm held
$1.78 billion and $4.57 billion of retained interests,
respectively, from securitization activities, including
$1.53 billion and $2.72 billion, respectively, held in
QSPEs.
The following table sets forth the weighted average key economic
assumptions used in measuring the fair value of the firms
retained interests and the sensitivity of this fair value to
immediate adverse changes of 10% and 20% in those assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
As of November 2007
|
|
|
Type of Retained Interests
|
|
Type of Retained Interests
|
|
|
Mortgage-
|
|
CDOs and
|
|
Mortgage-
|
|
CDOs and
|
|
|
Backed
|
|
CLOs (4)
|
|
Backed
|
|
CLOs (4)
|
|
|
|
|
($ in millions)
|
|
|
Fair value of retained interests
|
|
$
|
1,415
|
|
|
$
|
367
|
|
|
$
|
3,378
|
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average life (years)
|
|
|
6.0
|
|
|
|
5.1
|
|
|
|
6.6
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant prepayment
rate (1)
|
|
|
15.5
|
%
|
|
|
4.5
|
%
|
|
|
15.1
|
%
|
|
|
11.9
|
%
|
Impact of 10% adverse
change (1)
|
|
$
|
(14
|
)
|
|
$
|
(6
|
)
|
|
$
|
(50
|
)
|
|
$
|
(43
|
)
|
Impact of 20% adverse
change (1)
|
|
|
(27
|
)
|
|
|
(12
|
)
|
|
|
(91
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anticipated credit
losses (2)
|
|
|
2.0
|
%
|
|
|
N/A
|
|
|
|
4.3
|
%
|
|
|
N/A
|
|
Impact of 10% adverse
change (3)
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
(45
|
)
|
|
$
|
|
|
Impact of 20% adverse
change (3)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
21.1
|
%
|
|
|
29.2
|
%
|
|
|
8.4
|
%
|
|
|
23.1
|
%
|
Impact of 10% adverse change
|
|
$
|
(46
|
)
|
|
$
|
(25
|
)
|
|
$
|
(89
|
)
|
|
$
|
(46
|
)
|
Impact of 20% adverse change
|
|
|
(89
|
)
|
|
|
(45
|
)
|
|
|
(170
|
)
|
|
|
(92
|
)
|
|
|
|
|
(1)
|
Constant prepayment rate is included only for positions for
which constant prepayment rate is a key assumption in the
determination of fair value.
|
|
|
(2)
|
Anticipated credit losses are computed only on positions for
which expected credit loss is a key assumption in the
determination of fair value or positions for which expected
credit loss is not reflected within the discount rate.
|
|
|
(3)
|
The impacts of adverse change take into account credit mitigants
incorporated in the retained interests, including
over-collateralization
and subordination provisions.
|
|
|
(4)
|
Includes $192 million and $905 million as of
November 2008 and November 2007, respectively, of
retained interests related to transfers of securitized assets
that were accounted for as secured financings rather than sales
under SFAS No. 140.
|
164
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The preceding table does not give effect to the offsetting
benefit of other financial instruments that are held to mitigate
risks inherent in these retained interests. Changes in fair
value based on an adverse variation in assumptions generally
cannot be extrapolated because the relationship of the change in
assumptions to the change in fair value is not usually linear.
In addition, the impact of a change in a particular assumption
is calculated independently of changes in any other assumption.
In practice, simultaneous changes in assumptions might magnify
or counteract the sensitivities disclosed above.
In addition to the retained interests described above, the firm
also held interests in residential mortgage QSPEs purchased in
connection with secondary
market-making
activities. These purchased interests were approximately
$4 billion and $6 billion as of November 2008 and
November 2007, respectively.
As of November 2008 and November 2007, the firm held
mortgage servicing rights with a fair value of $147 million
and $93 million, respectively. These servicing assets
represent the firms right to receive a future stream of
cash flows, such as servicing fees, in excess of the firms
obligation to service residential mortgages. The fair value of
mortgage servicing rights will fluctuate in response to changes
in certain economic variables, such as discount rates and loan
prepayment rates. The firm estimates the fair value of mortgage
servicing rights by using valuation models that incorporate
these variables in quantifying anticipated cash flows related to
servicing activities. Mortgage servicing rights are included in
Trading assets, at fair value in the consolidated
statements of financial condition and are classified within
level 3 of the fair value hierarchy. The following table
sets forth changes in the firms mortgage servicing rights,
as well as servicing fees earned:
|
|
|
|
|
|
|
Year Ended
|
|
|
November 2008
|
|
|
(in millions)
|
Balance, beginning of year
|
|
$
|
93
|
|
Purchases (1)
|
|
|
272
|
|
Servicing assets that resulted from transfers of financial assets
|
|
|
3
|
|
Changes in fair value due to changes in valuation inputs and
assumptions
|
|
|
(221
|
)
|
|
|
|
|
|
Balance, end of
year (2)
|
|
$
|
147
|
|
|
|
|
|
|
|
|
|
|
|
Contractually specified servicing fees
|
|
$
|
315
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily related to the
acquisition of Litton Loan Servicing LP.
|
|
(2) |
|
As of November 2008, the fair
value was estimated using a weighted average discount rate of
approximately 16% and a weighted average prepayment rate of
approximately 27%.
|
165
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Variable
Interest Entities (VIEs)
The firm, in the ordinary course of business, retains interests
in VIEs in connection with its securitization activities. The
firm also purchases and sells variable interests in VIEs, which
primarily issue
mortgage-backed
and other
asset-backed
securities, CDOs and CLOs, in connection with its
market-making
activities and makes investments in and loans to VIEs that hold
performing and nonperforming debt, equity, real estate,
power-related and other assets. In addition, the firm utilizes
VIEs to provide investors with principal-protected notes,
credit-linked
notes and
asset-repackaged
notes designed to meet their objectives.
VIEs generally purchase assets by issuing debt and equity
instruments. In certain instances, the firm provides guarantees
to VIEs or holders of variable interests in VIEs. In such cases,
the maximum exposure to loss included in the tables set forth
below is the notional amount of such guarantees. Such amounts do
not represent anticipated losses in connection with these
guarantees.
The firms variable interests in VIEs include senior and
subordinated debt; loan commitments; limited and general
partnership interests; preferred and common stock; interest
rate, foreign currency, equity, commodity and credit
derivatives; guarantees; and residual interests in
mortgage-backed
and
asset-backed
securitization vehicles, CDOs and CLOs. The firms exposure
to the obligations of VIEs is generally limited to its interests
in these entities.
166
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables set forth total assets in nonconsolidated
VIEs in which the firm holds significant variable interests and
the firms maximum exposure to loss excluding the benefit
of offsetting financial instruments that are held to mitigate
the risks associated with these variable interests. The firm has
aggregated nonconsolidated VIEs based on principal business
activity, as reflected in the first column. The nature of the
firms variable interests can take different forms, as
described in the columns under maximum exposure to loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
|
|
|
Maximum Exposure to Loss in Nonconsolidated
VIEs (1)
|
|
|
|
|
|
Purchased
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
and Retained
|
|
and
|
|
|
|
Loans and
|
|
|
|
|
VIE Assets
|
|
|
Interests
|
|
Guarantees
|
|
Derivatives
|
|
Investments
|
|
Total
|
|
|
|
|
|
(in millions)
|
|
|
Mortgage CDOs
|
|
$
|
13,061
|
|
|
|
$
|
242
|
|
|
$
|
|
|
|
$
|
5,616
|
(4)
|
|
$
|
|
|
|
$
|
5,858
|
|
Corporate CDOs and CLOs
|
|
|
8,584
|
|
|
|
|
161
|
|
|
|
|
|
|
|
918
|
(5)
|
|
|
|
|
|
|
1,079
|
|
Real estate,
credit-related
and other
investing (2)
|
|
|
26,898
|
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
3,223
|
|
|
|
3,366
|
|
Municipal bond securitizations
|
|
|
111
|
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
111
|
|
Other
asset-backed
|
|
|
4,355
|
|
|
|
|
|
|
|
|
|
|
|
|
1,084
|
|
|
|
|
|
|
|
1,084
|
|
Power-related
|
|
|
844
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
213
|
|
|
|
250
|
|
Principal-protected
notes (3)
|
|
|
4,516
|
|
|
|
|
|
|
|
|
|
|
|
|
4,353
|
|
|
|
|
|
|
|
4,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
58,369
|
|
|
|
$
|
403
|
|
|
$
|
291
|
|
|
$
|
11,971
|
|
|
$
|
3,436
|
|
|
$
|
16,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2007
|
|
|
|
|
|
Maximum Exposure to Loss in Nonconsolidated
VIEs (1)
|
|
|
|
|
|
Purchased
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
and Retained
|
|
and
|
|
|
|
Loans and
|
|
|
|
|
VIE Assets
|
|
|
Interests
|
|
Guarantees
|
|
Derivatives
|
|
Investments
|
|
Total
|
|
|
|
|
|
(in millions)
|
|
|
Mortgage CDOs
|
|
$
|
18,914
|
|
|
|
$
|
1,011
|
|
|
$
|
|
|
|
$
|
10,089
|
(4)
|
|
$
|
|
|
|
$
|
11,100
|
|
Corporate CDOs and CLOs
|
|
|
10,750
|
|
|
|
|
411
|
|
|
|
|
|
|
|
2,218
|
(5)
|
|
|
|
|
|
|
2,629
|
|
Real estate,
credit-related
and other
investing (2)
|
|
|
17,272
|
|
|
|
|
|
|
|
|
107
|
|
|
|
12
|
|
|
|
3,141
|
|
|
|
3,260
|
|
Municipal bond securitizations
|
|
|
1,413
|
|
|
|
|
|
|
|
|
1,413
|
|
|
|
|
|
|
|
|
|
|
|
1,413
|
|
Other
mortgage-backed
|
|
|
3,881
|
|
|
|
|
719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
719
|
|
Other
asset-backed
|
|
|
3,771
|
|
|
|
|
|
|
|
|
|
|
|
|
1,579
|
|
|
|
|
|
|
|
1,579
|
|
Power-related
|
|
|
438
|
|
|
|
|
2
|
|
|
|
37
|
|
|
|
|
|
|
|
16
|
|
|
|
55
|
|
Principal-protected
notes (3)
|
|
|
5,698
|
|
|
|
|
|
|
|
|
|
|
|
|
5,186
|
|
|
|
|
|
|
|
5,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,137
|
|
|
|
$
|
2,143
|
|
|
$
|
1,557
|
|
|
$
|
19,084
|
|
|
$
|
3,157
|
|
|
$
|
25,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Such amounts do not represent the anticipated losses in
connection with these transactions as they exclude the effect of
offsetting financial instruments that are held to mitigate these
risks.
|
|
(2)
|
The firm obtains interests in these VIEs in connection with
making investments in real estate, distressed loans and other
types of debt, mezzanine instruments and equities.
|
|
(3)
|
Consists of
out-of-the-money
written put options that provide principal protection to clients
invested in various fund products, with risk to the firm
mitigated through portfolio rebalancing.
|
|
(4)
|
Primarily consists of written protection on
investment-grade,
short-term
collateral held by VIEs that have issued CDOs.
|
|
(5)
|
Primarily consists of total return swaps on CDOs and CLOs. The
firm has generally transferred the risks related to the
underlying securities through derivatives with
non-VIEs.
|
167
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the firms total assets and
maximum exposure to loss excluding the benefit of offsetting
financial instruments that are held to mitigate the risks
associated with its significant variable interests in
consolidated VIEs where the firm does not hold a majority voting
interest. The firm has aggregated consolidated VIEs based on
principal business activity, as reflected in the first column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
As of November 2007
|
|
|
|
|
Maximum
|
|
|
|
Maximum
|
|
|
|
|
Exposure
|
|
|
|
Exposure
|
|
|
VIE
Assets (1)
|
|
to
Loss (2)
|
|
VIE
Assets (1)
|
|
to
Loss (2)
|
|
|
|
|
(in millions)
|
|
|
Real estate,
credit-related
and other investing
|
|
$
|
1,560
|
|
|
$
|
469
|
|
|
$
|
2,118
|
|
|
$
|
525
|
|
Municipal bond securitizations
|
|
|
985
|
|
|
|
985
|
|
|
|
1,959
|
|
|
|
1,959
|
|
CDOs,
mortgage-backed
and other
asset-backed
|
|
|
32
|
|
|
|
|
|
|
|
604
|
|
|
|
109
|
|
Foreign exchange and commodities
|
|
|
652
|
|
|
|
740
|
|
|
|
300
|
|
|
|
329
|
|
Principal-protected notes
|
|
|
215
|
|
|
|
233
|
|
|
|
1,119
|
|
|
|
1,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,444
|
|
|
$
|
2,427
|
|
|
$
|
6,100
|
|
|
$
|
4,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consolidated VIE assets include
assets financed on a nonrecourse basis.
|
|
(2) |
|
Such amounts do not represent the
anticipated losses in connection with these transactions as they
exclude the effect of offsetting financial instruments that are
held to mitigate these risks.
|
The firm did not have
off-balance-sheet
commitments to purchase or finance any CDOs held by structured
investment vehicles as of November 2008 or
November 2007.
The following table sets forth deposits as of November 2008
and November 2007:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
U.S. offices (1)
|
|
$
|
23,018
|
|
|
$
|
15,272
|
|
Non-U.S. offices (2)
|
|
|
4,625
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
Total (includes $4,224 and $463 at fair value as of
November 2008 and November 2007, respectively)
|
|
$
|
27,643
|
|
|
$
|
15,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Substantially all
U.S. deposits were interest-bearing and were held at GS
Bank USA.
|
|
(2) |
|
All
non-U.S. deposits
were interest-bearing and were primarily held at Goldman Sachs
Bank (Europe) PLC (GS Bank Europe).
|
168
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Included in the above table are time deposits of
$8.49 billion and $463 million, as of
November 2008 and November 2007, respectively. The
following table sets forth the maturities of time deposits as of
November 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
U.S.
|
|
Non-U.S.
|
|
Total
|
|
|
(in millions)
|
2009
|
|
$
|
3,583
|
|
|
$
|
|
|
|
$
|
3,583
|
|
2010
|
|
|
937
|
|
|
|
30
|
|
|
|
967
|
|
2011
|
|
|
661
|
|
|
|
|
|
|
|
661
|
|
2012
|
|
|
286
|
|
|
|
|
|
|
|
286
|
|
2013
|
|
|
1,431
|
|
|
|
25
|
|
|
|
1,456
|
|
2014-thereafter
|
|
|
1,532
|
|
|
|
|
|
|
|
1,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,430
|
|
|
$
|
55
|
|
|
$
|
8,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6.
|
Short-Term
Borrowings
|
As of November 2008,
short-term
borrowings were $73.89 billion, comprised of
$21.23 billion included in Other secured
financings in the consolidated statement of financial
condition and $52.66 billion of unsecured
short-term
borrowings. As of November 2007,
short-term
borrowings were $103.97 billion, comprised of
$32.41 billion included in Other secured
financings in the consolidated statement of financial
condition and $71.56 billion of unsecured
short-term
borrowings. See Note 3 for information on other secured
financings.
Unsecured
short-term
borrowings include the portion of unsecured
long-term
borrowings maturing within one year of the financial statement
date and unsecured
long-term
borrowings that are redeemable within one year of the financial
statement date at the option of the holder. The firm accounts
for promissory notes, commercial paper and certain hybrid
financial instruments at fair value under SFAS No. 155
or SFAS No. 159.
Short-term
borrowings that are not recorded at fair value are recorded
based on the amount of cash received plus accrued interest, and
such amounts approximate fair value due to the
short-term
nature of the obligations.
Unsecured
short-term
borrowings are set forth below:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Current portion of unsecured
long-term
borrowings (1)
|
|
$
|
26,281
|
|
|
$
|
22,740
|
|
Hybrid financial instruments
|
|
|
12,086
|
|
|
|
22,318
|
|
Promissory
notes (2)
|
|
|
6,944
|
|
|
|
13,251
|
|
Commercial
paper (3)
|
|
|
1,125
|
|
|
|
4,343
|
|
Other
short-term
borrowings
|
|
|
6,222
|
|
|
|
8,905
|
|
|
|
|
|
|
|
|
|
|
Total (4)
|
|
$
|
52,658
|
|
|
$
|
71,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $25.12 billion and
$21.24 billion as of November 2008 and
November 2007, respectively, issued by
Group Inc.
|
|
(2) |
|
Includes $3.42 billion as of
November 2008 guaranteed by the Federal Deposit Insurance
Corporation (FDIC) under the Temporary Liquidity Guarantee
Program (TLGP).
|
|
(3) |
|
Includes $751 million as of
November 2008 guaranteed by the FDIC under the TLGP.
|
|
(4) |
|
The weighted average interest rates
for these borrowings, after giving effect to hedging activities,
were 3.37% and 4.77% as of November 2008 and
November 2007, respectively. The weighted average interest
rates as of November 2008 and November 2007 excluded
financial instruments accounted for at fair value under
SFAS No. 155 or SFAS No. 159.
|
169
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 7.
|
Long-Term
Borrowings
|
As of November 2008,
long-term
borrowings were $185.68 billion, comprised of
$17.46 billion included in Other secured
financings in the consolidated statements of financial
condition and $168.22 billion of unsecured
long-term
borrowings. As of November 2007,
long-term
borrowings were $197.47 billion, comprised of
$33.30 billion included in Other secured
financings in the consolidated statements of financial
condition and $164.17 billion of unsecured
long-term
borrowings. See Note 3 for information on other secured
financings.
The firms unsecured
long-term
borrowings extend through 2043 and consist principally of senior
borrowings.
Unsecured
long-term
borrowings issued by Group Inc. and its subsidiaries are set
forth below:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Fixed rate
obligations (1)
|
|
|
|
|
|
|
|
|
Group Inc.
|
|
$
|
101,454
|
|
|
$
|
82,276
|
|
Subsidiaries
|
|
|
2,371
|
|
|
|
2,144
|
|
Floating rate
obligations (2)
|
|
|
|
|
|
|
|
|
Group Inc.
|
|
|
57,018
|
|
|
|
73,075
|
|
Subsidiaries
|
|
|
7,377
|
|
|
|
6,679
|
|
|
|
|
|
|
|
|
|
|
Total (3)
|
|
$
|
168,220
|
|
|
$
|
164,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of November 2008 and
November 2007, $70.08 billion and $55.28 billion,
respectively, of the firms fixed rate debt obligations
were denominated in U.S. dollars and interest rates ranged
from 3.87% to 10.04% and from 3.88% to 10.04%, respectively. As
of November 2008 and November 2007,
$33.75 billion and $29.14 billion, respectively, of
the firms fixed rate debt obligations were denominated in
non-U.S. dollars
and interest rates ranged from 0.67% to 8.88% for both periods.
|
|
(2) |
|
As of November 2008 and
November 2007, $32.41 billion and $47.31 billion,
respectively, of the firms floating rate debt obligations
were denominated in U.S. dollars. As of November 2008
and November 2007, $31.99 billion and
$32.44 billion, respectively, of the firms floating
rate debt obligations were denominated in
non-U.S. dollars.
Floating interest rates generally are based on LIBOR or the
federal funds target rate.
Equity-linked
and indexed instruments are included in floating rate
obligations.
|
|
(3) |
|
Includes $3.36 billion and
$3.05 billion as of November 2008 and
November 2007, respectively, of foreign
currency-denominated
debt designated as hedges of net investments in
non-U.S. subsidiaries
under SFAS No. 133.
|
170
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unsecured
long-term
borrowings by maturity date are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008 (1)(2)
|
|
2007 (1)(2)
|
|
|
Group Inc.
|
|
Subsidiaries
|
|
Total
|
|
Group Inc.
|
|
Subsidiaries
|
|
Total
|
|
|
(in millions)
|
2009
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
22,695
|
|
|
$
|
487
|
|
|
$
|
23,182
|
|
2010
|
|
|
13,967
|
|
|
|
276
|
|
|
|
14,243
|
|
|
|
13,433
|
|
|
|
270
|
|
|
|
13,703
|
|
2011
|
|
|
10,377
|
|
|
|
502
|
|
|
|
10,879
|
|
|
|
10,572
|
|
|
|
115
|
|
|
|
10,687
|
|
2012
|
|
|
16,806
|
|
|
|
66
|
|
|
|
16,872
|
|
|
|
18,487
|
|
|
|
121
|
|
|
|
18,608
|
|
2013
|
|
|
21,627
|
|
|
|
251
|
|
|
|
21,878
|
|
|
|
15,501
|
|
|
|
315
|
|
|
|
15,816
|
|
2014-thereafter
|
|
|
95,695
|
|
|
|
8,653
|
|
|
|
104,348
|
|
|
|
74,663
|
|
|
|
7,515
|
|
|
|
82,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
158,472
|
|
|
$
|
9,748
|
|
|
$
|
168,220
|
|
|
$
|
155,351
|
|
|
$
|
8,823
|
|
|
$
|
164,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unsecured
long-term
borrowings maturing within one year of the financial statement
date and certain unsecured
long-term
borrowings that are redeemable within one year of the financial
statement date at the option of the holder are included as
unsecured
short-term
borrowings in the consolidated statements of financial condition.
|
|
(2) |
|
Unsecured
long-term
borrowings that are repayable prior to maturity at the option of
the firm are reflected at their contractual maturity dates.
Unsecured
long-term
borrowings that are redeemable prior to maturity at the option
of the holder are reflected at the dates such options become
exercisable.
|
The firm enters into derivative contracts to effectively convert
a substantial portion of its unsecured
long-term
borrowings which are not accounted for at fair value into
U.S. dollar-based
floating rate obligations. Accordingly, excluding the cumulative
impact of changes in the firms credit spreads, the
carrying value of unsecured
long-term
borrowings approximated fair value as of November 2008 and
November 2007. For unsecured
long-term
borrowings for which the firm did not elect the fair value
option, the cumulative impact due to the widening of the
firms own credit spreads was a reduction in the fair value
of total unsecured
long-term
borrowings of approximately 9% and 1% as of November 2008
and November 2007, respectively.
The effective weighted average interest rates for unsecured
long-term
borrowings are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
|
($ in millions)
|
Fixed rate obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Inc.
|
|
$
|
1,863
|
|
|
|
5.71
|
%
|
|
$
|
1,858
|
|
|
|
5.69
|
%
|
Subsidiaries
|
|
|
2,152
|
|
|
|
4.32
|
|
|
|
1,929
|
|
|
|
4.88
|
|
Floating rate
obligations (1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Inc.
|
|
|
156,609
|
|
|
|
2.66
|
|
|
|
153,493
|
|
|
|
5.20
|
|
Subsidiaries
|
|
|
7,596
|
|
|
|
4.23
|
|
|
|
6,894
|
|
|
|
4.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (2)
|
|
$
|
168,220
|
|
|
|
2.73
|
%
|
|
$
|
164,174
|
|
|
|
5.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes fixed rate obligations
that have been converted into floating rate obligations through
derivative contracts.
|
|
(2) |
|
The weighted average interest rates
as of November 2008 and November 2007 excluded
financial instruments accounted for at fair value under
SFAS No. 155 or SFAS No. 159.
|
171
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Subordinated
Borrowings
As of November 2008, unsecured
long-term
borrowings were comprised of subordinated borrowings with
outstanding principal amounts of $19.26 billion as set
forth below, of which $18.79 billion has been issued by
Group Inc. As of November 2007, unsecured
long-term
borrowings were comprised of subordinated borrowings with
outstanding principal amounts of $16.32 billion as set
forth below, of which $16.00 billion has been issued by
Group Inc.
Junior Subordinated Debt Issued to Trusts in Connection with
Fixed-to-Floating
and Floating Rate Normal Automatic Preferred Enhanced Capital
Securities. In 2007, Group Inc. issued a total of
$2.25 billion of remarketable junior subordinated debt to
Goldman Sachs Capital II and Goldman Sachs Capital III (APEX
Trusts), Delaware statutory trusts that, in turn, issued
$2.25 billion of guaranteed perpetual Automatic Preferred
Enhanced Capital Securities (APEX) to third parties and a de
minimis amount of common securities to Group Inc. Group Inc.
also entered into contracts with the APEX Trusts to sell
$2.25 billion of perpetual
non-cumulative
preferred stock to be issued by Group Inc. (the stock purchase
contracts). The APEX Trusts are wholly owned finance
subsidiaries of the firm for regulatory and legal purposes but
are not consolidated for accounting purposes.
The firm pays interest
semi-annually
on $1.75 billion of junior subordinated debt issued to
Goldman Sachs Capital II at a fixed annual rate of 5.59% and the
debt matures on June 1, 2043. The firm pays interest
quarterly on $500 million of junior subordinated debt
issued to Goldman Sachs Capital III at a rate per annum equal to
three-month
LIBOR plus 0.57% and the debt matures on
September 1, 2043. In addition, the firm makes
contract payments at a rate of 0.20% per annum on the stock
purchase contracts held by the APEX Trusts. The firm has the
right to defer payments on the junior subordinated debt and the
stock purchase contracts, subject to limitations, and therefore
cause payment on the APEX to be deferred. During any such
extension period, the firm will not be permitted to, among other
things, pay dividends on or make certain repurchases of its
common or preferred stock. The junior subordinated debt is
junior in right of payment to all of Group Inc.s senior
indebtedness and all of Group Inc.s other subordinated
borrowings.
In connection with the APEX issuance, the firm covenanted in
favor of certain of its debtholders, who are initially the
holders of Group Inc.s 6.345% Junior Subordinated
Debentures due February 15, 2034, that, subject to
certain exceptions, the firm would not redeem or purchase
(i) Group Inc.s junior subordinated debt issued to
the APEX Trusts prior to the applicable stock purchase date or
(ii) APEX or shares of Group Inc.s Series E or
Series F Preferred Stock prior to the date that is ten
years after the applicable stock purchase date, unless the
applicable redemption or purchase price does not exceed a
maximum amount determined by reference to the aggregate amount
of net cash proceeds that the firm has received from the sale of
qualifying equity securities during the
180-day
period preceding the redemption or purchase.
The firm has accounted for the stock purchase contracts as
equity instruments under EITF Issue
No. 00-19,
Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock, and, accordingly, recorded the cost of the stock
purchase contracts as a reduction to additional
paid-in
capital. See Note 9 for information on the preferred stock
that Group Inc. will issue in connection with the stock purchase
contracts.
Junior Subordinated Debt Issued to a Trust in Connection with
Trust Preferred Securities. Group Inc.
issued $2.84 billion of junior subordinated debentures in
2004 to Goldman Sachs Capital I (Trust), a Delaware statutory
trust that, in turn, issued $2.75 billion of guaranteed
preferred beneficial interests to third parties and
$85 million of common beneficial interests to Group Inc.
and invested the proceeds from the sale in junior subordinated
debentures issued by Group Inc. The Trust is a wholly
172
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
owned finance subsidiary of the firm for regulatory and legal
purposes but is not consolidated for accounting purposes.
The firm pays interest
semi-annually
on these debentures at an annual rate of 6.345% and the
debentures mature on February 15, 2034. The coupon
rate and the payment dates applicable to the beneficial
interests are the same as the interest rate and payment dates
applicable to the debentures. The firm has the right, from time
to time, to defer payment of interest on the debentures, and,
therefore, cause payment on the Trusts preferred
beneficial interests to be deferred, in each case up to ten
consecutive
semi-annual
periods. During any such extension period, the firm will not be
permitted to, among other things, pay dividends on or make
certain repurchases of its common stock. The Trust is not
permitted to pay any distributions on the common beneficial
interests held by Group Inc. unless all dividends payable on the
preferred beneficial interests have been paid in full. These
debentures are junior in right of payment to all of Group
Inc.s senior indebtedness and all of Group Inc.s
subordinated borrowings, other than the junior subordinated debt
issued in connection with the Normal Automatic Preferred
Enhanced Capital Securities.
Subordinated Debt. As of November 2008,
the firm had $14.17 billion of other subordinated debt
outstanding, of which $13.70 billion has been issued by
Group Inc., with maturities ranging from fiscal 2009 to 2038.
The effective weighted average interest rate on this debt was
1.99%, after giving effect to derivative contracts used to
convert fixed rate obligations into floating rate obligations.
As of November 2007, the firm had $11.23 billion of
other subordinated debt outstanding, of which
$10.91 billion has been issued by Group Inc., with
maturities ranging from fiscal 2009 to 2037. The effective
weighted average interest rate on this debt was 5.75%, after
giving effect to derivative contracts used to convert fixed rate
obligations into floating rate obligations. This debt is junior
in right of payment to all of the firms senior
indebtedness.
|
|
Note 8.
|
Commitments,
Contingencies and Guarantees
|
Commitments
Forward Starting Collateralized Agreements and
Financings. The firm had forward starting resale
agreements and securities borrowing agreements of
$61.46 billion and $28.14 billion as of
November 2008 and November 2007, respectively. The
firm had forward starting repurchase agreements and securities
lending agreements of $6.95 billion and $15.39 billion
as of November 2008 and November 2007, respectively.
Commitments to Extend Credit. In connection
with its lending activities, the firm had outstanding
commitments to extend credit of $41.04 billion and
$82.75 billion as of November 2008 and
November 2007, respectively. The firms commitments to
extend credit are agreements to lend to counterparties that have
fixed termination dates and are contingent on the satisfaction
of all conditions to borrowing set forth in the contract. Since
these commitments may expire unused or be reduced or cancelled
at the counterpartys request, the total commitment amount
does not necessarily reflect the actual future cash flow
requirements. The firm accounts for these commitments at fair
value. To the extent that the firm recognizes losses on these
commitments, such losses are recorded within the firms
Trading and Principal Investments segment net of any related
underwriting fees.
173
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the firms commitments to
extend credit, net of amounts syndicated to third parties, as of
November 2008 and November 2007:
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Commercial lending commitments
|
|
|
|
|
|
|
|
|
Investment-grade
|
|
$
|
8,007
|
|
|
$
|
11,719
|
|
Non-investment-grade
|
|
|
9,318
|
|
|
|
41,930
|
|
William Street program
|
|
|
22,610
|
|
|
|
24,488
|
|
Warehouse financing
|
|
|
1,101
|
|
|
|
4,610
|
|
|
|
|
|
|
|
|
|
|
Total commitments to extend credit
|
|
$
|
41,036
|
|
|
$
|
82,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lending commitments. The
firms commercial lending commitments are generally
extended in connection with contingent acquisition financing and
other types of corporate lending as well as commercial real
estate financing. The total commitment amount does not
necessarily reflect the actual future cash flow requirements, as
the firm may syndicate all or substantial portions of these
commitments in the future, the commitments may expire unused, or
the commitments may be cancelled or reduced at the request of
the counterparty. In addition, commitments that are extended for
contingent acquisition financing are often intended to be
short-term
in nature, as borrowers often seek to replace them with other
funding sources.
|
Included within
non-investment-grade
commitments as of November 2008 was $2.07 billion of
exposure to leveraged lending capital market transactions,
$164 million related to commercial real estate transactions
and $7.09 billion arising from other unfunded credit
facilities. Included within the
non-investment-grade
amount as of November 2007 was $26.09 billion of
exposure to leveraged lending capital market transactions,
$3.50 billion related to commercial real estate
transactions and $12.34 billion arising from other unfunded
credit facilities. Including funded loans, the firms total
exposure to leveraged lending capital market transactions was
$7.97 billion and $43.06 billion as of
November 2008 and November 2007, respectively.
|
|
|
|
|
William Street program. Substantially all of
the commitments provided under the William Street credit
extension program are to
investment-grade
corporate borrowers. Commitments under the program are
principally extended by William Street Commitment Corporation
(Commitment Corp.), a consolidated wholly owned subsidiary of GS
Bank USA, and also by William Street Credit Corporation, GS Bank
USA or Goldman Sachs Credit Partners L.P. The commitments
extended by Commitment Corp. are supported, in part, by funding
raised by William Street Funding Corporation (Funding Corp.),
another consolidated wholly owned subsidiary of GS Bank USA. The
assets and liabilities of Commitment Corp. and Funding Corp. are
legally separated from other assets and liabilities of the firm.
The assets of Commitment Corp. and of Funding Corp. will not be
available to their respective shareholders until the claims of
their respective creditors have been paid. In addition, no
affiliate of either Commitment Corp. or Funding Corp., except in
limited cases as expressly agreed in writing, is responsible for
any obligation of either entity. With respect to most of the
William Street commitments, Sumitomo Mitsui Financial Group,
Inc. (SMFG) provides the firm with credit loss protection that
is generally limited to 95% of the first loss the firm realizes
on approved loan commitments, up to a maximum of
$1.00 billion. In addition, subject to the satisfaction of
certain conditions, upon the firms request, SMFG will
provide protection for 70% of additional losses on such
commitments, up to a maximum of $1.13 billion, of which
$375 million of protection has been provided as of
November 2008. The firm also uses other financial
instruments to mitigate credit risks related to certain William
Street commitments not covered by SMFG.
|
174
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
Warehouse financing. The firm provides
financing for the warehousing of financial assets. These
arrangements are secured by the warehoused assets, primarily
consisting of commercial mortgages as of November 2008 and
corporate bank loans and commercial mortgages as of
November 2007.
|
Letters of Credit. The firm provides letters
of credit issued by various banks to counterparties in lieu of
securities or cash to satisfy various collateral and margin
deposit requirements. Letters of credit outstanding were
$7.25 billion and $8.75 billion as of
November 2008 and November 2007, respectively.
Investment Commitments. In connection with its
merchant banking and other investing activities, the firm
invests in private equity, real estate and other assets directly
and through funds that it raises and manages. In connection with
these activities, the firm had commitments to invest up to
$14.27 billion and $17.76 billion as of
November 2008 and November 2007, respectively,
including $12.25 billion and $12.32 billion,
respectively, of commitments to invest in funds managed by the
firm.
Construction-Related
Commitments. As of November 2008 and
November 2007, the firm had
construction-related
commitments of $483 million and $769 million,
respectively, including commitments of $388 million and
$642 million as of November 2008 and
November 2007, respectively, related to the firms new
headquarters in New York City, which is expected to cost between
$2.1 billion and $2.3 billion. The firm has partially
financed this construction project with $1.65 billion of
tax-exempt
Liberty Bonds.
Underwriting Commitments. As of
November 2008 and November 2007, the firm had
commitments to purchase $241 million and $88 million,
respectively, of securities in connection with its underwriting
activities.
Other. The firm had other purchase commitments
of $260 million as of November 2008 and
$1.76 billion (including a $1.34 billion commitment
for the acquisition of Litton Loan Servicing LP) as of
November 2007.
Leases. The firm has contractual obligations
under
long-term
noncancelable lease agreements, principally for office space,
expiring on various dates through 2069. Certain agreements are
subject to periodic escalation provisions for increases in real
estate taxes and other charges. Future minimum rental payments,
net of minimum sublease rentals are set forth below (in
millions):
|
|
|
|
|
Minimum rental payments
|
|
|
|
|
2009
|
|
$
|
494
|
|
2010
|
|
|
458
|
|
2011
|
|
|
342
|
|
2012
|
|
|
276
|
|
2013
|
|
|
259
|
|
2014-thereafter
|
|
|
1,664
|
|
|
|
|
|
|
Total
|
|
$
|
3,493
|
|
|
|
|
|
|
Rent charged to operating expense is set forth below (in
millions):
|
|
|
|
|
Net rent expense
|
|
|
|
|
2006
|
|
$
|
404
|
|
2007
|
|
|
412
|
|
2008
|
|
|
438
|
|
175
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contingencies
The firm is involved in a number of judicial, regulatory and
arbitration proceedings concerning matters arising in connection
with the conduct of its businesses. Management believes, based
on currently available information, that the results of such
proceedings, in the aggregate, will not have a material adverse
effect on the firms financial condition, but may be
material to the firms operating results for any particular
period, depending, in part, upon the operating results for such
period. Given the inherent difficulty of predicting the outcome
of the firms litigation and regulatory matters,
particularly in cases or proceedings in which substantial or
indeterminate damages or fines are sought, the firm cannot
estimate losses or ranges of losses for cases or proceedings
where there is only a reasonable possibility that a loss may be
incurred.
In connection with its insurance business, the firm is
contingently liable to provide guaranteed minimum death and
income benefits to certain contract holders and has established
a reserve related to $6.13 billion and $10.84 billion
of contract holder account balances as of November 2008 and
November 2007, respectively, for such benefits. The
weighted average attained age of these contract holders was
68 years and 67 years as of November 2008 and
November 2007, respectively. The net amount at risk,
representing guaranteed minimum death and income benefits in
excess of contract holder account balances, was
$2.96 billion and $1.04 billion as of
November 2008 and November 2007, respectively. See
Note 12 for more information on the firms insurance
liabilities.
Guarantees
The firm enters into various derivative contracts that meet the
definition of a guarantee under FIN 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, as amended by
FSP No. FAS 133-1
and
FIN 45-4.
FIN 45 does not require disclosures about derivative
contracts if such contracts may be cash settled and the firm has
no basis to conclude it is probable that the counterparties
held, at inception, the underlying instruments related to the
derivative contracts. The firm has concluded that these
conditions have been met for certain large, internationally
active commercial and investment bank counterparties and certain
other counterparties. Accordingly, the firm has not included
such contracts in the tables below.
The firm, in its capacity as an agency lender, indemnifies most
of its securities lending customers against losses incurred in
the event that borrowers do not return securities and the
collateral held is insufficient to cover the market value of the
securities borrowed.
In the ordinary course of business, the firm provides other
financial guarantees of the obligations of third parties
(e.g., performance bonds, standby letters of credit and
other guarantees to enable clients to complete transactions and
merchant banking fund-related guarantees). These guarantees
represent obligations to make payments to beneficiaries if the
guaranteed party fails to fulfill its obligation under a
contractual arrangement with that beneficiary.
176
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of November 2008 and November 2007, derivative contracts
that meet the definition of a guarantee include written equity
and commodity put options, written currency contracts and
interest rate caps, floors and swaptions. As of
November 2007, prior to the adoption of
FSP No. FAS 133-1
and
FIN 45-4,
derivative contracts that met the definition of a guarantee also
included credit derivatives, such as credit default swaps,
credit spread options, credit index products and total return
swaps. See
Recent
Accounting Developments for further information on
FSP No. FAS 133-1
and
FIN 45-4
and Note 3 for additional information on the firms
credit derivatives as of November 2008. The following
tables set forth certain information about the firms
derivative contracts that meet the definition of a guarantee and
certain other guarantees as of November 2008 and
November 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
|
|
Maximum Payout/Notional Amount by Period of
Expiration (1)
|
|
|
Carrying
|
|
|
|
2010-
|
|
2012-
|
|
2014-
|
|
|
|
|
Value
|
|
2009
|
|
2011
|
|
2013
|
|
Thereafter
|
|
Total
|
|
|
(in millions)
|
|
Derivatives (2)
|
|
|
$17,462
|
|
|
|
$114,863
|
|
|
|
$73,224
|
|
|
|
$30,312
|
|
|
|
$90,643
|
|
|
|
$309,042
|
|
Securities lending
indemnifications (3)
|
|
|
|
|
|
|
19,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,306
|
|
Other financial guarantees
|
|
|
235
|
|
|
|
203
|
|
|
|
477
|
|
|
|
458
|
|
|
|
238
|
|
|
|
1,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2007
|
|
|
|
|
Maximum Payout/Notional Amount by Period of
Expiration (1)
|
|
|
Carrying
|
|
|
|
2009-
|
|
2011-
|
|
2013-
|
|
|
|
|
Value
|
|
2008
|
|
2010
|
|
2012
|
|
Thereafter
|
|
Total
|
|
|
(in millions)
|
|
Derivatives (2)(4)
|
|
|
$33,098
|
|
|
|
$580,769
|
|
|
|
$492,563
|
|
|
|
$457,511
|
|
|
|
$514,498
|
|
|
|
$2,045,341
|
|
Securities lending
indemnifications (3)
|
|
|
|
|
|
|
26,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,673
|
|
Performance
bond (5)
|
|
|
|
|
|
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,046
|
|
Other financial guarantees
|
|
|
43
|
|
|
|
381
|
|
|
|
121
|
|
|
|
258
|
|
|
|
46
|
|
|
|
806
|
|
|
|
|
(1) |
|
Such amounts do not represent the
anticipated losses in connection with these contracts.
|
|
(2) |
|
Because derivative contracts are
accounted for at fair value, carrying value is considered the
best indication of payment/performance risk for individual
contracts. However, the carrying value excludes the effect of a
legal right of setoff that may exist under an enforceable
netting agreement and the effect of netting of cash paid
pursuant to credit support agreements. These derivative
contracts are risk managed together with derivative contracts
that are not considered guarantees under FIN 45 and,
therefore, these amounts do not reflect the firms overall
risk related to its derivative activities.
|
|
(3) |
|
Collateral held by the lenders in
connection with securities lending indemnifications was
$19.95 billion and $27.49 billion as of
November 2008 and November 2007, respectively. Because
the contractual nature of these arrangements requires the firm
to obtain collateral with a market value that exceeds the value
of the securities on loan from the borrower, there is minimal
performance risk associated with these guarantees.
|
|
(4) |
|
Includes credit derivatives that
meet the definition of a guarantee as of November 2007.
|
|
(5) |
|
Excludes cash collateral of
$2.05 billion related to this obligation.
|
The firm has established trusts, including Goldman Sachs Capital
I, II and III, and other entities for the limited purpose of
issuing securities to third parties, lending the proceeds to the
firm and entering into contractual arrangements with the firm
and third parties related to this purpose. See Note 7 for
information regarding the transactions involving Goldman Sachs
Capital I, II and III. The firm effectively provides for the
full and unconditional guarantee of the securities issued by
these entities, which are not consolidated for accounting
purposes. Timely payment by the firm of amounts due to these
entities under the borrowing, preferred stock and related
contractual arrangements will be sufficient to cover payments
due on the securities issued by these entities. Management
believes that it is unlikely that any circumstances will occur,
such as nonperformance on the part of paying agents or other
service providers, that would make it necessary for the firm to
make payments related
177
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to these entities other than those required under the terms of
the borrowing, preferred stock and related contractual
arrangements and in connection with certain expenses incurred by
these entities.
In the ordinary course of business, the firm indemnifies and
guarantees certain service providers, such as clearing and
custody agents, trustees and administrators, against specified
potential losses in connection with their acting as an agent of,
or providing services to, the firm or its affiliates. The firm
also indemnifies some clients against potential losses incurred
in the event specified
third-party
service providers, including
sub-custodians
and
third-party
brokers, improperly execute transactions. In addition, the firm
is a member of payment, clearing and settlement networks as well
as securities exchanges around the world that may require the
firm to meet the obligations of such networks and exchanges in
the event of member defaults. In connection with its prime
brokerage and clearing businesses, the firm agrees to clear and
settle on behalf of its clients the transactions entered into by
them with other brokerage firms. The firms obligations in
respect of such transactions are secured by the assets in the
clients account as well as any proceeds received from the
transactions cleared and settled by the firm on behalf of the
client. In connection with joint venture investments, the firm
may issue loan guarantees under which it may be liable in the
event of fraud, misappropriation, environmental liabilities and
certain other matters involving the borrower. The firm is unable
to develop an estimate of the maximum payout under these
guarantees and indemnifications. However, management believes
that it is unlikely the firm will have to make any material
payments under these arrangements, and no liabilities related to
these guarantees and indemnifications have been recognized in
the consolidated statements of financial condition as of
November 2008 and November 2007.
The firm provides representations and warranties to
counterparties in connection with a variety of commercial
transactions and occasionally indemnifies them against potential
losses caused by the breach of those representations and
warranties. The firm may also provide indemnifications
protecting against changes in or adverse application of certain
U.S. tax laws in connection with ordinary-course
transactions such as securities issuances, borrowings or
derivatives. In addition, the firm may provide indemnifications
to some counterparties to protect them in the event additional
taxes are owed or payments are withheld, due either to a change
in or an adverse application of certain
non-U.S. tax
laws. These indemnifications generally are standard contractual
terms and are entered into in the ordinary course of business.
Generally, there are no stated or notional amounts included in
these indemnifications, and the contingencies triggering the
obligation to indemnify are not expected to occur. The firm is
unable to develop an estimate of the maximum payout under these
guarantees and indemnifications. However, management believes
that it is unlikely the firm will have to make any material
payments under these arrangements, and no liabilities related to
these arrangements have been recognized in the consolidated
statements of financial condition as of November 2008 and
November 2007.
Group Inc. has guaranteed the payment obligations of Goldman,
Sachs & Co. (GS&Co.), GS Bank USA and GS
Bank Europe, subject to certain exceptions. In
November 2008, the firm contributed subsidiaries with an
aggregate of $117.16 billion of assets into GS Bank USA
(which brought total assets in GS Bank USA to
$145.06 billion as of November 2008) and Group Inc. agreed
to guarantee certain losses, including
credit-related
losses, relating to assets held by the contributed entities. In
connection with this guarantee, Group Inc. also agreed to pledge
to GS Bank USA certain collateral, including interests in
subsidiaries and other illiquid assets. In addition, Group Inc.
guarantees many of the obligations of its other consolidated
subsidiaries on a
transaction-by-transaction
basis, as negotiated with counterparties. Group Inc. is unable
to develop an estimate of the maximum payout under its
subsidiary guarantees; however, because these guaranteed
obligations are also obligations of consolidated subsidiaries
included in the tables above, Group Inc.s liabilities as
guarantor are not separately disclosed.
178
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 9.
|
Shareholders
Equity
|
Common and
Preferred Equity
In September 2008, Group Inc. completed a public offering
of 46.7 million shares of common stock at $123.00 per share
for proceeds of $5.75 billion.
In October 2008, Group Inc. issued to Berkshire Hathaway
Inc. and certain affiliates 50,000 shares of 10% Cumulative
Perpetual Preferred Stock, Series G (Series G
Preferred Stock), and a five-year warrant to purchase up to
43.5 million shares of common stock at an exercise price of
$115.00 per share, for aggregate proceeds of $5.00 billion.
The allocated carrying values of the warrant and the
Series G Preferred Stock on the date of issuance (based on
their relative fair values) were $1.14 billion and
$3.86 billion, respectively. The warrant is exercisable at
any time until October 1, 2013 and the number of
shares of common stock underlying the warrant and the exercise
price are subject to adjustment for certain dilutive events.
In October 2008, under the U.S. Department of the
Treasurys (U.S. Treasury) TARP Capital Purchase
Program, Group Inc. issued to the U.S. Treasury
10.0 million shares of Fixed Rate Cumulative Perpetual
Preferred Stock, Series H (Series H Preferred Stock),
and a
10-year
warrant to purchase up to 12.2 million shares of common
stock at an exercise price of $122.90 per share, for aggregate
proceeds of $10.00 billion. The allocated carrying values
of the warrant and the Series H Preferred Stock on the date
of issuance (based on their relative fair values) were
$490 million and $9.51 billion, respectively.
Cumulative dividends on the Series H Preferred Stock are
payable at 5% per annum through November 14, 2013 and
at a rate of 9% per annum thereafter. The Series H
Preferred Stock will be accreted to the redemption price of
$10.00 billion over five years. The warrant is exercisable
at any time until October 28, 2018 and the number of
shares of common stock underlying the warrant and the exercise
price are subject to adjustment for certain dilutive events. If,
on or prior to December 31, 2009, the firm receives
aggregate gross cash proceeds of at least $10 billion from
sales of Tier 1 qualifying perpetual preferred stock or
common stock, the number of shares of common stock issuable upon
exercise of the warrant will be reduced by
one-half of
the original number of shares of common stock.
Dividends declared per common share were $1.40 in 2008, $1.40 in
2007, and $1.30 in 2006. On December 15, 2008, the
Board of Directors of Group Inc. (Board) declared a dividend of
$0.4666666 per common share to be paid on
March 26, 2009 to common shareholders of record on
February 24, 2009. The dividend of $0.4666666 per
common share is reflective of a four-month period
(December 2008 through March 2009), due to the change
in the firms fiscal year-end. See Note 21 for further
information regarding the change in the firms fiscal
year-end. See below for information regarding restrictions on
the firms ability to raise its common stock dividend.
During 2008 and 2007, the firm repurchased 10.5 million and
41.2 million shares of its common stock at an average cost
per share of $193.18 and $217.29, for a total cost of
$2.04 billion and $8.96 billion, respectively. In
addition, to satisfy minimum statutory employee tax withholding
requirements related to the delivery of common stock underlying
restricted stock units, the firm cancelled 6.7 million and
4.7 million of restricted stock units with a total value of
$1.31 billion and $929 million in 2008 and 2007,
respectively.
The firms share repurchase program is intended to help
maintain the appropriate level of common equity and to
substantially offset increases in share count over time
resulting from employee
share-based
compensation. The repurchase program is effected primarily
through regular
open-market
purchases, the amounts and timing of which are determined
primarily by the firms current and projected capital
positions (i.e., comparisons of the firms desired
level of capital to its actual level of capital) but which may
also be influenced by general market conditions and the
179
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
prevailing price and trading volumes of the firms common
stock, in each case subject to the limit imposed under the
U.S. Treasurys TARP Capital Purchase Program. See
below for information regarding current restrictions on the
firms ability to repurchase common stock.
As of November 2008, the firm had 10.2 million shares
of perpetual preferred stock issued and outstanding as set forth
in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
Shares
|
|
Shares
|
|
|
|
Earliest
|
|
Redemption Value
|
Series
|
|
Preference
|
|
Issued
|
|
Authorized
|
|
Dividend Rate
|
|
Redemption Date
|
|
(in millions)
|
A
|
|
Non-cumulative
|
|
|
30,000
|
|
|
|
50,000
|
|
|
3 month LIBOR + 0.75%,
with floor of 3.75% per annum
|
|
April 25, 2010
|
|
$
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
Non-cumulative
|
|
|
32,000
|
|
|
|
50,000
|
|
|
6.20% per annum
|
|
October 31, 2010
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C
|
|
Non-cumulative
|
|
|
8,000
|
|
|
|
25,000
|
|
|
3 month LIBOR + 0.75%,
with floor of 4.00% per annum
|
|
October 31, 2010
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D
|
|
Non-cumulative
|
|
|
54,000
|
|
|
|
60,000
|
|
|
3 month LIBOR + 0.67%,
with floor of 4.00% per annum
|
|
May 24, 2011
|
|
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G
|
|
Cumulative
|
|
|
50,000
|
|
|
|
50,000
|
|
|
10.00% per annum
|
|
Date of issuance
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Cumulative
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
5.00% per annum through
November 14, 2013 and
9.00% per annum thereafter
|
|
Date of issuance
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,174,000
|
|
|
|
10,235,000
|
|
|
|
|
|
|
$
|
18,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each share of
non-cumulative
preferred stock issued and outstanding has a par value of $0.01,
has a liquidation preference of $25,000, is represented by 1,000
depositary shares and is redeemable at the firms option,
subject to the approval of the Board of Governors of the Federal
Reserve System (Federal Reserve Board), at a redemption price
equal to $25,000 plus declared and unpaid dividends.
Each share of Series G Preferred Stock issued and
outstanding has a par value of $0.01, has a liquidation
preference of $100,000 and is redeemable at the firms
option, subject to the approval of the Federal Reserve Board, at
a redemption price equal to $110,000 plus accrued and unpaid
dividends.
Each share of Series H Preferred Stock issued and
outstanding has a par value of $0.01, has a liquidation
preference of $1,000 and is redeemable at the firms
option, subject to the approval of the Federal Reserve Board, at
a redemption price equal to $1,000 plus accrued and unpaid
dividends, provided that through November 14, 2011 the
Series H Preferred Stock is redeemable only in an amount up
to the aggregate net cash proceeds received from sales of
Tier 1 qualifying perpetual preferred stock or common
stock, and only once such sales have resulted in aggregate gross
proceeds of at least $2.5 billion.
All series of preferred stock are pari passu and have a
preference over the firms common stock upon liquidation.
Dividends on each series of preferred stock, if declared, are
payable quarterly in arrears. The firms ability to declare
or pay dividends on, or purchase, redeem or otherwise acquire,
its common stock is subject to certain restrictions in the event
that the firm fails to pay or set aside full dividends on the
preferred stock for the latest completed dividend period. In
addition, pursuant to the U.S. Treasurys TARP Capital
Purchase Program, until the earliest of
October 28, 2011, the redemption of all of the
Series H Preferred Stock or transfer by the
U.S. Treasury of all of the Series H Preferred Stock
to third parties, the firm must obtain the consent of the
U.S. Treasury to raise the firms common stock
dividend or to repurchase any shares of common stock or other
preferred stock, with certain exceptions (including repurchases
of shares of common stock under the firms share repurchase
program to offset dilution from
equity-based
compensation). For as long as the Series H Preferred Stock
remains outstanding, due to the limitations pursuant to the U.S.
Treasurys TARP Capital Purchase Program, the firm will
repurchase shares of common stock through its share
180
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
repurchase program only for the purpose of offsetting dilution
from
equity-based
compensation, to the extent permitted.
In 2007, the Board authorized 17,500.1 shares of perpetual
Non-Cumulative
Preferred Stock, Series E, and 5,000.1 shares of
perpetual
Non-Cumulative
Preferred Stock, Series F, in connection with the APEX
issuance. See Note 7 for further information on the APEX
issuance. Under the stock purchase contracts, Group Inc. will
issue on the relevant stock purchase dates (on or before
June 1, 2013 and September 1, 2013 for
Series E and Series F preferred stock, respectively)
one share of Series E and Series F preferred stock to
Goldman Sachs Capital II and III, respectively, for each
$100,000 principal amount of subordinated debt held by these
trusts. When issued, each share of Series E and
Series F preferred stock will have a par value of $0.01 and
a liquidation preference of $100,000 per share. Dividends on
Series E preferred stock, if declared, will be payable
semi-annually
at a fixed annual rate of 5.79% if the stock is issued prior to
June 1, 2012 and quarterly thereafter, at a rate per
annum equal to the greater of
(i) three-month
LIBOR plus 0.77% and (ii) 4.00%. Dividends on Series F
preferred stock, if declared, will be payable quarterly at a
rate per annum equal to
three-month
LIBOR plus 0.77% if the stock is issued prior to
September 1, 2012 and quarterly thereafter, at a rate
per annum equal to the greater of
(i) three-month
LIBOR plus 0.77% and (ii) 4.00%. The preferred stock may be
redeemed at the option of the firm on the stock purchase dates
or any day thereafter, subject to regulatory approval and
certain covenant restrictions governing the firms ability
to redeem or purchase the preferred stock without issuing common
stock or other instruments with
equity-like
characteristics.
Preferred dividends declared are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
|
(per share)
|
|
(in millions)
|
|
(per share)
|
|
(in millions)
|
|
Series A
|
|
$
|
1,068.86
|
|
|
$
|
32
|
|
|
$
|
1,563.51
|
|
|
$
|
47
|
|
Series B
|
|
|
1,550.00
|
|
|
|
50
|
|
|
|
1,550.00
|
|
|
|
50
|
|
Series C
|
|
|
1,110.18
|
|
|
|
9
|
|
|
|
1,563.51
|
|
|
|
12
|
|
Series D
|
|
|
1,105.18
|
|
|
|
59
|
|
|
|
1,543.06
|
|
|
|
83
|
|
Series G
|
|
|
1,083.33
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
204
|
|
|
|
|
|
|
$
|
192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 15, 2008, the Board declared a dividend
per preferred share of $239.58, $387.50, $255.56, $255.56 and
$2,500 for Series A, Series B, Series C,
Series D and Series G preferred stock, respectively,
to be paid on February 10, 2009 to preferred
shareholders of record on January 26, 2009. Also on
December 15, 2008, the Board declared a dividend of
$14.8611111 per share of Series H preferred stock to be
paid on February 17, 2009 to preferred shareholders of
record on January 31, 2009. The total amount of
preferred stock dividends declared on
December 15, 2008 was $309 million.
181
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other
Comprehensive Income
The following table sets forth the firms accumulated other
comprehensive income/(loss) by type:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Adjustment from adoption of SFAS No. 158, net of tax
|
|
$
|
(194
|
)
|
|
$
|
(194
|
)
|
Currency translation adjustment, net of tax
|
|
|
(30
|
)
|
|
|
68
|
|
Pension and postretirement liability adjustment, net of tax
|
|
|
69
|
|
|
|
|
|
Net unrealized gains/(losses) on
available-for-sale
securities, net of
tax (1)
|
|
|
(47
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income/(loss), net of tax
|
|
$
|
(202
|
)
|
|
$
|
(118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of net unrealized losses
of $55 million on
available-for-sale
securities held by the firms insurance subsidiaries and
net unrealized gains of $8 million on
available-for-sale
securities held by investees accounted for under the equity
method as of November 2008. Consists of net unrealized
gains of $9 million on
available-for-sale
securities held by investees accounted for under the equity
method and net unrealized losses of $1 million on
available-for-sale
securities held by the firms insurance subsidiaries as of
November 2007.
|
|
|
Note 10.
|
Earnings
Per Common Share
|
The computations of basic and diluted earnings per common share
are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions, except per share amounts)
|
Numerator for basic and diluted EPS net earnings
applicable to common shareholders
|
|
$
|
2,041
|
|
|
$
|
11,407
|
|
|
$
|
9,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic EPS weighted average number of
common shares
|
|
|
437.0
|
|
|
|
433.0
|
|
|
|
449.0
|
|
Effect of dilutive
securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
|
10.2
|
|
|
|
13.6
|
|
|
|
13.6
|
|
Stock options
|
|
|
9.0
|
|
|
|
14.6
|
|
|
|
14.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
19.2
|
|
|
|
28.2
|
|
|
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted EPS weighted average number
of common shares and dilutive potential common shares
|
|
|
456.2
|
|
|
|
461.2
|
|
|
|
477.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
4.67
|
|
|
$
|
26.34
|
|
|
$
|
20.93
|
|
Diluted EPS
|
|
|
4.47
|
|
|
|
24.73
|
|
|
|
19.69
|
|
|
|
|
(1) |
|
The diluted EPS computations do not
include the antidilutive effect of restricted stock units
(RSUs), stock options and warrants as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Number of antidilutive RSUs and common shares underlying
antidilutive stock options and warrants
|
|
|
60.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 11.
|
Goodwill
and Identifiable Intangible Assets
|
Goodwill
The following table sets forth the carrying value of the
firms goodwill by operating segment, which is included in
Other assets in the consolidated statements of
financial condition:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Investment Banking
|
|
|
|
|
|
|
|
|
Underwriting
|
|
$
|
125
|
|
|
$
|
125
|
|
Trading and Principal Investments
|
|
|
|
|
|
|
|
|
FICC
|
|
|
247
|
|
|
|
123
|
|
Equities (1)
|
|
|
2,389
|
|
|
|
2,381
|
|
Principal Investments
|
|
|
80
|
|
|
|
11
|
|
Asset Management and Securities Services
|
|
|
|
|
|
|
|
|
Asset
Management (2)
|
|
|
565
|
|
|
|
564
|
|
Securities Services
|
|
|
117
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,523
|
|
|
$
|
3,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily related to SLK LLC (SLK).
|
|
(2) |
|
Primarily related to The Ayco
Company, L.P. (Ayco).
|
183
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Identifiable
Intangible Assets
The following table sets forth the gross carrying amount,
accumulated amortization and net carrying amount of the
firms identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(in millions)
|
|
Customer
lists (1)
|
|
Gross carrying amount
|
|
$
|
1,160
|
|
|
$
|
1,086
|
|
|
|
Accumulated amortization
|
|
|
(436
|
)
|
|
|
(354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
724
|
|
|
$
|
732
|
|
|
|
|
|
|
|
|
|
|
|
|
New York Stock
|
|
Gross carrying amount
|
|
$
|
714
|
|
|
$
|
714
|
|
Exchange (NYSE)
|
|
Accumulated amortization
|
|
|
(252
|
)
|
|
|
(212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DMM rights
|
|
Net carrying amount
|
|
$
|
462
|
|
|
$
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance-related
|
|
Gross carrying amount
|
|
$
|
448
|
|
|
$
|
461
|
|
assets (2)
|
|
Accumulated amortization
|
|
|
(145
|
)
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
303
|
|
|
$
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded
|
|
Gross carrying amount
|
|
$
|
138
|
|
|
$
|
138
|
|
fund (ETF) lead
|
|
Accumulated amortization
|
|
|
(43
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
market maker rights
|
|
Net carrying amount
|
|
$
|
95
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (3)
|
|
Gross carrying amount
|
|
$
|
178
|
|
|
$
|
360
|
|
|
|
Accumulated amortization
|
|
|
(85
|
)
|
|
|
(295
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
93
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Gross carrying amount
|
|
$
|
2,638
|
|
|
$
|
2,759
|
|
|
|
Accumulated amortization
|
|
|
(961
|
)
|
|
|
(988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
1,677
|
|
|
$
|
1,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily includes the firms
clearance and execution and NASDAQ customer lists related to SLK
and financial counseling customer lists related to Ayco.
|
|
(2) |
|
Consists of VOBA and DAC. VOBA
represents the present value of estimated future gross profits
of acquired variable annuity and life insurance businesses. DAC
results from commissions paid by the firm to the primary insurer
(ceding company) on life and annuity reinsurance agreements as
compensation to place the business with the firm and to cover
the ceding companys acquisition expenses. VOBA and DAC are
amortized over the estimated life of the underlying contracts
based on estimated gross profits, and amortization is adjusted
based on actual experience. The weighted average remaining
amortization period for VOBA and DAC is seven years as of
November 2008.
|
|
(3) |
|
Primarily includes
marketing-related assets and power contracts.
|
184
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Substantially all of the firms identifiable intangible
assets are considered to have finite lives and are amortized
over their estimated lives. The weighted average remaining life
of the firms identifiable intangibles is approximately
11 years.
The estimated future amortization for existing identifiable
intangible assets through 2013 is set forth below (in millions):
|
|
|
|
|
2009
|
|
$
|
172
|
|
2010
|
|
|
155
|
|
2011
|
|
|
150
|
|
2012
|
|
|
142
|
|
2013
|
|
|
129
|
|
|
|
Note 12.
|
Other
Assets and Other Liabilities
|
Other
Assets
Other assets are generally less liquid, nonfinancial assets. The
following table sets forth the firms other assets by type:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Property, leasehold improvements and
equipment (1)
|
|
$
|
10,793
|
|
|
$
|
8,975
|
|
Goodwill and identifiable intangible
assets (2)
|
|
|
5,200
|
|
|
|
5,092
|
|
Income tax-related assets
|
|
|
8,359
|
|
|
|
4,177
|
|
Equity-method
investments (3)
|
|
|
1,454
|
|
|
|
2,014
|
|
Miscellaneous receivables and other
|
|
|
4,632
|
|
|
|
3,809
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,438
|
|
|
$
|
24,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net of accumulated depreciation and
amortization of $6.55 billion and $5.88 billion as of
November 2008 and November 2007, respectively.
|
|
(2) |
|
See Note 11 for further
information regarding the firms goodwill and identifiable
intangible assets.
|
|
(3) |
|
Excludes investments of
$3.45 billion and $2.25 billion accounted for at fair
value under SFAS No. 159 as of November 2008 and
November 2007, respectively, which are included in
Trading assets, at fair value in the consolidated
statements of financial condition.
|
185
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other
Liabilities
The following table sets forth the firms other liabilities
and accrued expenses by type:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Compensation and benefits
|
|
$
|
4,646
|
|
|
$
|
11,816
|
|
Insurance-related
liabilities (1)
|
|
|
9,673
|
|
|
|
10,344
|
|
Minority
interest (2)
|
|
|
1,643
|
|
|
|
7,265
|
|
Income tax-related liabilities
|
|
|
2,865
|
|
|
|
2,546
|
|
Employee interests in consolidated funds
|
|
|
517
|
|
|
|
2,187
|
|
Accrued expenses and other payables
|
|
|
3,872
|
|
|
|
4,749
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,216
|
|
|
$
|
38,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Insurance-related liabilities are
set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
|
Separate account liabilities
|
|
$
|
3,628
|
|
|
$
|
7,039
|
|
Liabilities for future benefits and unpaid claims
|
|
|
4,778
|
|
|
|
2,142
|
|
Contract holder account balances
|
|
|
899
|
|
|
|
937
|
|
Reserves for guaranteed minimum death and income benefits
|
|
|
368
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Total insurance-related liabilities
|
|
$
|
9,673
|
|
|
$
|
10,344
|
|
|
|
|
|
|
|
|
|
|
Separate account liabilities are supported by separate account
assets, representing segregated contract holder funds under
variable annuity and life insurance contracts. Separate account
assets are included in Cash and securities segregated for
regulatory and other purposes in the consolidated
statements of financial condition.
Liabilities for future benefits and unpaid claims include
liabilities arising from reinsurance provided by the firm to
other insurers. The firm had a receivable for $1.30 billion
as of both November 2008 and November 2007, related to
such reinsurance contracts, which is reported in
Receivables from customers and counterparties in the
consolidated statements of financial condition. In addition, the
firm has ceded risks to reinsurers related to certain of its
liabilities for future benefits and unpaid claims and had a
receivable of $1.20 billion and $785 million as of
November 2008 and November 2007, respectively, related
to such reinsurance contracts, which is reported in
Receivables from customers and counterparties in the
consolidated statements of financial condition. Contracts to
cede risks to reinsurers do not relieve the firm from its
obligations to contract holders. Liabilities for future benefits
and unpaid claims include $978 million carried at fair
value under SFAS No. 159.
Reserves for guaranteed minimum death and income benefits
represent a liability for the expected value of guaranteed
benefits in excess of projected annuity account balances. These
reserves are computed in accordance with AICPA
SOP 03-1
and are based on total payments expected to be made less total
fees expected to be assessed over the life of the contract.
|
|
|
(2) |
|
Includes $784 million and
$5.95 billion related to consolidated investment funds as
of November 2008 and November 2007, respectively.
|
186
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 13.
|
Employee
Benefit Plans
|
The firm sponsors various pension plans and certain other
postretirement benefit plans, primarily healthcare and life
insurance. The firm also provides certain benefits to former or
inactive employees prior to retirement.
Defined
Benefit Pension Plans and Postretirement Plans
Employees of certain
non-U.S. subsidiaries
participate in various defined benefit pension plans. These
plans generally provide benefits based on years of credited
service and a percentage of the employees eligible
compensation. The firm maintains a defined benefit pension plan
for most U.K. employees. As of April 2008, the U.K. defined
benefit plan was closed to new participants, but will continue
to accrue benefits for existing participants.
The firm also maintains a defined benefit pension plan for
substantially all U.S. employees hired prior to
November 1, 2003. As of November 2004, this plan
was closed to new participants and frozen such that existing
participants would not accrue any additional benefits. In
addition, the firm maintains unfunded postretirement benefit
plans that provide medical and life insurance for eligible
retirees and their dependents covered under these programs.
On November 30, 2007, the firm adopted
SFAS No. 158 which requires an entity to recognize in
its statement of financial condition the funded status of its
defined benefit pension and postretirement plans, measured as
the difference between the fair value of the plan assets and the
benefit obligation. Upon adoption, SFAS No. 158
requires an entity to recognize previously unrecognized
actuarial gains and losses, prior service costs, and transition
obligations and assets within Accumulated other
comprehensive income/(loss) in the consolidated statements
of changes in shareholders equity. Additional minimum
pension liabilities are derecognized upon adoption of the new
standard.
As a result of adopting SFAS No. 158, the firm
recorded increases of $59 million and $253 million to
Other assets and Other liabilities and accrued
expenses, respectively, and a $194 million loss, net
of taxes, within Accumulated other comprehensive
income/(loss).
187
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides a summary of the changes in the
plans benefit obligations and the fair value of assets for
November 2008 and November 2007 and a statement of the
funded status of the plans as of November 2008 and
November 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended November
|
|
|
2008
|
|
2007
|
|
|
U.S.
|
|
Non-U.S.
|
|
Post-
|
|
U.S.
|
|
Non-U.S.
|
|
Post-
|
|
|
Pension
|
|
Pension
|
|
retirement
|
|
Pension
|
|
Pension
|
|
retirement
|
|
|
(in millions)
|
Benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
399
|
|
|
$
|
748
|
|
|
$
|
445
|
|
|
$
|
395
|
|
|
$
|
673
|
|
|
$
|
372
|
|
Service cost
|
|
|
|
|
|
|
84
|
|
|
|
26
|
|
|
|
|
|
|
|
78
|
|
|
|
21
|
|
Interest cost
|
|
|
24
|
|
|
|
41
|
|
|
|
31
|
|
|
|
22
|
|
|
|
34
|
|
|
|
23
|
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Actuarial loss/(gain)
|
|
|
(50
|
)
|
|
|
(261
|
)
|
|
|
10
|
|
|
|
(11
|
)
|
|
|
(79
|
)
|
|
|
36
|
|
Benefits paid
|
|
|
(8
|
)
|
|
|
(2
|
)
|
|
|
(10
|
)
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
Effect of foreign exchange rates
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
365
|
|
|
$
|
456
|
|
|
$
|
441
|
|
|
$
|
399
|
|
|
$
|
748
|
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
450
|
|
|
$
|
614
|
|
|
$
|
|
|
|
$
|
423
|
|
|
$
|
506
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
(151
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
34
|
|
|
|
36
|
|
|
|
|
|
Firm contributions
|
|
|
|
|
|
|
184
|
|
|
|
9
|
|
|
|
|
|
|
|
38
|
|
|
|
7
|
|
Employee contributions
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Benefits paid
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
Effect of foreign exchange rates
|
|
|
|
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
291
|
|
|
$
|
551
|
|
|
$
|
|
|
|
$
|
450
|
|
|
$
|
614
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of plans
|
|
$
|
(74
|
)
|
|
$
|
95
|
|
|
$
|
(441
|
)
|
|
$
|
51
|
|
|
$
|
(134
|
)
|
|
$
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Statements of Financial
Condition consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
|
|
|
$
|
129
|
|
|
$
|
|
|
|
$
|
51
|
|
|
$
|
|
|
|
$
|
|
|
Other liabilities and accrued expenses
|
|
|
(74
|
)
|
|
|
(34
|
)
|
|
|
(441
|
)
|
|
|
|
|
|
|
(134
|
)
|
|
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(74
|
)
|
|
$
|
95
|
|
|
$
|
(441
|
)
|
|
$
|
51
|
|
|
$
|
(134
|
)
|
|
$
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
Accumulated other comprehensive income/(loss) consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss/(gain)
|
|
$
|
195
|
|
|
$
|
(59
|
)
|
|
$
|
129
|
|
|
$
|
60
|
|
|
$
|
79
|
|
|
$
|
130
|
|
Prior service cost/(credit)
|
|
|
|
|
|
|
3
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
3
|
|
|
|
34
|
|
Transition obligation/(asset)
|
|
|
(11
|
)
|
|
|
3
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized
Pre-tax
|
|
$
|
184
|
|
|
$
|
(53
|
)
|
|
$
|
90
|
|
|
$
|
46
|
|
|
$
|
86
|
|
|
$
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for all defined benefit
pension plans was $769 million and $1.05 billion as of
November 2008 and November 2007, respectively.
For plans in which the accumulated benefit obligation exceeded
plan assets, the aggregate projected benefit obligation and
accumulated benefit obligation was $426 million and
$413 million, respectively, as of November 2008, and
$722 million and $636 million, respectively, as of
188
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
November 2007. The fair value of plan assets for each of
these plans was $317 million and $590 million as of
November 2008 and November 2007, respectively.
The components of pension expense/(income) and postretirement
expense are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
U.S. pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
24
|
|
|
$
|
22
|
|
|
$
|
21
|
|
Expected return on plan assets
|
|
|
(33
|
)
|
|
|
(32
|
)
|
|
|
(26
|
)
|
Net amortization
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(10
|
)
|
|
$
|
(9
|
)
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
84
|
|
|
$
|
78
|
|
|
$
|
58
|
|
Interest cost
|
|
|
41
|
|
|
|
34
|
|
|
|
25
|
|
Expected return on plan assets
|
|
|
(41
|
)
|
|
|
(36
|
)
|
|
|
(29
|
)
|
Net amortization
|
|
|
2
|
|
|
|
10
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
26
|
|
|
$
|
21
|
|
|
$
|
19
|
|
Interest cost
|
|
|
31
|
|
|
|
23
|
|
|
|
19
|
|
Net amortization
|
|
|
23
|
|
|
|
19
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
80
|
|
|
$
|
63
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated 2009 amortization from Accumulated other comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss/(gain)
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
Prior service cost/(credit)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
Transition obligation/(asset)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The weighted average assumptions used to develop the actuarial
present value of the projected benefit obligation and net
periodic pension cost are set forth below. These assumptions
represent a weighted average of the assumptions used for the
U.S. and
non-U.S. plans
and are based on the economic environment of each applicable
country.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Defined benefit pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. pension projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.75
|
%
|
|
|
6.00
|
%
|
|
|
5.50
|
%
|
Rate of increase in future compensation levels
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
U.S. pension net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.00
|
|
|
|
5.50
|
|
|
|
5.25
|
|
Rate of increase in future compensation levels
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Expected
long-term
rate of return on plan assets
|
|
|
7.50
|
|
|
|
7.50
|
|
|
|
7.50
|
|
Non-U.S. pension
projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.79
|
|
|
|
5.91
|
|
|
|
4.85
|
|
Rate of increase in future compensation levels
|
|
|
3.85
|
|
|
|
5.38
|
|
|
|
4.98
|
|
Non-U.S. pension
net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.91
|
|
|
|
4.85
|
|
|
|
4.81
|
|
Rate of increase in future compensation levels
|
|
|
5.38
|
|
|
|
4.98
|
|
|
|
4.75
|
|
Expected
long-term
rate of return on plan assets
|
|
|
5.89
|
|
|
|
6.84
|
|
|
|
6.93
|
|
Postretirement plans benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.75
|
%
|
|
|
6.00
|
%
|
|
|
5.50
|
%
|
Rate of increase in future compensation levels
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
5.00
|
|
Postretirement plans net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.00
|
|
|
|
5.50
|
|
|
|
5.25
|
|
Rate of increase in future compensation levels
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
5.00
|
|
Generally, the firm determined the discount rates for its
defined benefit plans by referencing indices for
long-term,
high-quality
bonds and ensuring that the discount rate does not exceed the
yield reported for those indices after adjustment for the
duration of the plans liabilities.
The firms approach in determining the
long-term
rate of return for plan assets is based upon historical
financial market relationships that have existed over time with
the presumption that this trend will generally remain constant
in the future.
For measurement purposes, an annual growth rate in the per
capita cost of covered healthcare benefits of 9.30% was assumed
for the year ending November 2009. The rate was assumed to
decrease ratably to 5.00% for the year ending November 2015
and remain at that level thereafter.
The assumed cost of healthcare has an effect on the amounts
reported for the firms postretirement plans. A 1% change
in the assumed healthcare cost trend rate would have the
following effects:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1% Increase
|
|
1% Decrease
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Service plus interest costs
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
(9
|
)
|
|
$
|
(9
|
)
|
Obligation
|
|
|
90
|
|
|
|
94
|
|
|
|
(70
|
)
|
|
|
(72
|
)
|
190
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the composition of plan assets
for the U.S. and
non-U.S. defined
benefit pension plans by asset category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
|
Pension
|
|
Pension
|
|
Pension
|
|
Pension
|
Equity securities
|
|
|
69
|
%
|
|
|
28
|
%
|
|
|
63
|
%
|
|
|
45
|
%
|
Debt securities
|
|
|
29
|
|
|
|
7
|
|
|
|
23
|
|
|
|
8
|
|
Other
|
|
|
2
|
|
|
|
65
|
|
|
|
14
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The investment approach of the firms U.S. and major
non-U.S. defined
benefit pension plans involves employing a sufficient level of
flexibility to capture investment opportunities as they occur,
while maintaining reasonable parameters to ensure that prudence
and care are exercised in the execution of the investment
programs. The plans employ a total return on investment
approach, whereby a mix, which is broadly similar to the actual
asset allocation as of November 2008, of equity securities,
debt securities and other assets, is targeted to maximize the
long-term
return on assets for a given level of risk. Investment risk is
measured and monitored on an ongoing basis by the firms
Retirement Committee through periodic portfolio reviews,
meetings with investment managers and annual liability
measurements.
The firm expects to contribute a minimum of $73 million to
its pension plans and $13 million to its postretirement
plans in 2009.
The following table sets forth benefits projected to be paid
from the firms U.S. and
non-U.S. defined
benefit pension and postretirement plans (net of Medicare
subsidy receipts) and reflects expected future service costs,
where appropriate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Non-U.S.
|
|
Post-
|
|
|
Pension
|
|
Pension
|
|
retirement
|
|
|
(in millions)
|
2009
|
|
$
|
9
|
|
|
$
|
7
|
|
|
$
|
13
|
|
2010
|
|
|
10
|
|
|
|
8
|
|
|
|
15
|
|
2011
|
|
|
10
|
|
|
|
8
|
|
|
|
17
|
|
2012
|
|
|
11
|
|
|
|
8
|
|
|
|
18
|
|
2013
|
|
|
13
|
|
|
|
8
|
|
|
|
19
|
|
2014-2018
|
|
|
81
|
|
|
|
47
|
|
|
|
108
|
|
Defined
Contribution Plans
The firm contributes to employer-sponsored U.S. and
non-U.S. defined
contribution plans. The firms contribution to these plans
was $208 million, $258 million and $230 million
for the years ended November 2008, November 2007 and
November 2006, respectively.
191
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 14.
|
Employee
Incentive Plans
|
Stock
Incentive Plan
The firm sponsors a stock incentive plan, The Goldman Sachs
Amended and Restated Stock Incentive Plan (Amended SIP), which
provides for grants of incentive stock options, nonqualified
stock options, stock appreciation rights, dividend equivalent
rights, restricted stock, restricted stock units, awards with
performance conditions and other
share-based
awards. In the second quarter of 2003, the Amended SIP was
approved by the firms shareholders, effective for grants
after April 1, 2003.
The total number of shares of common stock that may be issued
under the Amended SIP through 2008 may not exceed
250 million shares and, in each year thereafter, may not
exceed 5% of the issued and outstanding shares of common stock,
determined as of the last day of the immediately preceding year,
increased by the number of shares available for awards in
previous years but not covered by awards granted in such years.
As of November 2008 and November 2007,
162.4 million and 160.6 million shares, respectively,
were available for grant under the Amended SIP.
Other
Compensation Arrangements
The firm has maintained deferred compensation plans for eligible
employees. In general, under the plans, participants were able
to defer payment of a portion of their cash year-end
compensation. During the deferral period, participants were able
to notionally invest their deferrals in certain alternatives
available under the plans. Generally, under current tax law,
participants are not subject to income tax on amounts deferred
or on any notional investment earnings until the returns are
distributed, and the firm is not entitled to a corresponding tax
deduction until the amounts are distributed. Beginning with the
2008 year, these deferred compensation plans were frozen
with respect to new contributions and the plans were terminated.
Participants generally will receive distributions of their
benefits in 2009 except that no payments will be accelerated for
certain senior executives. The firm has recognized compensation
expense for the amounts deferred under these plans. As of
November 2008 and November 2007, $220 million and
$281 million, respectively, related to these plans was
included in Other liabilities and accrued expenses
in the consolidated statements of financial condition.
The firm has a discount stock program through which
Participating Managing Directors may be permitted to acquire
restricted stock units at an effective 25% discount (for
2008 year-end compensation, the program was suspended, and
no individual was permitted to acquire discounted restricted
stock units thereunder). In prior years, the 25% discount was
effected by an additional grant of restricted stock units equal
to one-third
of the number of restricted stock units purchased by qualifying
participants. The purchased restricted stock units were 100%
vested when granted, but the shares underlying them generally
were subject to certain transfer restrictions (which were waived
in December 2008 except for certain senior executives). The
shares underlying the restricted stock units that were granted
to effect the 25% discount generally vest in equal installments
on the second and third anniversaries following the grant date
and were not transferable before the third anniversary of the
grant date (transfer restrictions on vested awards were waived
in December 2008 except for certain senior executives).
Compensation expense related to these restricted stock units is
recognized over the vesting period. The total value of
restricted stock units granted for 2007 in order to effect the
25% discount was $66 million.
192
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted
Stock Units
The firm issues restricted stock units to employees under the
Amended SIP, primarily in connection with year-end compensation
and acquisitions. Restricted stock units are valued based on the
closing price of the underlying shares at the date of grant.
Year-end restricted stock units generally vest and deliver as
outlined in the applicable restricted stock unit agreements. All
employee restricted stock unit agreements provide that vesting
is accelerated in certain circumstances, such as upon
retirement, death and extended absence. Of the total restricted
stock units outstanding as of November 2008 and
November 2007, (i) 12.0 million units and
22.0 million units, respectively, required future service
as a condition to the delivery of the underlying shares of
common stock and (ii) 43.9 million units and
51.6 million units, respectively, did not require future
service. In all cases, delivery of the underlying shares of
common stock is conditioned on the grantees satisfying certain
vesting and other requirements outlined in the award agreements.
When delivering the underlying shares to employees, the firm
generally issues new shares of common stock. The activity
related to these restricted stock units is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant-Date
|
|
|
Restricted Stock
|
|
Fair Value of Restricted
|
|
|
Units Outstanding
|
|
Stock Units Outstanding
|
|
|
Future
|
|
No Future
|
|
Future
|
|
No Future
|
|
|
Service
|
|
Service
|
|
Service
|
|
Service
|
|
|
Required
|
|
Required
|
|
Required
|
|
Required
|
Outstanding,
November 2007 (1)
|
|
|
22,025,347
|
|
|
|
51,565,557
|
|
|
$
|
180.98
|
|
|
$
|
164.94
|
|
Granted (2)(3)
|
|
|
1,787,746
|
|
|
|
103,474
|
|
|
|
154.32
|
|
|
|
154.13
|
|
Forfeited
|
|
|
(898,950
|
)
|
|
|
(649,694
|
)
|
|
|
184.67
|
|
|
|
171.40
|
|
Delivered (4)
|
|
|
|
|
|
|
(18,086,395
|
)
|
|
|
|
|
|
|
112.27
|
|
Vested (3)
|
|
|
(10,950,279
|
)
|
|
|
10,950,279
|
|
|
|
152.06
|
|
|
|
152.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, November 2008
|
|
|
11,963,864
|
|
|
|
43,883,221
|
|
|
$
|
203.19
|
|
|
$
|
183.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes restricted stock units
granted to employees in December 2007 as part of
compensation for fiscal 2007.
|
|
(2) |
|
The weighted average grant-date
fair value of restricted stock units granted during the years
ended November 2008, November 2007 and
November 2006 was $154.31, $224.13 and $196.99,
respectively.
|
|
(3) |
|
The aggregate fair value of awards
vested during the years ended November 2008,
November 2007 and November 2006 was
$1.03 billion, $5.63 billion and $4.40 billion,
respectively.
|
|
(4) |
|
Includes restricted stock units
that were cash settled.
|
Stock
Options
Stock options granted to employees generally vest as outlined in
the applicable stock option agreement and generally first become
exercisable on or after the third anniversary of the grant date.
Other than the options granted in December 2007 related to
2007 compensation, no options were granted during fiscal 2008.
Year-end stock options for 2007 become exercisable in
January 2011 and expire on November 24, 2017.
Shares received on exercise prior to January 2013 for
year-end 2007 options cannot be sold, transferred or otherwise
disposed of until January 2013. All employee stock option
agreements provide that vesting is accelerated in certain
circumstances, such as upon retirement, death and extended
absence. In general, all stock options expire on the tenth
anniversary of the grant date, although they may be subject to
earlier termination or cancellation under certain circumstances
in accordance with the terms of the Amended SIP and the
applicable stock option agreement. The dilutive effect of the
firms outstanding stock options is included in
Average common shares outstanding
Diluted on the consolidated statements of earnings.
193
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The activity related to these stock options is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
Aggregate
|
|
Average
|
|
|
Options
|
|
Average
|
|
Intrinsic Value
|
|
Remaining
|
|
|
Outstanding
|
|
Exercise Price
|
|
(in millions)
|
|
Life (years)
|
Outstanding,
November 2007 (1)
|
|
|
39,229,629
|
|
|
$
|
106.63
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(4,743,181
|
)
|
|
|
74.55
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(847,316
|
)
|
|
|
173.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, November 2008
|
|
|
33,639,132
|
|
|
$
|
109.47
|
|
|
$
|
34
|
|
|
|
4.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, November 2008
|
|
|
24,866,508
|
|
|
$
|
84.67
|
|
|
$
|
34
|
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes stock options granted to
employees in December 2007 as part of compensation for
fiscal 2007, for which no future service was required.
|
The total intrinsic value of options exercised during the years
ended November 2008, November 2007 and
November 2006 was $433 million, $1.32 billion and
$1.52 billion, respectively.
The options outstanding as of November 2008 are set forth
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
Average
|
|
|
Options
|
|
Average
|
|
Remaining
|
Exercise Price
|
|
Outstanding
|
|
Exercise Price
|
|
Life (years)
|
$
|
45.00
|
|
|
$
|
59.99
|
|
|
|
|
|
1,285,788
|
|
|
$
|
52.97
|
|
|
|
0.50
|
|
|
60.00
|
|
|
|
74.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.00
|
|
|
|
89.99
|
|
|
|
|
|
11,898,382
|
|
|
|
81.03
|
|
|
|
2.93
|
|
|
90.00
|
|
|
|
104.99
|
|
|
|
|
|
11,682,338
|
|
|
|
91.86
|
|
|
|
3.07
|
|
|
105.00
|
|
|
|
119.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120.00
|
|
|
|
134.99
|
|
|
|
|
|
2,791,500
|
|
|
|
131.64
|
|
|
|
7.00
|
|
|
135.00
|
|
|
|
194.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195.00
|
|
|
|
209.99
|
|
|
|
|
|
5,981,124
|
|
|
|
202.27
|
|
|
|
8.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, November 2008
|
|
|
33,639,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair value of options granted for 2007 and
2006 was $51.04 and $49.96 per option, respectively. Fair value
was estimated as of the grant date based on a Black-Scholes
option-pricing model principally using the following weighted
average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008 (1)
|
|
2007
|
|
2006
|
Risk-free
interest rate
|
|
|
N/A
|
|
|
|
4.0
|
%
|
|
|
4.6
|
%
|
Expected volatility
|
|
|
N/A
|
|
|
|
35.0
|
|
|
|
27.5
|
|
Dividend yield
|
|
|
N/A
|
|
|
|
0.7
|
|
|
|
0.7
|
|
Expected life
|
|
|
N/A
|
|
|
|
7.5 years
|
|
|
|
7.5 years
|
|
|
|
|
(1) |
|
There were no options granted
during fiscal 2008 other than those related to 2007 compensation
and included in the 2007 disclosures above.
|
194
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The common stock underlying the options granted for 2007 and
2006 is subject to transfer restrictions for a period of
2 years and 1 year, respectively, from the date the
options become exercisable. The value of the common stock
underlying the options granted for 2007 and 2006 reflects a
liquidity discount of 24.0% and 17.5%, respectively, as a result
of these transfer restrictions. The liquidity discount was based
on the firms
pre-determined
written liquidity discount policies. The 7.5 years expected
life of the options reflects the estimated impact of these sales
restrictions on the life of the awards.
The following table sets forth
share-based
compensation and the related tax benefit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
Share-based
compensation
|
|
$
|
1,587
|
|
|
$
|
4,549
|
|
|
$
|
3,669
|
|
Excess tax benefit related to options exercised
|
|
|
144
|
|
|
|
469
|
|
|
|
542
|
|
Excess tax benefit related to
share-based
compensation (1)
|
|
|
645
|
|
|
|
908
|
|
|
|
653
|
|
|
|
|
(1) |
|
Represents the tax benefit,
recognized in additional
paid-in
capital, on stock options exercised and the delivery of common
stock underlying restricted stock units.
|
As of November 2008, there was $1.25 billion of total
unrecognized compensation cost related to nonvested
share-based
compensation arrangements. This cost is expected to be
recognized over a weighted average period of 1.84 years.
On December 17, 2008 the firm granted
20.6 million restricted stock units and 36.0 million
stock options to its employees. The restricted stock units and
options require future service and are subject to additional
vesting conditions as outlined in the award agreements.
Generally shares underlying RSUs are delivered and stock options
become exercisable shortly after vesting, but are subject to
certain transfer restrictions. These grants are not included in
the above tables.
|
|
Note 15.
|
Transactions
with Affiliated Funds
|
The firm has formed numerous nonconsolidated investment funds
with
third-party
investors. The firm generally acts as the investment manager for
these funds and, as such, is entitled to receive management fees
and, in certain cases, advisory fees, incentive fees or
overrides from these funds. These fees amounted to
$3.14 billion, $3.62 billion and $3.37 billion
for the years ended November 2008, November 2007 and
November 2006, respectively. As of November 2008 and
November 2007, the fees receivable from these funds were
$861 million and $596 million, respectively.
Additionally, the firm may invest alongside the
third-party
investors in certain funds. The aggregate carrying value of the
firms interests in these funds was $14.45 billion and
$12.90 billion as of November 2008 and
November 2007, respectively. In the ordinary course of
business, the firm may also engage in other activities with
these funds, including, among others, securities lending, trade
execution, trading, custody, and acquisition and bridge
financing. See Note 8 for the firms commitments
related to these funds.
195
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the net tax expense reflected in the
consolidated statements of earnings are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
Current taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
(278
|
)
|
|
$
|
2,934
|
|
|
$
|
3,736
|
|
State and local
|
|
|
91
|
|
|
|
388
|
|
|
|
627
|
|
Non-U.S.
|
|
|
1,964
|
|
|
|
2,554
|
|
|
|
2,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense
|
|
|
1,777
|
|
|
|
5,876
|
|
|
|
6,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(880
|
)
|
|
|
118
|
|
|
|
(635
|
)
|
State and local
|
|
|
(92
|
)
|
|
|
100
|
|
|
|
(262
|
)
|
Non-U.S.
|
|
|
(791
|
)
|
|
|
(89
|
)
|
|
|
(608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax (benefit)/expense
|
|
|
(1,763
|
)
|
|
|
129
|
|
|
|
(1,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax expense
|
|
$
|
14
|
|
|
$
|
6,005
|
|
|
$
|
5,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary
differences between the financial reporting and tax bases of
assets and liabilities. These temporary differences result in
taxable or deductible amounts in future years and are measured
using the tax rates and laws that will be in effect when such
differences are expected to reverse.
Significant components of the firms deferred tax assets
and liabilities are set forth below:
|
|
|
|
|
|
|
|
|
|
|
As of November
|
|
|
2008
|
|
2007
|
|
|
(in millions)
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
3,732
|
|
|
$
|
3,869
|
|
FIN 48 asset
|
|
|
625
|
|
|
|
|
|
Foreign tax credits
|
|
|
334
|
|
|
|
|
|
Unrealized losses
|
|
|
94
|
|
|
|
|
|
Other, net
|
|
|
1,481
|
|
|
|
997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,266
|
|
|
|
4,866
|
|
Valuation
allowance (1)
|
|
|
(93
|
)
|
|
|
(112
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax
assets (2)
|
|
$
|
6,173
|
|
|
$
|
4,754
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,558
|
|
|
|
1,208
|
|
Unrealized gains
|
|
|
|
|
|
|
1,279
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax
liabilities (2)
|
|
$
|
1,558
|
|
|
$
|
2,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Relates primarily to the ability to
utilize losses in various tax jurisdictions.
|
|
(2) |
|
Before netting within tax
jurisdictions.
|
The firm permanently reinvests eligible earnings of certain
foreign subsidiaries and, accordingly, does not accrue any
U.S. income taxes that would arise if such earnings were
repatriated. As of November 2008, this policy resulted in
an unrecognized net deferred tax liability of $1.1 billion
attributable to reinvested earnings of $11.6 billion.
196
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2008, the valuation allowance was decreased by
$19 million, primarily due to the utilization of net
operating losses previously considered more likely than not to
expire unused. Net operating loss carryforwards were
$2.77 billion and $2.12 billion as of
November 2008 and November 2007, respectively.
The firm had federal net operating loss carryforwards, primarily
resulting from acquisitions, of $172 million and
$139 million as of November 2008 and
November 2007, respectively. The firm recorded a related
net deferred income tax asset of $56 million and
$44 million as of November 2008 and
November 2007, respectively. These carryforwards are
subject to annual limitations on utilization and will begin to
expire in 2016.
The firm had state and local net operating loss carryforwards,
primarily resulting from acquisitions, of $2.59 billion and
$1.62 billion as of November 2008 and
November 2007, respectively. The firm recorded a related
net deferred income tax asset of $97 million and
$21 million as of November 2008 and
November 2007, respectively. These carryforwards are
subject to annual limitations on utilization and will begin to
expire in 2012.
The firm had foreign net operating loss carryforwards of
$5 million and $306 million as of November 2008
and November 2007, respectively. The firm recorded a
related net deferred income tax asset of $84 million as of
November 2007. These carryforwards are subject to
limitation on utilization and can be carried forward
indefinitely.
The firm had foreign tax credit carryforwards of
$334 million as of November 2008. These carryforwards
are subject to limitation on utilization and will begin to
expire in 2018.
The firm adopted the provisions of FIN 48 as of
December 1, 2007 and recorded a transition adjustment
resulting in a reduction of $201 million to beginning
retained earnings.
The following table sets forth the changes in the firms
unrecognized tax benefits from December 1, 2007 to
November 28, 2008 (in millions):
|
|
|
|
|
Balance at December 1, 2007
|
|
$
|
1,042
|
|
Increases based on tax positions related to the current year
|
|
|
172
|
|
Increases based on tax positions related to prior years
|
|
|
264
|
|
Decreases related to tax positions of prior years
|
|
|
(67
|
)
|
Decreases related to settlements
|
|
|
(38
|
)
|
|
|
|
|
|
Balance at November 2008
|
|
$
|
1,373
|
|
|
|
|
|
|
As of November 2008, the firms liability for
unrecognized tax benefits reported in Other liabilities
and accrued expenses in the consolidated statement of
financial condition was $1.4 billion. The firm reported a
related deferred tax asset of $625 million in Other
assets in the consolidated statement of financial
condition. If recognized, the net tax benefit of
$748 million would reduce the firms effective income
tax rate. As of November 2008, the firms accrued
liability for interest expense related to income tax matters and
income tax penalties was $110.9 million. The firm reports
interest expense related to income tax matters in
Provision for taxes in the consolidated statements
of earnings and income tax penalties in Other
expenses in the consolidated statements of earnings. The
firm recognized $36.7 million of interest and income tax
penalties for the year ended November 2008. The firm does
not expect unrecognized tax benefits to change significantly
during the twelve months subsequent to
November 28, 2008.
197
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The firm is subject to examination by the U.S. Internal
Revenue Service (IRS) and other taxing authorities in
jurisdictions where the firm has significant business
operations, such as the United Kingdom, Japan, Hong Kong, Korea
and various states, such as New York. The tax years under
examination vary by jurisdiction. The firm does not expect that
potential additional assessments from these examinations will be
material to its results of operations.
Below is a table of the earliest tax years that remain subject
to examination by major jurisdiction:
|
|
|
|
|
|
|
Earliest
|
|
|
Tax Year
|
|
|
Subject to
|
Jurisdiction
|
|
Examination
|
U.S. Federal
|
|
|
2005
|
(1)
|
New York State and City
|
|
|
2004
|
(2)
|
United Kingdom
|
|
|
2005
|
|
Japan
|
|
|
2005
|
|
Hong Kong
|
|
|
2002
|
|
Korea
|
|
|
2003
|
|
|
|
|
(1) |
|
IRS examination of fiscal 2005,
2006 and 2007 began during 2008.
|
|
(2) |
|
New York State and City examination
of fiscal 2004, 2005 and 2006 began in 2008.
|
All years subsequent to the above years remain open to
examination by the taxing authorities. The firm believes that
the liability for unrecognized tax benefits it has established
is adequate in relation to the potential for additional
assessments. The resolution of tax matters is not expected to
have a material effect on the firms financial condition
but may be material to the firms operating results for a
particular period, depending, in part, upon the operating
results for that period.
A reconciliation of the U.S. federal statutory income tax
rate to the firms effective income tax rate is set forth
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
U.S. federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase related to state and local taxes, net of
U.S. income tax effects
|
|
|
|
|
|
|
1.8
|
|
|
|
1.6
|
|
Tax credits
|
|
|
(4.3
|
)
|
|
|
(0.5
|
)
|
|
|
(0.6
|
)
|
Foreign operations
|
|
|
(29.8
|
)
|
|
|
(1.6
|
)
|
|
|
(1.3
|
)
|
Tax-exempt
income, including dividends
|
|
|
(5.9
|
)
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
Other
|
|
|
5.6
|
(1)
|
|
|
(0.2
|
) (2)
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
0.6
|
%
|
|
|
34.1
|
%
|
|
|
34.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily includes the effect of
FIN 48 liability increase.
|
|
(2) |
|
Primarily includes the effect of
audit settlements.
|
Tax benefits of approximately $645 million in
November 2008, $908 million in November 2007 and
$653 million in November 2006, related to the delivery
of common stock underlying restricted stock units and the
exercise of options, were credited directly to Additional
paid-in
capital in the consolidated statements of financial
condition and changes in shareholders equity.
198
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On September 21, 2008, Group Inc. became a bank
holding company under the U.S. Bank Holding Company Act of
1956. As of that date, the Federal Reserve Board became the
primary U.S. regulator of Group Inc., as a consolidated
entity. Prior to September 21, 2008, Group Inc. was
subject to regulation by the SEC as a Consolidated Supervised
Entity (CSE) and was subject to
group-wide
supervision and examination by the SEC and to minimum capital
standards on a consolidated basis. On
September 26, 2008, the SEC announced that it was
ending the CSE program. The firms principal
U.S. broker-dealer,
GS&Co., remains subject to regulation by the SEC.
The firm is subject to regulatory capital requirements
administered by the U.S. federal banking agencies. The
firms bank depository institution subsidiaries, including
GS Bank USA, are subject to similar capital guidelines. Under
the Federal Reserve Boards capital adequacy guidelines and
the regulatory framework for prompt corrective action (PCA) that
is applicable to GS Bank USA, the firm and its bank
depository institution subsidiaries must meet specific capital
guidelines that involve quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated
under regulatory reporting practices. The firm and its bank
depository institution subsidiaries capital amounts, as
well as GS Bank USAs PCA classification, are also
subject to qualitative judgments by the regulators about
components, risk weightings and other factors. The firm
anticipates reporting capital ratios as follows:
|
|
|
|
|
Before Group Inc. became a bank holding company, it was subject
to capital guidelines by the SEC as a CSE that were generally
consistent with those set out in the Revised Framework for the
International Convergence of Capital Measurement and Capital
Standards issued by the Basel Committee on Banking Supervision
(Basel II). The firm currently computes and reports its
firmwide capital ratios in accordance with the Basel II
requirements as applicable to the firm when it was regulated as
a CSE for the purpose of assessing the adequacy of its capital.
Under the Basel II framework as it applied to the firm when it
was regulated as a CSE, the firm evaluates its Tier 1
Capital and Total Allowable Capital as a percentage of
Risk-Weighted
Assets (RWAs). As of November 2008, the firms Total
Capital Ratio (Total Allowable Capital as a percentage of RWAs)
was 18.9% and the firms Tier 1 Ratio (Tier 1
Capital as a percentage of RWAs) was 15.6%, in each case
calculated under the Basel II framework as it applied to the
firm when it was regulated as a CSE. The firm expects to
continue to report to investors for a period of time its
Basel II capital ratios as applicable to it when it was
regulated as a CSE.
|
|
|
|
The regulatory capital guidelines currently applicable to bank
holding companies are based on the Capital Accord of the Basel
Committee on Banking Supervision (Basel I), with
Basel II to be phased in over time. The firm is currently
working with the Federal Reserve Board to put in place the
appropriate reporting and compliance mechanisms and
methodologies to allow reporting of the Basel I capital
ratios as of the end of March 2009.
|
|
|
|
In addition, the firm is currently working to implement the
Basel II framework as applicable to it as a bank holding company
(as opposed to as a CSE). U.S. banking regulators have
incorporated the Basel II framework into the existing
risk-based
capital requirements by requiring that internationally active
banking organizations, such as Group Inc., transition to Basel
II over the next several years.
|
199
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Federal Reserve Board also has established minimum leverage
ratio guidelines. The firm was not subject to these guidelines
before becoming a bank holding company and, accordingly, is
currently working with the Federal Reserve Board to finalize its
methodology for calculating this ratio. The Tier 1 leverage
ratio is defined as Tier 1 capital (as applicable to the
firm as a bank holding company) divided by adjusted average
total assets (which includes adjustments for disallowed goodwill
and certain intangible assets). The minimum Tier 1 leverage
ratio is 3% for bank holding companies that have received the
highest supervisory rating under Federal Reserve Board
guidelines or that have implemented the Federal Reserve
Boards
risk-based
capital measure for market risk. Other bank holding companies
must have a minimum Tier 1 leverage ratio of 4%. Bank
holding companies may be expected to maintain ratios well above
the minimum levels, depending upon their particular condition,
risk profile and growth plans. As of November 2008, the
firms estimated Tier 1 leverage ratio was 6.1%. This
ratio represents a preliminary estimate and may be revised in
subsequent filings as the firm continues to work with the
Federal Reserve Board to finalize the methodology for the
calculation.
The firms U.S. regulated
broker-dealer
subsidiaries include GS&Co. and Goldman Sachs
Execution & Clearing, L.P. (GSEC). GS&Co. and
GSEC are registered
U.S. broker-dealers
and futures commission merchants subject to
Rule 15c3-1
of the SEC and Rule 1.17 of the Commodity Futures Trading
Commission, which specify uniform minimum net capital
requirements, as defined, for their registrants, and also
effectively require that a significant part of the
registrants assets be kept in relatively liquid form.
GS&Co. and GSEC have elected to compute their minimum
capital requirements in accordance with the Alternative
Net Capital Requirement as permitted by
Rule 15c3-1.
As of November 2008, GS&Co. had regulatory net
capital, as defined by
Rule 15c3-1,
of $10.92 billion, which exceeded the amounts required by
$8.87 billion. As of November 2008, GSEC had
regulatory net capital, as defined by
Rule 15c3-1,
of $1.38 billion, which exceeded the amounts required by
$1.29 billion. In addition to its alternative minimum net
capital requirements, GS&Co. is also required to hold
tentative net capital in excess of $1 billion and net
capital in excess of $500 million in accordance with the
market and credit risk standards of Appendix E of
Rule 15c3-1.
GS&Co. is also required to notify the SEC in the event that
its tentative net capital is less than $5 billion. As of
November 2008 and November 2007, GS&Co. had
tentative net capital and net capital in excess of both the
minimum and the notification requirements.
As of November 2008, GS Bank USA, a New York
State-chartered bank and a member of the Federal Reserve System
and the FDIC, is regulated by the Federal Reserve Board and the
New York State Banking Department and is subject to minimum
capital requirements that (subject to certain exceptions) are
similar to those applicable to bank holding companies. GS Bank
USA was formed in November 2008 through the merger of the
firms existing Utah industrial bank (named GS Bank USA)
into the firms New York limited purpose trust company,
with the surviving company taking the name GS Bank USA. As of
November 2007, GS Bank USAs predecessor was a wholly
owned industrial bank regulated by the Utah Department of
Financial Institutions, was a member of the FDIC and was subject
to minimum capital requirements. The firm computes the capital
ratios for GS Bank USA in accordance with the Basel I
framework for purposes of assessing the adequacy of its capital.
In order to be considered a well capitalized
depository institution under the Federal Reserve Board
guidelines, GS Bank USA must maintain a Tier 1 capital
ratio of at least 6%, a total capital ratio of at least 10% and
a Tier 1 leverage ratio of at least 5%. In connection with
the November 2008 asset transfer described below, GS Bank USA
agreed with the Federal Reserve Board to minimum capital ratios
in excess of these well capitalized levels.
Accordingly, for a period of time, GS Bank USA is expected
to maintain a Tier 1 capital ratio of at least 8%, a total
capital ratio of at least 11% and a Tier 1 leverage ratio
of at least 6%. In November 2008, the firm contributed
subsidiaries with an aggregate of $117.16 billion in assets
into GS Bank USA (which brought total assets in
GS Bank USA
200
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to $145.06 billion as of November 2008). As a result, the
firm is currently working with the Federal Reserve Board to
finalize its methodology for the Basel I calculations. As
of November 2008, under Basel I, GS Bank USAs
estimated Tier 1 capital ratio was 8.9% and estimated total
capital ratio was 11.6%. In addition, GS Bank USAs
estimated Tier 1 leverage ratio was 9.1%.
The deposits of GS Bank USA are insured by the FDIC to the
extent provided by law. The Federal Reserve Board requires
depository institutions to maintain cash reserves with a Federal
Reserve Bank. The reserve balance deposited by the firms
depository institution subsidiaries held at the Federal Reserve
Bank was approximately $94 million and $32 million as
of November 2008 and November 2007, respectively. GS
Bank Europe, a wholly owned credit institution, is regulated by
the Irish Financial Services Regulatory Authority and is subject
to minimum capital requirements. As of November 2008, GS
Bank USA and GS Bank Europe were both in compliance with all
regulatory capital requirements.
Transactions between GS Bank USA and Group Inc. and its
subsidiaries and affiliates (other than, generally, subsidiaries
of GS Bank USA) are regulated by the Federal Reserve Board.
These regulations generally limit the types and amounts of
transactions (including loans to and borrowings from GS Bank
USA) that may take place and generally require those
transactions to be on an arms-length basis.
The firm has U.S. insurance subsidiaries that are subject
to state insurance regulation and oversight in the states in
which they are domiciled and in the other states in which they
are licensed. In addition, certain of the firms insurance
subsidiaries outside of the U.S. are regulated by the
Bermuda Monetary Authority and by Lloyds (which is, in
turn, regulated by the U.K.s Financial Services Authority
(FSA)). The firms insurance subsidiaries were in
compliance with all regulatory capital requirements as of
November 2008 and November 2007.
The firms principal
non-U.S. regulated
subsidiaries include Goldman Sachs International (GSI) and
Goldman Sachs Japan Co., Ltd. (GSJCL). GSI, the firms
regulated U.K.
broker-dealer,
is subject to the capital requirements of the FSA. GSJCL, the
firms regulated Japanese
broker-dealer,
is subject to the capital requirements imposed by Japans
Financial Services Agency. As of November 2008 and
November 2007, GSI and GSJCL were in compliance with their
local capital adequacy requirements. Certain other
non-U.S. subsidiaries
of the firm are also subject to capital adequacy requirements
promulgated by authorities of the countries in which they
operate. As of November 2008 and November 2007, these
subsidiaries were in compliance with their local capital
adequacy requirements.
The regulatory requirements referred to above restrict Group
Inc.s ability to withdraw capital from its regulated
subsidiaries. As of November 2008 and November 2007,
approximately $26.92 billion and $18.10 billion,
respectively, of net assets of regulated subsidiaries were
restricted as to the payment of dividends to Group Inc. In
addition to limitations on the payment of dividends imposed by
federal and state laws, the Federal Reserve Board and the FDIC
have authority to prohibit or to limit the payment of dividends
by the banking organizations they supervise (including
GS Bank USA) if, in the Federal Reserve Boards
opinion, payment of a dividend would constitute an unsafe or
unsound practice in the light of the financial condition of the
banking organization. As of November 2008, GS Bank USA was not
able to declare dividends to Group Inc. without regulatory
approval.
201
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 18.
|
Business
Segments
|
In reporting to management, the firms operating results
are categorized into the following three business segments:
Investment Banking, Trading and Principal Investments, and Asset
Management and Securities Services.
Basis of
Presentation
In reporting segments, certain of the firms business lines
have been aggregated where they have similar economic
characteristics and are similar in each of the following areas:
(i) the nature of the services they provide,
(ii) their methods of distribution, (iii) the types of
clients they serve and (iv) the regulatory environments in
which they operate.
The cost drivers of the firm taken as a whole
compensation, headcount and levels of business
activity are broadly similar in each of the
firms business segments. Compensation and benefits
expenses within the firms segments reflect, among other
factors, the overall performance of the firm as well as the
performance of individual business units. Consequently,
pre-tax
margins in one segment of the firms business may be
significantly affected by the performance of the firms
other business segments.
The firm allocates revenues and expenses among the three
business segments. Due to the integrated nature of these
segments, estimates and judgments have been made in allocating
certain revenue and expense items. Transactions between segments
are based on specific criteria or approximate
third-party
rates. Total operating expenses include corporate items that
have not been allocated to individual business segments. The
allocation process is based on the manner in which management
views the business of the firm.
The segment information presented in the table below is prepared
according to the following methodologies:
|
|
|
|
|
Revenues and expenses directly associated with each segment are
included in determining
pre-tax
earnings.
|
|
|
|
Net revenues in the firms segments include allocations of
interest income and interest expense to specific securities,
commodities and other positions in relation to the cash
generated by, or funding requirements of, such underlying
positions. Net interest is included within segment net revenues
as it is consistent with the way in which management assesses
segment performance.
|
|
|
|
Overhead expenses not directly allocable to specific segments
are allocated ratably based on direct segment expenses.
|
202
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Segment
Operating Results
Management believes that the following information provides a
reasonable representation of each segments contribution to
consolidated
pre-tax
earnings and total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended November
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
(in millions)
|
|
Investment
|
|
Net revenues
|
|
$
|
5,185
|
|
|
$
|
7,555
|
|
|
$
|
5,629
|
|
Banking
|
|
Operating expenses
|
|
|
3,143
|
|
|
|
4,985
|
|
|
|
4,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax earnings
|
|
$
|
2,042
|
|
|
$
|
2,570
|
|
|
$
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
1,948
|
|
|
$
|
5,526
|
|
|
$
|
4,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading and
|
|
Net revenues
|
|
$
|
9,063
|
|
|
$
|
31,226
|
|
|
$
|
25,562
|
|
Principal
|
|
Operating expenses
|
|
|
11,808
|
|
|
|
17,998
|
|
|
|
14,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
Pre-tax earnings/(loss)
|
|
$
|
(2,745
|
)
|
|
$
|
13,228
|
|
|
$
|
10,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
645,267
|
|
|
$
|
744,647
|
|
|
$
|
566,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Management
|
|
Net revenues
|
|
$
|
7,974
|
|
|
$
|
7,206
|
|
|
$
|
6,474
|
|
and Securities
|
|
Operating expenses
|
|
|
4,939
|
|
|
|
5,363
|
|
|
|
4,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
Pre-tax earnings
|
|
$
|
3,035
|
|
|
$
|
1,843
|
|
|
$
|
2,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
237,332
|
|
|
$
|
369,623
|
|
|
$
|
266,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Net
revenues (1)(2)
|
|
$
|
22,222
|
|
|
$
|
45,987
|
|
|
$
|
37,665
|
|
|
|
Operating
expenses (3)
|
|
|
19,886
|
|
|
|
28,383
|
|
|
|
23,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings (4)
|
|
$
|
2,336
|
|
|
$
|
17,604
|
|
|
$
|
14,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
|
$
|
838,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net revenues include net interest
as set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Investment Banking
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
16
|
|
Trading and Principal Investments
|
|
|
968
|
|
|
|
1,512
|
|
|
|
1,535
|
|
Asset Management and Securities Services
|
|
|
3,302
|
|
|
|
2,475
|
|
|
|
1,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net interest
|
|
$
|
4,276
|
|
|
$
|
3,987
|
|
|
$
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Net revenues includes
non-interest
income as set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Investment banking fees
|
|
$
|
5,179
|
|
|
$
|
7,555
|
|
|
$
|
5,613
|
|
Equities commissions
|
|
|
4,998
|
|
|
|
4,579
|
|
|
|
3,518
|
|
Asset management and other fees
|
|
|
4,672
|
|
|
|
4,731
|
|
|
|
4,527
|
|
Trading and principal investments revenues
|
|
|
3,097
|
|
|
|
25,135
|
|
|
|
20,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
income
|
|
$
|
17,946
|
|
|
$
|
42,000
|
|
|
$
|
34,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trading and principal investments revenues include
$(61) million, $6 million and $(7) million for
the years ended November 2008, November 2007 and
November 2006, respectively, of realized gains/(losses) on
securities held within the firms insurance subsidiaries
which are accounted for as
available-for-sale
under SFAS No. 115.
|
|
|
(3) |
|
Operating expenses include net
provisions for a number of litigation and regulatory proceedings
of $(4) million, $37 million and $45 million for
the years ended November 2008, November 2007 and
November 2006, respectively, that have not been allocated
to the firms segments.
|
|
(4) |
|
Pre-tax
earnings include total depreciation and amortization as set
forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
|
Investment Banking
|
|
$
|
187
|
|
|
$
|
137
|
|
|
$
|
119
|
|
Trading and Principal Investments
|
|
|
1,161
|
|
|
|
845
|
|
|
|
725
|
|
Asset Management and Securities Services
|
|
|
277
|
|
|
|
185
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
1,625
|
|
|
$
|
1,167
|
|
|
$
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
Information
Due to the highly integrated nature of international financial
markets, the firm manages its businesses based on the
profitability of the enterprise as a whole. Since a significant
portion of the firms activities require cross-border
coordination in order to facilitate the needs of the firms
clients, the methodology for allocating the firms
profitability to geographic regions is dependent on the judgment
of management.
Geographic results are generally allocated as follows:
|
|
|
|
|
Investment Banking: location of the client and investment
banking team.
|
|
|
|
Fixed Income, Currency and Commodities, and Equities: location
of the trading desk.
|
|
|
|
Principal Investments: location of the investment.
|
|
|
|
Asset Management: location of the sales team.
|
|
|
|
Securities Services: location of the primary market for the
underlying security.
|
204
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the total net revenues,
pre-tax
earnings and net earnings of the firm and its consolidated
subsidiaries by geographic region allocated on the methodology
described above, as well as the percentage of total net
revenues,
pre-tax
earnings and net earnings for each geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
($ in millions)
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas (1)
|
|
$
|
15,485
|
|
|
|
70
|
%
|
|
$
|
23,412
|
|
|
|
51
|
%
|
|
$
|
20,361
|
|
|
|
54
|
%
|
EMEA (2)
|
|
|
5,910
|
|
|
|
26
|
|
|
|
13,538
|
|
|
|
29
|
|
|
|
9,354
|
|
|
|
25
|
|
Asia
|
|
|
827
|
|
|
|
4
|
|
|
|
9,037
|
|
|
|
20
|
|
|
|
7,950
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
22,222
|
|
|
|
100
|
%
|
|
$
|
45,987
|
|
|
|
100
|
%
|
|
$
|
37,665
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas (1)
|
|
$
|
4,879
|
|
|
|
N.M.
|
%
|
|
$
|
7,673
|
|
|
|
43
|
%
|
|
$
|
7,515
|
|
|
|
52
|
%
|
EMEA (2)
|
|
|
169
|
|
|
|
N.M.
|
|
|
|
5,458
|
|
|
|
31
|
|
|
|
3,075
|
|
|
|
21
|
|
Asia
|
|
|
(2,716
|
)
|
|
|
N.M.
|
|
|
|
4,510
|
|
|
|
26
|
|
|
|
4,015
|
|
|
|
27
|
|
Corporate (3)
|
|
|
4
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
pre-tax
earnings
|
|
$
|
2,336
|
|
|
|
100
|
%
|
|
$
|
17,604
|
|
|
|
100
|
%
|
|
$
|
14,560
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas (1)
|
|
$
|
3,371
|
|
|
|
N.M.
|
%
|
|
$
|
4,981
|
|
|
|
43
|
%
|
|
$
|
4,855
|
|
|
|
51
|
%
|
EMEA (2)
|
|
|
694
|
|
|
|
N.M.
|
|
|
|
3,735
|
|
|
|
32
|
|
|
|
2,117
|
|
|
|
22
|
|
Asia
|
|
|
(1,746
|
)
|
|
|
N.M.
|
|
|
|
2,907
|
|
|
|
25
|
|
|
|
2,594
|
|
|
|
27
|
|
Corporate (3)
|
|
|
3
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net earnings
|
|
$
|
2,322
|
|
|
|
100
|
%
|
|
$
|
11,599
|
|
|
|
100
|
%
|
|
$
|
9,537
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Substantially all relates to the
U.S.
|
|
(2) |
|
EMEA (Europe, Middle East and
Africa).
|
|
(3) |
|
Consists of net provisions for a
number of litigation and regulatory proceedings.
|
205
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 19.
|
Interest
Income and Interest Expense
|
The following table sets forth the details of the firms
interest income and interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(in millions)
|
Interest
income (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits with banks
|
|
$
|
188
|
|
|
$
|
119
|
|
|
$
|
159
|
|
Securities borrowed, securities purchased under agreements to
resell, at fair value, and federal funds sold
|
|
|
11,746
|
|
|
|
18,013
|
|
|
|
9,850
|
|
Trading assets
|
|
|
13,150
|
|
|
|
13,120
|
|
|
|
10,717
|
|
Other
interest (2)
|
|
|
10,549
|
|
|
|
14,716
|
|
|
|
14,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
35,633
|
|
|
$
|
45,968
|
|
|
$
|
35,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
756
|
|
|
$
|
677
|
|
|
$
|
146
|
|
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
|
|
7,414
|
|
|
|
12,612
|
|
|
|
9,525
|
|
Trading liabilities
|
|
|
2,789
|
|
|
|
3,866
|
|
|
|
3,125
|
|
Short-term
borrowings (3)
|
|
|
1,864
|
|
|
|
3,398
|
|
|
|
2,905
|
|
Long-term
borrowings (4)
|
|
|
13,687
|
|
|
|
14,147
|
|
|
|
9,777
|
|
Other
interest (5)
|
|
|
4,847
|
|
|
|
7,281
|
|
|
|
6,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
31,357
|
|
|
$
|
41,981
|
|
|
$
|
31,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
4,276
|
|
|
$
|
3,987
|
|
|
$
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest income is recorded on an
accrual basis based on contractual interest rates.
|
|
(2) |
|
Primarily includes interest income
on customer debit balances, securities borrowed and other
interest-earning assets.
|
|
(3) |
|
Includes interest on unsecured
short-term
borrowings and
short-term
other secured financings.
|
|
(4) |
|
Includes interest on unsecured
long-term
borrowings and
long-term
other secured financings.
|
|
(5) |
|
Primarily includes interest expense
on customer credit balances, securities loaned and other
interest-bearing liabilities.
|
206
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Group
Inc. Condensed Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended November
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
(in millions)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from bank
subsidiary (1)
|
|
$
|
2,922
|
|
|
$
|
18
|
|
|
$
|
285
|
|
Dividends from nonbank subsidiaries
|
|
|
3,716
|
|
|
|
4,273
|
|
|
|
5,076
|
|
Undistributed earnings/(loss) of subsidiaries
|
|
|
(3,971
|
)
|
|
|
6,708
|
|
|
|
4,516
|
|
Principal
investments (2)
|
|
|
(2,886
|
)
|
|
|
2,062
|
|
|
|
1,951
|
|
Interest
income (2)
|
|
|
7,167
|
|
|
|
9,049
|
|
|
|
7,231
|
|
|
|
Total revenues
|
|
|
6,948
|
|
|
|
22,110
|
|
|
|
19,059
|
|
Interest
expense (2)
|
|
|
8,229
|
|
|
|
8,914
|
|
|
|
6,760
|
|
|
|
Revenues, net of interest expense
|
|
|
(1,281
|
)
|
|
|
13,196
|
|
|
|
12,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
122
|
|
|
|
780
|
|
|
|
407
|
|
Other
expenses (2)
|
|
|
471
|
|
|
|
281
|
|
|
|
177
|
|
|
|
Total operating expenses
|
|
|
593
|
|
|
|
1,061
|
|
|
|
584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings/(loss)
|
|
|
(1,874
|
)
|
|
|
12,135
|
|
|
|
11,715
|
|
Provision/(benefit) for taxes
|
|
|
(4,196
|
)
|
|
|
536
|
|
|
|
2,178
|
|
|
|
Net earnings
|
|
|
2,322
|
|
|
|
11,599
|
|
|
|
9,537
|
|
Preferred stock dividends
|
|
|
281
|
|
|
|
192
|
|
|
|
139
|
|
|
|
Net earnings applicable to
common shareholders
|
|
$
|
2,041
|
|
|
$
|
11,407
|
|
|
$
|
9,398
|
|
|
Group
Inc. Condensed Statements of Financial
Condition
|
|
|
|
|
|
|
|
|
As of November
|
|
2008
|
|
2007
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,035
|
|
|
$
|
62
|
|
Loans to and receivables from
subsidiaries (2)
|
|
|
|
|
|
|
|
|
Bank
subsidiary (1)
|
|
|
19,247
|
|
|
|
1,626
|
|
Nonbank subsidiaries
|
|
|
157,086
|
|
|
|
174,589
|
|
Investments in subsidiaries and
associates (2)
|
|
|
|
|
|
|
|
|
Bank
subsidiary (1)
|
|
|
13,322
|
|
|
|
4,028
|
|
Nonbank subsidiaries
|
|
|
38,375
|
|
|
|
36,333
|
|
Trading assets, at fair value
|
|
|
40,171
|
|
|
|
35,614
|
|
Other
assets (2)
|
|
|
10,414
|
|
|
|
6,929
|
|
|
|
Total assets
|
|
$
|
279,650
|
|
|
$
|
259,181
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Unsecured
short-term
borrowings (3)
|
|
|
|
|
|
|
|
|
With third parties
|
|
$
|
37,941
|
|
|
$
|
46,577
|
|
With subsidiaries
|
|
|
7,462
|
|
|
|
5,137
|
|
Payables to subsidiaries
|
|
|
754
|
|
|
|
392
|
|
Trading liabilities, at fair value
|
|
|
3,530
|
|
|
|
1,971
|
|
Other liabilities
|
|
|
5,247
|
|
|
|
5,038
|
|
|
|
|
|
|
|
|
|
|
Unsecured
long-term
borrowings (4)
|
|
|
|
|
|
|
|
|
With third
parties (2)
|
|
|
158,472
|
|
|
|
155,351
|
|
With
subsidiaries (2)
(5)
|
|
|
1,875
|
|
|
|
1,915
|
|
|
|
Total liabilities
|
|
|
215,281
|
|
|
|
216,381
|
|
|
Commitments, contingencies and guarantees
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
16,471
|
|
|
|
3,100
|
|
Common stock
|
|
|
7
|
|
|
|
6
|
|
Restricted stock units and employee stock options
|
|
|
9,284
|
|
|
|
9,302
|
|
Additional
paid-in
capital
|
|
|
31,071
|
|
|
|
22,027
|
|
Retained earnings
|
|
|
39,913
|
|
|
|
38,642
|
|
Accumulated other comprehensive income/(loss)
|
|
|
(202
|
)
|
|
|
(118
|
)
|
Common stock held in treasury, at cost
|
|
|
(32,175
|
)
|
|
|
(30,159
|
)
|
|
|
Total shareholders equity
|
|
|
64,369
|
|
|
|
42,800
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
279,650
|
|
|
$
|
259,181
|
|
|
Group
Inc. Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended November
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
(in millions)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2,322
|
|
|
$
|
11,599
|
|
|
$
|
9,537
|
|
Non-cash
items included in net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed (earnings)/loss of
subsidiaries (2)
|
|
|
3,971
|
|
|
|
(6,708
|
)
|
|
|
(4,516
|
)
|
Depreciation and amortization
|
|
|
1
|
|
|
|
11
|
|
|
|
7
|
|
Deferred income taxes
|
|
|
(2,178
|
)
|
|
|
877
|
|
|
|
228
|
|
Share-based
compensation
|
|
|
40
|
|
|
|
459
|
|
|
|
451
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets, at fair value
|
|
|
(4,661
|
)
|
|
|
(17,795
|
)
|
|
|
(7,763
|
)
|
Trading liabilities, at fair value
|
|
|
1,559
|
|
|
|
86
|
|
|
|
(85
|
)
|
Net receivables from subsidiaries
|
|
|
(12,177
|
)
|
|
|
2,396
|
|
|
|
1,883
|
|
Other, net
|
|
|
(6,588
|
)
|
|
|
5,448
|
|
|
|
4,187
|
|
|
|
Net cash provided by/(used for) operating activities
|
|
|
(17,711
|
)
|
|
|
(3,627
|
)
|
|
|
3,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, leasehold improvements
and equipment
|
|
|
(49
|
)
|
|
|
(29
|
)
|
|
|
|
|
Proceeds from sales of property, leasehold
improvements and equipment
|
|
|
|
|
|
|
11
|
|
|
|
30
|
|
Issuance of short-term loans to subsidiaries,
net of repayments
|
|
|
3,701
|
|
|
|
(22,668
|
)
|
|
|
(12,953
|
)
|
Issuance of term loans to subsidiaries
|
|
|
(14,242
|
)
|
|
|
(48,299
|
)
|
|
|
(12,362
|
)
|
Repayments of term loans by subsidiaries
|
|
|
24,925
|
|
|
|
41,143
|
|
|
|
3,967
|
|
Dividends
received (2)
|
|
|
6,638
|
|
|
|
4,291
|
|
|
|
5,361
|
|
Capital contributions to subsidiaries,
net (2)
|
|
|
(22,245
|
)
|
|
|
(4,517
|
)
|
|
|
(7,898
|
)
|
|
|
Net cash used for investing activities
|
|
|
(1,272
|
)
|
|
|
(30,068
|
)
|
|
|
(23,855
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
short-term
borrowings, net
|
|
|
(10,564
|
)
|
|
|
3,255
|
|
|
|
(6,621
|
)
|
Other secured financing
(short-term),
net
|
|
|
|
|
|
|
(380
|
)
|
|
|
380
|
|
Proceeds from issuance of
long-term
borrowings
|
|
|
35,645
|
|
|
|
53,041
|
|
|
|
44,043
|
|
Repayment of
long-term
borrowings, including the current portion
|
|
|
(23,959
|
)
|
|
|
(13,984
|
)
|
|
|
(12,590
|
)
|
Common stock repurchased
|
|
|
(2,034
|
)
|
|
|
(8,956
|
)
|
|
|
(7,817
|
)
|
Dividends and dividend equivalents paid on common stock,
preferred stock and restricted stock units
|
|
|
(850
|
)
|
|
|
(831
|
)
|
|
|
(754
|
)
|
Proceeds from issuance of common stock
|
|
|
6,105
|
|
|
|
791
|
|
|
|
1,613
|
|
Proceeds from issuance of preferred stock,
net of issuance costs
|
|
|
13,366
|
|
|
|
|
|
|
|
1,349
|
|
Proceeds from issuance of common stock warrants
|
|
|
1,633
|
|
|
|
|
|
|
|
|
|
Excess tax benefit related to
share-based
compensation
|
|
|
614
|
|
|
|
817
|
|
|
|
464
|
|
Cash settlement of
share-based
compensation
|
|
|
|
|
|
|
(1
|
)
|
|
|
(137
|
)
|
|
|
Net cash provided by financing activities
|
|
|
19,956
|
|
|
|
33,752
|
|
|
|
19,930
|
|
Net increase in cash and cash equivalents
|
|
|
973
|
|
|
|
57
|
|
|
|
4
|
|
Cash and cash equivalents, beginning of year
|
|
|
62
|
|
|
|
5
|
|
|
|
1
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
1,035
|
|
|
$
|
62
|
|
|
$
|
5
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
Cash payments for
third-party
interest, net of capitalized interest, were $7.18 billion,
$7.78 billion and $6.11 billion for the years ended
November 2008, November 2007 and November 2006,
respectively.
Cash payments for income taxes, net
of refunds, were $99 million, $3.27 billion and
$2.86 billion for the years ended November 2008,
November 2007 and November 2006, respectively.
|
|
|
(1)
|
|
GS Bank USA. For purposes of identifying bank subsidiaries, the
reorganization described in Note 17 is given effect as of the
earliest reporting period in this disclosure.
|
(2)
|
|
Prior periods have been reclassified to conform to the current
presentation.
|
(3)
|
|
Includes $11.67 billion and $28.69 billion at fair
value as of November 2008 and November 2007,
respectively.
|
(4)
|
|
Includes $10.90 billion and $10.29 billion at fair
value as of November 2008 and November 2007,
respectively.
|
(5)
|
|
As of November 2008, unsecured
long-term
borrowings with subsidiaries by maturity date are
$506 million in 2009, $512 million in 2010,
$184 million in 2011, $126 million in 2012,
$142 million in 2013 and $405 million in
2014-thereafter.
|
207
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Note 21.
|
Subsequent
Events
|
On December 15, 2008, the Board approved a change in
the firms fiscal year-end from the last Friday of November
to the last Friday of December. The change is effective for the
firms 2009 fiscal year. The firms 2009 fiscal year
began December 27, 2008 and will end
December 25, 2009, resulting in a
one-month
transition period that began November 29, 2008 and
ended December 26, 2008.
In December 2008, there was continued deterioration in the
credit of LyondellBasell Finance Company, to which the firm had
provided bridge loan financing. On January 6, 2009,
certain legal entities within the LyondellBasell Industries AF
S.C.A. group filed for bankruptcy. As a result, the firm
incurred a loss of approximately $850 million in
December 2008 from marking the bridge and bank loan
facilities held in LyondellBasell Finance Company to expected
recovery levels.
208
SUPPLEMENTAL
FINANCIAL INFORMATION
Quarterly Results
(unaudited)
The following represents the firms unaudited quarterly
results for 2008 and 2007. These quarterly results were prepared
in accordance with generally accepted accounting principles and
reflect all adjustments that are, in the opinion of management,
necessary for a fair statement of the results. These adjustments
are of a normal recurring nature.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Quarter
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
(in millions, except per share data)
|
Total revenues
|
|
$
|
18,629
|
|
|
$
|
17,643
|
|
|
$
|
13,625
|
|
|
$
|
3,682
|
|
Interest expense
|
|
|
10,294
|
|
|
|
8,221
|
|
|
|
7,582
|
|
|
|
5,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net of interest expense
|
|
|
8,335
|
|
|
|
9,422
|
|
|
|
6,043
|
|
|
|
(1,578
|
)
|
Operating
expenses (1)
|
|
|
6,192
|
|
|
|
6,590
|
|
|
|
5,083
|
|
|
|
2,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings/(loss)
|
|
|
2,143
|
|
|
|
2,832
|
|
|
|
960
|
|
|
|
(3,599
|
)
|
Provision/(benefit) for taxes
|
|
|
632
|
|
|
|
745
|
|
|
|
115
|
|
|
|
(1,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings/(loss)
|
|
|
1,511
|
|
|
|
2,087
|
|
|
|
845
|
|
|
|
(2,121
|
)
|
Preferred stock dividends
|
|
|
44
|
|
|
|
36
|
|
|
|
35
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings/(loss) applicable to common shareholders
|
|
$
|
1,467
|
|
|
$
|
2,051
|
|
|
$
|
810
|
|
|
$
|
(2,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
3.39
|
|
|
$
|
4.80
|
|
|
$
|
1.89
|
|
|
$
|
(4.97
|
)
|
Diluted
|
|
|
3.23
|
|
|
|
4.58
|
|
|
|
1.81
|
|
|
|
(4.97
|
)
|
Dividends declared and paid per common share
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Quarter
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
(in millions, except per share data)
|
Total revenues
|
|
$
|
22,280
|
|
|
$
|
20,351
|
|
|
$
|
23,803
|
|
|
$
|
21,534
|
|
Interest expense
|
|
|
9,550
|
|
|
|
10,169
|
|
|
|
11,469
|
|
|
|
10,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net of interest expense
|
|
|
12,730
|
|
|
|
10,182
|
|
|
|
12,334
|
|
|
|
10,741
|
|
Operating
expenses (1)
|
|
|
7,871
|
|
|
|
6,751
|
|
|
|
8,075
|
|
|
|
5,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
|
4,859
|
|
|
|
3,431
|
|
|
|
4,259
|
|
|
|
5,055
|
|
Provision for taxes
|
|
|
1,662
|
|
|
|
1,098
|
|
|
|
1,405
|
|
|
|
1,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
3,197
|
|
|
|
2,333
|
|
|
|
2,854
|
|
|
|
3,215
|
|
Preferred stock dividends
|
|
|
49
|
|
|
|
46
|
|
|
|
48
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings applicable to common shareholders
|
|
$
|
3,148
|
|
|
$
|
2,287
|
|
|
$
|
2,806
|
|
|
$
|
3,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.08
|
|
|
$
|
5.25
|
|
|
$
|
6.54
|
|
|
$
|
7.49
|
|
Diluted
|
|
|
6.67
|
|
|
|
4.93
|
|
|
|
6.13
|
|
|
|
7.01
|
|
Dividends declared and paid per common share
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
0.35
|
|
|
|
|
(1) |
|
The timing and magnitude of changes
in the firms bonus accruals can have a significant effect
on results in a given quarter.
|
209
SUPPLEMENTAL
FINANCIAL INFORMATION
Common Stock
Price Range
The following table sets forth, for the quarters indicated, the
high and low sales prices per share of the firms common
stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Price
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
First quarter
|
|
$
|
229.35
|
|
|
$
|
169.00
|
|
|
$
|
222.75
|
|
|
$
|
191.50
|
|
|
$
|
146.35
|
|
|
$
|
124.23
|
|
Second quarter
|
|
|
203.39
|
|
|
|
140.27
|
|
|
|
232.41
|
|
|
|
189.85
|
|
|
|
169.31
|
|
|
|
139.18
|
|
Third quarter
|
|
|
190.04
|
|
|
|
152.25
|
|
|
|
233.97
|
|
|
|
157.38
|
|
|
|
157.00
|
|
|
|
136.79
|
|
Fourth quarter
|
|
|
172.45
|
|
|
|
47.41
|
|
|
|
250.70
|
|
|
|
175.00
|
|
|
|
203.35
|
|
|
|
145.66
|
|
As of January 16, 2009, there were 9,909 holders of record
of the firms common stock.
On January 16, 2009, the last reported sales price for the
firms common stock on the New York Stock Exchange was
$73.05 per share.
210
SUPPLEMENTAL
FINANCIAL INFORMATION
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
Income statement data (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
53,579
|
|
|
$
|
87,968
|
|
|
$
|
69,353
|
|
|
$
|
43,391
|
|
|
$
|
29,839
|
|
Interest expense
|
|
|
31,357
|
|
|
|
41,981
|
|
|
|
31,688
|
|
|
|
18,153
|
|
|
|
8,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net of interest expense
|
|
|
22,222
|
|
|
|
45,987
|
|
|
|
37,665
|
|
|
|
25,238
|
|
|
|
20,951
|
|
Compensation and benefits
|
|
|
10,934
|
|
|
|
20,190
|
|
|
|
16,457
|
|
|
|
11,758
|
|
|
|
9,681
|
|
Other operating expenses
|
|
|
8,952
|
|
|
|
8,193
|
|
|
|
6,648
|
|
|
|
5,207
|
|
|
|
4,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
$
|
2,336
|
|
|
$
|
17,604
|
|
|
$
|
14,560
|
|
|
$
|
8,273
|
|
|
$
|
6,676
|
|
|
|
Balance sheet data (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
884,547
|
|
|
$
|
1,119,796
|
|
|
$
|
838,201
|
|
|
$
|
706,804
|
|
|
$
|
531,379
|
|
Other secured financings
(long-term)
|
|
|
17,458
|
|
|
|
33,300
|
|
|
|
26,134
|
|
|
|
15,669
|
|
|
|
12,087
|
|
Unsecured
long-term
borrowings
|
|
|
168,220
|
|
|
|
164,174
|
|
|
|
122,842
|
|
|
|
84,338
|
|
|
|
68,609
|
|
Total liabilities
|
|
|
820,178
|
|
|
|
1,076,996
|
|
|
|
802,415
|
|
|
|
678,802
|
|
|
|
506,300
|
|
Total shareholders equity
|
|
|
64,369
|
|
|
|
42,800
|
|
|
|
35,786
|
|
|
|
28,002
|
|
|
|
25,079
|
|
|
|
Common share data (in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
4.67
|
|
|
$
|
26.34
|
|
|
$
|
20.93
|
|
|
$
|
11.73
|
|
|
$
|
9.30
|
|
Diluted
|
|
|
4.47
|
|
|
|
24.73
|
|
|
|
19.69
|
|
|
|
11.21
|
|
|
|
8.92
|
|
Dividends declared and paid per common share
|
|
|
1.40
|
|
|
|
1.40
|
|
|
|
1.30
|
|
|
|
1.00
|
|
|
|
1.00
|
|
Book value per common
share (1)
|
|
|
98.68
|
|
|
|
90.43
|
|
|
|
72.62
|
|
|
|
57.02
|
|
|
|
50.77
|
|
Average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
437.0
|
|
|
|
433.0
|
|
|
|
449.0
|
|
|
|
478.1
|
|
|
|
489.5
|
|
Diluted
|
|
|
456.2
|
|
|
|
461.2
|
|
|
|
477.4
|
|
|
|
500.2
|
|
|
|
510.5
|
|
|
|
Selected data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
17,276
|
|
|
|
17,383
|
|
|
|
15,477
|
|
|
|
14,466
|
|
|
|
13,846
|
|
Non-Americas
|
|
|
12,791
|
|
|
|
13,139
|
|
|
|
10,990
|
|
|
|
9,157
|
|
|
|
7,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
employees (2)
|
|
|
30,067
|
|
|
|
30,522
|
|
|
|
26,467
|
|
|
|
23,623
|
|
|
|
21,736
|
|
|
|
Assets under management (in
billions) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative
investments (4)
|
|
$
|
146
|
|
|
$
|
151
|
|
|
$
|
145
|
|
|
$
|
110
|
|
|
$
|
95
|
|
Equity
|
|
|
112
|
|
|
|
255
|
|
|
|
215
|
|
|
|
167
|
|
|
|
133
|
|
Fixed income
|
|
|
248
|
|
|
|
256
|
|
|
|
198
|
|
|
|
154
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-money
market assets
|
|
|
506
|
|
|
|
662
|
|
|
|
558
|
|
|
|
431
|
|
|
|
362
|
|
Money markets
|
|
|
273
|
|
|
|
206
|
|
|
|
118
|
|
|
|
101
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
779
|
|
|
$
|
868
|
|
|
$
|
676
|
|
|
$
|
532
|
|
|
$
|
452
|
|
|
|
|
|
(1)
|
Book value per common share is based on common shares
outstanding, including restricted stock units granted to
employees with no future service requirements, of
485.4 million, 439.0 million, 450.1 million,
460.4 million and 494.0 million as of
November 2008, November 2007, November 2006,
November 2005 and November 2004, respectively.
|
|
(2)
|
Excludes 4,671, 4,572, 3,868, 7,382 and 485 employees as of
November 2008, November 2007, November 2006,
November 2005 and November 2004, respectively, of
consolidated entities held for investment purposes.
|
|
(3)
|
Substantially all assets under management are valued as of
calendar month-end.
|
|
(4)
|
Primarily includes hedge funds, private equity, real estate,
currencies, commodities and asset allocation strategies.
|
211
SUPPLEMENTAL
FINANCIAL INFORMATION
Statistical
Disclosures
Distribution of Assets, Liabilities and Shareholders
Equity
The following table sets forth a summary of consolidated average
balances and interest rates for the years ended
November 2008, November 2007 and November 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
|
balance
|
|
Interest
|
|
rate
|
|
balance
|
|
Interest
|
|
rate
|
|
balance
|
|
Interest
|
|
rate
|
|
|
(in millions, except rates)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits with banks
|
|
$
|
5,887
|
|
|
$
|
188
|
|
|
|
3.19
|
%
|
|
$
|
3,516
|
|
|
$
|
119
|
|
|
|
3.38
|
%
|
|
$
|
3,728
|
|
|
$
|
159
|
|
|
|
4.27
|
%
|
U.S.
|
|
|
1,541
|
|
|
|
41
|
|
|
|
2.66
|
|
|
|
741
|
|
|
|
23
|
|
|
|
3.10
|
|
|
|
1,351
|
|
|
|
36
|
|
|
|
2.66
|
|
Non-U.S.
|
|
|
4,346
|
|
|
|
147
|
|
|
|
3.38
|
|
|
|
2,775
|
|
|
|
96
|
|
|
|
3.46
|
|
|
|
2,377
|
|
|
|
123
|
|
|
|
5.17
|
|
Securities borrowed, securities purchased under agreements to
resell, at fair value, and federal funds sold
|
|
|
421,157
|
|
|
|
11,746
|
|
|
|
2.79
|
|
|
|
348,691
|
|
|
|
18,013
|
|
|
|
5.17
|
|
|
|
308,509
|
|
|
|
9,850
|
|
|
|
3.19
|
|
U.S.
|
|
|
331,043
|
|
|
|
8,791
|
|
|
|
2.66
|
|
|
|
279,456
|
|
|
|
15,449
|
|
|
|
5.53
|
|
|
|
240,263
|
|
|
|
8,061
|
|
|
|
3.36
|
|
Non-U.S.
|
|
|
90,114
|
|
|
|
2,955
|
|
|
|
3.28
|
|
|
|
69,235
|
|
|
|
2,564
|
|
|
|
3.70
|
|
|
|
68,246
|
|
|
|
1,789
|
|
|
|
2.62
|
|
Trading
assets (1)(2)
|
|
|
328,208
|
|
|
|
13,150
|
|
|
|
4.01
|
|
|
|
336,412
|
|
|
|
13,120
|
|
|
|
3.90
|
|
|
|
265,878
|
|
|
|
10,717
|
|
|
|
4.03
|
|
U.S.
|
|
|
186,498
|
|
|
|
7,700
|
|
|
|
4.13
|
|
|
|
190,589
|
|
|
|
8,167
|
|
|
|
4.29
|
|
|
|
177,984
|
|
|
|
7,397
|
|
|
|
4.16
|
|
Non-U.S.
|
|
|
141,710
|
|
|
|
5,450
|
|
|
|
3.85
|
|
|
|
145,823
|
|
|
|
4,953
|
|
|
|
3.40
|
|
|
|
87,894
|
|
|
|
3,320
|
|
|
|
3.78
|
|
Other interest-earning
assets (3)
|
|
|
221,040
|
|
|
|
10,549
|
|
|
|
4.77
|
|
|
|
203,048
|
|
|
|
14,716
|
|
|
|
7.25
|
|
|
|
158,162
|
|
|
|
14,460
|
|
|
|
9.14
|
|
U.S.
|
|
|
131,778
|
|
|
|
4,438
|
|
|
|
3.37
|
|
|
|
97,830
|
|
|
|
6,480
|
|
|
|
6.62
|
|
|
|
96,517
|
|
|
|
9,321
|
|
|
|
9.66
|
|
Non-U.S.
|
|
|
89,262
|
|
|
|
6,111
|
|
|
|
6.85
|
|
|
|
105,218
|
|
|
|
8,236
|
|
|
|
7.83
|
|
|
|
61,645
|
|
|
|
5,139
|
|
|
|
8.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
976,292
|
|
|
|
35,633
|
|
|
|
3.65
|
|
|
|
891,667
|
|
|
|
45,968
|
|
|
|
5.16
|
|
|
|
736,277
|
|
|
|
35,186
|
|
|
|
4.78
|
|
Cash and due from banks
|
|
|
7,975
|
|
|
|
|
|
|
|
|
|
|
|
3,926
|
|
|
|
|
|
|
|
|
|
|
|
3,348
|
|
|
|
|
|
|
|
|
|
Other noninterest-earning
assets (2)
|
|
|
154,727
|
|
|
|
|
|
|
|
|
|
|
|
102,312
|
|
|
|
|
|
|
|
|
|
|
|
80,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,138,994
|
|
|
|
|
|
|
|
|
|
|
$
|
997,905
|
|
|
|
|
|
|
|
|
|
|
$
|
820,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
$
|
26,455
|
|
|
|
756
|
|
|
|
2.86
|
|
|
$
|
13,227
|
|
|
|
677
|
|
|
|
5.12
|
|
|
$
|
2,853
|
|
|
|
146
|
|
|
|
5.12
|
|
U.S.
|
|
|
21,598
|
|
|
|
617
|
|
|
|
2.86
|
|
|
|
13,128
|
|
|
|
674
|
|
|
|
5.13
|
|
|
|
2,778
|
|
|
|
143
|
|
|
|
5.15
|
|
Non-U.S.
|
|
|
4,857
|
|
|
|
139
|
|
|
|
2.86
|
|
|
|
99
|
|
|
|
3
|
|
|
|
3.03
|
|
|
|
75
|
|
|
|
3
|
|
|
|
4.00
|
|
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
|
|
194,935
|
|
|
|
7,414
|
|
|
|
3.80
|
|
|
|
214,511
|
|
|
|
12,612
|
|
|
|
5.88
|
|
|
|
206,992
|
|
|
|
9,525
|
|
|
|
4.60
|
|
U.S.
|
|
|
107,361
|
|
|
|
3,663
|
|
|
|
3.41
|
|
|
|
95,391
|
|
|
|
7,697
|
|
|
|
8.07
|
|
|
|
118,020
|
|
|
|
7,055
|
|
|
|
5.98
|
|
Non-U.S.
|
|
|
87,574
|
|
|
|
3,751
|
|
|
|
4.28
|
|
|
|
119,120
|
|
|
|
4,915
|
|
|
|
4.13
|
|
|
|
88,972
|
|
|
|
2,470
|
|
|
|
2.78
|
|
Trading
liabilities (1)(2)
|
|
|
95,377
|
|
|
|
2,789
|
|
|
|
2.92
|
|
|
|
109,736
|
|
|
|
3,866
|
|
|
|
3.52
|
|
|
|
99,967
|
|
|
|
3,125
|
|
|
|
3.13
|
|
U.S.
|
|
|
49,152
|
|
|
|
1,202
|
|
|
|
2.45
|
|
|
|
61,510
|
|
|
|
2,334
|
|
|
|
3.79
|
|
|
|
61,005
|
|
|
|
1,814
|
|
|
|
2.97
|
|
Non-U.S.
|
|
|
46,225
|
|
|
|
1,587
|
|
|
|
3.43
|
|
|
|
48,226
|
|
|
|
1,532
|
|
|
|
3.18
|
|
|
|
38,962
|
|
|
|
1,311
|
|
|
|
3.36
|
|
Commercial paper
|
|
|
4,097
|
|
|
|
145
|
|
|
|
3.54
|
|
|
|
5,605
|
|
|
|
269
|
|
|
|
4.80
|
|
|
|
7,485
|
|
|
|
361
|
|
|
|
4.82
|
|
U.S.
|
|
|
3,147
|
|
|
|
121
|
|
|
|
3.84
|
|
|
|
4,871
|
|
|
|
242
|
|
|
|
4.97
|
|
|
|
6,859
|
|
|
|
331
|
|
|
|
4.83
|
|
Non-U.S.
|
|
|
950
|
|
|
|
24
|
|
|
|
2.53
|
|
|
|
734
|
|
|
|
27
|
|
|
|
3.68
|
|
|
|
626
|
|
|
|
30
|
|
|
|
4.79
|
|
Other
borrowings (4)(5)
|
|
|
99,351
|
|
|
|
1,719
|
|
|
|
1.73
|
|
|
|
89,924
|
|
|
|
3,129
|
|
|
|
3.48
|
|
|
|
58,277
|
|
|
|
2,544
|
|
|
|
4.37
|
|
U.S.
|
|
|
52,126
|
|
|
|
1,046
|
|
|
|
2.01
|
|
|
|
44,789
|
|
|
|
1,779
|
|
|
|
3.97
|
|
|
|
43,534
|
|
|
|
1,521
|
|
|
|
3.49
|
|
Non-U.S.
|
|
|
47,225
|
|
|
|
673
|
|
|
|
1.43
|
|
|
|
45,135
|
|
|
|
1,350
|
|
|
|
2.99
|
|
|
|
14,743
|
|
|
|
1,023
|
|
|
|
6.94
|
|
Long-term
borrowings (5)(6)
|
|
|
203,360
|
|
|
|
13,687
|
|
|
|
6.73
|
|
|
|
167,997
|
|
|
|
14,147
|
|
|
|
8.42
|
|
|
|
121,935
|
|
|
|
9,777
|
|
|
|
8.02
|
|
U.S.
|
|
|
181,775
|
|
|
|
12,306
|
|
|
|
6.77
|
|
|
|
158,694
|
|
|
|
13,317
|
|
|
|
8.39
|
|
|
|
110,186
|
|
|
|
9,396
|
|
|
|
8.53
|
|
Non-U.S.
|
|
|
21,585
|
|
|
|
1,381
|
|
|
|
6.40
|
|
|
|
9,303
|
|
|
|
830
|
|
|
|
8.92
|
|
|
|
11,749
|
|
|
|
381
|
|
|
|
3.24
|
|
Other interest-bearing
liabilities (7)
|
|
|
345,956
|
|
|
|
4,847
|
|
|
|
1.40
|
|
|
|
248,640
|
|
|
|
7,281
|
|
|
|
2.93
|
|
|
|
205,556
|
|
|
|
6,210
|
|
|
|
3.02
|
|
U.S.
|
|
|
214,780
|
|
|
|
2,184
|
|
|
|
1.02
|
|
|
|
142,002
|
|
|
|
3,666
|
|
|
|
2.58
|
|
|
|
114,874
|
|
|
|
2,932
|
|
|
|
2.55
|
|
Non-U.S.
|
|
|
131,176
|
|
|
|
2,663
|
|
|
|
2.03
|
|
|
|
106,638
|
|
|
|
3,615
|
|
|
|
3.39
|
|
|
|
90,682
|
|
|
|
3,278
|
|
|
|
3.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
969,531
|
|
|
|
31,357
|
|
|
|
3.23
|
|
|
|
849,640
|
|
|
|
41,981
|
|
|
|
4.94
|
|
|
|
703,065
|
|
|
|
31,688
|
|
|
|
4.51
|
|
Noninterest-bearing deposits
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noninterest-bearing
liabilities (2)
|
|
|
122,292
|
|
|
|
|
|
|
|
|
|
|
|
110,306
|
|
|
|
|
|
|
|
|
|
|
|
86,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,091,827
|
|
|
|
|
|
|
|
|
|
|
|
959,946
|
|
|
|
|
|
|
|
|
|
|
|
789,433
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
5,157
|
|
|
|
|
|
|
|
|
|
|
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
42,010
|
|
|
|
|
|
|
|
|
|
|
|
34,859
|
|
|
|
|
|
|
|
|
|
|
|
28,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
47,167
|
|
|
|
|
|
|
|
|
|
|
|
37,959
|
|
|
|
|
|
|
|
|
|
|
|
31,048
|
|
|
|
|
|
|
|
|
|
Total liabilities, preferred stock and
shareholders equity
|
|
$
|
1,138,994
|
|
|
|
|
|
|
|
|
|
|
$
|
997,905
|
|
|
|
|
|
|
|
|
|
|
$
|
820,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
|
|
|
0.42
|
%
|
|
|
|
|
|
|
|
|
|
|
0.22
|
%
|
|
|
|
|
|
|
|
|
|
|
0.27
|
%
|
Net interest income and net yield on
interest-earning assets
|
|
|
|
|
|
$
|
4,276
|
|
|
|
0.44
|
|
|
|
|
|
|
$
|
3,987
|
|
|
|
0.45
|
|
|
|
|
|
|
$
|
3,498
|
|
|
|
0.48
|
|
U.S.
|
|
|
|
|
|
|
(169
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
410
|
|
|
|
0.07
|
|
|
|
|
|
|
|
1,623
|
|
|
|
0.31
|
|
Non-U.S.
|
|
|
|
|
|
|
4,445
|
|
|
|
1.37
|
|
|
|
|
|
|
|
3,577
|
|
|
|
1.11
|
|
|
|
|
|
|
|
1,875
|
|
|
|
0.85
|
|
Percentage of interest-earning assets and interest-bearing
liabilities attributable to
non-U.S. operations (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
33.33
|
%
|
|
|
|
|
|
|
|
|
|
|
36.23
|
%
|
|
|
|
|
|
|
|
|
|
|
29.90
|
%
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
35.03
|
|
|
|
|
|
|
|
|
|
|
|
38.75
|
|
|
|
|
|
|
|
|
|
|
|
34.96
|
|
212
SUPPLEMENTAL
FINANCIAL INFORMATION
|
|
(1)
|
Consists of cash trading instruments, including equity
securities and convertible debentures.
|
|
(2)
|
Derivative instruments are included in other noninterest-earning
assets and other noninterest-bearing liabilities.
|
|
(3)
|
Primarily consists of cash and securities segregated for
regulatory and other purposes and receivables from customers and
counterparties.
|
|
(4)
|
Consists of short-term other secured financings and unsecured
short-term borrowings, excluding commercial paper.
|
|
(5)
|
Interest rates include the effects of hedging in accordance with
SFAS No. 133.
|
|
(6)
|
Consists of long-term other secured financings and unsecured
long-term borrowings.
|
|
(7)
|
Primarily consists of payables to customers and counterparties.
|
|
(8)
|
Assets, liabilities and interest are attributed to U.S. and
non-U.S.
based on the principal place of operations of the legal entity
in which the assets and liabilities are held.
|
213
SUPPLEMENTAL
FINANCIAL INFORMATION
Changes in Net
Interest Income, Volume and Rate Analysis
The following table sets forth an analysis of the effect on net
interest income of volume and rate changes for the periods 2008
versus 2007 and 2007 versus 2006. In this analysis, changes due
to volume/rate variance have been allocated to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended November
|
|
|
2008 versus 2007
|
|
2007 versus 2006
|
|
|
Increase (decrease)
|
|
|
|
Increase (decrease)
|
|
|
|
|
due to change in:
|
|
|
|
due to change in:
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
Volume
|
|
Rate
|
|
change
|
|
Volume
|
|
Rate
|
|
change
|
|
|
(in millions)
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits with banks
|
|
$
|
74
|
|
|
$
|
(5
|
)
|
|
$
|
69
|
|
|
$
|
(5
|
)
|
|
$
|
(35
|
)
|
|
$
|
(40
|
)
|
U.S.
|
|
|
21
|
|
|
|
(3
|
)
|
|
|
18
|
|
|
|
(19
|
)
|
|
|
6
|
|
|
|
(13
|
)
|
Non-U.S.
|
|
|
53
|
|
|
|
(2
|
)
|
|
|
51
|
|
|
|
14
|
|
|
|
(41
|
)
|
|
|
(27
|
)
|
Securities borrowed, securities purchased under agreements to
resell, at fair value and federal funds sold
|
|
|
2,055
|
|
|
|
(8,322
|
)
|
|
|
(6,267
|
)
|
|
|
2,203
|
|
|
|
5,960
|
|
|
|
8,163
|
|
U.S.
|
|
|
1,370
|
|
|
|
(8,028
|
)
|
|
|
(6,658
|
)
|
|
|
2,167
|
|
|
|
5,221
|
|
|
|
7,388
|
|
Non-U.S.
|
|
|
685
|
|
|
|
(294
|
)
|
|
|
391
|
|
|
|
36
|
|
|
|
739
|
|
|
|
775
|
|
Trading assets
|
|
|
(327
|
)
|
|
|
357
|
|
|
|
30
|
|
|
|
2,508
|
|
|
|
(105
|
)
|
|
|
2,403
|
|
U.S.
|
|
|
(169
|
)
|
|
|
(298
|
)
|
|
|
(467
|
)
|
|
|
540
|
|
|
|
230
|
|
|
|
770
|
|
Non-U.S.
|
|
|
(158
|
)
|
|
|
655
|
|
|
|
497
|
|
|
|
1,968
|
|
|
|
(335
|
)
|
|
|
1,633
|
|
Other interest-earning assets
|
|
|
51
|
|
|
|
(4,218
|
)
|
|
|
(4,167
|
)
|
|
|
3,498
|
|
|
|
(3,242
|
)
|
|
|
256
|
|
U.S.
|
|
|
1,143
|
|
|
|
(3,185
|
)
|
|
|
(2,042
|
)
|
|
|
87
|
|
|
|
(2,928
|
)
|
|
|
(2,841
|
)
|
Non-U.S.
|
|
|
(1,092
|
)
|
|
|
(1,033
|
)
|
|
|
(2,125
|
)
|
|
|
3,411
|
|
|
|
(314
|
)
|
|
|
3,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in interest income
|
|
|
1,853
|
|
|
|
(12,188
|
)
|
|
|
(10,335
|
)
|
|
|
8,204
|
|
|
|
2,578
|
|
|
|
10,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
378
|
|
|
|
(299
|
)
|
|
|
79
|
|
|
|
532
|
|
|
|
(1
|
)
|
|
|
531
|
|
U.S.
|
|
|
242
|
|
|
|
(299
|
)
|
|
|
(57
|
)
|
|
|
531
|
|
|
|
|
|
|
|
531
|
|
Non-U.S.
|
|
|
136
|
|
|
|
|
|
|
|
136
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
|
|
(943
|
)
|
|
|
(4,255
|
)
|
|
|
(5,198
|
)
|
|
|
(582
|
)
|
|
|
3,669
|
|
|
|
3,087
|
|
U.S.
|
|
|
408
|
|
|
|
(4,442
|
)
|
|
|
(4,034
|
)
|
|
|
(1,826
|
)
|
|
|
2,468
|
|
|
|
642
|
|
Non-U.S.
|
|
|
(1,351
|
)
|
|
|
187
|
|
|
|
(1,164
|
)
|
|
|
1,244
|
|
|
|
1,201
|
|
|
|
2,445
|
|
Trading liabilities
|
|
|
(371
|
)
|
|
|
(706
|
)
|
|
|
(1,077
|
)
|
|
|
313
|
|
|
|
428
|
|
|
|
741
|
|
U.S.
|
|
|
(302
|
)
|
|
|
(830
|
)
|
|
|
(1,132
|
)
|
|
|
19
|
|
|
|
501
|
|
|
|
520
|
|
Non-U.S.
|
|
|
(69
|
)
|
|
|
124
|
|
|
|
55
|
|
|
|
294
|
|
|
|
(73
|
)
|
|
|
221
|
|
Commercial paper
|
|
|
(61
|
)
|
|
|
(63
|
)
|
|
|
(124
|
)
|
|
|
(95
|
)
|
|
|
3
|
|
|
|
(92
|
)
|
U.S.
|
|
|
(66
|
)
|
|
|
(55
|
)
|
|
|
(121
|
)
|
|
|
(99
|
)
|
|
|
10
|
|
|
|
(89
|
)
|
Non-U.S.
|
|
|
5
|
|
|
|
(8
|
)
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
(7
|
)
|
|
|
(3
|
)
|
Other borrowings
|
|
|
177
|
|
|
|
(1,587
|
)
|
|
|
(1,410
|
)
|
|
|
959
|
|
|
|
(374
|
)
|
|
|
585
|
|
U.S.
|
|
|
147
|
|
|
|
(880
|
)
|
|
|
(733
|
)
|
|
|
50
|
|
|
|
208
|
|
|
|
258
|
|
Non-U.S.
|
|
|
30
|
|
|
|
(707
|
)
|
|
|
(677
|
)
|
|
|
909
|
|
|
|
(582
|
)
|
|
|
327
|
|
Long-term
debt
|
|
|
2,349
|
|
|
|
(2,809
|
)
|
|
|
(460
|
)
|
|
|
3,852
|
|
|
|
518
|
|
|
|
4,370
|
|
U.S.
|
|
|
1,563
|
|
|
|
(2,574
|
)
|
|
|
(1,011
|
)
|
|
|
4,070
|
|
|
|
(149
|
)
|
|
|
3,921
|
|
Non-U.S.
|
|
|
786
|
|
|
|
(235
|
)
|
|
|
551
|
|
|
|
(218
|
)
|
|
|
667
|
|
|
|
449
|
|
Other interest-bearing liabilities
|
|
|
1,238
|
|
|
|
(3,672
|
)
|
|
|
(2,434
|
)
|
|
|
1,243
|
|
|
|
(172
|
)
|
|
|
1,071
|
|
U.S.
|
|
|
740
|
|
|
|
(2,222
|
)
|
|
|
(1,482
|
)
|
|
|
701
|
|
|
|
33
|
|
|
|
734
|
|
Non-U.S.
|
|
|
498
|
|
|
|
(1,450
|
)
|
|
|
(952
|
)
|
|
|
542
|
|
|
|
(205
|
)
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in interest expense
|
|
|
2,767
|
|
|
|
(13,391
|
)
|
|
|
(10,624
|
)
|
|
|
6,222
|
|
|
|
4,071
|
|
|
|
10,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income
|
|
$
|
(914
|
)
|
|
$
|
1,203
|
|
|
$
|
289
|
|
|
$
|
1,982
|
|
|
$
|
(1,493
|
)
|
|
$
|
489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214
SUPPLEMENTAL
FINANCIAL INFORMATION
Available-for-sale
Securities Portfolio
The following table sets forth the amortized cost, gross
unrealized gains and losses, and fair value of
available-for-sale
securities at November 2008 and November 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
|
|
|
(in millions)
|
|
|
Available-for-sale
securities, November 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
|
$
|
259
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
259
|
|
U.S. governments, federal agency and sovereign obligations
|
|
|
574
|
|
|
|
23
|
|
|
|
(3
|
)
|
|
|
594
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
213
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
164
|
|
Corporate debt securities and other debt obligations
|
|
|
750
|
|
|
|
5
|
|
|
|
(90
|
)
|
|
|
665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,796
|
|
|
$
|
28
|
|
|
$
|
(142
|
)
|
|
$
|
1,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities, November 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29
|
|
U.S. governments, federal agency and sovereign obligations
|
|
|
389
|
|
|
|
9
|
|
|
|
|
|
|
|
398
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
179
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
178
|
|
Corporate debt securities and other debt obligations
|
|
|
575
|
|
|
|
3
|
|
|
|
(14
|
)
|
|
|
564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,172
|
|
|
$
|
13
|
|
|
$
|
(16
|
)
|
|
$
|
1,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215
SUPPLEMENTAL
FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 2008
|
|
|
|
|
|
|
Due After
|
|
Due After
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
Five Years
|
|
|
|
|
|
|
|
|
|
|
Due in One Year
|
|
Through
|
|
Through
|
|
Due After
|
|
|
|
|
|
|
or Less
|
|
Five Years
|
|
Ten Years
|
|
Ten Years
|
|
Total
|
|
|
Amount
|
|
Yield (1)
|
|
Amount
|
|
Yield (1)
|
|
Amount
|
|
Yield (1)
|
|
Amount
|
|
Yield (1)
|
|
Amount
|
|
Yield (1)
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
Fair value of
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
|
$
|
259
|
|
|
|
1
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
259
|
|
|
|
1
|
%
|
U.S. governments, federal agency and sovereign obligations
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
2
|
|
|
|
133
|
|
|
|
4
|
|
|
|
317
|
|
|
|
5
|
|
|
|
594
|
|
|
|
4
|
|
Mortgage and other
asset-backed
loans and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
21
|
|
|
|
164
|
|
|
|
21
|
|
Corporate debt securities and other debt obligations
|
|
|
48
|
|
|
|
16
|
|
|
|
227
|
|
|
|
7
|
|
|
|
94
|
|
|
|
8
|
|
|
|
296
|
|
|
|
9
|
|
|
|
665
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
307
|
|
|
|
|
|
|
$
|
371
|
|
|
|
|
|
|
$
|
227
|
|
|
|
|
|
|
$
|
777
|
|
|
|
|
|
|
$
|
1,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost of available-for-sale securities
|
|
$
|
310
|
|
|
|
|
|
|
$
|
377
|
|
|
|
|
|
|
$
|
229
|
|
|
|
|
|
|
$
|
880
|
|
|
|
|
|
|
$
|
1,796
|
|
|
|
|
|
|
|
(1) |
Yields are calculated on a weighted average basis.
|
216
SUPPLEMENTAL
FINANCIAL INFORMATION
Deposits
The following table sets forth a summary of the average balances
and average interest rates for the firms interest-bearing
deposits for the years ended November 2008,
November 2007 and November 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balances
|
|
Average Interest Rates
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
2007
|
|
2006
|
|
|
($ in millions)
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings (1)
|
|
$
|
20,214
|
|
|
$
|
13,096
|
|
|
$
|
2,745
|
|
|
|
2.82
|
%
|
|
|
5.12
|
%
|
|
|
5.14
|
%
|
Time
|
|
|
1,384
|
|
|
|
32
|
|
|
|
33
|
|
|
|
3.40
|
|
|
|
9.96
|
|
|
|
5.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. deposits
|
|
|
21,598
|
|
|
|
13,128
|
|
|
|
2,778
|
|
|
|
2.86
|
|
|
|
5.13
|
|
|
|
5.15
|
|
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
4,842
|
|
|
|
99
|
|
|
|
75
|
|
|
|
2.83
|
|
|
|
3.03
|
|
|
|
4.00
|
|
Time
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
13.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-U.S. deposits
|
|
|
4,857
|
|
|
|
99
|
|
|
|
75
|
|
|
|
2.86
|
|
|
|
3.03
|
|
|
|
4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
26,455
|
|
|
$
|
13,227
|
|
|
$
|
2,853
|
|
|
|
2.86
|
%
|
|
|
5.12
|
%
|
|
|
5.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts are available for
withdrawal upon short notice, generally within seven days.
|
As of November 2008, the firm had $55 million of non-U.S.
time deposits greater than $100,000.
Ratios
The following table sets forth selected financial ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
Net income to average assets
|
|
|
0.2
|
%
|
|
|
1.2
|
%
|
|
|
1.2
|
%
|
Return on common shareholders
equity (1)
|
|
|
4.9
|
|
|
|
32.7
|
|
|
|
32.8
|
|
Return on total shareholders
equity (2)
|
|
|
4.9
|
|
|
|
30.6
|
|
|
|
30.7
|
|
Total average equity to average assets
|
|
|
4.1
|
|
|
|
3.8
|
|
|
|
3.8
|
|
Dividend payout
ratio (3)
|
|
|
31.3
|
|
|
|
5.7
|
|
|
|
6.6
|
|
|
|
|
(1) |
|
Based on net income less preferred
stock dividends as a percentage of average common
shareholders equity.
|
|
(2) |
|
Based on net income as a percentage
of average total shareholders equity.
|
|
(3) |
|
Dividends declared per common share
as a percentage of net income per diluted share.
|
217
SUPPLEMENTAL
FINANCIAL INFORMATION
Short-term
and Other Borrowed Funds
(1)
The following table sets forth a summary of the firms
securities loaned and securities sold under agreements to
repurchase and
short-term
borrowings as of or for the years ended November as indicated
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Loaned and
|
|
|
|
|
|
|
Securities Sold Under
|
|
|
|
|
|
|
Agreements to Repurchase
|
|
Commercial Paper
|
|
Other Funds Borrowed
(2)(3)
|
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
2007
|
|
2006
|
|
2008
|
|
2007
|
|
2006
|
|
|
($ in millions)
|
Amounts outstanding at
year-end
|
|
$
|
79,943
|
|
|
$
|
187,802
|
|
|
$
|
169,700
|
|
|
$
|
1,125
|
|
|
$
|
4,343
|
|
|
$
|
1,489
|
|
|
$
|
72,758
|
|
|
$
|
99,624
|
|
|
$
|
70,705
|
|
Average outstanding during the year
|
|
|
194,935
|
|
|
|
214,511
|
|
|
|
206,992
|
|
|
|
4,097
|
|
|
|
5,605
|
|
|
|
7,485
|
|
|
|
99,351
|
|
|
|
89,924
|
|
|
|
58,277
|
|
Maximum month-end outstanding
|
|
|
256,596
|
|
|
|
270,991
|
|
|
|
278,560
|
|
|
|
12,718
|
|
|
|
8,846
|
|
|
|
18,227
|
|
|
|
109,927
|
|
|
|
105,845
|
|
|
|
82,353
|
|
Weighted average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the
year (3)
|
|
|
3.80
|
%
|
|
|
5.88
|
%
|
|
|
4.60
|
%
|
|
|
3.54
|
%
|
|
|
4.80
|
%
|
|
|
4.82
|
%
|
|
|
1.73
|
%
|
|
|
3.48
|
%
|
|
|
4.37
|
%
|
At year-end
|
|
|
3.27
|
|
|
|
5.15
|
|
|
|
5.52
|
|
|
|
2.79
|
|
|
|
4.81
|
|
|
|
4.99
|
|
|
|
2.06
|
(3)
|
|
|
3.11
|
(3)
|
|
|
3.93
|
(3)
|
|
|
|
(1) |
|
Includes borrowings maturing within
one year of the financial statement date and borrowings that are
redeemable at the option of the holder within one year of
the financial statement date.
|
|
(2) |
|
Includes
short-term
secured financings of $21.23 billion as of
November 2008, $32.41 billion as of November 2007
and $24.29 billion as of November 2006.
|
|
(3) |
|
As of November 2008,
November 2007 and November 2006, weighted average
interest rates include the effects of hedging in accordance with
SFAS No. 133.
|
Cross-border
Outstandings
Cross-border outstandings are based upon the Federal Financial
Institutions Examination Councils (FFIEC) regulatory
guidelines for reporting cross-border risk. Claims include cash,
receivables, securities purchased under agreements to resell,
securities borrowed and cash trading instruments, but exclude
derivative instruments and commitments. Securities purchased
under agreements to resell and securities borrowed are presented
based on the domicile of the counterparty, without reduction for
related securities collateral held.
The following table sets forth cross-border outstandings for
each country in which cross-border outstandings exceed 0.75% of
consolidated assets as of November 2008 in accordance with
the FFIEC guidelines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks
|
|
Governments
|
|
Other
|
|
Total
|
|
|
(in millions)
|
Country
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
$
|
5,104
|
|
|
$
|
4,600
|
|
|
$
|
51,531
|
|
|
$
|
61,235
|
|
Cayman Islands
|
|
|
50
|
|
|
|
|
|
|
|
20,904
|
|
|
|
20,954
|
|
Germany
|
|
|
3,973
|
|
|
|
2,518
|
|
|
|
7,825
|
|
|
|
14,316
|
|
France
|
|
|
2,264
|
|
|
|
1,320
|
|
|
|
9,791
|
|
|
|
13,375
|
|
Japan
|
|
|
4,003
|
|
|
|
100
|
|
|
|
3,354
|
|
|
|
7,457
|
|
218
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
There were no changes in or disagreements with accountants on
accounting and financial disclosure during the last two fiscal
years.
|
|
Item 9A.
|
Controls
and Procedures
|
As of the end of the period covered by this report, an
evaluation was carried out by Goldman Sachs management,
with the participation of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure
controls and procedures (as defined in
Rule 13a-15(e)
under the Exchange Act). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that
these disclosure controls and procedures were effective as of
the end of the period covered by this report. In addition, no
change in our internal control over financial reporting (as
defined in
Rule 13a-15(f)
under the Exchange Act) occurred during the fourth quarter
of our fiscal year ended November 28, 2008 that has
materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Managements Report on Internal Control over Financial
Reporting and the Report of Independent Registered Public
Accounting Firm are set forth in Part II, Item 8 of
our Annual Report on
Form 10-K.
|
|
Item 9B.
|
Other
Information
|
Not applicable.
219
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Information relating to our executive officers is included on
pages 51 to 52 of our Annual Report on
Form 10-K.
Information relating to our directors, including our audit
committee and audit committee financial experts and the
procedures by which shareholders can recommend director
nominees, and our executive officers will be in our definitive
Proxy Statement for our 2009 Annual Meeting of Shareholders to
be held on May 8, 2009, which will be filed within
120 days of the end of our fiscal year ended
November 28, 2008 (2009 Proxy Statement) and is
incorporated herein by reference. Information relating to our
Code of Business Conduct and Ethics that applies to our senior
financial officers, as defined in the Code, is included in
Part I, Item 1 of our Annual Report on
Form 10-K.
|
|
Item 11.
|
Executive
Compensation
|
Information relating to our executive officer and director
compensation and the compensation committee of our board of
directors will be in the 2009 Proxy Statement and is
incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Information relating to security ownership of certain beneficial
owners of our common stock and information relating to the
security ownership of our management will be in the 2009 Proxy
Statement and is incorporated herein by reference.
220
The following table provides information generally as of
November 28, 2008, the last day of fiscal 2008,
regarding securities to be issued on exercise of stock options,
and securities remaining available for issuance under our equity
compensation plans that were in effect during fiscal 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
Number of
|
|
|
|
Remaining Available
|
|
|
|
|
Securities to be
|
|
|
|
for Future Issuance
|
|
|
|
|
Issued Upon
|
|
Weighted-Average
|
|
Under Equity
|
|
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Compensation Plans
|
|
|
|
|
Outstanding
|
|
Outstanding
|
|
(Excluding Securities
|
|
|
|
|
Options, Warrants
|
|
Options, Warrants
|
|
Reflected in the
|
|
|
Plan Category
|
|
and Rights
|
|
and Rights
|
|
Second Column)
|
Equity compensation plans approved by security holders
|
|
|
The Goldman
Sachs Amended
and Restated
Stock Incentive
Plan (1)
|
|
|
|
33,639,132
|
(2)
|
|
$
|
109.47
|
(2)
|
|
|
216,990,058
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
33,639,132
|
(2)
|
|
|
|
|
|
|
216,990,058
|
(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Goldman Sachs Amended and
Restated Stock Incentive Plan (SIP) was approved by the
shareholders of Goldman Sachs at our 2003 Annual Meeting of
Shareholders and is a successor plan to The Goldman Sachs 1999
Stock Incentive Plan (1999 Plan), which was approved by our
shareholders immediately prior to our initial public offering in
May 1999 and under which no additional awards have been
granted since approval of the SIP.
|
|
(2) |
|
Includes options that are subject
to vesting and other conditions.
|
|
(3) |
|
Of these shares,
54,852,028 shares may be issued pursuant to outstanding
restricted stock units, including 54,824,666 shares granted
under the SIP and 27,362 shares granted under the 1999
Plan; 151,230 shares may be issued pursuant to outstanding
performance-based units granted under the SIP.
|
|
(4) |
|
Represents shares remaining to be
issued under the SIP (217,388,173 shares) and the 1999 Plan
(27,362 shares). The total number of shares of common stock
that may be delivered pursuant to awards granted under the SIP
initially may not exceed 250,000,000 shares. Beginning
November 29, 2008 and each fiscal year thereafter, the
number of shares of common stock that may be delivered pursuant
to awards granted after April 1, 2003 under the SIP
may not exceed 5% of our issued and outstanding shares of common
stock, determined as of the last day of the immediately
preceding fiscal year, increased by the number of shares that
were available for awards in previous fiscal years but were not,
at the date of determination, covered by awards granted in
previous years.
|
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
Information regarding certain relationships and related
transactions and director independence will be in the 2009 Proxy
Statement and is incorporated herein by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information regarding principal accountant fees and services
will be in the 2009 Proxy Statement and is incorporated herein
by reference.
221
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
(a) |
Documents filed as part of this Report:
|
|
|
|
|
1.
|
Consolidated Financial Statements
|
The consolidated financial statements required to be filed
in our Annual Report on
Form 10-K
are included in Part II, Item 8 hereof.
|
|
|
|
|
|
2.1
|
|
|
Plan of Incorporation (incorporated by reference to the
corresponding exhibit to the Registrants registration
statement on Form S-1 (No. 333-74449)).
|
|
3.1
|
|
|
Restated Certificate of Incorporation of The Goldman Sachs
Group, Inc.
|
|
3.2
|
|
|
Amended and Restated By-Laws of The Goldman Sachs Group, Inc.
(incorporated by reference to Exhibit 3.1 to the
Registrants Quarterly Report on
Form 8-K,
filed December 12, 2006).
|
|
4.1
|
|
|
Indenture, dated as of May 19, 1999, between The Goldman Sachs
Group, Inc. and The Bank of New York, as trustee (incorporated
by reference to Exhibit 6 to the Registrants registration
statement on Form 8-A, filed June 29, 1999).
|
|
4.2
|
|
|
Subordinated Debt Indenture, dated as of February 20, 2004,
between The Goldman Sachs Group, Inc. and The Bank of New York,
as trustee (incorporated by reference to Exhibit 4.2 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended November 28, 2003).
|
|
4.3
|
|
|
Warrant Indenture, dated as of February 14, 2006, between The
Goldman Sachs Group, Inc. and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.34 to the
Registrants Post-Effective Amendment No. 3 to Form S-3,
filed on March 1, 2006).
|
|
4.4
|
|
|
Senior Debt Indenture, dated as of December 4, 2007, among GS
Finance Corp., as issuer, The Goldman Sachs Group, Inc., as
guarantor, and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.69 to the Registrants
Post-Effective Amendment No. 10 to Form S-3, filed on December
4, 2007).
|
|
4.5
|
|
|
Form of floating rate senior debt security (TLGP) issued under
the Senior Debt Indenture, dated as of July 16, 2008, between
The Goldman Sachs Group, Inc. and The Bank of New York Mellon,
as trustee.
|
|
4.6
|
|
|
Form of fixed rate senior debt security (TLGP) issued under the
Senior Debt Indenture, dated as of July 16, 2008, between The
Goldman Sachs Group, Inc. and The Bank of New York Mellon, as
trustee.
|
|
4.7
|
|
|
Form of floating rate Medium-Term Note, Series D (TLGP)
issued under the Senior Debt Indenture, dated as of
July 16, 2008, between The Goldman Sachs Group, Inc. and
The Bank of New York Mellon, as trustee.
|
|
4.8
|
|
|
Form of fixed rate Medium-Term Note, Series D (TLGP) issued
under the Senior Debt Indenture, dated as of July 16, 2008,
between The Goldman Sachs Group, Inc. and The Bank of New York
Mellon, as trustee.
|
|
4.9
|
|
|
Senior Debt Indenture, dated as of July 16, 2008, between
The Goldman Sachs Group, Inc. and The Bank of New York Mellon,
as trustee (incorporated by reference to Exhibit 4.82 to
the Registrants Post-Effective Amendment No. 11 to
Form S-3
(No. 333-130074),
filed July 17, 2008).
|
|
4.10
|
|
|
Senior Debt Indenture, dated as of October 10, 2008, among
GS Finance Corp., as issuer, The Goldman Sachs Group, Inc., as
guarantor, and The Bank of New York Mellon, as trustee
(incorporated by reference to Exhibit 4.70 to the
Registrants registration statement on
Form S-3
(No. 333-154173),
filed October 10, 2008).
|
|
|
|
|
|
|
|
|
|
Certain instruments defining the rights of holders of
long-term debt securities of the Registrant and its subsidiaries
are omitted pursuant to Item 601(b)(4)(iii) of Regulation
S-K. The
Registrant hereby undertakes to furnish to the SEC, upon
request, copies of any such instruments.
|
222
|
|
|
|
|
|
10.1
|
|
|
The Goldman Sachs Amended and Restated Stock Incentive
Plan.
|
|
10.2
|
|
|
The Goldman Sachs Defined Contribution Plan (incorporated by
reference to Exhibit 10.16 to the Registrants registration
statement on Form S-1
(No. 333-75213)).
|
|
10.3
|
|
|
The Goldman Sachs Amended and Restated Restricted Partner
Compensation Plan (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
for the period ended February 24, 2006).
|
|
10.4
|
|
|
Form of Employment Agreement for pre-IPO Participating Managing
Directors (incorporated by reference to Exhibit 10.19 to the
Registrants registration statement on Form S-1
(No. 333-75213)).
|
|
10.5
|
|
|
Form of Agreement Relating to Noncompetition and Other Covenants
(incorporated by reference to Exhibit 10.20 to the
Registrants registration statement on Form S-1
(No. 333-75213)).
|
|
10.6
|
|
|
Form of Option Agreement (Discretionary Options) (incorporated
by reference to Exhibit 10.24 to the Registrants
registration statement on Form S-1
(No. 333-75213)).
|
|
10.7
|
|
|
Tax Indemnification Agreement, dated as of May 7, 1999, by and
among The Goldman Sachs Group, Inc. and various parties
(incorporated by reference to Exhibit 10.25 to the
Registrants registration statement on Form S-1
(No. 333-75213)).
|
|
10.8
|
|
|
Amended and Restated Shareholders Agreement, dated June
22, 2004, among The Goldman Sachs Group, Inc. and various
parties (incorporated by reference to Exhibit M to Amendment
No. 54 to Schedule 13D, filed June 23, 2004, relating to
the Registrants common stock (No. 005-56295)).
|
|
10.9
|
|
|
Instrument of Indemnification (incorporated by reference to
Exhibit 10.27 to the Registrants registration statement on
Form S-1
(No. 333-75213)).
|
|
10.10
|
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.28 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 26, 1999).
|
|
10.11
|
|
|
Registration Rights Instrument, dated as of December 10, 1999
(incorporated by reference to Exhibit G to Amendment No. 1
to Schedule 13D, filed December 17, 1999, relating to
the Registrants common stock (No. 005-56295)).
|
|
10.12
|
|
|
Supplemental Registration Rights Instrument, dated as of
December 10, 1999 (incorporated by reference to Exhibit H to
Amendment No. 1 to Schedule 13D, filed December 17, 1999,
relating to the Registrants common stock
(No. 005-56295)).
|
|
10.13
|
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.44 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 26, 1999).
|
|
10.14
|
|
|
Form of Indemnification Agreement, dated as of July 5, 2000
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the period ended August 25, 2000).
|
|
10.15
|
|
|
Amendment No. 1, dated as of September 5, 2000, to the Tax
Indemnification Agreement, dated as of May 7, 1999 (incorporated
by reference to Exhibit 10.3 to the Registrants Quarterly
Report on
Form 10-Q
for the period ended August 25, 2000).
|
|
10.16
|
|
|
Supplemental Registration Rights Instrument, dated as of
December 21, 2000 (incorporated by reference to Exhibit AA to
Amendment No. 12 to Schedule 13D, filed January 23, 2001,
relating to the Registrants common stock
(No. 005-56295)).
|
|
10.17
|
|
|
Supplemental Registration Rights Instrument, dated as of
December 21, 2001 (incorporated by reference to Exhibit 4.4 to
the Registrants registration statement on Form S-3
(No. 333-74006)).
|
223
|
|
|
|
|
|
10.18
|
|
|
Supplemental Registration Rights Instrument, dated as of
December 20, 2002 (incorporated by reference to Exhibit 4.4 to
the Registrants registration statement on Form S-3
(No. 333-101093)).
|
|
10.19
|
|
|
Letter, dated February 6, 2001, from The Goldman Sachs Group,
Inc. to Dr. Ruth J. Simmons (incorporated by reference to
Exhibit 10.63 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 24, 2000).
|
|
10.20
|
|
|
Letter, dated February 6, 2001, from The Goldman Sachs Group,
Inc. to Mr. John H. Bryan (incorporated by reference to
Exhibit 10.64 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 24, 2000).
|
|
10.21
|
|
|
Letter, dated February 6, 2001, from The Goldman Sachs Group,
Inc. to Mr. James A. Johnson (incorporated by reference to
Exhibit 10.65 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 24, 2000).
|
|
10.22
|
|
|
Letter, dated December 18, 2002, from The Goldman Sachs Group,
Inc. to Mr. William W. George (incorporated by reference to
Exhibit 10.39 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 29, 2002).
|
|
10.23
|
|
|
Letter, dated June 20, 2003, from The Goldman Sachs Group, Inc.
to Mr. Claes Dahlbäck (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the period ended May 30, 2003).
|
|
10.24
|
|
|
Supplemental Registration Rights Instrument, dated as of
December 19, 2003 (incorporated by reference to Exhibit 4.4 to
the Registrants registration statement on Form S-3
(No. 333-110371)).
|
|
10.25
|
|
|
Letter, dated March 31, 2004, from The Goldman Sachs Group, Inc.
to Ms. Lois D. Juliber (incorporated by reference to Exhibit
10.1 to the Registrants Quarterly Report on
Form 10-Q
for the period ended May 28, 2004).
|
|
10.26
|
|
|
Letter, dated April 6, 2005, from The Goldman Sachs Group, Inc.
to Mr. Stephen Friedman (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form
8-K, filed April 8, 2005).
|
|
10.27
|
|
|
Form of Amendment, dated November 27, 2004, to Agreement
Relating to Noncompetition and Other Covenants, dated May 7,
1999 (incorporated by reference to Exhibit 10.32 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended November 26, 2004).
|
|
10.28
|
|
|
Form of RSU Award Agreement for PMD Discount Stock Program
(subject to transfer restrictions) (incorporated by reference to
Exhibit 10.29 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007).
|
|
10.29
|
|
|
Form of RSU Award Agreement for PMD Discount Stock Program (not
subject to transfer restrictions) (incorporated by reference to
Exhibit 10.30 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007).
|
|
10.30
|
|
|
Form of RSU Award Agreement for PMD Discount Stock Program
(subject to transfer restrictions) (French alternative award)
(incorporated by reference to Exhibit 10.31 to the
Registrants Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007).
|
|
10.31
|
|
|
Form of RSU Award Agreement for PMD Discount Stock Program (not
subject to transfer restrictions) (French alternative award)
(incorporated by reference to Exhibit 10.32 to the
Registrants Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007).
|
|
10.32
|
|
|
Form of RSU Award Agreement for PMD Discount Stock Program (U.K.
employee benefit trusts) (incorporated by reference to
Exhibit 10.33 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended November 30, 2007).
|
|
10.33
|
|
|
Form of Year-End Restricted Stock Award (incorporated by
reference to Exhibit 10.34 to the Registrants Annual
Report on Form
10-K for the
fiscal year ended November 30, 2007).
|
224
|
|
|
|
|
|
10.34
|
|
|
Form of Year-End Restricted Stock Award in Connection with
Outstanding RSU Awards (incorporated by reference to Exhibit
10.35 to the Registrants Annual Report on Form
10-K for the
fiscal year ended November 30, 2007).
|
|
10.35
|
|
|
The Goldman Sachs Group, Inc. Non-Qualified Deferred
Compensation Plan for U.S. Participating Managing Directors
(terminated as of December 15, 2008) (incorporated by reference
to Exhibit 10.36 to the Registrants Annual Report on Form
10-K for the fiscal year ended November 30, 2007).
|
|
10.36
|
|
|
Form of Year-End Option Award Agreement.
|
|
10.37
|
|
|
Form of Year-End RSU Award Agreement (not fully vested upon
grant).
|
|
10.38
|
|
|
Form of Year-End RSU Award Agreement (fully vested upon grant)
(incorporated by reference to Exhibit 10.37 to the
Registrants Annual Report on Form
10-K for the
fiscal year ended November 30, 2007).
|
|
10.39
|
|
|
Form of Year-End RSU Award Agreement (French alternative
award).
|
|
10.40
|
|
|
Amendments to 2005 and 2006 Year-End RSU and Option Award
Agreements (incorporated by reference to Exhibit 10.44 to the
Registrants Annual Report on Form
10-K for the
fiscal year ended November 30, 2007).
|
|
10.41
|
|
|
Form of Non-Employee Director Option Award Agreement.
|
|
10.42
|
|
|
Form of Non-Employee Director RSU Award Agreement.
|
|
10.43
|
|
|
Description of Non-Employee Director Compensation.
|
|
10.44
|
|
|
Ground Lease, dated August 23, 2005, between Battery Park City
Authority d/b/a/ Hugh L. Carey Battery Park City Authority, as
Landlord, and Goldman Sachs Headquarters LLC, as Tenant
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed August 26,
2005).
|
|
10.45
|
|
|
General Guarantee Agreement, dated January 30, 2006, made by The
Goldman Sachs Group, Inc. (incorporated by reference to Exhibit
10.45 to the Registrants Annual Report on Form 10-K for
the fiscal year ended November 25, 2005).
|
|
10.46
|
|
|
Letter, dated November 10, 2006, from The Goldman Sachs Group,
Inc. to Mr. Rajat K. Gupta (incorporated by reference to
Exhibit 99.1 to the Registrants Current Report on Form
8-K, filed November 13, 2006).
|
|
10.47
|
|
|
Goldman, Sachs & Co. Executive Life Insurance Policy and
Certificate with Metropolitan Life Insurance Company for
Participating Managing Directors (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the period ended August 25, 2006).
|
|
10.48
|
|
|
Form of Goldman, Sachs & Co. Executive Life Insurance
Policy with Pacific Life & Annuity Company for
Participating Managing Directors, including policy
specifications and form of restriction on Policy Owners
Rights (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
for the period ended August 25, 2006).
|
|
10.49
|
|
|
Form of Signature Card for Equity Awards.
|
|
10.50
|
|
|
Form of Employment Agreement for post-IPO Participating Managing
Directors (incorporated by reference to Exhibit 10.50 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended November 24, 2006).
|
|
10.51
|
|
|
Form of Second Amendment, dated November 25, 2006, to Agreement
Relating to Noncompetition and Other Covenants, dated May 7,
1999, as amended effective November 27, 2004
(incorporated by reference to Exhibit 10.51 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended November 24, 2006).
|
|
10.52
|
|
|
Description of PMD Retiree Medical Program (incorporated by
reference to Exhibit 10.2 to the Registrants Quarterly
Report on
Form 10-Q
for the period ended February 29, 2008).
|
225
|
|
|
|
|
|
10.53
|
|
|
Letter, dated June 28, 2008, from The Goldman Sachs Group, Inc.
to Mr. Lakshmi N. Mittal (incorporated by reference to
Exhibit 99.1 to the Registrants Current Report on Form
8-K, filed June 30, 2008).
|
|
10.54
|
|
|
Securities Purchase Agreement, dated September 29, 2008, between
The Goldman Sachs Group, Inc. and Berkshire Hathaway Inc.
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the period ended August 29, 2008).
|
|
10.55
|
|
|
General Guarantee Agreement, dated October 21, 2008, made by The
Goldman Sachs Group, Inc. relating to the obligations of Goldman
Sachs Bank USA (incorporated by reference to Exhibit 4.85 to
the Registrants Post-Effective Amendment No. 1 to
Form S-3, filed October 22, 2008).
|
|
10.56
|
|
|
Form of Letter Agreement between The Goldman Sachs Group, Inc.
and each of Lloyd C. Blankfein, Gary D. Cohn, Jon Winkelried and
David A. Viniar (incorporated by reference to Exhibit O to
Amendment No. 70 to Schedule 13D, filed
October 1, 2008, relating to the Registrants
common stock (No. 005-56295)).
|
|
10.57
|
|
|
Letter Agreement, dated as of October 26, 2008, including
Securities Purchase Agreement Standard Terms
incorporated by reference therein, between The Goldman Sachs
Group, Inc. and the United States Department of the Treasury
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed October 28,
2008).
|
|
10.58
|
|
|
Form of Letter Agreement, dated October 28, 2008, between The
Goldman Sachs Group, Inc. and its senior executive officers
relating to executive compensation limitations under the U.S.
Treasury Departments Capital Purchase Program.
|
|
10.59
|
|
|
General Guarantee Agreement, dated November 24, 2008, made by
The Goldman Sachs Group, Inc. relating to the obligations of
Goldman Sachs Bank (Europe) PLC.
|
|
10.60
|
|
|
Guarantee Agreement, dated November 28, 2008, between The
Goldman Sachs Group, Inc. and Goldman Sachs Bank USA.
|
|
10.61
|
|
|
Collateral Agreement, dated November 28, 2008, between The
Goldman Sachs Group, Inc., Goldman Sachs Bank USA and each other
party that becomes a pledgor pursuant thereto.
|
|
10.62
|
|
|
Form of Performance-Based One-Time RSU Award Agreement.
|
|
10.63
|
|
|
Form of Make-Whole One-Time RSU Award Agreement.
|
|
10.64
|
|
|
Form of Incentive One-Time RSU Award Agreement.
|
|
10.65
|
|
|
Form of Year-End Supplemental RSU Award Agreement (employees in
France).
|
|
10.66
|
|
|
Form of Signature Card for Equity Awards (employees in Asia
outside China).
|
|
10.67
|
|
|
Form of Signature Card for Equity Awards (employees in
China).
|
|
10.68
|
|
|
Amendments to Certain Equity Award Agreements.
|
|
10.69
|
|
|
Amendments to Certain Non-Employee Director Equity Award
Agreements.
|
|
12.1
|
|
|
Statement re: Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
|
|
21.1
|
|
|
List of significant subsidiaries of The Goldman Sachs Group, Inc.
|
|
23.1
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
24.1
|
|
|
Powers of Attorney (included on signature page).
|
|
31.1
|
|
|
Rule 13a-14(a) Certifications.
|
|
32.1
|
|
|
Section 1350 Certifications.
|
|
99.1
|
|
|
Report of Independent Registered Public Accounting Firm on
Selected Financial Data.
|
|
|
|
This exhibit is a management contract or a compensatory plan or
arrangement.
|
226
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE GOLDMAN SACHS GROUP, INC.
Name: David A. Viniar
Title: Chief Financial Officer
Date: January 26, 2009
II-1
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Lloyd C.
Blankfein, Gary D. Cohn, Jon Winkelried, David A. Viniar,
Gregory K. Palm and Esta E. Stecher, and each of them severally,
his or her true and lawful
attorney-in-fact
with power of substitution and resubstitution to sign in his or
her name, place and stead, in any and all capacities, to do any
and all things and execute any and all instruments that such
attorney may deem necessary or advisable under the Securities
Exchange Act of 1934 and any rules, regulations and requirements
of the U.S. Securities and Exchange Commission in
connection with our Annual Report on
Form 10-K
and any and all amendments hereto, as fully for all intents and
purposes as he or she might or could do in person, and hereby
ratifies and confirms all said
attorneys-in-fact
and agents, each acting alone, and his or her substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Capacity
|
|
Date
|
|
/s/ Lloyd
C. Blankfein
Lloyd
C. Blankfein
|
|
Director, Chairman and
Chief Executive Officer
(Principal Executive Officer)
|
|
January 26, 2009
|
|
|
|
|
|
/s/ John
H. Bryan
John
H. Bryan
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Gary
D. Cohn
Gary
D. Cohn
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Claes
Dahlbäck
Claes
Dahlbäck
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Stephen
Friedman
Stephen
Friedman
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ William
W. George
William
W. George
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Rajat
K. Gupta
Rajat
K. Gupta
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ James
A. Johnson
James
A. Johnson
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Lois
D. Juliber
Lois
D. Juliber
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Lakshmi
N. Mittal
Lakshmi
N. Mittal
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Ruth
J. Simmons
Ruth
J. Simmons
|
|
Director
|
|
January 26, 2009
|
II-2
|
|
|
|
|
|
|
Signature
|
|
Capacity
|
|
Date
|
|
/s/ Jon
Winkelried
Jon
Winkelried
|
|
Director
|
|
January 26, 2009
|
|
|
|
|
|
/s/ David
A. Viniar
David
A. Viniar
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
January 26, 2009
|
|
|
|
|
|
/s/ Sarah
E. Smith
Sarah
E. Smith
|
|
Principal Accounting Officer
|
|
January 26, 2009
|
II-3
EX-3.1
2
y74032exv3w1.htm
EX-3.1: RESTATED CERTIFICATE OF INCORPORATION
EX-3.1
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the Delaware General
Corporation Law (the Corporation), DOES HEREBY CERTIFY:
1. The name of the Corporation is The Goldman Sachs Group, Inc. The date of filing of its original
certificate of incorporation with the Secretary of State of the State of Delaware was July 21,
1998.
2. This Restated Certificate of Incorporation restates and integrates and does not further amend
the provisions of the certificate of incorporation of the Corporation as heretofore amended or
supplemented. There is no discrepancy between the provisions of this Restated Certificate of
Incorporation and the provisions of the certificate of incorporation of the Corporation as
heretofore amended or supplemented. This Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Section 245 of the General Corporation Law of the
State of Delaware. The text of the certificate of incorporation is hereby restated to read herein
as set forth in full:
FIRST. The name of the Corporation is The Goldman Sachs Group, Inc.
SECOND. The address of the Corporations registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law. Without limiting the
generality of the foregoing, the Corporation shall have all of the powers conferred on
corporations by the Delaware General Corporation Law and other law, including the power and
authority to make an initial charitable contribution (as defined in Section 170(c) of the
Internal Revenue Code of 1986, as currently in effect or as the same may hereafter be amended)
of up to an aggregate of $200,000,000 to one or more entities (the Contribution), and to make
other charitable contributions from time to time thereafter, in such amounts, on such terms and
conditions and for such purposes as may be lawful.
FOURTH. The total number of shares of all classes of stock which the Corporation shall have
authority to issue is 4,350,000,000, of which 4,000,000,000 shares of the par value of $0.01
per share shall be a separate class designated as Common Stock, 200,000,000 shares of the par
value of $0.01 per share shall be a separate class designated as Nonvoting Common Stock and
150,000,000 shares of the par value of $0.01 per share shall be a separate class designated as
Preferred Stock.
COMMON STOCK AND NONVOTING COMMON STOCK
Except as set forth in this Article FOURTH, the Common Stock and the Nonvoting Common Stock
(together, the Common Shares) shall have the same rights and privileges and shall rank
equally, share ratably and be identical in all respects as to all matters.
(i) Voting. Except as may be provided in this Restated Certificate of Incorporation or
required by law, the Common Stock shall have voting rights in the election of directors and
on all other matters presented to stockholders, with each holder of Common Stock being
entitled to one vote for each share of Common Stock held of record by such holder on such
matters. The Nonvoting Common Stock shall have no voting rights other than such rights as
may be required by the first sentence of Section 242(b)(2) of the Delaware General
Corporation Law or any similar provision hereafter enacted; provided that an amendment of
this Restated Certificate of Incorporation to increase or decrease the number of authorized
shares of Nonvoting Common Stock (but not below the number of shares thereof then
outstanding) may be adopted by resolution adopted by the board of directors of the
Corporation and approved by the affirmative vote of the holders of a majority of the voting
power of all outstanding shares of Common Stock of the Corporation and all other
outstanding shares of stock of the Corporation entitled to vote thereon irrespective of the
provisions of Section 242(b)(2) of the Delaware General Corporation Law or any similar
provision hereafter enacted, with such outstanding shares of Common Stock and other stock
considered for this purpose as a single class, and no vote of the holders of any shares of
Nonvoting Common Stock, voting separately as a class, shall be required therefor.
(ii) Dividends. Subject to the rights of the holders of any series of Preferred Stock,
holders of Common Stock and holders of Nonvoting Common Stock shall be entitled to receive
such dividends and distributions (whether payable in cash or otherwise) as may be declared
on the Common Shares by the board of directors of the Corporation from time to time out of
assets or funds of the Corporation legally available therefor; provided that the board of
directors of the Corporation shall declare no dividend, and no dividend shall be paid, with
respect to any outstanding share of Common Stock or Nonvoting Common Stock, whether in cash
or otherwise (including any dividend in shares of Common Stock on or with respect to shares
of Common Stock or any dividend in shares of Nonvoting Common Stock on or with respect to
shares of Nonvoting Common Stock (collectively, Stock Dividends)), unless,
simultaneously, the same dividend is declared or paid with respect to each share of Common
Stock and Nonvoting Common Stock. If a Stock Dividend is declared or paid with respect to
one class, then a Stock Dividend shall likewise be declared or paid with respect to the
other class and shall consist of shares of such other class in a number that bears the same
relationship to the total number of shares of such other class, issued and outstanding
immediately prior to the payment of such dividend, as the number of shares comprising the
Stock Dividend with respect to the first referenced class
-2-
bears to the total number of shares of such first referenced class, issued and outstanding
immediately prior to the payment of such dividend. Stock Dividends with respect to Common
Stock may be paid only with shares of Common Stock. Stock Dividends with respect to
Nonvoting Common Stock may be paid only with shares of Nonvoting Common Stock.
Notwithstanding the foregoing, in the case of any dividend in the form of capital stock of
a subsidiary of the Corporation, the capital stock of the subsidiary distributed to holders
of Common Stock shall be identical to the capital stock of the subsidiary distributed to
holders of Nonvoting Common Stock, except that the capital stock distributed to holders of
Common Stock may have full or any other voting rights and the capital stock distributed to
holders of Nonvoting Common Stock shall be non-voting to the same extent as the Nonvoting
Common Stock is non-voting.
(iii) Subdivisions, Combinations and Mergers. If the Corporation shall in any manner split,
subdivide or combine the outstanding shares of Common Stock or the outstanding shares of
Nonvoting Common Stock, the outstanding shares of the other such class of the Common Shares
shall likewise be split, subdivided or combined in the same manner proportionately and on
the same basis per share. In the event of any merger, statutory share exchange,
consolidation or similar form of corporate transaction involving the Corporation (whether
or not the Corporation is the surviving entity), the holders of Common Stock and the
holders of Nonvoting Common Stock shall be entitled to receive the same per share
consideration, if any, except that any securities received by holders of Common Stock in
consideration of such stock may have full or any other voting rights and any securities
received by holders of Nonvoting Common Stock in consideration of such stock shall be
non-voting to the same extent as the Nonvoting Common Stock is non-voting.
(iv) Rights on Liquidation. Subject to the rights of the holders of any series of Preferred
Stock, in the event of any liquidation, dissolution or winding-up of the Corporation
(whether voluntary or involuntary), the assets of the Corporation available for
distribution to stockholders shall be distributed in equal amounts per share to the holders
of Common Stock and the holders of Nonvoting Common Stock, as if such classes constituted a
single class. For purposes of this paragraph, a merger, statutory share exchange,
consolidation or similar corporate transaction involving the Corporation (whether or not
the Corporation is the surviving entity), or the sale, transfer or lease by the Corporation
of all or substantially all its assets, shall not constitute or be deemed a liquidation,
dissolution or winding-up of the Corporation.
-3-
PREFERRED STOCK
Shares of Preferred Stock may be issued in one or more series from time to time as determined
by the board of directors of the Corporation, and the board of directors of the Corporation is
authorized to fix by resolution or resolutions the designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions thereof, of the shares of each
series of Preferred Stock, including the following:
(i) the distinctive serial designation of such series which shall distinguish it from other
series;
(ii) the number of shares included in such series;
(iii) whether dividends shall be payable to the holders of the shares of such series and,
if so, the basis on which such holders shall be entitled to receive dividends (which may
include, without limitation, a right to receive such dividends or distributions as may be
declared on the shares of such series by the board of directors of the Corporation, a right
to receive such dividends or distributions, or any portion or multiple thereof, as may be
declared on the Common Stock or any other class of stock or, in addition to or in lieu of
any other right to receive dividends, a right to receive dividends at a particular rate or
at a rate determined by a particular method, in which case such rate or method of
determining such rate may be set forth), the form of such dividend, any conditions on which
such dividends shall be payable and the date or dates, if any, on which such dividends
shall be payable;
(iv) whether dividends on the shares of such series shall be cumulative and, if so, the
date or dates or method of determining the date or dates from which dividends on the shares
of such series shall be cumulative;
(v) the amount or amounts, if any, which shall be payable out of the assets of the
Corporation to the holders of the shares of such series upon the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, and the relative rights of
priority, if any, of payment of the shares of such series;
(vi) the price or prices (in cash, securities or other property or a combination thereof)
at which, the period or periods within which and the terms and conditions upon which the
shares of such series may be redeemed, in whole or in part, at the option of the
Corporation or at the option of the holder or holders thereof or upon the happening of a
specified event or events;
(vii) the obligation, if any, of the Corporation to purchase or redeem shares of such
series pursuant to a sinking fund or otherwise and the price or prices (in cash, securities
or other property or a combination thereof) at which, the period or periods within which
and the terms and conditions upon which the shares of such series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
-4-
(viii) whether or not the shares of such series shall be convertible or exchangeable, at
any time or times at the option of the holder or holders thereof or at the option of the
Corporation or upon the happening of a specified event or events, into shares of any other
class or classes or any other series of the same or any other class or classes of stock of
the Corporation or any other securities or property of the Corporation or any other entity,
and the price or prices (in cash, securities or other property or a combination thereof) or
rate or rates of conversion or exchange and any adjustments applicable thereto; and
(ix) whether or not the holders of the shares of such series shall have voting rights, in
addition to the voting rights provided by law, and if so the terms of such voting rights,
which may provide, among other things and subject to the other provisions of this Restated
Certificate of Incorporation, that each share of such series shall carry one vote or more
or less than one vote per share, that the holders of such series shall be entitled to vote
on certain matters as a separate class (which for such purpose may be comprised solely of
such series or of such series and one or more other series or classes of stock of the
Corporation) and that all the shares of such series entitled to vote on a particular matter
shall be deemed to be voted on such matter in the manner that a specified portion of the
voting power of the shares of such series or separate class are voted on such matter.
For all purposes, this Restated Certificate of Incorporation shall include each certificate of
designations (if any) setting forth the terms of a series of Preferred Stock.
Subject to the rights, if any, of the holders of any series of Preferred Stock set forth in a
certificate of designations, an amendment of this Restated Certificate of Incorporation to
increase or decrease the number of authorized shares of any series of Preferred Stock (but not
below the number of shares thereof then outstanding) may be adopted by resolution adopted by
the board of directors of the Corporation and approved by the affirmative vote of the holders
of a majority of the voting power of all outstanding shares of Common Stock of the Corporation
and all other outstanding shares of stock of the Corporation entitled to vote thereon
irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law or
any similar provision hereafter enacted, with such outstanding shares of Common Stock and other
stock considered for this purpose as a single class, and no vote of the holders of any series
of Preferred Stock, voting as a separate class, shall be required therefor.
Except as otherwise required by law or provided in the certificate of designations for the
relevant series, holders of Common Shares, as such, shall not be entitled to vote on any
amendment of this Restated Certificate of Incorporation that alters or changes the powers,
preferences, rights or other terms of one or more outstanding series of Preferred Stock if the
holders of such affected series are entitled, either separately or together with the holders of
one or more other series of Preferred Stock, to vote thereon as a separate class pursuant to
this Restated Certificate of Incorporation or pursuant to the Delaware General Corporation Law
as then in effect.
-5-
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee of the board of directors of the Corporation (the Securities Issuance Committee),
the Securities Issuance Committee created a series of shares of Preferred Stock designated as
Floating Rate Non-Cumulative Preferred Stock, Series A, by filing a certificate of designations
of the Corporation with the Secretary of State of the State of Delaware on April 22, 2005, and
the voting powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of the
Corporations Floating Rate Non-Cumulative Preferred Stock, Series A, are set forth in Appendix
A hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as 6.20% Non-Cumulative Preferred Stock, Series B, by filing a certificate of
designations of the Corporation with the Secretary of State of the State of Delaware on October
28, 2005, and the voting powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or restrictions thereof,
of the Corporations 6.20% Non-Cumulative Preferred Stock, Series B, are set forth in Appendix
B hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as Floating Rate Non-Cumulative Preferred Stock, Series C, by filing a certificate
of designations of the Corporation with the Secretary of State of the State of Delaware on
October 28, 2005, and the voting powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or restrictions thereof,
of the Corporations Floating Rate Non-Cumulative Preferred Stock, Series C, are set forth in
Appendix C hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as Floating Rate Non-Cumulative Preferred Stock, Series D, by filing a certificate
of designations of the Corporation with the Secretary of State of the State of Delaware on May
23, 2006, and the voting powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or restrictions thereof,
of the Corporations Floating Rate Non-Cumulative Preferred Stock, Series D, are set forth in
Appendix D hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the
-6-
Securities Issuance Committee, the Securities Issuance Committee created a series of shares of
Preferred Stock designated as Perpetual Non-Cumulative Preferred Stock, Series E, by filing a
certificate of designations of the Corporation with the Secretary of State of the State of
Delaware on May 14, 2007, and the voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the Corporations Perpetual Non-Cumulative Preferred Stock, Series E,
are set forth in Appendix E hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as Perpetual Non-Cumulative Preferred Stock, Series F, by filing a certificate of
designations of the Corporation with the Secretary of State of the State of Delaware on May 14,
2007, and the voting powers, designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions thereof, of the
Corporations Perpetual Non-Cumulative Preferred Stock, Series F, are set forth in Appendix F
hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as 10% Cumulative Perpetual Preferred Stock, Series G, by filing a certificate of
designations of the Corporation with the Secretary of State of the State of Delaware on
September 30, 2008, and the voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the Corporations 10% Cumulative Perpetual Preferred Stock, Series G,
are set forth in Appendix G hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article FOURTH upon the board of directors of the
Corporation and authority delegated by the board of directors to the Securities Issuance
Committee, the Securities Issuance Committee created a series of shares of Preferred Stock
designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series H, by filing a
certificate of designations of the Corporation with the Secretary of State of the State of
Delaware on October 27, 2008, and the voting powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the Corporations Fixed Rate Cumulative Perpetual Preferred Stock,
Series H, are set forth in Appendix H hereto and are incorporated herein by reference.
-7-
OPTIONS, WARRANTS AND OTHER RIGHTS
The board of directors of the Corporation is authorized to create and issue options, warrants
and other rights from time to time entitling the holders thereof to purchase securities or
other property of the Corporation or any other entity, including any class or series of stock
of the Corporation or any other entity and whether or not in connection with the issuance or
sale of any securities or other property of the Corporation, for such consideration (if any),
at such times and upon such other terms and conditions as may be determined or authorized by
the board of directors of the Corporation and set forth in one or more agreements or
instruments. Among other things and without limitation, such terms and conditions may provide
for the following:
(i) adjusting the number or exercise price of such options, warrants or other rights or the
amount or nature of the securities or other property receivable upon exercise thereof in
the event of a subdivision or combination of any securities, or a recapitalization, of the
Corporation, the acquisition by any person of beneficial ownership of securities
representing more than a designated percentage of the voting power of any outstanding
series, class or classes of securities, a change in ownership of the Corporations
securities or a merger, statutory share exchange, consolidation, reorganization, sale of
assets or other occurrence relating to the Corporation or any of its securities, and
restricting the ability of the Corporation to enter into an agreement with respect to any
such transaction absent an assumption by another party or parties thereto of the
obligations of the Corporation under such options, warrants or other rights;
(ii) restricting, precluding or limiting the exercise, transfer or receipt of such options,
warrants or other rights by any person that becomes the beneficial owner of a designated
percentage of the voting power of any outstanding series, class or classes of securities of
the Corporation or any direct or indirect transferee of such a person, or invalidating or
voiding such options, warrants or other rights held by any such person or transferee; and
(iii) permitting the board of directors (or certain directors specified or qualified by the
terms of the governing instruments of such options, warrants or other rights) to redeem,
terminate or exchange such options, warrants or other rights.
This paragraph shall not be construed in any way to limit the power of the board of directors
of the Corporation to create and issue options, warrants or other rights.
FIFTH. The name and mailing address of the incorporator is Gregory K. Palm, 85 Broad Street,
New York, New York 10004.
SIXTH. All corporate powers shall be exercised by the board of directors of the Corporation,
except as otherwise specifically required by law or as otherwise
-8-
provided in this Restated Certificate of Incorporation. Any meeting of stockholders may be
postponed by action of the board of directors at any time in advance of such meeting. The board
of directors of the Corporation shall have the power to adopt such rules and regulations for
the conduct of the meetings and management of the affairs of the Corporation as they may deem
proper and the power to adjourn any meeting of stockholders without a vote of the stockholders,
which powers may be delegated by the board of directors to the chairman of such meeting either
in such rules and regulations or pursuant to the by-laws of the Corporation.
Special meetings of stockholders of the Corporation may be called at any time by, but only by,
the board of directors of the Corporation, to be held at such date, time and place either
within or without the State of Delaware as may be stated in the notice of the meeting.
The board of directors of the Corporation is authorized to adopt, amend or repeal by-laws of
the Corporation. No adoption, amendment or repeal of a by-law by action of stockholders shall
be effective unless approved by the affirmative vote of the holders of not less than 80% of the
voting power of all outstanding shares of Common Stock of the Corporation and all other
outstanding shares of stock of the Corporation entitled to vote on such matter, with such
outstanding shares of Common Stock and other stock considered for this purpose as a single
class. Any vote of stockholders required by this Article SIXTH shall be in addition to any
other vote of stockholders that may be required by law, this Restated Certificate of
Incorporation, the by-laws of the Corporation, any agreement with a national securities
exchange or otherwise.
SEVENTH. Elections of directors need not be by written ballot except and to the extent provided
in the by-laws of the Corporation.
EIGHTH. The number of directors of the Corporation shall be fixed only by resolution of the
board of directors of the Corporation from time to time. Each director who is serving as a
director on the date of this Restated Certificate of Incorporation shall hold office until the
next annual meeting of stockholders after such date and until his or her successor has been
duly elected and qualified, notwithstanding that such director may have been elected for a term
that extended beyond the date of such next annual meeting of stockholders. At each annual
meeting of stockholders after the date of this Restated Certificate of Incorporation, directors
elected at such annual meeting shall hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified.
Any director may be removed, with or without cause, with the affirmative vote of the holders of
not less than 80% of the voting power of all outstanding shares of stock of the Corporation
entitled to vote generally in the election of directors, considered for this purpose as a
single class.
Vacancies and newly created directorships resulting from any increase in the authorized number
of directors or from any other cause (other than vacancies and newly created directorships
which the holders of any class or classes of stock or series
-9-
thereof are expressly entitled by this Restated Certificate of Incorporation to fill) shall be
filled by, and only by, a majority of the directors then in office, although less than a
quorum, or by the sole remaining director. Any director appointed to fill a vacancy or a newly
created directorship shall hold office until the next annual meeting of stockholders, and until
his or her successor is elected and qualified or until his or her earlier resignation or
removal.
Notwithstanding the foregoing, in the event that the holders of any class or series of
Preferred Stock of the Corporation shall be entitled, voting separately as a class, to elect
any directors of the Corporation, then the number of directors that may be elected by such
holders voting separately as a class shall be in addition to the number fixed pursuant to a
resolution of the board of directors of the Corporation. Except as otherwise provided in the
terms of such class or series, (i) the terms of the directors elected by such holders voting
separately as a class shall expire at the annual meeting of stockholders next succeeding their
election and (ii) any director or directors elected by such holders voting separately as a
class may be removed, with or without cause, by the holders of a majority of the voting power
of all outstanding shares of stock of the Corporation entitled to vote separately as a class in
an election of such directors.
NINTH. In taking any action, including action that may involve or relate to a change or
potential change in the control of the Corporation, a director of the Corporation may consider,
among other things, both the long-term and short-term interests of the Corporation and its
stockholders and the effects that the Corporations actions may have in the short term or long
term upon any one or more of the following matters:
(i) the prospects for potential growth, development, productivity and profitability of the
Corporation;
(ii) the Corporations current employees;
(iii) the retired former partners of The Goldman Sachs Group, L.P. (GS Group) and the
Corporations employees and other beneficiaries receiving or entitled to receive
retirement, welfare or similar benefits from or pursuant to any plan sponsored, or
agreement entered into, by the Corporation;
(iv) the Corporations customers and creditors;
(v) the ability of the Corporation to provide, as a going concern, goods, services,
employment opportunities and employment benefits and otherwise to contribute to the
communities in which it does business; and
(vi) such other additional factors as a director may consider appropriate in such
circumstances.
Nothing in this Article NINTH shall create any duty owed by any director of the Corporation to
any person or entity to consider, or afford any particular weight to, any of the foregoing
matters or to limit his or her consideration to the foregoing matters. No such employee,
retired former partner of GS Group, former employee,
-10-
beneficiary, customer, creditor or community or member thereof shall have any rights against
any director of the Corporation or the Corporation under this Article NINTH.
TENTH. From and after the consummation of the initial public offering of the shares of Common
Stock of the Corporation, no action of stockholders of the Corporation required or permitted to
be taken at any annual or special meeting of stockholders of the Corporation may be taken
without a meeting of stockholders, without prior notice and without a vote, and the power of
stockholders of the Corporation to consent in writing to the taking of any action without a
meeting is specifically denied. Notwithstanding this Article TENTH, the holders of any series
of Preferred Stock of the Corporation shall be entitled to take action by written consent to
such extent, if any, as may be provided in the terms of such series.
ELEVENTH. No provision of Articles SIXTH, NINTH, TENTH or TWELFTH or of this Article ELEVENTH
or of the second paragraph of Article EIGHTH shall be amended, modified or repealed, and no
provision inconsistent with any such provision shall become part of this Restated Certificate
of Incorporation, unless such matter is approved by the affirmative vote of the holders of not
less than 80% of the voting power of all outstanding shares of Common Stock of the Corporation
and all other outstanding shares of stock of the Corporation entitled to vote on such matter,
with such outstanding shares of Common Stock and other stock considered for this purpose as a
single class. Any vote of stockholders required by this Article ELEVENTH shall be in addition
to any other vote of the stockholders that may be required by law, this Restated Certificate of
Incorporation, the by-laws of the Corporation, any agreement with a national securities
exchange or otherwise.
TWELFTH. A director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director of the
Corporation, except to the extent that such exemption from liability or limitation thereof is
not permitted under the Delaware General Corporation Law as currently in effect or as the same
may hereafter be amended.
Pursuant to the Plan of Incorporation of GS Group, dated as of March 8, 1999, as currently in
effect or as the same may hereafter be amended (the Plan), the Corporation has the right, but
not the obligation, to make special arrangements with any person who was a partner of GS Group
participating in the Plan to ameliorate, in whole or in part, certain significantly
disproportionate tax or other burdens. The board of directors of the Corporation is authorized
to cause the Corporation to make such arrangements (which may include special payments) as the
board of directors of the Corporation may, in its sole discretion, deem appropriate to
effectuate the intent of the relevant provision of the Plan and the Corporation and each
stockholder of the Corporation shall, to the fullest extent permitted by law, be deemed to have
approved and ratified any such determination and to have waived any claim or objection on
behalf of the Corporation or any such stockholder arising out of the making of such
arrangements.
-11-
Pursuant to the Plan, the Corporation has the right, but not the obligation, to register with
the Securities and Exchange Commission the resale of certain securities of the Corporation by
directors, employees and former directors and employees of the Corporation and its subsidiaries
and affiliates and former partners and employees of GS Group and its subsidiaries and
affiliates and to undertake various actions and to enter into agreements and arrangements in
connection therewith (collectively, the Registration Arrangements). The board of directors of
the Corporation is authorized to cause the Corporation to undertake such Registration
Arrangements as the board of directors of the Corporation may, in its sole discretion, deem
appropriate and the Corporation and each stockholder of the Corporation shall, to the fullest
extent permitted by law, be deemed to have approved and ratified any such determination and to
have waived any claim or objection on behalf of the Corporation or any such stockholder arising
out of the undertaking of such Registration Arrangements.
The Corporation and each stockholder of the Corporation shall, to the fullest extent permitted
by law, be deemed to have approved and ratified any decision by the board of directors of the
Corporation to make the Contribution referred to in Article THIRD, including the amount thereof
(up to the limit specified in Article THIRD) and to have waived any claim or objection on
behalf of the Corporation or any such stockholder arising out of any such decision to make, or
the making of, the Contribution.
The authorizations, approvals and ratifications contained in the second, third and fourth
paragraphs of this Article TWELFTH shall not be construed to indicate that any other
arrangements or contributions not specifically referred to in such paragraphs are, by reason of
such omission, not within the power and authority of the board of directors of the Corporation
or that the determination of the board of directors of the Corporation with respect thereto
should be judged by any legal standard other than that which would have applied but for the
inclusion of the second, third and fourth paragraphs of this Article TWELFTH.
No amendment, modification or repeal of this Article TWELFTH shall adversely affect any right
or protection of a director of the Corporation that exists at the time of such amendment,
modification or repeal.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be
signed and attested by its duly authorized officer on this
22nd day of January, 2009.
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/s/
Gregory K. Palm
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Name: |
Gregory K. Palm |
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Title: |
Executive Vice President and General Counsel |
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Appendix A
CERTIFICATE OF DESIGNATIONS
OF
FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES A
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated April 6, 2005, the provisions of the amended and restated certificate of
incorporation and bylaws of the Corporation and applicable law, by unanimous written consent dated
April 18, 2005, adopted the following resolution creating a series of 50,000 shares of Preferred
Stock of the Corporation designated as Floating Rate Non-Cumulative Preferred Stock, Series A.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated April 6, 2005, the provisions of the amended and
restated certificate of incorporation and bylaws of the Corporation and applicable law, a series of
Preferred Stock, par value $.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares of such series, and the voting and other powers, preferences
and relative, participating, optional or other rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series, are as follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is Floating Rate Non-Cumulative Preferred Stock, Series A (Series A). Each share of Series A
shall be identical in all respects to every other share of Series A, except as to the respective
dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted
pursuant to Section 4(a) below.
Section 2. Number of Shares. The authorized number of shares of Series A shall be 50,000.
Shares of Series A that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series A.
Section 3. Definitions. As used herein with respect to Series A:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Calculation Agent means, at any time, the person or entity appointed by the
Corporation and serving as such agent at such time. The Corporation may terminate any such
appointment and may appoint a successor agent at any time and from time to time, provided
that the Corporation shall use its best efforts to ensure that there is, at all relevant
times when the Series A is outstanding, a person or entity appointed and serving as such
agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) Certificate of Designations means this Certificate of Designations relating to
the Series A, as it may be amended from time to time.
(f) Certification of Incorporation shall mean the amended and restated certificate
of incorporation of the Corporation, as it may be amended from time to time, and shall
include this Certificate of Designations.
(g) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(h) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series A) that ranks junior to Series A either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(i) London Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday
or Friday and is a day on which dealings in U.S. dollars are transacted in the London
interbank market.
(j) Moneyline Telerate Page means the display on Moneyline Telerate, Inc., or any
successor service, on the page or pages specified in Section 4 below or any replacement
page or pages on that service.
(k) Parity Stock means any class or series of stock of the Corporation (other than
Series A) that ranks equally with Series A both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
A-2
(l) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series A.
(m) Representative Amount means, at any time, an amount that, in the Calculation
Agents judgment, is representative of a single transaction in the relevant market at the
relevant time.
(n) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series A are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series A) that rank
equally with Series A either as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation and upon which like
voting rights have been conferred and are exercisable with respect to such matter.
Section 4. Dividends.
(a) Rate. Holders of Series A shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at the rate determined as set forth below in this Section (4) applied
to the liquidation preference amount of $25,000 per share of Series A. Such dividends shall be
payable quarterly in arrears (as provided below in this Section 4(a)), but only when, as and if
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors), on February 10, May 10, August 10 and November 10 (Dividend Payment Dates),
commencing on August 10, 2005; provided that if any such Dividend Payment Date would otherwise
occur on a day that is not a Business Day, such Dividend Payment Date shall instead be (and any
dividend payable on Series A on such Dividend Payment Date shall instead be payable on) the
immediately succeeding Business Day, unless such immediately succeeding Business Day falls in the
next calendar month, in which case such Dividend Payment Date shall instead be (and any such
dividend shall instead be payable on) the immediately preceding Business Day. Dividends on Series A
shall not be cumulative; holders of Series A shall not be entitled to receive any dividends not
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors) and no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend not so declared.
Dividends that are payable on Series A on any Dividend Payment Date will be payable to holders
of record of Series A as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) that is not more than 60 nor less than 10 days prior to such Dividend
Payment Date (each, a Dividend Record Date). Any such day that is a Dividend Record Date shall be
a Dividend Record Date whether or not such day is a Business Day.
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Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series A, provided that, for any share of Series A issued after such original
issue date, the initial Dividend Period for such shares may commence on and include such other date
as the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) shall determine and publicly disclose) and shall end on and include the calendar day
next preceding the next Dividend Payment Date. Dividends payable on the Series A in respect of any
Dividend Period shall be computed by the Calculation Agent on the basis of a 360-day year and the
actual number of days elapsed in such Dividend Period. Dividends payable in respect of a Dividend
Period shall be payable in arrears - i.e., on the first Dividend Payment Date after such
Dividend Period.
The dividend rate on the Series A, for each Dividend Period, shall be a rate per annum equal
to the greater of (1) 0.75% above LIBOR (as defined below) for such Dividend Period and (2) 3.75%.
LIBOR, with respect to any Dividend Period, means the offered rate expressed as a percentage per
annum for three-month deposits in U.S. dollars on the first day of such Dividend Period, as that
rate appears on Moneyline Telerate Page 3750 as of 11:00 A.M., London time, on the second London
Business Day immediately preceding the first day of such Dividend Period.
If the rate described in the preceding paragraph does not appear on Moneyline Telerate Page
3750, LIBOR shall be determined on the basis of the rates, at approximately 11:00 A.M., London
time, on the second London Business Day immediately preceding the first day of such Dividend
Period, at which deposits of the following kind are offered to prime banks in the London interbank
market by four major banks in that market selected by the Calculation Agent: three-month deposits
in U.S. dollars, beginning on the first day of such Dividend Period, and in a Representative
Amount. The Calculation Agent shall request the principal London office of each of these banks to
provide a quotation of its rate at approximately 11:00 A.M., London time. If at least two
quotations are provided, LIBOR for such Dividend Period shall be the arithmetic mean of such
quotations.
If fewer than two quotations are provided as described in the preceding paragraph, LIBOR for
such Dividend Period shall be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M. New York City time, on the second London
Business Day immediately preceding the first day of such Dividend Period, by three major banks in
New York City selected by the Calculation Agent: three-month loans of U.S. dollars, beginning on
the first day of such Dividend Period, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described in the
preceding paragraph, LIBOR for such Dividend Period shall be LIBOR in effect for the prior Dividend
Period.
The Calculation Agents determination of any dividend rate, and its calculation of the amount
of dividends for any Dividend Period, will be maintained on
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file at the Corporations principal offices and will be available to any stockholder upon
request and will be final and binding in the absence of manifest error.
Holders of Series A shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series A as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series A remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series A have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series A and any shares of Parity Stock, all dividends declared on the
Series A and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series A and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series A shall not be entitled to participate in any such dividends.
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Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series A
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series A as to such distribution, in full
an amount equal to $25,000 per share (the Series A Liquidation Amount), together with an amount
equal to all dividends (if any) that have been declared but not paid prior to the date of payment
of such distribution (but without any amount in respect of dividends that have not been declared
prior to such payment date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series A and all holders of any stock of the Corporation ranking
equally with the Series A as to such distribution, the amounts paid to the holders of Series A and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series A and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series A and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series A, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series A receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Series A may not be redeemed by the Corporation prior to
April 25, 2010. On or after April 25, 2010, the Corporation, at its
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option, may redeem, in whole at any time or in part from time to time, the shares of Series A
at the time outstanding, upon notice given as provided in Section 6(c) below, at a redemption price
equal to $25,000 per share, together (except as otherwise provided herein below) with an amount
equal to any dividends that have been declared but not paid prior to the redemption date (but with
no amount in respect of any dividends that have not been declared prior to such date). The
redemption price for any shares of Series A shall be payable on the redemption date to the holder
of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or
its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent
to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to
receive the redemption price on the redemption date, but rather shall be paid to the holder of
record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as
provided in Section 4 above.
(b) No Sinking Fund. The Series A will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series A will have no right to require redemption of
any shares of Series A.
(c) Notice of Redemption. Notice of every redemption of shares of Series A shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series A designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series A. Notwithstanding the foregoing, if the Series A or any depositary shares
representing interests in the Series A are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series A
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series A to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series A at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series A shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
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(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed at the end of three
years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series A, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series A for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series A in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified form of common equity constitute the dominant
form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,
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then, upon such affirmative election, the Series A shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series A, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable
to the holders thereof than the rights, preferences, privileges and voting powers, and the
qualifications, limitations and restrictions thereof, of the Series A, taken as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series A of any election to qualify the
Series A for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series A into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series A pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series A shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series A shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series A shall not have been declared and paid for at least six Dividend Periods, whether
or not consecutive (a Nonpayment Event), the number of directors then constituting the Board of
Directors shall automatically be
A-9
increased by two and the holders of Series A, together with the holders of any outstanding
shares of Voting Preferred Stock, voting together as a single class, shall be entitled to elect the
two additional directors (the Preferred Stock Directors), provided that it shall be a
qualification for election for any such Preferred Stock Director that the election of such director
shall not cause the Corporation to violate the corporate governance requirement of the New York
Stock Exchange (or any other securities exchange or other trading facility on which securities of
the Corporation may then be listed or traded) that listed or traded companies must have a majority
of independent directors.
In the event that the holders of the Series A, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series A or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series A or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series A for at least four Dividend Periods (whether or not consecutive) after a
Nonpayment Event, then the right of the holders of Series A to elect the Preferred Stock Directors
shall cease (but subject always to revesting of such voting rights in the case of any future
Nonpayment Event), and, if and when any rights of holders of Series A and Voting Preferred Stock to
elect the Preferred Stock Directors shall have ceased, the terms of office of all the Preferred
Stock Directors shall forthwith terminate and the number of directors constituting the Board of
Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series A and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of Preferred Stock Directors after a Nonpayment Event) may be filled by the
written consent of the Preferred Stock Director remaining in office, or if none remains in office,
by a vote of the holders of record of a majority of the outstanding shares of the Series A and all
Voting Preferred Stock, when they have the voting rights described above (voting together as a
single class). Any such vote of stockholders to remove, or to fill a vacancy in the office of, a
Preferred Stock Director may be taken only at a special meeting of such stockholders, called as
provided above for an initial election of Preferred Stock Director
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after a Nonpayment Event (unless such request is received less than 90 days before the date
fixed for the next annual or special meeting of the stockholders, in which event such election
shall be held at such next annual or special meeting of stockholders). The Preferred Stock
Directors shall each be entitled to one vote per director on any matter that shall come before the
Board of Directors for a vote. Each Preferred Stock Director elected at any special meeting of
stockholders or by written consent of the other Preferred Stock Director shall hold office until
the next annual meeting of the stockholders if such office shall not have previously terminated as
above provided.
(c) Other Voting Rights. So long as any shares of Series A are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series A and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series A with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series A. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series A, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series A, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series A remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series A immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series A or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of
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Preferred Stock ranking equally with and/or junior to the Series A with respect to the payment of
dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of
assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to
adversely affect the special rights, preferences, privileges or voting powers of the Series A. In
addition, any conversion of the Series A pursuant to Section 7 above shall not be deemed to
adversely affect the rights, preferences, privileges and voting powers of the Series A.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series A and one or more
but not all other series of Preferred Stock, then only the Series A and such series of Preferred
Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter
together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series A, so long as
such action does not adversely affect the special rights, preferences, privileges and voting
powers, and limitations and restrictions thereof, of the Series A, the Corporation may amend,
alter, supplement or repeal any terms of the Series A:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series A that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series A
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series A shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series A (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws,
applicable law and any national securities exchange or other trading facility on which the Series A
is listed or traded at the time. Whether the vote or consent of the holders of a plurality,
majority or other portion of the shares of Series A and any Voting Preferred Stock has been cast or
given on any matter on which the holders of shares of Series A are
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entitled to vote shall be determined by the Corporation by reference to the specified
liquidation amounts of the shares voted or covered by the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series A may deem and treat the record holder of any share of Series
A as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series A shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series A shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series A shall not have any voting powers,
preferences or relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, other than as set forth herein or in the Certificate of
Incorporation or as provided by applicable law.
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Appendix B
CERTIFICATE OF DESIGNATIONS
OF
6.20% NON-CUMULATIVE PREFERRED STOCK, SERIES B
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005, the provisions of the amended and restated certificate of
incorporation and bylaws of the Corporation and applicable law, by unanimous written consent dated
October 25, 2005, adopted the following resolution creating a series of 50,000 shares of Preferred
Stock of the Corporation designated as 6.20% Non-Cumulative Preferred Stock, Series B.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005, the provisions of the amended and
restated certificate of incorporation and bylaws of the Corporation and applicable law, a series of
Preferred Stock, par value $.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares of such series, and the voting and other powers, preferences
and relative, participating, optional or other rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series, are as follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is 6.20% Non-Cumulative Preferred Stock, Series B (Series B). Each share of Series B shall be
identical in all respects to every other share of Series B, except as to the respective dates from
which dividends thereon shall accrue, to the extent such dates may differ as permitted pursuant to
Section 4(a) below.
Section 2. Number of Shares. The authorized number of shares of Series B shall be 50,000.
Shares of Series B that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series B.
Section 3. Definitions. As used herein with respect to Series B:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Certificate of Designations means this Certificate of Designations relating to
the Series B, as it may be amended from time to time.
(e) Certification of Incorporation shall mean the amended and restated certificate
of incorporation of the Corporation, as it may be amended from time to time, and shall
include this Certificate of Designations.
(f) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(g) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series B) that ranks junior to Series B either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(h) Parity Stock means any class or series of stock of the Corporation (other than
Series B) that ranks equally with Series B both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
(i) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series B.
(j) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series B are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series B) that rank
equally with Series B either as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation and upon which like
voting rights have been conferred and are exercisable with respect to such matter.
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Section 4. Dividends.
(a) Rate. Holders of Series B shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at a rate per annum of 6.20% applied to the liquidation preference
amount of $25,000 per share of Series B. Such dividends shall be payable quarterly in arrears (as
provided below in this Section 4(a)), but only when, as and if declared by the Board of Directors
or the Committee (or another duly authorized committee of the Board of Directors), on February 10,
May 10, August 10 and November 10 (Dividend Payment Dates), commencing on February 10, 2006;
provided that if any such Dividend Payment Date would otherwise occur on a day that is not a
Business Day, such Dividend Payment Date shall instead be (and any dividend payable on Series B on
such Dividend Payment Date shall instead be payable on) the immediately succeeding Business Day.
Dividends on Series B shall not be cumulative; holders of Series B shall not be entitled to receive
any dividends not declared by the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) and no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend not so declared.
Dividends that are payable on Series B on any Dividend Payment Date will be payable to holders
of record of Series B as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) that is not more than 60 nor less than 10 days prior to such Dividend
Payment Date (each, a Dividend Record Date). Any such day that is a Dividend Record Date shall be
a Dividend Record Date whether or not such day is a Business Day.
Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series B, provided that, for any share of Series B issued after such original
issue date, the initial Dividend Period for such shares may commence on and include such other date
as the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) shall determine and publicly disclose) and shall end on and include the calendar day
next preceding the next Dividend Payment Date. Dividends payable on the Series B in respect of any
Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends payable in respect of a Dividend Period shall be payable in arrears -
i.e., on the first Dividend Payment Date after such Dividend Period.
Holders of Series B shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series B as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
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(b) Priority of Dividends. So long as any share of Series B remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series B have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series B and any shares of Parity Stock, all dividends declared on the
Series B and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series B and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series B shall not be entitled to participate in any such dividends.
Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series B
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series B as to such distribution, in full
an amount equal to $25,000
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per share (the Series B Liquidation Amount), together with an amount equal to all dividends
(if any) that have been declared but not paid prior to the date of payment of such distribution
(but without any amount in respect of dividends that have not been declared prior to such payment
date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series B and all holders of any stock of the Corporation ranking
equally with the Series B as to such distribution, the amounts paid to the holders of Series B and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series B and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series B and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series B, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series B receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Series B may not be redeemed by the Corporation prior to October
31, 2010. On or after October 31, 2010, the Corporation, at its option, may redeem, in whole at
any time or in part from time to time, the shares of Series B at the time outstanding, upon notice
given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together
(except as otherwise provided herein below) with an amount equal to any dividends that have been
declared but not paid prior to the redemption date (but with no amount in respect of any dividends
that have not been declared prior to such date). The redemption price for any shares of Series B
shall be payable on the redemption date to the holder of such shares against surrender of the
certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid
dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a
Dividend Period shall not be paid to the holder entitled to receive the
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redemption price on the redemption date, but rather shall be paid to the holder of record of
the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided
in Section 4 above.
(b) No Sinking Fund. The Series B will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series B will have no right to require redemption of
any shares of Series B.
(c) Notice of Redemption. Notice of every redemption of shares of Series B shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series B designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series B. Notwithstanding the foregoing, if the Series B or any depositary shares
representing interests in the Series B are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series B
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series B to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series B at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series B shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed
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at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series B, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series B for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series B in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified form of common equity constitute the dominant
form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,
then, upon such affirmative election, the Series B shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series B, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not
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materially less favorable to the holders thereof than the rights, preferences, privileges and
voting powers, and the qualifications, limitations and restrictions thereof, of the Series B, taken
as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series B of any election to qualify the
Series B for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series B into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series B pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series B shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series B shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series B shall not have been declared and paid for at least six Dividend Periods, whether
or not consecutive (a Nonpayment Event), the number of directors then constituting the Board of
Directors shall automatically be increased by two and the holders of Series B, together with the
holders of any outstanding shares of Voting Preferred Stock, voting together as a single class,
shall be entitled to elect the two additional directors (the Preferred Stock Directors), provided
that it shall be a qualification for election for any such Preferred Stock Director that the
election of such director shall not cause the Corporation to violate the corporate governance
requirement of the New York Stock Exchange (or any other securities exchange or other trading
facility on which securities of the Corporation may then be listed or traded) that listed or traded
companies must have a majority of independent directors and provided further that the Board of
Directors shall at no time include more than two Preferred Stock Directors (including, for purposes
of this limitation, all directors that the holders of any series of Voting Preferred Stock are
entitled to elect pursuant to like voting rights).
B-8
In the event that the holders of the Series B, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series B or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series B or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series B for at least four Dividend Periods (whether or not consecutive) after a
Nonpayment Event, then the right of the holders of Series B to elect the Preferred Stock Directors
shall cease (but subject always to revesting of such voting rights in the case of any future
Nonpayment Event), and, if and when any rights of holders of Series B and Voting Preferred Stock to
elect the Preferred Stock Directors shall have ceased, the terms of office of all the Preferred
Stock Directors shall forthwith terminate and the number of directors constituting the Board of
Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series B and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of Preferred Stock Directors after a Nonpayment Event) may be filled by the
written consent of the Preferred Stock Director remaining in office, or if none remains in office,
by a vote of the holders of record of a majority of the outstanding shares of the Series B and all
Voting Preferred Stock, when they have the voting rights described above (voting together as a
single class). Any such vote of stockholders to remove, or to fill a vacancy in the office of, a
Preferred Stock Director may be taken only at a special meeting of such stockholders, called as
provided above for an initial election of Preferred Stock Director after a Nonpayment Event (unless
such request is received less than 90 days before the date fixed for the next annual or special
meeting of the stockholders, in which event such election shall be held at such next annual or
special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one vote
per director on any matter that shall come before the Board of Directors for a vote. Each Preferred
Stock Director elected at any special meeting of stockholders or by written consent of the other
Preferred Stock Director shall hold office until the next annual meeting of the stockholders if
such office shall not have previously terminated as above provided.
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(c) Other Voting Rights. So long as any shares of Series B are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series B and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series B with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series B. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series B, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series B, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series B remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series B immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series B or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series B with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series B. In addition, any conversion of the Series B pursuant
to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and
voting powers of the Series B.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series B
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and one or more but not all other series of Preferred Stock, then only the Series B and such
series of Preferred Stock as are adversely affected by and entitled to vote on the matter shall
vote on the matter together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series B, so long as
such action does not adversely affect the rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of the Series B, the Corporation may amend, alter, supplement
or repeal any terms of the Series B:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series B that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series B
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series B shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series B (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws,
applicable law and any national securities exchange or other trading facility on which the Series B
is listed or traded at the time. Whether the vote or consent of the holders of a plurality,
majority or other portion of the shares of Series B and any Voting Preferred Stock has been cast or
given on any matter on which the holders of shares of Series B are entitled to vote shall be
determined by the Corporation by reference to the specified liquidation amounts of the shares voted
or covered by the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series B may deem and treat the record holder of any share of Series
B as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series B shall be
sufficiently given if given in writing and delivered in person or by first
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class mail, postage prepaid, or if given in such other manner as may be permitted in this
Certificate of Designations, in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series B shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series B shall not have any voting powers, preferences or
relative, participating, optional or other special rights, or qualifications, limitations or
restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as
provided by applicable law.
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Appendix C
CERTIFICATE OF DESIGNATIONS
OF
FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES C
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005, the provisions of the amended and restated certificate of
incorporation and bylaws of the Corporation and applicable law, by unanimous written consent dated
October 25, 2005, adopted the following resolution creating a series of 25,000 shares of Preferred
Stock of the Corporation designated as Floating Rate Non-Cumulative Preferred Stock, Series C.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005, the provisions of the amended and
restated certificate of incorporation and bylaws of the Corporation and applicable law, a series of
Preferred Stock, par value $.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares of such series, and the voting and other powers, preferences
and relative, participating, optional or other rights, and the qualifications, limitations and
restrictions thereof, of the shares of such series, are as follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is Floating Rate Non-Cumulative Preferred Stock, Series C (Series C). Each share of Series C
shall be identical in all respects to every other share of Series C, except as to the respective
dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted
pursuant to Section 4(a) below.
Section 2. Number of Shares. The authorized number of shares of Series C shall be 25,000.
Shares of Series C that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series C.
Section 3. Definitions. As used herein with respect to Series C:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Calculation Agent means, at any time, the person or entity appointed by the
Corporation and serving as such agent at such time. The Corporation may terminate any such
appointment and may appoint a successor agent at any time and from time to time, provided
that the Corporation shall use its best efforts to ensure that there is, at all relevant
times when the Series C is outstanding, a person or entity appointed and serving as such
agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) Certificate of Designations means this Certificate of Designations relating to
the Series C, as it may be amended from time to time.
(f) Certification of Incorporation shall mean the amended and restated certificate
of incorporation of the Corporation, as it may be amended from time to time, and shall
include this Certificate of Designations.
(g) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(h) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series C) that ranks junior to Series C either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(i) London Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday
or Friday and is a day on which dealings in U.S. dollars are transacted in the London
interbank market.
(j) Moneyline Telerate Page means the display on Moneyline Telerate, Inc., or any
successor service, on the page or pages specified in Section 4 below or any replacement
page or pages on that service.
(k) Parity Stock means any class or series of stock of the Corporation (other than
Series C) that ranks equally with Series C both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
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(l) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series C.
(m) Representative Amount means, at any time, an amount that, in the Calculation
Agents judgment, is representative of a single transaction in the relevant market at the
relevant time.
(n) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series C are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series C)
that rank equally with Series C either as to the payment of dividends or as to the
distribution of assets upon liquidation, dissolution or winding up of the Corporation and
upon which like voting rights have been conferred and are exercisable with respect to such
matter.
Section 4. Dividends.
(a) Rate. Holders of Series C shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at the rate determined as set forth below in this Section (4) applied
to the liquidation preference amount of $25,000 per share of Series C. Such dividends shall be
payable quarterly in arrears (as provided below in this Section 4(a)), but only when, as and if
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors), on February 10, May 10, August 10 and November 10 (Dividend Payment Dates),
commencing on February 10, 2006; provided that if any such Dividend Payment Date would otherwise
occur on a day that is not a Business Day, such Dividend Payment Date shall instead be (and any
dividend payable on Series C on such Dividend Payment Date shall instead be payable on) the
immediately succeeding Business Day, unless such immediately succeeding Business Day falls in the
next calendar month, in which case such Dividend Payment Date shall instead be (and any such
dividend shall instead be payable on) the immediately preceding Business Day. Dividends on Series C
shall not be cumulative; holders of Series C shall not be entitled to receive any dividends not
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors) and no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend not so declared.
Dividends that are payable on Series C on any Dividend Payment Date will be payable to holders
of record of Series C as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) that is not more than 60 nor less than 10 days prior to such Dividend
Payment Date (each, a Dividend Record Date). Any such day that is a Dividend Record Date shall be
a Dividend Record Date whether or not such day is a Business Day.
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Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series C, provided that, for any share of Series C issued after such original
issue date, the initial Dividend Period for such shares may commence on and include such other date
as the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) shall determine and publicly disclose) and shall end on and include the calendar day
next preceding the next Dividend Payment Date. Dividends payable on the Series C in respect of any
Dividend Period shall be computed by the Calculation Agent on the basis of a 360-day year and the
actual number of days elapsed in such Dividend Period. Dividends payable in respect of a Dividend
Period shall be payable in arrears - i.e., on the first Dividend Payment Date after such
Dividend Period.
The dividend rate on the Series C, for each Dividend Period, shall be a rate per annum equal
to the greater of (1) 0.75% above LIBOR (as defined below) for such Dividend Period and (2) 4.00%.
LIBOR, with respect to any Dividend Period, means the offered rate
expressed as a percentage per annum for three-month deposits in U.S. dollars on the first day
of such Dividend Period, as that rate appears on Moneyline Telerate Page 3750 as of 11:00 A.M.,
London time, on the second London Business Day immediately preceding the first day of such Dividend
Period.
If the rate described in the preceding paragraph does not appear on Moneyline Telerate Page
3750, LIBOR shall be determined on the basis of the rates, at approximately 11:00 A.M., London
time, on the second London Business Day immediately preceding the first day of such Dividend
Period, at which deposits of the following kind are offered to prime banks in the London interbank
market by four major banks in that market selected by the Calculation Agent: three-month deposits
in U.S. dollars, beginning on the first day of such Dividend Period, and in a Representative
Amount. The Calculation Agent shall request the principal London office of each of these banks to
provide a quotation of its rate at approximately 11:00 A.M., London time. If at least two
quotations are provided, LIBOR for such Dividend Period shall be the arithmetic mean of such
quotations.
If fewer than two quotations are provided as described in the preceding paragraph, LIBOR for
such Dividend Period shall be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M. New York City time, on the second London
Business Day immediately preceding the first day of such Dividend Period, by three major banks in
New York City selected by the Calculation Agent: three-month loans of U.S. dollars, beginning on
the first day of such Dividend Period, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described in the
preceding paragraph, LIBOR for such Dividend Period shall be LIBOR in effect for the prior Dividend
Period.
The Calculation Agents determination of any dividend rate, and its calculation of the amount
of dividends for any Dividend Period, will be maintained on
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file at the Corporations principal
offices and will be available to any stockholder upon request and will be final and binding in the
absence of manifest error.
Holders of Series C shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series C as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series C remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series C have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series C and any shares of Parity Stock, all dividends declared on the
Series C and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series C and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series C shall not be entitled to participate in any such dividends.
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Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series C
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series C as to such distribution, in full
an amount equal to $25,000 per share (the Series C Liquidation Amount), together with an amount
equal to all dividends (if any) that have been declared but not paid prior to the date of payment
of such distribution (but without any amount in respect of dividends that have not been declared
prior to such payment date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series C and all holders of any stock of the Corporation ranking
equally with the Series C as to such distribution, the amounts paid to the holders of Series C and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series C and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series C and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series C, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series C receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Series C may not be redeemed by the Corporation prior to October
31, 2010. On or after October 31, 2010, the Corporation, at
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its option, may redeem, in whole at
any time or in part from time to time, the shares of Series C at the time outstanding, upon notice
given as provided in Section 6(c) below, at a redemption price equal to $25,000 per share, together
(except as otherwise provided herein below) with an amount equal to any dividends that have been
declared but not paid prior to the redemption date (but with no amount in respect of any dividends
that have not been declared prior to such date). The redemption price for any shares of Series C
shall be payable on the redemption date to the holder of such shares against surrender of the
certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid
dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a
Dividend Period shall not be paid to the holder entitled to receive the redemption price on the
redemption date, but rather shall be paid to the holder of record of the redeemed shares on such
Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.
(b) No Sinking Fund. The Series C will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series C will have no right to require redemption of
any shares of Series C.
(c) Notice of Redemption. Notice of every redemption of shares of Series C shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series C designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series C. Notwithstanding the foregoing, if the Series C or any depositary shares
representing interests in the Series C are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series C
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series C to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series C at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series C shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
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(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed at the end of three
years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series C, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series C for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series C in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified form of common equity constitute the dominant
form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,
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then, upon such affirmative election, the Series C shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series C, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable
to the holders thereof than the rights, preferences, privileges and voting powers, and the
qualifications, limitations and restrictions thereof, of the Series C, taken as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series C of any election to qualify the
Series C for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series C into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series C pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series C shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series C shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series C shall not have been declared and paid for at least six Dividend Periods, whether
or not consecutive (a Nonpayment Event), the number of directors then constituting the Board of
Directors shall automatically be
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increased by two and the holders of Series C, together with the holders of any outstanding shares of Voting Preferred Stock, voting together as a single class,
shall be entitled to elect the two additional directors (the Preferred Stock Directors), provided
that it shall be a qualification for election for any such Preferred Stock Director that the
election of such director shall not cause the Corporation to violate the corporate governance
requirement of the New York Stock Exchange (or any other securities exchange or other trading
facility on which securities of the Corporation may then be listed or traded) that listed or traded
companies must have a majority of independent directors and
provided further that the Board of Directors shall at no time include more than two Preferred
Stock Directors (including, for purposes of this limitation, all directors that the holders of any
series of Voting Preferred Stock are entitled to elect pursuant to like voting rights).
In the event that the holders of the Series C, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series C or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series C or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series C for at least four Dividend Periods (whether or not consecutive) after a
Nonpayment Event, then the right of the holders of Series C to elect the Preferred Stock Directors
shall cease (but subject always to revesting of such voting rights in the case of any future
Nonpayment Event), and, if and when any rights of holders of Series C and Voting Preferred Stock to
elect the Preferred Stock Directors shall have ceased, the terms of office of all the Preferred
Stock Directors shall forthwith terminate and the number of directors constituting the Board of
Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series C and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of Preferred Stock Directors after a Nonpayment Event) may be filled by the
written consent of the Preferred Stock Director remaining in office, or if none remains in office,
by a vote of the holders of record of a majority of the outstanding shares of the Series C and all
Voting Preferred Stock, when they have the voting rights described above (voting together as a
single class). Any such vote of stockholders to remove, or to fill a vacancy
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in the office of, a Preferred Stock Director may be taken only at a special meeting of such
stockholders, called as provided above for an initial election of Preferred Stock Director after a
Nonpayment Event (unless such request is received less than 90 days before the date fixed for the
next annual or special meeting of the stockholders, in which event such election shall be held at
such next annual or special meeting of stockholders). The Preferred Stock Directors shall each be
entitled to one vote per director on any matter that shall come before the Board of Directors for a
vote. Each Preferred Stock Director elected at any special meeting of stockholders or by written
consent of the other Preferred Stock Director shall hold office until the next annual meeting of
the stockholders if such office shall not have previously terminated as above provided.
(c) Other Voting Rights. So long as any shares of Series C are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series C and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series C with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series C. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series C, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series C, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series C remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series C immediately prior to such consummation, taken as a whole;
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provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series C or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series C with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series C. In addition, any conversion of the Series C pursuant
to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and
voting powers of the Series C.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series C and one or more
but not all other series of Preferred Stock, then only the Series C and such series of Preferred
Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter
together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series C, so long as
such action does not adversely affect the rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of the Series C, the Corporation may amend, alter, supplement
or repeal any terms of the Series C:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series C that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series C
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series C shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series C (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws,
applicable law and any national securities exchange or other trading facility on which the Series C
is listed or traded at the time. Whether the vote or consent of the holders of a plurality,
majority or other portion of the shares of Series C and any Voting Preferred
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Stock has been cast or given on any matter on which the holders of shares of Series C are
entitled to vote shall be determined by the Corporation by reference to the specified liquidation
amounts of the shares voted or covered by the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series C may deem and treat the record holder of any share of Series
C as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series C shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series C shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series C shall not have any voting powers,
preferences or relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, other than as set forth herein or in the Certificate of
Incorporation or as provided by applicable law.
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Appendix D
CERTIFICATE OF DESIGNATIONS
OF
FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES D
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005, the provisions of the restated certificate of incorporation and
the amended and restated bylaws of the Corporation and applicable law, by unanimous written consent
dated May 16, 2005, adopted the following resolution creating a series of 60,000 shares of
Preferred Stock of the Corporation designated as Floating Rate Non-Cumulative Preferred Stock,
Series D.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005, the provisions of the restated
certificate of incorporation and the amended and restated bylaws of the Corporation and applicable
law, a series of Preferred Stock, par value $.01 per share, of the Corporation be and hereby is
created, and that the designation and number of shares of such series, and the voting and other
powers, preferences and relative, participating, optional or other rights, and the qualifications,
limitations and restrictions thereof, of the shares of such series, are as follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is Floating Rate Non-Cumulative Preferred Stock, Series D (Series D). Each share of Series D
shall be identical in all respects to every other share of Series D, except as to the respective
dates from which dividends thereon shall accrue, to the extent such dates may differ as permitted
pursuant to Section 4(a) below.
Section 2. Number of Shares. The authorized number of shares of Series D shall be 60,000.
Shares of Series D that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series D.
Section 3. Definitions. As used herein with respect to Series D:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Calculation Agent means, at any time, the person or entity appointed by the
Corporation and serving as such agent at such time. The Corporation may terminate any such
appointment and may appoint a successor agent at any time and from time to time, provided
that the Corporation shall use its best efforts to ensure that there is, at all relevant
times when the Series D is outstanding, a person or entity appointed and serving as such
agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) Certificate of Designations means this Certificate of Designations relating to
the Series D, as it may be amended from time to time.
(f) Certification of Incorporation shall mean the restated certificate of
incorporation of the Corporation, as it may be amended from time to time, and shall include
this Certificate of Designations.
(g) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(h) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series D) that ranks junior to Series D either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(i) London Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday
or Friday and is a day on which dealings in U.S. dollars are transacted in the London
interbank market.
(j) Moneyline Telerate Page means the display on Moneyline Telerate, Inc., or any
successor service, on the page or pages specified in Section 4 below or any replacement
page or pages on that service.
(k) Parity Stock means any class or series of stock of the Corporation (other than
Series D) that ranks equally with Series D both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
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(l) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series D.
(m) Representative Amount means, at any time, an amount that, in the Calculation
Agents judgment, is representative of a single transaction in the relevant market at the
relevant time.
(n) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series D are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series D) that rank
equally with Series D either as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation and upon which like
voting rights have been conferred and are exercisable with respect to such matter.
Section 4. Dividends.
(a) Rate. Holders of Series D shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at the rate determined as set forth below in this Section (4) applied
to the liquidation preference amount of $25,000 per share of Series D. Such dividends shall be
payable quarterly in arrears (as provided below in this Section 4(a)), but only when, as and if
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors), on February 10, May 10, August 10 and November 10 (Dividend Payment Dates),
commencing on August 10, 2006; provided that if any such Dividend Payment Date would otherwise
occur on a day that is not a Business Day, such Dividend Payment Date shall instead be (and any
dividend payable on Series D on such Dividend Payment Date shall instead be payable on) the
immediately succeeding Business Day, unless such immediately succeeding Business Day falls in the
next calendar month, in which case such Dividend Payment Date shall instead be (and any such
dividend shall instead be payable on) the immediately preceding Business Day. Dividends on Series D
shall not be cumulative; holders of Series D shall not be entitled to receive any dividends not
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors) and no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend not so declared.
Dividends that are payable on Series D on any Dividend Payment Date will be payable to holders
of record of Series D as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) that is not more than 60 nor less than 10 days prior to such Dividend
Payment Date (each, a Dividend Record Date). Any such day that is a Dividend Record Date shall
be a Dividend Record Date whether or not such day is a Business Day.
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Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series D, provided that, for any share of Series D issued after such original
issue date, the initial Dividend Period for such shares may commence on and include such other date
as the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) shall determine and publicly disclose) and shall end on and include the calendar day
next preceding the next Dividend Payment Date. Dividends payable on the Series D in respect of any
Dividend Period shall be computed by the Calculation Agent on the basis of a 360-day year and the
actual number of days elapsed in such Dividend Period. Dividends payable in respect of a Dividend
Period shall be payable in arrears - i.e., on the first Dividend Payment Date after such
Dividend Period.
The dividend rate on the Series D, for each Dividend Period, shall be a rate per annum equal
to the greater of (1) 0.67% above LIBOR (as defined below) for such Dividend Period and (2) 4.00%.
LIBOR, with respect to any Dividend Period, means the offered rate expressed as a percentage per
annum for three-month deposits in U.S. dollars on the first day of such Dividend Period, as that
rate appears on Moneyline Telerate Page 3750 (or any successor or replacement page) as of 11:00
A.M., London time, on the second London Business Day immediately preceding the first day of such
Dividend Period.
If the rate described in the preceding paragraph does not appear on Moneyline Telerate Page
3750 (or any successor or replacement page), LIBOR shall be determined on the basis of the rates,
at approximately 11:00 A.M., London time, on the second London Business Day immediately preceding
the first day of such Dividend Period, at which deposits of the following kind are offered to prime
banks in the London interbank market by four major banks in that market selected by the Calculation
Agent: three-month deposits in U.S. dollars, beginning on the first day of such Dividend Period,
and in a Representative Amount. The Calculation Agent shall request the principal London office of
each of these banks to provide a quotation of its rate at approximately 11:00 A.M., London time. If
at least two quotations are provided, LIBOR for such Dividend Period shall be the arithmetic mean
of such quotations.
If fewer than two quotations are provided as described in the preceding paragraph, LIBOR for
such Dividend Period shall be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M. New York City time, on the second London
Business Day immediately preceding the first day of such Dividend Period, by three major banks in
New York City selected by the Calculation Agent: three-month loans of U.S. dollars, beginning on
the first day of such Dividend Period, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described in the
preceding paragraph, LIBOR for such Dividend Period shall be LIBOR in effect for the prior Dividend
Period.
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The Calculation Agents determination of any dividend rate, and its calculation of the amount
of dividends for any Dividend Period, will be maintained on file at the Corporations principal
offices and will be available to any stockholder upon request and will be final and binding in the
absence of manifest error.
Holders of Series D shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series D as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series D remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series D have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series D and any shares of Parity Stock, all dividends declared on the
Series D and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series D and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series D shall not be entitled to participate in any such dividends.
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Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series D
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series D as to such distribution, in full
an amount equal to $25,000 per share (the Series D Liquidation Amount), together with an amount
equal to all dividends (if any) that have been declared but not paid prior to the date of payment
of such distribution (but without any amount in respect of dividends that have not been declared
prior to such payment date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series D and all holders of any stock of the Corporation ranking
equally with the Series D as to such distribution, the amounts paid to the holders of Series D and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series D and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series D and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series D, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series D receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Series D may not be redeemed by the Corporation prior to May 24,
2011. On or after May 24, 2011, the Corporation, at its
D-6
option, may redeem, in whole at any time or in part from time to time, the shares of Series D
at the time outstanding, upon notice given as provided in Section 6(c) below, at a redemption price
equal to $25,000 per share, together (except as otherwise provided hereinbelow) with an amount
equal to any dividends that have been declared but not paid prior to the redemption date (but with
no amount in respect of any dividends that have not been declared prior to such date). The
redemption price for any shares of Series D shall be payable on the redemption date to the holder
of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or
its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent
to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to
receive the redemption price on the redemption date, but rather shall be paid to the holder of
record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as
provided in Section 4 above.
(b) No Sinking Fund. The Series D will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series D will have no right to require redemption of
any shares of Series D.
(c) Notice of Redemption. Notice of every redemption of shares of Series D shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series D designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series D. Notwithstanding the foregoing, if the Series D or any depositary shares
representing interests in the Series D are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series D
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series D to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series D at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series D shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
D-7
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed at the end of three
years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series D, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series D for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series D in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified form of common equity constitute the dominant
form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,
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then, upon such affirmative election, the Series D shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series D, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable
to the holders thereof than the rights, preferences, privileges and voting powers, and the
qualifications, limitations and restrictions thereof, of the Series D, taken as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series D of any election to qualify the
Series D for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series D into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series D pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series D shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series D shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series D shall not have been declared and paid for at least six Dividend Periods, whether
or not consecutive (a Nonpayment Event),
the number of directors then constituting the Board of Directors shall automatically be
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increased by two and the holders of Series D, together with the holders of any outstanding shares
of Voting Preferred Stock, voting together as a single class, shall be entitled to elect the two
additional directors (the Preferred Stock Directors), provided that it shall be a qualification
for election for any such Preferred Stock Director that the election of such director shall not
cause the Corporation to violate the corporate governance requirement of the New York Stock
Exchange (or any other securities exchange or other trading facility on which securities of the
Corporation may then be listed or traded) that listed or traded companies must have a majority of
independent directors and provided further that the Board of Directors shall at no time include
more than two Preferred Stock Directors (including, for purposes of this limitation, all directors
that the holders of any series of Voting Preferred Stock are entitled to elect pursuant to like
voting rights).
In the event that the holders of the Series D, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series D or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series D or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series D for at least four Dividend Periods (whether or not consecutive) after a
Nonpayment Event, then the right of the holders of Series D to elect the Preferred Stock Directors
shall cease (but subject always to revesting of such voting rights in the case of any future
Nonpayment Event), and, if and when any rights of holders of Series D and Voting Preferred Stock to
elect the Preferred Stock Directors shall have ceased, the terms of office of all the Preferred
Stock Directors shall forthwith terminate and the number of directors constituting the Board of
Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series D and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of Preferred Stock Directors after a Nonpayment Event) may be filled by the
written consent of the Preferred Stock Director remaining in office, or if none remains in office,
by a vote of the holders of record of a majority of the outstanding shares of the Series D and all
Voting Preferred
Stock, when they have the voting rights described above (voting together as a single
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class).
Any such vote of stockholders to remove, or to fill a vacancy in the office of, a Preferred Stock
Director may be taken only at a special meeting of such stockholders, called as provided above for
an initial election of Preferred Stock Director after a Nonpayment Event (unless such request is
received less than 90 days before the date fixed for the next annual or special meeting of the
stockholders, in which event such election shall be held at such next annual or special meeting of
stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on
any matter that shall come before the Board of Directors for a vote. Each Preferred Stock Director
elected at any special meeting of stockholders or by written consent of the other Preferred Stock
Director shall hold office until the next annual meeting of the stockholders if such office shall
not have previously terminated as above provided.
(c) Other Voting Rights. So long as any shares of Series D are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series D and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series D with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series D. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series D, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series D, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series D remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series D immediately prior to such consummation, taken as a whole;
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provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series D or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series D with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series D. In addition, any conversion of the Series D pursuant
to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and
voting powers of the Series D.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series D and one or more
but not all other series of Preferred Stock, then only the Series D and such series of Preferred
Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter
together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series D, so long as
such action does not adversely affect the rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of the Series D, the Corporation may amend, alter, supplement
or repeal any terms of the Series D:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series D that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series D
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series D shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series D (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws,
applicable law and any national securities exchange or other trading facility on which the Series D
is listed or traded at the time. Whether the vote or consent of the holders of a
plurality, majority or other portion of the shares of Series D and any Voting Preferred
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Stock
has been cast or given on any matter on which the holders of shares of Series D are entitled to
vote shall be determined by the Corporation by reference to the specified liquidation amounts of
the shares voted or covered by the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series D may deem and treat the record holder of any share of Series
D as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series D shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series D shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series D shall not have any voting powers,
preferences or relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, other than as set forth herein or in the Certificate of
Incorporation or as provided by applicable law.
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Appendix E
CERTIFICATE OF DESIGNATIONS
OF
PERPETUAL NON-CUMULATIVE PREFERRED STOCK, SERIES E
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005 and September 29, 2006, the provisions of the restated
certificate of incorporation and the amended and restated bylaws of the Corporation and applicable
law, by unanimous written consent dated May 14, 2007, adopted the following resolution creating a
series of 17,500.1 shares of Preferred Stock of the Corporation designated as Perpetual
Non-Cumulative Preferred Stock, Series E.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005 and September 29, 2006, the
provisions of the restated certificate of incorporation and the amended and restated bylaws of the
Corporation and applicable law, a series of Preferred Stock, par value $.01 per share, of the
Corporation be and hereby is created, and that the designation and number of shares of such series,
and the voting and other powers, preferences and relative, participating, optional or other rights,
and the qualifications, limitations and restrictions thereof, of the shares of such series, are as
follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is Perpetual Non-Cumulative Preferred Stock, Series E (Series E). Each share of Series E shall
be identical in all respects to every other share of Series E.
Section 2. Number of Shares. The authorized number of shares of Series E shall be 17,500.1.
Shares of Series E that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series E.
Section 3. Definitions. As used herein with respect to Series E:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Calculation Agent means, at any time, the person or entity appointed by the
Corporation and serving as such agent at such time. The Corporation may terminate any such
appointment and may appoint a successor agent at any time and from time to time, provided
that the Corporation shall use its best efforts to ensure that there is, at all relevant
times when the Series E is outstanding, a person or entity appointed and serving as such
agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) Certificate of Designations means this Certificate of Designations relating to
the Series E, as it may be amended from time to time.
(f) Certification of Incorporation shall mean the restated certificate of
incorporation of the Corporation, as it may be amended from time to time, and shall include
this Certificate of Designations.
(g) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(h) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series E) that ranks junior to Series E either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(i) London Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday
or Friday and is a day on which dealings in U.S. dollars are transacted in the London
interbank market.
(j) Parity Stock means any class or series of stock of the Corporation (other than
Series E) that ranks equally with Series E both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
(k) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series E.
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(l) Representative Amount means, at any time, an amount that, in the Calculation
Agents judgment, is representative of a single transaction in the relevant market at the
relevant time.
(m) Reuters Screen LIBOR01 means the display designated on the Reuters 3000 Xtra (or
such other page as may replace that page on that service or such other service as may be
nominated by the British Bankers Association for the purpose of displaying London
interbank offered rates for U.S. Dollar deposits).
(n) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series E are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series E) that rank
equally with Series E either as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation and upon which like
voting rights have been conferred and are exercisable with respect to such matter.
Section 4. Dividends.
(a) Rate. Holders of Series E shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at the rate determined as set forth below in this Section (4) applied
to the liquidation preference amount of $100,000 per share of Series E. Such dividends shall be
payable in arrears (as provided below in this Section 4(a)), but only when, as and if declared by
the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors), (a) if the shares of Series E are issued prior to June 1, 2012 (or if such date is not
a Business Day, the next Business Day), on June 1 and December 1 of each year until June 1, 2012,
and (b) thereafter, on March 1, June 1, September 1 and December 1 of each year (each a Dividend
Payment Date); provided that if any such Dividend Payment Date would otherwise occur on a day that
is not a Business Day, such Dividend Payment Date shall instead be (and any dividend payable on
Series E on such Dividend Payment Date shall instead be payable on) the immediately succeeding
Business Day. If a Dividend Payment Date prior to June 1, 2012 is not a Business Day, the
applicable dividend shall be paid on the first Business Day following that day without adjustment.
Dividends on Series E shall not be cumulative; holders of Series E shall not be entitled to receive
any dividends not declared by the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) and no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend not so declared.
Dividends that are payable on Series E on any Dividend Payment Date will be payable to holders
of record of Series E as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or
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the Committee (or another duly authorized committee of the Board of Directors) that is not
more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a Dividend Record
Date). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not
such day is a Business Day.
Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series E) and shall end on and include the calendar day next preceding the
next Dividend Payment Date. Dividends payable on the Series E in respect of a Dividend Period
shall be computed by the Calculation Agent (i) if shares of Series E are issued prior to June 1,
2012, on the basis of a 360-day year consisting of twelve-30 day months until the Dividend Payment
Date in June 2012 and (ii) thereafter, on the basis of a 360-day year and the actual number of days
elapsed in such Dividend Period. Dividends payable in respect of a Dividend Period shall be
payable in arrears - i.e., on the first Dividend Payment Date after such Dividend Period.
The dividend rate on the Series E, for each Dividend Period, shall be (a) if the shares of
Series E are issued prior to June 1, 2012, a rate per annum equal to 5.793% until the Dividend
Payment date in June 2012, and (b) thereafter, a rate per annum that will reset quarterly and shall
be equal to the greater of (i) three-month LIBOR for such Dividend Period plus 0.7675% and (ii)
4.000%. Three-month LIBOR, with respect to any Dividend Period, means the offered rate expressed
as a percentage per annum for three-month deposits in U.S. dollars on the first day of such
Dividend Period, as that rate appears on Reuters Screen LIBOR01 (or any successor or replacement
page) as of 11:00 A.M., London time, on the second London Business Day immediately preceding the
first day of such Dividend Period.
If the rate described in the preceding paragraph does not appear on Reuters Screen LIBOR01(or
any successor or replacement page), LIBOR shall be determined on the basis of the rates, at
approximately 11:00 A.M., London time, on the second London Business Day immediately preceding the
first day of such Dividend Period, at which deposits of the following kind are offered to prime
banks in the London interbank market by four major banks in that market selected by the Calculation
Agent: three-month deposits in U.S. dollars, beginning on the first day of such Dividend Period,
and in a Representative Amount. The Calculation Agent shall request the principal London office of
each of these banks to provide a quotation of its rate at approximately 11:00 A.M., London time. If
at least two quotations are provided, LIBOR for such Dividend Period shall be the arithmetic mean
of such quotations.
If fewer than two quotations are provided as described in the preceding paragraph, LIBOR for
such Dividend Period shall be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M. New York City time, on the second London
Business Day immediately preceding the first day of such Dividend Period, by three major banks in
New York City selected by the Calculation Agent: three-month loans of U.S. dollars, beginning on
the first day of such Dividend Period, and in a Representative Amount.
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If fewer than three banks selected by the Calculation Agent are quoting as described in the
preceding paragraph, LIBOR for such Dividend Period shall be LIBOR in effect for the prior Dividend
Period.
The Calculation Agents determination of any dividend rate, and its calculation of the amount
of dividends for any Dividend Period, will be maintained on file at the Corporations principal
offices and will be available to any stockholder upon request and will be final and binding in the
absence of manifest error.
Holders of Series E shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series E as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series E remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series E have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series E and any shares of Parity Stock, all dividends declared on the
Series E and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series E and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid
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on any securities, including Common Stock and other Junior Stock, from time to time out of any
funds legally available for such payment, and the Series E shall not be entitled to participate in
any such dividends.
Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series E
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series E as to such distribution, in full
an amount equal to $100,000 per share (the Series E Liquidation Amount), together with an amount
equal to all dividends (if any) that have been declared but not paid prior to the date of payment
of such distribution (but without any amount in respect of dividends that have not been declared
prior to such payment date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series E and all holders of any stock of the Corporation ranking
equally with the Series E as to such distribution, the amounts paid to the holders of Series E and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series E and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series E and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series E, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series E receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
E-6
Section 6. Redemption.
(a) Optional Redemption. The Series E may not be redeemed by the Corporation prior to the
later of June 1, 2012 and the date of original issue of Series E. On or after that date, the
Corporation, at its option, may redeem, in whole at any time or in part from time to time, the
shares of Series E at the time outstanding, upon notice given as provided in Section 6(c) below, at
a redemption price equal to $100,000 per share, together (except as otherwise provided herein) with
an amount equal to any dividends that have been declared but not paid prior to the redemption date
(but with no amount in respect of any dividends that have not been declared prior to such date).
The redemption price for any shares of Series E shall be payable on the redemption date to the
holder of such shares against surrender of the certificate(s) evidencing such shares to the
Corporation or its agent. Any declared but unpaid dividends payable on a redemption date that
occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder
entitled to receive the redemption price on the redemption date, but rather shall be paid to the
holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend
Payment Date as provided in Section 4 above.
(b) No Sinking Fund. The Series E will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series E will have no right to require redemption of
any shares of Series E.
(c) Notice of Redemption. Notice of every redemption of shares of Series E shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series E designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series E. Notwithstanding the foregoing, if the Series E or any depositary shares
representing interests in the Series E are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series E
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series E to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series E at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series E shall be redeemed from time to time. If fewer than all the shares
represented by any certificate
E-7
are redeemed, a new certificate shall be issued representing the unredeemed shares without
charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed at the end of three
years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series E, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series E for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series E in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified
E-8
form of common equity constitute the dominant form of Allowable Capital or Tier 1
Capital Equivalent) under such Regulations,
then, upon such affirmative election, the Series E shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series E, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable
to the holders thereof than the rights, preferences, privileges and voting powers, and the
qualifications, limitations and restrictions thereof, of the Series E, taken as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series E of any election to qualify the
Series E for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series E into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series E pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series E shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series E shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
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(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series E shall not have been declared and paid for Dividend Periods, whether or not
consecutive, equivalent to at least eighteen months (a Nonpayment Event), the number of directors
then constituting the Board of Directors shall automatically be increased by two and the holders of
Series E, together with the holders of any outstanding shares of Voting Preferred Stock, voting
together as a single class, shall be entitled to elect the two additional directors (the Preferred
Stock Directors), provided that it shall be a qualification for election for any such Preferred
Stock Director that the election of such director shall not cause the Corporation to violate the
corporate governance requirement of the New York Stock Exchange (or any other securities exchange
or other trading facility on which securities of the Corporation may then be listed or traded) that
listed or traded companies must have a majority of independent directors and provided further that
the Board of Directors shall at no time include more than two Preferred Stock Directors (including,
for purposes of this limitation, all directors that the holders of any series of Voting Preferred
Stock are entitled to elect pursuant to like voting rights).
In the event that the holders of the Series E, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series E or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series E or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series E for Dividend Periods, whether or not consecutive, equivalent to at least
one year after a Nonpayment Event, then the right of the holders of Series E to elect the Preferred
Stock Directors shall cease (but subject always to revesting of such voting rights in the case of
any future Nonpayment Event), and, if and when any rights of holders of Series E and Voting
Preferred Stock to elect the Preferred Stock Directors shall have ceased, the terms of office of
all the Preferred Stock Directors shall forthwith terminate and the number of directors
constituting the Board of Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series E and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of
E-10
Preferred Stock Directors after a Nonpayment Event) may be filled by the written consent of
the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the
holders of record of a majority of the outstanding shares of the Series E and all Voting Preferred
Stock, when they have the voting rights described above (voting together as a single class). Any
such vote of stockholders to remove, or to fill a vacancy in the office of, a Preferred Stock
Director may be taken only at a special meeting of such stockholders, called as provided above for
an initial election of Preferred Stock Director after a Nonpayment Event (unless such request is
received less than 90 days before the date fixed for the next annual or special meeting of the
stockholders, in which event such election shall be held at such next annual or special meeting of
stockholders). The Preferred Stock Directors shall each be entitled to one vote per director on
any matter that shall come before the Board of Directors for a vote. Each Preferred Stock Director
elected at any special meeting of stockholders or by written consent of the other Preferred Stock
Director shall hold office until the next annual meeting of the stockholders if such office shall
not have previously terminated as above provided.
(c) Other Voting Rights. So long as any shares of Series E are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series E and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series E with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series E. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series E, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series E, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series E remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than
E-11
the rights, preferences, privileges and voting powers, and limitations and
restrictions thereof, of the Series E immediately prior to such consummation, taken as a
whole;
provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series E or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series E with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series E. In addition, any conversion of the Series E pursuant
to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and
voting powers of the Series E.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series E and one or more
but not all other series of Preferred Stock, then only the Series E and such series of Preferred
Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter
together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series E, so long as
such action does not adversely affect the rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of the Series E, the Corporation may amend, alter, supplement
or repeal any terms of the Series E:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series E that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series E
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series E shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series E (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures
E-12
shall conform to the requirements of the Certificate of Incorporation, the Bylaws, applicable
law and any national securities exchange or other trading facility on which the Series E is listed
or traded at the time. Whether the vote or consent of the holders of a plurality, majority or
other portion of the shares of Series E and any Voting Preferred Stock has been cast or given on
any matter on which the holders of shares of Series E are entitled to vote shall be determined by
the Corporation by reference to the specified liquidation amounts of the shares voted or covered by
the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series E may deem and treat the record holder of any share of Series
E as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series E shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series E shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series E shall not have any voting powers,
preferences or relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, other than as set forth herein or in the Certificate of
Incorporation or as provided by applicable law.
E-13
Appendix F
CERTIFICATE OF DESIGNATIONS
OF
PERPETUAL NON-CUMULATIVE PREFERRED STOCK, SERIES F
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the provisions of
Sections 103 and 151 thereof, DOES HEREBY CERTIFY:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005 and September 29, 2006, the provisions of the restated
certificate of incorporation and the amended and restated bylaws of the Corporation and applicable
law, by unanimous written consent dated May 14, 2007, adopted the following resolution creating a
series of 5,000.1 shares of Preferred Stock of the Corporation designated as Perpetual
Non-Cumulative Preferred Stock, Series F.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005 and September 29, 2006, the
provisions of the restated certificate of incorporation and the amended and restated bylaws of the
Corporation and applicable law, a series of Preferred Stock, par value $.01 per share, of the
Corporation be and hereby is created, and that the designation and number of shares of such series,
and the voting and other powers, preferences and relative, participating, optional or other rights,
and the qualifications, limitations and restrictions thereof, of the shares of such series, are as
follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is Perpetual Non-Cumulative Preferred Stock, Series F (Series F). Each share of Series F shall
be identical in all respects to every other share of Series F.
Section 2. Number of Shares. The authorized number of shares of Series F shall be 5,000.1.
Shares of Series F that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall be cancelled and shall revert to authorized
but unissued shares of Series F.
Section 3. Definitions. As used herein with respect to Series F:
(a) Board of Directors means the board of directors of the Corporation.
(b) ByLaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(c) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close.
(d) Calculation Agent means, at any time, the person or entity appointed by the
Corporation and serving as such agent at such time. The Corporation may terminate any such
appointment and may appoint a successor agent at any time and from time to time, provided
that the Corporation shall use its best efforts to ensure that there is, at all relevant
times when the Series F is outstanding, a person or entity appointed and serving as such
agent. The Calculation Agent may be a person or entity affiliated with the Corporation.
(e) Certificate of Designations means this Certificate of Designations relating to
the Series F, as it may be amended from time to time.
(f) Certification of Incorporation shall mean the restated certificate of
incorporation of the Corporation, as it may be amended from time to time, and shall include
this Certificate of Designations.
(g) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(h) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series F) that ranks junior to Series F either or both as to
the payment of dividends and/or as to the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(i) London Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday
or Friday and is a day on which dealings in U.S. dollars are transacted in the London
interbank market.
(j) Parity Stock means any class or series of stock of the Corporation (other than
Series F) that ranks equally with Series F both in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of the Corporation.
(k) Preferred Stock means any and all series of Preferred Stock, having a par value
of $0.01 per share, of the Corporation, including the Series F.
F-2
(l) Representative Amount means, at any time, an amount that, in the Calculation
Agents judgment, is representative of a single transaction in the relevant market at the
relevant time.
(m) Reuters Screen LIBOR01 means the display designated on the Reuters 3000 Xtra (or
such other page as may replace that page on that service or such other service as may be
nominated by the British Bankers Association for the purpose of displaying London
interbank offered rates for U.S. Dollar deposits).
(n) Voting Preferred Stock means, with regard to any election or removal of a
Preferred Stock Director (as defined in Section 8(b) below) or any other matter as to which
the holders of Series F are entitled to vote as specified in Section 8 of this Certificate
of Designations, any and all series of Preferred Stock (other than Series F) that rank
equally with Series F either as to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up of the Corporation and upon which like
voting rights have been conferred and are exercisable with respect to such matter.
Section 4. Dividends.
(a) Rate. Holders of Series F shall be entitled to receive, when, as and if declared by the
Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) out of funds legally available for the payment of dividends under Delaware law,
non-cumulative cash dividends at the rate determined as set forth below in this Section (4) applied
to the liquidation preference amount of $100,000 per share of Series F. Such dividends shall be
payable quarterly in arrears (as provided below in this Section 4(a)), but only when, as and if
declared by the Board of Directors or the Committee (or another duly authorized committee of the
Board of Directors), on March 1, June 1, September 1 and December 1 of each year (each a Dividend
Payment Date); provided that if any such Dividend Payment Date would otherwise occur on a day that
is not a Business Day, such Dividend Payment Date shall instead be (and any dividend payable on
Series F on such Dividend Payment Date shall instead be payable on) the immediately succeeding
Business Day. If a Dividend Payment Date is not a Business Day, the applicable dividend shall be
paid on the first Business Day following that day. Dividends on Series F shall not be cumulative;
holders of Series F shall not be entitled to receive any dividends not declared by the Board of
Directors or the Committee (or another duly authorized committee of the Board of Directors) and no
interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so
declared.
Dividends that are payable on Series F on any Dividend Payment Date will be payable to holders
of record of Series F as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date or such other
record date fixed by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) that is not more than 60 nor less than 10 days prior to such Dividend
Payment Date (each, a
F-3
Dividend Record Date). Any such day that is a Dividend Record Date shall be a Dividend
Record Date whether or not such day is a Business Day.
Each dividend period (a Dividend Period) shall commence on and include a Dividend Payment
Date (other than the initial Dividend Period, which shall commence on and include the date of
original issue of the Series F) and shall end on and include the calendar day next preceding the
next Dividend Payment Date. Dividends payable on the Series F in respect of any Dividend Period
shall be computed by the Calculation Agent on the basis of a 360-day year and the actual number of
days elapsed in such Dividend Period. Dividends payable in respect of a Dividend Period shall be
payable in arrears - i.e., on the first Dividend Payment Date after such Dividend Period.
The dividend rate on the Series F, for each Dividend Period, shall be (a) if the shares of
Series F are issued prior to September 1, 2012, a rate per annum equal to three-month LIBOR plus
0.77% until the Dividend Payment date in September 2012, and (b) thereafter, a rate per annum that
will reset quarterly and shall be equal to the greater of (i) three-month LIBOR for such Dividend
Period plus 0.77% and (ii) 4.000%. Three-month LIBOR, with respect to any Dividend Period, means
the offered rate expressed as a percentage per annum for three-month deposits in U.S. dollars on
the first day of such Dividend Period, as that rate appears on Reuters Screen LIBOR01 (or any
successor or replacement page) as of 11:00 A.M., London time, on the second London Business Day
immediately preceding the first day of such Dividend Period.
If the rate described in the preceding paragraph does not appear on Reuters Screen LIBOR01(or
any successor or replacement page), LIBOR shall be determined on the basis of the rates, at
approximately 11:00 A.M., London time, on the second London Business Day immediately preceding the
first day of such Dividend Period, at which deposits of the following kind are offered to prime
banks in the London interbank market by four major banks in that market selected by the Calculation
Agent: three-month deposits in U.S. dollars, beginning on the first day of such Dividend Period,
and in a Representative Amount. The Calculation Agent shall request the principal London office of
each of these banks to provide a quotation of its rate at approximately 11:00 A.M., London time. If
at least two quotations are provided, LIBOR for such Dividend Period shall be the arithmetic mean
of such quotations.
If fewer than two quotations are provided as described in the preceding paragraph, LIBOR for
such Dividend Period shall be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M. New York City time, on the second London
Business Day immediately preceding the first day of such Dividend Period, by three major banks in
New York City selected by the Calculation Agent: three-month loans of U.S. dollars, beginning on
the first day of such Dividend Period, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described in the
preceding paragraph, LIBOR for such Dividend Period shall be LIBOR in effect for the prior Dividend
Period.
F-4
The Calculation Agents determination of any dividend rate, and its calculation of the amount
of dividends for any Dividend Period, will be maintained on file at the Corporations principal
offices and will be available to any stockholder upon request and will be final and binding in the
absence of manifest error.
Holders of Series F shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series F as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series F remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock or other Junior Stock shall be
purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock, or the exchange or conversion of one share of Junior Stock for or into another share of
Junior Stock and other than through the use of the proceeds of a substantially contemporaneous sale
of Junior Stock) during a Dividend Period, unless the full dividends for the latest completed
Dividend Period on all outstanding shares of Series F have been declared and paid (or declared and
a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not
restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to engage
in any market-making transactions in Junior Stock in the ordinary course of business.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside)
on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates
different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend
Period) in full upon the Series F and any shares of Parity Stock, all dividends declared on the
Series F and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
parity stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends shall bear the same ratio to
each other as all accrued but unpaid dividends per share on the Series F and all Parity Stock
payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment
dates different from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series F shall not be entitled to participate in any such dividends.
F-5
Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series F
shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether
capital or surplus) available for distribution to stockholders of the Corporation, and after
satisfaction of all liabilities and obligations to creditors of the Corporation, before any
distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to the Series F as to such distribution, in full
an amount equal to $100,000 per share (the Series F Liquidation Amount), together with an amount
equal to all dividends (if any) that have been declared but not paid prior to the date of payment
of such distribution (but without any amount in respect of dividends that have not been declared
prior to such payment date).
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series F and all holders of any stock of the Corporation ranking
equally with the Series F as to such distribution, the amounts paid to the holders of Series F and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series F and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of the
Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming
no limitation on the assets of the Corporation available for such distribution), including an
amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other
than Series F and on which dividends accrue on a cumulative basis, an amount equal to any unpaid,
accrued, cumulative dividends, whether or not declared, as applicable).
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series F, the holders of other stock of the Corporation shall be entitled to receive all
remaining assets of the Corporation (or proceeds thereof) according to their respective rights and
preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series F receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Series F may not be redeemed by the Corporation prior to the
later of September 1, 2012 and the date of original issue of Series
F-6
F. On or after that date, the Corporation, at its option, may redeem, in whole at any time or
in part from time to time, the shares of Series F at the time outstanding, upon notice given as
provided in Section 6(c) below, at a redemption price equal to $100,000 per share, together (except
as otherwise provided herein) with an amount equal to any dividends that have been declared but not
paid prior to the redemption date (but with no amount in respect of any dividends that have not
been declared prior to such date). The redemption price for any shares of Series F shall be
payable on the redemption date to the holder of such shares against surrender of the certificate(s)
evidencing such shares to the Corporation or its agent. Any declared but unpaid dividends payable
on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall
not be paid to the holder entitled to receive the redemption price on the redemption date, but
rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date
relating to the Dividend Payment Date as provided in Section 4 above.
(b) No Sinking Fund. The Series F will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series F will have no right to require redemption of
any shares of Series F.
(c) Notice of Redemption. Notice of every redemption of shares of Series F shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series F designated
for redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series F. Notwithstanding the foregoing, if the Series F or any depositary shares
representing interests in the Series F are issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be given to the holders of Series F
at such time and in any manner permitted by such facility. Each such notice given to a holder
shall state: (1) the redemption date; (2) the number of shares of Series F to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of only part of the shares of Series F at
the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series F shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
F-7
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for any share so called for
redemption has not been surrendered for cancellation, on and after the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so called for redemption
shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders thereof to receive
the amount payable on such redemption, without interest. Any funds unclaimed at the end of three
years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion Upon Regulatory Changes. If both (i) and (ii) below occur:
(i) after the date of the issuance of the Series F, the Corporation (by election or
otherwise) becomes subject to any law, rule, regulation or guidance (together,
Regulations) relating to its capital adequacy, which Regulation (x) modifies the existing
requirements for treatment as Allowable Capital (as defined under the Securities and
Exchange Commission rules relating to consolidated supervised entities as in effect from
time to time), (y) provides for a type or level of capital characterized as Tier 1 or its
equivalent pursuant to Regulations of any governmental agency, authority or other body
having regulatory jurisdiction over the Corporation (or any of its subsidiaries or
consolidated affiliates) and implementing the capital standards published by the Basel
Committee on Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System or any other United States national governmental
agency, authority or other body, or any other applicable regime based on capital standards
published by the Basel Committee on Banking Supervision or its successor, or (z) provides
for a type or level of capital that in the judgment of the Corporation (after consultation
with legal counsel of recognized standing) is substantially equivalent to such Tier 1
capital (such capital described in either (y) or (z) above is referred to below as Tier 1
Capital Equivalent), and
(ii) the Corporation affirmatively elects to qualify the Series F for treatment as
Allowable Capital or Tier 1 Capital Equivalent without any sublimit or other quantitative
restriction on the inclusion of the Series F in Allowable Capital or Tier 1 Capital
Equivalent (other than any limitation the Corporation elects to accept and any limitation
requiring that common equity or a specified form of common equity constitute the dominant
form of Allowable Capital or Tier 1 Capital Equivalent) under such Regulations,
F-8
then, upon such affirmative election, the Series F shall be convertible at the Corporations option
into a new series of Preferred Stock having terms and provisions substantially identical to those
of the Series F, except that such new series may have such additional or modified rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, as are
necessary in the judgment of the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors) (after consultation with legal counsel of recognized standing)
to comply with the Required Unrestricted Capital Provisions (as defined below), provided that the
Corporation will not cause any such conversion unless the Board of Directors or the Committee (or
another duly authorized committee of the Board of Directors) determines that the rights,
preferences, privileges and voting powers, and the qualifications, limitations and restrictions
thereof, of such new series of Preferred Stock, taken as a whole, are not materially less favorable
to the holders thereof than the rights, preferences, privileges and voting powers, and the
qualifications, limitations and restrictions thereof, of the Series F, taken as a whole.
As used above, the term Required Unrestricted Capital Provisions means such terms and
provisions as are, in the judgment of the Corporation (after consultation with counsel of
recognized standing), required for preferred stock to be treated as Allowable Capital or Tier 1
Capital Equivalent, as applicable, without any sublimit or other quantitative restriction on the
inclusion of such preferred stock in Allowable Capital or Tier 1 Capital Equivalent, as applicable
(other than any limitation the Corporation elects to accept and any limitation requiring that
common equity or a specified form of common equity constitute the dominant form of Allowable
Capital or Tier 1 Capital Equivalent) pursuant to the applicable Regulations.
The Corporation shall provide notice to the holders of Series F of any election to qualify the
Series F for Allowable Capital or Tier 1 Capital Equivalent treatment and of any determination to
convert the Series F into a new series of Preferred Stock pursuant to the terms of this Section 7,
promptly upon the effectiveness of any such election or determination. A copy of such notice and of
the relevant Regulations shall be maintained on file at the principal offices of the Corporation
and, upon request, will be made available to any stockholder of the Corporation. Any conversion of
the Series F pursuant to this Section 7 shall be effected pursuant to such procedures as the
Corporation may determine and publicly disclose.
Except as specified in this Section 7, holders of Series F shares shall have no right to
exchange or convert such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series F shall not have any voting rights except as set forth
below or as otherwise from to time required by law.
(b) Right To Elect Two Directors Upon Nonpayment Events. If and whenever dividends on any
shares of Series F shall not have been declared and paid for at least six Dividend Periods, whether
or not consecutive (a Nonpayment Event), the number of directors then constituting the Board of
Directors shall automatically be
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increased by two and the holders of Series F, together with the holders of any outstanding
shares of Voting Preferred Stock, voting together as a single class, shall be entitled to elect the
two additional directors (the Preferred Stock Directors), provided that it shall be a
qualification for election for any such Preferred Stock Director that the election of such director
shall not cause the Corporation to violate the corporate governance requirement of the New York
Stock Exchange (or any other securities exchange or other trading facility on which securities of
the Corporation may then be listed or traded) that listed or traded companies must have a majority
of independent directors and provided further that the Board of Directors shall at no time include
more than two Preferred Stock Directors (including, for purposes of this limitation, all directors
that the holders of any series of Voting Preferred Stock are entitled to elect pursuant to like
voting rights).
In the event that the holders of the Series F, and such other holders of Voting Preferred
Stock, shall be entitled to vote for the election of the Preferred Stock Directors following a
Nonpayment Event, such directors shall be initially elected following such Nonpayment Event only at
a special meeting called at the request of the holders of record of at least 20% of the Series F or
of any other series of Voting Preferred Stock then outstanding (unless such request for a special
meeting is received less than 90 days before the date fixed for the next annual or special meeting
of the stockholders of the Corporation, in which event such election shall be held only at such
next annual or special meeting of stockholders), and at each subsequent annual meeting of
stockholders of the Corporation. Such request to call a special meeting for the initial election
of the Preferred Stock Directors after a Nonpayment Event shall be made by written notice, signed
by the requisite holders of Series F or Voting Preferred Stock, and delivered to the Secretary of
the Corporation in such manner as provided for in Section 10 below, or as may otherwise be required
by law.
When dividends have been paid (or declared and a sum sufficient for payment thereof set aside)
in full on the Series F for at least four Dividend Periods (whether or not consecutive) after a
Nonpayment Event, then the right of the holders of Series F to elect the Preferred Stock Directors
shall cease (but subject always to revesting of such voting rights in the case of any future
Nonpayment Event), and, if and when any rights of holders of Series F and Voting Preferred Stock to
elect the Preferred Stock Directors shall have ceased, the terms of office of all the Preferred
Stock Directors shall forthwith terminate and the number of directors constituting the Board of
Directors shall automatically be reduced accordingly.
Any Preferred Stock Director may be removed at any time without cause by the holders of record
of a majority of the outstanding shares of the Series F and Voting Preferred Stock, when they have
the voting rights described above (voting together as a single class). So long as a Nonpayment
Event shall continue, any vacancy in the office of a Preferred Stock Director (other than prior to
the initial election of Preferred Stock Directors after a Nonpayment Event) may be filled by the
written consent of the Preferred Stock Director remaining in office, or if none remains in office,
by a vote of the holders of record of a majority of the outstanding shares of the Series F and all
Voting Preferred Stock, when they have the voting rights described above (voting together as a
single class). Any such vote of stockholders to remove, or to fill a vacancy in the office of, a
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Preferred Stock Director may be taken only at a special meeting of such stockholders, called
as provided above for an initial election of Preferred Stock Director after a Nonpayment Event
(unless such request is received less than 90 days before the date fixed for the next annual or
special meeting of the stockholders, in which event such election shall be held at such next annual
or special meeting of stockholders). The Preferred Stock Directors shall each be entitled to one
vote per director on any matter that shall come before the Board of Directors for a vote. Each
Preferred Stock Director elected at any special meeting of stockholders or by written consent of
the other Preferred Stock Director shall hold office until the next annual meeting of the
stockholders if such office shall not have previously terminated as above provided.
(c) Other Voting Rights. So long as any shares of Series F are outstanding, in addition to
any other vote or consent of stockholders required by law or by the Certificate of Incorporation,
the vote or consent of the holders of at least 66⅔% of the shares of Series F and any Voting
Preferred Stock at the time outstanding and entitled to vote thereon, voting together as a single
class, given in person or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series F with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series F. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series F, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series F, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series F remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series F immediately prior to such consummation, taken as a whole;
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provided, however, that for all purposes of this Section 8(c), any increase in the amount of the
authorized or issued Series F or authorized Preferred Stock, or the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series F with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series F. In addition, any conversion of the Series F pursuant
to Section 7 above shall not be deemed to adversely affect the rights, preferences, privileges and
voting powers of the Series F.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 7(c) would adversely affect the Series F and one or more
but not all other series of Preferred Stock, then only the Series F and such series of Preferred
Stock as are adversely affected by and entitled to vote on the matter shall vote on the matter
together as a single class (in lieu of all other series of Preferred Stock).
(d) Changes for Clarification. Without the consent of the holders of the Series F, so long as
such action does not adversely affect the rights, preferences, privileges and voting powers, and
limitations and restrictions thereof, of the Series F, the Corporation may amend, alter, supplement
or repeal any terms of the Series F:
(i) to cure any ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Designations that may be defective or inconsistent; or
(ii) to make any provision with respect to matters or questions arising with respect to the
Series F that is not inconsistent with the provisions of this Certificate of Designations.
(e) Changes after Provision for Redemption. No vote or consent of the holders of Series F
shall be required pursuant to Section 8(b), (c) or (d) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all outstanding shares
of Series F shall have been redeemed, or shall have been called for redemption upon proper notice
and sufficient funds shall have been set aside for such redemption, in each case pursuant to
Section 6 above.
(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series F (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules the Board of Directors or the Committee (or another duly authorized
committee of the Board of Directors), in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Certificate of Incorporation, the Bylaws,
applicable law and any national securities exchange or other trading facility on which the Series F
is listed or traded at the time. Whether the vote or consent of the holders of a plurality,
majority or other portion of the shares of Series F and any Voting Preferred
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Stock has been cast or given on any matter on which the holders of shares of Series F are
entitled to vote shall be determined by the Corporation by reference to the specified liquidation
amounts of the shares voted or covered by the consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series F may deem and treat the record holder of any share of Series
F as the true and lawful owner thereof for all purposes, and neither the Corporation nor such
transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series F shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law.
Section 11. No Preemptive Rights. No share of Series F shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Other Rights. The shares of Series F shall not have any voting powers,
preferences or relative, participating, optional or other special rights, or qualifications,
limitations or restrictions thereof, other than as set forth herein or in the Certificate of
Incorporation or as provided by applicable law.
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Appendix G
CERTIFICATE OF DESIGNATIONS
OF
10% CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES G
OF
THE GOLDMAN SACHS GROUP, INC.
THE GOLDMAN SACHS GROUP, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the
provisions of Sections 103 and 151 thereof, does hereby certify:
The Securities Issuance Committee (the Committee) of the board of directors of the
Corporation (the Board of Directors), in accordance with the resolutions of the Board of
Directors dated September 16, 2005 and September 29, 2006, the provisions of the restated
certificate of incorporation and the amended and restated bylaws of the Corporation and applicable
law, at a meeting duly called and held on September 29, 2008, adopted the following resolution
creating a series of 50,000 shares of Preferred Stock of the Corporation designated as 10%
Cumulative Perpetual Preferred Stock, Series G.
RESOLVED, that pursuant to the authority vested in the Committee and in accordance with the
resolutions of the Board of Directors dated September 16, 2005 and September 29, 2006, the
provisions of the restated certificate of incorporation and the amended and restated bylaws of the
Corporation and applicable law, a series of Preferred Stock, par value $.01 per share, of the
Corporation be and hereby is created, and that the designation and number of shares of such series,
and the voting and other powers, preferences and relative, participating, optional or other rights,
and the qualifications, limitations and restrictions thereof, of the shares of such series, are as
follows:
Section 1. Designation. The distinctive serial designation of such series of Preferred Stock
is 10% Cumulative Perpetual Preferred Stock, Series G (Series G). Each share of
Series G shall be identical in all respects to every other share of Series G.
Section 2. Number of Shares. The authorized number of shares of Series G shall be 50,000.
Shares of Series G that are redeemed, purchased or otherwise acquired by the Corporation, or
converted into another series of Preferred Stock, shall revert to authorized but unissued shares of
Preferred Stock (provided that any such cancelled shares of Series G may be reissued only as shares
of any series other than Series G).
Section 3. Definitions. As used herein with respect to Series G:
(a) Bylaws means the amended and restated bylaws of the Corporation, as they may be
amended from time to time.
(b) Business Day means a day that is a Monday, Tuesday, Wednesday, Thursday or
Friday and is not a day on which banking institutions in New York City generally are authorized or
obligated by law, regulation or executive order to close.
(c) Certificate of Designations means this Certificate of Designations relating to
the Series G, as it may be amended from time to time.
(d) Certification of Incorporation shall mean the restated certificate of
incorporation of the Corporation, as it may be amended from time to time, and shall include this
Certificate of Designations.
(e) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(f) Junior Stock means the Common Stock and any other class or series of stock of
the Corporation (other than Series G) that ranks junior to Series G either or both as to the
payment of dividends and/or as to the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
(g) Original Issue Date means October 1, 2008.
(h) Parity Stock means any class or series of stock of the Corporation (other than
Series G) that ranks equally with Series G both in the payment of dividends and in the distribution
of assets on any liquidation, dissolution or winding up of the Corporation (in each case without
regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the
foregoing, Parity Stock shall include the Corporations (i) Floating Rate Non-Cumulative Preferred
Stock, Series A; (ii) 6.20% Non-Cumulative Preferred Stock, Series B; (iii) Floating Rate
Non-Cumulative Preferred Stock, Series C; (iv) Floating Rate Non-Cumulative Preferred Stock, Series
D; (v) Perpetual Non-Cumulative Preferred Stock, Series E; and (vi) Perpetual Non-Cumulative
Preferred Stock, Series F.
(i) Preferred Stock means any and all series of preferred stock of the Corporation,
including the Series G.
(j) Voting Parity Stock means, with regard to any matter as to which the holders of
Series G are entitled to vote as specified in Section 8 of this Certificate of Designations, any
and all series of Parity Stock upon which like voting rights have been conferred and are
exercisable with respect to such matter.
G-2
(k) Voting Preferred Stock means, with regard to any matter as to which the holders
of Series G are entitled to vote as specified in Section 8 of this Certificate of Designations, any
and all series of Preferred Stock (other than Series G) that rank equally with Series G either as
to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or
winding up of the Corporation and upon which like voting rights have been conferred and are
exercisable with respect to such matter.
Section 4. Dividends.
(a) Rate. Holders of Series G shall be entitled to receive, on each share of Series G, out of
funds legally available for the payment of dividends under Delaware law, cumulative cash dividends
with respect to each Dividend Period (as defined below) at a per annum rate of 10% on (i) the
amount of $100,000 per share of Series G and (ii) the amount of accrued and unpaid dividends on
such share of Series G, if any (giving effect to (A) any dividends paid through the Dividend
Payment Date (as defined below) that begins such Dividend Period (other than the initial Dividend
Period) and (B) any dividends (including dividends thereon at a per annum rate of 10% to the date
of payment) paid during such Dividend Period). Such dividends shall begin to accrue and be
cumulative from the Original Issue Date, shall compound on each Dividend Payment Date (i.e., no
dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such
other dividends has passed without such other dividends having been paid on such date) and shall be
payable in arrears (as provided below in this Section 4(a)), but only when, as and if declared by
the Board of Directors or the Committee (or another duly authorized committee of the Board of
Directors) on each November 10, February 10, May 10 and August 10 (each, a Dividend Payment
Date), commencing on November 10, 2008; provided that if any such Dividend Payment Date would
otherwise occur on a day that is not a Business Day, such Dividend Payment Date shall instead be
(and any dividend payable on Series G on such Dividend Payment Date shall instead be payable on)
the immediately succeeding Business Day. Dividends payable on the Series G in respect of any
Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day
months. The amount of dividends payable on the Series G on any date prior to the end of a Dividend
Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months, and actual days elapsed over a 30-day month.
Dividends that are payable on Series G on any Dividend Payment Date will be payable to holders
of record of Series G as they appear on the stock register of the Corporation on the applicable
record date, which shall be the 15th calendar day before such Dividend Payment Date (as originally
scheduled) or such other record date fixed by the Board of Directors or the Committee (or another
duly authorized committee of the Board of Directors) that is not more than 60 nor less than 10 days
prior to such Dividend Payment Date (each, a Dividend Record Date). Any such day that is
a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
G-3
Each dividend period (a Dividend Period) shall commence on and include a Dividend
Payment Date (other than the initial Dividend Period, which shall commence on and include the
Original Issue Date of the Series G) and shall end on and include the calendar day next preceding
the next Dividend Payment Date. Dividends payable in respect of a Dividend Period shall be
payable in arrears on the first Dividend Payment Date after such Dividend Period.
Holders of Series G shall not be entitled to any dividends, whether payable in cash,
securities or other property, other than dividends (if any) declared and payable on the Series G as
specified in this Section 4 (subject to the other provisions of this Certificate of Designations).
(b) Priority of Dividends. So long as any share of Series G remains outstanding, no dividend
shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a
dividend payable solely in Junior Stock), and no Common Stock, Junior Stock or Parity Stock shall
be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or
indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior
Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate
liquidation amount) or Junior Stock, or the exchange or conversion of one share of Junior Stock for
or into another share of Junior Stock or of one share of Parity Stock for or into another share of
Parity Stock (with the same or lesser per share liquidation amount) or Junior Stock) during a
Dividend Period, unless all accrued and unpaid dividends for all past Dividend Periods, including
the latest completed Dividend Period (including, if applicable as provided in Section 4(a) above,
dividends on such amount), on all outstanding shares of Series G have been declared and paid in
full (or declared and a sum sufficient for the payment thereof has been set aside for the benefit
of the holders of shares of Series G on the applicable record date). The foregoing provision shall
not restrict the ability of Goldman, Sachs & Co., or any other affiliate of the Corporation, to
engage in any market-making or customer facilitation transactions in Junior Stock or Parity Stock
in the ordinary course of its business or, in connection with the issuance of Junior Stock or
Parity Stock, to engage in ordinary sale and repurchase transactions to facilitate the distribution
of such Junior Stock or Parity Stock.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside
for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date
(or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment
Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment
Date) in full upon the Series G and any shares of Parity Stock, all dividends declared on the
Series G and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of
Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend
payment date falling within the Dividend Period related to such Dividend Payment Date) shall be
declared pro rata so that the respective amounts of such dividends declared shall bear the same
ratio to each other as all accrued and unpaid dividends per share on the Series G (including, if
applicable as provided in Section 4(a) above,
G-4
dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in
the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates,
on a dividend payment date falling within the Dividend Period related to such Dividend Payment
Date) bear to each other.
Subject to the foregoing, such dividends (payable in cash, securities or other property) as
may be determined by the Board of Directors or the Committee (or another duly authorized committee
of the Board of Directors) may be declared and paid on any securities, including Common Stock and
other Junior Stock, from time to time out of any funds legally available for such payment, and the
Series G shall not be entitled to participate in any such dividends.
Section 5. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series G
shall be entitled to receive for each share of Series G, out of the assets of the Corporation or
proceeds thereof (whether capital or surplus) available for distribution to stockholders of the
Corporation, and after satisfaction of all liabilities and obligations to creditors of the
Corporation, before any distribution of such assets or proceeds is made to or set aside for the
holders of Common Stock and any other stock of the Corporation ranking junior to the Series G as to
such distribution, payment in full in an amount equal to the sum of (i) $100,000 per share and
(ii) the accrued and unpaid dividends thereon (including, if applicable as provided in Section 4(a)
above, dividends on such amount), whether or not declared, to the date of payment.
(b) Partial Payment. If in any distribution described in Section 5(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined
below) in full to all holders of Series G and all holders of any stock of the Corporation ranking
equally with the Series G as to such distribution, the amounts paid to the holders of Series G and
to the holders of all such other stock shall be paid pro rata in accordance with the respective
aggregate Liquidation Preferences of the holders of Series G and the holders of all such other
stock. In any such distribution, the Liquidation Preference of any holder of stock of
the Corporation shall mean the amount otherwise payable to such holder in such distribution
(assuming no limitation on the assets of the Corporation available for such distribution),
including an amount equal to any declared but unpaid dividends (and, in the case of any holder of
stock, including the Series G, on which dividends accrue on a cumulative basis, an amount equal to
any accrued and unpaid dividends (including, if applicable, dividends on such amount), whether or
not declared, as applicable), provided that the Liquidation Preference for any share of Series G
shall be determined in accordance with Section 5(a) above.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all
holders of Series G, the holders of other stock of the Corporation shall
G-5
be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according
to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Series G receive cash, securities or
other property for their shares, or the sale, lease or exchange (for cash, securities or other
property) of all or substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Corporation, at its option, subject to the approval of the Board
of Governors of the Federal Reserve System, may redeem, in whole at any time or in part from time
to time, the shares of Series G at the time outstanding, upon notice given as provided in Section
6(c) below, at a redemption price equal to the sum of (i) $110,000 per share and (ii) the accrued
and unpaid dividends thereon (including, if applicable as provided in Section 4(a) above, dividends
on such amount), whether or not declared, to the redemption date, provided that the minimum number
of shares of Series G redeemable at any time is the lesser of (i) 10,000 shares of Series G and
(ii) the number of shares of Series G outstanding. The redemption price for any shares of Series G
shall be payable on the redemption date to the holder of such shares against surrender of the
certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid
dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a
Dividend Period shall not be paid to the holder entitled to receive the redemption price on the
redemption date, but rather shall be paid to the holder of record of the redeemed shares on such
Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above. An
exchange of Series G for Spinco Preferred (as defined in the Securities Purchase Agreement, dated
as of September 29, 2008, between the Corporation and Berkshire Hathaway Inc. (the SPA))
pursuant to Section 4.7 of the SPA, shall not be deemed to be a redemption for purposes of this
Section 6.
(b) No Sinking Fund. The Series G will not be subject to any mandatory redemption, sinking
fund or other similar provisions. Holders of Series G will have no right to require redemption of
any shares of Series G.
(c) Notice of Redemption. Notice of every redemption of shares of Series G shall be given by
first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed
at their respective last addresses appearing on the books of the Corporation. Such mailing shall
be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice
mailed as provided in this Subsection shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice, but failure duly to give such notice by mail, or
any defect in such notice or in the mailing thereof, to any holder of shares of Series G designated
for
G-6
redemption shall not affect the validity of the proceedings for the redemption of any other
shares of Series G. Notwithstanding the foregoing, if the Series G are issued in book-entry form
through The Depository Trust Company or any other similar facility, notice of redemption may be
given to the holders of Series G at such time and in any manner permitted by such facility. Each
notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of
shares of Series G to be redeemed and, if less than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and
(4) the place or places where certificates for such shares are to be surrendered for payment of the
redemption price.
(d) Partial Redemption. In case of any redemption of part of the shares of Series G at the
time outstanding, the shares to be redeemed shall be selected either pro rata or in such other
manner as the Corporation may determine to be fair and equitable. Subject to the provisions
hereof, the Corporation shall have full power and authority to prescribe the terms and conditions
upon which shares of Series G shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares
called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The
City of New York, and having a capital and surplus of at least $50 million and selected by the
Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding
that any certificate for any share so called for redemption has not been surrendered for
cancellation, on and after the redemption date dividends shall cease to accrue on all shares so
called for redemption, all shares so called for redemption shall no longer be deemed outstanding
and all rights with respect to such shares shall forthwith on such redemption date cease and
terminate, except only the right of the holders thereof to receive the amount payable on such
redemption from such bank or trust company, without interest. Any funds unclaimed at the end of
three years from the redemption date shall, to the extent permitted by law, be released to the
Corporation, after which time the holders of the shares so called for redemption shall look only to
the Corporation for payment of the redemption price of such shares.
Section 7. Conversion. Holders of Series G shares shall have no right to exchange or convert
such shares into any other securities.
Section 8. Voting Rights.
(a) General. The holders of Series G shall not have any voting rights except as set forth
below or as otherwise from time to time required by law.
G-7
(b) Class Voting Rights as to Particular Matters. So long as any shares of Series G are
outstanding, in addition to any other vote or consent of stockholders required by law or by the
Certificate of Incorporation, the vote or consent of the holders of at least 66⅔% of the shares of
Series G and any Voting Preferred Stock at the time outstanding and entitled to vote thereon,
voting together as a single class, given in person or by proxy, either in writing without a meeting
or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Incorporation to authorize or create, or increase the authorized amount of, any shares of
any class or series of capital stock of the Corporation ranking senior to the Series G with
respect to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Series G. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to materially and adversely affect the special
rights, preferences, privileges or voting powers of the Series G, taken as a whole; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series G, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series G remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of the
Series G immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of this Section 8(b), any increase in the amount of the
authorized Preferred Stock, or the creation and issuance, or an increase in the authorized or
issued amount, of any other series of Preferred Stock ranking equally with and/or junior to the
Series G with respect to the payment of dividends (whether such dividends are cumulative or
non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of
the Corporation will not be deemed to adversely affect the rights, preferences, privileges or
voting powers of the Series G.
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 8(b) would adversely affect the Series G and one or more
but not all other series of Preferred Stock, then only the Series G and
G-8
such series of Preferred Stock as are adversely affected by and entitled to vote on the matter
shall vote on the matter together as a single class (in lieu of all other series of Preferred
Stock).
If any amendment, alteration, repeal, share exchange, reclassification, merger or
consolidation specified in this Section 8(b) would adversely affect the Series G but would not
similarly adversely affect all other series of Voting Parity Stock, then only the Series G and each
other series of Voting Parity Stock as is similarly adversely affected by and entitled to vote on
the matter, if any, shall vote on the matter together as a single class (in lieu of all other
series of Preferred Stock).
(c) Series G Voting Rights as to Particular Matters. In addition to any other vote or consent
of stockholders required by law or by the Certificate of Incorporation, so long as at least 10,000
shares of Series G are outstanding, the vote or consent of the holders of at least 50.1% of the
shares of Series G at the time outstanding, voting in person or by proxy, either in writing without
a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or
validating:
(i) Authorization or Issuance of Senior Stock. Any amendment or alteration of the
Certificate of Incorporation to authorize or create, or increase the authorized amount of,
any shares of any class or series of capital stock of the Corporation, or the issuance of
any shares of any class or series of capital stock of the Corporation, in each case,
ranking senior to the Series G with respect to either or both the payment of dividends
and/or the distribution of assets on any liquidation, dissolution or winding up of the
Corporation;
(ii) Amendment of Series G. Any amendment, alteration or repeal of any provision of
the Certificate of Incorporation so as to affect or change the rights, preferences,
privileges or voting powers of the Series G so as not to be substantially similar to those
in effect immediately prior to such amendment, alteration or repeal; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any
consummation of a binding share exchange or reclassification involving the Series G, or of
a merger or consolidation of the Corporation with another corporation or other entity,
unless in each case (x) the shares of Series G remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, are converted into or exchanged for preference securities of the
surviving or resulting entity or its ultimate parent, and (y) such shares remaining
outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof as are
substantially similar to the rights, preferences, privileges and voting powers, and
limitations and restrictions of the Series G immediately prior to such consummation;
G-9
provided, however, that for all purposes of this Section 8(c), the creation and issuance, or an
increase in the authorized or issued amount, of any other series of Preferred Stock ranking equally
with and/or junior to the Series G with respect to the payment of dividends (whether such dividends
are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution
or winding up of the Corporation will not be deemed to adversely affect the rights, preferences,
privileges or voting powers of the Series G.
(d) Changes after Provision for Redemption. No vote or consent of the holders of Series G
shall be required pursuant to Section 8(b) or (c) above if, at or prior to the time when any such
vote or consent would otherwise be required pursuant to such Section, all outstanding shares of
Series G (or, in the case of Section 8(c), more than 40,000 shares of Series G) shall have been
redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall
have been deposited in trust for such redemption, in each case pursuant to Section 6 above.
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Series G (including, without limitation, the fixing of a record date
in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other aspect or matter with regard to such a meeting or such consents
shall be governed by any rules of the Board of Directors or the Committee (or another duly
authorized committee of the Board of Directors), in its discretion, may adopt from time to time,
which rules and procedures shall conform to the requirements of the Certificate of Incorporation,
the Bylaws, and applicable law and the rules of any national securities exchange or other trading
facility on which the Series G is listed or traded at the time. Whether the vote or consent of the
holders of a plurality, majority or other portion of the shares of Series G and any Voting
Preferred Stock has been cast or given on any matter on which the holders of shares of Series G are
entitled to vote shall be determined by the Corporation by reference to the specified liquidation
amount of the shares voted or covered by the consent (provided that the specified liquidation
amount for any share of Series G shall be the Liquidation Preference for such share) as if the
Corporation were liquidated on the record date for such vote or consent, if any, or, in the absence
of a record date, on the date for such vote or consent.
Section 9. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for the Series G may deem and treat the record holder of any share of
Series G as the true and lawful owner thereof for all purposes, and neither the Corporation nor
such transfer agent shall be affected by any notice to the contrary.
Section 10. Notices. All notices or communications in respect of Series G shall be
sufficiently given if given in writing and delivered in person or by first class mail, postage
prepaid, or if given in such other manner as may be permitted in this Certificate of Designations,
in the Certificate of Incorporation or Bylaws or by applicable law. Notwithstanding the foregoing,
if the Series G are issued in book-entry form
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through The Depository Trust Company or any similar facility, such notices may be given to the
holders of Series G in any manner permitted by such facility.
Section 11. No Preemptive Rights. No share of Series G shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated, issued or granted.
Section 12. Replacement Certificates. The Corporation shall replace any mutilated certificate
at the holders expense upon surrender of that certificate to the Corporation. The Corporation
shall replace certificates that become destroyed, stolen or lost at the holders expense upon
delivery to the Corporation of reasonably satisfactory evidence that the certificate has been
destroyed, stolen or lost, together with any indemnity that may be reasonably required by the
Corporation.
Section 13. Other Rights. The shares of Series G shall not have any rights, preferences,
privileges or voting powers or relative, participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, other than as set forth herein or in the
Certificate of Incorporation or as provided by applicable law.
G-11
Appendix H
CERTIFICATE OF DESIGNATIONS
OF
FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES H
OF
THE GOLDMAN SACHS GROUP, INC.
The Goldman Sachs Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the Corporation), in accordance with the
provisions of Sections 103 and 151 thereof, does hereby certify:
The Securities Issuance Committee of the board of directors of the Corporation (the Board
of Directors), in accordance with the resolutions of the Board of Directors dated September
16, 2005, September 29, 2006 and October 13, 2008, the provisions of the restated certificate of
incorporation and the amended and restated bylaws of the Corporation and applicable law, at a
meeting duly called and held on October 26, 2008, adopted the following resolution creating a
series of 10,000,000 shares of Preferred Stock of the Corporation designated as Fixed Rate
Cumulative Perpetual Preferred Stock, Series H.
RESOLVED, that pursuant to the authority vested in the Securities Issuance Committee and in
accordance with the resolutions of the Board of Directors dated September 16, 2005, September 29,
2006 and October 13, 2008, the provisions of the restated certificate of incorporation and the
amended and restated bylaws of the Corporation and applicable law, a series of Preferred Stock, par
value $0.01 per share, of the Corporation be and hereby is created, and that the designation and
number of shares of such series, and the voting and other powers, preferences and relative,
participating, optional or other rights, and the qualifications, limitations and restrictions
thereof, of the shares of such series, are as follows:
Section 1. Designation and Number of Shares. There is hereby created out of the authorized
and unissued shares of preferred stock of the Corporation a series of preferred stock designated as
the Fixed Rate Cumulative Perpetual Preferred Stock, Series H (the Designated Preferred
Stock). The authorized number of shares of Designated Preferred Stock shall be 10,000,000.
Section 2. Standard Provisions. The Standard Provisions contained in Annex A attached hereto
are incorporated herein by reference in their entirety and shall be deemed to be a part of this
Certificate of Designations to the same extent as if such provisions had been set forth in full
herein.
Section 3. Definitions. The following terms are used in this Certificate of Designations
(including the Standard Provisions in Annex A hereto) as defined below:
(a) Common Stock means the common stock, par value $0.01 per share, of the
Corporation.
(b) Dividend Payment Date means February 15, May 15, August 15 and November 15 of
each year.
(c) Junior Stock means the Common Stock, and any other class or series of stock of
the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred
Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the
Corporation.
(d) Liquidation Amount means $1,000 per share of Designated Preferred Stock.
(e) Minimum Amount means $2,500,000,000.
(f) Parity Stock means any class or series of stock of the Corporation (other than
Designated Preferred Stock) the terms of which do not expressly provide that such class or series
will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights
on liquidation, dissolution or winding up of the Corporation (in each case without regard to
whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity
Stock shall include the Corporations (i) Floating Rate Non-Cumulative Preferred Stock, Series A;
(ii) 6.20% Non-Cumulative Preferred Stock, Series B; (iii) Floating Rate Non-Cumulative Preferred
Stock, Series C; (iv) Floating Rate Non-Cumulative Preferred Stock, Series D; (v) Perpetual
Non-Cumulative Preferred Stock, Series E; (vi) Perpetual Non-Cumulative Preferred Stock, Series F;
and (vii) 10% Cumulative Perpetual Preferred Stock, Series G.
(g) Signing Date means October 26, 2008.
Section 4. Certain Voting Matters. Whether the
vote or consent of the holders of a plurality,
majority or other portion of the shares of
Designated Preferred Stock and any Voting Parity
Stock has been cast or given on any matter on
which the holders of shares of Designated
Preferred Stock are entitled to vote shall be
determined by the Corporation by reference to the
specified liquidation amount of the shares voted
or covered by the consent as if the Corporation
were liquidated on the record date for such vote
or consent, if any, or, in the absence of a
record date, on the date for such vote or
consent. For purposes of determining the voting
rights of the holders of Designated Preferred
Stock under Section 7 of the Standard Provisions
forming part of this Certificate of Designations,
each holder will be entitled to one vote for each
$1,000 of liquidation preference to which such
holders shares are entitled.
H-2
Annex A to Appendix H
STANDARD PROVISIONS
Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all
respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall
be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part
of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity
Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the
distribution of assets in the event of any dissolution, liquidation or winding up of the
Corporation.
Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:
(a) Applicable Dividend Rate means (i) during the period from the Original Issue
Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth
anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the
first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9%
per annum.
(b) Appropriate Federal Banking Agency means the appropriate Federal banking
agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance
Act (12 U.S.C. Section 1813(q)), or any successor provision.
(c) Business Combination means a merger, consolidation, statutory share exchange or
similar transaction that requires the approval of the Corporations stockholders.
(d) Business Day means any day except Saturday, Sunday and any day on which banking
institutions in the State of New York generally are authorized or required by law or other
governmental actions to close.
(e) Bylaws means the bylaws of the Corporation, as they may be amended from time to
time.
(f) Certificate of Designations means the Certificate of Designations or comparable
instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a
part, as it may be amended from time to time.
(g) Charter means the Corporations certificate or articles of incorporation,
articles of association, or similar organizational document.
(h) Dividend Period has the meaning set forth in Section 3(a).
(i) Dividend Record Date has the meaning set forth in Section 3(a).
(j) Liquidation Preference has the meaning set forth in Section 4(a).
(k) Original Issue Date means the date on which shares of Designated Preferred Stock
are first issued.
(l) Preferred Director has the meaning set forth in Section 7(b).
(m) Preferred Stock means any and all series of preferred stock of the Corporation,
including the Designated Preferred Stock.
(n) Qualified Equity Offering means the sale and issuance for cash by the
Corporation to persons other than the Corporation or any of its subsidiaries after the Original
Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock,
that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time
of issuance under the applicable risk-based capital guidelines of the Corporations Appropriate
Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or
arrangements entered into, or pursuant to financing plans which were publicly announced, on or
prior to October 13, 2008).
(o) Share Dilution Amount has the meaning set forth in Section 3(b).
(p) Standard Provisions mean these Standard Provisions that form a part of the
Certificate of Designations relating to the Designated Preferred Stock.
(q) Successor Preferred Stock has the meaning set forth in Section 5(a).
(r) Voting Parity Stock means, with regard to any matter as to which the holders of
Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these
Standard Provisions that form a part of the Certificate of Designations, any and all series of
Parity Stock upon which like voting rights have been conferred and are exercisable with respect to
such matter.
Section 3. Dividends.
(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of
Designated Preferred Stock if, as and when declared by the Board of Directors or any duly
authorized committee of the Board of Directors, but only out of assets legally available therefor,
cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per
annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated
Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period
on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be
cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date
(i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment
Date for such other dividends has passed without such other dividends
H-A-2
having been paid on such date) and shall be payable quarterly in arrears on each Dividend
Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar
days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise
fall on a day that is not a Business Day, the dividend payment due on that date will be postponed
to the next day that is a Business Day and no additional dividends will accrue as a result of that
postponement. The period from and including any Dividend Payment Date to, but excluding, the next
Dividend Payment Date is a Dividend Period, provided that the initial Dividend Period
shall be the period from and including the Original Issue Date to, but excluding, the next Dividend
Payment Date.
Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period
shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of
dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period,
and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of
twelve 30-day months, and actual days elapsed over a 30-day month.
Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be
payable to holders of record of Designated Preferred Stock as they appear on the stock register of
the Corporation on the applicable record date, which shall be the 15th calendar day immediately
preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or
any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10
days prior to such Dividend Payment Date (each, a Dividend Record Date). Any such day
that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a
Business Day.
Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable
in cash, securities or other property, other than dividends (if any) declared and payable on
Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the
Certificate of Designations).
(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains
outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other
shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity
Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common
Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or
otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all
accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend
Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on
all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared
and paid in full (or have been declared and a sum sufficient for the payment thereof has been set
aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable
record date). The foregoing limitation shall
H-A-3
not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or
other Junior Stock in connection with the administration of any employee benefit plan in the
ordinary course of business (including purchases to offset the Share Dilution Amount (as defined
below) pursuant to a publicly announced repurchase plan) and consistent with past practice,
provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share
Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the
Corporation solely for the purpose of market-making, stabilization or customer facilitation
transactions in Junior Stock or Parity Stock in the ordinary course of its business; (iii)
purchases by a broker-dealer subsidiary of the Corporation of capital stock of the Corporation for
resale pursuant to an offering by the Corporation of such capital stock underwritten by such
broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in
connection with a stockholders rights plan or any redemption or repurchase of rights pursuant to
any stockholders rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of
record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons
(other than the Corporation or any of its subsidiaries), including as trustees or custodians; and
(vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock
for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior
Stock, in each case, solely to the extent required pursuant to binding contractual agreements
entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise,
settlement or exchange thereof for Common Stock. Share Dilution Amount means the
increase in the number of diluted shares outstanding (determined in accordance with generally
accepted accounting principles in the United States, and as measured from the date of the
Corporations consolidated financial statements most recently filed with the Securities and
Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise
of equity-based compensation to employees and equitably adjusted for any stock split, stock
dividend, reverse stock split, reclassification or similar transaction.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside
for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date
(or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment
Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment
Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends
declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend
Payment Date (or, in the case of Parity Stock having dividend payment dates different from the
Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to
such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such
dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per
share on the shares of Designated Preferred Stock (including, if applicable as provided in Section
3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date
(or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment
Dates, on a dividend payment date falling within the Dividend Period related to such Dividend
H-A-4
Payment Date) (subject to their having been declared by the Board of Directors or a duly
authorized committee of the Board of Directors out of legally available funds and including, in the
case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to
each other. If the Board of Directors or a duly authorized committee of the Board of Directors
determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation
will provide written notice to the holders of Designated Preferred Stock prior to such Dividend
Payment Date.
Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or
other property) as may be determined by the Board of Directors or any duly authorized committee of
the Board of Directors may be declared and paid on any securities, including Common Stock and other
Junior Stock, from time to time out of any funds legally available for such payment, and holders of
Designated Preferred Stock shall not be entitled to participate in any such dividends.
Section 4. Liquidation Rights.
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of
Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred
Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus)
available for distribution to stockholders of the Corporation, subject to the rights of any
creditors of the Corporation, before any distribution of such assets or proceeds is made to or set
aside for the holders of Common Stock and any other stock of the Corporation ranking junior to
Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum
of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends
(including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or
not declared, to the date of payment (such amounts collectively, the Liquidation
Preference).
(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the
Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect
to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with
respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to
such distribution, holders of Designated Preferred Stock and the holders of such other stock shall
share ratably in any such distribution in proportion to the full respective distributions to which
they are entitled.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders
of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock
of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been
paid in full, the holders of
H-A-5
other stock of the Corporation shall be entitled to receive all remaining assets of the
Corporation (or proceeds thereof) according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4,
the merger or consolidation of the Corporation with any other corporation or other entity,
including a merger or consolidation in which the holders of Designated Preferred Stock receive
cash, securities or other property for their shares, or the sale, lease or exchange (for cash,
securities or other property) of all or substantially all of the assets of the Corporation, shall
not constitute a liquidation, dissolution or winding up of the Corporation.
Section 5. Redemption.
(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be
redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the
Original Issue Date. On or after the first Dividend Payment Date falling on or after the third
anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of
the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time
to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the
time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal
to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any
accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends
on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the
date fixed for redemption.
Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after
the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the
approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time
and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon
notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the
Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid
dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount)
(regardless of whether any dividends are actually declared) to, but excluding, the date fixed for
redemption; provided that (x) the Corporation (or any successor by Business Combination) has
received aggregate gross proceeds of not less than the Minimum Amount (plus the Minimum Amount as
defined in the relevant certificate of designations for each other outstanding series of preferred
stock of such successor that was originally issued to the United States Department of the Treasury
(the Successor Preferred Stock) in connection with the Troubled Asset Relief Program
Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity
Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred
Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the
aggregate net cash proceeds received by the Corporation (or any successor by Business Combination)
H-A-6
from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).
The redemption price for any shares of Designated Preferred Stock shall be payable on the
redemption date to the holder of such shares against surrender of the certificate(s) evidencing
such shares to the Corporation or its agent. Any declared but unpaid dividends payable on a
redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not
be paid to the holder entitled to receive the redemption price on the redemption date, but rather
shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating
to the Dividend Payment Date as provided in Section 3 above.
(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will
have no right to require redemption or repurchase of any shares of Designated Preferred Stock.
(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock
shall be given by first class mail, postage prepaid, addressed to the holders of record of the
shares to be redeemed at their respective last addresses appearing on the books of the Corporation.
Such mailing shall be at least 30 days and not more than 60 days before the date fixed for
redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have
been duly given, whether or not the holder receives such notice, but failure duly to give such
notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of
Designated Preferred Stock designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding
the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The
Depository Trust Corporation or any other similar facility, notice of redemption may be given to
the holders of Designated Preferred Stock at such time and in any manner permitted by such
facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the
number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3)
the redemption price; and (4) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price.
(d) Partial Redemption. In case of any redemption of part of the shares of Designated
Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro
rata or in such other manner as the Board of Directors or a duly authorized committee thereof may
determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a
duly authorized committee thereof shall have full power and authority to prescribe the terms and
conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If
fewer than all the
H-A-7
shares represented by any certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without charge to the holder thereof.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the redemption have been
deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called
for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City
of New York, and having a capital and surplus of at least $500 million and selected by the Board of
Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any
certificate for any share so called for redemption has not been surrendered for cancellation, on
and after the redemption date dividends shall cease to accrue on all shares so called for
redemption, all shares so called for redemption shall no longer be deemed outstanding and all
rights with respect to such shares shall forthwith on such redemption date cease and terminate,
except only the right of the holders thereof to receive the amount payable on such redemption from
such bank or trust company, without interest. Any funds unclaimed at the end of three years from
the redemption date shall, to the extent permitted by law, be released to the Corporation, after
which time the holders of the shares so called for redemption shall look only to the Corporation
for payment of the redemption price of such shares.
(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed,
repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares
of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be
reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).
Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to
exchange or convert such shares into any other securities.
Section 7. Voting Rights.
(a) General. The holders of Designated Preferred Stock shall not have any voting rights except
as set forth below or as otherwise from time to time required by law.
(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the
shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend
Periods or more, whether or not consecutive, the authorized number of directors of the Corporation
shall automatically be increased by two and the holders of the Designated Preferred Stock shall
have the right, with holders of shares of any one or more other classes or series of Voting Parity
Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the
"Preferred Directors and each a "Preferred Director") to fill such newly created
directorships at the Corporations next annual meeting of stockholders (or at a special meeting
called for that
H-A-8
purpose prior to such next annual meeting) and at each subsequent annual meeting of
stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the
latest completed Dividend Period (including, if applicable as provided in Section 3(a) above,
dividends on such amount), on all outstanding shares of Designated Preferred Stock have been
declared and paid in full at which time such right shall terminate with respect to the Designated
Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event
of each and every subsequent default of the character above mentioned; provided that it shall be a
qualification for election for any Preferred Director that the election of such Preferred Director
shall not cause the Corporation to violate any corporate governance requirements of any securities
exchange or other trading facility on which securities of the Corporation may then be listed or
traded that listed or traded companies must have a majority of independent directors. Upon any
termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity
Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be
qualified as directors, the term of office of all Preferred Directors then in office shall
terminate immediately and the authorized number of directors shall be reduced by the number of
Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time,
with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote
of the holders a majority of the shares of Designated Preferred Stock at the time outstanding
voting separately as a class together with the holders of shares of Voting Parity Stock, to the
extent the voting rights of such holders described above are then exercisable. If the office of
any Preferred Director becomes vacant for any reason other than removal from office as aforesaid,
the remaining Preferred Director may choose a successor who shall hold office for the unexpired
term in respect of which such vacancy occurred.
(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated
Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required
by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of
Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or
by proxy, either in writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of
Designations for the Designated Preferred Stock or the Charter to authorize or create or
increase the authorized amount of, or any issuance of, any shares of, or any securities
convertible into or exchangeable or exercisable for shares of, any class or series of
capital stock of the Corporation ranking senior to Designated Preferred Stock with respect
to either or both the payment of dividends and/or the distribution of assets on any
liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of
any provision of the Certificate of Designations for the
H-A-9
Designated Preferred Stock or the Charter (including, unless no vote on such merger or
consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal
by means of a merger, consolidation or otherwise) so as to adversely affect the rights,
preferences, privileges or voting powers of the Designated Preferred Stock; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation
of a binding share exchange or reclassification involving the Designated Preferred Stock,
or of a merger or consolidation of the Corporation with another corporation or other
entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding
or, in the case of any such merger or consolidation with respect to which the Corporation
is not the surviving or resulting entity, are converted into or exchanged for preference
securities of the surviving or resulting entity or its ultimate parent, and (y) such shares
remaining outstanding or such preference securities, as the case may be, have such rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, taken
as a whole, as are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and limitations and restrictions thereof, of
Designated Preferred Stock immediately prior to such consummation, taken as a whole;
provided, however, that for all purposes of this Section 7(c), any increase in the amount of the
authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred
Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons
prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued
amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of
Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other
series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with
respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and
the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not
be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not
require the affirmative vote or consent of, the holders of outstanding shares of the Designated
Preferred Stock.
(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated
Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when
any such vote or consent would otherwise be required pursuant to such Section, all outstanding
shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for
redemption upon proper notice and sufficient funds shall have been deposited in trust for such
redemption, in each case pursuant to Section 5 above.
H-A-10
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting
any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing
of a record date in connection therewith), the solicitation and use of proxies at such a meeting,
the obtaining of written consents and any other aspect or matter with regard to such a meeting or
such consents shall be governed by any rules of the Board of Directors or any duly authorized
committee of the Board of Directors, in its discretion, may adopt from time to time, which rules
and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and
the rules of any national securities exchange or other trading facility on which Designated
Preferred Stock is listed or traded at the time.
Section 8. Record Holders. To the fullest extent permitted by applicable law, the Corporation
and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any
share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and
neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
Section 9. Notices. All notices or communications in respect of Designated Preferred Stock
shall be sufficiently given if given in writing and delivered in person or by first class mail,
postage prepaid, or if given in such other manner as may be permitted in this Certificate of
Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if
shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust
Corporation or any similar facility, such notices may be given to the holders of Designated
Preferred Stock in any manner permitted by such facility.
Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights
of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or
options issued or granted with respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated, issued or granted.
Section 11. Replacement Certificates. The Corporation shall replace any mutilated certificate
at the holders expense upon surrender of that certificate to the Corporation. The Corporation
shall replace certificates that become destroyed, stolen or lost at the holders expense upon
delivery to the Corporation of reasonably satisfactory evidence that the certificate has been
destroyed, stolen or lost, together with any indemnity that may be reasonably required by the
Corporation.
Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights,
preferences, privileges or voting powers or relative, participating, optional or other special
rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or
in the Charter or as provided by applicable law.
H-A-11
EX-4.5
3
y74032exv4w5.htm
EX-4.5: FORM OF FLOATING RATE SENIOR DEBT SECURITY (TLGP)
EX-4.5
Exhibit 4.5
[FORM OF FLOATING RATE SENIOR DEBT SECURITY]
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Registered No.
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CUSIP No.
ISIN No. |
(Face of Security)
[IF A GLOBAL SECURITY, INSERT THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
2008 INDENTURE AS DEFINED ON THE REVERSE OF THIS SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE 2008 INDENTURE AND THIS SECURITY.]
[IF DTC IS THE DEPOSITARY, INSERT UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE GOLDMAN
SACHS GROUP, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.]
[INSERT ANY LEGEND REQUIRED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT AND THE REGULATIONS
THEREUNDER.]
THIS SECURITY IS GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND THE RIGHTS OF
THE HOLDER OF THIS SECURITY ARE SUBJECT TO CERTAIN RIGHTS OF THE FDIC, AS AND TO THE EXTENT
INDICATED IN THIS SECURITY, INCLUDING SECTIONS 7, 9, 10, 11, 12, 13, 14, 15 AND 16 ON THE REVERSE
HEREOF.
(Face of Security continued on next page)
-1-
Title of Series:
Title of Securities:
THE GOLDMAN SACHS GROUP, INC.
[TITLE OF SECURITY]
The Goldman Sachs Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the Company, which term includes any successor Person under
the 2008 Indenture (as defined on the reverse of this Security)), for value received, hereby
promises to pay to ___, or registered assigns, the principal sum of ___on ___and to pay interest
thereon, from ___or from the most recent Interest Payment Date to which interest has been paid or
made available for payment, ___on ___in each year (each, an Interest Payment Date), commencing on
___and at the Maturity of the principal hereof, until the principal hereof is paid or made
available for payment, at the rate of [IF APPLICABLE, INSERT - ___% above][LIBOR][EURIBOR],
determined in accordance with the following provisions and reset effective each Interest Reset
Date. [IF FOLLOWING BUSINESS DAY CONVENTION APPLIES, INSERT If an Interest Payment Date would
otherwise be a day that is not a Business Day, the Interest Payment Date will be postponed to the
next day that is a Business Day. [IF MODIFIED FOLLOWING BUSINESS DAY CONVENTION APPLIES, ALSO
INSERT However, if that Business Day is in the next succeeding calendar month, the Interest
Payment Date will instead be advanced to the immediately preceding day that is a Business Day.]]
[IF FOLLOWING UNADJUSTED BUSINESS DAY CONVENTION APPLIES, INSERT If an Interest Payment Date
would otherwise be a day that is not a Business Day, the payment due on that Interest Payment Date
(but no such Interest Payment Date) will be postponed to the next day that is a Business Day;
provided, however, that interest due with respect to such Interest Payment Date
shall not accrue from and including such Interest Payment Date shall not accrue from and including
such Interest Payment Date to and including the date of payment of such interest as so postponed
[IF MODIFIED FOLLOWING UNADJUSTED BUSINESS DAY CONVENTION APPLIES, ALSO INSERT , and
provided further that, if such next succeeding Business Day would fall in the next
succeeding calendar month, the date of payment with respect to such Interest Payment Date (but not
such Interest Payment Date) will be advanced to the Business Day immediately preceding such
Interest Payment Date].] Not withstanding
the foregoing, an Interest Payment Date that falls on the Maturity
of this Security will not be changed. Any such installment
of interest that is overdue shall also bear interest at the same rate
in effect during the Interest Period ending on the due date of such
installment of interest (to the extent that the payment of such
interest shall be legally enforceable), from the date any such
overdue amount first becomes due until it is paid or made available
for payment. Notwithstanding the foregoing, interest on any
installment of interest that is overdue shall be payable on demand.
Unless otherwise specified, interest on this Security shall be calculated on the basis of a
360-day year and the actual number of days elapsed. Payments of interest on this Security with
respect to any Interest Payment Date or at the Maturity of the principal hereof will include
interest accrued to but excluding such Interest Payment Date or the date of such Maturity, as the
case may be. Accrued interest from the date of issue or from the last date to which interest has
been paid or made available for payment shall be calculated by the Calculation Agent by multiplying
the principal amount by an accrued interest factor. Such accrued interest factor shall be computed
by adding the interest factors calculated for each day from and including the date of issue or from
and including the last date to which interest has been paid or made available for payment, to but
excluding the date for which accrued interest is being calculated. The interest factor for each
such day shall be expressed as a decimal and computed by dividing the interest rate (also expressed
as a decimal) in effect on such day by 360. Notwithstanding the foregoing, interest on this
Security shall not be higher than the maximum rate permitted by New York law, as it may be modified
by U.S. law of general applicability.
For the purposes of this Security, [LIBOR][EURIBOR] will be determined in the following
manner:
[IF LIBOR, INSERT LIBOR will be the offered rate for [insert applicable index maturity]
deposits in [insert applicable index currency], as that rate appears on the Reuters Screen LIBOR
Page as of
(Face of Security continued on next page)
-2-
11:00 A.M., London time, on the relevant Interest Determination Date, beginning on the
relevant Interest Reset Date. Notwithstanding the foregoing, LIBOR for the initial Interest Period
will be the Initial Base Rate.
If the rate described above does not so appear on the Reuters Screen LIBOR Page, LIBOR will be
determined on the basis of the rates, at approximately 11:00 A.M., London time, on the relevant
Interest Determination Date, at which deposits of the following kind are offered to prime banks in
the London interbank market by four major banks in that market selected by the Calculation Agent:
[insert applicable index maturity] [insert applicable index currency] deposits, beginning on the
relevant Interest Reset Date, and in a Representative Amount. The Calculation Agent will request
the principal London office of each such bank to provide a quotation of its rate. If at least two
quotations are provided, LIBOR for the relevant Interest Determination Date will be the arithmetic
mean of the quotations.
If fewer than two quotations are provided as described above, LIBOR for the relevant Interest
Determination Date will be the arithmetic mean of the rates for loans of the following kind to
leading European banks quoted, at approximately 11:00 A.M., in [the principal financial center for
the country of the applicable index currency], on that Interest Determination Date, by three major
banks in [that principal financial center] selected by the Calculation Agent: [insert applicable
index maturity] [insert applicable index currency] loans, beginning on the relevant Interest Reset
Date, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described above,
LIBOR for the new Interest Period will be LIBOR in effect for the prior Interest Period. If the
Initial Base Rate has been in effect for the prior Interest Period, however, it will remain in
effect for the new Interest Period.
For all purposes of this Security:
The term Initial Base Rate means the base rate in effect for the initial Interest Period.
This rate will be ___%, which is the [insert applicable index maturity] deposits in [insert
applicable index currency] LIBOR rate on ___, as determined by the Calculation Agent.
The term Interest Determination Date means [IF INDEX CURRENCY IS NOT POUNDS STERLING, INSERT
two London Business Days prior to] the first day of each Interest Period.
The term Interest Period means, with respect to the initial Interest Period, the period from
and including ___to, but excluding, the initial Interest Reset Date and, with respect to the
subsequent Interest Periods, the periods from and including an Interest Reset Date to, but
excluding, the next Interest Reset Date.
The term Interest Reset Date means every ___, commencing on ___, on each of which the rate
of interest on this Security will be reset. If any Interest Reset Date would otherwise be a day
that is not a Business Day with respect to this Security, the Interest Reset Date shall be the next
succeeding day that is a Business Day with respect to this Security. However, if that Business Day
is in the next succeeding calendar month, the Interest Reset Date will instead be the immediately
preceding Business Day. Notwithstanding the foregoing, an Interest Reset Date that falls on the
Maturity of this Security will not be changed.
The term London Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in London generally are authorized or obligated by law,
regulation or executive order to close and is also a day on which dealings in [insert applicable
index currency] are transacted in the London interbank market.
The term Representative Amount means an amount that, in the Calculation Agents judgment, is
representative of a single transaction in the relevant market at the relevant time.
(Face of Security continued on next page)
-3-
The term Reuters Screen LIBOR Page means the display on the Reuters Screen LIBOR01 Page or
Reuters Screen LIBOR02 Page, as specified on the face hereof, or any successor or replacement page
or pages on that or any successor service, on which London interbank rates of major banks for the
Index Currency are displayed.]
[IF EURIBOR, INSERT For the purposes of this Security, EURIBOR will be determined in the
following manner:
EURIBOR will be the offered rate per annum for [insert applicable index maturity] deposits in
euros, beginning on the second Euro Business Day after the relevant Interest Determination Date, as
that rate appears on the Reuters Screen EURIBOR01 Page as of 11:00 A.M., Brussels time, on the
relevant Interest Determination Date. EURIBOR for the initial Interest Period will be the Initial
Base Rate.
If the rate described above does not so appear on the Reuters Screen EURIBOR01 Page, EURIBOR
will be determined on the basis of the rates, at approximately 11:00 A.M., Brussels time, on the
relevant Interest Determination Date, at which deposits of the following kind are offered to prime
banks in the euro-zone interbank market by the principal euro-zone office of each of four major
banks in that market selected by the Calculation Agent: [insert applicable index maturity] deposits
in euros, beginning on the relevant Interest Reset Date, and in a Representative Amount. The
Calculation Agent will request the principal euro-zone office of each of these banks to provide a
quotation of its rate. If at least two quotations are provided, EURIBOR for the relevant Interest
Determination Date will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as described above, EURIBOR for the relevant
Interest Determination Date will be the arithmetic mean of the rates for loans of the following
kind to leading euro-zone banks quoted, at approximately 11:00 A.M., Brussels time, on that
Interest Determination Date, by three major banks in the euro-zone selected by the Calculation
Agent: loans of euros having the maturity of [insert applicable index maturity], beginning on the
relevant Interest Reset Date, and in a Representative Amount.
If fewer than three banks selected by the Calculation Agent are quoting as described above,
EURIBOR for the new Interest Period will be EURIBOR in effect for the prior Interest Period. If
the Initial Base Rate has been in effect for the prior Interest Period, however, it will remain in
effect for the new Interest Period.
For all purposes of this Security:
The term Initial Base Rate means the base rate in effect for the initial Interest Period.
This rate will be ___%, which is the [insert applicable index maturity] deposits in euros EURIBOR
rate on ___, as determined by the Calculation Agent.
The term Interest Determination Date means two Euro Business Days prior to the first day of
each Interest Period.
The term Interest Period means, with respect to the initial Interest Period, the period from
and including ___to, but excluding, the initial Interest Reset Date and, with respect to the
subsequent Interest Periods, the periods from and including an Interest Reset Date to, but
excluding, the next Interest Reset Date.
The term Interest Reset Date means every ___, commencing on ___, on each of which the rate
of interest on this Security will be reset. If any Interest Reset Date would otherwise be a day
that is not a Business Day with respect to this Security, the Interest Reset Date shall be the next
succeeding day that is a Business Day with respect to this Security. However, if that Business Day
is in the next succeeding calendar month, the Interest Reset Date will instead be the immediately
preceding Business Day.
(Face of Security continued on next page)
-4-
Notwithstanding the foregoing, an Interest Reset Date that falls on the Maturity of this
Security will not be changed.
The term Euro Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday on
which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System, or
any successor system, is open for business.
The term Representative Amount means an amount that, in the Calculation Agents judgment, is
representative of a single transaction in the relevant market at the relevant time.
The term Reuters Screen EURIBOR01 Page means the display on the Reuters 3000 Xtra Service,
or any successor or replacement service, on the page designated as EURIBOR01 or successor or any
replacement page or pages on which euro-zone interbank rates of major banks for deposits in euros
are displayed.]
All percentages resulting from any calculation with respect to this Security shall be rounded
upward or downward, as appropriate, to the next higher or lower one hundred-thousandth of a
percentage point (e.g., 9.876541% (or .09876541) being rounded down to 9.87654% (or .0987654) and
9.876545% (or .09876545) being rounded up to 9.87655% (or .0987655)). All amounts used in or
resulting from any calculation with respect to this Security shall be rounded upward or downward,
as appropriate, to the nearest cent with one-half or more of a cent being rounded upward.
The interest so payable, and punctually paid or made available for payment, on any Interest
Payment Date will, as provided in the 2008 Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be the ___(whether or not a Business Day, as
defined below) next preceding such Interest Payment Date. Any interest so payable, but not
punctually paid or made available for payment, on any Interest Payment Date will forthwith cease to
be payable to the Holder on such Regular Record Date and such Defaulted Interest may either be paid
to the Person in whose name this Security (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof being given to the Holder of this Security not less than 10
days prior to such Special Record Date, or be paid in any other lawful manner not inconsistent with
the requirements of any securities exchange on which this Security may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the 2008 Indenture. For
the purpose of determining the Holder at the close of business on any relevant record date when
business is not conducted, the close of business will mean 5:00 P.M., New York City time, on that
day.
The Company and the Trustee acknowledge that the Company has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit Insurance
Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a result, this debt is
guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed by the full faith and
credit of the United States. The details of the FDIC guarantee are provided in the FDICs
regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The expiration date of
the FDICs guarantee is the earlier of the maturity date of this debt or June 30, 2012.
The Trustee is hereby designated as the duly authorized representative of the Holder for
purposes of making claims and taking other permitted or required actions under the Debt Guarantee
Program (the Representative). The Holder of this Security may elect not to be represented by
the Representative with respect to this Security by providing written notice of such election to
the Representative.
Notwithstanding any provision of this Security, any right of the Holder to receive payment in
respect of this Security under the Debt Guarantee Program shall be subject to the procedures and
other requirements of the Debt Guarantee Program, and the Holder will not be entitled under the
Debt Guarantee
(Face of Security continued on next page)
-5-
Program to receive any additional interest or penalty amounts on account of any default or
resulting delay in payment in respect of this Security.
Currency and Manner of Payment
[IF PAYMENT IS IN U.S. DOLLARS, INSERT Payment of the principal of and premium or interest
on this Security will be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts. Notwithstanding any other
provision of this Security or the 2008 Indenture, if this Security is a Global Security, any
payment in respect of this Security may be made pursuant to the Applicable Procedures of the
Depositary as permitted in the 2008 Indenture.
Subject to the prior paragraph and except as provided in the next paragraph, payment of any
amount payable on this Security will be made at the office or agency of the Company maintained for
that purpose in The City of New York (and at any other office or agency maintained by the Company
for that purpose), against surrender of this Security in the case of any payment due at the
Maturity of the principal hereof (other than any payment of interest that first becomes due on an
Interest Payment Date); provided, however, that, at the option of the Company and
subject to the next paragraph, payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security Register.
Subject to the second preceding paragraph, payment of any amount payable on this Security will
be made by wire transfer of immediately available funds to an account maintained by the payee with
a bank located in the Borough of Manhattan, The City of New York, if (i) the principal of this
Security is at least $1,000,000 (or the equivalent in another currency) and (ii) the Holder
entitled to receive such payment transmits a written request for such payment to be made in such
manner to the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, on
or before the fifth Business Day before the day on which such payment is to be made;
provided that, in the case of any such payment due at the Maturity of the principal hereof
(other than any payment of interest that first becomes due on an Interest Payment Date), this
Security must be surrendered at the office or agency of the Company maintained for that purpose in
The City of New York (or at any other office or agency maintained by the Company for that purpose)
in time for the Paying Agent to make such payment in such funds in accordance with its normal
procedures. Any such request made with respect to any payment on this Security payable to a
particular Holder will remain in effect for all later payments on this Security payable to such
Holder, unless such request is revoked on or before the fifth Business Day before a payment is to
be made, in which case such revocation shall be effective for such payment and all later payments.
In the case of any payment of interest payable on an Interest Payment Date, such written request
must be made by the Person who is the registered Holder of this Security on the relevant Regular
Record Date. The Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer with respect to this Security, but any tax, assessment or other
governmental charge imposed upon any payment will be borne by the Holder of this Security and may
be deducted from the payment by the Company or the Paying Agent.]
[IF PAYMENT IS IN EUROS, INSERT Payment of the principal of and premium or interest on this
Security will be made in euros. Notwithstanding any other provision of this Security or the 2008
Indenture, if this Security is a Global Security, any payment in respect of this Security may be
made pursuant to the Applicable Procedures of the Depositary as permitted in the 2008 Indenture.
Subject to the prior paragraph and except as provided in the next [two][three] paragraphs,
payment of any amount payable on this Security will be made at the office or agency of the Company
maintained for that purpose in The City of New York (and at any other office or agency maintained
by the Company for that purpose), against surrender of this Security in the case of any payment due
at the Maturity of the principal hereof (other than any payment of interest that first becomes due
on an Interest Payment Date); provided, however, that, at the option of the Company and subject to
the next paragraph, payment of
(Face of Security continued on next page)
-6-
interest may be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Subject to the second preceding paragraph, payment of any amount payable on this Security will
be made by wire transfer of immediately available funds to an account maintained by the payee with
a bank located in the Borough of Manhattan, The City of New York, if (i) the principal of this
Security is at least USD$1,000,000 (or the equivalent in euros) and (ii) the Holder entitled to
receive such payment transmits a written request for such payment to be made in such manner to the
Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, on or before the
fifth Business Day before the day on which such payment is to be made; provided that, in the case
of any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an Interest Payment Date), this Security must be surrendered at the
office or agency of the Company maintained for that purpose in The City of New York (or at any
other office or agency maintained by the Company for that purpose) in time for the Paying Agent to
make such payment in such funds in accordance with its normal procedures. Any such request made
with respect to any payment on this Security payable to a particular Holder will remain in effect
for all later payments on this Security payable to such Holder, unless such request is revoked on
or before the fifth Business Day before a payment is to be made, in which case such revocation
shall be effective for such payment and all later payments. In the case of any payment of interest
payable on an Interest Payment Date, such written request must be made by the Person who is the
registered Holder of this Security on the relevant Regular Record Date. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire transfer with
respect to this Security, but any tax, assessment or other governmental charge imposed upon any
payment will be borne by the Holder of this Security and may be deducted from the payment by the
Company or the Paying Agent.]
[IF LISTED ON LUXEMBOURG STOCK EXCHANGE, INSERT So long as the Securities of this series
are listed on the Official List of the Luxembourg Stock Exchange and such Stock Exchange shall so
require, the Company will at all times maintain an office or agency in Luxembourg for the payment
of the principal of and interest on the Securities of this series. Such Paying Agent in Luxembourg
shall initially be Dexia Banque Internationale à Luxembourg société anonyme.]
Payments Due on a Business Day
[IF LIBOR, INSERT Notwithstanding any provision of this Security or the 2008 Indenture, if
the Maturity of the principal hereof occurs on a day that is not a Business Day, any amount of
principal, premium or interest that would otherwise be due on this Security on a day (the
Specified Day) that is not a Business Day may be paid or made available for payment on
the next succeeding Business Day with the same force and effect as if such amount were paid on the
Specified Day. For all purposes of this Security, Business Day means any day that is not
a Saturday or Sunday, and that is not a day on which banking institutions generally are authorized
or obligated by law, regulation or executive order to close in The City of New York and that is
also a London Business Day; provided that, solely with respect to any payment to be made at
any Place of Payment outside The City of New York or London, Business Day means any day that is a
Business Day as defined above and that also is not a day on which banking institutions generally
are authorized or obligated by law, regulation or executive order to close in such Place of
Payment; provided further that, with respect to Section 12 of the reverse hereof
and Exhibit B hereto, the definition of Business Day therein shall apply. The provisions of this
paragraph shall apply to this Security in lieu of the provisions of Section 1.13 of the 2008
Indenture.]
[IF EURIBOR, INSERT Notwithstanding any provision of this Security or the 2008 Indenture,
if the Maturity of the principal hereof occurs on a day that is not a Business Day, any amount of
principal, premium or interest that would otherwise be due on this Security on a day (the
Specified Day) that is not a Business Day may be paid or made available for payment on the next
succeeding Business Day with the same force and effect as if such amount were paid on the Specified
Day. For all purposes of this Security, Business Day means any day that is not a Saturday or
Sunday, and that is not a day on which banking institutions are generally authorized or obligated
by law, regulation or executive order to close in
(Face of Security continued on next page)
-7-
The City of New York or London, and that is also a Euro Business Day, as defined below;
provided that, with respect to Section 12 of the reverse hereof and Exhibit B hereto, the
definition of Business Day therein shall apply. The term Euro Business Day means any day on
which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System, or
any successor system, is open for business. The provisions of this paragraph shall apply to this
Security in lieu of the provisions of Section 1.13 of the 2008 Indenture.]
[IF PAYMENT IS IN EUROS, INSERT Payments Made in U.S. Dollars
Notwithstanding any provision of this Security or the 2008 Indenture, if any amount payable on
this Security is payable on any day and if euros are not available to the Company on the two
Business Days before such day, due to the imposition of exchange controls, disruption in a currency
market or any other circumstances beyond the control of the Company, the Company will be entitled
to satisfy its obligation to pay such amount in euros by making such payment in U.S. dollars. The
amount of such payment in U.S. dollars shall be determined by the Exchange Rate Agent on the basis
of the noon buying rate for cable transfers in The City of New York for euros (the Exchange Rate)
as of the latest day before the day on which such payment is to be made. Any payment made under
such circumstances in U.S. dollars where the required payment is in euros will not constitute an
Event of Default under this Security or the 2008 Indenture.
Exchange Rate Agent
As
used herein, the Exchange Rate Agent shall initially mean
[ ];
provided that the Company may, in its sole discretion, appoint any other institution (including any
affiliate of the Company) to serve as any such agent from time to time. The Company will give the
Trustee prompt written notice of any change in any such appointment. Insofar as this Security
provides for any such agent to obtain rates, quotes or other data from a bank, dealer or other
institution for use in making any determination hereunder, such agent may do so from any
institution or institutions of the kind contemplated hereby notwithstanding that any one or more of
such institutions are any such agent, affiliates of any such agent or affiliates of the Company.
All determinations made by the Exchange Rate Agent pursuant to the terms of this Security
shall be, absent manifest error, conclusive for all purposes and binding on the Holder of this
Security and the Company. The Exchange Rate Agent shall not have any liability therefor.]
Calculation Agent
As used herein, the Calculation Agent shall initially mean The Bank of New York Mellon;
provided that the Company may, in its sole discretion, appoint any other institution (including any
affiliate of the Company) to serve as any such agent from time to time. The Company will give the
Trustee prompt written notice of any change in any such appointment. Insofar as this Security
provides for any such agent to obtain rates, quotes or other data from a bank, dealer or other
institution for use in making any determination hereunder, such agent may do so from any
institution or institutions of the kind contemplated hereby notwithstanding that any one or more of
such institutions are any such agent, affiliates of any such agent or affiliates of the Company.
All determinations made by the Calculation Agent may be made by such agent in its sole
discretion and, absent manifest error, shall be conclusive for all purposes and binding on the
Holder of this Security and the Company. The Calculation Agent shall not have any liability
therefor.
Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.
(Face of Security continued on next page)
-8-
Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the 2008 Indenture or be valid or obligatory for any purpose.
(Face of Security continued on next page)
-9-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
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THE GOLDMAN SACHS GROUP, INC.
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By |
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Name: |
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Title: |
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This is one of the Securities of the series designated herein and referred to in the 2008
Indenture.
Dated:
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THE BANK OF NEW YORK MELLON, as Trustee
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By |
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Authorized Signatory |
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(Reverse of Security)
1. Securities and Indenture.
This Security is one of a duly authorized issue of securities of the Company (herein called
the Securities) issued and to be issued in one or more series under a Senior Debt
Indenture, dated as of July 16, 2008 (herein called the 2008 Indenture, which term shall
have the meaning assigned to it in such instrument), between the Company and The Bank of New York
Mellon, as Trustee (herein called the Trustee, which term includes any successor trustee
under the 2008 Indenture), and reference is hereby made to the 2008 Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are
to be, authenticated and delivered.
2. Series and Denominations.
This Security is one of the series designated on the face hereof, limited to an aggregate
principal amount as shall be determined and may be increased from time to time by the Company. Any
election by the Company so to increase such aggregate principal amount shall be evidenced by a
certificate of an Authorized Person (as defined in the Determination of an Authorized Person, dated
___, with respect to this series). References herein to this series mean the series of
Securities designated on the face hereof. The Securities of this series are issuable only in
registered form without coupons in denominations of integral multiples of ___, subject to a minimum
denomination of $___.
3. [IF APPLICABLE, INSERT-Additional Amounts.
If the beneficial owner of this Security is a United States Alien (as defined below), the
Company will pay all additional amounts that may be necessary so that every net payment of the
principal of and interest on this Security to such beneficial owner, after deduction or withholding
for or on account of any present or future tax, assessment or governmental charge imposed with
respect to such payment by any U.S. Taxing Authority (as defined below), will not be less than the
amount provided for in this Security to be then due and payable; provided, however,
that the Company shall have no obligation to pay additional amounts for or on account of any one or
more of the following:
(i) any tax, assessment or other governmental charge imposed solely because at any time
there is or was a connection between such beneficial owner (or between a fiduciary,
settlor, beneficiary or member of such beneficial owner, if such beneficial owner is an
estate, trust or partnership) and the United States (as defined below) (other than the mere
receipt of a payment on, or the ownership or holding of, a Security), including because
such beneficial owner (or such fiduciary, settlor, beneficiary or member) at any time, for
U.S. federal income tax purposes: (a) is or was a citizen or resident, or is or was treated
as a resident, of the United States, (b) is or was present in the United States, (c) is or
was engaged in a trade or business in the United States, (d) has or had a permanent
establishment in the United States, (e) is or was a domestic or foreign personal holding
company, a passive foreign investment company or a controlled foreign corporation, (f) is
or was a corporation that accumulates earnings to avoid U.S. federal income tax or (g) is
or was a 10-percent shareholder of the Company as defined in section 871(h)(3) of the
U.S. Internal Revenue Code or any successor provision;
(ii) any tax, assessment or governmental charge imposed solely because of a change in
applicable law or regulation, or in any official interpretation or application of
applicable law or regulation, that becomes effective more than 15 days after the day on
which the payment becomes due or is made available, whichever occurs later;
(iii) any estate, inheritance, gift, sales, excise, transfer, wealth or personal property
tax or any similar tax, assessment or other governmental charge;
(Reverse of Security continued on next page)
-10-
(iv) any tax, assessment or other governmental charge imposed solely because such
beneficial owner or any other Person fails to comply with any certification, identification
or other reporting requirement concerning the nationality, residence, identity or
connection with the United States of the Holder or any beneficial owner of this Security,
if compliance is required by statute, by regulation of the U.S. Treasury Department or by
an applicable income tax treaty to which the United States is a party, as a precondition to
exemption from such tax, assessment or other governmental charge;
(v) any tax, assessment or other governmental charge that is payable otherwise than by
deduction or withholding from payments of principal of or interest on this Security;
(vi) any tax, assessment or other governmental charge imposed solely because the payment is
to be made by a particular Paying Agent (which term may include the Company) and would not
be imposed if made by another Paying Agent (which term may include the Company);
(vii) by or on behalf of a Holder who would be able to avoid such withholding or deduction
by presenting this Security to another Paying Agent in a Member State of the European
Union;
(viii) any tax, assessment or other governmental charge imposed solely because the Holder
(1) is a bank purchasing this Security in the ordinary course of its lending business or
(2) is a bank that is neither (A) buying this Security for investment purposes only nor (B)
buying this Security for resale to a third party that either is not a bank or holding the
note for investment purposes only; or
(ix) any combination of the taxes, assessments or other governmental charges described in
items (i) through (viii) of this Section 3.
Additional amounts also will not be paid with respect to any payment of principal of or
interest on this Security to any United States Alien who is a fiduciary or a partnership, or who is
not the sole beneficial owner of any such payment, to the extent that the Company would not be
required to pay additional amounts to any beneficiary or settlor of such fiduciary or any member of
such a partnership, or to any beneficial owner of the payment, if that Person had been treated as
the beneficial owner of this Security for this purpose.
The term United States Alien means any Person who, for U.S. federal income tax
purposes, is a nonresident alien individual, a foreign corporation, a foreign partnership one or
more of the members of which is, for United States federal income tax purposes, a foreign
corporation, a nonresident alien individual or a nonresident alien fiduciary of a foreign estate or
trust, or a nonresident alien fiduciary of an estate or trust that is not subject to U.S. federal
income tax on a net income basis on income or gain from this Security. For the purposes of this
Section 3 and Section 4 only, (a) the term United States means the United States of
America (including the states thereof and the District of Columbia), together with the territories,
possessions and all other areas subject to the jurisdiction of the United States of America and (b)
the term U.S. Taxing Authority means the United States of America or any state, other
jurisdiction or taxing authority in the United States.
Except as specifically provided in this Security, the Company shall not be required to make
any payment with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or taxing authority thereof or therein.
Whenever in the Securities of this series (or in the 2008 Indenture, including in Sections
5.01(1) and 501(2) thereof, insofar as applicable to this series) there is a reference, in any
context, to the payment of the principal of or interest on any Security of this series, such
mention shall be deemed to include mention of any payment of additional amounts to United States
Aliens in respect of such payment of principal or interest to the extent that, in such context,
such additional amounts are, were or would be payable in respect thereof pursuant to this Section 3
or any corresponding section of another Security of
(Reverse of Security continued on next page)
-11-
this series, as the case may be. Express mention of the payment of additional amounts in any
provision of any Security of this series shall not be construed as excluding additional amounts in
the provisions of any Security of this series (or of the 2008 Indenture insofar as it applies to
this series) where such express mention is not made.]
4. Redemption.
The Securities of this series may be redeemed, as a whole but not in part, at the option of
the Company, at a redemption price equal to 100% of the principal amount of the Securities to be
redeemed, together with interest accrued to the date fixed for redemption, if, as a result of any
amendment to, or change in, the laws or regulations of any U.S. Taxing Authority (as defined in
Section 3 above), or any amendment to or change in any official interpretation or application of
such laws or regulations, which amendment or change becomes effective or is announced on or after
___, the Company will become obligated to pay, on the next Interest Payment Date, additional
amounts in respect of any Security of this series pursuant to Section 3 of this Security or any
corresponding section of another Security of this series. If the Company becomes entitled to redeem
the Securities of this series, it may do so on any day thereafter pursuant to the 2008 Indenture;
provided, however, that (1) the Company gives the Holder of this Security notice of
such redemption not more than 60 days nor less than 30 days prior to the date fixed for redemption
as provided in the 2008 Indenture, (2) no such notice of redemption may be given earlier than 90
days prior to the next Interest Payment Date on which the Company would be obligated to pay such
additional amounts and (3) at the time such notice is given, such obligation to pay such additional
amounts remains in effect. Immediately prior to the giving of any notice of redemption of
Securities pursuant to this Section 4, the Company will deliver to the Trustee an Officers
Certificate stating that the Company is entitled to effect such redemption and setting forth in
reasonable detail a statement of facts showing that the conditions precedent to the right of the
Company to so redeem the Securities have occurred. Interest installments due on or prior to a
Redemption Date will be payable to the Holder of this Security or one or more Predecessor
Securities, of record at the close of business on the relevant record date, all as provided in the
2008 Indenture.
5. Defeasance.
The 2008 Indenture contains provisions for defeasance at any time of the entire indebtedness
of this Security or certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth in the 2008 Indenture.
6. Modification and Waiver.
The 2008 Indenture permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company, and the rights of the Holders of
the Securities to be affected, under the 2008 Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of all Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any series, may
comprise fewer than all the Securities of such series). The 2008 Indenture also contains provisions
(i) permitting the Holders of a majority in principal amount of the Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any particular
series, may comprise fewer than all the Securities of such series), on behalf of the Holders of all
such affected Securities, to waive compliance by the Company with certain provisions of the 2008
Indenture and (ii) permitting the Holders of a majority in principal amount of the Securities at
the time Outstanding of any series to be affected (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to waive certain past
defaults under the 2008 Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.
(Reverse of Security continued on next page)
-12-
7. Remedies.
Sections 5.01 and 5.02 of the 2008 Indenture are hereby amended with respect to the Securities
of this series to the extent necessary to comply with Section 5.01 and Annex A of the Master
Agreement, dated November 25, 2008, as the same may be amended from time to time (the Master
Agreement), by and between the Company and the FDIC, attached hereto as Exhibit A. Subject to the
immediately preceding sentence and Section 14 of the reverse of this Security, if an Event of
Default with respect to Securities of this series shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the 2008 Indenture.
As provided in and subject to the provisions of the 2008 Indenture and subject to Section 14
of the reverse of this Security, the Holder of this Security shall not have the right to institute
any proceeding with respect to the 2008 Indenture, or for the appointment of a receiver or trustee,
or for any other remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this series at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee indemnity reasonably satisfactory to it,
and the Trustee shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity.
The foregoing shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
If so provided pursuant to the terms of any specific Securities, the above-referenced
provisions of the 2008 Indenture regarding the ability of Holders to waive certain defaults, or to
request the Trustee to institute proceedings (or to give the Trustee other directions) in respect
thereof, may be applied differently with regard to such Securities.
No reference herein to the 2008 Indenture and no provision of this Security or of the 2008
Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
8. Transfer and Exchange.
As provided in the 2008 Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any place where the
principal of and interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his or her attorney duly authorized in writing, and thereupon one
or more new Securities of this series and of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or transferees.
As provided in the 2008 Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount of Securities of
this series and of like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
(Reverse of Security continued on next page)
-13-
Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security is a Global Security and is subject to the provisions of the 2008 Indenture
relating to Global Securities, including the limitations in Section 3.05 thereof on transfers and
exchanges of Global Securities (subject to Section 10 of the reverse of this Security).
9. Subrogation.
The FDIC shall be subrogated to all of the rights of the Holder and the Representative under
this Security and the 2008 Indenture against the Company in respect of any amounts paid to the
Holder, or for the benefit of the Holder, by the FDIC pursuant to the Debt Guarantee Program.
10. Agreement to Execute Assignment upon Guarantee Payment.
The Holder hereby authorizes the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the Holder pursuant to the
Debt Guarantee Program, to execute an assignment in the form attached to this Security as Exhibit B
pursuant to which the Representative shall assign to the FDIC its right as Representative to
receive any and all payments from the Company under this Security on behalf of the Holder. The
Company hereby consents and agrees that the FDIC is an acceptable transferee for all or any portion
of the indebtedness hereunder for all purposes of this Security and upon any such assignment, the
FDIC shall be deemed the Holder of this Security for all purposes hereof, and the Company hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Security and the 2008 Indenture as a result of such assignment.
Section 3.05 of the 2008 Indenture is hereby amended with respect to the Securities of this
series to the extent necessary to permit the Holder, the Representative and the Company to comply
with this Section 10, Section 11 below or any other similar provision of this Security.
11. Surrender of Senior Unsecured Debt Instrument to the FDIC.
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Company is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period),
payment in full hereunder shall be made pursuant to the Debt Guarantee Program on the outstanding
principal and accrued interest to such date of payment, the Holder shall, or the Holder shall cause
the person or entity in possession to, promptly surrender to the FDIC this Security.
12. Notice Obligations to FDIC of Payment Default.
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Company is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default. Solely for the purpose of this
Section 12, Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
13. Ranking.
Any indebtedness of the Company to the FDIC arising under Section 2.03 of the Master Agreement
will constitute a senior unsecured general obligation of the Company, ranking pari passu with any
indebtedness hereunder.
(Reverse of Security continued on next page)
-14-
14. No Event of Default during Time of Timely FDIC Guarantee Payments.
There shall not be deemed to be an Event of Default under this Security or the 2008 Indenture
which would permit or result in the acceleration of amounts due hereunder, if such an Event of
Default is due solely to the failure of the Company to make timely payment hereunder, provided that
the FDIC is making timely guarantee payments with respect to this Security in accordance with 12
C.F.R Part 370.
The following provisions of this paragraph shall apply to this Security in addition to, and
without limiting, the foregoing provisions of this Section 14. No event that would otherwise
constitute an Event of Default with respect to the Securities of this series shall constitute an
Event of Default with respect to this Security, provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. As a result, upon the occurrence of any such event (including any event of the kind
specified in said Section 5.01), neither the Trustee nor the Holder of this Security shall be
entitled, with respect to this Security, to seek any remedies otherwise available, or to take any
other action otherwise provided for, under the 2008 Indenture upon an Event of Default (including
any right to accelerate the Maturity of the principal of this Security pursuant to Section 5.02 of
the 2008 Indenture, any right to exchange (at the Holders option) this Security for a Security
that is not a Global Security pursuant to Section 3.05 thereof and any right to institute a
proceeding pursuant to Section 5.07 thereof), provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. Without limiting the foregoing, no event, including any event of the kind specified in
Section 5.01(5) or 5.01(6) of the 2008 Indenture, shall result in the automatic acceleration of the
Maturity of the principal of this Security pursuant to Section 5.02 thereof. Notwithstanding the
foregoing, however, the rights of the Holder of this Security pursuant to Section 5.08 of the 2008
Indenture shall not be affected by this Section 14. With regard to this Security, the provisions
of Article Five of the 2008 Indenture shall be subject to, and shall be deemed modified as
necessary to be consistent with, the provisions of this Section 14.
15. No Modifications without FDIC Consent.
Without the express written consent of the FDIC, the Company and the Trustee agree not to
amend, modify, supplement or waive any provision in this Security or the 2008 Indenture that is
related to the principal, interest, payment, default or ranking of the indebtedness hereunder or
that is required to be included herein pursuant to the Master Agreement.
16. Demand Obligations to FDIC upon the Companys Failure to Pay.
On the 30th day after the date the Company defaults in payment of interest on this Security,
which default has not been cured by the Company by such 30th day, in the case of default in
interest, or at the Maturity, in the case of default in principal of this Security, the
Representative shall make a demand on behalf of the Holder to the FDIC for payment on the
guaranteed amount under the Debt Guarantee Program. Such demand shall be accompanied by a proof of
claim, which shall include evidence, to the extent not previously provided in the Master Agreement,
in form and content satisfactory to the FDIC, of: (A) the Representatives financial and
organizational capacity to act as Representative; (B) the Representatives exclusive authority to
act on behalf of the Holder and its fiduciary responsibility to the Holder when acting as such, as
established by the terms of this Security and the 2008 Indenture; (C) the occurrence of a payment
default; and (D) the authority to make an assignment of the Holders right, title, and interest in
this Security to the FDIC and to effect the transfer to the FDIC of the Holders claim in any
insolvency proceeding. Such assignment shall include the right of the FDIC to receive any and all
distributions on this Security from the proceeds of the receivership or bankruptcy estate. Any
demand under this Section 16 shall be made in writing and directed to the Director, Division of
Resolution and Receiverships, Federal Deposit Insurance Corporation, Washington, D.C., and shall
include all supporting evidences as provided in this Section 16, and shall certify to the accuracy
thereof.
(Reverse of Security continued on next page)
-15-
[IF LISTED ON LUXEMBOURG STOCK EXCHANGE, INSERT
17. Notices.
Notices that are required hereunder or under the 2008 Indenture to be given to Holders of the
Securities of this series shall be given to Holders of the Securities of this series as set forth
in the 2008 Indenture and in the next paragraph.
So long as the Securities of this series are listed on the Official List of the Luxembourg
Stock Exchange and such Stock Exchange shall so require, the Trustee will publish any such required
notices in a daily newspaper of general circulation in Luxembourg. If publication in Luxembourg is
not practical, the Trustee will publish any such required notices elsewhere in Europe. Published
notices will be deemed to have been given on the date they are published. If publication as
described in this paragraph becomes impossible, the Trustee may publish sufficient notice by
alternate means that approximate the terms and conditions as described in this paragraph.]
18. Governing Law.
This Security and the 2008 Indenture shall be governed by and construed in accordance with the
laws of the State of New York.
19. Terms Defined in the 2008 Indenture.
All terms used in this Security which are defined in the 2008 Indenture shall have the
meanings assigned to them in the 2008 Indenture.
[IF APPLICABLE, INSERT References in this Security to euro shall mean, as of any time, the
coin or currency (if any) that is legal tender for the payment of private and public debt in all
countries then participating in the European Economic and Monetary Union (or any successor union)
pursuant to the Treaty on European Union of February 1992 (or any successor treaty), as it may be
amended from time to time.]
-16-
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [
]
(Please Print or Typewrite Name and Address Including Postal Zip Code of Assignee)
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the attached Security and all rights thereunder, and hereby irrevocably
constitutes and appoints
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to transfer said Security on the books of the Company, with full power of substitution in the
premises.
Dated:
Signature Guaranteed
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NOTICE: Signature must be guaranteed.
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NOTICE: The signature to this
assignment must correspond with the
name of the Holder as written upon
the face of the attached Security in
every particular, without alteration
or any change whatever. |
EXHIBIT A
MASTER AGREEMENT
Federal Deposit Insurance Corporation
Temporary Liquidity Guarantee Program Debt Guarantee Program
TLGP Master Agreement 11/24/08
TABLE OF CONTENTS
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Page |
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ARTICLE I DEFINITIONS |
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1 |
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1.01. |
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Certain Defined Terms |
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1 |
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1.02. |
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Terms Generally |
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2 |
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ARTICLE II SENIOR DEBT GUARANTEE |
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2 |
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2.01. |
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Acknowledgement of Guarantee |
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2 |
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2.02. |
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Guarantee Payments |
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2 |
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2.03. |
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Issuer Make-Whole Payments |
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3 |
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2.04. |
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Waiver of Defenses |
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3 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER |
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4 |
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3.01. |
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Organization and Authority |
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4 |
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3.02. |
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Authorization, Enforceability |
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4 |
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3.03. |
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Reports |
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5 |
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ARTICLE IV NOTICE AND REPORTING |
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5 |
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4.01. |
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Reports of Existing and Future Guaranteed Debt |
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5 |
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4.02. |
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On-going Reporting |
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5 |
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4.03. |
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Notice of Defaults |
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5 |
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ARTICLE V COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER |
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6 |
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5.01. |
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Terms to be included in Future Guaranteed Debt |
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6 |
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5.02. |
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Breaches; False or Misleading Statements |
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6 |
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5.03. |
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No Modifications |
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6 |
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5.04. |
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Waiver by the Issuer |
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6 |
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ARTICLE VI GENERAL PROVISIONS |
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6 |
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6.01. |
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Amendment and Modification of this Master Agreement |
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6 |
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6.02. |
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Notices |
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7 |
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6.03. |
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Counterparts |
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6.04. |
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Severability |
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6.05. |
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Governing Law |
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6.06. |
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Venue |
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6.07. |
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Assignment |
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6.08. |
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Headings |
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8 |
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6.09. |
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Delivery Requirement |
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8 |
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Annex A |
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Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt |
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Annex B |
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Form of Assignment |
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TLGP Master Agreement 11/24/08
MASTER AGREEMENT
THIS MASTER AGREEMENT (this Master Agreement) is being entered into as of the date
set forth on the signature page hereto by and between THE FEDERAL DEPOSIT INSURANCE CORPORATION, a
corporation organized under the laws of the United States of America and having its principal
office in Washington, D.C. (the FDIC), and the entity whose name appears on the signature
page hereto (the Issuer).
RECITALS
WHEREAS, on November 21, 2008, the FDIC issued its Final Rule, 12 C.F.R. Part 370 (as may be
amended from time to time, the Rule), establishing the Temporary Liquidity Guarantee
Program (the Program); and
WHEREAS, pursuant to the Rule, the FDIC will guarantee the payment of certain newly-issued
senior unsecured debt (as defined in the Rule,
hereinafter Senior Unsecured
Debt) issued by an eligible entity (as defined in the Rule); and
WHEREAS, the Issuer is an eligible entity for purposes of the Rule and has elected to
participate in the debt guarantee component of the Program.
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. As used in this Master Agreement, the following terms
shall have the following meanings:
Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
FDIC has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
FDIC Guarantee means the guarantee of payment by the FDIC of the Senior Unsecured
Debt of the Issuer in accordance with the terms of the Program.
Guarantee Payment means any payment made by the FDIC under the Program with respect
to Senior Unsecured Debt of the Issuer.
Guarantee Payment Notice has the meaning ascribed to such term in Section
2.02.
Issuer has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
Issuer Make-Whole Payments has the meaning ascribed to such term in
Section 2.03.
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TLGP Master Agreement 11/24/08 |
Issuer Reports means reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that the Issuer or any subsidiary of the Issuer
is required to file with any governmental entity.
Master Agreement means this Master Agreement, together with all Annexes and
amendments hereto.
Material Adverse Effect means a material adverse effect on the business, results of
operations or financial condition of the Issuer and its consolidated subsidiaries taken as a whole.
Program has the meaning ascribed to such term in the Recitals.
Reimbursement Payment has the meaning ascribed to such term in Section 2.03.
Relevant Provision means any provision that is related to the principal, interest,
payment, default or ranking of the Senior Unsecured Debt, any provision contained in Annex A or any
other provision the amendment of which would require the consent of any or all of the holders of
such debt.
Representative means the trustee, administrative agent, paying agent or other
fiduciary or agent designated as the Representative under the governing documents for any Senior
Unsecured Debt of the Issuer subject to the FDIC Guarantee for purposes of submitting claims or
taking other actions under the Program.
Rule has the meaning ascribed to such term in the Recitals.
Senior Unsecured Debt has the meaning ascribed to such term in the Recitals.
1.02. Terms Generally. Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other gender as the context
requires, the terms hereof, herein and herewith and words of similar import shall, unless
otherwise stated, be construed to refer to this Master Agreement and not to any particular
provision of this Master Agreement, and Article, Section and paragraph references are to the
Articles, Sections and paragraphs of this Master Agreement unless otherwise specified, and the word
including and words of similar import when used in this Master Agreement shall mean including,
without limitation, unless otherwise specified.
ARTICLE II
SENIOR DEBT GUARANTEE
2.01. Acknowledgement of Guarantee. The FDIC hereby acknowledges that the Issuer has
elected to participate in the debt guarantee component of the Program and that, as a result, the
Issuers Senior Unsecured Debt is guaranteed by the FDIC to the extent set forth in, and subject to
the provisions of, the Rule, and subject to the terms hereof.
2.02. Guarantee Payments. The Issuer understands and acknowledges that any Guarantee
Payment with respect to a particular issue of Senior Unsecured Debt shall be paid by the FDIC
directly to:
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2 |
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TLGP Master Agreement 11/24/08 |
(a) the Representative with respect to such Senior Unsecured Debt if a Representative has been
designated; or
(b) the registered holder(s) of such Senior Unsecured Debt if no Representative has been
designated; or
(c) any registered holder of such Senior Unsecured Debt who has opted out of being represented
by the designated Representative;
in each case, pursuant to the claims procedure set forth in the Rule. In no event shall the FDIC
make any Guarantee Payment to the Issuer directly. The FDIC will provide prompt written notice to
the Issuer of any Guarantee Payment made by the FDIC with respect to any of the Issuers Senior
Unsecured Debt (the Guarantee Payment Notice).
2.03. Issuer Make-Whole Payments. In consideration of the FDIC providing the FDIC
Guarantee with respect to the Senior Unsecured Debt of the Issuer, the Issuer hereby irrevocably
and unconditionally covenants and agrees:
(a) to reimburse the FDIC immediately upon receipt of the Guarantee Payment Notice for all
Guarantee Payments set forth in the Guarantee Payment Notice (the Reimbursement Payment)
(without duplication of any amounts actually received by the FDIC as subrogee or assignee under the
governing documents of the relevant Senior Unsecured Debt of the Issuer);
(b) beginning as of the date of the Issuers receipt of the Guarantee Payment Notice, to pay
interest on any unpaid Reimbursement Payments until such Reimbursement Payments shall have been
paid in full by the Issuer, at an interest rate equal to one percent (1%) per annum above the
non-default interest rate payable on the Senior Unsecured Debt with respect to which the relevant
Guarantee Payments were made, as calculated in accordance with the documents governing such Senior
Unsecured Debt; and
(c) to reimburse the FDIC for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by it, including costs of collection or other enforcement of the Issuers
payment obligations hereunder. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the FDICs agents, counsel, accountants and experts.
Clauses (a), (b) and (c) above are collectively referred to herein as the Issuer
Make-Whole Payments. The indebtedness of the Issuer to the FDIC arising under this
Section 2.03 constitutes a senior unsecured general obligation of the Issuer, ranking pari
passu with other senior unsecured indebtedness of the Issuer, including without limitation Senior Unsecured Debt of
the Issuer that is subject to the FDIC Guarantee.
2.04. Waiver of Defenses. The Issuer hereby waives any defenses it might otherwise
have to its payment obligations under any of the Issuers Senior Unsecured Debt or under
Section 2.03 hereof, in each case beginning at such time as the FDIC has made any Guarantee
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3 |
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TLGP Master Agreement 11/24/08 |
Payment with respect to such Senior Unsecured Debt and continuing until such time as all Issuer
Make-Whole Payments have been received by the FDIC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
3.01. Organization and Authority. The Issuer has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of organization, with the
necessary power and authority to own its properties and conduct its business in all material
respects as currently conducted, except as has not had, or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.02. Authorization, Enforceability.
(a) The Issuer has the power and authority to execute and deliver this Master Agreement and to
carry out its obligations hereunder. The execution, delivery and performance by the Issuer of this
Master Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Issuer, and no further approval or
authorization is required on the part of the Issuer. This Master Agreement is a valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws
now or hereafter in effect relating to creditors rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
(b) The execution, delivery and performance by the Issuer of this Master Agreement and the
consummation of the transactions contemplated hereby and compliance by the Issuer with the
provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of the Issuer or any
subsidiary of the Issuer under, any of the terms, conditions or provisions of, as applicable, (X)
its organizational documents or (Y) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Issuer or any subsidiary of the
Issuer may be bound, or to which the Issuer or any subsidiary of the Issuer may be subject, or (ii)
violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree
applicable to the Issuer or any subsidiary of the Issuer or any of their respective properties or
assets except, in the case of clauses (i)(Y) and (ii), for those occurrences that, individually or
in the aggregate, have not had and would not reasonably be expected to have a Material Adverse
Effect.
(c) No prior notice to, filing with, exemption or review by, or authorization, consent or
approval of, any governmental entity is required to be made or obtained by the Issuer in connection
with the execution of this Master Agreement, except for any such notices, filings, exemptions,
reviews, authorizations, consents and approvals which have been made or obtained
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TLGP Master Agreement 11/24/08 |
or the failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.03. Reports. Since December 31, 2007, the Issuer and each subsidiary of the Issuer
has timely filed all Issuer Reports and has paid all fees and assessments due and payable in
connection therewith, except, in each case, as would not individually or in the aggregate have a
Material Adverse Effect. As of their respective dates of filing, the Issuer Reports complied in
all material respects with all statutes and applicable rules and regulations of all applicable
governmental entities. In the case of each such Issuer Report filed with or furnished to the
Securities and Exchange Commission, if any, such Issuer Report (a) did not, as of its date, or if
amended prior to the date of this Master Agreement, as of the date of such amendment, contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading,
(b) complied as to form in all material respects with all applicable requirements of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and (c) no executive
officer of the Issuer or any subsidiary of the Issuer has failed in any respect to make the
certifications required by him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.
With respect to all other Issuer Reports, the Issuer Reports were complete and accurate in all
material respects as of their respective dates.
ARTICLE IV
NOTICE AND REPORTING
4.01. Reports of Existing and Future Guaranteed Debt. The Issuer shall provide
reports to the FDIC of the amount of all Senior Unsecured Debt subject to the FDIC Guarantee in
accordance with the reporting requirements of the Rule.
4.02. On-going Reporting. The Issuer covenants and agrees that, for so long as it has
outstanding Senior Unsecured Debt that is subject to the FDIC Guarantee, it shall furnish or cause
to be furnished to the FDIC (a) monthly reports, in such form as specified by the FDIC, containing
information relating to the Issuers outstanding Senior Unsecured Debt that is subject to the FDIC
Guarantee and such other information as may be requested in such form, and (b) such other
information that the FDIC may reasonably request, such other information to be delivered within ten
(10) Business Days of receipt by the Issuer of any such request.
4.03. Notice of Defaults. The Issuer covenants and agrees that it shall notify the
FDIC within one (1) Business Day of any default in the payment of any principal or interest when
due, without giving effect to any cure period, with respect to any indebtedness of the Issuer
(including debt that is not subject to the FDIC Guarantee), whether such debt is existing as of the
date of this Master Agreement or is issued subsequent to the date hereof, if such default would
result, or would reasonably be expected to result, in an event of default under any Senior
Unsecured Debt of the Issuer that is subject to the FDIC Guarantee.
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TLGP Master Agreement 11/24/08 |
ARTICLE V
COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER
5.01. Terms to be included in Future Guaranteed Debt. The governing documents for the
issuance of any Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee shall
contain each of the provisions set forth in Annex A. If a particular issue of Senior
Unsecured Debt is evidenced solely by a trade confirmation, the Issuer shall use commercially
reasonable efforts to cause the holder of such debt to execute a written instrument setting forth
the holders agreement to be bound by the provisions set forth in Annex A. No document
governing the issuance of Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee
shall contain any provision that would result in the automatic acceleration of the debt upon a
default by the Issuer at any time during which the FDIC Guarantee is in effect or during which
Guarantee Payments are being made in accordance with Section 370.12(b)(2) of the Rule.
5.02. Breaches; False or Misleading Statements. The Issuer acknowledges and agrees
that (a) if it is in breach of any provision of this Master Agreement or (b) if it makes any false
or misleading statement or representation in connection with the Issuers participation in the
Program, or makes any statement or representation in bad faith with the intent to influence the
actions of the FDIC, the FDIC may take the enforcement actions provided in Section 370.11 of the
Rule, including termination of the Issuers participation in the Program. As set forth in the
Rule, any termination of the Issuers participation in the Program would solely have prospective
effect, and would in no event affect the FDIC Guarantee with respect to Senior Unsecured Debt of
the Issuer that is issued and outstanding prior to the termination of the Issuers participation in
the Program.
5.03. No Modifications. The Issuer covenants and agrees that it shall not amend,
modify, or consent to any amendment or modification, or waive any Relevant Provision, without the
express written consent of the FDIC.
5.04. Waiver by the Issuer. The Issuer acknowledges and agrees that if any covenant,
stipulation or other provision of this Master Agreement that imposes on the Issuer the obligation
to make any payment is at any time void under any provision of applicable law, the Issuer will not
make any claim, counterclaim or institute any proceedings against the FDIC or any of its assignees
or subrogees for any amount paid by the Issuer at any time, and the Issuer waives unconditionally
and absolutely any rights and defenses, legal or equitable, which arise under or in connection with
any such provision and which might otherwise be available to it for recovery of any amount due
under this Master Agreement.
ARTICLE
VI
GENERAL
PROVISIONS
6.01. Amendment and Modification of this Master Agreement. This Master Agreement may
be amended, modified and supplemented in any and all respects, but only by a written instrument
signed by the parties hereto expressly stating that such instrument is intended to amend, modify or
supplement this Master Agreement.
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TLGP Master Agreement 11/24/08 |
6.02. Notices. Unless otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, telecopied (which is confirmed) or sent by an overnight courier service, such as FedEx,
to the parties at the following addresses (or at such other address for a party as shall be
specified by such party by like notice):
if to the Issuer, to the address appearing on the signature page hereto
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if to the FDIC, to:
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The Federal Deposit Insurance Corporation |
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Deputy Director, Receivership Operations Branch |
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Division of Resolutions and Receiverships |
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Attention: Master Agreement |
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550 17th Street, N.W. |
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Washington, DC 20429 |
6.03. Counterparts. This Master Agreement may be executed in counterparts, which,
together, shall be considered one and the same agreement. Copies of executed counterparts
transmitted by telecopy or other electronic transmission service shall be considered original,
executed counterparts, provided receipt of such counterparts is confirmed.
6.04. Severability. Any term or provision of this Master Agreement that is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall have the power to
reduce the scope, duration or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
6.05. Governing Law. Federal law of the United States shall control this Master
Agreement. To the extent that federal law does not supply a rule of decision, this Master
Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of New York without giving effect to principles of conflicts of law other than Section 5-1401
of the New York General Obligations Law. Nothing in this Master Agreement will require any
unlawful action or inaction by either party.
6.06. Venue. Each of the parties hereto irrevocably and unconditionally agrees that
any legal action arising under or in connection with this Master Agreement is to be instituted in
the United States District Court in and for the District of Columbia or in any United States
District Court in the jurisdiction where the Issuers principal office is located.
6.07. Assignment. Neither this Master Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party, and any purported
assignment
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7 |
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TLGP Master Agreement 11/24/08 |
without such consent shall be void. Subject to the preceding sentence, this Master Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6.08. Headings. The headings and subheadings of the Table of Contents, Articles and
Sections contained in this Master Agreement, except the terms identified for definition in Article
I and elsewhere in this Master Agreement, are inserted for convenience only and shall not affect
the meaning or interpretation of this Master Agreement or any provision hereof.
6.09. Delivery Requirement. The Issuer shall submit a completed, executed and dated
copy of the signature page hereto to the FDIC within five (5) business days of the date of the
Issuers election to continue participating in the debt guarantee component of the Program in
accordance with the delivery instructions set forth on the signature page.
[SIGNATURES BEGIN ON NEXT PAGE]
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TLGP Master Agreement 11/24/08 |
IN WITNESS WHEREOF, the Issuer and the FDIC have caused this Master Agreement to be executed
by their respective officers thereunto duly authorized.
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THE FEDERAL DEPOSIT INSURANCE
CORPORATION
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By: |
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Name: |
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Title: |
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NAME OF ISSUER:
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THE GOLDMAN SACHS GROUP, INC. |
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/s/ David Viniar |
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David Viniar |
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Chief Financial Officer |
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Address of Issuer:
85 Broad Street
New York, New York 10004
FDIC Certificate
Number: ________________________
RSSD ID or
OTS Docket
Number:
2380443
Date:
11/25/08
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Delivery Instructions
Please deliver a completed, executed and dated copy of this Signature Page to the FDIC within
five (5) business days of the date of the Issuers election to continue participating in the Debt
Guarantee Program. Email is the preferred method of delivery to MasterAgreement@fdic.gov, or you
may send it by an overnight courier service such as FedEx to Senior Counsel, Special Issues Unit,
E7056, Attention: Master Agreement, 3501 Fairfax Drive, Arlington, Virginia, 22226.
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TLGP Master Agreement 11/24/08 |
Annex A
Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt
The following provisions shall be included in the governing documents for the issuance of
Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee, in substantially the
form presented below, unless otherwise specified. The appropriate name of the governing
document(s) shall be inserted in place of the term Agreement where it appears in this Annex A.
Acknowledgement of the FDICs Debt Guarantee Program
The parties to this Agreement acknowledge that the Issuer has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit
Insurance Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a
result, this debt is guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed
by the full faith and credit of the United States. The details of the FDIC guarantee are provided
in the FDICs regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The
expiration date of the FDICs guarantee is the earlier of the maturity date of this debt or June
30, 2012. [The italicized portion of the above provision shall be included exactly as written
above]
Representative
The [insert name of the: trustee, administrative agent, paying agent or other fiduciary or
agent to be designated as the duly authorized representative of the debt holders] is designated
under this Agreement as the duly authorized representative of the holder[s] for purposes of making
claims and taking other permitted or required actions under the Debt Guarantee Program (the
Representative). Any holder may elect not to be represented by the Representative by
providing written notice of such election to the Representative.
Subrogation
The FDIC shall be subrogated to all of the rights of the holder[s] and the Representative, if
there shall be one, under this Agreement against the Issuer in respect of any amounts paid to the
holder[s], or for the benefit of the holder[s], by the FDIC pursuant to the Debt Guarantee Program.
Agreement to Execute Assignment upon Guarantee Payment
[If there is a Representative, insert the following:]
The holder[s] hereby authorize the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the holder[s] pursuant to
the Debt Guarantee Program, to execute an assignment in the form attached to this Agreement as
Exhibit [ ] [See Annex B to Master Agreement] pursuant to which the Representative shall
assign to the FDIC its right as Representative to receive any and all payments from the Issuer
under this Agreement on behalf of the holder[s]. The Issuer hereby consents and agrees that the
FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for all
purposes of this Agreement and upon any such assignment, the
TLGP Master Agreement 11/24/08
FDIC shall be deemed a holder under this Agreement for all purposes hereof, and the Issuer hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Agreement as a result of such assignment.
[or, if (i) there is no Representative or (ii) the holder has exercised its right not to be
represented by the Representative, insert the following:]
The holder[s] hereby agree that, at such time as the FDIC shall commence making any guarantee
payments to the holder[s] pursuant to the Debt Guarantee Program, the holder[s] shall execute an
assignment in the form attached to this Agreement as Exhibit [ ] [See Annex B to Master
Agreement] pursuant to which the holder[s] shall assign to the FDIC [its/their] right to receive
any and all payments from the Issuer under this Agreement. The Issuer hereby consents and agrees
that the FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for
all purposes of this Agreement and upon any such assignment, the FDIC shall be deemed a holder
under this Agreement for all purposes thereof, and the Issuer hereby agrees to take such reasonable
steps as are necessary to comply with any relevant provision of this Agreement as a result of such
assignment.
Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Issuer is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period), payment in full hereunder shall be made
pursuant to the Debt Guarantee Program on the outstanding principal and accrued interest to such
date of payment, the holder shall, or the holder shall cause the person or entity in possession to,
promptly surrender to the FDIC the security certificate, note or other instrument evidencing such
debt, if any.
Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Issuer is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default.
Ranking
Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of the Master Agreement
entered into by the Issuer and the FDIC in connection with the Debt Guarantee Program will
constitute a senior unsecured general obligation of the Issuer, ranking pari passu with any indebtedness hereunder.
No Event of Default during Time of Timely FDIC Guarantee Payments
There shall not be deemed to be an event of default under this Agreement which would permit or
result in the acceleration of amounts due hereunder, if such an event of default is due solely to
the failure of the Issuer to make timely payment hereunder, provided that the FDIC is
TLGP Master Agreement 11/24/08
A-2
making timely guarantee payments with respect to the debt obligations hereunder in accordance with
12 C.F.R Part 370.
No Modifications without FDIC Consent
Without the express written consent of the FDIC, the parties hereto agree not to amend,
modify, supplement or waive any provision in this Agreement that is related to the principal,
interest, payment, default or ranking of the indebtedness hereunder or that is required to be
included herein pursuant to the Master Agreement executed by the Issuer in connection with the Debt
Guarantee Program.
TLGP Master Agreement 11/24/08
A-3
EXHIBIT B
ASSIGNMENT
This Assignment is made pursuant to the terms of Section 10 of the reverse of The Goldman
Sachs Group, Inc.s Notes due , CUSIP No. (the Security), between The
Bank of New York Mellon (the Representative), acting on behalf of the Holder of the Security who
have not opted out of representation by the Representative, and The Goldman Sachs Group, Inc. (the
Company) with respect to the debt obligations of the Company that are guaranteed under the Debt
Guarantee Program. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Security. Solely for the purpose of this Assignment, Business
Day means any day that is not a Saturday, a Sunday or a day on which banks are required or
authorized by law to be closed in the State of New York.
For value received, the Representative, on behalf of the Holder (the Assignor), hereby
assigns to the Federal Deposit Insurance Corporation (the FDIC), without recourse, all of the
Assignors respective rights, title and interest in and to: (a) the Security; (b) the Senior Debt
Indenture, dated July 16, 2008 (the 2008 Indenture), by and between the Company and the
Representative, with respect to the Security; and (c) any other instrument or agreement executed by
the Company regarding obligations of the Company under the Security or the 2008 Indenture with
respect to the Security (collectively, the Assignment).
The Assignor hereby certifies that:
1. Without the FDICs prior written consent, the Assignor has not:
(a) agreed to any material amendment of the Security or to any material deviation from the
provisions thereof; or
(b) accelerated the maturity of the Security.
[Instructions to the Assignor: If the Assignor has not assigned or transferred any interest in
the Security and related documentation, such Assignor must include the following representation.]
2. The Assignor has not assigned or otherwise transferred any interest in the Security;
[Instructions to the Assignor: If the Assignor has assigned a partial interest in the Security
and related documentation, the Assignor must include the following representation.]
2. The Assignor has assigned part of its rights, title and interest in the Security to
pursuant to the agreement, dated as of , 20___, between
, as assignor, and , as assignee, an executed copy of which is attached
hereto.
The Assignor acknowledges and agrees that this Assignment is subject to the Security and the
2008 Indenture and to the following:
1. In the event the Assignor receives any payment under or related to the Security from a
party other than the FDIC (a Non-FDIC Payment):
(a) after the date of demand for a guarantee payment on the FDIC pursuant to 12 CFR Part 370,
but prior to the date of the FDICs first guarantee payment under the Security pursuant to 12 CFR
Part 370, the Assignor shall promptly but in no event later than five (5) Business Days after
receipt notify the FDIC of the date and the amount of such Non-FDIC Payment and shall apply such
payment as payment made by the Company, and not as a guarantee payment made by the FDIC, and
therefore, the amount of such payment shall be excluded from this Assignment; and
B-1
(b) after the FDICs first guarantee payment under the Security, the Assignor shall forward
promptly to the FDIC such Non-FDIC Payment in accordance with the payment instructions provided in
writing by the FDIC.
2. Acceptance by the Assignor of payment pursuant to the Debt Guarantee Program on behalf of
the Holder shall constitute a release by the Holder of any liability of the FDIC under the Debt
Guarantee Program with respect to such payment.
The Person who is executing this Assignment on behalf of the Assignor hereby represents and
warrants to the FDIC that he/she/it is duly authorized to do so.
B-2
******
IN WITNESS WHEREOF, the Assignor has caused this instrument to be executed and delivered this
___day of , 20_.
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Very truly yours, |
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[ASSIGNOR] |
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(Signature) |
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(Print) |
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(Print) |
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Consented to and acknowledged by this ___day of ___, 20___:
THE FEDERAL DEPOSIT INSURANCE CORPORATION
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(Signature)
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EX-4.6
4
y74032exv4w6.htm
EX-4.6: FORM OF FIXED RATE SENIOR DEBT SECURITY (TLGP)
EX-4.6
\
Exhibit 4.6
[FORM OF FIXED RATE SENIOR DEBT SECURITY]
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Registered No.
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CUSIP No.
ISIN No. |
(Face of Security)
[IF A GLOBAL SECURITY, INSERT THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
2008 INDENTURE AS DEFINED ON THE REVERSE OF THIS SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE 2008 INDENTURE AND THIS SECURITY.]
[IF DTC IS THE DEPOSITARY, INSERT UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE GOLDMAN
SACHS GROUP, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.]
[INSERT ANY LEGEND REQUIRED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT AND THE REGULATIONS
THEREUNDER.]
THIS SECURITY IS GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND THE RIGHTS OF
THE HOLDER OF THIS SECURITY ARE SUBJECT TO CERTAIN RIGHTS OF THE FDIC, AS AND TO THE EXTENT
INDICATED IN THIS SECURITY, INCLUDING SECTIONS 7, 9, 10, 11, 12, 13, 14, 15 AND 16 ON THE REVERSE
HEREOF.
(Face of Security continued on next page)
-1-
Title of Series:
Title of Securities:
THE GOLDMAN SACHS GROUP, INC.
[TITLE OF SECURITY]
The Goldman Sachs Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the Company, which term includes any successor Person under
the 2008 Indenture (as defined on the reverse of this Security)), for value received, hereby
promises to pay to , or registered assigns, the principal sum of on
and to pay interest thereon, from or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, on in each year, commencing on
and at the Maturity of the principal hereof, at the rate of % per annum,
until the principal hereof is paid or made available for payment. Any such installment of interest that is overdue shall also bear interest at the rate of % per annum (to the extent that the payment of such interest shall be legally enforceable), from the date any such overdue amount first becomes due until it is paid
or made available for payment. Notwithstanding the foregoing, interest on any installment of interest that is overdue shall be payable on demand.
The interest so payable, and punctually paid or made available for payment, on any Interest
Payment Date will, as provided in the 2008 Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be the (whether or not a Business Day, as
defined below) next preceding such Interest Payment Date. Any interest so payable, but not
punctually paid or made available for payment, on any Interest Payment Date will forthwith cease to
be payable to the Holder on such Regular Record Date and such Defaulted Interest may either be paid
to the Person in whose name this Security (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof being given to the Holder of this Security not less than
10 days prior to such Special Record Date, or be paid in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Security may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in the 2008 Indenture.
For the purpose of determining the Holder at the close of business on any relevant record date when
business is not conducted, the close of business will mean 5:00 P.M., New York City time, on that
day.
The Company and the Trustee acknowledge that the Company has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit Insurance
Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a result, this debt is
guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed by the full faith and
credit of the United States. The details of the FDIC guarantee are provided in the FDICs
regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The expiration date of
the FDICs guarantee is the earlier of the maturity date of this debt or June 30, 2012.
The Trustee is hereby designated as the duly authorized representative of the Holder for
purposes of making claims and taking other permitted or required actions under the Debt Guarantee
Program (the Representative). The Holder of this Security may elect not to be represented by the
Representative with respect to this Security by providing written notice of such election to the
Representative.
Notwithstanding any provision of this Security, any right of the Holder to receive payment in
respect of this Security under the Debt Guarantee Program shall be subject to the procedures and
other requirements of the Debt Guarantee Program, and the Holder will not be entitled under the
Debt Guarantee Program to receive any additional interest or penalty amounts on account of any
default or resulting delay in payment in respect of this Security.
(Face of Security continued on next page)
-2-
Currency and Manner of Payment
[IF PAYMENT IS IN U.S. DOLLARS, INSERT Payment of the principal of and premium or interest
on this Security will be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts. Notwithstanding any other
provision of this Security or the 2008 Indenture, if this Security is a Global Security, any
payment in respect of this Security may be made pursuant to the Applicable Procedures of the
Depositary as permitted in the 2008 Indenture.
Subject to the prior paragraph and except as provided in the next paragraph, payment of any
amount payable on this Security will be made at the office or agency of the Company maintained for
that purpose in The City of New York (and at any other office or agency maintained by the Company
for that purpose), against surrender of this Security in the case of any payment due at the
Maturity of the principal hereof (other than any payment of interest that first becomes due on an
Interest Payment Date); provided, however, that, at the option of the Company and
subject to the next paragraph, payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security Register.
Subject to the second preceding paragraph, payment of any amount payable on this Security will
be made by wire transfer of immediately available funds to an account maintained by the payee with
a bank located in the Borough of Manhattan, The City of New York, if (i) the principal of this
Security is at least $1,000,000 (or the equivalent in another currency) and (ii) the Holder
entitled to receive such payment transmits a written request for such payment to be made in such
manner to the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, on
or before the fifth Business Day before the day on which such payment is to be made;
provided that, in the case of any such payment due at the Maturity of the principal hereof
(other than any payment of interest that first becomes due on an Interest Payment Date), this
Security must be surrendered at the office or agency of the Company maintained for that purpose in
The City of New York (or at any other office or agency maintained by the Company for that purpose)
in time for the Paying Agent to make such payment in such funds in accordance with its normal
procedures. Any such request made with respect to any payment on this Security payable to a
particular Holder will remain in effect for all later payments on this Security payable to such
Holder, unless such request is revoked on or before the fifth Business Day before a payment is to
be made, in which case such revocation shall be effective for such payment and all later payments.
In the case of any payment of interest payable on an Interest Payment Date, such written request
must be made by the Person who is the registered Holder of this Security on the relevant Regular
Record Date. The Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer with respect to this Security, but any tax, assessment or other
governmental charge imposed upon any payment will be borne by the Holder of this Security and may
be deducted from the payment by the Company or the Paying Agent.]
[IF PAYMENT IS IN EUROS, INSERT Payment of the principal of and premium or interest on this
Security will be made in euros. Notwithstanding any other provision of this Security or the 2008
Indenture, if this Security is a Global Security, any payment in respect of this Security may be
made pursuant to the Applicable Procedures of the Depositary as permitted in the 2008 Indenture.
Subject to the prior paragraph and except as provided in the next [two] [three] paragraphs,
payment of any amount payable on this Security will be made at the office or agency of the Company
maintained for that purpose in The City of New York (and at any other office or agency maintained
by the Company for that purpose), against surrender of this Security in the case of any payment due
at the Maturity of the principal hereof (other than any payment of interest that first becomes due
on an Interest Payment Date); provided, however, that, at the option of the Company
and subject to the next paragraph, payment of interest may be made by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security Register.
Subject to the second preceding paragraph, payment of any amount payable on this Security will
be made by wire transfer of immediately available funds to an account maintained by the payee with
a bank located in the Borough of Manhattan, The City of New York, if (i) the principal of this
Security is at least
(Face of Security continued on next page)
-3-
USD$1,000,000 (or the equivalent in euros) and (ii) the Holder entitled to receive such
payment transmits a written request for such payment to be made in such manner to the Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration, on or before the fifth
Business Day before the day on which such payment is to be made; provided that, in the case
of any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an Interest Payment Date), this Security must be surrendered at the
office or agency of the Company maintained for that purpose in The City of New York (or at any
other office or agency maintained by the Company for that purpose) in time for the Paying Agent to
make such payment in such funds in accordance with its normal procedures. Any such request made
with respect to any payment on this Security payable to a particular Holder will remain in effect
for all later payments on this Security payable to such Holder, unless such request is revoked on
or before the fifth Business Day before a payment is to be made, in which case such revocation
shall be effective for such payment and all later payments. In the case of any payment of interest
payable on an Interest Payment Date, such written request must be made by the Person who is the
registered Holder of this Security on the relevant Regular Record Date. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire transfer with
respect to this Security, but any tax, assessment or other governmental charge imposed upon any
payment will be borne by the Holder of this Security and may be deducted from the payment by the
Company or the Paying Agent.]
[IF LISTED ON LUXEMBOURG STOCK EXCHANGE, INSERT So long as the Securities of this series are
listed on the Official List of the Luxembourg Stock Exchange and such Stock Exchange shall so
require, the Company will at all times maintain an office or agency in Luxembourg for the payment
of the principal of and interest on the Securities of this series. Such Paying Agent in Luxembourg
shall initially be Dexia Banque Internationale à Luxembourg société anonyme.]
Payments Due on a Business Day
Notwithstanding any provision of this Security or the 2008 Indenture, if any amount of
principal, premium or interest would otherwise be due on this Security on a day (the Specified
Day) that is not a Business Day, such amount may be paid or made available for payment on the
Business Day that is next succeeding the Specified Day with the same force and effect as if such
amount were paid on the Specified Day; and no interest will accrue on the amount so payable for the
period from the Specified Day to such next succeeding Business Day. For all purposes of this
Security, Business Day means any day that is not a Saturday or Sunday, and that is not a day on
which banking institutions generally are authorized or obligated by law, regulation or executive
order to close in The City of New York [;][IF PAYMENT IS IN EUROS, INSERT or London, and that is
also a Euro Business Day, as defined below. The term Euro Business Day means any day on which
the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System, or any
successor system, is open for business;] provided that, solely with respect to any payment
to be made at any Place of Payment outside The City of New York[IF PAYMENT IS IN EUROS, INSERT or
London], Business Day means any day that is a Business Day as defined above and that is also not
a day on which banking institutions generally are authorized or obligated by law, regulation or
executive order to close in such Place of Payment; provided further that, with
respect to Section 12 of the reverse hereof and Exhibit B hereto, the definition of Business Day
therein shall apply. The provisions of this paragraph shall apply to this Security in lieu of the
provisions of Section 1.13 of the 2008 Indenture.
[IF PAYMENT IS IN EUROS, INSERT Payments Made in U.S. Dollars
Notwithstanding any provision of this Security or the 2008 Indenture, if any amount payable on
this Security is payable on any day and if euros are not available to the Company on the two
Business Days before such day, due to the imposition of exchange controls, disruption in a currency
market or any other circumstances beyond the control of the Company, the Company will be entitled
to satisfy its obligation to pay such amount in euros by making such payment in U.S. dollars. The
amount of such payment in U.S. dollars shall be determined by the Exchange Rate Agent on the basis
of the noon buying rate for cable transfers in The City of New York for euros (the Exchange Rate)
as of the latest day before the day on which such payment is to be made. Any payment made under
such circumstances in U.S. dollars where the
(Face of Security continued on next page)
-4-
required payment is in euros will not constitute an Event of Default under this Security or
the 2008 Indenture.
Exchange Rate Agent
As
used herein, the Exchange Rate Agent shall initially mean
[ ];
provided that the Company may, in its sole discretion, appoint any other institution
(including any affiliate of the Company) to serve as any such agent from time to time. The Company
will give the Trustee prompt written notice of any change in any such appointment. Insofar as this
Security provides for any such agent to obtain rates, quotes or other data from a bank, dealer or
other institution for use in making any determination hereunder, such agent may do so from any
institution or institutions of the kind contemplated hereby notwithstanding that any one or more of
such institutions are any such agent, affiliates of any such agent or affiliates of the Company.
All determinations made by the Exchange Rate Agent pursuant to the terms of this Security
shall be, absent manifest error, conclusive for all purposes and binding on the Holder of this
Security and the Company. The Exchange Rate Agent shall not have any liability therefor.]
Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the 2008 Indenture or be valid or obligatory for any purpose.
(Face of Security continued on next page)
-5-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
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THE GOLDMAN SACHS GROUP, INC.
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This is one of the Securities of the series designated herein and referred to in the 2008
Indenture.
Dated:
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THE BANK OF NEW YORK MELLON, as Trustee
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By |
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Authorized Signatory |
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(Reverse of Security)
1. Securities and Indenture.
This Security is one of a duly authorized issue of securities of the Company (herein called
the Securities) issued and to be issued in one or more series under a Senior Debt Indenture,
dated as of July 16, 2008 (herein called the 2008 Indenture, which term shall have the meaning
assigned to it in such instrument), between the Company and The Bank of New York Mellon, as Trustee
(herein called the Trustee, which term includes any successor trustee under the 2008 Indenture),
and reference is hereby made to the 2008 Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to be, authenticated and
delivered.
2. Series and Denominations.
This Security is one of the series designated on the face hereof, limited to an aggregate
principal amount as shall be determined and may be increased from time to time by the Company. Any
election by the Company so to increase such aggregate principal amount shall be evidenced by a
certificate of an Authorized Person (as defined in the Determination of an Authorized Person, dated
, with respect to this series). References herein to this series mean the series of
Securities designated on the face hereof. The Securities of this series are issuable only in
registered form without coupons in denominations of integral multiples of
, subject to a minimum denomination of $ .
3. [IF APPLICABLE, INSERT Additional Amounts.
If the beneficial owner of this Security is a United States Alien (as defined below), the
Company will pay all additional amounts that may be necessary so that every net payment of the
principal of and interest on this Security to such beneficial owner, after deduction or withholding
for or on account of any present or future tax, assessment or governmental charge imposed with
respect to such payment by any U.S. Taxing Authority (as defined below), will not be less than the
amount provided for in this Security to be then due and payable; provided, however,
that the Company shall have no obligation to pay additional amounts for or on account of any one or
more of the following:
(i) any tax, assessment or other governmental charge imposed solely because at any
time there is or was a connection between such beneficial owner (or between a fiduciary,
settlor, beneficiary or member of such beneficial owner, if such beneficial owner is an
estate, trust or partnership) and the United States (as defined below) (other than the mere
receipt of a payment on, or the ownership or holding of, a Security), including because
such beneficial owner (or such fiduciary, settlor, beneficiary or member) at any time, for
U.S. federal income tax purposes: (a) is or was a citizen or resident, or is or was treated
as a resident, of the United States, (b) is or was present in the United States, (c) is or
was engaged in a trade or business in the United States, (d) has or had a permanent
establishment in the United States, (e) is or was a domestic or foreign personal holding
company, a passive foreign investment company or a controlled foreign corporation, (f) is
or was a corporation that accumulates earnings to avoid U.S. federal income tax or (g) is
or was a 10-percent shareholder of the Company as defined in section 871(h)(3) of the
U.S. Internal Revenue Code or any successor provision;
(ii) any tax, assessment or governmental charge imposed solely because of a change in
applicable law or regulation, or in any official interpretation or application of
applicable law or regulation, that becomes effective more than 15 days after the day on
which the payment becomes due or is made available, whichever occurs later;
(iii) any estate, inheritance, gift, sales, excise, transfer, wealth or personal
property tax or any similar tax, assessment or other governmental charge;
(Reverse of Security continued on next page)
-7-
(iv) any tax, assessment or other governmental charge imposed solely because such
beneficial owner or any other Person fails to comply with any certification, identification
or other reporting requirement concerning the nationality, residence, identity or
connection with the United States of the Holder or any beneficial owner of this Security,
if compliance is required by statute, by regulation of the U.S. Treasury Department or by
an applicable income tax treaty to which the United States is a party, as a precondition to
exemption from such tax, assessment or other governmental charge;
(v) any tax, assessment or other governmental charge that is payable otherwise than by
deduction or withholding from payments of principal of or interest on this Security;
(vi) any tax, assessment or other governmental charge imposed solely because the
payment is to be made by a particular Paying Agent (which term may include the Company) and
would not be imposed if made by another Paying Agent (which term may include the Company);
(vii) by or on behalf of a Holder who would be able to avoid such withholding or
deduction by presenting this Security to another Paying Agent in a Member State of the
European Union;
(viii) any tax, assessment or other governmental charge imposed solely because the
Holder (1) is a bank purchasing this Security in the ordinary course of its lending
business or (2) is a bank that is neither (A) buying this Security for investment purposes
only nor (B) buying this Security for resale to a third party that either is not a bank or
holding the note for investment purposes only; or
(ix) any combination of the taxes, assessments or other governmental charges described
in items (i) through (viii) of this Section 3.
Additional amounts also will not be paid with respect to any payment of principal of or
interest on this Security to any United States Alien who is a fiduciary or a partnership, or who is
not the sole beneficial owner of any such payment, to the extent that the Company would not be
required to pay additional amounts to any beneficiary or settlor of such fiduciary or any member of
such a partnership, or to any beneficial owner of the payment, if that Person had been treated as
the beneficial owner of this Security for this purpose.
The term United States Alien means any Person who, for U.S. federal income tax purposes, is
a nonresident alien individual, a foreign corporation, a foreign partnership one or more of the
members of which is, for United States federal income tax purposes, a foreign corporation, a
nonresident alien individual or a nonresident alien fiduciary of a foreign estate or trust, or a
nonresident alien fiduciary of an estate or trust that is not subject to U.S. federal income tax on
a net income basis on income or gain from this Security. For the purposes of this Section 3 and
Section 4 only, (a) the term United States means the United States of America (including the
states thereof and the District of Columbia), together with the territories, possessions and all
other areas subject to the jurisdiction of the United States of America and (b) the term U.S.
Taxing Authority means the United States of America or any state, other jurisdiction or taxing
authority in the United States.
Except as specifically provided in this Security, the Company shall not be required to make
any payment with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or taxing authority thereof or therein.
Whenever in the Securities of this series (or in the 2008 Indenture, including in Sections
5.01(1) and 501(2) thereof, insofar as applicable to this series) there is a reference, in any
context, to the payment of the principal of or interest on any Security of this series, such
mention shall be deemed to include mention of any payment of additional amounts to United States
Aliens in respect of such payment of principal or interest to the extent that, in such context,
such additional amounts are, were or would be
(Reverse of Security continued on next page)
-8-
payable in respect thereof pursuant to this Section 3 or any corresponding section of another
Security of this series, as the case may be. Express mention of the payment of additional amounts
in any provision of any Security of this series shall not be construed as excluding additional
amounts in the provisions of any Security of this series (or of the 2008 Indenture insofar as it
applies to this series) where such express mention is not made.]
4. Redemption.
The Securities of this series may be redeemed, as a whole but not in part, at the option of
the Company, at a redemption price equal to 100% of the principal amount of the Securities to be
redeemed, together with interest accrued to the date fixed for redemption, if, as a result of any
amendment to, or change in, the laws or regulations of any U.S. Taxing Authority (as defined in
Section 3 above), or any amendment to or change in any official interpretation or application of
such laws or regulations, which amendment or change becomes effective or is announced on or after
, the Company will become obligated to pay, on the next Interest Payment Date,
additional amounts in respect of any Security of this series pursuant to Section 3 of this Security
or any corresponding section of another Security of this series. If the Company becomes entitled to
redeem the Securities of this series, it may do so on any day thereafter pursuant to the 2008
Indenture; provided, however, that (1) the Company gives the Holder of this
Security notice of such redemption not more than 60 days nor less than 30 days prior to the date
fixed for redemption as provided in the 2008 Indenture, (2) no such notice of redemption may be
given earlier than 90 days prior to the next Interest Payment Date on which the Company would be
obligated to pay such additional amounts and (3) at the time such notice is given, such obligation
to pay such additional amounts remains in effect. Immediately prior to the giving of any notice of
redemption of Securities pursuant to this Section 4, the Company will deliver to the Trustee an
Officers Certificate stating that the Company is entitled to effect such redemption and setting
forth in reasonable detail a statement of facts showing that the conditions precedent to the right
of the Company to so redeem the Securities have occurred. Interest installments due on or prior to
a Redemption Date will be payable to the Holder of this Security or one or more Predecessor
Securities, of record at the close of business on the relevant record date, all as provided in the
2008 Indenture.
5. Defeasance.
The 2008 Indenture contains provisions for defeasance at any time of the entire indebtedness
of this Security or certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth in the 2008 Indenture.
6. Modification and Waiver.
The 2008 Indenture permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company, and the rights of the Holders of
the Securities to be affected, under the 2008 Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of all Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any series, may
comprise fewer than all the Securities of such series). The 2008 Indenture also contains provisions
(i) permitting the Holders of a majority in principal amount of the Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any particular
series, may comprise fewer than all the Securities of such series), on behalf of the Holders of all
such affected Securities, to waive compliance by the Company with certain provisions of the 2008
Indenture and (ii) permitting the Holders of a majority in principal amount of the Securities at
the time Outstanding of any series to be affected (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to waive certain past
defaults under the 2008 Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the
(Reverse of Security continued on next page)
-9-
registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
7. Remedies.
Sections 5.01 and 5.02 of the 2008 Indenture are hereby amended with respect to the Securities
of this series to the extent necessary to comply with Section 5.01 and Annex A of the Master
Agreement, dated November 25, 2008, as the same may be amended from time to time (the Master
Agreement), by and between the Company and the FDIC, attached hereto as Exhibit A. Subject to the
immediately preceding sentence and Section 14 of the reverse of this Security, if an Event of
Default with respect to Securities of this series shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the 2008 Indenture.
As provided in and subject to the provisions of the 2008 Indenture and subject to Section 14
of the reverse of this Security, the Holder of this Security shall not have the right to institute
any proceeding with respect to the 2008 Indenture, or for the appointment of a receiver or trustee,
or for any other remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this series at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee indemnity reasonably satisfactory to it,
and the Trustee shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
If so provided pursuant to the terms of any specific Securities, the above-referenced
provisions of the 2008 Indenture regarding the ability of Holders to waive certain defaults, or to
request the Trustee to institute proceedings (or to give the Trustee other directions) in respect
thereof, may be applied differently with regard to such Securities.
No reference herein to the 2008 Indenture and no provision of this Security or of the 2008
Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
8. Transfer and Exchange.
As provided in the 2008 Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any place where the
principal of and interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his or her attorney duly authorized in writing, and thereupon one
or more new Securities of this series and of like tenor, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or transferees.
As provided in the 2008 Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount of Securities of
this series and of like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
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Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security is a Global Security and is subject to the provisions of the 2008 Indenture
relating to Global Securities, including the limitations in Section 3.05 thereof on transfers and
exchanges of Global Securities (subject to Section 10 of the reverse of this Security).
9. Subrogation.
The FDIC shall be subrogated to all of the rights of the Holder and the Representative under
this Security and the 2008 Indenture against the Company in respect of any amounts paid to the
Holder, or for the benefit of the Holder, by the FDIC pursuant to the Debt Guarantee Program.
10. Agreement to Execute Assignment upon Guarantee Payment.
The Holder hereby authorizes the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the Holder pursuant to the
Debt Guarantee Program, to execute an assignment in the form attached to this Security as Exhibit B
pursuant to which the Representative shall assign to the FDIC its right as Representative to
receive any and all payments from the Company under this Security on behalf of the Holder. The
Company hereby consents and agrees that the FDIC is an acceptable transferee for all or any portion
of the indebtedness hereunder for all purposes of this Security and upon any such assignment, the
FDIC shall be deemed the Holder of this Security for all purposes hereof, and the Company hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Security and the 2008 Indenture as a result of such assignment.
Section 3.05 of the 2008 Indenture is hereby amended with respect to the Securities of this
series to the extent necessary to permit the Holder, the Representative and the Company to comply
with this Section 10, Section 11 below or any other similar provision of this Security.
11. Surrender of Senior Unsecured Debt Instrument to the FDIC.
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Company is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period),
payment in full hereunder shall be made pursuant to the Debt Guarantee Program on the outstanding
principal and accrued interest to such date of payment, the Holder shall, or the Holder shall cause
the person or entity in possession to, promptly surrender to the FDIC this Security.
12. Notice Obligations to FDIC of Payment Default.
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Company is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default. Solely for the purpose of this
Section 12, Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
13. Ranking.
Any indebtedness of the Company to the FDIC arising under Section 2.03 of the Master Agreement
will constitute a senior unsecured general obligation of the Company, ranking pari passu with any
indebtedness hereunder.
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14. No Event of Default during Time of Timely FDIC Guarantee Payments.
There shall not be deemed to be an Event of Default under this Security or the 2008 Indenture
which would permit or result in the acceleration of amounts due hereunder, if such an Event of
Default is due solely to the failure of the Company to make timely payment hereunder, provided that
the FDIC is making timely guarantee payments with respect to this Security in accordance with 12
C.F.R Part 370.
The following provisions of this paragraph shall apply to this Security in addition to, and
without limiting, the foregoing provisions of this Section 14. No event that would otherwise
constitute an Event of Default with respect to the Securities of this series shall constitute an
Event of Default with respect to this Security, provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. As a result, upon the occurrence of any such event (including any event of the kind
specified in said Section 5.01), neither the Trustee nor the Holder of this Security shall be
entitled, with respect to this Security, to seek any remedies otherwise available, or to take any
other action otherwise provided for, under the 2008 Indenture upon an Event of Default (including
any right to accelerate the Maturity of the principal of this Security pursuant to Section 5.02 of
the 2008 Indenture, any right to exchange (at the Holders option) this Security for a Security
that is not a Global Security pursuant to Section 3.05 thereof and any right to institute a
proceeding pursuant to Section 5.07 thereof), provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. Without limiting the foregoing, no event, including any event of the kind specified in
Section 5.01(5) or 5.01(6) of the 2008 Indenture, shall result in the automatic acceleration of the
Maturity of the principal of this Security pursuant to Section 5.02 thereof. Notwithstanding the
foregoing, however, the rights of the Holder of this Security pursuant to Section 5.08 of the 2008
Indenture shall not be affected by this Section 14. With regard to this Security, the provisions
of Article Five of the 2008 Indenture shall be subject to, and shall be deemed modified as
necessary to be consistent with, the provisions of this Section 14.
15. No Modifications without FDIC Consent.
Without the express written consent of the FDIC, the Company and the Trustee agree not to
amend, modify, supplement or waive any provision in this Security or the 2008 Indenture that is
related to the principal, interest, payment, default or ranking of the indebtedness hereunder or
that is required to be included herein pursuant to the Master Agreement.
16. Demand Obligations to FDIC upon the Companys Failure to Pay.
On the 30th day after the date the Company defaults in payment of interest on this Security,
which default has not been cured by the Company by such 30th day, in the case of default in
interest, or at the Maturity, in the case of default in principal of this Security, the
Representative shall make a demand on behalf of the Holder to the FDIC for payment on the
guaranteed amount under the Debt Guarantee Program. Such demand shall be accompanied by a proof of
claim, which shall include evidence, to the extent not previously provided in the Master Agreement,
in form and content satisfactory to the FDIC, of: (A) the Representatives financial and
organizational capacity to act as Representative; (B) the Representatives exclusive authority to
act on behalf of the Holder and its fiduciary responsibility to the Holder when acting as such, as
established by the terms of this Security and the 2008 Indenture; (C) the occurrence of a payment
default; and (D) the authority to make an assignment of the Holders right, title, and interest in
this Security to the FDIC and to effect the transfer to the FDIC of the Holders claim in any
insolvency proceeding. Such assignment shall include the right of the FDIC to receive any and all
distributions on this Security from the proceeds of the receivership or bankruptcy estate. Any
demand under this Section 16 shall be made in writing and directed to the Director, Division of
Resolution and Receiverships, Federal Deposit Insurance Corporation, Washington, D.C., and shall
include all supporting evidences as provided in this Section 16, and shall certify to the accuracy
thereof.
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[IF LISTED ON LUXEMBOURG STOCK EXCHANGE, INSERT
17. Notices.
Notices that are required hereunder or under the 2008 Indenture to be given to Holders of the
Securities of this series shall be given to Holders of the Securities of this series as set forth
in the 2008 Indenture and in the next paragraph.
So long as the Securities of this series are listed on the Official List of the Luxembourg
Stock Exchange and such Stock Exchange shall so require, the Trustee will publish any such required
notices in a daily newspaper of general circulation in Luxembourg. If publication in Luxembourg is
not practical, the Trustee will publish any such required notices elsewhere in Europe. Published
notices will be deemed to have been given on the date they are published. If publication as
described in this paragraph becomes impossible, the Trustee may publish sufficient notice by
alternate means that approximate the terms and conditions as described in this paragraph.]
18. Governing Law.
This Security and the 2008 Indenture shall be governed by and construed in accordance with the
laws of the State of New York.
19. Terms Defined in the 2008 Indenture.
All terms used in this Security which are defined in the 2008 Indenture shall have the
meanings assigned to them in the 2008 Indenture.
[IF APPLICABLE, INSERT References in this Security to euro shall mean, as of any time, the
coin or currency (if any) that is legal tender for the payment of private and public debt in all
countries then participating in the European Economic and Monetary Union (or any successor union)
pursuant to the Treaty on European Union of February 1992 (or any successor treaty), as it may be
amended from time to time.]
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
(Please Print or Typewrite Name and Address
Including Postal Zip Code of Assignee)
the attached Security and all rights thereunder, and hereby irrevocably constitutes and appoints
to transfer said Security on the books of the Company, with full power of substitution in the
premises.
Dated:
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Signature Guaranteed
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NOTICE: Signature must be guaranteed.
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NOTICE: The signature to this
assignment must correspond with the
name of the Holder as written upon
the face of the attached Security in
every particular, without alteration
or any change whatever. |
EXHIBIT A
MASTER AGREEMENT
Federal Deposit Insurance Corporation
Temporary Liquidity Guarantee Program Debt Guarantee Program
TLGP Master Agreement 11/24/08
TABLE OF CONTENTS
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Page |
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ARTICLE I DEFINITIONS |
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1 |
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1.01. |
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Certain Defined Terms |
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1 |
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1.02. |
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Terms Generally |
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2 |
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ARTICLE II SENIOR DEBT GUARANTEE |
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2 |
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2.01. |
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Acknowledgement of Guarantee |
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2 |
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2.02. |
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Guarantee Payments |
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2 |
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2.03. |
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Issuer Make-Whole Payments |
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3 |
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2.04. |
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Waiver of Defenses |
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3 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER |
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4 |
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3.01. |
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Organization and Authority |
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4 |
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3.02. |
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Authorization, Enforceability |
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3.03. |
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Reports |
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5 |
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ARTICLE IV NOTICE AND REPORTING |
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5 |
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4.01. |
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Reports of Existing and Future Guaranteed Debt |
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5 |
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4.02. |
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On-going Reporting |
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5 |
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4.03. |
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Notice of Defaults |
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5 |
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ARTICLE V COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER |
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6 |
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5.01. |
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Terms to be included in Future Guaranteed Debt |
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6 |
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5.02. |
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Breaches; False or Misleading Statements |
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6 |
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5.03. |
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No Modifications |
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6 |
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5.04. |
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Waiver by the Issuer |
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6 |
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ARTICLE VI GENERAL PROVISIONS |
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6 |
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6.01. |
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Amendment and Modification of this Master Agreement |
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6 |
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6.02. |
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Notices |
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6.03. |
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Counterparts |
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7 |
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6.04. |
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Severability |
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6.05. |
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Governing Law |
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7 |
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6.06. |
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Venue |
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6.07. |
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Assignment |
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6.08. |
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Headings |
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8 |
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6.09. |
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Delivery Requirement |
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8 |
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Annex A |
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Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt |
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Annex B |
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Form of Assignment |
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TLGP Master Agreement 11/24/08
MASTER AGREEMENT
THIS MASTER AGREEMENT (this Master Agreement) is being entered into as of the date
set forth on the signature page hereto by and between THE FEDERAL DEPOSIT INSURANCE CORPORATION, a
corporation organized under the laws of the United States of America and having its principal
office in Washington, D.C. (the FDIC), and the entity whose name appears on the signature
page hereto (the Issuer).
RECITALS
WHEREAS, on November 21, 2008, the FDIC issued its Final Rule, 12 C.F.R. Part 370 (as may be
amended from time to time, the Rule), establishing the Temporary Liquidity Guarantee
Program (the Program); and
WHEREAS, pursuant to the Rule, the FDIC will guarantee the payment of certain newly-issued
senior unsecured debt (as defined in the Rule,
hereinafter Senior Unsecured
Debt) issued by an eligible entity (as defined in the Rule); and
WHEREAS, the Issuer is an eligible entity for purposes of the Rule and has elected to
participate in the debt guarantee component of the Program.
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. As used in this Master Agreement, the following terms
shall have the following meanings:
Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
FDIC has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
FDIC Guarantee means the guarantee of payment by the FDIC of the Senior Unsecured
Debt of the Issuer in accordance with the terms of the Program.
Guarantee Payment means any payment made by the FDIC under the Program with respect
to Senior Unsecured Debt of the Issuer.
Guarantee Payment Notice has the meaning ascribed to such term in Section
2.02.
Issuer has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
Issuer Make-Whole Payments has the meaning ascribed to such term in
Section 2.03.
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Issuer Reports means reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that the Issuer or any subsidiary of the Issuer
is required to file with any governmental entity.
Master Agreement means this Master Agreement, together with all Annexes and
amendments hereto.
Material Adverse Effect means a material adverse effect on the business, results of
operations or financial condition of the Issuer and its consolidated subsidiaries taken as a whole.
Program has the meaning ascribed to such term in the Recitals.
Reimbursement Payment has the meaning ascribed to such term in Section 2.03.
Relevant Provision means any provision that is related to the principal, interest,
payment, default or ranking of the Senior Unsecured Debt, any provision contained in Annex A or any
other provision the amendment of which would require the consent of any or all of the holders of
such debt.
Representative means the trustee, administrative agent, paying agent or other
fiduciary or agent designated as the Representative under the governing documents for any Senior
Unsecured Debt of the Issuer subject to the FDIC Guarantee for purposes of submitting claims or
taking other actions under the Program.
Rule has the meaning ascribed to such term in the Recitals.
Senior Unsecured Debt has the meaning ascribed to such term in the Recitals.
1.02. Terms Generally. Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other gender as the context
requires, the terms hereof, herein and herewith and words of similar import shall, unless
otherwise stated, be construed to refer to this Master Agreement and not to any particular
provision of this Master Agreement, and Article, Section and paragraph references are to the
Articles, Sections and paragraphs of this Master Agreement unless otherwise specified, and the word
including and words of similar import when used in this Master Agreement shall mean including,
without limitation, unless otherwise specified.
ARTICLE II
SENIOR DEBT GUARANTEE
2.01. Acknowledgement of Guarantee. The FDIC hereby acknowledges that the Issuer has
elected to participate in the debt guarantee component of the Program and that, as a result, the
Issuers Senior Unsecured Debt is guaranteed by the FDIC to the extent set forth in, and subject to
the provisions of, the Rule, and subject to the terms hereof.
2.02. Guarantee Payments. The Issuer understands and acknowledges that any Guarantee
Payment with respect to a particular issue of Senior Unsecured Debt shall be paid by the FDIC
directly to:
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(a) the Representative with respect to such Senior Unsecured Debt if a Representative has been
designated; or
(b) the registered holder(s) of such Senior Unsecured Debt if no Representative has been
designated; or
(c) any registered holder of such Senior Unsecured Debt who has opted out of being represented
by the designated Representative;
in each case, pursuant to the claims procedure set forth in the Rule. In no event shall the FDIC
make any Guarantee Payment to the Issuer directly. The FDIC will provide prompt written notice to
the Issuer of any Guarantee Payment made by the FDIC with respect to any of the Issuers Senior
Unsecured Debt (the Guarantee Payment Notice).
2.03. Issuer Make-Whole Payments. In consideration of the FDIC providing the FDIC
Guarantee with respect to the Senior Unsecured Debt of the Issuer, the Issuer hereby irrevocably
and unconditionally covenants and agrees:
(a) to reimburse the FDIC immediately upon receipt of the Guarantee Payment Notice for all
Guarantee Payments set forth in the Guarantee Payment Notice (the Reimbursement Payment)
(without duplication of any amounts actually received by the FDIC as subrogee or assignee under the
governing documents of the relevant Senior Unsecured Debt of the Issuer);
(b) beginning as of the date of the Issuers receipt of the Guarantee Payment Notice, to pay
interest on any unpaid Reimbursement Payments until such Reimbursement Payments shall have been
paid in full by the Issuer, at an interest rate equal to one percent (1%) per annum above the
non-default interest rate payable on the Senior Unsecured Debt with respect to which the relevant
Guarantee Payments were made, as calculated in accordance with the documents governing such Senior
Unsecured Debt; and
(c) to reimburse the FDIC for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by it, including costs of collection or other enforcement of the Issuers
payment obligations hereunder. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the FDICs agents, counsel, accountants and experts.
Clauses (a), (b) and (c) above are collectively referred to herein as the Issuer
Make-Whole Payments. The indebtedness of the Issuer to the FDIC arising under this
Section 2.03 constitutes a senior unsecured general obligation of the Issuer, ranking pari
passu with other senior unsecured indebtedness of the Issuer, including without limitation Senior Unsecured Debt of
the Issuer that is subject to the FDIC Guarantee.
2.04. Waiver of Defenses. The Issuer hereby waives any defenses it might otherwise
have to its payment obligations under any of the Issuers Senior Unsecured Debt or under
Section 2.03 hereof, in each case beginning at such time as the FDIC has made any Guarantee
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Payment with respect to such Senior Unsecured Debt and continuing until such time as all Issuer
Make-Whole Payments have been received by the FDIC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
3.01. Organization and Authority. The Issuer has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of organization, with the
necessary power and authority to own its properties and conduct its business in all material
respects as currently conducted, except as has not had, or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.02. Authorization, Enforceability.
(a) The Issuer has the power and authority to execute and deliver this Master Agreement and to
carry out its obligations hereunder. The execution, delivery and performance by the Issuer of this
Master Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Issuer, and no further approval or
authorization is required on the part of the Issuer. This Master Agreement is a valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws
now or hereafter in effect relating to creditors rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
(b) The execution, delivery and performance by the Issuer of this Master Agreement and the
consummation of the transactions contemplated hereby and compliance by the Issuer with the
provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of the Issuer or any
subsidiary of the Issuer under, any of the terms, conditions or provisions of, as applicable, (X)
its organizational documents or (Y) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Issuer or any subsidiary of the
Issuer may be bound, or to which the Issuer or any subsidiary of the Issuer may be subject, or (ii)
violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree
applicable to the Issuer or any subsidiary of the Issuer or any of their respective properties or
assets except, in the case of clauses (i)(Y) and (ii), for those occurrences that, individually or
in the aggregate, have not had and would not reasonably be expected to have a Material Adverse
Effect.
(c) No prior notice to, filing with, exemption or review by, or authorization, consent or
approval of, any governmental entity is required to be made or obtained by the Issuer in connection
with the execution of this Master Agreement, except for any such notices, filings, exemptions,
reviews, authorizations, consents and approvals which have been made or obtained
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or the failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.03. Reports. Since December 31, 2007, the Issuer and each subsidiary of the Issuer
has timely filed all Issuer Reports and has paid all fees and assessments due and payable in
connection therewith, except, in each case, as would not individually or in the aggregate have a
Material Adverse Effect. As of their respective dates of filing, the Issuer Reports complied in
all material respects with all statutes and applicable rules and regulations of all applicable
governmental entities. In the case of each such Issuer Report filed with or furnished to the
Securities and Exchange Commission, if any, such Issuer Report (a) did not, as of its date, or if
amended prior to the date of this Master Agreement, as of the date of such amendment, contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading,
(b) complied as to form in all material respects with all applicable requirements of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and (c) no executive
officer of the Issuer or any subsidiary of the Issuer has failed in any respect to make the
certifications required by him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.
With respect to all other Issuer Reports, the Issuer Reports were complete and accurate in all
material respects as of their respective dates.
ARTICLE IV
NOTICE AND REPORTING
4.01. Reports of Existing and Future Guaranteed Debt. The Issuer shall provide
reports to the FDIC of the amount of all Senior Unsecured Debt subject to the FDIC Guarantee in
accordance with the reporting requirements of the Rule.
4.02. On-going Reporting. The Issuer covenants and agrees that, for so long as it has
outstanding Senior Unsecured Debt that is subject to the FDIC Guarantee, it shall furnish or cause
to be furnished to the FDIC (a) monthly reports, in such form as specified by the FDIC, containing
information relating to the Issuers outstanding Senior Unsecured Debt that is subject to the FDIC
Guarantee and such other information as may be requested in such form, and (b) such other
information that the FDIC may reasonably request, such other information to be delivered within ten
(10) Business Days of receipt by the Issuer of any such request.
4.03. Notice of Defaults. The Issuer covenants and agrees that it shall notify the
FDIC within one (1) Business Day of any default in the payment of any principal or interest when
due, without giving effect to any cure period, with respect to any indebtedness of the Issuer
(including debt that is not subject to the FDIC Guarantee), whether such debt is existing as of the
date of this Master Agreement or is issued subsequent to the date hereof, if such default would
result, or would reasonably be expected to result, in an event of default under any Senior
Unsecured Debt of the Issuer that is subject to the FDIC Guarantee.
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ARTICLE V
COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER
5.01. Terms to be included in Future Guaranteed Debt. The governing documents for the
issuance of any Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee shall
contain each of the provisions set forth in Annex A. If a particular issue of Senior
Unsecured Debt is evidenced solely by a trade confirmation, the Issuer shall use commercially
reasonable efforts to cause the holder of such debt to execute a written instrument setting forth
the holders agreement to be bound by the provisions set forth in Annex A. No document
governing the issuance of Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee
shall contain any provision that would result in the automatic acceleration of the debt upon a
default by the Issuer at any time during which the FDIC Guarantee is in effect or during which
Guarantee Payments are being made in accordance with Section 370.12(b)(2) of the Rule.
5.02. Breaches; False or Misleading Statements. The Issuer acknowledges and agrees
that (a) if it is in breach of any provision of this Master Agreement or (b) if it makes any false
or misleading statement or representation in connection with the Issuers participation in the
Program, or makes any statement or representation in bad faith with the intent to influence the
actions of the FDIC, the FDIC may take the enforcement actions provided in Section 370.11 of the
Rule, including termination of the Issuers participation in the Program. As set forth in the
Rule, any termination of the Issuers participation in the Program would solely have prospective
effect, and would in no event affect the FDIC Guarantee with respect to Senior Unsecured Debt of
the Issuer that is issued and outstanding prior to the termination of the Issuers participation in
the Program.
5.03. No Modifications. The Issuer covenants and agrees that it shall not amend,
modify, or consent to any amendment or modification, or waive any Relevant Provision, without the
express written consent of the FDIC.
5.04. Waiver by the Issuer. The Issuer acknowledges and agrees that if any covenant,
stipulation or other provision of this Master Agreement that imposes on the Issuer the obligation
to make any payment is at any time void under any provision of applicable law, the Issuer will not
make any claim, counterclaim or institute any proceedings against the FDIC or any of its assignees
or subrogees for any amount paid by the Issuer at any time, and the Issuer waives unconditionally
and absolutely any rights and defenses, legal or equitable, which arise under or in connection with
any such provision and which might otherwise be available to it for recovery of any amount due
under this Master Agreement.
ARTICLE
VI
GENERAL
PROVISIONS
6.01. Amendment and Modification of this Master Agreement. This Master Agreement may
be amended, modified and supplemented in any and all respects, but only by a written instrument
signed by the parties hereto expressly stating that such instrument is intended to amend, modify or
supplement this Master Agreement.
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6.02. Notices. Unless otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, telecopied (which is confirmed) or sent by an overnight courier service, such as FedEx,
to the parties at the following addresses (or at such other address for a party as shall be
specified by such party by like notice):
if to the Issuer, to the address appearing on the signature page hereto
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if to the FDIC, to:
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The Federal Deposit Insurance Corporation |
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Deputy Director, Receivership Operations Branch |
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Division of Resolutions and Receiverships |
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Attention: Master Agreement |
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550 17th Street, N.W. |
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Washington, DC 20429 |
6.03. Counterparts. This Master Agreement may be executed in counterparts, which,
together, shall be considered one and the same agreement. Copies of executed counterparts
transmitted by telecopy or other electronic transmission service shall be considered original,
executed counterparts, provided receipt of such counterparts is confirmed.
6.04. Severability. Any term or provision of this Master Agreement that is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall have the power to
reduce the scope, duration or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
6.05. Governing Law. Federal law of the United States shall control this Master
Agreement. To the extent that federal law does not supply a rule of decision, this Master
Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of New York without giving effect to principles of conflicts of law other than Section 5-1401
of the New York General Obligations Law. Nothing in this Master Agreement will require any
unlawful action or inaction by either party.
6.06. Venue. Each of the parties hereto irrevocably and unconditionally agrees that
any legal action arising under or in connection with this Master Agreement is to be instituted in
the United States District Court in and for the District of Columbia or in any United States
District Court in the jurisdiction where the Issuers principal office is located.
6.07. Assignment. Neither this Master Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party, and any purported
assignment
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without such consent shall be void. Subject to the preceding sentence, this Master Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6.08. Headings. The headings and subheadings of the Table of Contents, Articles and
Sections contained in this Master Agreement, except the terms identified for definition in Article
I and elsewhere in this Master Agreement, are inserted for convenience only and shall not affect
the meaning or interpretation of this Master Agreement or any provision hereof.
6.09. Delivery Requirement. The Issuer shall submit a completed, executed and dated
copy of the signature page hereto to the FDIC within five (5) business days of the date of the
Issuers election to continue participating in the debt guarantee component of the Program in
accordance with the delivery instructions set forth on the signature page.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, the Issuer and the FDIC have caused this Master Agreement to be executed
by their respective officers thereunto duly authorized.
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THE FEDERAL DEPOSIT INSURANCE
CORPORATION
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Name: |
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NAME OF ISSUER:
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THE GOLDMAN SACHS GROUP, INC. |
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/s/ David Viniar |
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David Viniar |
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Chief Financial Officer |
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Address of Issuer:
85 Broad Street
New York, New York 10004
FDIC Certificate
Number: ________________________
RSSD ID or
OTS Docket
Number:
2380443
Date:
11/25/08
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Delivery Instructions
Please deliver a completed, executed and dated copy of this Signature Page to the FDIC within
five (5) business days of the date of the Issuers election to continue participating in the Debt
Guarantee Program. Email is the preferred method of delivery to MasterAgreement@fdic.gov, or you
may send it by an overnight courier service such as FedEx to Senior Counsel, Special Issues Unit,
E7056, Attention: Master Agreement, 3501 Fairfax Drive, Arlington, Virginia, 22226.
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Annex A
Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt
The following provisions shall be included in the governing documents for the issuance of
Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee, in substantially the
form presented below, unless otherwise specified. The appropriate name of the governing
document(s) shall be inserted in place of the term Agreement where it appears in this Annex A.
Acknowledgement of the FDICs Debt Guarantee Program
The parties to this Agreement acknowledge that the Issuer has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit
Insurance Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a
result, this debt is guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed
by the full faith and credit of the United States. The details of the FDIC guarantee are provided
in the FDICs regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The
expiration date of the FDICs guarantee is the earlier of the maturity date of this debt or June
30, 2012. [The italicized portion of the above provision shall be included exactly as written
above]
Representative
The [insert name of the: trustee, administrative agent, paying agent or other fiduciary or
agent to be designated as the duly authorized representative of the debt holders] is designated
under this Agreement as the duly authorized representative of the holder[s] for purposes of making
claims and taking other permitted or required actions under the Debt Guarantee Program (the
Representative). Any holder may elect not to be represented by the Representative by
providing written notice of such election to the Representative.
Subrogation
The FDIC shall be subrogated to all of the rights of the holder[s] and the Representative, if
there shall be one, under this Agreement against the Issuer in respect of any amounts paid to the
holder[s], or for the benefit of the holder[s], by the FDIC pursuant to the Debt Guarantee Program.
Agreement to Execute Assignment upon Guarantee Payment
[If there is a Representative, insert the following:]
The holder[s] hereby authorize the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the holder[s] pursuant to
the Debt Guarantee Program, to execute an assignment in the form attached to this Agreement as
Exhibit [ ] [See Annex B to Master Agreement] pursuant to which the Representative shall
assign to the FDIC its right as Representative to receive any and all payments from the Issuer
under this Agreement on behalf of the holder[s]. The Issuer hereby consents and agrees that the
FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for all
purposes of this Agreement and upon any such assignment, the
TLGP Master Agreement 11/24/08
FDIC shall be deemed a holder under this Agreement for all purposes hereof, and the Issuer hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Agreement as a result of such assignment.
[or, if (i) there is no Representative or (ii) the holder has exercised its right not to be
represented by the Representative, insert the following:]
The holder[s] hereby agree that, at such time as the FDIC shall commence making any guarantee
payments to the holder[s] pursuant to the Debt Guarantee Program, the holder[s] shall execute an
assignment in the form attached to this Agreement as Exhibit [ ] [See Annex B to Master
Agreement] pursuant to which the holder[s] shall assign to the FDIC [its/their] right to receive
any and all payments from the Issuer under this Agreement. The Issuer hereby consents and agrees
that the FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for
all purposes of this Agreement and upon any such assignment, the FDIC shall be deemed a holder
under this Agreement for all purposes thereof, and the Issuer hereby agrees to take such reasonable
steps as are necessary to comply with any relevant provision of this Agreement as a result of such
assignment.
Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Issuer is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period), payment in full hereunder shall be made
pursuant to the Debt Guarantee Program on the outstanding principal and accrued interest to such
date of payment, the holder shall, or the holder shall cause the person or entity in possession to,
promptly surrender to the FDIC the security certificate, note or other instrument evidencing such
debt, if any.
Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Issuer is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default.
Ranking
Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of the Master Agreement
entered into by the Issuer and the FDIC in connection with the Debt Guarantee Program will
constitute a senior unsecured general obligation of the Issuer, ranking pari passu with any indebtedness hereunder.
No Event of Default during Time of Timely FDIC Guarantee Payments
There shall not be deemed to be an event of default under this Agreement which would permit or
result in the acceleration of amounts due hereunder, if such an event of default is due solely to
the failure of the Issuer to make timely payment hereunder, provided that the FDIC is
TLGP Master Agreement 11/24/08
A-2
making timely guarantee payments with respect to the debt obligations hereunder in accordance with
12 C.F.R Part 370.
No Modifications without FDIC Consent
Without the express written consent of the FDIC, the parties hereto agree not to amend,
modify, supplement or waive any provision in this Agreement that is related to the principal,
interest, payment, default or ranking of the indebtedness hereunder or that is required to be
included herein pursuant to the Master Agreement executed by the Issuer in connection with the Debt
Guarantee Program.
TLGP Master Agreement 11/24/08
A-3
EXHIBIT B
ASSIGNMENT
This Assignment is made pursuant to the terms of Section 10 of the reverse of The Goldman
Sachs Group, Inc.s Notes due , CUSIP No. (the Security), between The
Bank of New York Mellon (the Representative), acting on behalf of the Holder of the Security who
have not opted out of representation by the Representative, and The Goldman Sachs Group, Inc. (the
Company, which has the meaning given such term in the Security) with respect to the debt
obligations of the Company that are guaranteed under the Debt Guarantee Program. Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned thereto in the
Security. Solely for the purpose of this Assignment, Business Day means any day that is not a
Saturday, a Sunday or a day on which banks are required or authorized by law to be closed in the
State of New York.
For value received, the Representative, on behalf of the Holder (the Assignor), hereby
assigns to the Federal Deposit Insurance Corporation (the FDIC), without recourse, all of the
Assignors respective rights, title and interest in and to: (a) the Security; (b) the Senior Debt
Indenture, dated July 16, 2008 (the 2008 Indenture), by and between the Company and the
Representative, with respect to the Security; and (c) any other instrument or agreement executed by
the Company regarding obligations of the Company under the Security or the 2008 Indenture with
respect to the Security (collectively, the Assignment).
The Assignor hereby certifies that:
1. Without the FDICs prior written consent, the Assignor has not:
(a) agreed to any material amendment of the Security or to any material deviation from the
provisions thereof; or
(b) accelerated the maturity of the Security.
[Instructions to the Assignor: If the Assignor has not assigned or transferred any interest in
the Security and related documentation, such Assignor must include the following representation.]
2. The Assignor has not assigned or otherwise transferred any interest in the Security;
[Instructions to the Assignor: If the Assignor has assigned a partial interest in the Security
and related documentation, the Assignor must include the following representation.]
2. The Assignor has assigned part of its rights, title and interest in the Security to
pursuant to the agreement, dated as of , 20___, between
, as assignor, and , as assignee, an executed copy of which is attached
hereto.
The Assignor acknowledges and agrees that this Assignment is subject to the Security and the
2008 Indenture and to the following:
1. In the event the Assignor receives any payment under or related to the Security from a
party other than the FDIC (a Non-FDIC Payment):
(a) after the date of demand for a guarantee payment on the FDIC pursuant to 12 CFR Part 370,
but prior to the date of the FDICs first guarantee payment under the Security pursuant to 12 CFR
Part 370, the Assignor shall promptly but in no event later than five (5) Business Days after
receipt notify the FDIC of the date and the amount of such Non-FDIC Payment and shall apply such
payment as payment made by the Company, and not as a guarantee payment made by the FDIC, and
therefore, the amount of such payment shall be excluded from this Assignment; and
B-1
(b) after the FDICs first guarantee payment under the Security, the Assignor shall forward
promptly to the FDIC such Non-FDIC Payment in accordance with the payment instructions provided in
writing by the FDIC.
2. Acceptance by the Assignor of payment pursuant to the Debt Guarantee Program on behalf of
the Holder shall constitute a release by the Holder of any liability of the FDIC under the Debt
Guarantee Program with respect to such payment.
The Person who is executing this Assignment on behalf of the Assignor hereby represents and
warrants to the FDIC that he/she/it is duly authorized to do so.
B-2
******
IN WITNESS WHEREOF, the Assignor has caused this instrument to be executed and delivered this
___day of , 20___.
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Consented to and acknowledged by this day of , 20__:
THE FEDERAL DEPOSIT INSURANCE CORPORATION
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B-3
EX-4.7
5
y74032exv4w7.htm
EX-4.7: FORM OF FLOATING RATE MEDIUM-TERM NOTE, SERIES D (TLGP)
EX-4.7
Exhibit 4.7
[FORM OF FLOATING RATE MEDIUM-TERM NOTE, SERIES D]
(Face of Security)
[IF A GLOBAL SECURITY, INSERT THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
2008 INDENTURE AS DEFINED ON THE REVERSE OF THIS SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE 2008 INDENTURE AND THIS SECURITY.]
[IF DTC IS THE DEPOSITARY, INSERT UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE GOLDMAN
SACHS GROUP, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.]
[INSERT ANY LEGEND REQUIRED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT AND THE REGULATIONS
THEREUNDER.]
THIS SECURITY IS GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND
THE RIGHTS OF THE HOLDER OF THIS SECURITY ARE SUBJECT TO CERTAIN RIGHTS OF THE FDIC, AS AND TO THE
EXTENT INDICATED IN THIS SECURITY, INCLUDING SECTIONS 8, 10, 11, 12, 13, 14, 15, 16 AND 17 ON THE
REVERSE HEREOF.
(Face of Security continued on next page)
CUSIP No.
THE GOLDMAN SACHS GROUP, INC.
MEDIUM-TERM NOTES, SERIES D
(Floating Rate Security)
The following terms apply to this Security, as and to the extent shown below:
PRINCIPAL AMOUNT:
SPECIFIED CURRENCY: U.S. dollars for all payments unless otherwise specified below:
payments of principal and any premium:
payments of interest:
EXCHANGE RATE AGENT:
ORIGINAL ISSUE DATE*:
TRADE DATE:
STATED MATURITY DATE:
ORIGINAL ISSUE DISCOUNT SECURITY:
Total Amount of OID:
Yield to Maturity:
Initial Accrual Period OID:
BASE RATE:
CD Rate:
CMS Rate:
CMT Rate:
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Designated CMT Index Maturity: |
Commercial Paper Rate:
EURIBOR:
Federal Funds Rate:
LIBOR:
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Reuters Screen LIBOR Page: |
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Index Currency: |
Prime Rate:
Treasury Rate:
11th District Cost of Funds Rate:
INDEX MATURITY:
SPREAD:
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This date shall be the issue date of this Security, unless there is a
Predecessor Security, in which case this date shall be the issue date of the first Predecessor security. |
(Face of Security continued on next page)
-2-
SPREAD MULTIPLIER:
INITIAL BASE RATE:
MAXIMUM RATE:
MINIMUM RATE:
INTEREST DETERMINATION DATE(S): as provided in Sections 3(b) through 3(k), as applicable, on the
reverse of this Security (unless otherwise specified), subject to the second paragraph under
Payments Due on a Business Day below
INTEREST PAYMENT DATE(S):
INTEREST RESET PERIOD:
INTEREST RESET DATE(S): as provided in Section 3(a) on the reverse of this Security (unless
otherwise specified)
REDEMPTION COMMENCEMENT DATE:
REPAYMENT DATE(S):
REDEMPTION OR REPAYMENT PRICE(S):
CALCULATION AGENT:
DEFEASANCE:
Full Defeasance:
Covenant Defeasance:
DAY COUNT CONVENTION:
BUSINESS DAY CONVENTION:
OTHER TERMS:
(Face of Security continued on next page)
-3-
Terms left blank or marked N/A, No, None or in a similar manner do not apply to this
Security except as otherwise may be specified.
Whenever used in this Security, the terms specified above that apply to this Security have the
meanings specified above, unless the context requires otherwise. Other terms used in this Security
that are not defined herein but that are defined in the 2008 Indenture referred to in Section 1 on
the reverse of this Security are used herein as defined therein.
The Goldman Sachs Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the Company, which term includes any successor
Person under the 2008 Indenture (as defined on the reverse of this Security)), for value received,
hereby promises to pay to , or registered assigns, as principal the Principal Amount
on the Stated Maturity Date and to pay interest thereon, from the Original Issue Date or from the
most recent Interest Payment Date to which interest has been paid or made available for payment, on
the Interest Payment Date(s) in each year, commencing on the first such date that is at least
15 calendar days after the Original Issue Date, and at the Maturity of the principal hereof, at a
rate per annum determined in accordance with the applicable provisions of Section 3 on the reverse
hereof, until the principal hereof is paid or made available for
payment. Any premium and any such installment of interest that is
overdue at any time shall also bear interest (to the extent that the
payment of such interest shall be legally enforceable) at the rate
per annum at which the principal then bears interest, from the date
any such overdue amount first becomes due until it is paid or made
available for payment. Notwithstanding the foregoing, interest on any
principal, premium or installment of interest that is overdue shall
be payable on demand.
The interest so payable, and punctually paid or made available for payment, on any Interest
Payment Date will, as provided in the 2008 Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of business on the
15th calendar day (whether or not a Business Day, as such term is defined in
Section 3(o) on the reverse hereof) next preceding such Interest Payment Date (a Regular
Record Date); provided, however, if this Security is a Global Security, a
Regular Record Date will instead occur on the fifth Business Day preceding such Interest Payment
Date. Any interest so payable, but not punctually paid or made available for payment, on any
Interest Payment Date will forthwith cease to be payable to the Holder on such Regular Record Date
and such Defaulted Interest may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
the Holder of this Security not less than 10 days prior to such Special Record Date, or be paid in
any other lawful manner not inconsistent with the requirements of any securities exchange on which
this Security may be listed, and upon such notice as may be required by such exchange, all as more
fully provided in the 2008 Indenture. For the purpose of determining a Holder at the close of
business on any relevant record date when business is not conducted, the close of business will
mean 5:00 P.M., New York City time, on that day.
(Face of Security continued on next page)
-4-
The Company and the Trustee acknowledge that the Company has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit Insurance
Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a result, this debt is
guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed by the full faith and
credit of the United States. The details of the FDIC guarantee are provided in the FDICs
regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The expiration date of
the FDICs guarantee is the earlier of the maturity date of this debt or June 30, 2012.
The Trustee is hereby designated as the duly authorized representative of the Holder for
purposes of making claims and taking other permitted or required actions under the Debt Guarantee
Program (the Representative). The Holder of this Security may elect not to be
represented by the Representative with respect to this Security by providing written notice of such
election to the Representative.
Notwithstanding any provision of this Security, any right of the Holder to receive payment in
respect of this Security under the Debt Guarantee Program shall be subject to the procedures and
other requirements of the Debt Guarantee Program, and the Holder will not be entitled under the
Debt Guarantee Program to receive any additional interest or penalty amounts on account of any
default or resulting delay in payment in respect of this Security.
Currency of Payment
Payment of principal of (and premium, if any) and interest on this Security will be made in
the Specified Currency for such payment, except as provided in this and the next three paragraphs.
The Specified Currency for any payment shall be the currency specified as such on the face of this
Security unless, at the time of such payment, such currency is not legal tender for the payment of
public and private debts in the country issuing such currency on the Original Issue Date, in which
case the Specified Currency for such payment shall be such coin or currency as at the time of such
payment is legal tender for the payment of public and private debts in such country, except as
provided in the next sentence. If the euro is specified on the face of this Security as the
Specified Currency for any payment, the Specified Currency for such payment shall be such coin or
currency as at the time of payment is legal tender for the payment of public and private debts in
all EMU Countries (as defined in Section 3(o) on the reverse hereof), provided that, if on
any day there are not at least two EMU Countries, or if on any day there are at least two EMU
Countries but no coin or currency is legal tender for the payment of public and private debts in
all EMU Countries, then the Specified Currency for such payment shall be deemed not to be available
to the Company on such day.
Except as provided in the next paragraph, any payment to be made on this Security in a
Specified Currency other than U.S. dollars will be made in U.S. dollars if the Person entitled to
receive such payment transmits a written request for such payment
(Face of Security continued on next page)
-5-
to be made in U.S. dollars to the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, on or before the fifth Business Day before the payment is to be made. Such
written request may be mailed, hand delivered, telecopied or delivered in any other manner approved
by the Trustee. Any such request made with respect to any payment on this Security payable to a
particular Holder will remain in effect for all later payments on this Security payable to such
Holder, unless such request is revoked on or before the fifth Business Day before a payment is to
be made, in which case such revocation shall be effective for such and all later payments. In the
case of any payment of interest payable on an Interest Payment Date, such written request must be
made by the Person who is the registered Holder of this Security on the relevant Regular Record
Date.
The U.S. dollar amount of any payment made pursuant to the immediately preceding paragraph
will be determined by the Exchange Rate Agent based upon the highest bid quotation received by the
Exchange Rate Agent as of 11:00 A.M., New York City time, on the second Business Day preceding the
applicable payment date, from three (or, if three are not available, then two) recognized foreign
exchange dealers selected by the Exchange Rate Agent in The City of New York, in each case for the
purchase by the quoting dealer, for U.S. dollars and for settlement on such payment date of an
amount of such Specified Currency for such payment equal to the aggregate amount of such Specified
Currency payable on such payment date to all Holders of this Security who elect to receive U.S.
dollar payments on such payment date, and at which the applicable dealer commits to execute a
contract. If the Exchange Rate Agent determines that two such bid quotations are not available on
such second Business Day, such payment will be made in the Specified Currency for such payment.
All currency exchange costs associated with any payment in U.S. dollars on this Security will be
borne by the Holder entitled to receive such payment, by deduction from such payment.
Notwithstanding the foregoing, if any amount payable on this Security is payable on any day
(including at Maturity) in a Specified Currency other than U.S. dollars, and if such Specified
Currency is not available to the Company on the two Business Days before such day, due to the
imposition of exchange controls, disruption in a currency market or any other circumstances beyond
the control of the Company, the Company will be entitled to satisfy its obligation to pay such
amount in such Specified Currency by making such payment in U.S. dollars. The amount of such
payment in U.S. dollars shall be determined by the Exchange Rate Agent on the basis of the noon
buying rate for cable transfers in The City of New York, for such Specified Currency (the
Exchange Rate) as of the latest day before the day on which such payment is to be made.
Any payment made under such circumstances in U.S. dollars where the required payment is in other
than U.S. dollars will not constitute an Event of Default under the 2008 Indenture or this
Security.
Manner of Payment U.S. Dollars
(Face of Security continued on next page)
-6-
Except as provided in the next paragraph, payment of any amount payable on this Security in
U.S. dollars will be made at the office or agency of the Company maintained for that purpose in The
City of New York (or at any other office or agency maintained by the Company for that purpose),
against surrender of this Security in the case of any payment due at the Maturity of the principal
hereof (other than any payment of interest that first becomes due on an Interest Payment Date);
provided, however, that, at the option of the Company and subject to the next
paragraph, payment of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Payment of any amount payable on this Security in U.S. dollars will be made by wire transfer
of immediately available funds to an account maintained by the payee with a bank located in the
Borough of Manhattan, The City of New York, if (i) the principal of this Security is at least
$1,000,000 (or the equivalent in another currency) and (ii) the Holder entitled to receive such
payment transmits a written request for such payment to be made in such manner to the Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration, on or before the fifth
Business Day before the day on which such payment is to be made; provided that, in the case
of any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an Interest Payment Date), this Security must be surrendered at the
office or agency of the Company maintained for that purpose in The City of New York (or at any
other office or agency maintained by the Company for that purpose) in time for the Paying Agent to
make such payment in such funds in accordance with its normal procedures. Any such request made
with respect to any payment on this Security payable to a particular Holder will remain in effect
for all later payments on this Security payable to such Holder, unless such request is revoked on
or before the fifth Business Day before a payment is to be made, in which case such revocation
shall be effective for such payment and all later payments. In the case of any payment of interest
payable on an Interest Payment Date, such written request must be made by the Person who is the
registered Holder of this Security on the relevant Regular Record Date. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire transfer with
respect to this Security, but any tax, assessment or other governmental charge imposed upon any
payment will be borne by the Holder of this Security and may be deducted from the payment by the
Company or the Paying Agent.
Manner of Payment Other Specified Currencies
Payment of any amount payable on this Security in a Specified Currency other than U.S. dollars
will be made by wire transfer of immediately available funds to such account as is maintained in
such Specified Currency at a bank or other financial institution acceptable to the Company and the
Trustee and as shall have been designated at least five Business Days prior to the applicable
payment date by the Person entitled to receive such payment; provided that, in the case of
any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an
(Face of Security continued on next page)
-7-
Interest Payment Date), this Security must be surrendered at the office or agency of the
Company maintained for that purpose in The City of New York (or at any other office or agency
maintained by the Company for that purpose) in time for the Paying Agent to make such payment in
such funds in accordance with its normal procedures. Such account designation shall be made by
transmitting the appropriate information to the Trustee at its Corporate Trust Office in the
Borough of Manhattan, The City of New York, by mail, hand delivery, telecopier or in any other
manner approved by the Trustee. Unless revoked, any such account designation made with respect to
this Security by the Holder hereof will remain in effect with respect to any further payments with
respect to this Security payable to such Holder. If a payment in a Specified Currency other than
U.S. dollars with respect to this Security cannot be made by wire transfer because the required
account designation has not been received by the Trustee on or before the requisite date or for any
other reason, the Company will cause a notice to be given to the Holder of this Security at its
registered address requesting an account designation pursuant to which such wire transfer can be
made and such payment will be made within five Business Days after the Trustees receipt of such a
designation meeting the requirements specified above, with the same force and effect as if made on
the due date. The Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer with respect to this Security, but any tax, assessment or other
governmental charge imposed upon any payment will be borne by the Holder of this Security and may
be deducted from the payment by the Company or the Paying Agent.
Manner of Payment Global Securities
Notwithstanding any provision of this Security or the 2008 Indenture, if this Security is a
Global Security, the Company may make any and all payments of principal, premium and interest on
this Security pursuant to the Applicable Procedures of the Depositary for this Security as
permitted in the 2008 Indenture.
Payments Due on a Business Day
Notwithstanding any provision of this Security or the 2008 Indenture, if the Maturity of the
principal hereof occurs on a day that is not a Business Day, any amount of principal, premium or
interest that would otherwise be due on this Security on such day (the Specified Day) may
be paid or made available for payment on the Business Day that is next succeeding the Specified Day
with the same force and effect as if such amount were paid on the Specified Day, and no interest
will accrue on the amount so payable for the period from the Specified Day to such next succeeding
Business Day.
As specified on the face of this Security, one of the following Business Day Conventions shall
apply to any relevant date other than one that falls on the date of Maturity of the principal
hereof. If any such date would otherwise fall on a day that is not a Business Day:
(Face of Security continued on next page)
-8-
(i) if the Business Day Convention is Following, then such date will be
postponed to the next day that is a Business Day;
(ii) if the Business Day Convention is Modified Following, then such date
will be postponed to the next day that is a Business Day; provided that, if such
next succeeding Business Day falls in the next calendar month, then such date will be
advanced to the immediately preceding Business Day;
(iii) if the Business Day Convention is Following Unadjusted, any payment
due on such date will be postponed to the next day that is a Business Day; provided
that interest due with respect to such Interest Payment Date shall not accrue from and
including such Interest Payment Date to and including such next succeeding Business Day;
and
(iv) if the Business Day Convention is Modified Following Unadjusted, any
payment due on such date will be postponed to the next day that is a Business Day;
provided that interest due with respect to such Interest Payment Date shall not
accrue from and including such Interest Payment Date to and including such next succeeding
Business Day, and provided further that, if such next succeeding Business
Day would fall in the next succeeding calendar month, the date of payment with respect to
such Interest Payment Date will instead be advanced to the immediately preceding Business
Day.
The provisions of the two immediately preceding paragraphs shall apply to this Security in
lieu of the provisions of Section 1.13 of the 2008 Indenture.
Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the 2008 Indenture or be valid or obligatory for any purpose.
(Face of Security continued on next page)
-9-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
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THE GOLDMAN SACHS GROUP, INC.
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This is one of the Securities of the series designated herein and referred to in the 2008
Indenture.
Dated:
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THE BANK OF NEW YORK MELLON, as Trustee
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Authorized Signatory |
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(Reverse of Security)
1. Securities and Indenture
This Security is one of a duly authorized issue of securities of the Company (herein called
the Securities) issued and to be issued in one or more series under a Senior Debt
Indenture, dated as of July 16, 2008 (herein called the 2008 Indenture, which term shall
have the meaning assigned to it in such instrument), between the Company and The Bank of New York
Mellon, as Trustee (herein called the Trustee, which term includes any successor trustee
under the 2008 Indenture), and reference is hereby made to the 2008 Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are
to be, authenticated and delivered.
2. Series and Denominations
This Security is one of the series designated on the face hereof, limited to an aggregate
principal amount (or the equivalent thereof in any other currency or currencies or currency units)
as shall be determined and may be increased from time to time by the Company. References herein to
this series mean the series of Securities designated on the face hereof.
The Securities of this series are issuable only in registered form without coupons in
Authorized Denominations, which term shall have the following meaning. For each Security
of this series having a principal amount payable in U.S. dollars, the Authorized Denominations
shall be $1,000 and integral multiples of $1,000 in excess thereof. For each Security of this
series having a principal amount payable in a Specified Currency other than U.S. dollars, the
Authorized Denominations shall be the amount of such Specified Currency equivalent, at the Exchange
Rate on the first Business Day next preceding the date on which the Company accepts the offer to
purchase such Security, to $1,000 or any integral multiples of $1,000 in excess thereof.
3. Interest Rate
(a) Interest Rate Reset. The interest rate on this Security will be reset from time
to time, as provided in this Section 3, and each date upon which such rate is reset as so provided
is hereinafter called an Interest Reset Date. Unless otherwise specified on the face
hereof, the Interest Reset Dates with respect to this Security will be as follows:
(i) if the Interest Reset Period is daily, each Business Day;
(ii) if the Interest Reset Period is weekly and the Base Rate is not the Treasury
Rate, the Wednesday of each week;
(Reverse
of Security continued on next page)
-11-
(iii) if the Interest Reset Period is weekly and the Base Rate is the Treasury Rate,
except as otherwise provided in the definition of Treasury Interest Determination Date in
Section 3(o) below, the Tuesday of each week;
(iv) if the Interest Reset Period is monthly, the third Wednesday of each month;
(v) if the Interest Reset Period is quarterly, the third Wednesday of each March,
June, September and December;
(vi) if the Interest Reset Period is semi-annual, the third Wednesday of each of two
months in each year specified under Interest Reset Period on the face hereof; and
(vii) if the Interest Reset Period is annual, the third Wednesday of the month in each
year specified under Interest Reset Period on the face hereof;
provided, however, that (x) the Base Rate in effect from and including the Original
Issue Date to but excluding the initial Interest Reset Date will be the Initial Base Rate and
(y) if the Interest Reset Period is daily or weekly, the Base Rate in effect for each day following
the second Business Day immediately prior to an Interest Payment Date to but excluding such
Interest Payment Date, and for each day following the second Business Day immediately prior to the
day of Maturity of the principal hereof to but excluding such day of Maturity, will be the Base
Rate in effect on such applicable second Business Day; and provided, further, if so
specified, that any Interest Reset Date shall be subject to adjustment as provided in the second
paragraph under the heading Payments Due on a Business Day on the face of this Security.
Subject to applicable provisions of law and except as otherwise specified herein, on each
Interest Reset Date the interest rate on this Security shall be the rate determined in accordance
with such of the following Sections 3(b) through 3(k) as provide for determination of the Base Rate
for this Security. The Calculation Agent shall determine the interest rate of this Security in
accordance with the applicable Section below.
Unless the Base Rate is LIBOR or EURIBOR, the Calculation Agent will determine the interest
rate of this Security that takes effect on any Interest Reset Date on a day no later than the
Calculation Date (as defined in Section 3(o) below) corresponding to such Interest Reset Date.
However, the Calculation Agent need not wait until the Calculation Date to determine such interest
rate if the rate information it needs to make such determination in the manner specified in the
applicable provisions of Sections 3(b) through 3(k) hereof is available from the relevant sources
specified in such applicable provisions.
(Reverse of Security continued on next page)
-12-
Upon request of the Holder to the Calculation Agent, the Calculation Agent will provide the
interest rate then in effect on this Security and, if determined, the interest rate that will
become effective on the next Interest Reset Date.
(b) Determination of CD Rate. If the Base Rate specified on the face hereof is the CD
Rate, the Base Rate that takes effect on any Interest Reset Date shall equal the rate, on the
second Business Day immediately preceding such Interest Reset Date (the CD Interest
Determination Date), for negotiable U.S. dollar certificates of deposit having the Index
Maturity as published in H.15(519) (as defined in Section 3(o) below) opposite the heading CDs
(secondary market). If the CD Rate cannot be determined as described above, the following
procedures will apply in determining the CD Rate:
(i) If the rate described above does not appear in H.15(519) at 3:00 P.M., New York
City time, on the Calculation Date corresponding to such CD Interest Determination Date
(unless the calculation is made earlier and the rate is available from that source at that
time), then the CD Rate shall be the rate described above as published in H.15 Daily
Update, or another recognized electronic source used for displaying that rate, under the
heading CDs (secondary market).
(ii) If the rate described in clause (i) above does not appear in H.15(519), H.15
Daily Update or another recognized electronic source at 3:00 P.M., New York City time, on
such Calculation Date (unless the calculation is made earlier and the rate is available
from one of those sources at that time), then the CD Rate shall be the arithmetic mean of
the following secondary market offered rates for negotiable U.S. dollar certificates of
deposit of major U.S. money center banks having a remaining maturity closest to the Index
Maturity specified on the face hereof and in a Representative Amount: the rates offered as
of 10:00 A.M., New York City time, on such CD Interest Determination Date, by three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in New York City, as
selected by the Calculation Agent.
(iii) If fewer than three dealers selected by the Calculation Agent are quoting as
described in clause (ii) above, the CD Rate will be the CD Rate in effect on such CD
Interest Determination Date (or, in the case of the first Base Reset Date, the Initial Base
Rate).
(c) Determination of CMS Rate. If the Base Rate specified on the face hereof is the
CMS Rate, the Base Rate that takes effect on any Interest Reset Date shall equal the rate, on the
second Business Day immediately preceding such Interest Reset Date (the CMS Interest
Determination Date), appearing on the Reuters Screen ISDAFIX2 Page under the heading EURIBOR
Basis-EUR or LIBOR Basis-EUR, for the Index Maturity specified on the face hereof, at
10:00 A.M., London time. If the CMS
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Rate cannot be determined as described above, the following procedures will apply in
determining the CMS Rate:
(i) If the rate described above does not appear on Reuters ISDAFIX2 page under the
appropriate heading for the Index Maturity specified on the face hereof at 10:00 A.M.,
London time, on the Calculation Date corresponding to such CMS Interest Determination Date,
unless the calculation is made earlier and the rate is available from that source at that
time, then the CMS rate will be determined on the basis of the mid-market semi-annual swap
rate quotations provided by five leading swap dealers in the London interbank market at
approximately 10:00 A.M., London time, on the CMS Interest Determination Date. For this
purpose, the semi-annual swap rate means the mean of the bid and offered rates for the
semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating euro
interest rate swap transaction with a term equal to such Index Maturity commencing on the
CMS Interest Determination Date with an acknowledged dealer of good credit in the swap
market, where the floating leg, calculated on an actual /360 day count basis, is equivalent
to EURIBOR (in the case of EURIBOR Basis-EUR) or LIBOR (in the case of LIBOR Basis-EUR)
with a maturity of three months, as such rate may be determined as provided in Section
3(f). The Calculation Agent will select the five swap dealers in its sole discretion and
will request the principal London office of each of those dealers to provide a quotation of
its rate.
(ii) If at least three quotations are provided, the CMS Rate for the CMS Interest
Determination Date will be the arithmetic mean of the quotations, eliminating the highest
and lowest quotations or, in the event of equality, one of the highest and one of the
lowest quotations.
(iii) If fewer than three quotations are provided, the Calculation Agent will
determine the CMS Rate in its sole discretion.
(d) Determination of CMT Rate. If the Base Rate specified on the face hereof is the
CMT Rate, the Base Rate that takes effect on any Interest Reset Date shall equal the CMT Rate on
the second Business Day immediately preceding such Interest Reset Date (the CMT Interest
Determination Date). CMT Rate means the following rate as published in H.15(519)
opposite the heading Treasury constant maturities, as the yield is displayed on the Designated
CMT Reuters Screen Page (as defined in Section 3(o) below) under the heading . . . Treasury
Constant Maturities . . ., under the column for the Designated CMT Index Maturity (as defined in
Section 3(o) below):
(x) if the Designated CMT Reuters Screen Page is the Reuters Screen FRBCMT Page, the
rate for such CMT Interest Determination Date; or
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(y) if the Designated CMT Reuters Screen Page is the Reuters Screen FEDCMT Page, the
weekly or monthly average, as specified on the face hereof, for the week that ends
immediately before the week in which such CMT Interest Determination Date falls, or for the
month that ends immediately before the month in which such CMT Interest Determination Date
falls, as applicable.
If the CMT Rate cannot be determined as described above, the following procedures will apply in
determining the CMT Rate:
(i) If the applicable rate described above is not displayed on the relevant Designated
CMT Reuters Screen Page at 3:00 P.M., New York City time, on the Calculation Date
corresponding to such CMT Interest Determination Date (unless the calculation is made
earlier and the rate is available from that source at that time), then the CMT Rate will be
the applicable Treasury constant maturity rate described above i.e., for
the Designated CMT Index Maturity and for either such CMT Interest Determination Date or
the weekly or monthly average, as applicable as published in H.15(519).
(ii) If the applicable rate described in clause (i) above does not appear in H.15(519)
at 3:00 P.M., New York City time, on such Calculation Date (unless the calculation is made
earlier and the rate is available from that source at that time), then the CMT Rate will be
the Treasury constant maturity rate, or other U.S. Treasury rate, for the Designated CMT
Index Maturity and with reference to such CMT Interest Determination Date, that:
(A) is published by the Board of Governors of the Federal Reserve System, or
the U.S. Department of the Treasury, and
(B) is determined by the Calculation Agent to be comparable to the applicable
rate formerly displayed on the Designated CMT Reuters Screen Page and published in
H.15(519).
(iii) If the rate described in clause (ii) above does not appear in H.15(519) at
3:00 P.M., New York City time, on such Calculation Date (unless the calculation is made
earlier and the rate is available from that source at that time), then the CMT Rate will be
the yield to maturity of the arithmetic mean of the following secondary market offered
rates for the most recently issued Treasury Notes (as defined in Section 3(o) below) having
an original maturity of approximately the Designated CMT Index Maturity, having a remaining
term to maturity of not less than the Designated CMT Index Maturity minus one year and in a
Representative Amount: the offered rates, as of approximately 3:30 P.M., New York City
time, on such CMT Interest Determination Date, of three primary U.S. government securities
dealers in New York City selected by the Calculation Agent. In selecting such offered
rates, the Calculation Agent will request
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quotations from five such primary dealers and will disregard the highest quotation
or, if there is equality, one of the highest and the lowest quotation or, if there is
equality, one of the lowest.
(iv) If the Calculation Agent is unable to obtain three quotations of the kind
described in clause (iii) above, the CMT Rate will be the yield to maturity of the
arithmetic mean of the following secondary market offered rates for Treasury Notes having
an original maturity longer than the Designated CMT Index Maturity, having a remaining term
to maturity closest to the Designated CMT Index Maturity and in a Representative Amount:
the offered rates, as of approximately 3:30 P.M., New York City time, on such CMT Interest
Determination Date, of three primary U.S. government securities dealers in New York City
selected by the Calculation Agent. In selecting such offered rates, the Calculation Agent
will request quotations from five such primary dealers and will disregard the highest
quotation or, if there is equality, one of the highest and the lowest quotation or,
if there is equality, one of the lowest. If two Treasury Notes with an original maturity
longer than the CMT Designated Index Maturity have remaining terms to maturity that are
equally close to the Designated CMT Index Maturity, the Calculation Agent will obtain
quotations for the Treasury Notes with the shorter original term to maturity.
(v) If fewer than five but more than two such primary dealers are quoting as described
in clause (iv) above, then the CMT Rate for such CMT Interest Determination Date will be
based on the arithmetic mean of the offered rates so obtained, and neither the highest nor
the lowest of such quotations will be disregarded.
(vi) If two or fewer primary dealers selected by the Calculation Agent are quoting as
described in clause (v) above, the CMT Rate shall be the CMT Rate in effect on such CMT
Interest Determination Date (or, in the case of the first Interest Reset Date, the Initial
Base Rate).
(e) Determination of Commercial Paper Rate. If the Base Rate specified on the face
hereof is the Commercial Paper Rate, the Base Rate that takes effect on any Interest Reset Date
shall equal the Money Market Yield (as defined in Section 3(o) below) of the rate, for the second
Business Day immediately preceding such Interest Reset Date (the Commercial Paper Interest
Determination Date), for commercial paper having the Index Maturity specified on the face
hereof, as published in H.15(519) opposite the heading Commercial Paper Nonfinancial. If the
Commercial Paper Rate cannot be determined as described above, the following procedures will apply
in determining the Commercial Paper Rate:
(i) If the rate described above does not appear in H.15(519) at 3:00 P.M., New York
City time, on the Calculation Date (as defined in Section 3(o)
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below) corresponding to such Commercial Paper Interest Determination Date (unless the
calculation is made earlier and the rate is available from that source at that time), then
the Commercial Paper Rate will be the rate, for such Commercial Paper Interest
Determination Date, for commercial paper having the Index Maturity specified on the face
hereof, as published in H.15 Daily Update (as defined in Section 3(o) below) or any other
recognized electronic source used for displaying that rate, opposite the heading
Commercial Paper Nonfinancial.
(ii) If the rate described in clause (i) above does not appear in H.15(519), H.15
Daily Update or another recognized electronic source at 3:00 P.M., New York City time, on
such Calculation Date (unless the calculation is made earlier and the rate is available
from one of those sources at that time), the Commercial Paper Rate will be the Money Market
Yield of the arithmetic mean of the following offered rates for U.S. dollar commercial
paper that has the Index Maturity and is placed for an industrial issuer whose long-term
bond rating is AA, or the equivalent, from a nationally recognized rating agency: the
rates offered as of 11:00 A.M., New York City time, on such Commercial Paper Interest
Determination Date by three leading U.S. dollar commercial paper dealers in New York City
selected by the Calculation Agent.
(iii) If fewer than three dealers selected by the Calculation Agent are quoting as
described in clause (ii) above, the Commercial Paper Rate shall be the Commercial Paper
Rate in effect on such Commercial Paper Interest Determination Date (or, in the case of the
first Interest Reset Date, the Initial Base Rate).
(f) Determination of EURIBOR. If the Base Rate specified on the face hereof is
EURIBOR, the Base Rate that takes effect on any Interest Reset Date shall equal the interest rate
for deposits in euros designated as EURIBOR and sponsored jointly by the European Banking
Federation and ACI The Financial Markets Association (or any company established by the joint
sponsors for purposes of compiling and publishing that rate) on the second Euro Business Day (as
defined in Section 3(o) below) before such Interest Reset Date (a EURIBOR Interest
Determination Date), and will be determined in accordance with the following provisions:
(i) EURIBOR will be the offered rate for deposits in euros having the Index Maturity
beginning on such Interest Reset Date, as that rate appears on the Reuters Screen EURIBOR01
Page as of 11:00 A.M., Brussels time, on such EURIBOR Interest Determination Date.
(ii) If the rate described in clause (i) above does not so appear on the Reuters
Screen EURIBOR01 Page, EURIBOR will be determined on the basis of the rates, at
approximately 11:00 A.M., Brussels time, on such EURIBOR Interest Determination Date, at
which deposits of the following kind are offered to prime
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banks in the Euro-Zone (as defined in Section 3(o) below) interbank market by the
principal Euro-Zone office of each of four major banks in that market selected by the
Calculation Agent: euro deposits having the Index Maturity specified on the face hereof
beginning on such Interest Reset Date and in a Representative Amount. The Calculation
Agent will request the principal Euro-Zone office of each of these banks to provide a
quotation of its rate. If at least two quotations are provided, EURIBOR for such EURIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
(iii) If fewer than two quotations are provided as described in clause (ii) above,
EURIBOR for such EURIBOR Interest Determination Date will be the arithmetic mean of the
rates for loans of the following kind to leading Euro-Zone banks quoted, at approximately
11:00 A.M., Brussels time, on such EURIBOR Interest Determination Date, by three major
banks in the Euro-Zone selected by the Calculation Agent: loans of euros having the Index
Maturity specified on the face hereof beginning on such Interest Reset Date and in a
Representative Amount.
(iv) If fewer than three banks selected by the Calculation Agent are quoting as
described in clause (iii) above, EURIBOR shall be the EURIBOR in effect on such EURIBOR
Interest Determination Date (or, in the case of the first Interest Reset Date, the Initial
Base Rate).
(g) Determination of Federal Funds Rate. If the Base Rate specified on the face
hereof is the Federal Funds (Effective) Rate, the Base Rate that takes effect on any Interest Reset
Date shall equal the rate, on the second Business Day immediately preceding such Interest Reset
Date (the Federal Funds Interest Determination Date), as published in H.15(519)
opposite the heading Federal funds (effective), as that rate is displayed on the Reuters Screen
FEDFUNDS1 Page under the heading EFFECT. If the Federal Funds (Effective) Rate cannot be
determined as described above, the following procedures will apply in determining the Federal Funds
(Effective) Rate:
(i) If the rate described above is not displayed on the Reuters Screen FEDFUNDS1 Page
at 3:00 P.M., New York City time, on the Calculation Date corresponding to such Federal
Funds Interest Determination Date (unless the calculation is made earlier and the rate is
available from that source at that time), then the Federal Funds (Effective) Rate will be
the rate described above as published in H.15 Daily Update, or another recognized
electronic source used for displaying that rate, opposite the heading Federal funds
(effective).
(ii) If the rate described in clause (i) above is not displayed on the Reuters Screen
FEDFUNDS1 Page and does not appear in H.15(519), H.15 Daily Update or another recognized
electronic source at 3:00 P.M., New York City time, on such Calculation Date (unless the
calculation is made earlier and the rate
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is available from one of those sources at that time), the Federal Funds (Effective)
Rate will be the arithmetic mean of the rates for the last transaction in overnight, U.S.
dollar federal funds arranged, before 9:00 A.M., New York City time, on such Federal Funds
Interest Determination Date, by three leading brokers of U.S. dollar federal funds
transactions in New York City selected by the Calculation Agent.
(iii) If fewer than three brokers selected by the Calculation Agent are quoting as
described in clause (ii) above, the Federal Funds (Effective) Rate will be the Federal
Funds (Effective) Rate in effect on such Federal Funds Interest Determination Date (or, in
the case of the first Interest Reset Date, the Initial Base Rate).
If the Base Rate specified on the face hereof is the Federal Funds Open Rate, the Base Rate
that takes effect on any Interest Reset Date shall equal the rate, on the Federal Funds Interest
Determination Date, as published in H.15(519) under the heading Federal funds and opposite the
caption Open, as that rate is displayed on the Reuters Screen Page 5. If the Federal Funds Open
Rate cannot be determined as described above, the following procedures will apply in determining
the Federal Funds Open Rate:
(i) If the rate described above is not displayed on the Reuters Screen Page 5 at 5:00
P.M., New York City time, on such Federal Funds Interest Determination Date (unless the
calculation is made earlier and the rate is available from that source at that time), then
the Federal Funds Open Rate will be the rate for such day displayed on the FFPREBON Index
page on Bloomberg (which is the Fed Funds Opening Rate as reported by Prebon Yamane (or a
successor) on Bloomberg).
(ii) If the rate described in clause (i) above is not displayed on the Reuters Screen
Page 5 and does not appear on the FFPREBON Index on Bloomberg at 5:00 P.M., New York City
time, on such Federal Funds Interest Determination Date (unless the calculation is made
earlier and the rate is available from one of those sources at that time), the Federal
Funds Open Rate will be the arithmetic mean of the rates for the last transaction in
overnight, U.S. dollar federal funds arranged, before 9:00 A.M., New York City time, on
such Federal Funds Interest Determination Date, quoted by three leading brokers of U.S.
dollar federal funds transactions in New York City selected by the Calculation Agent.
(iii) If fewer than three brokers selected by the Calculation Agent are quoting as
described in clause (ii) above, the Federal Funds Open Rate will be the Federal Funds Open
Rate in effect on such Federal Funds Interest Determination Date (or, in the case of the
first Interest Reset Date, the Initial Base Rate).
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(h) Determination of LIBOR. If the Base Rate specified on the face hereof is LIBOR,
the Base Rate that takes effect on any Interest Reset Date shall be LIBOR on the corresponding
LIBOR Interest Determination Date (as defined in Section 3(o) below). LIBOR will be the offered
rate appearing on the Reuters Screen LIBOR Page (as defined in Section 3(o) below) as of 11:00
A.M., London time, on such LIBOR Interest Determination Date for deposits of the Index Currency
having the Index Maturity beginning on such Interest Reset Date.
(i) If LIBOR does not so appear on the Reuters Screen LIBOR Page, then LIBOR will be
determined on the basis of the rates, at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date, at which deposits of the following kind are offered to
prime banks in the London interbank market by four major banks in that market selected by
the Calculation Agent: deposits of the Index Currency having the Index Maturity specified
on the face hereof beginning on the relevant Interest Reset Date and in a Representative
Amount (as defined in Section 3(o) below). The Calculation Agent will request the
principal London office of each such bank to provide a quotation of its rate. If at least
two quotations are provided, LIBOR for such LIBOR Interest Determination Date will be the
arithmetic mean of the quotations.
(ii) If fewer than two quotations are provided as described in clause (i) above, LIBOR
for such LIBOR Interest Determination Date will be the arithmetic mean of the rates for
loans of the following kind to leading European banks quoted, at approximately 11:00 A.M.
in the principal financial center for the country issuing the Index Currency, on such LIBOR
Interest Determination Date, by three major banks in that principal financial center
selected by the Calculation Agent: loans of the Index Currency having the Index Maturity
specified on the face hereof beginning on such Interest Reset Date and in a Representative
Amount.
(iii) If fewer than three banks selected by the Calculation Agent are quoting as
described in clause (ii) above, LIBOR will be the LIBOR in effect on such LIBOR Interest
Determination Date (or, in the case of the first Interest Reset Date, the Initial Base
Rate).
(i) Determination of Prime Rate. If the Base Rate specified on the face hereof is the
Prime Rate, the Base Rate that takes effect on any Interest Reset Date shall equal the rate, for
the second Business Day immediately preceding such Interest Reset Date (the Prime Interest
Determination Date), published in H.15(519) opposite the heading Bank prime loan. If the
Prime Rate cannot be determined as described above, the following procedures will apply in
determining the Prime Rate:
(i) If the rate described above does not appear in H.15(519) at 3:00 P.M., New York
City time, on the Calculation Date corresponding to such
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Prime Interest Determination Date (unless the calculation is made earlier and the rate
is available from that source at that time), then the Prime Rate will be the rate, for such
Prime Interest Determination Date, as published in H.15 Daily Update or another recognized
electronic source used for the purpose of displaying that rate, opposite the heading Bank
prime loan.
(ii) If the rate described in clause (i) above does not appear in H.15(519), H.15
Daily Update or another recognized electronic source at 3:00 P.M., New York City time, on
such Calculation Date (unless the calculation is made earlier and the rate is available
from one of those sources at that time), then the Prime Rate will be the arithmetic mean of
the following rates as they appear on the Reuters Screen USPRIME 1 Page (as defined in
Section 3(o) below): the rate of interest publicly announced by each bank appearing on that
page as that banks prime rate or base lending rate, as of 11:00 A.M., New York City time,
on such Prime Interest Determination Date.
(iii) If fewer than four of the rates referred to in clause (ii) above appear on the
Reuters Screen USPRIME 1 Page, the Prime Rate will be the arithmetic mean of the Prime
Rates or base lending rates, as of the close of business on such Prime Interest
Determination Date, of three major banks in New York City selected by the Calculation
Agent. For this purpose, the Calculation Agent will use rates quoted on the basis of the
actual number of days in the year divided by a 360-day year.
(iv) If fewer than three banks selected by the Calculation Agent are quoting as
described in clause (iii) above, the Prime Rate shall be the Prime Rate in effect on such
Prime Interest Determination Date (or, in the case of the first Interest Reset Date, the
Initial Base Rate).
(j) Determination of Treasury Rate. If the Base Rate specified on the face hereof is
the Treasury Rate, the Base Rate that takes effect on any Interest Reset Date shall equal the rate
for the auction on the corresponding Treasury Interest Determination Date (as defined in
Section 3(o) below) of direct obligations of the United States (Treasury Bills) having
the Index Maturity specified on the face hereof, as that rate appears on the Reuters Screen
USAUCTION10 Page or the Reuters Screen USAUCTION11 Page under the heading INVEST RATE. If the
Treasury Rate cannot be determined as described above, the following procedures will apply in
determining the Treasury Rate:
(i) If the rate described above does not appear on either the Reuters Screen
USAUCTION10 or USAUCTION11 Page at 3:00 P.M., New York City time, on the Calculation Date
corresponding to such Treasury Interest Determination Date (unless the calculation is made
earlier and the rate is available from that source at that time), the Treasury Rate will be
the Bond Equivalent
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Yield (as defined in Section 3(o) below) of the rate, for such Treasury Interest
Determination Date and for Treasury Bills having the Index Maturity specified on the face
hereof, as announced by the U.S. Department of the Treasury.
(ii) If the auction rate described in clause (i) above is not so announced by 3:00
P.M., New York City time, on such Calculation Date, or if no such auction is held for the
relevant week, then the Treasury Rate will be the Bond Equivalent Yield of the rate, for
such Treasury Interest Determination Date and for Treasury Bills having the Index Maturity
specified on the face hereof, as published in H.15(519) under the heading U.S. government
securities/Treasury bills (secondary market).
(iii) If the rate described in clause (ii) above does not appear in H.15(519) at 3:00
P.M., New York City time, on such Calculation Date (unless the calculation is made earlier
and the rate is available from one of those sources at that time), then the Treasury Rate
will be the rate, for such Treasury Interest Determination Date and for Treasury Bills
having the Index Maturity specified on the face hereof, as published in H.15 Daily Update,
or another recognized electronic source used for displaying that rate, under the heading
U.S. government securities/Treasury Bills (secondary market).
(iv) If the rate described in clause (iii) above does not appear in H.15 Daily Update
or another recognized electronic source at 3:00 P.M., New York City time, on such
Calculation Date (unless the calculation is made earlier and the rate is available from one
of those sources at that time), the Treasury Rate will be the Bond Equivalent Yield of the
arithmetic mean of the following secondary market bid rates for the issue of Treasury Bills
with a remaining maturity closest to the Index Maturity specified on the face hereof: the
rates bid as of approximately 3:30 P.M., New York City time, on such Treasury Interest
Determination Date, by three primary U.S. government securities dealers in New York City
selected by the Calculation Agent.
(v) If fewer than three dealers selected by the Calculation Agent are quoting as
described in clause (iv) above, the Treasury Rate shall be the Treasury Rate in effect on
such Treasury Interest Determination Date (or, in the case of the first Interest Reset
Date, the Initial Base Rate).
(k) Determination of 11th District Rate. If the Base Rate specified on the face
hereof is the 11th District Cost of Funds Rate (the 11th District Rate), the Base Rate
that takes effect on any Interest Reset Date shall equal the 11th District Rate on the 11th
District Interest Determination Date (as defined in Section 3(o) below) corresponding to such
Interest Reset Date. The 11th District Rate on any 11th District Interest Determination Date shall
be the rate equal to the monthly weighted average cost of funds for the calendar month immediately
before such date, as displayed on the
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Reuters Screen COFI/ARMS Page opposite the heading 11TH Dist COFI: as of 11:00 A.M., San
Francisco time, on such date. If the 11th District Rate cannot be determined as described above,
the following procedures will apply in determining the 11th District Rate:
(i) If the rate described above does not appear on the Reuters Screen COFI/ARMS Page
on such 11th District Interest Determination Date, then the 11th District Rate on such date
will be the monthly weighted average cost of funds paid by institutions that are members of
the Eleventh Federal Home Loan Bank District for the calendar month immediately preceding
such date, as most recently announced by the Federal Home Loan Bank of San Francisco as
such monthly weighted average cost of funds.
(ii) If the Federal Home Loan Bank of San Francisco fails to announce the cost of
funds described in clause (i) above on or before such 11th District Interest Determination
Date, the 11th District Rate that takes effect on such Interest Reset Date will be the 11th
District Rate in effect on such 11th District Interest Determination Date (or, in the case
of the first Interest Reset Date, the Initial Base Rate).
Any of the interest rates determined in accordance with Sections 3(b) (k) will be adjusted
by the addition or subtraction of the Spread, if any, specified on the face hereof or by
multiplying such Base Rate by the Spread Multiplier, if any, specified on the face hereof.
(l) Minimum and Maximum Limits. Notwithstanding the foregoing, the rate at which
interest accrues on this Security (i) shall not at any time be higher than the Maximum Rate, if
any, or less than the Minimum Rate, if any, specified on the face hereof, in each case on an
accrual basis, and (ii) shall not at any time be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
(m) Calculation of Interest. Payments of interest hereon with respect to any Interest
Payment Date or at the Maturity of the principal hereof will include interest accrued to but
excluding such Interest Payment Date or the date of such Maturity, as the case may be. Accrued
interest from the date of issue or from the last date to which interest has been paid or made
available for payment shall be calculated by the Calculation Agent by multiplying the Principal
Amount by an accrued interest factor for the specified Interest Period. Such accrued interest
factor shall be expressed as a decimal and computed by multiplying the interest rate (also
expressed as a decimal) in effect on the applicable period by the Day Count Convention specified on
the face hereof for such Interest Period.
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All percentages resulting from any calculation with respect to this Security will be rounded
upward or downward, as appropriate, to the next higher or lower one hundred-thousandth of a
percentage point (e.g., 9.876541% (or .09876541) being rounded down to 9.87654%
(or .0987654) and 9.876545% (or .09876545) being rounded up to 9.87655% (or .0987655)). All amounts
used in or resulting from any calculation with respect to this Security will be rounded upward or
downward, as appropriate, to the nearest cent, in the case of U.S. dollars, or to the nearest
corresponding hundredth of a unit, in the case of a currency other than U.S. dollars, with one-half
cent or one-half of a corresponding hundredth of a unit or more being rounded upward.
(n) Calculation Agent and Exchange Rate Agent. The Company has initially appointed
the institutions named on the face of this Security as Calculation Agent and Exchange Rate Agent,
respectively, to act as such agents with respect to this Security, but the Company may, in its sole
discretion, appoint any other institution (including any Affiliate of the Company) to serve as any
such agent from time to time. The Company will give the Trustee prompt written notice of any
change in any such appointment. Insofar as this Security provides for any such agent to obtain
rates, quotes or other data from a bank, dealer or other institution for use in making any
determination hereunder, such agent may do so from any institution or institutions of the kind
contemplated hereby notwithstanding that any one or more of such institutions are any such agent,
Affiliates of any such agent or Affiliates of the Company.
All determinations made by the Calculation Agent or the Exchange Rate Agent may be made by
such agent in its sole discretion and, absent manifest error, shall be conclusive for all purposes
and binding on the Holder of this Security and the Company. Neither the Calculation Agent nor the
Exchange Rate Agent shall have any liability therefor.
(o) Definitions of Calculation Terms. As used in this Security, the following terms
have the meanings set forth below:
Bond Equivalent Yield means a yield expressed as a percentage and calculated in
accordance with the following formula:
where
|
|
|
D equals the annual rate for Treasury Bills quoted on a bank discount basis and
expressed as a decimal; |
|
|
|
|
N equals 365 or 366, as the case may be; and |
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|
|
|
M equals the actual number of days in the applicable Interest Reset Period. |
Business Day means, for this Security, a day that meets the requirements set forth
in each of clauses (i) through (v) below, in each case to the extent such requirements apply to
this Security as specified below:
(i) |
|
is a New York Business Day; |
|
(ii) |
|
if the Base Rate is LIBOR, is also a London Business Day; |
|
(iii) |
|
if the Specified Currency for payment of principal of or interest on this Security is other
than U.S. dollars or euros, is also a day on which banking institutions are not authorized or
obligated by law, regulation or executive order to close in the principal financial center of
the country issuing the Specified Currency; |
|
(iv) |
|
if the Base Rate is EURIBOR or if the Specified Currency for payment of principal of or
interest on this Security is euros, or the Base Rate is LIBOR for which the Index Currency is
euros, is also a Euro Business Day; and |
|
(v) |
|
solely with respect to any payment or other action to be made or taken at any Place of
Payment outside The City of New York, is a Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in such Place of Payment generally are authorized
or obligated by law, regulation or executive order to close. |
Solely when used in the third paragraph under the heading Currency of Payment on the face of this
Security, the meaning of the term Business Day shall be determined as if the Base Rate for this
Security is neither LIBOR nor EURIBOR. With respect to Section 13 of the reverse hereof and
Exhibit B hereto, the definition of Business Day therein shall apply.
The Calculation Date corresponding to any Commercial Paper Interest Determination
Date, Prime Interest Determination Date, LIBOR Interest Determination Date, EURIBOR Interest
Determination Date, Treasury Interest Determination Date, CMT Interest Determination Date, CD
Interest Determination Date, CMS Interest Determination Date, Federal Funds Interest Determination
Date or 11th District Interest Determination Date, as the case may be, means the earlier of:
(i) the tenth day after such Interest Determination Date or, if any such day is not a
Business Day, the next succeeding Business Day; and
(ii) the Business Day immediately preceding the Interest Payment Date or the date of
Maturity of the principal hereof, whichever is the day on which the next payment of
interest will be due.
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The Calculation Date corresponding to any Interest Reset Date means the Calculation Date
corresponding to the relevant interest determination date immediately preceding such Interest Reset
Date.
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Day Count Convention means: |
(i) |
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if 1/1 (ISDA), 1; |
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(ii) |
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if Actual/Actual (ISDA) or Act/Act (ISDA), the number of days in the Interest Period
divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of
(1) the number of days in that portion of the Interest Period falling in a leap year divided
by 366 and (2) the number of days in that portion of the Interest Period falling in a non-leap
year divided by 365); |
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(iii) |
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if Actual/Actual (ICMA), the number of days in the Interest Period, including February 29
in a leap year, divided by 360 or, if the Specified Currency is euro or pounds sterling, the
number of days in the calendar year; |
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(iv) |
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if Actual/Actual (Bond), the number of calendar days in the Interest Period, divided by the
number of calendar days in the Interest Period multiplied by the number of Interest Periods in
the calendar year; |
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(v) |
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if Actual/Actual (Euro), the number of calendar days in the Interest Period divided by 365
or, if the Interest Period includes February 29, 366; |
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(vi) |
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if Actual/365 (Fixed), Act/365 (Fixed), A/365 (Fixed) or A365F, the actual number of
days in the Interest Period divided by 365; |
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(vii) |
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if Actual/360 (ISDA), Act/360 (ISDA) or A/360 (ISDA), the number of days in the
Interest Period divided by 360; |
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(viii) |
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if Actual/360 (ICMA), the number of calendar days in the period, including February 29 in
a leap year, divided by 360 days; |
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(ix) |
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if 30/360 (ISDA), 360/360 (ISDA) or Bond Basis (ISDA), the number of days in the
Interest Period in respect of which payment is being made divided by 360, calculated on a
formula basis as follows: |
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where |
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Y1 is the year, expressed as a number, in which the first day of the
Interest Period falls; |
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Y2 is the year, expressed as a number, in which the day immediately
following the last day included in the Interest Period falls; |
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M1 is the calendar month, expressed as a number, in which the first
day of the Interest Period falls; |
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M2 is the calendar month, expressed as a number, in which the day
immediately following the last day included in the Interest Period falls; |
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D1 is the first calendar day, expressed as a number, of the Interest
Period, unless such number would be 31, in which case D1 will be 30; and |
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D2 is the calendar day, expressed as a number, immediately following
the last day included in the Interest Period, unless such number would be 31 and
D1 is greater than 29, in which case D2 will be 30; and |
(x) |
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if 30E/360, 30E/360 (ISDA) or Eurobond Basis, the number of days in the Interest Period
in respect of which payment is being made divided by 360, calculated on a formula basis as
follows: |
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where |
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Y1 is the year, expressed as a number, in which the first day of the
Interest Period falls; |
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|
Y2 is the year, expressed as a number, in which the day immediately
following the last day included in the Interest Period falls; |
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M1 is the calendar month, expressed as a number, in which the first
day of the Interest Period falls; |
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|
M2 is the calendar month, expressed as a number, in which the day
immediately following the last day included in the Interest Period falls; |
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D1 is the first calendar day, expressed as a number, of the Interest
Period, unless such number would be 31, in which case D1 will be 30; and |
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D2 is the calendar day, expressed as a number, immediately following
the last day included in the Interest Period, unless (1) such number would be 31, and
(2), if 30E/360 (ISDA) is specified, that day is also the last day of February, in
which case D2 will be 30. |
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Designated CMT Index Maturity means, if the Base Rate is the CMT Rate, the Index
Maturity for this Security and will be the original period to maturity of a U.S. Treasury security
either 1, 2, 3, 5, 7, 10, 20 or 30 years specified on the face hereof, provided that,
if no such original maturity period is so specified, the Designated CMT Index Maturity will be 2
years.
Designated CMT Reuters Screen Page means, if the Base Rate is the CMT Rate, the
Reuters Screen Page specified on the face hereof that displays Treasury constant maturities as
reported in H.15(519), provided that, if no Reuters Screen Page is so specified, then the
applicable page will be the Reuters Screen FEDCMT Page and provided, further, that
if the Reuters Screen FEDCMT Page applies but it is not specified on the face hereof whether the
weekly or monthly average applies, the weekly average will apply.
EMU Countries means, at any time, the countries (if any) then participating in the
European Economic and Monetary Union (or any successor union) pursuant to the Treaty on European
Union of February 1992 (or any successor treaty), as it may be amended from time to time.
Euro Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday on
which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System, or
any successor system, is open for business.
Euro-Zone means, at any time, the region comprised of the EMU Countries.
H.15(519) means the weekly statistical release designated as such published by the
Federal Reserve System Board of Governors, or its successor, available through the website of the
Board of Governors of the Federal Reserve System at
http://www.federalreserve.gov/releases/h15/update/h15upd.htm, or any successor site or
publication.
H.15 Daily Update means the daily update of H.15(519), available through the website
of the Board of Governors of the Federal Reserve System, at
http://www.federalreserve.gov/releases/h15/update/h15upd.htm, or any successor site or
publication.
Index Maturity means the period to maturity of the instrument or obligation on which
the interest rate formula is based, as specified on the face hereof.
Interest Period means the period from and including an Interest Payment Date (or,
with respect to the initial Interest Period, the Original Issue Date) to but excluding the next
succeeding Interest Payment Date.
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The LIBOR Interest Determination Date corresponding to any Interest Reset Date means
the second London Business Day preceding such Interest Reset Date, unless the Index Currency is
pounds sterling, in which case the LIBOR Interest Determination Date will be the Interest Reset
Date.
London Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in London generally are authorized or obligated by law,
regulation or executive order to close and, if the Base Rate for the Security is LIBOR, is also a
day on which dealings in the Index Currency specified on the face hereof are transacted in the
London interbank market.
Money Market Yield means a yield expressed as a percentage and calculated in
accordance with the following formula:
where
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D equals the per annum rate for commercial paper quoted on a bank discount basis
and expressed as a decimal; and |
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M equals the actual number of days in the applicable Interest Reset Period. |
New York Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York City generally are authorized or
obligated by law, regulation or executive order to close.
Representative Amount means an amount that, in the Calculation Agents judgment, is
representative of a single transaction in the relevant market at the relevant time.
Reuters Screen means the display on the Reuters 3000 Xtra service or any successor
or replacement service, on the page or pages, or any successor or replacement page or pages on that
service.
Reuters Screen LIBOR Page means the display on the Reuters Screen LIBOR01 Page or
Reuters Screen LIBOR02 Page, as specified on the face hereof, or any successor or replacement page
or pages, on which London interbank rates of major banks for the Index Currency are displayed.
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Reuters Screen USPRIME1 Page means the display on the Reuters Screen page titled
USPRIME1, for the purpose of displaying prime rates or base lending rates of major U.S. banks.
The Treasury Interest Determination Date corresponding to any Interest Reset Date
means the day of the week in which such Interest Reset Date falls on which Treasury bills would
normally be auctioned. If, as the result of a legal holiday, an auction is so held on the Friday
in the week immediately preceding the week in which such Interest Reset Day falls, such Friday will
be the corresponding Treasury Interest Determination Date. If an auction date shall fall on a day
that would otherwise be an Interest Reset Date, then such Interest Reset Date shall instead be the
first Business Day immediately following such auction date.
Treasury Notes means direct, noncallable, fixed rate obligations of the U.S.
government.
The 11th District Interest Determination Date corresponding to a particular Interest
Reset Date will be the last working day, in the first calendar month immediately preceding such
Interest Reset Date, on which the Federal Home Loan Bank of San Francisco publishes the monthly
average cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank District
for the second calendar month immediately preceding such Interest Reset Date.
References in this Security to U.S. dollars shall mean, as of any time, the coin or currency
that is then legal tender for the payment of public and private debts in the United States of
America.
References in this Security to the euro shall mean, as of any time, the coin or currency (if
any) that is then legal tender for the payment of public and private debts in all EMU Countries.
References in this Security to a particular currency other than U.S. dollars and euros shall
mean, as of any time, the coin or currency that is then legal tender for the payment of public and
private debts in the country issuing such currency on the Original Issue Date.
References in this Security to a particular heading or headings on any of Designated CMT
Reuters Screen Page, H.15(519), H.15 Daily Update, Reuters Screen LIBOR Page, Reuters Screen
USPRIME 1 Page, Reuters Screen USAUCTION10 Page, Reuters Screen USAUCTION11 Page, Reuters Screen
ISDAFIX2 Page, Reuters Screen COFI/ARMS Page, Reuters Screen Page 5 or Reuters Screen include any
successor or replacement heading or headings as determined by the Calculation Agent.
4. Redemption
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Unless a Redemption Commencement Date is specified on the face hereof, this Security shall not
be redeemable at the option of the Company before the Stated Maturity Date. If a Redemption
Commencement Date is so specified, and unless otherwise specified on the face hereof, this Security
is subject to redemption upon not less than 30 days nor more than 60 days notice at any time and
from time to time on or after the Redemption Commencement Date, in each case as a whole or in part,
at the election of the Company and at the applicable Redemption Price specified on the face hereof
(expressed as a percentage of the principal amount of this Security to be redeemed), together with
accrued interest to the Redemption Date, but interest installments due on or prior to such
Redemption Date will be payable to the Holder of this Security, or one or more Predecessor
Securities, of record at the close of business on the relevant record date, all as provided in the
2008 Indenture.
5. Repayment at the Holders Option
Except as otherwise may be provided on the face hereof, if one or more Repayment Dates are
specified on the face hereof, this Security will be repayable in whole or in part in an amount
equal to any Authorized Denomination (provided that the remaining principal amount of any
Security surrendered for partial repayment shall at least equal an Authorized Denomination), on any
such Repayment Date, in each case at the option of the Holder and at the applicable Repayment Price
specified on the face hereof (expressed as a percentage of the principal amount to be repaid),
together with accrued interest to the applicable Repayment Date (but interest installments due on
or prior to such Repayment Date will be payable to the Holder of this Security, or one or more
Predecessor Securities, of record at the close of business on the relevant Regular Record Date as
provided in the 2008 Indenture). If this Security provides for more than one Repayment Date and
the Holder exercises its option to elect repayment, the Holder shall be deemed to have elected
repayment on the earliest Repayment Date after all conditions to such exercise have been satisfied,
and references herein to the applicable Repayment Date shall mean such earliest Repayment Date.
In order for the exercise of such option to be effective and this Security to be repaid, the
Company must receive at the applicable address of the Trustee set forth below (or at such other
place or places of which the Company shall from time to time notify the Holder of this Security),
on any Business Day not later than the 15th, and not earlier than the 25th, calendar day prior to
the applicable Repayment Date (or, if either such calendar day is not a Business Day, the next
succeeding Business Day), either (i) this Security, with the form below entitled Option to Elect
Repayment duly completed and signed, or (ii) a facsimile transmission or letter from a member of a
national securities exchange or the Financial Industry Regulatory Authority, Inc., a commercial
bank or a trust company in the United States of America setting forth (a) the name, address and
telephone number of the Holder of this Security, (b) the principal amount of this Security and the
amount of this Security to be repaid, (c) a statement that the option to elect repayment is being
exercised thereby and (d) a guarantee stating that
(Reverse of Security continued on next page)
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the Company will receive this Security, with the form below entitled Option to Elect
Repayment duly completed and signed, not later than five Business Days after the date of such
facsimile transmission or letter (provided that this Security and form duly completed and
signed are received by the Company by such fifth Business Day). Any such election shall be
irrevocable. The address to which such deliveries are to be made is The Bank of New York Mellon,
Attention: Corporate Trust Administration, 101 Barclay Street, 4E, New York, New York 10286 (or at
such other places as the Company or the Trustee shall notify the Holder of this Security). All
questions as to the validity, eligibility (including time of receipt) and acceptance of any
Security for repayment will be determined by the Company, whose determination will be final and
binding. Notwithstanding the foregoing, (x) if this Security is a Global Security, the option of
the Holder to elect repayment may be exercised in accordance with the Applicable Procedures of the
Depositary for this Security at least 15 calendar days prior to the applicable Repayment Date and
(y) whether or not this Security is a Global Security, the option of the Holder to elect repayment
may be exercised in any such manner as the Company may approve.
6. Transfer and Exchange
As provided in the 2008 Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any place where the
principal of and any premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his or her attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like tenor, of Authorized
Denominations and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
As provided in the 2008 Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount of Securities of
this series and of like tenor, of a different Authorized Denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
(Reverse of Security continued on next page)
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If this Security is a Global Security, this Security shall be subject to the provisions of the
2008 Indenture relating to Global Securities, including the limitations in Section 3.05 thereof on
transfers and exchanges of Global Securities (subject to Section 11 of the reverse of this
Security).
7. Defeasance
The 2008 Indenture contains provisions for defeasance at any time of the entire indebtedness
of this Security or certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth in the 2008 Indenture. If
so specified on the face hereof, either or both of such provisions are applicable to this Security,
as so specified.
8. Remedies
Sections 5.01 and 5.02 of the 2008 Indenture are hereby amended with respect to the Securities
of this series to the extent necessary to comply with Section 5.01 and Annex A of the Master
Agreement, dated November 25, 2008, as the same may be amended from time to time (the Master
Agreement), by and between the Company and the FDIC, attached hereto as Exhibit A. Subject to
the immediately preceding sentence and Section 15 of the reverse of this Security, if an Event of
Default with respect to Securities of this series shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the 2008 Indenture.
As provided in and subject to the provisions of the 2008 Indenture and subject to Section 15
of the reverse of this Security, the Holder of this Security shall not have the right to institute
any proceeding with respect to the 2008 Indenture, or for the appointment of a receiver or trustee,
or for any other remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this series at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee indemnity reasonably satisfactory to it,
and the Trustee shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity.
The foregoing shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
If so provided pursuant to the terms of any specific Securities, the above-referenced
provisions of the 2008 Indenture regarding the ability of Holders to waive
(Reverse of Security continued on next page)
-33-
certain defaults, or to request the Trustee to institute proceedings (or to give the Trustee
other directions) in respect thereof, may be applied differently with regard to such Securities.
No reference herein to the 2008 Indenture and no provision of this Security or of the 2008
Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
9. Modification and Waiver
The 2008 Indenture permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company, and the rights of the Holders of
the Securities to be affected, under the 2008 Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of all Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any series, may
comprise fewer than all the Securities of such series). The 2008 Indenture also contains
provisions (i) permitting the Holders of a majority in principal amount of the Securities at the
time Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any particular
series, may comprise fewer than all the Securities of such series), on behalf of the Holders of all
such affected Securities, to waive compliance by the Company with certain provisions of the 2008
Indenture and (ii) permitting the Holders of a majority in principal amount of the Securities at
the time Outstanding of any series to be affected (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to waive certain past
defaults under the 2008 Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.
10. Subrogation
The FDIC shall be subrogated to all of the rights of the Holder and the Representative under
this Security and the 2008 Indenture against the Company in respect of any amounts paid to the
Holder, or for the benefit of the Holder, by the FDIC pursuant to the Debt Guarantee Program.
11. Agreement to Execute Assignment upon Guarantee Payment
The Holder hereby authorizes the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the Holder pursuant to the
Debt Guarantee Program, to execute an assignment in the form
(Reverse of Security continued on next page)
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attached to this Security as Exhibit B pursuant to which the Representative shall assign to
the FDIC its right as Representative to receive any and all payments from the Company under this
Security on behalf of the Holder. The Company hereby consents and agrees that the FDIC is an
acceptable transferee for all or any portion of the indebtedness hereunder for all purposes of this
Security and upon any such assignment, the FDIC shall be deemed the Holder of this Security for all
purposes hereof, and the Company hereby agrees to take such reasonable steps as are necessary to
comply with any relevant provision of this Security and the 2008 Indenture as a result of such
assignment.
Section 3.05 of the 2008 Indenture is hereby amended with respect to the Securities of this
series to the extent necessary to permit the Holder, the Representative and the Company to comply
with this Section 11, Section 12 below or any other similar provision of this Security.
12. Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Company is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period),
payment in full hereunder shall be made pursuant to the Debt Guarantee Program on the outstanding
principal and accrued interest to such date of payment, the Holder shall, or the Holder shall cause
the person or entity in possession to, promptly surrender to the FDIC this Security.
13. Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Company is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default. Solely for the purpose of this
Section 13, Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
14. Ranking
Any indebtedness of the Company to the FDIC arising under Section 2.03 of the Master Agreement
will constitute a senior unsecured general obligation of the Company, ranking pari passu with any
indebtedness hereunder.
15. No Event of Default during Time of Timely FDIC Guarantee
Payments
There shall not be deemed to be an Event of Default under this Security or the 2008 Indenture
which would permit or result in the acceleration of amounts due
(Reverse of Security continued on next page)
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hereunder, if such an Event of Default is due solely to the failure of the Company to make
timely payment hereunder, provided that the FDIC is making timely guarantee payments with respect
to this Security in accordance with 12 C.F.R Part 370.
The following provisions of this paragraph shall apply to this Security in addition to, and
without limiting, the foregoing provisions of this Section 15. No event that would otherwise
constitute an Event of Default with respect to the Securities of this series shall constitute an
Event of Default with respect to this Security, provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. As a result, upon the occurrence of any such event (including any event of the kind
specified in said Section 5.01), neither the Trustee nor the Holder of this Security shall be
entitled, with respect to this Security, to seek any remedies otherwise available, or to take any
other action otherwise provided for, under the 2008 Indenture upon an Event of Default (including
any right to accelerate the Maturity of the principal of this Security pursuant to Section 5.02 of
the 2008 Indenture, any right to exchange (at the Holders option) this Security for a Security
that is not a Global Security pursuant to Section 3.05 thereof and any right to institute a
proceeding pursuant to Section 5.07 thereof), provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. Without limiting the foregoing, no event, including any event of the kind specified in
Section 5.01(5) or 5.01(6) of the 2008 Indenture, shall result in the automatic acceleration of the
Maturity of the principal of this Security pursuant to Section 5.02 thereof. Notwithstanding the
foregoing, however, the rights of the Holder of this Security pursuant to Section 5.08 of the 2008
Indenture shall not be affected by this Section 15. With regard to this Security, the provisions
of Article Five of the 2008 Indenture shall be subject to, and shall be deemed modified as
necessary to be consistent with, the provisions of this Section 15.
16. No Modifications without FDIC Consent
Without the express written consent of the FDIC, the Company and the Trustee agree not to
amend, modify, supplement or waive any provision in this Security or the 2008 Indenture that is
related to the principal, interest, payment, default or ranking of the indebtedness hereunder or
that is required to be included herein pursuant to the Master Agreement.
17. Demand Obligations to FDIC upon the Companys Failure to Pay
On the 30th day after the date the Company defaults in payment of interest on this Security,
which default has not been cured by the Company by such 30th day, in the case of default in
interest, or at the Maturity, in the case of default in principal of this
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Security, the Representative shall make a demand on behalf of the Holder to the FDIC for
payment on the guaranteed amount under the Debt Guarantee Program. Such demand shall be
accompanied by a proof of claim, which shall include evidence, to the extent not previously
provided in the Master Agreement, in form and content satisfactory to the FDIC, of: (A) the
Representatives financial and organizational capacity to act as Representative; (B) the
Representatives exclusive authority to act on behalf of the Holder and its fiduciary
responsibility to the Holder when acting as such, as established by the terms of this Security and
the 2008 Indenture; (C) the occurrence of a payment default; and (D) the authority to make an
assignment of the Holders right, title, and interest in this Security to the FDIC and to effect
the transfer to the FDIC of the Holders claim in any insolvency proceeding. Such assignment shall
include the right of the FDIC to receive any and all distributions on this Security from the
proceeds of the receivership or bankruptcy estate. Any demand under this Section 17 shall be made
in writing and directed to the Director, Division of Resolution and Receiverships, Federal Deposit
Insurance Corporation, Washington, D.C., and shall include all supporting evidences as provided in
this Section 17, and shall certify to the accuracy thereof.
18. Governing Law
This Security and the 2008 Indenture shall be governed by and construed in accordance with the laws
of the State of New York.
-37-
CUSIP NO.
ORIGINAL ISSUE DATE:
THE GOLDMAN SACHS GROUP, INC.
MEDIUM-TERM NOTE, SERIES D
OPTION TO ELECT REPAYMENT
TO BE COMPLETED ONLY IF THIS SECURITY IS REPAYABLE
AT THE OPTION OF THE HOLDER AND THE HOLDER
ELECTS TO EXERCISE SUCH RIGHT
The undersigned hereby irrevocably requests and instructs the Company to repay the Security
referred to in this notice (or the portion thereof specified below) at the applicable Repayment
Price, together with interest to the Repayment Date, all as provided for in such Security, to the
undersigned, whose name, address and telephone number are as follows:
(please print name of the undersigned)
(please print address of the undersigned)
(please print telephone number of the undersigned)
If such Security provides for more than one Repayment Date, the undersigned requests repayment
on the earliest Repayment Date after the requirements for exercising this option have been
satisfied, and references in this notice to the Repayment Date mean such earliest Repayment Date.
Terms used in this notice that are defined in such Security are used herein as defined therein.
For such Security to be repaid the Company must receive at the applicable address of the
Trustee set forth below or at such other place or places of which the Company or the Trustee shall
from time to time notify the Holder of such Security, any Business Day not later than the 15th or
earlier than the 25th calendar day prior to the Repayment Date (or, if either such calendar day is
not a Business Day, the next succeeding Business Day), (i) such Security, with this Option to
Elect Repayment form duly completed and signed, or (ii) a facsimile transmission or letter from a
member of a national securities exchange or the Financial Industry Regulatory Authority, Inc., a
commercial bank or a trust company in the United States of America setting forth (a) the name,
address and telephone number of the Holder of such Security, (b) the principal amount of such
Security and the amount of such Security to be repaid, (c) a statement that the option to elect
repayment is being exercised thereby and (d) a guarantee stating that such Security to be repaid
with the form entitled Option to Elect Repayment on the
38
addendum to the Security duly completed and signed will be received by the Company not later
than five Business Days after the date of such facsimile transmission or letter (provided
that such Security and form duly completed and signed are received by the Company by such fifth
Business Day). The address to which such deliveries are to be made is:
The Bank of New York Mellon
Attention: Corporate Trust Administration
101 Barclay Street, 4E
New York, New York 10286
or at such other place as the Company or the Trustee shall notify the Holder of such Security.
If less than the entire principal amount of such Security is to be repaid, specify the portion
thereof (which shall equal any Authorized Denomination) that the Holder elects to have repaid:
and specify the denomination or denominations (which shall equal any Authorized Denomination) of
the Security or Securities to be issued to the Holder in respect of the portion of such Security
not being repaid (in the absence of any specification, one Security will be issued in respect of
the portion not being repaid):
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Date: |
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Notice: The signature to this Option to Elect Repayment must
correspond with the name of the Holder as written on the face of
such Security in every particular without alteration or enlargement
or any other change whatsoever. |
39
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Security, shall
be construed as though they were written out in full according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with the right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT Custodian
(Cust) (Minor)
under Uniform Gifts to Minors Act
(State)
Additional abbreviations may also be used
though not in the above list.
40
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
(Please Print or Typewrite Name and Address
Including Postal Zip Code of Assignee)
the attached Security and all rights thereunder, and hereby irrevocably constitutes and appoints
to transfer said Security on the books of the Company, with full power of substitution in the
premises.
Dated:
Signature Guaranteed
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NOTICE: Signature must be
guaranteed.
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NOTICE: The signature to this
assignment must correspond with the
name of the Holder as written upon
the face of the attached Security in
every particular, without alteration
or enlargement or any change
whatever. |
41
EXHIBIT A
MASTER AGREEMENT
Federal Deposit Insurance Corporation
Temporary Liquidity Guarantee Program Debt Guarantee Program
TLGP Master Agreement 11/24/08
TABLE OF CONTENTS
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Page |
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ARTICLE I DEFINITIONS |
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1 |
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1.01. |
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Certain Defined Terms |
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1 |
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1.02. |
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Terms Generally |
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2 |
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ARTICLE II SENIOR DEBT GUARANTEE |
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2 |
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2.01. |
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Acknowledgement of Guarantee |
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2 |
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2.02. |
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Guarantee Payments |
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2 |
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2.03. |
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Issuer Make-Whole Payments |
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3 |
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2.04. |
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Waiver of Defenses |
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3 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER |
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4 |
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3.01. |
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Organization and Authority |
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4 |
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3.02. |
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Authorization, Enforceability |
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4 |
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3.03. |
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Reports |
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5 |
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ARTICLE IV NOTICE AND REPORTING |
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5 |
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4.01. |
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Reports of Existing and Future Guaranteed Debt |
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5 |
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4.02. |
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On-going Reporting |
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5 |
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4.03. |
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Notice of Defaults |
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5 |
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ARTICLE V COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER |
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6 |
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5.01. |
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Terms to be included in Future Guaranteed Debt |
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6 |
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5.02. |
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Breaches; False or Misleading Statements |
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6 |
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5.03. |
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No Modifications |
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5.04. |
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Waiver by the Issuer |
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6 |
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ARTICLE VI GENERAL PROVISIONS |
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6 |
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6.01. |
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Amendment and Modification of this Master Agreement |
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6 |
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6.02. |
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Notices |
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7 |
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6.03. |
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Counterparts |
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7 |
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6.04. |
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Severability |
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6.05. |
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Governing Law |
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6.06. |
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Venue |
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6.07. |
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Assignment |
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6.08. |
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Headings |
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8 |
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6.09. |
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Delivery Requirement |
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8 |
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Annex A |
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Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt |
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Annex B |
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Form of Assignment |
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TLGP Master Agreement 11/24/08
MASTER AGREEMENT
THIS MASTER AGREEMENT (this Master Agreement) is being entered into as of the date
set forth on the signature page hereto by and between THE FEDERAL DEPOSIT INSURANCE CORPORATION, a
corporation organized under the laws of the United States of America and having its principal
office in Washington, D.C. (the FDIC), and the entity whose name appears on the signature
page hereto (the Issuer).
RECITALS
WHEREAS, on November 21, 2008, the FDIC issued its Final Rule, 12 C.F.R. Part 370 (as may be
amended from time to time, the Rule), establishing the Temporary Liquidity Guarantee
Program (the Program); and
WHEREAS, pursuant to the Rule, the FDIC will guarantee the payment of certain newly-issued
senior unsecured debt (as defined in the Rule,
hereinafter Senior Unsecured
Debt) issued by an eligible entity (as defined in the Rule); and
WHEREAS, the Issuer is an eligible entity for purposes of the Rule and has elected to
participate in the debt guarantee component of the Program.
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. As used in this Master Agreement, the following terms
shall have the following meanings:
Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
FDIC has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
FDIC Guarantee means the guarantee of payment by the FDIC of the Senior Unsecured
Debt of the Issuer in accordance with the terms of the Program.
Guarantee Payment means any payment made by the FDIC under the Program with respect
to Senior Unsecured Debt of the Issuer.
Guarantee Payment Notice has the meaning ascribed to such term in Section
2.02.
Issuer has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
Issuer Make-Whole Payments has the meaning ascribed to such term in
Section 2.03.
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TLGP Master Agreement 11/24/08 |
Issuer Reports means reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that the Issuer or any subsidiary of the Issuer
is required to file with any governmental entity.
Master Agreement means this Master Agreement, together with all Annexes and
amendments hereto.
Material Adverse Effect means a material adverse effect on the business, results of
operations or financial condition of the Issuer and its consolidated subsidiaries taken as a whole.
Program has the meaning ascribed to such term in the Recitals.
Reimbursement Payment has the meaning ascribed to such term in Section 2.03.
Relevant Provision means any provision that is related to the principal, interest,
payment, default or ranking of the Senior Unsecured Debt, any provision contained in Annex A or any
other provision the amendment of which would require the consent of any or all of the holders of
such debt.
Representative means the trustee, administrative agent, paying agent or other
fiduciary or agent designated as the Representative under the governing documents for any Senior
Unsecured Debt of the Issuer subject to the FDIC Guarantee for purposes of submitting claims or
taking other actions under the Program.
Rule has the meaning ascribed to such term in the Recitals.
Senior Unsecured Debt has the meaning ascribed to such term in the Recitals.
1.02. Terms Generally. Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other gender as the context
requires, the terms hereof, herein and herewith and words of similar import shall, unless
otherwise stated, be construed to refer to this Master Agreement and not to any particular
provision of this Master Agreement, and Article, Section and paragraph references are to the
Articles, Sections and paragraphs of this Master Agreement unless otherwise specified, and the word
including and words of similar import when used in this Master Agreement shall mean including,
without limitation, unless otherwise specified.
ARTICLE II
SENIOR DEBT GUARANTEE
2.01. Acknowledgement of Guarantee. The FDIC hereby acknowledges that the Issuer has
elected to participate in the debt guarantee component of the Program and that, as a result, the
Issuers Senior Unsecured Debt is guaranteed by the FDIC to the extent set forth in, and subject to
the provisions of, the Rule, and subject to the terms hereof.
2.02. Guarantee Payments. The Issuer understands and acknowledges that any Guarantee
Payment with respect to a particular issue of Senior Unsecured Debt shall be paid by the FDIC
directly to:
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TLGP Master Agreement 11/24/08 |
(a) the Representative with respect to such Senior Unsecured Debt if a Representative has been
designated; or
(b) the registered holder(s) of such Senior Unsecured Debt if no Representative has been
designated; or
(c) any registered holder of such Senior Unsecured Debt who has opted out of being represented
by the designated Representative;
in each case, pursuant to the claims procedure set forth in the Rule. In no event shall the FDIC
make any Guarantee Payment to the Issuer directly. The FDIC will provide prompt written notice to
the Issuer of any Guarantee Payment made by the FDIC with respect to any of the Issuers Senior
Unsecured Debt (the Guarantee Payment Notice).
2.03. Issuer Make-Whole Payments. In consideration of the FDIC providing the FDIC
Guarantee with respect to the Senior Unsecured Debt of the Issuer, the Issuer hereby irrevocably
and unconditionally covenants and agrees:
(a) to reimburse the FDIC immediately upon receipt of the Guarantee Payment Notice for all
Guarantee Payments set forth in the Guarantee Payment Notice (the Reimbursement Payment)
(without duplication of any amounts actually received by the FDIC as subrogee or assignee under the
governing documents of the relevant Senior Unsecured Debt of the Issuer);
(b) beginning as of the date of the Issuers receipt of the Guarantee Payment Notice, to pay
interest on any unpaid Reimbursement Payments until such Reimbursement Payments shall have been
paid in full by the Issuer, at an interest rate equal to one percent (1%) per annum above the
non-default interest rate payable on the Senior Unsecured Debt with respect to which the relevant
Guarantee Payments were made, as calculated in accordance with the documents governing such Senior
Unsecured Debt; and
(c) to reimburse the FDIC for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by it, including costs of collection or other enforcement of the Issuers
payment obligations hereunder. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the FDICs agents, counsel, accountants and experts.
Clauses (a), (b) and (c) above are collectively referred to herein as the Issuer
Make-Whole Payments. The indebtedness of the Issuer to the FDIC arising under this
Section 2.03 constitutes a senior unsecured general obligation of the Issuer, ranking pari
passu with other senior unsecured indebtedness of the Issuer, including without limitation Senior Unsecured Debt of
the Issuer that is subject to the FDIC Guarantee.
2.04. Waiver of Defenses. The Issuer hereby waives any defenses it might otherwise
have to its payment obligations under any of the Issuers Senior Unsecured Debt or under
Section 2.03 hereof, in each case beginning at such time as the FDIC has made any Guarantee
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3 |
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TLGP Master Agreement 11/24/08 |
Payment with respect to such Senior Unsecured Debt and continuing until such time as all Issuer
Make-Whole Payments have been received by the FDIC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
3.01. Organization and Authority. The Issuer has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of organization, with the
necessary power and authority to own its properties and conduct its business in all material
respects as currently conducted, except as has not had, or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.02. Authorization, Enforceability.
(a) The Issuer has the power and authority to execute and deliver this Master Agreement and to
carry out its obligations hereunder. The execution, delivery and performance by the Issuer of this
Master Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Issuer, and no further approval or
authorization is required on the part of the Issuer. This Master Agreement is a valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws
now or hereafter in effect relating to creditors rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
(b) The execution, delivery and performance by the Issuer of this Master Agreement and the
consummation of the transactions contemplated hereby and compliance by the Issuer with the
provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of the Issuer or any
subsidiary of the Issuer under, any of the terms, conditions or provisions of, as applicable, (X)
its organizational documents or (Y) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Issuer or any subsidiary of the
Issuer may be bound, or to which the Issuer or any subsidiary of the Issuer may be subject, or (ii)
violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree
applicable to the Issuer or any subsidiary of the Issuer or any of their respective properties or
assets except, in the case of clauses (i)(Y) and (ii), for those occurrences that, individually or
in the aggregate, have not had and would not reasonably be expected to have a Material Adverse
Effect.
(c) No prior notice to, filing with, exemption or review by, or authorization, consent or
approval of, any governmental entity is required to be made or obtained by the Issuer in connection
with the execution of this Master Agreement, except for any such notices, filings, exemptions,
reviews, authorizations, consents and approvals which have been made or obtained
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TLGP Master Agreement 11/24/08 |
or the failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.03. Reports. Since December 31, 2007, the Issuer and each subsidiary of the Issuer
has timely filed all Issuer Reports and has paid all fees and assessments due and payable in
connection therewith, except, in each case, as would not individually or in the aggregate have a
Material Adverse Effect. As of their respective dates of filing, the Issuer Reports complied in
all material respects with all statutes and applicable rules and regulations of all applicable
governmental entities. In the case of each such Issuer Report filed with or furnished to the
Securities and Exchange Commission, if any, such Issuer Report (a) did not, as of its date, or if
amended prior to the date of this Master Agreement, as of the date of such amendment, contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading,
(b) complied as to form in all material respects with all applicable requirements of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and (c) no executive
officer of the Issuer or any subsidiary of the Issuer has failed in any respect to make the
certifications required by him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.
With respect to all other Issuer Reports, the Issuer Reports were complete and accurate in all
material respects as of their respective dates.
ARTICLE IV
NOTICE AND REPORTING
4.01. Reports of Existing and Future Guaranteed Debt. The Issuer shall provide
reports to the FDIC of the amount of all Senior Unsecured Debt subject to the FDIC Guarantee in
accordance with the reporting requirements of the Rule.
4.02. On-going Reporting. The Issuer covenants and agrees that, for so long as it has
outstanding Senior Unsecured Debt that is subject to the FDIC Guarantee, it shall furnish or cause
to be furnished to the FDIC (a) monthly reports, in such form as specified by the FDIC, containing
information relating to the Issuers outstanding Senior Unsecured Debt that is subject to the FDIC
Guarantee and such other information as may be requested in such form, and (b) such other
information that the FDIC may reasonably request, such other information to be delivered within ten
(10) Business Days of receipt by the Issuer of any such request.
4.03. Notice of Defaults. The Issuer covenants and agrees that it shall notify the
FDIC within one (1) Business Day of any default in the payment of any principal or interest when
due, without giving effect to any cure period, with respect to any indebtedness of the Issuer
(including debt that is not subject to the FDIC Guarantee), whether such debt is existing as of the
date of this Master Agreement or is issued subsequent to the date hereof, if such default would
result, or would reasonably be expected to result, in an event of default under any Senior
Unsecured Debt of the Issuer that is subject to the FDIC Guarantee.
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TLGP Master Agreement 11/24/08 |
ARTICLE V
COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER
5.01. Terms to be included in Future Guaranteed Debt. The governing documents for the
issuance of any Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee shall
contain each of the provisions set forth in Annex A. If a particular issue of Senior
Unsecured Debt is evidenced solely by a trade confirmation, the Issuer shall use commercially
reasonable efforts to cause the holder of such debt to execute a written instrument setting forth
the holders agreement to be bound by the provisions set forth in Annex A. No document
governing the issuance of Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee
shall contain any provision that would result in the automatic acceleration of the debt upon a
default by the Issuer at any time during which the FDIC Guarantee is in effect or during which
Guarantee Payments are being made in accordance with Section 370.12(b)(2) of the Rule.
5.02. Breaches; False or Misleading Statements. The Issuer acknowledges and agrees
that (a) if it is in breach of any provision of this Master Agreement or (b) if it makes any false
or misleading statement or representation in connection with the Issuers participation in the
Program, or makes any statement or representation in bad faith with the intent to influence the
actions of the FDIC, the FDIC may take the enforcement actions provided in Section 370.11 of the
Rule, including termination of the Issuers participation in the Program. As set forth in the
Rule, any termination of the Issuers participation in the Program would solely have prospective
effect, and would in no event affect the FDIC Guarantee with respect to Senior Unsecured Debt of
the Issuer that is issued and outstanding prior to the termination of the Issuers participation in
the Program.
5.03. No Modifications. The Issuer covenants and agrees that it shall not amend,
modify, or consent to any amendment or modification, or waive any Relevant Provision, without the
express written consent of the FDIC.
5.04. Waiver by the Issuer. The Issuer acknowledges and agrees that if any covenant,
stipulation or other provision of this Master Agreement that imposes on the Issuer the obligation
to make any payment is at any time void under any provision of applicable law, the Issuer will not
make any claim, counterclaim or institute any proceedings against the FDIC or any of its assignees
or subrogees for any amount paid by the Issuer at any time, and the Issuer waives unconditionally
and absolutely any rights and defenses, legal or equitable, which arise under or in connection with
any such provision and which might otherwise be available to it for recovery of any amount due
under this Master Agreement.
ARTICLE
VI
GENERAL
PROVISIONS
6.01. Amendment and Modification of this Master Agreement. This Master Agreement may
be amended, modified and supplemented in any and all respects, but only by a written instrument
signed by the parties hereto expressly stating that such instrument is intended to amend, modify or
supplement this Master Agreement.
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6 |
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TLGP Master Agreement 11/24/08 |
6.02. Notices. Unless otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, telecopied (which is confirmed) or sent by an overnight courier service, such as FedEx,
to the parties at the following addresses (or at such other address for a party as shall be
specified by such party by like notice):
if to the Issuer, to the address appearing on the signature page hereto
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if to the FDIC, to:
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The Federal Deposit Insurance Corporation |
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Deputy Director, Receivership Operations Branch |
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Division of Resolutions and Receiverships |
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Attention: Master Agreement |
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550 17th Street, N.W. |
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Washington, DC 20429 |
6.03. Counterparts. This Master Agreement may be executed in counterparts, which,
together, shall be considered one and the same agreement. Copies of executed counterparts
transmitted by telecopy or other electronic transmission service shall be considered original,
executed counterparts, provided receipt of such counterparts is confirmed.
6.04. Severability. Any term or provision of this Master Agreement that is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall have the power to
reduce the scope, duration or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
6.05. Governing Law. Federal law of the United States shall control this Master
Agreement. To the extent that federal law does not supply a rule of decision, this Master
Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of New York without giving effect to principles of conflicts of law other than Section 5-1401
of the New York General Obligations Law. Nothing in this Master Agreement will require any
unlawful action or inaction by either party.
6.06. Venue. Each of the parties hereto irrevocably and unconditionally agrees that
any legal action arising under or in connection with this Master Agreement is to be instituted in
the United States District Court in and for the District of Columbia or in any United States
District Court in the jurisdiction where the Issuers principal office is located.
6.07. Assignment. Neither this Master Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party, and any purported
assignment
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7 |
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TLGP Master Agreement 11/24/08 |
without such consent shall be void. Subject to the preceding sentence, this Master Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6.08. Headings. The headings and subheadings of the Table of Contents, Articles and
Sections contained in this Master Agreement, except the terms identified for definition in Article
I and elsewhere in this Master Agreement, are inserted for convenience only and shall not affect
the meaning or interpretation of this Master Agreement or any provision hereof.
6.09. Delivery Requirement. The Issuer shall submit a completed, executed and dated
copy of the signature page hereto to the FDIC within five (5) business days of the date of the
Issuers election to continue participating in the debt guarantee component of the Program in
accordance with the delivery instructions set forth on the signature page.
[SIGNATURES BEGIN ON NEXT PAGE]
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8 |
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TLGP Master Agreement 11/24/08 |
IN WITNESS WHEREOF, the Issuer and the FDIC have caused this Master Agreement to be executed
by their respective officers thereunto duly authorized.
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THE FEDERAL DEPOSIT INSURANCE
CORPORATION
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By: |
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Name: |
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Title: |
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NAME OF ISSUER:
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THE GOLDMAN SACHS GROUP, INC. |
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By: |
/s/ David Viniar |
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Name: |
David Viniar |
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Chief Financial Officer |
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Address of Issuer:
85 Broad Street
New York, New York 10004
FDIC Certificate
Number: ________________________
RSSD ID or
OTS Docket
Number:
2380443
Date:
11/25/08
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Delivery Instructions
Please deliver a completed, executed and dated copy of this Signature Page to the FDIC within
five (5) business days of the date of the Issuers election to continue participating in the Debt
Guarantee Program. Email is the preferred method of delivery to MasterAgreement@fdic.gov, or you
may send it by an overnight courier service such as FedEx to Senior Counsel, Special Issues Unit,
E7056, Attention: Master Agreement, 3501 Fairfax Drive, Arlington, Virginia, 22226.
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TLGP Master Agreement 11/24/08 |
Annex A
Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt
The following provisions shall be included in the governing documents for the issuance of
Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee, in substantially the
form presented below, unless otherwise specified. The appropriate name of the governing
document(s) shall be inserted in place of the term Agreement where it appears in this Annex A.
Acknowledgement of the FDICs Debt Guarantee Program
The parties to this Agreement acknowledge that the Issuer has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit
Insurance Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a
result, this debt is guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed
by the full faith and credit of the United States. The details of the FDIC guarantee are provided
in the FDICs regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The
expiration date of the FDICs guarantee is the earlier of the maturity date of this debt or June
30, 2012. [The italicized portion of the above provision shall be included exactly as written
above]
Representative
The [insert name of the: trustee, administrative agent, paying agent or other fiduciary or
agent to be designated as the duly authorized representative of the debt holders] is designated
under this Agreement as the duly authorized representative of the holder[s] for purposes of making
claims and taking other permitted or required actions under the Debt Guarantee Program (the
Representative). Any holder may elect not to be represented by the Representative by
providing written notice of such election to the Representative.
Subrogation
The FDIC shall be subrogated to all of the rights of the holder[s] and the Representative, if
there shall be one, under this Agreement against the Issuer in respect of any amounts paid to the
holder[s], or for the benefit of the holder[s], by the FDIC pursuant to the Debt Guarantee Program.
Agreement to Execute Assignment upon Guarantee Payment
[If there is a Representative, insert the following:]
The holder[s] hereby authorize the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the holder[s] pursuant to
the Debt Guarantee Program, to execute an assignment in the form attached to this Agreement as
Exhibit [ ] [See Annex B to Master Agreement] pursuant to which the Representative shall
assign to the FDIC its right as Representative to receive any and all payments from the Issuer
under this Agreement on behalf of the holder[s]. The Issuer hereby consents and agrees that the
FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for all
purposes of this Agreement and upon any such assignment, the
TLGP Master Agreement 11/24/08
FDIC shall be deemed a holder under this Agreement for all purposes hereof, and the Issuer hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Agreement as a result of such assignment.
[or, if (i) there is no Representative or (ii) the holder has exercised its right not to be
represented by the Representative, insert the following:]
The holder[s] hereby agree that, at such time as the FDIC shall commence making any guarantee
payments to the holder[s] pursuant to the Debt Guarantee Program, the holder[s] shall execute an
assignment in the form attached to this Agreement as Exhibit [ ] [See Annex B to Master
Agreement] pursuant to which the holder[s] shall assign to the FDIC [its/their] right to receive
any and all payments from the Issuer under this Agreement. The Issuer hereby consents and agrees
that the FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for
all purposes of this Agreement and upon any such assignment, the FDIC shall be deemed a holder
under this Agreement for all purposes thereof, and the Issuer hereby agrees to take such reasonable
steps as are necessary to comply with any relevant provision of this Agreement as a result of such
assignment.
Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Issuer is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period), payment in full hereunder shall be made
pursuant to the Debt Guarantee Program on the outstanding principal and accrued interest to such
date of payment, the holder shall, or the holder shall cause the person or entity in possession to,
promptly surrender to the FDIC the security certificate, note or other instrument evidencing such
debt, if any.
Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Issuer is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default.
Ranking
Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of the Master Agreement
entered into by the Issuer and the FDIC in connection with the Debt Guarantee Program will
constitute a senior unsecured general obligation of the Issuer, ranking pari passu with any indebtedness hereunder.
No Event of Default during Time of Timely FDIC Guarantee Payments
There shall not be deemed to be an event of default under this Agreement which would permit or
result in the acceleration of amounts due hereunder, if such an event of default is due solely to
the failure of the Issuer to make timely payment hereunder, provided that the FDIC is
TLGP Master Agreement 11/24/08
A-2
making timely guarantee payments with respect to the debt obligations hereunder in accordance with
12 C.F.R Part 370.
No Modifications without FDIC Consent
Without the express written consent of the FDIC, the parties hereto agree not to amend,
modify, supplement or waive any provision in this Agreement that is related to the principal,
interest, payment, default or ranking of the indebtedness hereunder or that is required to be
included herein pursuant to the Master Agreement executed by the Issuer in connection with the Debt
Guarantee Program.
TLGP Master Agreement 11/24/08
A-3
EXHIBIT B
ASSIGNMENT
This Assignment is made pursuant to the terms of Section 10 of the reverse of The Goldman
Sachs Group, Inc.s Notes due , CUSIP No. (the Security), between The
Bank of New York Mellon (the Representative), acting on behalf of the Holder of the Security who
have not opted out of representation by the Representative, and The Goldman Sachs Group, Inc. (the
Company) with respect to the debt obligations of the Company that are guaranteed under the Debt
Guarantee Program. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Security. Solely for the purpose of this Assignment, Business
Day means any day that is not a Saturday, a Sunday or a day on which banks are required or
authorized by law to be closed in the State of New York.
For value received, the Representative, on behalf of the Holder (the Assignor), hereby
assigns to the Federal Deposit Insurance Corporation (the FDIC), without recourse, all of the
Assignors respective rights, title and interest in and to: (a) the Security; (b) the Senior Debt
Indenture, dated July 16, 2008 (the 2008 Indenture), by and between the Company and the
Representative, with respect to the Security; and (c) any other instrument or agreement executed by
the Company regarding obligations of the Company under the Security or the 2008 Indenture with
respect to the Security (collectively, the Assignment).
The Assignor hereby certifies that:
1. Without the FDICs prior written consent, the Assignor has not:
(a) agreed to any material amendment of the Security or to any material deviation from the
provisions thereof; or
(b) accelerated the maturity of the Security.
[Instructions to the Assignor: If the Assignor has not assigned or transferred any interest in
the Security and related documentation, such Assignor must include the following representation.]
2. The Assignor has not assigned or otherwise transferred any interest in the Security;
[Instructions to the Assignor: If the Assignor has assigned a partial interest in the Security
and related documentation, the Assignor must include the following representation.]
B-1
2. The Assignor has assigned part of its rights, title and interest in the Security to
pursuant to the agreement, dated as of , 20___, between
, as assignor, and , as assignee, an executed copy of which is attached
hereto.
The Assignor acknowledges and agrees that this Assignment is subject to the Security and the
2008 Indenture and to the following:
1. In the event the Assignor receives any payment under or related to the Security from a
party other than the FDIC (a Non-FDIC Payment):
(a) after the date of demand for a guarantee payment on the FDIC pursuant to 12 CFR Part 370,
but prior to the date of the FDICs first guarantee payment under the Security pursuant to 12 CFR
Part 370, the Assignor shall promptly but in no event later than five (5) Business Days after
receipt notify the FDIC of the date and the amount of such Non-FDIC Payment and shall apply such
payment as payment made by the Company, and not as a guarantee payment made by the FDIC, and
therefore, the amount of such payment shall be excluded from this Assignment; and
(b) after the FDICs first guarantee payment under the Security, the Assignor shall forward
promptly to the FDIC such Non-FDIC Payment in accordance with the payment instructions provided in
writing by the FDIC.
2. Acceptance by the Assignor of payment pursuant to the Debt Guarantee Program on behalf of
the Holder shall constitute a release by the Holder of any liability of the FDIC under the Debt
Guarantee Program with respect to such payment.
The Person who is executing this Assignment on behalf of the Assignor hereby represents and
warrants to the FDIC that he/she/it is duly authorized to do so.
B-2
******
IN WITNESS WHEREOF, the Assignor has caused this instrument to be executed and delivered this
day of , 20___.
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Very truly yours, |
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[ASSIGNOR] |
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By: |
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(Signature) |
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(Print) |
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Title: |
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(Print) |
Consented to and acknowledged by this ___day of , 20___:
THE FEDERAL DEPOSIT INSURANCE CORPORATION
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By: |
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(Signature)
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Name: |
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(Print)
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EX-4.8
6
y74032exv4w8.htm
EX-4.8: FORM OF FIXED RATE MEDIUM-TERM NOTE, SERIES D (TLGP)
EX-4.8
Exhibit 4.8
[FORM OF FIXED RATE MEDIUM-TERM NOTE, SERIES D]
(Face of Security)
[IF A GLOBAL SECURITY, INSERT THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
2008 INDENTURE AS DEFINED ON THE REVERSE OF THIS SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE 2008 INDENTURE AND THIS SECURITY.]
[IF DTC IS THE DEPOSITARY, INSERT UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE GOLDMAN
SACHS GROUP, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.]
[INSERT ANY LEGEND REQUIRED BY THE EMPLOYEE RETIREMENT INCOME SECURITY ACT AND THE REGULATIONS
THEREUNDER.]
THIS SECURITY IS GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND THE RIGHTS OF
THE HOLDER OF THIS SECURITY ARE SUBJECT TO CERTAIN RIGHTS OF THE FDIC, AS AND TO THE EXTENT
INDICATED IN THIS SECURITY, INCLUDING SECTIONS 8, 10, 11, 12, 13, 14, 15, 16 AND 17 ON THE REVERSE
HEREOF.
(Face of Security continued on next page)
CUSIP No.
THE GOLDMAN SACHS GROUP, INC.
MEDIUM-TERM NOTES, SERIES D
(Fixed Rate Security)
PRINCIPAL
AMOUNT:
STATED MATURITY DATE:
SPECIFIED CURRENCY: U.S. dollars for all payments unless otherwise specified below:
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payments of principal and any premium: |
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payments of interest: |
EXCHANGE RATE AGENT:
INTEREST RATE: ___% per annum
INTEREST PAYMENT DATE(S):
ORIGINAL ISSUE DATE*:
ORIGINAL ISSUE DISCOUNT SECURITY:
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Total Amount of OID: |
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Yield to Maturity: |
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Initial Accrual Period OID: |
REDEMPTION COMMENCEMENT DATE:
REPAYMENT DATE(S):
REDEMPTION OR REPAYMENT PRICE(S):
DEFEASANCE:
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Full Defeasance: |
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Covenant Defeasance: |
OTHER TERMS:
Terms left blank or marked N/A, No, None or in a similar manner do not apply to this
Security except as otherwise may be specified.
Whenever used in this Security, the terms specified above that apply to this Security have the
meanings specified above, unless the context requires otherwise. Other terms used in this Security
that are not defined herein but that are defined in the 2008 Indenture referred to in Section 1 on
the reverse of this Security are used herein as defined therein.
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This date shall be the issue date of this Security, unless there is a Predecessor Security,
in which case this date shall be the issue date of the first Predecessor Security. |
(Face of Security continued on next page)
-2-
The Goldman Sachs Group, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the Company, which term includes any successor
Person under the 2008 Indenture (as defined on the reverse of this Security)), for value received,
hereby promises to pay to , or registered assigns, as principal the Principal Amount
on the Stated Maturity Date and to pay interest thereon, from the Original Issue Date or from the
most recent Interest Payment Date to which interest has been paid or made available for payment, on
the Interest Payment Date(s) in each year, commencing on the first such date that is at least 15
calendar days after the Original Issue Date, and at the Maturity of the principal hereof, at a rate
per annum equal to the Interest Rate specified on the face hereof, until the principal hereof is
paid or made available for payment. Any premium and any such
installment of interest that is overdue at any time shall also bear
interest (to the extent that the payment of such interest shall be
legally enforceable) at the rate per annum at which the principal
then bears interest, from the date any such overdue amount first
becomes due until it is paid or made available for payment.
Notwithstanding the foregoing, interest on any principal, premium or
installment of interest that is overdue shall be payable on demand.
The interest so payable, and punctually paid or made available for payment, on any Interest
Payment Date will, as provided in the 2008 Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of business on the 15th
calendar day (whether or not a Business Day, as such term is defined in Section 3 on the reverse
hereof) next preceding such Interest Payment Date (a Regular Record Date);
provided, however, if this Security is a Global Security, a Regular Record Date
will instead occur on the fifth Business Day preceding such Interest Payment Date. Any interest so
payable, but not punctually paid or made available for payment, on any Interest Payment Date will
forthwith cease to be payable to the Holder on such Regular Record Date and such Defaulted Interest
may either be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of this
Security not less than 10 days prior to such Special Record Date, or be paid in any other lawful
manner not inconsistent with the requirements of any securities exchange on which this Security may
be listed, and upon such notice as may be required by such exchange, all as more fully provided in
the 2008 Indenture. For the purpose of determining a Holder at the close of business on any
relevant record date when business is not conducted, the close of business will mean 5:00 P.M., New
York City time, on that day.
The Company and the Trustee acknowledge that the Company has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit Insurance
Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a result, this debt is
guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed by the full faith and
credit of the United States. The details of the FDIC guarantee are provided in the FDICs
regulations,
(Face of Security continued on next page)
-3-
12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The expiration date of the FDICs
guarantee is the earlier of the maturity date of this debt or June 30, 2012.
The Trustee is hereby designated as the duly authorized representative of the Holder for
purposes of making claims and taking other permitted or required actions under the Debt Guarantee
Program (the Representative). The Holder of this Security may elect not to be represented by the
Representative with respect to this Security by providing written notice of such election to the
Representative.
Notwithstanding any provision of this Security, any right of the Holder to receive payment in
respect of this Security under the Debt Guarantee Program shall be subject to the procedures and
other requirements of the Debt Guarantee Program, and the Holder will not be entitled under the
Debt Guarantee Program to receive any additional interest or penalty amounts on account of any
default or resulting delay in payment in respect of this Security.
Currency of Payment
Payment of principal of (and premium, if any) and interest on this Security will be made in
the Specified Currency for such payment, except as provided in this and the next three paragraphs.
The Specified Currency for any payment shall be the currency specified as such on the face of this
Security unless, at the time of such payment, such currency is not legal tender for the payment of
public and private debts in the country issuing such currency on the Original Issue Date, in which
case the Specified Currency for such payment shall be such coin or currency as at the time of such
payment is legal tender for the payment of public and private debts in such country, except as
provided in the next sentence. If the euro is specified on the face of this Security as the
Specified Currency for any payment, the Specified Currency for such payment shall be such coin or
currency as at the time of payment is legal tender for the payment of public and private debts in
all EMU Countries (as defined in Section 3 on the reverse hereof), provided that, if on any
day there are not at least two EMU Countries, or if on any day there are at least two EMU Countries
but no coin or currency is legal tender for the payment of public and private debts in all EMU
Countries, then the Specified Currency for such payment shall be deemed not to be available to the
Company on such day.
Except as provided in the next paragraph, any payment to be made on this Security in a
Specified Currency other than U.S. dollars will be made in U.S. dollars if the Person entitled to
receive such payment transmits a written request for such payment to be made in U.S. dollars to the
Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, on or before the
fifth Business Day before the payment is to be made. Such written request may be mailed, hand
delivered, telecopied or delivered in any other manner approved by the Trustee. Any such request
made with respect to any payment on this Security payable to a particular Holder will remain in
effect for all later payments on this Security payable to such Holder, unless such request
(Face of Security continued on next page)
-4-
is revoked on or before the fifth Business Day before a payment is to be made, in which case
such revocation shall be effective for such and all later payments. In the case of any payment of
interest payable on an Interest Payment Date, such written request must be made by the Person who
is the registered Holder of this Security on the relevant Regular Record Date.
The U.S. dollar amount of any payment made pursuant to the immediately preceding paragraph
will be determined by the Exchange Rate Agent based upon the highest bid quotation received by the
Exchange Rate Agent as of 11:00 A.M., New York City time, on the second Business Day preceding the
applicable payment date, from three (or, if three are not available, then two) recognized foreign
exchange dealers selected by the Exchange Rate Agent in The City of New York, in each case for the
purchase by the quoting dealer, for U.S. dollars and for settlement on such payment date of an
amount of such Specified Currency for such payment equal to the aggregate amount of such Specified
Currency payable on such payment date to all Holders of this Security who elect to receive U.S.
dollar payments on such payment date, and at which the applicable dealer commits to execute a
contract. If the Exchange Rate Agent determines that two such bid quotations are not available on
such second Business Day, such payment will be made in the Specified Currency for such payment.
All currency exchange costs associated with any payment in U.S. dollars on this Security will be
borne by the Holder entitled to receive such payment, by deduction from such payment.
Notwithstanding the foregoing, if any amount payable on this Security is payable on any day
(including at Maturity) in a Specified Currency other than U.S. dollars, and if such Specified
Currency is not available to the Company on the two Business Days before such day, due to the
imposition of exchange controls, disruption in a currency market or any other circumstances beyond
the control of the Company, the Company will be entitled to satisfy its obligation to pay such
amount in such Specified Currency by making such payment in U.S. dollars. The amount of such
payment in U.S. dollars shall be determined by the Exchange Rate Agent on the basis of the noon
buying rate for cable transfers in The City of New York, for such Specified Currency (the
Exchange Rate) as of the latest day before the day on which such payment is to be made.
Any payment made under such circumstances in U.S. dollars where the required payment is in other
than U.S. dollars will not constitute an Event of Default under the 2008 Indenture or this
Security.
Manner of Payment U.S. Dollars
Except as provided in the next paragraph, payment of any amount payable on this Security in
U.S. dollars will be made at the office or agency of the Company maintained for that purpose in The
City of New York (or at any other office or agency maintained by the Company for that purpose),
against surrender of this Security in the case of any payment due at the Maturity of the principal
hereof (other than any payment of interest that first becomes due on an Interest Payment Date);
provided, however, that,
(Face of Security continued on next page)
-5-
at the option of the Company and subject to the next paragraph, payment of interest may be
made by check mailed to the address of the Person entitled thereto as such address shall appear in
the Security Register.
Payment of any amount payable on this Security in U.S. dollars will be made by wire transfer
of immediately available funds to an account maintained by the payee with a bank located in the
Borough of Manhattan, The City of New York, if (i) the principal of this Security is at least
$1,000,000 (or the equivalent in another currency) and (ii) the Holder entitled to receive such
payment transmits a written request for such payment to be made in such manner to the Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration, on or before the fifth
Business Day before the day on which such payment is to be made; provided that, in the case
of any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an Interest Payment Date), this Security must be surrendered at the
office or agency of the Company maintained for that purpose in The City of New York (or at any
other office or agency maintained by the Company for that purpose) in time for the Paying Agent to
make such payment in such funds in accordance with its normal procedures. Any such request made
with respect to any payment on this Security payable to a particular Holder will remain in effect
for all later payments on this Security payable to such Holder, unless such request is revoked on
or before the fifth Business Day before a payment is to be made, in which case such revocation
shall be effective for such payment and all later payments. In the case of any payment of interest
payable on an Interest Payment Date, such written request must be made by the Person who is the
registered Holder of this Security on the relevant Regular Record Date. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire transfer with
respect to this Security, but any tax, assessment or other governmental charge imposed upon any
payment will be borne by the Holder of this Security and may be deducted from the payment by the
Company or the Paying Agent.
Manner of Payment Other Specified Currencies
Payment of any amount payable on this Security in a Specified Currency other than U.S. dollars
will be made by wire transfer of immediately available funds to such account as is maintained in
such Specified Currency at a bank or other financial institution acceptable to the Company and the
Trustee and as shall have been designated at least five Business Days prior to the applicable
payment date by the Person entitled to receive such payment; provided that, in the case of
any such payment due at the Maturity of the principal hereof (other than any payment of interest
that first becomes due on an Interest Payment Date), this Security must be surrendered at the
office or agency of the Company maintained for that purpose in The City of New York (or at any
other office or agency maintained by the Company for that purpose) in time for the Paying Agent to
make such payment in such funds in accordance with its normal procedures. Such account designation
shall be made by transmitting the appropriate information to the Trustee at its Corporate Trust
Office in the Borough of Manhattan, The City of New
(Face of Security continued on next page)
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York, by mail, hand delivery, telecopier or in any other manner approved by the Trustee.
Unless revoked, any such account designation made with respect to this Security by the Holder
hereof will remain in effect with respect to any further payments with respect to this Security
payable to such Holder. If a payment in a Specified Currency other than U.S. dollars with respect
to this Security cannot be made by wire transfer because the required account designation has not
been received by the Trustee on or before the requisite date or for any other reason, the Company
will cause a notice to be given to the Holder of this Security at its registered address requesting
an account designation pursuant to which such wire transfer can be made and such payment will be
made within five Business Days after the Trustees receipt of such a designation meeting the
requirements specified above, with the same force and effect as if made on the due date. The
Company will pay any administrative costs imposed by banks in connection with making payments by
wire transfer with respect to this Security, but any tax, assessment or other governmental charge
imposed upon any payment will be borne by the Holder of this Security and may be deducted from the
payment by the Company or the Paying Agent.
Manner of Payment Global Securities
Notwithstanding any provision of this Security or the 2008 Indenture, if this Security is a
Global Security, the Company may make any and all payments of principal, premium and interest on
this Security pursuant to the Applicable Procedures of the Depositary for this Security as
permitted in the 2008 Indenture.
Payments Due on a Business Day
Unless otherwise specified on the face of this Security, the following sentence shall apply to
this Security. Notwithstanding any provision of this Security or the 2008 Indenture, if any amount
of principal, premium or interest would otherwise be due on this Security on a day (the
Specified Day) that is not a Business Day, such amount may be paid or made available for
payment on the Business Day that is next succeeding the Specified Day with the same force and
effect as if such amount were paid on the Specified Day, and no interest will accrue on the amount
so payable for the period from the Specified Day to such next succeeding Business Day. The
provisions of this paragraph shall apply to this Security in lieu of the provisions of Section 1.13
of the 2008 Indenture.
Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.
(Face of Security continued on next page)
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Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the 2008 Indenture or be valid or obligatory for any purpose.
(Face of Security continued on next page)
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
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THE GOLDMAN SACHS GROUP, INC.
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By: |
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Name: |
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This is one of the Securities of the series designated herein and referred to in the 2008
Indenture.
Dated:
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THE BANK OF NEW YORK MELLON, as Trustee
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Authorized Signatory |
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(Reverse of Security)
1. Securities and Indenture
This Security is one of a duly authorized issue of securities of the Company (herein called
the Securities) issued and to be issued in one or more series under a Senior Debt
Indenture, dated as of July 16, 2008 (herein called the 2008 Indenture, which term shall
have the meaning assigned to it in such instrument), between the Company and The Bank of New York
Mellon, as Trustee (herein called the Trustee, which term includes any successor trustee
under the 2008 Indenture), and reference is hereby made to the 2008 Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are
to be, authenticated and delivered.
2. Series and Denominations
This Security is one of the series designated on the face hereof, limited to an aggregate
principal amount (or the equivalent thereof in any other currency or currencies or currency units)
as shall be determined and may be increased from time to time by the Company. References herein to
this series mean the series of Securities designated on the face hereof.
The Securities of this series are issuable only in registered form without coupons in
Authorized Denominations, which term shall have the following meaning. For each Security
of this series having a principal amount payable in U.S. dollars, the Authorized Denominations
shall be $1,000 and integral multiples of $1,000 in excess thereof. For each Security of this
series having a principal amount payable in a Specified Currency other than U.S. dollars, the
Authorized Denominations shall be the amount of such Specified Currency equivalent, at the Exchange
Rate on the first Business Day next preceding the date on which the Company accepts the offer to
purchase such Security, to $1,000 or any integral multiples of $1,000 in excess thereof.
3. Exchange Rate Agent and Related Terms
If the principal of or interest on this Security is payable in a Specified Currency other than
U.S. dollars, the Company has initially appointed the institution named on the face of this
Security as Exchange Rate Agent to act as such agent with respect to this Security, but the Company
may, in its sole discretion, appoint any other institution (including any Affiliate of the Company)
to serve as any such agent from time to time. The Company will give the Trustee prompt written
notice of any change in any such appointment. Insofar as this Security provides for any such agent
to obtain rates, quotes or other data from a bank, dealer or other institution for use in making
any determination hereunder, such agent may do so from any institution or institutions of the
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kind contemplated hereby notwithstanding that any one or more of such institutions are such
agent, Affiliates of such agent or Affiliates of the Company.
All determinations made by the Exchange Rate Agent may be made by such agent in its sole
discretion and, absent manifest error, shall be conclusive for all purposes and binding on the
Holder of this Security and the Company. The Exchange Rate Agent shall not have any liability
therefor.
Unless otherwise specified on the face hereof, for all purposes of this Security, the term
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday that (i) is not a
day on which banking institutions in The City of New York generally are authorized or obligated by
law, regulation or executive order to close, (ii) if the Specified Currency for any payment on this
Security is other than U.S. dollars or euros, is not a day on which banking institutions in the
principal financial center of the country issuing such Specified Currency generally are authorized
or obligated by law, regulation or executive order to close, (iii) if the Specified Currency for
any payment on this Security is euros, is not a Euro Business Day and (iv) solely with respect to
any payment or other action to be made or taken at any Place of Payment outside The City of New
York, is a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking
institutions in such Place of Payment generally are authorized or obligated by law, regulation or
executive order to close. Euro Business Day means each Monday, Tuesday, Wednesday,
Thursday and Friday on which the Trans-European Automated Real-Time Gross Settlement Express
(TARGET) System, or any successor system, is open for business. With respect to Section 13 of the
reverse hereof and Exhibit B hereto, the definition of Business Day therein shall apply.
References in this Security to U.S. dollars shall mean, as of any time, the coin or currency
that is then legal tender for the payment of public and private debts in the United States of
America.
References in this Security to the euro shall mean, as of any time, the coin or currency (if
any) that is then legal tender for the payment of public and private debts in all EMU Countries.
EMU Countries means, at any time, the countries (if any) then participating in the
European Economic and Monetary Union (or any successor union) pursuant to the Treaty on European
Union of February 1992 (or any successor treaty), as it may be amended from time to time.
References in this Security to a particular currency other than U.S. dollars and euros shall
mean, as of any time, the coin or currency that is then legal tender for the payment of public and
private debts in the country issuing such currency on the Original Issue Date.
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4. Redemption
Unless a Redemption Commencement Date is specified on the face hereof, this Security shall not
be redeemable at the option of the Company before the Stated Maturity Date. If a Redemption
Commencement Date is so specified, and unless otherwise specified on the face hereof, this Security
is subject to redemption upon not less than 30 days nor more than 60 days notice at any time and
from time to time on or after the Redemption Commencement Date, in each case as a whole or in part,
at the election of the Company and at the applicable Redemption Price specified on the face hereof
(expressed as a percentage of the principal amount of this Security to be redeemed), together with
accrued interest to the Redemption Date, but interest installments due on or prior to such
Redemption Date will be payable to the Holder of this Security, or one or more Predecessor
Securities, of record at the close of business on the relevant record date, all as provided in the
2008 Indenture.
5. Repayment at the Holders Option
Except as otherwise may be provided on the face hereof, if one or more Repayment Dates are
specified on the face hereof, this Security will be repayable in whole or in part in an amount
equal to any Authorized Denomination (provided that the remaining principal amount of any
Security surrendered for partial repayment shall at least equal an Authorized Denomination), on any
such Repayment Date, in each case at the option of the Holder and at the applicable Repayment Price
specified on the face hereof (expressed as a percentage of the principal amount to be repaid),
together with accrued interest to the applicable Repayment Date (but interest installments due on
or prior to such Repayment Date will be payable to the Holder of this Security, or one or more
Predecessor Securities, of record at the close of business on the relevant Regular Record Date as
provided in the 2008 Indenture). If this Security provides for more than one Repayment Date and
the Holder exercises its option to elect repayment, the Holder shall be deemed to have elected
repayment on the earliest Repayment Date after all conditions to such exercise have been satisfied,
and references herein to the applicable Repayment Date shall mean such earliest Repayment Date.
In order for the exercise of such option to be effective and this Security to be repaid, the
Company must receive at the applicable address of the Trustee set forth below (or at such other
place or places of which the Company shall from time to time notify the Holder of this Security),
on any Business Day not later than the 15th, and not earlier than the 25th, calendar day prior to
the applicable Repayment Date (or, if either such calendar day is not a Business Day, the next
succeeding Business Day), either (i) this Security, with the form below entitled Option to Elect
Repayment duly completed and signed, or (ii) a facsimile transmission or letter from a member of a
national securities exchange or the Financial Industry Regulatory Authority, Inc., a commercial
bank or a trust company in the United States of America setting forth (a) the name, address and
telephone number of the Holder of this Security, (b) the principal amount of
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this Security and the amount of this Security to be repaid, (c) a statement that the option to
elect repayment is being exercised thereby and (d) a guarantee stating that the Company will
receive this Security, with the form below entitled Option to Elect Repayment duly completed and
signed, not later than five Business Days after the date of such facsimile transmission or letter
(provided that this Security and form duly completed and signed are received by the Company
by such fifth Business Day). Any such election shall be irrevocable. The address to which such
deliveries are to be made is The Bank of New York Mellon, Attention: Corporate Trust
Administration, 101 Barclay Street, 4E, New York, New York 10286 (or at such other places as the
Company or the Trustee shall notify the Holder of this Security). All questions as to the
validity, eligibility (including time of receipt) and acceptance of any Security for repayment will
be determined by the Company, whose determination will be final and binding. Notwithstanding the
foregoing, (x) if this Security is a Global Security, the option of the Holder to elect repayment
may be exercised in accordance with the Applicable Procedures of the Depositary for this Security
at least 15 calendar days prior to the applicable Repayment Date and (y) whether or not this
Security is a Global Security, the option of the Holder to elect repayment may be exercised in any
such manner as the Company may approve.
6. Transfer and Exchange
As provided in the 2008 Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the Company in any place where the
principal of and any premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his or her attorney duly authorized in
writing, and thereupon one or more new Securities of this series and of like tenor, of Authorized
Denominations and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
As provided in the 2008 Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount of Securities of
this series and of like tenor, of a different Authorized Denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or
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not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
If this Security is a Global Security, this Security shall be subject to the provisions of the
2008 Indenture relating to Global Securities, including the limitations in Section 3.05 thereof on
transfers and exchanges of Global Securities (subject to Section 11 of the reverse of this
Security).
7. Defeasance
The 2008 Indenture contains provisions for defeasance at any time of the entire indebtedness
of this Security or certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth in the 2008 Indenture. If
so specified on the face hereof, either or both of such provisions are applicable to this Security,
as so specified.
8. Remedies
Sections 5.01 and 5.02 of the 2008 Indenture are hereby amended with respect to the Securities
of this series to the extent necessary to comply with Section 5.01 and Annex A of the Master
Agreement, dated November 25, 2008, as the same may be amended from time to time (the Master
Agreement), by and between the Company and the FDIC, attached hereto as Exhibit A. Subject to the
immediately preceding sentence and Section 15 of the reverse of this Security, if an Event of
Default with respect to Securities of this series shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and with the effect
provided in the 2008 Indenture.
As provided in and subject to the provisions of the 2008 Indenture and subject to Section 15
of the reverse of this Security, the Holder of this Security shall not have the right to institute
any proceeding with respect to the 2008 Indenture, or for the appointment of a receiver or trustee,
or for any other remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this series at the time
Outstanding shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee indemnity reasonably satisfactory to it,
and the Trustee shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
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If so provided pursuant to the terms of any specific Securities, the above-referenced
provisions of the 2008 Indenture regarding the ability of Holders to waive certain defaults, or to
request the Trustee to institute proceedings (or to give the Trustee other directions) in respect
thereof, may be applied differently with regard to such Securities.
No reference herein to the 2008 Indenture and no provision of this Security or of the 2008
Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
9. Modification and Waiver
The 2008 Indenture permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company, and the rights of the Holders of
the Securities to be affected, under the 2008 Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of all Securities at the time
Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any series, may
comprise fewer than all the Securities of such series). The 2008 Indenture also contains
provisions (i) permitting the Holders of a majority in principal amount of the Securities at the
time Outstanding to be affected, considered together as one class for this purpose (such affected
Securities may be Securities of the same or different series and, with respect to any particular
series, may comprise fewer than all the Securities of such series), on behalf of the Holders of all
such affected Securities, to waive compliance by the Company with certain provisions of the 2008
Indenture and (ii) permitting the Holders of a majority in principal amount of the Securities at
the time Outstanding of any series to be affected (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to waive certain past
defaults under the 2008 Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security.
10. Subrogation
The FDIC shall be subrogated to all of the rights of the Holder and the Representative under
this Security and the 2008 Indenture against the Company in respect of any amounts paid to the
Holder, or for the benefit of the Holder, by the FDIC pursuant to the Debt Guarantee Program.
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11. Agreement to Execute Assignment upon Guarantee Payment
The Holder hereby authorizes the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the Holder pursuant to the
Debt Guarantee Program, to execute an assignment in the form attached to this Security as Exhibit B
pursuant to which the Representative shall assign to the FDIC its right as Representative to
receive any and all payments from the Company under this Security on behalf of the Holder. The
Company hereby consents and agrees that the FDIC is an acceptable transferee for all or any portion
of the indebtedness hereunder for all purposes of this Security and upon any such assignment, the
FDIC shall be deemed the Holder of this Security for all purposes hereof, and the Company hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Security and the 2008 Indenture as a result of such assignment.
Section 3.05 of the 2008 Indenture is hereby amended with respect to the Securities of this
series to the extent necessary to permit the Holder, the Representative and the Company to comply
with this Section 11, Section 12 below or any other similar provision of this Security.
12. Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Company is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period),
payment in full hereunder shall be made pursuant to the Debt Guarantee Program on the outstanding
principal and accrued interest to such date of payment, the Holder shall, or the Holder shall cause
the person or entity in possession to, promptly surrender to the FDIC this Security.
13. Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Company is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default. Solely for the purpose of this
Section 13, Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
14. Ranking
Any indebtedness of the Company to the FDIC arising under Section 2.03 of the Master Agreement
will constitute a senior unsecured general obligation of the Company, ranking pari passu with any
indebtedness hereunder.
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15. No Event of Default during Time of Timely FDIC Guarantee
Payments
There shall not be deemed to be an Event of Default under this Security or the 2008 Indenture
which would permit or result in the acceleration of amounts due hereunder, if such an Event of
Default is due solely to the failure of the Company to make timely payment hereunder, provided that
the FDIC is making timely guarantee payments with respect to this Security in accordance with 12
C.F.R Part 370.
The following provisions of this paragraph shall apply to this Security in addition to, and
without limiting, the foregoing provisions of this Section 15. No event that would otherwise
constitute an Event of Default with respect to the Securities of this series shall constitute an
Event of Default with respect to this Security, provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. As a result, upon the occurrence of any such event (including any event of the kind
specified in said Section 5.01), neither the Trustee nor the Holder of this Security shall be
entitled, with respect to this Security, to seek any remedies otherwise available, or to take any
other action otherwise provided for, under the 2008 Indenture upon an Event of Default (including
any right to accelerate the Maturity of the principal of this Security pursuant to Section 5.02 of
the 2008 Indenture, any right to exchange (at the Holders option) this Security for a Security
that is not a Global Security pursuant to Section 3.05 thereof and any right to institute a
proceeding pursuant to Section 5.07 thereof), provided that, if any amounts of principal or
interest are due in respect of this Security and have not been paid (or made available for
payment), the FDIC is making timely guarantee payments of such amounts in accordance with 12 C.F.R
Part 370. Without limiting the foregoing, no event, including any event of the kind specified in
Section 5.01(5) or 5.01(6) of the 2008 Indenture, shall result in the automatic acceleration of the
Maturity of the principal of this Security pursuant to Section 5.02 thereof. Notwithstanding the
foregoing, however, the rights of the Holder of this Security pursuant to Section 5.08 of the 2008
Indenture shall not be affected by this Section 15. With regard to this Security, the provisions
of Article Five of the 2008 Indenture shall be subject to, and shall be deemed modified as
necessary to be consistent with, the provisions of this Section 15.
16. No Modifications without FDIC Consent
Without the express written consent of the FDIC, the Company and the Trustee agree not to
amend, modify, supplement or waive any provision in this Security or the 2008 Indenture that is
related to the principal, interest, payment, default or ranking of the indebtedness hereunder or
that is required to be included herein pursuant to the Master Agreement.
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17. Demand Obligations to FDIC upon the Companys Failure to Pay
On the 30th day after the date the Company defaults in payment of interest on this Security,
which default has not been cured by the Company by such 30th day, in the case of default in
interest, or at the Maturity, in the case of default in principal of this Security, the
Representative shall make a demand on behalf of the Holder to the FDIC for payment on the
guaranteed amount under the Debt Guarantee Program. Such demand shall be accompanied by a proof of
claim, which shall include evidence, to the extent not previously provided in the Master Agreement,
in form and content satisfactory to the FDIC, of: (A) the Representatives financial and
organizational capacity to act as Representative; (B) the Representatives exclusive authority to
act on behalf of the Holder and its fiduciary responsibility to the Holder when acting as such, as
established by the terms of this Security and the 2008 Indenture; (C) the occurrence of a payment
default; and (D) the authority to make an assignment of the Holders right, title, and interest in
this Security to the FDIC and to effect the transfer to the FDIC of the Holders claim in any
insolvency proceeding. Such assignment shall include the right of the FDIC to receive any and all
distributions on this Security from the proceeds of the receivership or bankruptcy estate. Any
demand under this Section 17 shall be made in writing and directed to the Director, Division of
Resolution and Receiverships, Federal Deposit Insurance Corporation, Washington, D.C., and shall
include all supporting evidences as provided in this Section 17, and shall certify to the accuracy
thereof.
18. Governing Law
This Security and the 2008 Indenture shall be governed by and construed in accordance with the laws
of the State of New York.
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CUSIP NO.
ORIGINAL ISSUE DATE:
THE GOLDMAN SACHS GROUP, INC.
MEDIUM-TERM NOTE, SERIES D
OPTION TO ELECT REPAYMENT
TO BE COMPLETED ONLY IF THIS SECURITY IS REPAYABLE
AT THE OPTION OF THE HOLDER AND THE HOLDER
ELECTS TO EXERCISE SUCH RIGHT
The undersigned hereby irrevocably requests and instructs the Company to repay the Security
referred to in this notice (or the portion thereof specified below) at the applicable Repayment
Price, together with interest to the Repayment Date, all as provided for in such Security, to the
undersigned, whose name, address and telephone number are as follows:
(please print name of the undersigned)
(please print address of the undersigned)
(please print telephone number of the undersigned)
If such Security provides for more than one Repayment Date, the undersigned requests repayment
on the earliest Repayment Date after the requirements for exercising this option have been
satisfied, and references in this notice to the Repayment Date mean such earliest Repayment Date.
Terms used in this notice that are defined in such Security are used herein as defined therein.
For such Security to be repaid the Company must receive at the applicable address of the
Trustee set forth below or at such other place or places of which the Company or the Trustee shall
from time to time notify the Holder of such Security, any Business Day not later than the 15th or
earlier than the 25th calendar day prior to the Repayment Date (or, if either such calendar day is
not a Business Day, the next succeeding Business Day), (i) such Security, with this Option to
Elect Repayment form duly completed and signed, or (ii) a facsimile transmission or letter from a
member of a national securities exchange or the Financial Industry Regulatory Authority, Inc., a
commercial bank or a trust company in the United States of America setting forth (a) the name,
address and telephone number of the Holder of such Security, (b) the principal amount of such
Security and the amount of such Security to be repaid, (c) a statement that the option to elect
repayment is being exercised thereby and (d) a guarantee stating that such Security to be repaid
with the form entitled Option to Elect Repayment on the addendum to the Security duly completed
and signed will be received by the Company not later than five Business Days after the date of such
facsimile transmission or letter (provided that such Security and form duly completed and
signed are received by the
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Company by such fifth Business Day). The address to which such deliveries are to be made is:
The Bank of New York Mellon
Attention: Corporate Trust Administration
101 Barclay Street, 4E
New York, New York 10286
or at such other place as the Company or the Trustee shall notify the Holder of such Security.
If less than the entire principal amount of such Security is to be repaid, specify the portion
thereof (which shall equal any Authorized Denomination) that the Holder elects to have repaid:
and specify the denomination or denominations (which shall equal any Authorized Denomination) of
the Security or Securities to be issued to the Holder in respect of the portion of such Security
not being repaid (in the absence of any specification, one Security will be issued in respect of
the portion not being repaid):
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Notice: The signature to this Option to Elect Repayment must
correspond with the name of the Holder as written on the face of
such Security in every particular without alteration or enlargement
or any other change whatsoever. |
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ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Security, shall
be construed as though they were written out in full according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with the right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT Custodian
(Cust)
(Minor)
under Uniform Gifts to Minors Act
(State)
Additional abbreviations may also be used
though not in the above list.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
(Please Print or Typewrite Name and Address
Including Postal Zip Code of Assignee)
the attached Security and all rights thereunder, and hereby irrevocably constitutes and appoints
to transfer said Security on the books of the Company, with full power of substitution in the
premises.
Dated:
Signature Guaranteed
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NOTICE: Signature must be
guaranteed.
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NOTICE: The signature to this
assignment must correspond with the
name of the Holder as written upon
the face of the attached Security in
every particular, without alteration
or enlargement or any change
whatever. |
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EXHIBIT A
MASTER AGREEMENT
Federal Deposit Insurance Corporation
Temporary Liquidity Guarantee Program Debt Guarantee Program
TLGP Master Agreement 11/24/08
TABLE OF CONTENTS
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Page |
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ARTICLE I DEFINITIONS |
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1 |
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1.01. |
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Certain Defined Terms |
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1 |
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1.02. |
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Terms Generally |
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2 |
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ARTICLE II SENIOR DEBT GUARANTEE |
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2 |
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2.01. |
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Acknowledgement of Guarantee |
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2 |
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2.02. |
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Guarantee Payments |
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2 |
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2.03. |
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Issuer Make-Whole Payments |
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2.04. |
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Waiver of Defenses |
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3 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER |
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4 |
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3.01. |
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Organization and Authority |
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4 |
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3.02. |
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Authorization, Enforceability |
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3.03. |
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Reports |
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5 |
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ARTICLE IV NOTICE AND REPORTING |
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5 |
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4.01. |
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Reports of Existing and Future Guaranteed Debt |
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5 |
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4.02. |
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On-going Reporting |
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4.03. |
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Notice of Defaults |
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5 |
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ARTICLE V COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER |
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5.01. |
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Terms to be included in Future Guaranteed Debt |
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5.02. |
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Breaches; False or Misleading Statements |
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6 |
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5.03. |
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No Modifications |
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5.04. |
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Waiver by the Issuer |
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ARTICLE VI GENERAL PROVISIONS |
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6.01. |
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Amendment and Modification of this Master Agreement |
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6.02. |
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Notices |
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6.03. |
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Counterparts |
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6.04. |
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Severability |
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6.05. |
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Governing Law |
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6.06. |
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Venue |
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6.07. |
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Assignment |
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6.08. |
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Headings |
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8 |
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6.09. |
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Delivery Requirement |
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Annex A |
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Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt |
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Annex B |
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Form of Assignment |
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TLGP Master Agreement 11/24/08
MASTER AGREEMENT
THIS MASTER AGREEMENT (this Master Agreement) is being entered into as of the date
set forth on the signature page hereto by and between THE FEDERAL DEPOSIT INSURANCE CORPORATION, a
corporation organized under the laws of the United States of America and having its principal
office in Washington, D.C. (the FDIC), and the entity whose name appears on the signature
page hereto (the Issuer).
RECITALS
WHEREAS, on November 21, 2008, the FDIC issued its Final Rule, 12 C.F.R. Part 370 (as may be
amended from time to time, the Rule), establishing the Temporary Liquidity Guarantee
Program (the Program); and
WHEREAS, pursuant to the Rule, the FDIC will guarantee the payment of certain newly-issued
senior unsecured debt (as defined in the Rule,
hereinafter Senior Unsecured
Debt) issued by an eligible entity (as defined in the Rule); and
WHEREAS, the Issuer is an eligible entity for purposes of the Rule and has elected to
participate in the debt guarantee component of the Program.
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. As used in this Master Agreement, the following terms
shall have the following meanings:
Business Day means any day that is not a Saturday, a Sunday or a day on which banks
are required or authorized by law to be closed in the State of New York.
FDIC has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
FDIC Guarantee means the guarantee of payment by the FDIC of the Senior Unsecured
Debt of the Issuer in accordance with the terms of the Program.
Guarantee Payment means any payment made by the FDIC under the Program with respect
to Senior Unsecured Debt of the Issuer.
Guarantee Payment Notice has the meaning ascribed to such term in Section
2.02.
Issuer has the meaning ascribed to such term in the introductory paragraph to this
Master Agreement.
Issuer Make-Whole Payments has the meaning ascribed to such term in
Section 2.03.
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TLGP Master Agreement 11/24/08 |
Issuer Reports means reports, registrations, documents, filings, statements and
submissions, together with any amendments thereto, that the Issuer or any subsidiary of the Issuer
is required to file with any governmental entity.
Master Agreement means this Master Agreement, together with all Annexes and
amendments hereto.
Material Adverse Effect means a material adverse effect on the business, results of
operations or financial condition of the Issuer and its consolidated subsidiaries taken as a whole.
Program has the meaning ascribed to such term in the Recitals.
Reimbursement Payment has the meaning ascribed to such term in Section 2.03.
Relevant Provision means any provision that is related to the principal, interest,
payment, default or ranking of the Senior Unsecured Debt, any provision contained in Annex A or any
other provision the amendment of which would require the consent of any or all of the holders of
such debt.
Representative means the trustee, administrative agent, paying agent or other
fiduciary or agent designated as the Representative under the governing documents for any Senior
Unsecured Debt of the Issuer subject to the FDIC Guarantee for purposes of submitting claims or
taking other actions under the Program.
Rule has the meaning ascribed to such term in the Recitals.
Senior Unsecured Debt has the meaning ascribed to such term in the Recitals.
1.02. Terms Generally. Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other gender as the context
requires, the terms hereof, herein and herewith and words of similar import shall, unless
otherwise stated, be construed to refer to this Master Agreement and not to any particular
provision of this Master Agreement, and Article, Section and paragraph references are to the
Articles, Sections and paragraphs of this Master Agreement unless otherwise specified, and the word
including and words of similar import when used in this Master Agreement shall mean including,
without limitation, unless otherwise specified.
ARTICLE II
SENIOR DEBT GUARANTEE
2.01. Acknowledgement of Guarantee. The FDIC hereby acknowledges that the Issuer has
elected to participate in the debt guarantee component of the Program and that, as a result, the
Issuers Senior Unsecured Debt is guaranteed by the FDIC to the extent set forth in, and subject to
the provisions of, the Rule, and subject to the terms hereof.
2.02. Guarantee Payments. The Issuer understands and acknowledges that any Guarantee
Payment with respect to a particular issue of Senior Unsecured Debt shall be paid by the FDIC
directly to:
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TLGP Master Agreement 11/24/08 |
(a) the Representative with respect to such Senior Unsecured Debt if a Representative has been
designated; or
(b) the registered holder(s) of such Senior Unsecured Debt if no Representative has been
designated; or
(c) any registered holder of such Senior Unsecured Debt who has opted out of being represented
by the designated Representative;
in each case, pursuant to the claims procedure set forth in the Rule. In no event shall the FDIC
make any Guarantee Payment to the Issuer directly. The FDIC will provide prompt written notice to
the Issuer of any Guarantee Payment made by the FDIC with respect to any of the Issuers Senior
Unsecured Debt (the Guarantee Payment Notice).
2.03. Issuer Make-Whole Payments. In consideration of the FDIC providing the FDIC
Guarantee with respect to the Senior Unsecured Debt of the Issuer, the Issuer hereby irrevocably
and unconditionally covenants and agrees:
(a) to reimburse the FDIC immediately upon receipt of the Guarantee Payment Notice for all
Guarantee Payments set forth in the Guarantee Payment Notice (the Reimbursement Payment)
(without duplication of any amounts actually received by the FDIC as subrogee or assignee under the
governing documents of the relevant Senior Unsecured Debt of the Issuer);
(b) beginning as of the date of the Issuers receipt of the Guarantee Payment Notice, to pay
interest on any unpaid Reimbursement Payments until such Reimbursement Payments shall have been
paid in full by the Issuer, at an interest rate equal to one percent (1%) per annum above the
non-default interest rate payable on the Senior Unsecured Debt with respect to which the relevant
Guarantee Payments were made, as calculated in accordance with the documents governing such Senior
Unsecured Debt; and
(c) to reimburse the FDIC for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by it, including costs of collection or other enforcement of the Issuers
payment obligations hereunder. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the FDICs agents, counsel, accountants and experts.
Clauses (a), (b) and (c) above are collectively referred to herein as the Issuer
Make-Whole Payments. The indebtedness of the Issuer to the FDIC arising under this
Section 2.03 constitutes a senior unsecured general obligation of the Issuer, ranking pari
passu with other senior unsecured indebtedness of the Issuer, including without limitation Senior Unsecured Debt of
the Issuer that is subject to the FDIC Guarantee.
2.04. Waiver of Defenses. The Issuer hereby waives any defenses it might otherwise
have to its payment obligations under any of the Issuers Senior Unsecured Debt or under
Section 2.03 hereof, in each case beginning at such time as the FDIC has made any Guarantee
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TLGP Master Agreement 11/24/08 |
Payment with respect to such Senior Unsecured Debt and continuing until such time as all Issuer
Make-Whole Payments have been received by the FDIC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
3.01. Organization and Authority. The Issuer has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of organization, with the
necessary power and authority to own its properties and conduct its business in all material
respects as currently conducted, except as has not had, or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.02. Authorization, Enforceability.
(a) The Issuer has the power and authority to execute and deliver this Master Agreement and to
carry out its obligations hereunder. The execution, delivery and performance by the Issuer of this
Master Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Issuer, and no further approval or
authorization is required on the part of the Issuer. This Master Agreement is a valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws
now or hereafter in effect relating to creditors rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
(b) The execution, delivery and performance by the Issuer of this Master Agreement and the
consummation of the transactions contemplated hereby and compliance by the Issuer with the
provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of the Issuer or any
subsidiary of the Issuer under, any of the terms, conditions or provisions of, as applicable, (X)
its organizational documents or (Y) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Issuer or any subsidiary of the
Issuer may be bound, or to which the Issuer or any subsidiary of the Issuer may be subject, or (ii)
violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree
applicable to the Issuer or any subsidiary of the Issuer or any of their respective properties or
assets except, in the case of clauses (i)(Y) and (ii), for those occurrences that, individually or
in the aggregate, have not had and would not reasonably be expected to have a Material Adverse
Effect.
(c) No prior notice to, filing with, exemption or review by, or authorization, consent or
approval of, any governmental entity is required to be made or obtained by the Issuer in connection
with the execution of this Master Agreement, except for any such notices, filings, exemptions,
reviews, authorizations, consents and approvals which have been made or obtained
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TLGP Master Agreement 11/24/08 |
or the failure of which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.03. Reports. Since December 31, 2007, the Issuer and each subsidiary of the Issuer
has timely filed all Issuer Reports and has paid all fees and assessments due and payable in
connection therewith, except, in each case, as would not individually or in the aggregate have a
Material Adverse Effect. As of their respective dates of filing, the Issuer Reports complied in
all material respects with all statutes and applicable rules and regulations of all applicable
governmental entities. In the case of each such Issuer Report filed with or furnished to the
Securities and Exchange Commission, if any, such Issuer Report (a) did not, as of its date, or if
amended prior to the date of this Master Agreement, as of the date of such amendment, contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading,
(b) complied as to form in all material respects with all applicable requirements of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and (c) no executive
officer of the Issuer or any subsidiary of the Issuer has failed in any respect to make the
certifications required by him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.
With respect to all other Issuer Reports, the Issuer Reports were complete and accurate in all
material respects as of their respective dates.
ARTICLE IV
NOTICE AND REPORTING
4.01. Reports of Existing and Future Guaranteed Debt. The Issuer shall provide
reports to the FDIC of the amount of all Senior Unsecured Debt subject to the FDIC Guarantee in
accordance with the reporting requirements of the Rule.
4.02. On-going Reporting. The Issuer covenants and agrees that, for so long as it has
outstanding Senior Unsecured Debt that is subject to the FDIC Guarantee, it shall furnish or cause
to be furnished to the FDIC (a) monthly reports, in such form as specified by the FDIC, containing
information relating to the Issuers outstanding Senior Unsecured Debt that is subject to the FDIC
Guarantee and such other information as may be requested in such form, and (b) such other
information that the FDIC may reasonably request, such other information to be delivered within ten
(10) Business Days of receipt by the Issuer of any such request.
4.03. Notice of Defaults. The Issuer covenants and agrees that it shall notify the
FDIC within one (1) Business Day of any default in the payment of any principal or interest when
due, without giving effect to any cure period, with respect to any indebtedness of the Issuer
(including debt that is not subject to the FDIC Guarantee), whether such debt is existing as of the
date of this Master Agreement or is issued subsequent to the date hereof, if such default would
result, or would reasonably be expected to result, in an event of default under any Senior
Unsecured Debt of the Issuer that is subject to the FDIC Guarantee.
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TLGP Master Agreement 11/24/08 |
ARTICLE V
COVENANTS AND ACKNOWLEDGMENTS OF THE ISSUER
5.01. Terms to be included in Future Guaranteed Debt. The governing documents for the
issuance of any Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee shall
contain each of the provisions set forth in Annex A. If a particular issue of Senior
Unsecured Debt is evidenced solely by a trade confirmation, the Issuer shall use commercially
reasonable efforts to cause the holder of such debt to execute a written instrument setting forth
the holders agreement to be bound by the provisions set forth in Annex A. No document
governing the issuance of Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee
shall contain any provision that would result in the automatic acceleration of the debt upon a
default by the Issuer at any time during which the FDIC Guarantee is in effect or during which
Guarantee Payments are being made in accordance with Section 370.12(b)(2) of the Rule.
5.02. Breaches; False or Misleading Statements. The Issuer acknowledges and agrees
that (a) if it is in breach of any provision of this Master Agreement or (b) if it makes any false
or misleading statement or representation in connection with the Issuers participation in the
Program, or makes any statement or representation in bad faith with the intent to influence the
actions of the FDIC, the FDIC may take the enforcement actions provided in Section 370.11 of the
Rule, including termination of the Issuers participation in the Program. As set forth in the
Rule, any termination of the Issuers participation in the Program would solely have prospective
effect, and would in no event affect the FDIC Guarantee with respect to Senior Unsecured Debt of
the Issuer that is issued and outstanding prior to the termination of the Issuers participation in
the Program.
5.03. No Modifications. The Issuer covenants and agrees that it shall not amend,
modify, or consent to any amendment or modification, or waive any Relevant Provision, without the
express written consent of the FDIC.
5.04. Waiver by the Issuer. The Issuer acknowledges and agrees that if any covenant,
stipulation or other provision of this Master Agreement that imposes on the Issuer the obligation
to make any payment is at any time void under any provision of applicable law, the Issuer will not
make any claim, counterclaim or institute any proceedings against the FDIC or any of its assignees
or subrogees for any amount paid by the Issuer at any time, and the Issuer waives unconditionally
and absolutely any rights and defenses, legal or equitable, which arise under or in connection with
any such provision and which might otherwise be available to it for recovery of any amount due
under this Master Agreement.
ARTICLE
VI
GENERAL
PROVISIONS
6.01. Amendment and Modification of this Master Agreement. This Master Agreement may
be amended, modified and supplemented in any and all respects, but only by a written instrument
signed by the parties hereto expressly stating that such instrument is intended to amend, modify or
supplement this Master Agreement.
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TLGP Master Agreement 11/24/08 |
6.02. Notices. Unless otherwise provided herein, all notices and other
communications hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, telecopied (which is confirmed) or sent by an overnight courier service, such as FedEx,
to the parties at the following addresses (or at such other address for a party as shall be
specified by such party by like notice):
if to the Issuer, to the address appearing on the signature page hereto
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if to the FDIC, to:
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The Federal Deposit Insurance Corporation |
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Deputy Director, Receivership Operations Branch |
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Division of Resolutions and Receiverships |
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Attention: Master Agreement |
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550 17th Street, N.W. |
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Washington, DC 20429 |
6.03. Counterparts. This Master Agreement may be executed in counterparts, which,
together, shall be considered one and the same agreement. Copies of executed counterparts
transmitted by telecopy or other electronic transmission service shall be considered original,
executed counterparts, provided receipt of such counterparts is confirmed.
6.04. Severability. Any term or provision of this Master Agreement that is held by a
court of competent jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent
jurisdiction or other authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall have the power to
reduce the scope, duration or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
6.05. Governing Law. Federal law of the United States shall control this Master
Agreement. To the extent that federal law does not supply a rule of decision, this Master
Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of New York without giving effect to principles of conflicts of law other than Section 5-1401
of the New York General Obligations Law. Nothing in this Master Agreement will require any
unlawful action or inaction by either party.
6.06. Venue. Each of the parties hereto irrevocably and unconditionally agrees that
any legal action arising under or in connection with this Master Agreement is to be instituted in
the United States District Court in and for the District of Columbia or in any United States
District Court in the jurisdiction where the Issuers principal office is located.
6.07. Assignment. Neither this Master Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party, and any purported
assignment
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TLGP Master Agreement 11/24/08 |
without such consent shall be void. Subject to the preceding sentence, this Master Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6.08. Headings. The headings and subheadings of the Table of Contents, Articles and
Sections contained in this Master Agreement, except the terms identified for definition in Article
I and elsewhere in this Master Agreement, are inserted for convenience only and shall not affect
the meaning or interpretation of this Master Agreement or any provision hereof.
6.09. Delivery Requirement. The Issuer shall submit a completed, executed and dated
copy of the signature page hereto to the FDIC within five (5) business days of the date of the
Issuers election to continue participating in the debt guarantee component of the Program in
accordance with the delivery instructions set forth on the signature page.
[SIGNATURES BEGIN ON NEXT PAGE]
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TLGP Master Agreement 11/24/08 |
IN WITNESS WHEREOF, the Issuer and the FDIC have caused this Master Agreement to be executed
by their respective officers thereunto duly authorized.
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THE FEDERAL DEPOSIT INSURANCE
CORPORATION
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By: |
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Name: |
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Title: |
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NAME OF ISSUER:
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THE GOLDMAN SACHS GROUP, INC. |
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By: |
/s/ David Viniar |
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Name: |
David Viniar |
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Chief Financial Officer |
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Address of Issuer:
85 Broad Street
New York, New York 10004
FDIC Certificate
Number: ________________________
RSSD ID or
OTS Docket
Number:
2380443
Date:
11/25/08
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Delivery Instructions
Please deliver a completed, executed and dated copy of this Signature Page to the FDIC within
five (5) business days of the date of the Issuers election to continue participating in the Debt
Guarantee Program. Email is the preferred method of delivery to MasterAgreement@fdic.gov, or you
may send it by an overnight courier service such as FedEx to Senior Counsel, Special Issues Unit,
E7056, Attention: Master Agreement, 3501 Fairfax Drive, Arlington, Virginia, 22226.
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TLGP Master Agreement 11/24/08 |
Annex A
Terms to be Included in Future Issuances of FDIC Guaranteed Senior Unsecured Debt
The following provisions shall be included in the governing documents for the issuance of
Senior Unsecured Debt of the Issuer that is subject to the FDIC Guarantee, in substantially the
form presented below, unless otherwise specified. The appropriate name of the governing
document(s) shall be inserted in place of the term Agreement where it appears in this Annex A.
Acknowledgement of the FDICs Debt Guarantee Program
The parties to this Agreement acknowledge that the Issuer has not opted out of the debt
guarantee program (the Debt Guarantee Program) established by the Federal Deposit
Insurance Corporation (FDIC) under its Temporary Liquidity Guarantee Program. As a
result, this debt is guaranteed under the FDIC Temporary Liquidity Guarantee Program and is backed
by the full faith and credit of the United States. The details of the FDIC guarantee are provided
in the FDICs regulations, 12 CFR Part 370, and at the FDICs website, www.fdic.gov/tlgp. The
expiration date of the FDICs guarantee is the earlier of the maturity date of this debt or June
30, 2012. [The italicized portion of the above provision shall be included exactly as written
above]
Representative
The [insert name of the: trustee, administrative agent, paying agent or other fiduciary or
agent to be designated as the duly authorized representative of the debt holders] is designated
under this Agreement as the duly authorized representative of the holder[s] for purposes of making
claims and taking other permitted or required actions under the Debt Guarantee Program (the
Representative). Any holder may elect not to be represented by the Representative by
providing written notice of such election to the Representative.
Subrogation
The FDIC shall be subrogated to all of the rights of the holder[s] and the Representative, if
there shall be one, under this Agreement against the Issuer in respect of any amounts paid to the
holder[s], or for the benefit of the holder[s], by the FDIC pursuant to the Debt Guarantee Program.
Agreement to Execute Assignment upon Guarantee Payment
[If there is a Representative, insert the following:]
The holder[s] hereby authorize the Representative, at such time as the FDIC shall commence
making any guarantee payments to the Representative for the benefit of the holder[s] pursuant to
the Debt Guarantee Program, to execute an assignment in the form attached to this Agreement as
Exhibit [ ] [See Annex B to Master Agreement] pursuant to which the Representative shall
assign to the FDIC its right as Representative to receive any and all payments from the Issuer
under this Agreement on behalf of the holder[s]. The Issuer hereby consents and agrees that the
FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for all
purposes of this Agreement and upon any such assignment, the
TLGP Master Agreement 11/24/08
FDIC shall be deemed a holder under this Agreement for all purposes hereof, and the Issuer hereby
agrees to take such reasonable steps as are necessary to comply with any relevant provision of this
Agreement as a result of such assignment.
[or, if (i) there is no Representative or (ii) the holder has exercised its right not to be
represented by the Representative, insert the following:]
The holder[s] hereby agree that, at such time as the FDIC shall commence making any guarantee
payments to the holder[s] pursuant to the Debt Guarantee Program, the holder[s] shall execute an
assignment in the form attached to this Agreement as Exhibit [ ] [See Annex B to Master
Agreement] pursuant to which the holder[s] shall assign to the FDIC [its/their] right to receive
any and all payments from the Issuer under this Agreement. The Issuer hereby consents and agrees
that the FDIC is an acceptable transferee for all or any portion of the indebtedness hereunder for
all purposes of this Agreement and upon any such assignment, the FDIC shall be deemed a holder
under this Agreement for all purposes thereof, and the Issuer hereby agrees to take such reasonable
steps as are necessary to comply with any relevant provision of this Agreement as a result of such
assignment.
Surrender of Senior Unsecured Debt Instrument to the FDIC
If, at any time on or prior to the expiration of the period during which senior unsecured debt
of the Issuer is guaranteed by the FDIC under the Debt Guarantee Program (the Effective Period), payment in full hereunder shall be made
pursuant to the Debt Guarantee Program on the outstanding principal and accrued interest to such
date of payment, the holder shall, or the holder shall cause the person or entity in possession to,
promptly surrender to the FDIC the security certificate, note or other instrument evidencing such
debt, if any.
Notice Obligations to FDIC of Payment Default
If, at any time prior to the earlier of (a) full satisfaction of the payment obligations
hereunder, or (b) expiration of the Effective Period, the Issuer is in default of any payment
obligation hereunder, including timely payment of any accrued and unpaid interest, without regard
to any cure period, the Representative covenants and agrees that it shall provide written notice to
the FDIC within one (1) Business Day of such payment default.
Ranking
Any indebtedness of the Issuer to the FDIC arising under Section 2.03 of the Master Agreement
entered into by the Issuer and the FDIC in connection with the Debt Guarantee Program will
constitute a senior unsecured general obligation of the Issuer, ranking pari passu with any indebtedness hereunder.
No Event of Default during Time of Timely FDIC Guarantee Payments
There shall not be deemed to be an event of default under this Agreement which would permit or
result in the acceleration of amounts due hereunder, if such an event of default is due solely to
the failure of the Issuer to make timely payment hereunder, provided that the FDIC is
TLGP Master Agreement 11/24/08
A-2
making timely guarantee payments with respect to the debt obligations hereunder in accordance with
12 C.F.R Part 370.
No Modifications without FDIC Consent
Without the express written consent of the FDIC, the parties hereto agree not to amend,
modify, supplement or waive any provision in this Agreement that is related to the principal,
interest, payment, default or ranking of the indebtedness hereunder or that is required to be
included herein pursuant to the Master Agreement executed by the Issuer in connection with the Debt
Guarantee Program.
TLGP Master Agreement 11/24/08
A-3
EXHIBIT B
ASSIGNMENT
This Assignment is made pursuant to the terms of Section 10 of the reverse of The Goldman
Sachs Group, Inc.s Notes due , CUSIP No. (the Security), between The
Bank of New York Mellon (the Representative), acting on behalf of the Holder of the Security who
have not opted out of representation by the Representative, and The Goldman Sachs Group, Inc. (the
Company) with respect to the debt obligations of the Company that are guaranteed under the Debt
Guarantee Program. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Security. Solely for the purpose of this Assignment, Business
Day means any day that is not a Saturday, a Sunday or a day on which banks are required or
authorized by law to be closed in the State of New York.
For value received, the Representative, on behalf of the Holder (the Assignor), hereby
assigns to the Federal Deposit Insurance Corporation (the FDIC), without recourse, all of the
Assignors respective rights, title and interest in and to: (a) the Security; (b) the Senior Debt
Indenture, dated July 16, 2008 (the 2008 Indenture), by and between the Company and the
Representative, with respect to the Security; and (c) any other instrument or agreement executed by
the Company regarding obligations of the Company under the Security or the 2008 Indenture with
respect to the Security (collectively, the Assignment).
The Assignor hereby certifies that:
1. Without the FDICs prior written consent, the Assignor has not:
(a) agreed to any material amendment of the Security or to any material deviation from the
provisions thereof; or
(b) accelerated the maturity of the Security.
[Instructions to the Assignor: If the Assignor has not assigned or transferred any interest in
the Security and related documentation, such Assignor must include the following representation.]
2. The Assignor has not assigned or otherwise transferred any interest in the Security;
[Instructions to the Assignor: If the Assignor has assigned a partial interest in the Security
and related documentation, the Assignor must include the following representation.]
B-1
2. The Assignor has assigned part of its rights, title and interest in the Security to
pursuant to the agreement, dated as of , 20___, between
, as assignor, and , as assignee, an executed copy of which is attached
hereto.
The Assignor acknowledges and agrees that this Assignment is subject to the Security and the
2008 Indenture and to the following:
1. In the event the Assignor receives any payment under or related to the Security from a
party other than the FDIC (a Non-FDIC Payment):
(a) after the date of demand for a guarantee payment on the FDIC pursuant to 12 CFR Part 370,
but prior to the date of the FDICs first guarantee payment under the Security pursuant to 12 CFR
Part 370, the Assignor shall promptly but in no event later than five (5) Business Days after
receipt notify the FDIC of the date and the amount of such Non-FDIC Payment and shall apply such
payment as payment made by the Company, and not as a guarantee payment made by the FDIC, and
therefore, the amount of such payment shall be excluded from this Assignment; and
(b) after the FDICs first guarantee payment under the Security, the Assignor shall forward
promptly to the FDIC such Non-FDIC Payment in accordance with the payment instructions provided in
writing by the FDIC.
2. Acceptance by the Assignor of payment pursuant to the Debt Guarantee Program on behalf of
the Holder shall constitute a release by the Holder of any liability of the FDIC under the Debt
Guarantee Program with respect to such payment.
The Person who is executing this Assignment on behalf of the Assignor hereby represents and
warrants to the FDIC that he/she/it is duly authorized to do so.
B-2
******
IN WITNESS WHEREOF, the Assignor has caused this instrument to be executed and delivered this
___day of , 20___.
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Very truly yours, |
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[ASSIGNOR] |
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(Signature) |
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Title: |
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Consented to and acknowledged by this ___day of ___, 20___:
THE FEDERAL DEPOSIT INSURANCE CORPORATION
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By: |
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(Signature)
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B-3
EX-10.1
7
y74032exv10w1.htm
EX-10.1: AMENDED AND RESTATED STOCK INCENTIVE PLAN
EX-10.1
Exhibit 10.1
THE GOLDMAN SACHS
AMENDED AND RESTATED STOCK INCENTIVE PLAN
(amended and restated effective as of December 31, 2008)
TABLE OF CONTENTS
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ARTICLE I GENERAL |
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1 |
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1.1 Purpose |
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1.2 Definitions of Certain Terms |
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1.3 Administration |
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1.4 Persons Eligible for Awards |
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1.5 Types of Awards Under Plan |
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1.6 Shares Available for Awards |
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ARTICLE II AWARDS UNDER THE PLAN |
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2.1 Agreements Evidencing Awards |
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2.2 No Rights as a Shareholder |
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2.3 Options |
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2.4 SARs |
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2.5 Restricted Shares |
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2.6 RSUs |
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2.7 Other Stock-Based Awards |
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2.8 Dividend Equivalent Rights |
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2.9 Adoption of Standardized Award Terms and Conditions |
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ARTICLE III MISCELLANEOUS |
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3.1 Amendment of the Plan or Award Agreement |
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3.2 Tax Withholding |
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3.3 Required Consents and Legends |
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3.4 Right of Offset |
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3.5 Nonassignability |
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3.6 Requirement of Consent and Notification of Election Under Section 83(b) of the
Code or Similar Provision |
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3.7 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b)
of the Code |
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3.8 Change in Control |
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3.9 Other Conditions to Awards |
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3.10 Right of Discharge Reserved |
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3.11 Nature and Form of Payments |
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3.12 Non-Uniform Determinations |
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3.13 Other Payments or Awards |
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3.14 Plan Headings; References to Laws, Rules or Regulations |
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3.15 Date of Adoption and Term of Plan; Shareholder Approval Required |
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3.16 Governing Law |
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3.17 Arbitration |
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3.18 Severability; Entire Agreement |
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3.19 Waiver of Claims |
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3.20 No Third Party Beneficiaries |
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3.21 Limitations Imposed by Section 162(m) of the Code |
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3.22 Certain Limitations on Transactions Involving Common Stock; Fees and Commissions |
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3.23 Deliveries |
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3.24 Successors and Assigns of GS Inc. |
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ii
THE GOLDMAN SACHS
AMENDED AND RESTATED STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of The Goldman Sachs Amended and Restated Stock Incentive Plan is to attract,
retain and motivate officers, directors, employees (including prospective employees), consultants
and others who may perform services for the Firm (as hereinafter defined), to compensate them for
their contributions to the long-term growth and profits of the Firm and to encourage them to
acquire a proprietary interest in the success of the Firm.
The Plan was originally adopted by the Board of Directors of GS Inc. on April 30, 1999 as The
Goldman Sachs 1999 Stock Incentive Plan (the 1999 SIP) and was amended and restated by the Board
on January 16, 2003, subject to the approval by the shareholders of GS Inc. Such shareholder
approval was obtained on April 1, 2003. The Plan was further amended and restated, effective as of
December 31, 2008.
The amendments made to the 1999 SIP shall affect only Awards granted on or after the
Effective Date (as hereinafter defined). Awards granted prior to the Effective Date shall be
governed by the terms of the 1999 SIP and Award Agreements as in effect prior to the Effective
Date. The terms of this Plan are not intended to affect the interpretation of the terms of the
1999 SIP as they existed prior to the Effective Date.
1.2 Definitions of Certain Terms
Unless otherwise specified in an applicable Award Agreement, the terms listed below shall have
the following meanings for purposes of the Plan, any Award Agreement and any standardized terms and
conditions that may be adopted from time to time by the Committee.
1.2.1 Award means an award made pursuant to the Plan.
1.2.2 Award Agreement means the written document or documents by which each Award is
evidenced, including any Award Statement.
1.2.3 Award Statement means a written statement that reflects certain Award terms.
1.2.4 Board means the Board of Directors of GS Inc.
1.2.5 Business Day means any day other than a Saturday, a Sunday or a day on which
banking institutions in New York City are authorized or obligated by federal law or executive order
to be closed.
1.2.6 Cause means (a) the Grantees conviction, whether following trial or by plea
of guilty or nolo contendere (or similar plea), in a criminal proceeding (i) on a misdemeanor
charge involving fraud, false statements or misleading omissions, wrongful taking, embezzlement,
bribery, forgery, counterfeiting or extortion, or (ii) on a felony charge, or (iii) on an
equivalent charge to those in clauses (i) and (ii) in jurisdictions which do not use those
designations, (b) the Grantees engaging in any conduct which constitutes an employment
disqualification under applicable law (including statutory disqualification as defined under the
Exchange Act), (c) the Grantees willful failure to perform the Grantees duties to the Firm, (d)
the Grantees violation of any securities or commodities laws, any rules or regulations issued
pursuant to such laws, or the rules and regulations of any securities or commodities exchange or
association of which the Firm is a member, (e) the Grantees violation of any Firm policy
concerning hedging or pledging or confidential or proprietary information, or the Grantees
material violation of any other Firm policy as in effect from time to time, (f) the Grantees
engaging in any act or making any statement which impairs, impugns, denigrates, disparages or
negatively reflects upon the name, reputation or business interests of the Firm or (g) the
Grantees engaging in any conduct detrimental to the Firm. The determination as to whether Cause
has occurred shall be made by the Committee in its sole discretion and, in such case, the Committee
also may, but shall not be required to, specify the date such Cause occurred (including by
determining that a prior termination of Employment was for Cause). Any rights the Firm may have
hereunder and in any Award Agreement in respect of the events giving rise to Cause shall be in
addition to the rights the Firm have under any other agreement with a Grantee or at law or in
equity.
1.2.7 Certificate means a stock certificate (or other appropriate document or
evidence of ownership) representing shares of Common Stock.
1.2.8 Change in Control means the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving GS Inc. (a Reorganization) or
sale or other disposition of all or substantially all of GS Inc.s assets to an entity that is not
an affiliate of GS Inc. (a Sale), that in each case requires the approval of GS Inc.s
stockholders under the law of GS Inc.s jurisdiction of organization, whether for such
Reorganization or Sale (or the issuance of securities of GS Inc. in such Reorganization or Sale),
unless immediately following such Reorganization or Sale, either: (a) at least 50% of the total
voting power (in respect of the election of directors, or similar officials in the case of an
entity other than a corporation) of (i) the entity resulting from such Reorganization, or the
entity which has acquired all or substantially all of the assets of GS Inc. in a Sale (in either
case, the Surviving Entity), or (ii) if applicable, the ultimate parent entity that directly or
indirectly has
2
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, as such Rule is
in effect on the date of the adoption of the 1999 SIP) of 50% or more of the total voting power (in
respect of the election of directors, or similar officials in the case of an entity other than a
corporation) of the Surviving Entity (the Parent Entity) is represented by GS Inc.s securities
(the GS Inc. Securities) that were outstanding immediately prior to such Reorganization or Sale
(or, if applicable, is represented by shares into which such GS Inc. Securities were converted
pursuant to such Reorganization or Sale) or (b) at least 50% of the members of the board of
directors (or similar officials in the case of an entity other than a corporation) of the Parent
Entity (or, if there is no Parent Entity, the Surviving Entity) following the consummation of the
Reorganization or Sale were, at the time of the Boards approval of the execution of the initial
agreement providing for such Reorganization or Sale, individuals (the Incumbent Directors) who
either (i) were members of the Board on the Effective Date or (ii) became directors subsequent to
the Effective Date and whose election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval
of GS Inc.s proxy statement in which such persons are named as nominees for director).
1.2.9 Client means any client or prospective client of the Firm to whom the Grantee
provided services, or for whom the Grantee transacted business, or whose identity became known to
the Grantee in connection with the Grantees relationship with or employment by the Firm.
1.2.10 Code means the Internal Revenue Code of 1986, as amended from time to time,
and the applicable rulings and regulations thereunder.
1.2.11 Committee means the committee appointed by the Board to administer the Plan
pursuant to Section 1.3, and, to the extent the Board determines it is appropriate for the
compensation realized from Awards under the Plan to be considered performance based compensation
under Section 162(m) of the Code, shall be a committee or subcommittee of the Board composed of two
or more members, each of whom is an outside director within the meaning of Code Section 162(m),
and which, to the extent the Board determines it is appropriate for Awards under the Plan to
qualify for the exemption available under Rule 16b-3(d)(1) or Rule 16b-3(e) promulgated under the
Exchange Act, shall be a committee or subcommittee of the Board composed of two or more members,
each of whom is a non-employee director within the meaning of Rule 16b-3. Unless otherwise
determined by the Board, the Committee shall be the Compensation Committee of the Board.
1.2.12 Common Stock means common stock of GS Inc., par value $0.01 per share.
1.2.13 Competitive Enterprise means a business enterprise that (a) engages in any
activity, (b) owns or controls a significant interest in or (c) is owned by, or a significant
interest in which is owned or controlled by, any entity that engages in any activity, that, in any
3
case, competes anywhere with any activity in which the Firm is engaged. The activities
covered by this definition include, without limitation, financial services such as investment
banking, public or private finance, lending, financial advisory services, private investing (for
anyone other than the Grantee and members of the Grantees family), merchant banking, asset or
hedge fund management, insurance or reinsurance underwriting or brokerage, property management, or
securities, futures, commodities, energy, derivatives or currency brokerage, sales, lending,
custody, clearance, settlement or trading.
1.2.14 Custody Account means the custody account maintained by a Grantee with The
Chase Manhattan Bank or such successor custodian as may be designated by GS Inc.
1.2.15 Date of Grant means the date specified in the Grantees Award Agreement as
the date of grant of the Award.
1.2.16 Delivery Date means each date specified in the Grantees Award Agreement as a
delivery date, provided, unless the Committee determines otherwise, such date is during a Window
Period or, if such date is not during a Window Period, the first trading day of the first Window
Period beginning after such date.
1.2.17 Dividend Equivalent Right means a dividend equivalent right granted under the
Plan, which represents an unfunded and unsecured promise to pay to the Grantee amounts equal to all
or any portion of the regular cash dividends that would be paid on shares of Common Stock covered
by an Award if such shares had been delivered pursuant to an Award.
1.2.18 Effective Date means the date this Plan is approved by the stockholders of GS
Inc. pursuant to Section 3.15 hereof.
1.2.19 Employment means the Grantees performance of services for the Firm, as
determined by the Committee. The terms employ and employed shall have their correlative
meanings. The Committee in its sole discretion may determine (a) whether and when a Grantees
leave of absence results in a termination of Employment (for this purpose, unless the Committee
determines otherwise, a Grantee shall be treated as terminating Employment with the Firm upon the
occurrence of an Extended Absence), (b) whether and when a change in a Grantees association with
the Firm results in a termination of Employment and (c) the impact, if any, of any such leave of
absence or change in association on Awards theretofore made. Unless expressly provided otherwise,
any references in the Plan or any Award Agreement to a Grantees Employment being terminated shall
include both voluntary and involuntary terminations.
1.2.20 Exchange Act means the Securities Exchange Act of 1934, as amended from time
to time, and the applicable rules and regulations thereunder.
1.2.21 Exercise Price means (i) in the case of Options, the price specified in the
Grantees Award Agreement as the price-per-share of Common Stock at which such share can be
purchased pursuant to the Option or (ii) in the case of SARs, the price specified in the Grantees
4
Award Agreement as the reference price-per-share of Common Stock used to calculate the amount
payable to the Grantee.
1.2.22 Expiration Date means the date specified in the Grantees Award Agreement as
the final expiration date of the Award.
1.2.23 Extended Absence means the Grantees inability to perform for six (6)
continuous months, due to illness, injury or pregnancy-related complications, substantially all the
essential duties of the Grantees occupation, as determined by the Committee.
1.2.24 Fair Market Value means, with respect to a share of Common Stock on any day,
the fair market value as determined in accordance with a valuation methodology approved by the
Committee.
1.2.25 Firm means GS Inc. and its subsidiaries and affiliates.
1.2.26 Good Reason means, in connection with a termination of employment by a
Grantee following a Change in Control, (a) as determined by the Committee, a materially adverse
alteration in the Grantees position or in the nature or status of the Grantees responsibilities
from those in effect immediately prior to the Change in Control or (b) the Firms requiring the
Grantees principal place of Employment to be located more than seventy-five (75) miles from the
location where the Grantee is principally Employed at the time of the Change in Control (except for
required travel on the Firms business to an extent substantially consistent with the Grantees
customary business travel obligations in the ordinary course of business prior to the Change in
Control).
1.2.27 Grantee means a person who receives an Award.
1.2.28 GS Inc. means The Goldman Sachs Group, Inc., and any successor thereto.
1.2.29 Incentive Stock Option means an option to purchase shares of Common Stock
that is intended to qualify for special federal income tax treatment pursuant to Sections 421 and
422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision
of the Code, and which is so designated in the applicable Option Award Agreement.
1.2.30 Initial Exercise Date means, with respect to an Option or an SAR, the date
specified in the Grantees Award Agreement as the initial date on which such Award may be
exercised, provided, unless the Committee determines otherwise, such date is during a Window Period
or, if such date is not during a Window Period, the first trading day of the first Window Period
beginning after such date.
5
1.2.31 1999 SIP means The Goldman Sachs 1999 Stock Incentive Plan, as in effect
prior to the Effective Date.
1.2.32 Nonqualified Stock Option means an option to purchase shares of Common Stock
that is not an Incentive Stock Option.
1.2.33 Option means an Incentive Stock Option or a Nonqualified Stock Option or
both, as the context requires.
1.2.34 Outstanding means any Award to the extent it has not been forfeited,
cancelled, terminated, exercised or with respect to which the shares of Common Stock underlying the
Award have not been previously delivered or other payments made.
1.2.35 Plan means The Goldman Sachs Amended and Restated Stock Incentive Plan, as
described herein and as hereafter amended from time to time.
1.2.36 RSU means a restricted stock unit Award granted under the Plan, which
represents an unfunded and unsecured promise to deliver shares of Common Stock in accordance with
the terms of the RSU Award Agreement.
1.2.37 RSU Shares means shares of Common Stock that underlie an RSU.
1.2.38 Restricted Share means a share of Common Stock delivered under the Plan that
is subject to certain transfer restrictions, forfeiture provisions and/or other terms and
conditions specified herein and in the Restricted Share Award Agreement.
1.2.39 Retirement means termination of the Grantees Employment (other than for
Cause) on or after the Date of Grant at a time when (a) the sum of the Grantees age plus years of
service with the Firm (as determined by the Committee in its sole discretion) equals or exceeds 55
and (b) the Grantee has completed at least five (5) years of service with the Firm (as determined
by the Committee in its sole discretion).
1.2.40 SAR means a stock appreciation right granted under the Plan, which represents
an unfunded and unsecured promise to deliver shares of Common Stock, cash or other property equal
in value to the excess of the Fair Market Value per share of Common Stock over the Exercise Price
per share of the SAR, subject to the terms of the SAR Award Agreement.
1.2.41 SIP Administrator means each person designated by the Committee as a SIP
Administrator with the authority to perform day-to-day administrative functions for the Plan.
1.2.42 Solicit means any direct or indirect communication of any kind whatsoever,
regardless of by whom initiated, inviting, advising, encouraging or requesting any person or
entity, in any manner, to take or refrain from taking any action.
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1.2.43 Vested means, with respect to an Award, the portion of the Award that is not
subject to a condition that the Grantee remain actively employed by the Firm in order for the Award
to remain Outstanding. The fact that an Award becomes Vested shall not mean or otherwise indicate
that the Grantee has an unconditional or nonforfeitable right to such Award, and such Award shall
remain subject to such terms, conditions and forfeiture provisions as may be provided for in the
Plan or in the Award Agreement.
1.2.44 Vesting Date means each date specified in the Grantees Award Agreement as a
date on which part or all of an Award becomes Vested.
1.2.45 Window Period means a period designated by the Firm during which all
employees of the Firm are permitted to purchase or sell shares of Common Stock (provided that, if
the Grantee is a member of a designated group of employees who are subject to different
restrictions, the Window Period may be a period designated by the Firm during which an employee of
the Firm in such designated group is permitted to purchase or sell shares of Common Stock).
1.3 Administration
1.3.1 Subject to Sections 1.3.3 and 1.3.4, the Plan shall be administered by the Committee.
1.3.2 The Committee shall have complete control over the administration of the Plan and shall
have the authority in its sole discretion to (a) exercise all of the powers granted to it under the
Plan, (b) construe, interpret and implement the Plan and all Award Agreements, (c) prescribe, amend
and rescind rules and regulations relating to the Plan, including rules governing its own
operations, (d) make all determinations necessary or advisable in administering the Plan,
(e) correct any defect, supply any omission and reconcile any inconsistency in the Plan, (f) amend
the Plan to reflect changes in applicable law (whether or not the rights of the Grantee of any
Award are adversely affected, unless otherwise provided in such Grantees Award Agreement), (g)
grant Awards and determine who shall receive Awards, when such Awards shall be granted and the
terms of such Awards, including setting forth provisions with regard to termination of Employment,
such as termination of Employment for Cause or due to death, Extended Absence, or Retirement, (h)
unless otherwise provided in an Award Agreement, amend any outstanding Award Agreement in any
respect, whether or not the rights of the Grantee of such Award are adversely affected, including,
without limitation, to (1) accelerate the time or times at which the Award becomes Vested,
unrestricted or may be exercised (and, in connection with such acceleration, the Committee may
provide that any shares of Common Stock acquired pursuant to such Award shall be Restricted Shares,
which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the
Grantees underlying Award), (2) accelerate the time or times at which shares of Common Stock are
delivered under the Award (and, without limitation on the Committees rights, in connection
7
with such acceleration, the Committee may provide that any shares of Common Stock delivered
pursuant to such Award shall be Restricted Shares, which are subject to vesting, transfer,
forfeiture or repayment provisions similar to those in the Grantees underlying Award), (3) waive
or amend any goals, restrictions or conditions set forth in such Award Agreement, or impose new
goals, restrictions and conditions or (4) reflect a change in the Grantees circumstances (e.g., a
change to part-time employment status or a change in position, duties or responsibilities) and (i)
determine at any time whether, to what extent and under what circumstances and method or methods
(1) Awards may be (A) settled in cash, shares of Common Stock, other securities, other Awards or
other property (in which event, the Committee may specify what other effects such settlement will
have on the Grantees Award, including the effect on any repayment provisions under the Plan or
Award Agreement), (B) exercised or (C) canceled, forfeited or suspended, (2) shares of Common
Stock, other securities, other Awards or other property and other amounts payable with respect to
an Award may be deferred either automatically or at the election of the Grantee thereof or of the
Committee, (3) to the extent permitted under applicable law, loans (whether or not secured by
Common Stock) may be extended by the Firm with respect to any Awards, (4) Awards may be settled by
GS Inc., any of its subsidiaries or affiliates or any of its or their designees and (5) the
Exercise Price for any Option (other than an Incentive Stock Option, unless the Committee
determines that such an Option shall no longer constitute an Incentive Stock Option) or SAR may be
reset.
1.3.3 Actions of the Committee may be taken by the vote of a majority of its members present
at a meeting (which may be held telephonically). Any action may be taken by a written instrument
signed by a majority of the Committee members, and action so taken shall be fully as effective as
if it had been taken by a vote at a meeting. The determination of the Committee on all matters
relating to the Plan or any Award Agreement shall be final, binding and conclusive. The Committee
may allocate among its members and delegate to any person who is not a member of the Committee or
to any administrative group within the Firm, including the SIP Administrators or any of them, any
of its powers, responsibilities or duties. In delegating its authority, the Committee shall
consider the extent to which any delegation may cause Awards to fail to be deductible under
Section 162(m) of the Code or to fail to meet the requirements of Rule 16(b)-3(d)(1) or Rule
16(b)-3(e) under the Exchange Act.
1.3.4 Notwithstanding anything to the contrary contained herein, the Board may, in its sole
discretion, at any time and from time to time, grant Awards or administer the Plan. In any such
case, the Board shall have all of the authority and responsibility granted to the Committee herein.
1.3.5 No Liability
No member of the Board or the Committee or any employee of the Firm (each such person, a
Covered Person) shall have any liability to any person (including any Grantee) for any action
taken or omitted to be taken or any determination made in good faith with respect to the Plan or
any Award. Each Covered Person shall be indemnified and held harmless by GS
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Inc. against and from (a) any loss, cost, liability or expense (including attorneys fees)
that may be imposed upon or incurred by such Covered Person in connection with or resulting from
any action, suit or proceeding to which such Covered Person may be a party or in which such Covered
Person may be involved by reason of any action taken or omitted to be taken under the Plan or any
Award Agreement and (b) any and all amounts paid by such Covered Person, with GS Inc.s approval,
in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such
action, suit or proceeding against such Covered Person, provided that GS Inc. shall have the right,
at its own expense, to assume and defend any such action, suit or proceeding and, once GS Inc.
gives notice of its intent to assume the defense, GS Inc. shall have sole control over such defense
with counsel of GS Inc.s choice. The foregoing right of indemnification shall not be available to
a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other
final adjudication, in either case not subject to further appeal, determines that the acts or
omissions of such Covered Person giving rise to the indemnification claim resulted from such
Covered Persons bad faith, fraud or willful criminal act or omission. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to which Covered
Persons may be entitled under GS Inc.s Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws, as a matter of law, or otherwise, or any other power that GS Inc. may
have to indemnify such persons or hold them harmless.
1.4 Persons Eligible for Awards
Awards under the Plan may be made to such officers, directors, employees (including
prospective employees), consultants and other individuals who may perform services for the Firm, as
the Committee may select.
1.5 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) Options, (b) SARs, (c) Restricted Shares,
(d) RSUs, (e) Dividend Equivalent Rights and (f) other equity-based or equity-related Awards that
the Committee determines are consistent with the purpose of the Plan and the interests of the Firm.
No Incentive Stock Option (other than an Incentive Stock Option that may be assumed or issued by
GS Inc. in connection with a transaction to which Section 424(a) of the Code applies) may be
granted to a person who is not eligible to receive an Incentive Stock Option under the Code.
1.6 Shares Available for Awards
1.6.1 Total Shares Available. Subject to adjustment pursuant to Section 1.6.2, the
total number of shares of Common Stock which may be delivered pursuant to Awards
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granted under the Plan on or after the Effective Date shall not exceed two hundred and fifty
million shares (250,000,000) and pursuant to Awards granted in the fiscal year beginning November
29, 2008 and each fiscal year thereafter until the expiration of the Plan shall not exceed five
percent (5%) of the issued and outstanding shares of Common Stock, determined as of the last day of
the immediately preceding fiscal year, increased by the number of shares available for Awards in
previous fiscal years but not then covered by Awards granted in such years. No further Awards
shall be granted pursuant to the 1999 Plan. If, on or after the Effective Date, any Award that was
granted on or after the Effective Date is forfeited or otherwise terminates or is canceled without
the delivery of shares of Common Stock, shares of Common Stock are surrendered or withheld from any
Award to satisfy any obligation of the Grantee (including Federal, state or foreign taxes) or
shares of Common Stock owned by a Grantee are tendered to pay the exercise price of any Award
granted under the Plan, then the shares covered by such forfeited, terminated or canceled Award or
which are equal to the number of shares surrendered, withheld or tendered shall again become
available to be delivered pursuant to Awards granted under this Plan. Notwithstanding the
foregoing, but subject to adjustment as provided in Section 1.6.2, no more than one hundred million
(100,000,000) shares of Common Stock that can be delivered under the Plan shall be deliverable
pursuant to the exercise of Incentive Stock Options. The maximum number of shares of Common Stock
with respect to which Options or SARs may be granted to an individual Grantee (i) in GS Inc.s
fiscal year ending in 2003 shall equal 2,500,000 shares of Common Stock and (ii) in each subsequent
fiscal year shall equal 105% of the maximum number for the preceding fiscal year. Any shares of
Common Stock (a) delivered by GS Inc., (b) with respect to which Awards are made hereunder and (c)
with respect to which the Firm becomes obligated to make Awards, in each case through the
assumption of, or in substitution for, outstanding awards previously granted by an acquired entity,
shall not count against the shares of Common Stock available to be delivered pursuant to Awards
under this Plan. Shares of Common Stock that may be delivered pursuant to Awards may be authorized
but unissued Common Stock or authorized and issued Common Stock held in GS Inc.s treasury or
otherwise acquired for the purposes of the Plan.
1.6.2 Adjustments. The Committee shall adjust the number of shares of Common Stock
authorized pursuant to Section 1.6.1 and shall adjust (including, without limitation, by payment of
cash) the terms of any Outstanding Awards (including, without limitation, the number of shares of
Common Stock covered by each Outstanding Award, the type of property to which the Award relates and
the exercise or strike price of any Award), in such manner as it deems appropriate to prevent the
enlargement or dilution of rights, for any increase or decrease in the number of issued shares of
Common Stock (or issuance of shares of stock other than shares of Common Stock) resulting from a
recapitalization, stock split, reverse stock split, stock dividend, spinoff, splitup, combination,
reclassification or exchange of shares of Common Stock, merger, consolidation, rights offering,
separation, reorganization or any other change in corporate structure or event the Committee
determines in its sole discretion affects the capitalization of GS Inc., provided, however, that no
such adjustment shall be required if the Committee determines that such action would cause an award
to fail to satisfy the conditions of an applicable exception from the requirements of Section 409A
of the Internal Revenue Code
10
(Section 409A) or otherwise would subject a Grantee to an additional tax imposed under
Section 409A in respect of an Outstanding Award. After any adjustment made pursuant to this
Section 1.6.2, the number of shares of Common Stock subject to each Outstanding Award shall be
rounded up or down to the nearest whole number as determined by the Committee.
1.6.3 Except as provided in this Section 1.6 or under the terms of any applicable Award
Agreement, there shall be no limit on the number or the value of shares of Common Stock that may be
subject to Awards to any individual under the Plan.
1.6.4 There shall be no limit on the amount of cash, securities (other than shares of Common
Stock as provided in Section 1.6.1, as adjusted by 1.6.2) or other property that may be delivered
pursuant to any Award.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each Award granted under the Plan shall be evidenced by an Award Agreement, which shall
contain such provisions and conditions as the Committee deems appropriate (and which may
incorporate by reference some or all of the provisions of the Plan). The Committee may grant
Awards in tandem with or in substitution for any other Award or Awards granted under this Plan or
any award granted under any other plan of the Firm. By accepting an Award pursuant to the Plan, a
Grantee thereby agrees that the Award shall be subject to all of the terms and provisions of the
Plan and the applicable Award Agreement.
2.2 No Rights as a Shareholder
No Grantee (or other person having rights pursuant to an Award) shall have any of the rights
of a shareholder of GS Inc. with respect to shares of Common Stock subject to an Award until the
delivery of such shares. Except as otherwise provided in Section 1.6.2, no adjustments shall be
made for dividends or distributions on (whether ordinary or extraordinary, and whether in cash,
Common Stock, other securities or other property), or other events relating to, shares of Common
Stock subject to an Award for which the record date is prior to the date such shares are delivered.
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2.3 Options
2.3.1 Grant. The Committee may grant Awards of Options in such amounts and subject to
such terms and conditions as the Committee may determine (and may include a grant of Dividend
Equivalent Rights under Section 2.8 in connection with such Option grants).
2.3.2 Exercise. Options that are not Vested or that are not Outstanding may not be
exercised. Outstanding Vested Options may be exercised in accordance with procedures established
by the Committee (but, subject to the applicable Award Agreement, may not be exercised earlier than
the Initial Exercise Date). The Committee may from time to time prescribe periods during which
Outstanding Vested Options shall not be exercisable.
2.3.3 Payment of Exercise Price. Any acceptance by the Committee of a Grantees
written notice of exercise of a Vested Option shall be conditioned upon payment for the shares of
Common Stock being purchased. Such payment may be made in cash or by such other methods as the
Committee may from time to time prescribe.
2.3.4 Delivery of Shares. Unless otherwise determined by the Committee, or as
otherwise provided in the applicable Award Agreement, and except as provided in Sections 3.3, 3.4,
3.11 and 3.17.1, and subject to Section 3.2, upon receipt of payment of the full Exercise Price (or
upon satisfaction of procedures adopted by the Committee in connection with a cashless exercise
method adopted by it) for shares of Common Stock subject to an Outstanding Vested Option, delivery
of such shares of Common Stock shall be effected by book-entry credit to the Grantees Custody
Account. The Grantee shall be the beneficial owner and record holder of such shares of Common
Stock properly credited to the Custody Account. No delivery of such shares of Common Stock shall
be made to a Grantee unless the Grantee has timely returned all required documentation specified in
the Grantees Award Agreement or as otherwise required by the Committee or the SIP Administrator.
2.3.5 Repayment if Conditions Not Met. If the Committee determines that all terms and
conditions of the Plan and a Grantees Option Award Agreement in respect of exercised Options were
not satisfied, then the Grantee shall be obligated to pay the Firm immediately upon demand
therefor, an amount equal to the excess of the Fair Market Value (determined at the time of
exercise) of the shares of Common Stock that were delivered in respect of such exercised Options
over the Exercise Price paid therefor, without reduction for any shares of Common Stock applied to
satisfy withholding tax or other obligations in respect of such shares.
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2.4 SARs
2.4.1 Grant. The Committee may grant Awards of SARs in such amounts and subject to
such terms and conditions as the Committee may determine (and may include a grant of Dividend
Equivalent Rights under Section 2.8 in connection with such SAR grants).
2.4.2 Exercise. SARs that are not Vested or that are not Outstanding may not be
exercised. Outstanding Vested SARs may be exercised in accordance with procedures established by
the Committee (but, subject to the applicable Award Agreement, may not be exercised earlier than
the Initial Exercise Date). The Committee may from time to time prescribe periods during which
Outstanding Vested SARs shall not be exercisable.
2.4.3 Delivery of Shares. Unless otherwise determined by the Committee, or as
otherwise provided in the applicable Award Agreement, and except as provided in Sections 3.3, 3.4,
3.11 and 3.17.1, and subject to Section 3.2, upon exercise of an Outstanding Vested SAR for which
payment will be made partly or entirely in shares of Common Stock, delivery of shares of Common
Stock (and cash in respect of fractional shares), with a Fair Market Value (on the exercise date)
equal to (i) the excess of (a) the Fair Market Value of a share of Common Stock (on the exercise
date) over (b) the Exercise Price of such SAR multiplied by (ii) the number of SARs exercised,
shall be effected by book-entry credit to the Grantees Custody Account. The Grantee shall be the
beneficial owner and record holder of such shares of Common Stock properly credited to the Custody
Account on such date of delivery. No delivery of such shares of Common Stock shall be made to a
Grantee unless the Grantee has timely returned all required documentation specified in the
Grantees Award Agreement or as otherwise required by the Committee or the SIP Administrator.
2.4.4 Repayment if Conditions Not Met. If the Committee determines that all terms and
conditions of the Plan and a Grantees SAR Award Agreement in respect of exercised SARs were not
satisfied, then the Grantee shall be obligated to pay the Firm immediately upon demand therefor, an
amount equal to the excess of the Fair Market Value (determined at the time of exercise) of the
shares of Common Stock subject to the exercised SARs over the Exercise Price therefor, without
reduction for any amount applied to satisfy withholding tax or other obligations in respect of such
SARs.
2.5 Restricted Shares
2.5.1 Grant. The Committee may grant or offer for sale Awards of Restricted Shares in
such amounts and subject to such terms and conditions as the Committee may determine. Upon the
issuance of such shares in the name of the Grantee, the Grantee shall have the rights of a
shareholder with respect to the Restricted Shares and shall become the record holder of such
shares, subject to the provisions of the Plan and any restrictions and conditions as the Committee
may include in the applicable Award Agreement. In the event that a Certificate is
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issued in respect of Restricted Shares, such Certificate may be registered in the name of the
Grantee but shall be held by a custodian (which may be GS Inc. or one of its affiliates) until the
time the restrictions lapse.
2.5.2 Repayment if Conditions Not Met. If the Committee determines that all terms and
conditions of the Plan and a Grantees Restricted Share Award Agreement in respect of Restricted
Shares which have become Vested were not satisfied, then the Grantee shall be obligated to pay the
Firm immediately upon demand therefor, an amount equal to the Fair Market Value (determined at the
time such shares became Vested) of such Restricted Shares, without reduction for any amount applied
to satisfy withholding tax or other obligations in respect of such Restricted Shares.
2.6 RSUs
2.6.1 Grant. The Committee may grant Awards of RSUs in such amounts and subject to
such terms and conditions as the Committee may determine. A Grantee of an RSU has only the rights
of a general unsecured creditor of GS Inc. until delivery of shares of Common Stock, cash or other
securities or property is made as specified in the applicable Award Agreement.
2.6.2 Delivery of Shares. Unless otherwise determined by the Committee, or as
otherwise provided in the applicable Award Agreement, and except as provided in Sections 3.3, 3.4,
3.11 and 3.17.3, and subject to Section 3.2, on each Delivery Date the number or percentage of RSU
Shares specified in the Grantees Award Agreement with respect to the Grantees then Outstanding
Vested RSUs (which amount may be rounded to avoid fractional RSU Shares) shall be delivered.
Unless otherwise determined by the Committee, or as otherwise provided in the applicable Award
Agreement, delivery of RSU Shares shall be effected by book-entry credit to the Grantees Custody
Account. The Grantee shall be the beneficial owner and record holder of any RSU Shares properly
credited to the Grantees Custody Account. No delivery of shares of Common Stock underlying a
Grantees RSUs shall be made unless the Grantee has timely returned all required documentation
specified in the Grantees Award Agreement or as otherwise determined by the Committee or the SIP
Administrator.
2.6.3 Repayment if Conditions Not Met. If the Committee determines that all terms and
conditions of the Plan and a Grantees RSU Award Agreement in respect of the delivery of shares
underlying such RSUs were not satisfied, then the Grantee shall be obligated to pay the Firm
immediately upon demand therefor, an amount equal to the Fair Market Value (determined at the time
of delivery) of the shares of Common Stock delivered with respect to such Delivery Date, without
reduction for any shares applied to satisfy withholding tax or other obligations in respect of such
shares of Common Stock.
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2.7 Other Stock-Based Awards
The Committee may grant other types of equity-based or equity-related Awards (including the
grant or offer for sale of unrestricted shares of Common Stock) in such amounts and subject to such
terms and conditions as the Committee shall determine. Such Awards may entail the transfer of
actual shares of Common Stock to Plan participants, or payment in cash or otherwise of amounts
based on the value of shares of Common Stock, and may include, without limitation, Awards designed
to comply with or take advantage of the applicable local laws of jurisdictions other than the
United States.
2.8 Dividend Equivalent Rights
2.8.1 Grant. The Committee may grant, either alone or in connection with any other
Award, a Dividend Equivalent Right.
2.8.2 Payment. The Committee shall determine whether payments in connection with a
Dividend Equivalent Right shall be made in cash, in shares of Common Stock or in another form,
whether they shall be conditioned upon the exercise of any Award to which they relate, the time or
times at which they shall be made and such other terms and conditions as the Committee shall deem
appropriate.
2.8.3 Certain Section 162(m) Related Conditions. No Dividend Equivalent Right shall
be conditioned on the exercise of any Option or SAR, if and to the extent such Dividend Equivalent
Right would cause the compensation payable to a covered employee as a result of the related
Option or SAR not to constitute performance-based compensation under Section 162(m)(4)(C) of the
Code.
2.9 Adoption of Standardized Award Terms and Conditions
The Committee may, in its discretion, adopt standardized terms and conditions that, unless and
to the extent a Grantees Award Agreement expressly provides otherwise, shall apply to such Awards
as may be determined by the Committee in its discretion. Any such standardized terms and
conditions shall have the same force and effect as if expressly incorporated into the Plan and each
applicable Award Agreement.
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ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan or Award Agreement
3.1.1 Unless otherwise provided in the Plan or in an Award Agreement, the Board may from time
to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, including in any
manner that adversely affects the rights, duties or obligations of any Grantee of an Award.
3.1.2 Unless otherwise determined by the Board, shareholder approval of any suspension,
discontinuance, revision or amendment shall be obtained only to the extent necessary to comply with
any applicable law, rule or regulation; provided, however, if and to the extent the Board
determines that it is appropriate for Awards granted under the Plan to constitute performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code, no amendment that would
require stockholder approval in order for amounts paid pursuant to the Plan to constitute
performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code shall be
effective without the approval of the stockholders of GS Inc. as required by Section 162(m) of the
Code and the regulations thereunder and, if and to the extent the Board determines it is
appropriate for the Plan to comply with the provisions of Section 422 of the Code, no amendment
that would require stockholder approval under Section 422 of the Code shall be effective without
the approval of the stockholders of GS Inc.
3.2 Tax Withholding
3.2.1 As a condition to the delivery of any shares of Common Stock, other property or cash
pursuant to any Award or the lifting or lapse of restrictions on any Award, or in connection with
any other event that gives rise to a federal or other governmental tax withholding obligation on
the part of the Firm relating to an Award (including, without limitation, FICA tax), (a) the Firm
may deduct or withhold (or cause to be deducted or withheld) from any payment or distribution to
the Grantee, whether or not pursuant to the Plan, (b) the Committee shall be entitled to require
that the Grantee remit cash to the Firm (through payroll deduction or otherwise) or (c) the Firm
may enter into any other suitable arrangements to withhold, in each case in an amount sufficient in
the opinion of the Firm to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation involves a transfer of shares of
Common Stock, then, at the discretion of the Committee, the Grantee may satisfy the withholding
obligation described under Section 3.2.1 by electing to have GS Inc. withhold shares
16
of Common Stock (which withholding, unless otherwise provided in the applicable Award
Agreement, will be at a rate not in excess of the statutory minimum rate) or by tendering
previously owned shares of Common Stock, in each case having a Fair Market Value equal to the
amount of tax to be withheld (or by any other mechanism as may be required or appropriate to
conform with local tax and other rules). For this purpose, Fair Market Value shall be determined
as of the date on which the amount of tax to be withheld is determined (and GS Inc. may cause any
fractional share amount to be settled in cash).
3.3 Required Consents and Legends
3.3.1 If the Committee shall at any time determine that any consent (as hereinafter defined)
is necessary or desirable as a condition of, or in connection with, the granting of any Award, the
delivery of shares of Common Stock or the delivery of any cash, securities or other property under
the Plan, or the taking of any other action thereunder (each such action being hereinafter referred
to as a plan action), then such plan action shall not be taken, in whole or in part, unless and
until such consent shall have been effected or obtained to the full satisfaction of the Committee.
The Committee may direct that any Certificate evidencing shares delivered pursuant to the Plan
shall bear a legend setting forth such restrictions on transferability as the Committee may
determine to be necessary or desirable, and may advise the transfer agent to place a stop order
against any legended shares.
3.3.2 By accepting an Award, each Grantee shall have expressly provided consent to the items
described in Section 3.3.3(d) hereof.
3.3.3 The term consent as used herein with respect to any plan action includes (a) any and
all listings, registrations or qualifications in respect thereof upon any securities exchange or
under any federal, state or local law, or law, rule or regulation of a jurisdiction outside the
United States, (b) any and all written agreements and representations by the Grantee with respect
to the disposition of shares, or with respect to any other matter, which the Committee may deem
necessary or desirable to comply with the terms of any such listing, registration or qualification
or to obtain an exemption from the requirement that any such listing, qualification or registration
be made, (c) any and all other consents, clearances and approvals in respect of a plan action by
any governmental or other regulatory body or any stock exchange or self-regulatory agency, (d) any
and all consents by the Grantee to (i) the Firms supplying to any third party recordkeeper of the
Plan such personal information as the Committee deems advisable to administer the Plan, (ii) the
Firms deducting amounts from the Grantees wages, or another arrangement satisfactory to the
Committee, to reimburse the Firm for advances made on the Grantees behalf to satisfy certain
withholding and other tax obligations in connection with an Award and (iii) the Firms imposing
sales and transfer procedures and restrictions and hedging restrictions on shares of Common Stock
delivered under the Plan and (e) any and all consents or authorizations required to comply with, or
required to be obtained under, applicable
17
local law or otherwise required by the Committee. Nothing herein shall require GS Inc. to
list, register or qualify the shares of Common Stock on any securities exchange.
3.4 Right of Offset
The Firm shall have the right to offset against its obligation to deliver shares of Common
Stock (or other property or cash) under the Plan or any Award Agreement any outstanding amounts
(including, without limitation, travel and entertainment or advance account balances, loans,
repayment obligations under any Awards, or amounts repayable to the Firm pursuant to tax
equalization, housing, automobile or other employee programs) the Grantee then owes to the Firm and
any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or
agreement.
3.5 Nonassignability
Except to the extent otherwise expressly provided in the applicable Award Agreement, no Award
(or any rights and obligations thereunder) granted to any person under the Plan may be sold,
exchanged, transferred, assigned, pledged, hypothecated, fractionalized, hedged or otherwise
disposed of (including through the use of any cash-settled instrument), whether voluntarily or
involuntarily, other than by will or by the laws of descent and distribution, and all such Awards
(and any rights thereunder) shall be exercisable during the life of the Grantee only by the Grantee
or the Grantees legal representative. Notwithstanding the preceding sentence, the Committee may
permit, under such terms and conditions that it deems appropriate in its sole discretion, a Grantee
to transfer any Award to any person or entity that the Committee so determines. Any sale,
exchange, transfer, assignment, pledge, hypothecation, fractionalization, hedge or other
disposition in violation of the provisions of this Section 3.5 shall be void. All of the terms and
conditions of this Plan and the Award Agreements shall be binding upon any permitted successors and
assigns.
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3.6 |
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Requirement of Consent and Notification of Election Under Section 83(b) of
the Code or Similar Provision |
No election under Section 83(b) of the Code (to include in gross income in the year of
transfer the amounts specified in Code Section 83(b)) or under a similar provision of the law of a
jurisdiction outside the United States may be made unless expressly permitted by the terms of the
Award Agreement or by action of the Committee in writing prior to the making of such election. If
a Grantee of an Award, in connection with the acquisition of shares of Common Stock under the Plan
or otherwise, is expressly permitted under the terms of the Award Agreement or by such Committee
action to make any such election and the Grantee makes the election, the Grantee shall notify the
Committee of such election within ten (10) days of filing
18
notice of the election with the Internal Revenue Service or other governmental authority, in
addition to any filing and notification required pursuant to regulations issued under Code
Section 83(b) or other applicable provision.
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3.7 |
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Requirement of Notification Upon Disqualifying Disposition Under Section 421(b)
of the Code |
If any Grantee shall make any disposition of shares of Common Stock delivered pursuant to the
exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions), such Grantee shall notify GS Inc. of such
disposition within ten (10) days thereof.
3.8 Change in Control
3.8.1 The Committee may provide in any Award Agreement for provisions relating to a Change in
Control, including, without limitation, the acceleration of the exercisability of, or the lapse of
restrictions or deemed satisfaction of goals with respect to, any Outstanding Awards.
3.8.2 Unless otherwise provided in the applicable Award Agreement and except as otherwise
determined by the Committee, in the event of a merger, consolidation, mandatory share exchange or
other similar business combination of GS Inc. with or into any other entity (successor entity) or
any transaction in which another person or entity acquires all of the issued and outstanding Common
Stock of GS Inc., or all or substantially all of the assets of GS Inc., Outstanding Awards may be
assumed or a substantially equivalent Award may be substituted by such successor entity or a parent
or subsidiary of such successor entity, and such an assumption or substitution shall not be deemed
to violate this Plan or any provision of any Award Agreement.
3.9 Other Conditions to Awards
Unless the Committee determines otherwise, the Grantees rights in respect of all of his or
her Outstanding Awards (whether or not Vested) shall immediately terminate and such Awards shall
cease to be Outstanding if: (a) the Grantee attempts to have any dispute under the Plan or his or
her Award Agreement resolved in any manner that is not provided for by Section 3.17, (b) the
Grantee in any manner, directly or indirectly, (1) Solicits any Client to transact business with a
Competitive Enterprise or to reduce or refrain from doing any business with the Firm or (2)
interferes with or damages (or attempts to interfere with or damage) any relationship between the
Firm and any Client or (3) Solicits any person who is an employee of the Firm to resign from the
Firm or to apply for or accept employment with any Competitive
19
Enterprise, (c) the Grantee fails to certify to GS Inc., in accordance with procedures
established by the Committee, that the Grantee has complied, or the Committee determines that the
Grantee in fact has failed to comply, with all the terms and conditions of the Plan or Award
Agreement or (d) any event constituting Cause occurs with respect to the Grantee. By exercising
any Option or SAR or by accepting delivery of shares of Common Stock or any other payment under
this Plan, the Grantee shall be deemed to have represented and certified at such time that the
Grantee has complied with all the terms and conditions of the Plan and the Award Agreement.
3.10 Right of Discharge Reserved
Neither the grant of an Award nor any provision in the Plan or in any Award Agreement shall
confer upon any Grantee the right to continued Employment by the Firm or affect any right that the
Firm may have to terminate or alter the terms and conditions of the Grantees Employment.
3.11 Nature and Form of Payments
3.11.1 Any and all grants of Awards and deliveries of shares of Common Stock, cash or other
property under the Plan shall be in consideration of services performed or to be performed for the
Firm by the Grantee. Awards under the Plan may, in the sole discretion of the Committee, be made
in substitution in whole or in part for cash or other compensation otherwise payable to an
Employee. Without limitation on Section 1.3 hereof, unless otherwise specifically provided in an
Award Agreement or by applicable law, the Committee shall be permitted with respect to any or all
Awards to exercise all of the rights described in Section 1.3.2(h) and 1.3.2(i). Deliveries of
shares of Common Stock may be rounded to avoid fractional shares. In addition, the Firm may pay
cash in lieu of fractional shares.
3.11.2 All grants of Awards and deliveries of shares of Common Stock, cash or other property
under the Plan shall constitute a special discretionary incentive payment to the Grantee and shall
not be required to be taken into account in computing the amount of salary or compensation of the
Grantee for the purpose of determining any contributions to or any benefits under any pension,
retirement, profit-sharing, bonus, life insurance, severance or other benefit plan of the Firm or
under any agreement with the Grantee, unless the Firm specifically provides otherwise.
3.12 Non-Uniform Determinations
None of Committees determinations under the Plan and Award Agreements need to be uniform and
any such determinations may be made by it selectively among persons who receive, or are eligible to
receive, Awards under the Plan (whether or not such persons are
20
similarly situated). Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations under Award
Agreements, and to enter into non-uniform and selective Award Agreements, as to (a) the persons to
receive Awards, (b) the terms and provisions of Awards, (c) whether a Grantees Employment has been
terminated for purposes of the Plan and (d) any adjustments to be made to Awards pursuant to
Section 1.6.2 or otherwise.
3.13 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or restrict the Firm from
making any award or payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
3.14 Plan Headings; References to Laws, Rules or Regulations
The headings in this Plan are for the purpose of convenience only, and are not intended to
define or limit the construction of the provisions hereof.
Any reference in this Plan to any law, rule or regulation shall be deemed to include any
amendments, revisions or successor provisions to such law, rule or regulation.
3.15 Date of Adoption and Term of Plan; Shareholder Approval Required
The 1999 SIP was originally adopted by the Board on April 30, 1999 and was amended and
restated by the Board on January 16, 2003. The adoption of the Plan as amended and restated on
January 16, 2003 was conditioned on the approval of the stockholders of GS Inc. in accordance with
Treasury Regulation §1.162-27(e)(4), Section 422 of the Code, the rules of the New York Stock
Exchange and other applicable law, and such approval was obtained on April 1, 2003. The Plan was
further amended and restated effective as of December 31, 2008. Unless sooner terminated by the
Board, the Plan shall terminate on the tenth anniversary of the Effective Date. The Board reserves
the right to terminate the Plan at any time. All Awards made under the Plan prior to the
termination of the Plan shall remain in effect until such Awards have been satisfied or terminated
in accordance with the terms and provisions of the Plan and the applicable Award Agreements.
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3.16 Governing Law
All rights and obligations under the Plan and each Award Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without regard to principles of
conflict of laws.
3.17 Arbitration
3.17.1 Unless otherwise specified in an applicable Award Agreement, it shall be a condition of
each Award that any dispute, controversy or claim between the Firm and a Grantee, arising out of or
relating to or concerning the Plan or applicable Award Agreement, shall be finally settled by
arbitration in New York City before, and in accordance with the rules then obtaining of, the New
York Stock Exchange, Inc. (the NYSE) or, if the NYSE declines to arbitrate the matter in New York
City (or if the matter otherwise is not arbitrable by it), the American Arbitration Association
(the AAA) in accordance with the commercial arbitration rules of the AAA. Prior to arbitration,
all claims maintained by the Grantee must first be submitted to the Committee in accordance with
claims procedures determined by the Committee. This Section is subject to the provisions of
Sections 3.17.2 and 3.17.3 below.
3.17.2 Unless otherwise specified in an applicable Award Agreement, it shall be a condition of
each Award that the Firm and the Grantee irrevocably submit to the exclusive jurisdiction of any
state or federal court located in the city of New York over any suit, action or proceeding arising
out of or relating to or concerning the Plan or the Award that is not otherwise arbitrated or
resolved according to Section 3.17.1. This includes any suit, action or proceeding to compel
arbitration or to enforce an arbitration award. By accepting an Award, the Grantee acknowledges
that the forum designated by this Section 3.17.2 has a reasonable relation to the Plan, any
applicable Award and to the Grantees relationship with the Firm. Notwithstanding the foregoing,
nothing herein shall preclude the Firm from bringing any suit, action or proceeding in any other
court for the purpose of enforcing the provisions of this Section 3.17 or otherwise.
3.17.3 Unless otherwise specified in an applicable Award Agreement, the agreement by the
Grantee and the Firm as to forum is independent of the law that may be applied in the suit, action
or proceeding and the Grantee and the Firm agree to such forum even if the forum may under
applicable law choose to apply non-forum law. By accepting an Award, (a) the Grantee waives, to
the fullest extent permitted by applicable law, any objection which the Grantee may have to
personal jurisdiction or to the laying of venue of any such suit, action or proceeding in any court
referred to in Section 3.17.2, (b) the Grantee undertakes not to commence any action arising out of
or relating to or concerning any Award in any forum other than a forum described in Section 3.17
and (c) the Grantee agrees that, to the fullest extent permitted by applicable law, a final and
non-appealable judgment in any such suit, action or proceeding in any such court shall be
conclusive and binding upon the Grantee and the Firm.
22
3.17.4 Unless otherwise specified in an applicable Award Agreement, by accepting an Award, the
Grantee irrevocably appoints each General Counsel of GS Inc. as his or her agent for service of
process in connection with any suit, action or proceeding arising out of or relating to or
concerning this Plan or any Award which is not arbitrated pursuant to the provisions of
Section 3.17.1, who shall promptly advise the Grantee of any such service of process.
3.17.5 Unless otherwise specified in an applicable Award Agreement, by accepting an Award, the
Grantee agrees to keep confidential the existence of, and any information concerning, a dispute,
controversy or claim described in this Section 3.17, except that the Grantee may disclose
information concerning such dispute, controversy or claim to the arbitrator or court that is
considering such dispute, controversy or claim or to his or her legal counsel (provided that such
counsel agrees not to disclose any such information other than as necessary to the prosecution or
defense of the dispute, controversy or claim).
3.18 Severability; Entire Agreement
If any of the provisions of this Plan or any Award Agreement is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to
the extent, but only to the extent, of such invalidity, illegality or unenforceability and the
remaining provisions shall not be affected thereby; provided that, if any of such provisions is
finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope
determined to be acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in order to make such
provision enforceable hereunder. By accepting an Award, the Grantee acknowledges that the Plan and
any Award Agreements contain the entire agreement of the parties with respect to the subject matter
thereof and supersede all prior agreements, promises, covenants, arrangements, communications,
representations and warranties between them, whether written or oral with respect to the subject
matter thereof.
3.19 Waiver of Claims
By accepting an Award, the Grantee recognizes and agrees that prior to being selected by the
Committee to receive an Award he or she has no right to any benefits under such Award.
Accordingly, in consideration of the Grantees receipt of any Award, he or she expressly waives any
right to contest the amount of any Award, the terms of any Award Agreement, any determination,
action or omission hereunder or under any Award Agreement by the Committee, the SIP Administrator,
GS Inc. or the Board or any amendment to the Plan or any Award Agreement (other than an amendment
to this Plan or an Award Agreement to which his or her consent is expressly required by the express
terms of an Award Agreement), and the Grantee expressly waives any claim related in any way to any
Award including any claim based upon any
23
promissory estoppel or other theory in connection with any Award and the Grantees employment
with the Firm.
3.20 No Third Party Beneficiaries
Except as expressly provided in an Award Agreement, neither the Plan nor any Award Agreement
shall confer on any person other than the Firm and the Grantee of the Award any rights or remedies
thereunder; provided that the exculpation and indemnification provisions of Section 1.3.5 shall
inure to the benefit of a Covered Persons estate, beneficiaries and legatees.
3.21 Limitations Imposed by Section 162(m) of the Code
Notwithstanding any other provision hereunder, prior to a Change in Control, if and to the
extent that the Committee determines GS Inc.s federal tax deduction in respect of a particular
Grantees Award may be limited as a result of Section 162(m) of the Code, the Committee may
determine to delay delivery or payment under the Award in such manner as it deems appropriate,
including the following actions:
3.21.1 With respect to such Grantees Options, SARs and Dividend Equivalent Rights, the
Committee may delay the payment in respect of such Options, SARs and Dividend Equivalent Rights
until a date that is within 30 Business Days after the earlier to occur of (i) the date that
compensation paid to the Grantee is no longer subject to the deduction limitation under
Section 162(m) of the Code and (ii) the occurrence of a Change in Control. In the event that a
Grantee exercises an Option or SAR or would receive a payment in respect of a dividend equivalent
right at a time when the Grantee is a covered employee and the Committee determines to delay the
payment in respect of any such Award, the Committee shall credit cash, or, in the case of an amount
payable in Common Stock, the Fair Market Value of the Common Stock, payable to the Grantee to a
book account. The Grantee shall have no rights in respect of such book account, and the amount
credited thereto shall be subject to the transfer restrictions in Section 3.5. The Committee may
credit additional amounts to such book account as it may determine in its sole discretion. Any
book account created hereunder shall represent only an unfunded unsecured promise to pay the amount
credited thereto to the Grantee in the future.
3.21.2 With respect to such Grantees Restricted Shares, the Committee may require the Grantee
to surrender to the Committee any certificates and agreements with respect to such Restricted
Shares in order to cancel the Awards of Restricted Shares. In exchange for such cancellation, the
Committee shall credit the Fair Market Value of the Restricted Shares subject to such Awards to a
book account. The amount credited to the book account shall be paid to the Grantee within 30
Business Days after the earlier to occur of (i) the date that compensation paid to the Grantee is
no longer subject to the deduction limitation under Section 162(m) of the Code and (ii) the
occurrence of a Change in Control. The Grantee shall have no rights in respect of
24
such book account, and the amount credited thereto shall be subject to the transfer
restrictions in Section 3.5. The Committee may credit additional amounts to such book account as
it may determine in its sole discretion. Any book account created hereunder shall represent only
an unfunded unsecured promise to pay the amount credited thereto to the Grantee in the future.
3.21.3 With respect to such Grantees RSUs, the Committee may elect to delay delivery of such
RSU Shares until a date that is within 30 Business Days after the earlier to occur of (i) the date
that compensation paid to the Grantee is no longer subject to the deduction limitation under
Section 162(m) of the Code and (ii) the occurrence of a Change in Control.
3.22 Certain Limitations on Transactions Involving Common Stock; Fees and Commissions
3.22.1 Each Grantee shall be subject to, and acceptance of an Award shall constitute an
agreement to be subject to the Firms policies in effect from time to time concerning trading in
Common Stock, hedging or pledging and confidential or proprietary information. In addition, with
respect to any shares of Common Stock delivered to any Grantee in respect of an Award, sales of
such Common Stock shall be effected in accordance such rules and procedures as may be adopted from
time to time with respect to sales of such shares of Common Stock (which may include, without
limitation, restrictions relating to the timing of sale requests, the manner in which sales are
executed, pricing method, consolidation or aggregation of orders and volume limits determined by
the Firm).
3.22.2 Each Grantee may be required to pay any brokerage costs or other fees or expenses
associated with any Award, including without limitation, in connection with the sale of any shares
of Common Stock delivered in respect of any Award or the exercise of an Option or SAR.
3.23 Deliveries
Deliveries of shares of Common Stock, cash or other property under the Plan shall be made to
the Grantee reasonably promptly after the Delivery Date or any other date such delivery is called
for, but in no case more than thirty (30) Business Days after such date.
3.24 Successors and Assigns of GS Inc.
The terms of this Plan shall be binding upon and inure to the benefit of GS Inc. and its
successors and assigns.
25
IN WITNESS WHEREOF, and as evidence of the adoption of this amended and restated Plan
effective as of December 31, 2008 by GS Inc., it has caused the same to be signed by its duly
authorized officer this 21st day of January, 2009.
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THE GOLDMAN SACHS GROUP, INC.
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By: |
/s/ Esta E. Stecher
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Name: |
Esta E. Stecher |
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Title: |
Executive Vice President and
General Counsel |
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26
EX-10.36
8
y74032exv10w36.htm
EX-10.36: FORM OF YEAR-END OPTION AWARD AGREEMENT
EX-10.36
Exhibit 10.36
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
_____YEAR-END OPTION AWARD
This Award Agreement sets forth the terms and conditions of the ___Year-End award (this
Award) of Nonqualified Stock Options (Year-End Options) granted to you under The Goldman Sachs
Amended and Restated Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision.
2. Award. The Award Statement delivered to you sets forth (i) the Date of Grant of
the Year-End Options, (ii) the number of Year-End Options, (iii) the Exercise Price of each
Year-End Option, (iv) the Vesting Dates for the Year-End Options, (v) the Initial Exercisability
Dates for the Year-End Options and (vi) the Transferability Date (as defined below) for the shares
underlying your Year-End Options. Until shares of Common Stock (Shares) are delivered to you
pursuant to Paragraph 7 after you exercise your Year-End Options, you have no rights as a
shareholder of GS Inc. In addition, as set forth in your Award Statement, Shares delivered
pursuant to the exercise of your Year-End Options may be subject to transfer restrictions as
described in Paragraph 6(e) below. This Award is conditioned on your executing the related
signature card and returning it to the address designated on the signature card and/or by the
method designated on the signature card by the date specified, and is subject to all terms,
conditions and provisions of the Plan and this Award Agreement, including, without limitation, the
arbitration and choice of forum provisions set forth in Paragraph 13. By executing the
related signature card (which, among other things, opens the custody account referred to in
paragraph 7 if you have not done so already), you will have confirmed your acceptance of all of the
terms and conditions of this Award Agreement.
3. Expiration Date. The Expiration Date for your Year-End Options is ___
(in New York). Notwithstanding anything to the contrary in this Award Agreement,
but subject to earlier termination as provided in this Award Agreement or otherwise in accordance
with the Plan, on the Expiration Date all of your then Outstanding Year-End Options shall
terminate.
4. Vesting.
(a) In General. Except as provided below in Paragraphs 4(b), 4(c), 4(d), 5(a), 5(b),
10(g), 10(i) and 11, on each Vesting Date you shall become Vested in the number or percentage of
your Year-End Options specified next to such Vesting Date on the Award Statement (which may be
rounded to avoid fractional Shares). While continued active Employment is not required in order
for your Outstanding Vested Year-End Options to become exercisable, all other terms and conditions
of this Award Agreement shall continue to apply to such Vested Year-End Options, and failure to
meet such terms and conditions may result in the termination of this Award (as a result of which no
Shares subject to any such Vested Year-End Options would be delivered).
(b) Death. Notwithstanding any other provision of this Award Agreement (except
Paragraph 10(i)), if you die prior to an applicable Vesting Date, as soon as practicable after the
date of death and after such documentation as may be requested by the Committee is provided to the
Committee, any such Year-End Options that were Outstanding but that had not yet become Vested
immediately prior to your death shall become Vested, but all other conditions of this Award
Agreement shall continue to apply.
(c) Extended Absence, Retirement and Downsizing.
(i) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
5(c), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence or Retirement (as defined below), the condition set
forth in Paragraph 5(a) shall be waived with respect to any Year-End Options that were Outstanding
but that had not yet become Vested immediately prior to such termination of Employment (as a result
of which such Year-End Options shall become Vested), but all other conditions of this Award
Agreement shall continue to apply. Notwithstanding anything to the contrary in the Plan or
otherwise, Retirement means termination of your Employment (other than for Cause) on or after the
Date of Grant at a time when (A) the sum of your age plus years of service with the Firm (as
determined by the Committee in its sole discretion) equals or exceeds 60, (B) you have completed at
least ten (10) years of service with the Firm (as determined by the Committee in its sole
discretion), and (C) you have completed one year of service with the Firm following the Date of
Grant (as determined by the Committee in its sole discretion).
(ii) Notwithstanding any other provision of this Award Agreement and subject to your executing
such general waiver and release of claims and an agreement to pay any associated tax liability,
both as may be prescribed by the Firm or its designee, if your Employment is terminated without
Cause solely by reason of a downsizing, the condition set forth in Paragraph 5(a) shall be waived
with respect to your Year-End Options that were Outstanding but that had not yet become Vested
immediately prior to such termination of Employment (as a result of which such Year-End Options
shall become Vested), but all other conditions of this Award Agreement shall continue to apply.
Whether or not your Employment is terminated solely by reason of a downsizing shall be determined
by the Firm in its sole discretion. No termination of Employment initiated by you, including any
termination claimed to be a constructive termination or the like or a termination for good
reason, will be solely by reason of a downsizing.
(d) Change in Control. Notwithstanding any other provision of this Award Agreement
(except Paragraph 10(i)), if there is a Change in Control and your Employment terminates as
described in Paragraph 6(d), the condition set forth in Paragraph 5(a) shall be waived with respect
to any Year-End Options that were Outstanding but that had not yet become Vested immediately prior
to such termination of Employment (as a result of which such Year-End Options shall become Vested),
but all other terms and conditions of this Award Agreement shall continue to apply.
5. Termination of Year-End Options Upon Certain Events.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 4(b),
4(c), 4(d) and 10(g), if your Employment terminates for any reason or you otherwise are no longer
actively employed with the Firm, your rights in respect of your Year-End Options that were
Outstanding but had not yet become Vested immediately prior to your termination of Employment
immediately shall terminate.
(b) Unless the Committee determines otherwise, your rights in respect of all of your
Outstanding Year-End Options (whether or not Vested) shall immediately terminate, such Year-End
Options shall cease to be Outstanding, and no Shares shall be delivered in respect thereof, if at
any time prior to the date you exercise such Year-End Options:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 13 or Section 3.17 of the Plan;
(ii) any event that constitutes Cause has occurred;
-2-
(iii) (A) you in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring, of any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By exercising any
Year-End Option under this Award Agreement, or by accepting the delivery of Shares under this Award
Agreement, you shall be deemed to have represented and certified at such time that you have
complied with all the terms and conditions of the Plan and this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for exercise of your Year-End Options or delivery of Shares in respect thereto are
invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace or substitute for, or otherwise in respect of, any
Outstanding Year-End Options.
For purposes of the foregoing, the term Selected Firm Personnel means: (i) any Firm employee or
consultant (A) with whom you personally worked while employed by the Firm, or (B) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (ii) any Managing Director of the Firm.
For the avoidance of doubt, failure to pay or reimburse the Firm, upon demand, for any amount you
owe to the Firm shall constitute (i) failure to meet an obligation you have under an agreement
referred to in Paragraph 5(b)(v), regardless of whether such obligation arises under a written
agreement, and/or (ii) a material violation of Firm policy constituting Cause referred to in
Paragraph 5(b)(ii)).
(c) Without limiting the application of Paragraph 5(b), your Outstanding Year-End Options that
become Vested in accordance with Paragraph 4(c)(i) immediately shall terminate, and such
Outstanding Year-End Options shall cease to be Outstanding if, prior to the original Vesting Date
with respect to such Year-End Options, you (i) form, or acquire a 5% or greater equity ownership,
voting or profit participation interest in, any Competitive Enterprise, or (ii) associate in any
capacity (including, but not limited to, association as an officer, employee, partner, director,
consultant, agent or advisor) with any Competitive Enterprise. Notwithstanding the foregoing,
unless otherwise determined by the Committee in its discretion, this
-3-
Paragraph 5(c) will not apply if your termination of Employment by reason of Extended Absence
or Retirement is characterized by the Firm as involuntary or by mutual agreement other than for
Cause and if you execute such a general waiver and release of claims and an agreement to pay any
associated tax liability, both as may be prescribed by the Firm or its designee. No termination of
Employment initiated by you, including any termination claimed to be a constructive termination
or the like or a termination for good reason, will constitute an involuntary termination of
Employment or a termination of Employment by mutual agreement.
6. Exercisability of Year-End Options.
(a) In General. Only Year-End Options that are Outstanding and Vested can be
exercised. Outstanding Vested Year-End Options must be exercised subject to Paragraph 6(e) and in
accordance with procedures established by the Committee from time to time but, subject to
Paragraphs 6(b), 6(d) and 10(g), not earlier than the applicable Initial Exercise Date. Except as
otherwise provided in this Award Agreement, reasonably promptly (but in no case more than thirty
(30) Business Days) after each date specified as the Initial Exercise Date on your Award Statement,
the number or percentage of your Year-End Options specified next to such Initial Exercise Date on
the Award Statement that are Outstanding and Vested will become exercisable. If the applicable
Initial Exercise Date is not during a Window Period, such Year-End Options will become exercisable
on a date specified by the Committee that is not more than 30 Business Days after the first Trading
Day of the first Window Period that begins thereafter. For this purpose, a Trading Day is a day
on which Shares trade regular way on the New York Stock Exchange. The Committee may from time to
time prescribe periods during which the Vested Year-End Options shall not be exercisable. In
addition, the exercise procedures established by the Committee may require you to take specific
steps in order to exercise your Year-End Options within a minimum time prior to the effective date
of exercise.
(b) Death. Notwithstanding any other provision of this Award Agreement (except
Paragraph 10(i)), if you die and, at the time of your death, you have any Outstanding Year-End
Options or any Restricted Shares (as defined in Paragraph 6(e)):
(i) the Transfer Restrictions described in Paragraph 6(e) shall cease to apply to any
Restricted Shares (as defined in Paragraph 6(e)) and shall not apply to any Shares acquired in
connection with any subsequent exercise of Year-End Options, and
(ii) subject to Paragraph 9, such Outstanding Year-End Options (A) shall be exercisable by the
representative of your estate or, to the extent you specifically bequeath any of your Outstanding
Year-End Options under your will in accordance with such procedures, if any, as may be adopted by
the Committee to an organization described in Sections 501(c)(3) and 2055(a) of the Code (or such
other similar charitable organization as may be approved by the Committee) (a Charitable
Beneficiary), by the Charitable Beneficiary, in either case in accordance with Paragraph 6(a)
beginning on the date that is as soon as practicable after the date of death and after such
documentation as may be requested by the Committee is provided to the Committee and (B) unless
earlier terminated in accordance with the terms of this Award Agreement, shall remain exercisable
until the Expiration Date.
(c) Other Terminations of Employment. Subject to Paragraphs 5(b), 5(c) and 10(i),
upon the termination of your Employment for any reason (other than death or Cause), but subject to
Paragraphs 6(d) and 10(g), your then Outstanding Vested Year-End Options shall be exercisable in
accordance with Paragraph 6(a) beginning on the applicable Initial Exercise Date and, unless
earlier terminated in accordance with the terms of this Award Agreement, shall remain exercisable
until the Expiration Date.
(d) Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraph 10(i)), if a Change in Control shall occur, and within 18 months
thereafter the Firm terminates your Employment without Cause or you terminate your Employment for
Good Reason, as
-4-
provided in Paragraph 4(d), (i) all of your Year-End Options that were Outstanding but that
had not yet become Vested immediately prior to your termination of Employment, shall become Vested,
(ii) all of your Outstanding Vested Year-End Options shall become exercisable and, unless earlier
terminated in accordance with the terms of this Award Agreement, shall remain exercisable until the
Expiration Date, and (iii) the Transfer Restrictions described in Paragraph 6(e) will cease to
apply.
(e) Transfer Restrictions on Shares after Exercise. Subject to Paragraphs 6(b), 6(d)
and 10(g), notwithstanding any other provision of this Award Agreement, (i) (A) no sale, exchange,
transfer, assignment, pledge, hypothecation, fractionalization, hedge or other disposition of
(including through the use of any cash-settled instrument) any Shares acquired in connection with
the exercise of your Year-End Options, whether voluntarily or involuntarily by you; and (B) no
exercise of any Year-End Options involving the sale of Shares acquired in respect of such exercise
(the restrictions in clauses (i)(A) and (i)(B) of this Paragraph 6(e) being referred to
collectively as the Transfer Restrictions) may be effected before the transferability date
specified on your Award Statement (the Transferability Date), and any purported sale, exchange,
transfer, assignment, pledge, hypothecation, fractionalization, hedge, other disposition or
exercise in violation of the Transfer Restrictions shall be void; and (ii) if and to the extent
Shares subject to your Year-End Options are certificated, the certificates representing such
Shares, shall bear a legend specifying that such Shares are subject to the restrictions described
in this Paragraph 6(e) and GS Inc. shall advise its transfer agent to place a stop order against
the transfer of such Shares in violation of such Transfer Restrictions. Any Shares acquired in
connection with any exercise of your Year-End Options prior to the Transferability Date (such
Shares, Restricted Shares) shall be held in the Custody Account or other account designated by
the Firm. Within 30 Business Days after the Transferability Date (or any other date for which
removal of the Transfer Restrictions is called for), GS Inc. shall take, or shall cause to be
taken, such steps as may be necessary to remove the Transfer Restrictions.
(f) Forfeiture of Restricted Shares. Unless the Committee determines otherwise, and
except as provided in Paragraph 6(b), 6(d) and
10(g), your rights in respect of any Restricted
Shares immediately shall terminate and such Restricted Shares shall be cancelled if:
(i) any event constituting Cause has occurred;
(ii) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party; or
(iii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Restricted Shares.
For the avoidance of doubt, failure to pay or reimburse the Firm, upon demand, for any amount you
owe to the Firm, shall constitute (i) failure to meet an obligation you have under an agreement
referred to in Paragraph 6(f)(ii), regardless of whether such obligation arises under a written
agreement, and/or (ii) a material violation of Firm policy constituting Cause referred to in
Paragraph 6(f)(i).
7. Delivery.
(a) Subject to Section 6(e), unless otherwise determined by the Committee, or as otherwise
provided in this Award Agreement, including, without limitation, Paragraphs 10 and 11, after
receipt of payment of the Exercise Price in respect of a Year-End Option, a Share shall be
delivered by book-entry credit to your Custody Account or to a brokerage account, as approved or
required by the Firm, and until the
-5-
Transferability Date, shall be subject to the Transfer Restrictions. Notwithstanding the
foregoing, if you are or become considered by GS Inc. to be one of its covered employees within
the meaning of Section 162(m) of the Code, then you shall be subject to the provisions of Section
3.21.1 of the Plan, as a result of which delivery of your Shares may be delayed. In accordance
with Section 1.3.2(h) of the Plan, in the discretion of the Committee, in lieu of all or any
portion of the Shares otherwise deliverable upon the exercise of all or any portion of your
Year-End Options, the Firm may deliver cash, other securities, other Awards or other property, and
all references in this Award Agreement to deliveries of Shares shall include such deliveries of
cash, other securities, other Awards or other property.
(b) In the discretion of the Committee, delivery of Shares (including Restricted Shares) may
be made initially into an escrow account meeting such terms and conditions as are determined by the
Firm and may be held in that escrow account until such time as the Committee has received such
documentation as it may have requested or until the Committee has determined that any other
conditions or restrictions on delivery of Shares required by this Award Agreement have been
satisfied. By accepting your Year-End Options, you have agreed on behalf of yourself (and your
estate or other permitted beneficiary) that the Firm may establish and maintain an escrow account
on such terms and conditions (which may include, without limitation, your executing any documents
related to, and your paying for any costs associated with, such escrow account) as the Firm may
deem necessary or appropriate. Any such escrow arrangement shall, unless otherwise determined by
the Firm, provide that (A) the escrow agent shall have the exclusive authority to vote such Shares
while held in escrow and (B) dividends paid on such Shares held in escrow may be accumulated and
shall be paid as determined by the Firm in its discretion.
8. Repayment. The provisions of Section 2.3.5 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such exercise were not satisfied) shall
apply to this Award.
9. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, and without limiting any permitted transfer in
accordance with Paragraph 10(g), the limitations on transferability set forth in Section 3.5 of the
Plan shall apply to this Award. Any purported transfer or assignment in violation of the
provisions of this Paragraph 9 or Section 3.5 of the Plan shall be void. The Committee may adopt
procedures pursuant to which some or all recipients of Year-End Options may transfer some or all of
their Year-End Options through a gift for no consideration to any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any
person sharing the recipients household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, and any other entity in which these persons
(or the recipient) own more than 50% of the voting interests.
10. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to provide for a reserve in
an amount the Firm determines is advisable or necessary in connection with any actual, anticipated
or potential tax consequences related to your separate employment contracts by requiring you to
choose between remitting such amount (i) in cash (or through payroll deduction or otherwise) or
(ii) in the form
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of proceeds from the Firms executing a sale of Shares delivered to you pursuant to this Award
(or any other Outstanding Awards under the Plan). In no event, however, shall any choice you may
have under the preceding two sentences determine, or give you any discretion to affect, the timing
of the delivery of Shares or the timing of payment of tax obligations.
(b) If you are or become a Managing Director, your rights in respect of your Year-End Options
are conditioned on your becoming a party to any shareholders agreement to which other similarly
situated employees of the Firm are a party.
(c) Your rights in respect of your Year-End Options are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares, hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your Year-End
Options in accordance with such rules and procedures as may be adopted from time to time with
respect to sales of such Shares (which may include, without limitation, restrictions relating to
the timing of sale requests, the manner in which sales are executed, pricing method, consolidation
or aggregation of orders and volume limits determined by the Firm). In addition, you understand
and agree that you shall be responsible for all brokerage costs and other fees or expenses
associated with your Award, including without limitation, such brokerage costs or other fees or
expenses in connection with the exercise of your Year-End Options or the sale of Shares delivered
to you hereunder.
(f) Without limiting the application of Paragraph 6(e), GS Inc. may affix to Certificates
representing Shares issued pursuant to this Award Agreement upon exercise of your Year-End Options
any legend that the Committee determines to be necessary or advisable (including to reflect any
restrictions to which you may be subject under a separate agreement with GS Inc.). GS Inc. may
advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraphs 5(b) and 6(f), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization, or any agency or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment your continued holding of your Year-End Options and/or Restricted Shares
would result in an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 10(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding Year-End Options and/or Restricted Shares;
then, in the case of Paragraph 10(g)(i) above only, the condition set forth in Paragraph 5(a) shall
be waived with respect to any Outstanding Year-End Options you then hold that had not yet become
Vested (as a result of which such Year-End Options shall become Vested) and, in the cases of
Paragraphs 10(g)(i) and 10(g)(ii) above,
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any Transfer Restrictions shall cease to apply and, at the sole discretion of the Firm, (a) such
Outstanding Year-End Options shall be cancelled and as soon as practicable after the Committee has
received satisfactory documentation relating to your Conflicted Employment (the Release Date) you
shall receive a payment equal to the excess (if any) of (x) the Fair Market Value of a Share on the
Business Day immediately prior to the Release Date multiplied by the number of your Year-End
Options that were Outstanding immediately prior to such cancellation over (y) the Exercise Price
multiplied by the number of such Outstanding Year-End Options; (b) the Initial Exercise Date shall
become the Release Date; or (c) if and to the extent provided in any procedures adopted by the
Committee, you may be permitted to transfer your Outstanding Year-End Options for value to a party
or parties acceptable to the Firm (which may include the Firm). Notwithstanding anything else
herein, the actions described in this Paragraph 10(g) shall be permitted only at such time and if
and to the extent as would not result in the imposition of any additional tax to you under Section
409A of the Code (which governs the taxation of certain deferred compensation).
(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your Year-End Options, you understand and agree that, if you are or become a senior
executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your Year-End Options or Restricted Shares to the
extent that such term or condition would result in a violation of the Firms obligations under the
U.S. Treasurys TARP Capital Purchase Program (the CPP), as determined by the Firm in its sole
discretion;
(ii) The Firm reserves the right to add any terms or conditions to your Year-End Options or
Restricted Shares as the Firm deems necessary in its sole discretion to satisfy the Firms
obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any Year-End Options, in
accordance with Paragraph 8 and Section 2.6.3 of the Plan, as the Firm deems necessary in its sole
discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your Year-End Options or Restricted Shares that the Firm deems necessary in its sole discretion to
satisfy its obligations under the CPP. This waiver includes all claims you may have under the laws
of the United States or any state related to the requirements imposed by the EESA, including
without limitation a claim for any compensation or other payments you would otherwise receive, any
challenge to the process by which the EESA was adopted and any tort or constitutional claim about
the effect of the EESA on your employment relationship.
11. Right of Offset. Subject to Paragraph 15, the obligation to deliver Shares under
this Award Agreement upon exercise of your Year-End Options or to remove the Transfer Restrictions
is subject to Section 3.4 of the Plan, which provides for the Firms right to offset against such
obligation any outstanding amounts you owe to the Firm and any amounts the Committee deems
appropriate pursuant to any tax equalization policy or agreement.
12. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and
-8-
provided further that the Committee expressly reserves its rights to amend the Award Agreement
and the Plan as described in Sections 1.3.2(h)(1), (2) and (4) of the Plan. For the avoidance of
doubt, your acceptance of Paragraph 10(i) constitutes your consent to any amendments (including
amendments which materially adversely affect your rights and obligations) to your Year-End Options
or Restricted Shares contemplated under such Paragraph. Any amendment of this Award Agreement
shall be in writing signed by an authorized member of the Committee or a person or persons
designated by the Committee.
13. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Section 409A of the Code. This Award is intended to be exempt from the provisions
of Section 409A of the Code (Section 409A). Notwithstanding anything else herein (but subject to
Paragraph 10(i)) or in the Plan, no action described herein, including without limitation
Paragraphs 7, 10(g) and 11, or in the Plan shall be permitted if the Firm determines such action
would result in the imposition of additional tax under Section 409A.
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered as of
the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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Title: |
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EX-10.37
9
y74032exv10w37.htm
EX-10.37: FORM OF YEAR-END RSU AWARD AGREEMENT
EX-10.37
Exhibit 10.37
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
_____ YEAR-END RSU AWARD
This Award Agreement sets forth the terms and conditions of the ___Year-End award (this
Award) of RSUs (Year-End RSUs) granted to you under The Goldman Sachs Amended and Restated
Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award. The number of Year-End RSUs subject to this Award is set forth in the Award
Statement delivered to you. An RSU is an unfunded and unsecured promise to deliver (or cause to be
delivered) to you, subject to the terms and conditions of this Award Agreement, a share of Common
Stock (a Share) on the Delivery Date or as otherwise provided herein. Until such delivery, you
have only the rights of a general unsecured creditor, and no rights as a shareholder of GS Inc. In
addition, as set forth in your Award Statement, some or all of any Shares delivered pursuant to
your Year-End RSUs may be subject to transfer restrictions following the Delivery Date as described
in Paragraph 3(b)(iv) below. This Award is conditioned on your executing the related signature
card and returning it to the address designated on the signature card and/or by the method
designated on the signature card by the date specified, and is subject to all terms, conditions and
provisions of the Plan and this Award Agreement, including, without limitation, the arbitration and
choice of forum provisions set forth in Paragraph 12. By executing the related signature
card (which, among other things, opens the custody account referred to in paragraph 3(b)
if you have not done so already), you will have confirmed your acceptance of all of the terms and
conditions of this Award Agreement.
3. Vesting and Delivery and Transfer Restrictions.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of Year-End
RSUs specified next to such Vesting Date on the Award Statement (which may be rounded to avoid
fractional Shares). While continued active Employment is not required in order to receive delivery
of the Shares underlying your Outstanding Year-End RSUs that are or become Vested, all other terms
and conditions of this Award Agreement shall continue to apply to such Vested Year-End RSUs, and
failure to meet such terms and conditions may result in the termination of this Award (as a result
of which no Shares underlying such Vested Year-End RSUs would be delivered).
(b) Delivery and Transfer Restrictions.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of Year-End RSUs) as such on your Award Statement if such date is during a
Window Period or, if such date is not during a Window Period, the first Trading Day of the first
Window Period beginning after that date. For this purpose, a Trading Day is a day on which
Shares trade regular way on the New York Stock Exchange.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and
15, in accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than
thirty (30) Business Days) after each date specified as a Delivery Date (or any other date delivery
of Shares is called for hereunder), Shares underlying the number or percentage of your then
Outstanding Year-End RSUs with respect to which such Delivery Date (or other date) has occurred
(which number of Shares may be rounded to avoid fractional Shares) shall be delivered by book entry
credit to your Custody Account or to a brokerage account, as approved or required by the Firm.
Notwithstanding the foregoing, if you are or become considered by GS Inc. to be one of its covered
employees within the meaning of Section 162(m) of the Code, then you shall be subject to Section
3.21.3 of the Plan, as a result of which delivery of your Shares may be delayed.
(iii) In accordance with Section 1.3.2(i) of the Plan, in the discretion of the
Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of all or
any portion of your Year-End RSUs, the Firm may deliver cash, other securities, other Awards or
other property, and all references in this Award Agreement to deliveries of Shares shall include
such deliveries of cash, other securities, other Awards or other property.
(iv) Except as provided in Paragraphs 3(c), 7, and 9(g), until the date specified on your
Award Statement as the Transferability Date: (A) on each Delivery Date (or any other date
delivery of Shares is called for hereunder), 50% of gross delivered Shares underlying Year-End RSUs
identified on your Award Statement as Base Year-End RSUs will be subject to the Transfer
Restrictions (as hereinafter defined) (such Shares, Restricted Shares) and shall not be
permitted to be sold, exchanged, transferred, assigned, pledged, hypothecated, fractionalized,
hedged or otherwise disposed of (including through the use of any cash-settled instrument), whether
voluntarily or involuntarily by you (collectively referred to as the Transfer Restrictions) and
any purported sale, exchange, transfer, assignment, pledge, hypothecation, fractionalization, hedge
or other disposition in violation of the Transfer Restrictions shall be void; and (B) if and to the
extent your Restricted Shares are certificated, the Certificates representing the Restricted Shares
are subject to the restrictions in this Paragraph 3(b)(iv), and GS Inc. shall advise its transfer
agent to place a stop order against your Restricted Shares. Within 30 Business Days after the
Transferability Date (or any other date described herein on which the Transfer Restrictions are
removed), GS Inc. shall take, or shall cause to be taken, such steps as may be necessary to remove
the Transfer Restrictions. Year-End RSUs identified on your Award Statement as Supplemental
Year-End RSUs, if any, will not be subject to Transfer Restrictions.
(v) In the discretion of the Committee, delivery of Shares (including Restricted Shares) may
be made initially into an escrow account meeting such terms and conditions as are determined by the
Firm and may be held in that escrow account until such time as the Committee has received such
documentation as it may have requested or until the Committee has determined that any other
conditions or restrictions on delivery of Shares required by this Award Agreement have been
satisfied. By accepting your Year-End RSUs, you have agreed on behalf of yourself (and your estate
or other permitted beneficiary) that the Firm may establish and maintain an escrow account on such
terms and conditions (which may include, without limitation, your executing any documents related
to, and your paying for any costs associated with, such escrow account) as the Firm may deem
necessary or appropriate. Any such escrow arrangement shall, unless otherwise determined by the
Firm, provide that (A) the escrow agent shall have the exclusive authority to vote such Shares
-2-
while held in escrow and (B) dividends paid on such Shares held in escrow may be accumulated
and shall be paid as determined by the Firm in its discretion.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(i) and 15), if you die prior to the Delivery Date and/or the Transferability Date, the
Shares underlying your then Outstanding Year-End RSUs shall be delivered to the representative of
your estate and any Transfer Restrictions shall cease to apply as soon as practicable after the
date of death and after such documentation as may be requested by the Committee is provided to the
Committee. The Committee may adopt procedures pursuant to which you may be permitted to
specifically bequeath some or all of your Outstanding Year-End RSUs under your will to an
organization described in Sections 501(c)(3) and 2055(a) of the Code (or such other similar
charitable organization as may be approved by the Committee).
4. Termination of Year-End RSUs and Non-Delivery of Shares; Termination and Cancellation
of Restricted Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your Year-End RSUs that were Outstanding but that
had not yet become Vested immediately prior to your termination of Employment immediately shall
terminate, such Year-End RSUs shall cease to be Outstanding and no Shares shall be delivered in
respect thereof. Unless the Committee determines otherwise, and except as provided in Paragraphs
3(c), 7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer
actively employed with the Firm, any Transfer Restrictions shall continue to apply until the
Transferability Date as provided in Paragraph 3(b)(iv).
(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding Year-End RSUs (whether or not Vested) immediately
shall terminate, such Year-End RSUs shall cease to be Outstanding and no Shares shall be delivered
in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
-3-
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding Year-End RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (A) any Firm employee or
consultant (1) with whom you personally worked while employed by the Firm, or (2) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (B) any Managing Director of the Firm.
(c) Unless the Committee determines otherwise, and except as provided in Paragraph 7, your
rights in respect of all of your Restricted Shares immediately shall terminate and such Restricted
Shares shall be cancelled if:
(i) any event constituting Cause has occurred;
(ii) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party; or
(iii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Restricted Shares.
(d) For the avoidance of doubt, failure to pay or reimburse the Firm, upon demand, for any
amount you owe to the Firm shall constitute (i) failure to meet an obligation you have under an
agreement referred to in Paragraph 4(b)(v) and 4(c)(ii), regardless of whether such obligation
arises under a written agreement, and/or (ii) a material violation of Firm policy constituting
Cause referred to in Paragraph 4(b)(ii)) and 4(c)(i).
-4-
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such delivery were not satisfied) shall
apply to this Award.
6. Extended Absence, Retirement, Downsizing and Approved Termination for Program Analysts.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
6(b), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence or Retirement (as defined below), the condition set
forth in Paragraph 4(a) shall be waived with respect to any Year-End RSUs that were Outstanding but
that had not yet become Vested immediately prior to such termination of Employment (as a result of
which such Year-End RSUs shall become Vested), but all other terms and conditions of this Award
Agreement shall continue to apply (including any applicable Transfer Restrictions).
Notwithstanding anything to the contrary in the Plan or otherwise, Retirement means termination
of your Employment (other than for Cause) on or after the Date of Grant at a time when (i) the sum
of your age plus years of service with the Firm (as determined by the Committee in its sole
discretion) equals or exceeds 60, (ii) you have completed at least ten (10) years of service with
the Firm (as determined by the Committee in its sole discretion), and (iii) you have completed one
year of service with the Firm following the Date of Grant (as determined by the Committee in its
sole discretion). Any termination of Employment by reason of Extended Absence or Retirement shall
not affect any applicable Transfer Restrictions, and any Transfer Restrictions shall continue to
apply until the Transferability Date as provided in Paragraph 3(b)(iv).
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding Year-End RSUs that become Vested in accordance with Paragraph 6(a) immediately shall
terminate, such Outstanding Year-End RSUs shall cease to be Outstanding, and no Shares shall be
delivered in respect thereof if, prior to the original Vesting Date with respect to such Year-End
RSUs, you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation
interest in, any Competitive Enterprise, or (ii) associate in any capacity (including, but not
limited to, association as an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise. Notwithstanding the foregoing, unless otherwise determined by the
Committee in its discretion, this Paragraph 6(b) will not apply if your termination of Employment
by reason of Extended Absence or Retirement is characterized by the Firm as involuntary or by
mutual agreement other than for Cause and if you execute such a general waiver and release of
claims and an agreement to pay any associated tax liability, both as may be prescribed by the Firm
or its designee. No termination of Employment initiated by you, including any termination claimed
to be a constructive termination or the like or a termination for good reason, will constitute an
involuntary termination of Employment or a termination of Employment by mutual agreement.
(c) Notwithstanding any other provision of this Award Agreement and subject to your executing
such general waiver and release of claims and an agreement to pay any associated tax liability,
both as may be prescribed by the Firm or its designee, if your Employment is terminated without
Cause solely by reason of a downsizing, the condition set forth in Paragraph 4(a) shall be waived
with respect to your Year-End RSUs that were Outstanding but that had not yet become Vested
immediately prior to such termination of Employment (as a result of which such Year-End RSUs shall
become Vested), but all other conditions of this Award Agreement shall continue to apply (including
any applicable Transfer Restrictions). Whether or not your Employment is terminated solely by
reason of a downsizing shall be determined by the Firm in its sole discretion. No termination of
Employment initiated by you, including any termination claimed to be a constructive termination
or the like or a termination for good reason, will be solely by reason of a
-5-
downsizing. Your termination of Employment by reason of downsizing shall not affect any
applicable Transfer Restrictions, and any Transfer Restrictions shall continue to apply until the
Transferability Date as provided in Paragraph 3(b)(iv).
(d) Notwithstanding any other provision of this Award Agreement, if you are classified by the
Firm as a program analyst, and your Employment is terminated without Cause solely by reason of an
approved termination with respect to your participation in the program prior to any Vesting Date
specified on your Award Statement, the condition set forth in Paragraph 4(a) shall be waived with
respect to any Year-End RSUs that were Outstanding but had not yet become Vested immediately prior
to such termination of Employment (as a result of which such Year-End RSUs shall become Vested),
but all other conditions of this Award Agreement shall continue to apply (including any applicable
Transfer Restrictions). Unless otherwise determined by the Committee, for purposes of this
Paragraph 6(d), an approved termination shall mean a termination of Employment from the analyst
program where: (i) you complete your analyst program, (ii) you receive a bonus for completing the
analyst program and (iii) you terminate Employment with the Firm immediately after you complete the
analyst program, without any stay-on or other agreement or understanding to continue Employment
with the Firm. If you agree to stay with the Firm as an employee after your analyst program ends
and then later terminate Employment, you will not have an approved termination. An approved
termination shall not affect any applicable Transfer Restrictions, and any Transfer Restrictions
shall continue to apply until the Transferability Date as provided in Paragraph 3(b)(iv).
7. Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraphs 9(i) and 15), in the event a Change in Control shall occur and within
18 months thereafter the Firm terminates your Employment without Cause or you terminate your
Employment for Good Reason, all Shares underlying your then Outstanding Year-End RSUs, whether or
not Vested, shall be delivered and any Transfer Restrictions shall cease to apply.
8. Dividend Equivalent Rights; Dividends. Each Year-End RSU shall include a Dividend
Equivalent Right. Accordingly, with respect to each of your Outstanding Year-End RSUs, at or after
the time of distribution of any regular cash dividend paid by GS Inc. in respect of a Share the
record date for which occurs on or after the Date of Grant, you shall be entitled to receive an
amount (less applicable withholding) equal to such regular dividend payment as would have been made
in respect of the Share underlying such Outstanding Year-End RSU. Payment in respect of a Dividend
Equivalent Right shall be made only with respect to Year-End RSUs that are Outstanding on the
relevant record date. Each Dividend Equivalent Right shall be subject to the provisions of Section
2.8.2 of the Plan. You shall be entitled to receive on a current basis any regular cash dividend
paid by GS, Inc. in respect of your Restricted Shares, or, if the Restricted Shares are held in
escrow, the Firm will direct the transfer/paying agent to distribute the dividends to you in
respect of your Restricted Shares.
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to
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provide for a reserve in an amount the Firm determines is advisable or necessary in connection with
any actual, anticipated or potential tax consequences related to your separate employment contracts
by requiring you to choose between remitting such amount (i) in cash (or through payroll deduction
or otherwise) or (ii) in the form of proceeds from the Firms executing a sale of Shares delivered
to you pursuant to this Award (or any other Outstanding Awards under the Plan). In no event,
however, shall any choice you may have under the preceding two sentences determine, or give you any
discretion to affect, the timing of the delivery of Shares or the timing of payment of tax
obligations.
(b) If you are or become a Managing Director, your rights in respect of the Year-End RSUs are
conditioned on your becoming a party to any shareholders agreement to which other similarly
situated employees of the Firm are a party.
(c) Your rights in respect of your Year-End RSUs are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your Year-End
RSUs in accordance with such rules and procedures as may be adopted from time to time with respect
to sales of such Shares (which may include, without limitation, restrictions relating to the timing
of sale requests, the manner in which sales are executed, pricing method, consolidation or
aggregation of orders and volume limits determined by the Firm). In addition, you understand and
agree that you shall be responsible for all brokerage costs and other fees or expenses associated
with your Year-End RSU Award, including without limitation, such brokerage costs or other fees or
expenses in connection with the sale of Shares delivered to you hereunder.
(f) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable (including to
reflect any restrictions to which you may be subject under a separate agreement with GS Inc.). GS
Inc. may advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding Year-End RSUs and/or
Restricted Shares would result in an actual or perceived conflict of interest (Conflicted
Employment); or
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(ii) following your termination of Employment other than described in Paragraph 9(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding Year-End RSUs and/or Restricted Shares;
then, in the case of Paragraph 9(g)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any Year-End RSUs you then hold that had not yet become Vested (as a
result of which such Year-End RSUs shall become Vested) and, in the case of Paragraphs 9(g)(i) and
9(g)(ii) above, any Transfer Restrictions shall cease to apply, and, at the sole discretion of the
Firm, you shall receive either a lump sum cash payment in respect of, or delivery of Shares
underlying, your then Outstanding Vested Year-End RSUs, in each case as soon as practicable after
the Committee has received satisfactory documentation relating to your Conflicted Employment.
(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your Year-End RSUs, you understand and agree that, if you are or become a senior
executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your Year-End RSUs or Restricted Shares to the extent
that such term or condition would result in a violation of the Firms obligations under the U.S.
Treasurys TARP Capital Purchase Program (the CPP), as determined by the Firm in its sole
discretion;
(ii) The Firm reserves the right to add any terms or conditions to your Year-End RSUs or
Restricted Shares as the Firm deems necessary in its sole discretion to satisfy the Firms
obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any Year-End RSUs, in
accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems necessary in its sole
discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your Year-End RSUs or Restricted Shares that the Firm deems necessary in its sole discretion to
satisfy its obligations under the CPP. This waiver includes all claims you may have under the laws
of the United States or any state related to the requirements imposed by the EESA, including
without limitation a claim for any compensation or other payments you would otherwise receive, any
challenge to the process by which the EESA was adopted and any tort or constitutional claim about
the effect of the EESA on your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares or to remove the Transfer Restrictions under this Award Agreement is subject to Section 3.4
of the Plan, which provides for the Firms right to offset against such obligation any outstanding
amounts you owe to the Firm and any amounts the Committee deems appropriate pursuant to any tax
equalization policy or agreement.
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11. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and provided further that the Committee expressly reserves its
rights to amend the Award Agreement and the Plan as described in Sections 1.3.2(h)(1), (2) and (4)
of the Plan. For the avoidance of doubt, your acceptance of Paragraph 9(i) constitutes your
consent to any amendments (including amendments which materially adversely affect your rights and
obligations) to your Year-End RSUs or Restricted Shares contemplated under such Paragraph. Any
amendment of this Award Agreement shall be in writing signed by an authorized member of the
Committee or a person or persons designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of Year-End RSUs may transfer some or all
of their Year-End RSUs through a gift for no consideration to any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any
person sharing the recipients household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, and any other entity in which these persons
(or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
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1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern; provided, however, in
the event of any conflict or potential inconsistency between this Paragraph 15 and Paragraph 9(i),
Paragraph 9(i) will govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your Year-End RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) and (c) (execution
of waiver and release of claims and agreement to pay associated tax liability) and 9 and the
consents and other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by
March 15 of the calendar year in which the Delivery Date occurs unless, in order to permit such
conditions or restrictions to be satisfied, the Committee elects, pursuant to Treasury Regulations
section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance with Section
409A, to delay delivery of Shares to a later date within the same calendar year or to such later
date as may be permitted under Section 409A, including, without limitation, Regs. 1.409A-2(b)(7)
(in conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your Year-End RSUs shall not have the effect of deferring
delivery or payment, income inclusion, or a substantial risk of forfeiture, beyond the date on
which such delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with
respect to the Shares that would otherwise have been deliverable (unless the Committee elects a
later date for this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted
under Section 409A, including, without limitation and to the extent applicable, the subsequent
election provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified employee (as defined by the Firm in accordance
with Section 409A(a)(2)(i)(B) of the Code), delivery shall occur on the earlier of the Delivery
Date or (to the extent required to avoid the imposition of additional tax under Section 409A) the
date that is six months after your termination of Employment (or, if the latter date is not during
a Window Period, the first trading day of the next Window Period). For purposes of Paragraph 7,
references in this Award Agreement to termination of Employment mean separation from service (as
defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding Year-End RSUs shall be paid
to you within the calendar year that includes the date of distribution of any corresponding regular
cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or after
the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding Year-End RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
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documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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By: |
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Name: |
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Title: |
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EX-10.39
10
y74032exv10w39.htm
EX-10.39: FORM OF YEAR-END RSU AWARD AGREEMENT (FRENCH ALTERNATIVE AWARD)
EX-10.39
Exhibit 10.39
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
_____ YEAR-END FRENCH ALTERNATIVE RSU AWARD
This Award Agreement sets forth the terms and conditions of the ___Year-End award (this
Award) of French Alternative RSUs (Year-End French Alternative RSUs), which is comprised of
Base Year-End RSUs, granted to you under The Goldman Sachs Amended and Restated Stock Incentive
Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which
are incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are
not defined in this Award Agreement have the meanings as used or defined in the Plan. References
in this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award.
(a) The number of Year-End French Alternative RSUs subject to this Award is set forth (as
___Year-End Base RSUs (French Alternative)) in the Award Statement delivered to you. An RSU is
an unfunded and unsecured promise to deliver (or cause to be delivered) to you, subject to the
terms and conditions of this Award Agreement, a share of Common Stock (a Share) on the Delivery
Date or as otherwise provided herein. Until such delivery, you have only the rights of a general
unsecured creditor, and no rights as a shareholder of GS Inc. In addition, as set forth in your
Award Statement, all Shares delivered pursuant to your Year-End French Alternative RSUs will be
subject to transfer restrictions following the Delivery Date as described in Paragraph 3(b)(iv)
below. This Award is conditioned on your executing the related signature card and returning it
to the address designated on the signature card and/or by the method designated on the signature
card by the date specified, and is subject to all terms, conditions and provisions of the Plan and
this Award Agreement, including, without limitation, the arbitration and choice of forum provisions
set forth in Paragraph 12. By executing the related signature card (which, among other
things, opens the custody account referred to in paragraph 3(b) if you have not done so
already), you will have confirmed your acceptance of all of the terms and conditions of this Award
Agreement.
(b) This Award is made available to you solely because you are an employee of the Firm on the
Date of Grant who does not own shares representing 10% or more of the issued share capital of GS
Inc.
3. Vesting and Delivery and Transfer Restrictions.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of Year-End
French
Alternative RSUs specified next to such Vesting Date on the Award Statement (which may be
rounded to avoid fractional Shares). While continued active Employment is not required in order to
receive delivery of the Shares underlying your Outstanding Year-End French Alternative RSUs that
are or become Vested, all other terms and conditions of this Award Agreement shall continue to
apply to such Vested Year-End French Alternative RSUs, and failure to meet such terms and
conditions may result in the termination of this Award (as a result of which no Shares underlying
such Vested Year-End French Alternative RSUs would be delivered).
(b) Delivery and Transfer Restrictions.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of Year-End French Alternative RSUs) as such on your Award Statement if such
date is during a Window Period or, if such date is not during a Window Period, the first Trading
Day of the first Window Period beginning after that date. For this purpose, a Trading Day is a
day on which Shares trade regular way on the New York Stock Exchange. Notwithstanding any other
provision to the contrary in this Award Agreement or your Award Statement, a Delivery Date shall
not occur prior to the expiration of a minimum period of two years following the Date of Grant,
except as provided in Paragraph 3(c) hereof.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and
15, in accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than
thirty (30) Business Days) after each date specified as a Delivery Date (or any other date delivery
of Shares is called for hereunder), Shares underlying the number or percentage of your then
Outstanding Year-End French Alternative RSUs with respect to which such Delivery Date (or other
date) has occurred (which number of Shares may be rounded to avoid fractional Shares) shall be
delivered by book-entry credit to a special custody account or a special brokerage account, as
approved or required by the Firm and shall be subject to the Transfer Restrictions described in
Paragraph 3(b)(iv) hereof until the applicable Transferability Date (defined below) identified on
your Award Statement. Notwithstanding the foregoing, if you are or become considered by GS Inc. to
be one of its covered employees within the meaning of Section 162(m) of the Code, then you shall
be subject to Section 3.21.3 of the Plan, as a result of which delivery of your Shares may be
delayed.
(iii) Notwithstanding Section 1.3.2(i) of the Plan, you shall receive, on
each Delivery Date, Shares only to the exclusion of cash, other securities, other Awards or other
property.
(iv) Notwithstanding any other provision to the contrary in this Award Agreement (except as
provided in Paragraphs 3(c), 7 and 9(h)) or the Award Statement and except as may be determined by
the Firm in a manner it concludes, in its sole discretion, is consistent with the deferral of
French income taxes with respect to the Year-End French Alternative RSUs: (A) on each Delivery Date
(or any other date delivery of Shares is called for hereunder) and until the date specified herein
as the applicable Transferability Date (which date shall not occur prior to the expiration of a
minimum period of two years following the applicable Delivery Date) (all such dates, the
Transferability Dates), all of the delivered Shares underlying your Year-End French Alternative
RSUs for which the applicable Delivery Date has occurred will be subject to the Transfer
Restrictions (as hereinafter defined) (such Shares, Restricted Shares) and shall not be
permitted to be sold, exchanged, transferred, assigned, pledged, hypothecated, fractionalized,
hedged or otherwise disposed of (including through the use of any cash-settled instrument), whether
voluntarily or involuntarily by you (collectively referred to as the Transfer Restrictions) and
any purported sale, exchange, transfer, assignment, pledge, hypothecation, fractionalization, hedge
or other disposition in violation of the
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Transfer Restrictions shall be void; and (B) until the applicable Transferability Date, if and
to the extent your Restricted Shares are certificated, the Certificates representing such
Restricted Shares are subject to the restrictions in this Paragraph 3(b)(iv), and GS Inc. shall
advise its transfer agent to place a stop order against the transfer of such Restricted Shares in
violation of the Transfer Restrictions. Within 30 Business Days after the Transferability Date (or
any other date described herein on which the Transfer Restrictions are removed), GS Inc. shall
take, or shall cause to be taken, such steps as may be necessary to remove the Transfer
Restrictions. Shares underlying 50% of your French Alternative Year-End RSUs with a Delivery Date
(as specified on your Award Statement) of ___will have a Transferability Date of
___. Shares underlying (i) the remaining 50% of your French Alternative Year-End RSUs with
a Delivery Date (as specified on your Award Statement) of ___- and (ii) 100% of your French
Alternative Year-End RSUs with a Delivery Date (as specified on your Award Statement) of
___will have a Transferability Date of ___.
(v) In the discretion of the Committee, delivery of Shares (including Restricted Shares) may
be made initially into an escrow account meeting such terms and conditions as are determined by the
Firm and may be held in that escrow account until such time as the Committee has received such
documentation as it may have requested or until the Committee has determined that any other
conditions or restrictions on delivery of Shares required by this Award Agreement have been
satisfied. By accepting your French Alternative Year-End RSUs, you have agreed on behalf of
yourself (and your estate or other permitted beneficiary) that the Firm may establish and maintain
an escrow account on such terms and conditions (which may include, without limitation, your
executing any documents related to, and your paying for any costs associated with, such escrow
account) as the Firm may deem necessary or appropriate.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(j) and 15), if you die prior to the Delivery Date and/or the Transferability Date, the
Shares underlying your then Outstanding Year-End French Alternative RSUs shall be delivered to the
representative of your estate and any Transfer Restrictions shall cease to apply as soon as
practicable after the date of death and after such documentation as may be requested by the
Committee is provided to the Committee. The Committee may adopt procedures pursuant to which you
may be permitted to specifically bequeath some or all of your Outstanding Year-End French
Alternative RSUs under your will to an organization described in Sections 501(c)(3) and 2055(a) of
the Code (or such other similar charitable organization as may be approved by the Committee).
4. Termination of Year-End French Alternative RSUs and Non-Delivery of Shares;
Retrocession of Restricted Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(h), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your Year-End French Alternative RSUs that were
Outstanding but that had not yet become Vested immediately prior to your termination of Employment
immediately shall terminate, such Year-End French Alternative RSUs shall cease to be Outstanding
and no Shares shall be delivered in respect thereof. Unless the Committee determines otherwise,
and except as provided in Paragraphs 3(c), 7, and 9(h), if your Employment terminates for any
reason or you otherwise are no longer actively employed with the Firm, any Transfer Restrictions
shall continue to apply until the Transferability Date as provided in Paragraph 3(b)(iv).
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(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding Year-End French Alternative RSUs (whether or not
Vested) immediately shall terminate, such Year-End French Alternative RSUs shall cease to be
Outstanding and no Shares shall be delivered in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding Year-End French Alternative RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (A) any Firm employee or
consultant (1) with whom you personally worked while employed by the Firm, or (2) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (B) any Managing Director of the Firm.
-4-
Notwithstanding the foregoing, your Outstanding Year-End French Alternative RSUs with a Vesting
Date (as specified on your Award Statement) of December 31, ___that become Vested will not be
subject to Paragraph 4(b)(iii) following December 31, ___.
(c) Unless the Committee determines otherwise, and except as provided in Paragraph 7, your
rights in respect of all of your Restricted Shares immediately shall terminate and such Restricted
Shares shall be retroceded for no consideration if:
(i) any event constituting Cause has occurred;
(ii) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party; or
(iii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Restricted Shares.
(d) For the avoidance of doubt, failure to pay or reimburse the Firm, upon demand, for any
amount you owe to the Firm shall constitute (i) failure to meet an obligation you have under an
agreement referred to in Paragraph 4(b)(v) and 4(c)(ii), regardless of whether such obligation
arises under a written agreement, and/or (ii) a material violation of Firm policy constituting
Cause referred to in Paragraph 4(b)(ii)) and 4(c)(i).
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires
Award recipients to repay to the Firm amounts delivered to them if the Committee determines that
all terms and conditions of this Award Agreement in respect of such delivery were not satisfied)
shall apply to this Award.
6. Extended Absence, Retirement, Downsizing and Approved Termination for Program
Analysts.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraphs
3(b)(i) and 3(b)(iv) and 6(b), in the event of the termination of your Employment (determined as
described in Section 1.2.19 of the Plan) by reason of Extended Absence or Retirement (as defined
below), the condition set forth in Paragraph 4(a) shall be waived with respect to any Year-End
French Alternative RSUs that were Outstanding but that had not yet become Vested immediately prior
to such termination of Employment (as a result of which such Year-End French Alternative RSUs shall
become Vested), but all other terms and conditions of this Award Agreement shall continue to apply
(including any applicable Transfer Restrictions). Notwithstanding anything to the contrary in the
Plan or otherwise, Retirement means termination of your Employment (other than for Cause) on or
after the Date of Grant at a time when (i) the sum of your age plus years of service with the Firm
(as determined by the Committee in its sole discretion) equals or exceeds 60, (ii) you have
completed at least ten (10) years of service with the Firm (as determined by the Committee in its
sole discretion), and (iii) you have completed one year of service with the Firm following the Date
of Grant (as determined by the Committee in its sole discretion). Any termination of Employment by
reason of Extended
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Absence or Retirement shall not affect any applicable Transfer Restrictions, and any Transfer
Restrictions shall continue to apply until the Transferability Date as provided in Paragraph
3(b)(iv).
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding Year-End French Alternative RSUs that become Vested in accordance with Paragraph 6(a)
immediately shall terminate, such Outstanding Year-End French Alternative RSUs shall cease to be
Outstanding, and no Shares shall be delivered in respect thereof if, prior to the original Vesting
Date with respect to such Year-End French Alternative RSUs, you (i) form, or acquire a 5% or
greater equity ownership, voting or profit participation interest in, any Competitive Enterprise,
or (ii) associate in any capacity (including, but not limited to, association as an officer,
employee, partner, director, consultant, agent or advisor) with any Competitive Enterprise.
Notwithstanding the foregoing, unless otherwise determined by the Committee in its discretion, this
Paragraph 6(b) will not apply if your termination of Employment by reason of Extended Absence or
Retirement is characterized by the Firm as involuntary or by mutual agreement other than for
Cause and if you execute such a general waiver and release of claims and an agreement to pay any
associated tax liability, both as may be prescribed by the Firm or its designee. No termination of
Employment initiated by you, including any termination claimed to be a constructive termination
or the like or a termination for good reason, will constitute an involuntary termination of
Employment or a termination of Employment by mutual agreement.
(c) Notwithstanding any other provision of this Award Agreement and subject to your executing
such general waiver and release of claims and an agreement to pay any associated tax liability,
both as may be prescribed by the Firm or its designee, if your Employment is terminated without
Cause solely by reason of a downsizing, the condition set forth in Paragraph 4(a) shall be waived
with respect to your Year-End French Alternative RSUs that were Outstanding but that had not yet
become Vested immediately prior to such termination of Employment (as a result of which such
Year-End French Alternative RSUs shall become Vested), but all other conditions of this Award
Agreement shall continue to apply (including, without limitation, Paragraphs 3(b)(i) and 3(b)(iv)).
Whether or not your Employment is terminated solely by reason of a downsizing shall be
determined by the Firm in its sole discretion. No termination of Employment initiated by you,
including any termination claimed to be a constructive termination or the like or a termination
for good reason, will be solely by reason of a downsizing. Your termination of Employment by
reason of downsizing shall not affect any applicable Transfer Restrictions, and any Transfer
Restrictions shall continue to apply until the Transferability Date as provided in Paragraph
3(b)(iv).
(d) Notwithstanding any other provision of this Award Agreement, if you are classified by the
Firm as a program analyst, and your Employment is terminated without Cause solely by reason of an
approved termination with respect to your participation in the program prior to any Vesting Date
specified on your Award Statement, the condition set forth in Paragraph 4(a) shall be waived with
respect to any Year-End French Alternative RSUs that were Outstanding but had not yet become Vested
immediately prior to such termination of Employment (as a result of which such Year-End French
Alternative RSUs shall become Vested), but all other conditions of this Award Agreement shall
continue to apply (including, without limitation, Paragraphs 3(b)(i) and 3(b)(iv)). Unless
otherwise determined by the Committee, for purposes of this Paragraph 6(d), an approved
termination shall mean a termination of Employment from the analyst program where: (i) you
complete your analyst program, (ii) you receive a bonus for completing the analyst program and
(iii) you terminate Employment with the Firm immediately after you complete the analyst program,
without any stay-on or other agreement or understanding to continue Employment with the Firm. If
you agree to stay with the Firm as an employee after your analyst program ends and then later
terminate Employment, you will not have an
-6-
approved termination. An approved termination shall not affect any applicable Transfer
Restrictions, and any Transfer Restrictions shall continue to apply until the Transferability Date
as provided in Paragraph 3(b)(iv).
7. Change in Control. Notwithstanding anything to the contrary in this
Award Agreement (except Paragraphs 3(b)(i), 3(b)(iv), 9(j) and 15), in the event a Change in
Control shall occur and within 18 months thereafter the Firm terminates your Employment without
Cause or you terminate your Employment for Good Reason, all Shares underlying your then Outstanding
Year-End French Alternative RSUs, whether or not Vested, shall be delivered (but not earlier than
the second anniversary of the Date of Grant) and the Transfer Restrictions shall cease to apply
(but not earlier than the second anniversary of the applicable Delivery Date).
8. Dividend Equivalent Rights; Dividends. Each Year-End French Alternative RSU shall
include a Dividend Equivalent Right. Accordingly, with respect to each of your Outstanding
Year-End French Alternative RSUs, at or after the time of distribution of any regular cash dividend
paid by GS Inc. in respect of a Share the record date for which occurs on or after the Date of
Grant, you shall be entitled to receive an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Share underlying such
Outstanding Year-End French Alternative RSU. Payment in respect of a Dividend Equivalent Right
shall be made only with respect to Year-End French Alternative RSUs that are Outstanding on the
relevant record date. Each Dividend Equivalent Right shall be subject to the provisions of Section
2.8.2 of the Plan. You shall be entitled to receive on a current basis any regular cash dividend
paid by GS, Inc. in respect of your Restricted Shares held in a special custody account or in a
special brokerage account, and the Firm will direct the transfer/paying agent to distribute the
dividends to you in respect of your Restricted Shares.
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to provide for a reserve in an
amount the Firm determines is advisable or necessary in connection with any actual, anticipated or
potential tax consequences related to your separate employment contracts by requiring you to choose
between remitting such amount (i) in cash (or through payroll deduction or otherwise) or (ii) in
the form of proceeds from the Firms executing a sale of Shares delivered to you pursuant to this
Award (or any other Outstanding Awards under the Plan). In no event, however, shall any choice you
may have under the preceding two sentences determine, or give you any discretion to affect, the
timing of the delivery of Shares or the timing of payment of tax obligations.
(b) If you are or become a Managing Director, your rights in respect of the Year-End French
Alternative RSUs are conditioned on your becoming a party to any shareholders agreement to which
other similarly situated employees of the Firm are a party.
-7-
(c) Your rights in respect of your Year-End French Alternative RSUs are conditioned on the
receipt to the full satisfaction of the Committee of any required consents (as described in Section
3.3 of the Plan) that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your Year-End
French Alternative RSUs in accordance with such rules and procedures as may be adopted from time to
time with respect to sales of such Shares (which may include, without limitation, restrictions
relating to the timing of sale requests, the manner in which sales are executed, pricing method,
consolidation or aggregation of orders and volume limits determined by the Firm). In addition, you
understand and agree that you shall be responsible for all brokerage costs and other fees or
expenses associated with your Year-End French Alternative RSU Award, including without limitation,
such brokerage costs or other fees or expenses in connection with the sale of Shares delivered to
you hereunder.
(f) In addition to the legends described in Paragraph 3(b)(iv) hereof, GS Inc. may affix to
Certificates representing Shares issued pursuant to this Award Agreement any legend that the
Committee determines to be necessary or advisable (including to reflect any restrictions to which
you may be subject under a separate agreement with GS Inc.). GS Inc. may advise the transfer agent
to place a stop order against any legended Shares.
(g) You undertake to comply with (and take all steps requested by the Firm to assure that it
complied with) the reporting requirements to be established by French law and regulations in order
to benefit from the tax and social security regime set forth under article 83 of the Finance Bill
for 2005 (#2004-1484) dated December 30, 2004, article 41 of the law #2005-842 dated July 26, 2005
and articles 34, 39, 40 and article 41 of the Law #2006-1770 dated December 30, 2006.
(h) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding Year-End French Alternative
RSUs and/or the Restricted Shares delivered in respect of your Year-End French Alternative RSUs
would result in an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 9(h)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a
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time when you continue to hold Outstanding Year-End French Alternative RSUs and/or Restricted
Shares delivered in respect of Year-End French Alternative RSUs;
then, in the case of Paragraph 9(h)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any Year-End French Alternative RSUs you then hold that had not yet
become Vested (as a result of which such Year-End French Alternative RSUs shall become Vested) and,
in the case of Paragraphs 9(h)(i) and 9(h)(ii) above, any Transfer Restrictions shall cease to
apply, and, at the sole discretion of the Firm, you shall receive either a lump sum cash payment in
respect of, or delivery of Shares underlying, your then Outstanding Vested Year-End French
Alternative RSUs, in each case as soon as practicable after the Committee has received satisfactory
documentation relating to your Conflicted Employment.
(i) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(j) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your Year-End French Alternative RSUs, you understand and agree that, if you are or
become a senior executive officer (as defined in the regulations promulgated under the Emergency
Economic Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your Year-End French Alternative RSUs or Restricted
Shares to the extent that such term or condition would result in a violation of the Firms
obligations under the U.S. Treasurys TARP Capital Purchase Program (the CPP), as determined by
the Firm in its sole discretion;
(ii) The Firm reserves the right to add any terms or conditions to your Year-End French
Alternative RSUs or Restricted Shares as the Firm deems necessary in its sole discretion to satisfy
the Firms obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any Year-End French
Alternative RSUs, in accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems
necessary in its sole discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your Year-End French Alternative RSUs or Restricted Shares that the Firm deems necessary in its
sole discretion to satisfy its obligations under the CPP. This waiver includes all claims you may
have under the laws of the United States or any state related to the requirements imposed by the
EESA, including without limitation a claim for any compensation or other payments you would
otherwise receive, any challenge to the process by which the EESA was adopted and any tort or
constitutional claim about the effect of the EESA on your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares or to remove the Transfer Restrictions under this Award Agreement is subject to Section 3.4
of the Plan, which provides for the Firms right to offset against such obligation any outstanding
amounts you owe to the Firm and any amounts the Committee deems appropriate pursuant to any tax
equalization policy or agreement.
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11. Amendment. The Committee reserves the right at any time to amend the terms
and conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and provided further that the Committee expressly reserves its
rights to amend the Award Agreement and the Plan as described in Sections 1.3.2(h)(1), (2) and (4)
of the Plan. For the avoidance of doubt, your acceptance of Paragraph 9(j) constitutes your
consent to any amendments (including amendments which materially adversely affect your rights and
obligations) to your Year-End French Alternative RSUs or Restricted Shares contemplated under such
Paragraph. Any amendment of this Award Agreement shall be in writing signed by an authorized
member of the Committee or a person or persons designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of Year-End French Alternative RSUs may
transfer some or all of their Year-End French Alternative RSUs through a gift for no consideration
to any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the recipients household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, and any
other entity in which these persons (or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full
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authority to give effect to this intent. To the extent necessary to give effect to this
intent, in the case of any conflict or potential inconsistency between the provisions of the Plan
(including, without limitation, Sections 1.3.2 and 2.1 thereof) and this Award Agreement, the
provisions of this Award Agreement shall govern, and in the case of any conflict or potential
inconsistency between this Paragraph 15 and the other provisions of this Award Agreement, this
Paragraph 15 shall govern; provided, however, in the event of any conflict or potential
inconsistency between this Paragraph 15 and Paragraph 9(j), Paragraph 9(j) will govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable
conditions or restrictions on delivery of Shares in respect of your Year-End French Alternative
RSUs required by this Agreement (including, without limitation, those specified in Paragraphs 3(b)
and (c), 6(b) and (c) (execution of waiver and release of claims and agreement to pay associated
tax liability) and 9 and the consents and other items specified in Section 3.3 of the Plan) are
satisfied, and shall occur by March 15 of the calendar year in which the Delivery Date occurs
unless, in order to permit such conditions or restrictions to be satisfied, the Committee elects,
pursuant to Treasury Regulations section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be
permitted in accordance with Section 409A, to delay delivery of
Shares to a later date within the
same calendar year or to such later date as may be permitted under Section 409A, including, without
limitation, Regs.
1.409A-2(b)(7) (in conjunction with Section 3.21.3 of the Plan pertaining to Code
Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your Year-End French Alternative RSUs shall not have the
effect of deferring delivery or payment, income inclusion, or a substantial risk of forfeiture,
beyond the date on which such delivery, payment or inclusion would occur or such risk of forfeiture
would lapse, with respect to the Shares that would otherwise have been deliverable (unless the
Committee elects a later date for this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise
as may be permitted under Section 409A, including, without limitation and to the extent applicable,
the subsequent election provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs (but
not earlier than the second anniversary of the Date of Grant); provided, however, that, if you are
a specified employee (as defined by the Firm in accordance with Section 409A(a)(2)(i)(B) of the
Code), delivery shall occur on the earlier of the Delivery Date or (to the extent required to avoid
the imposition of additional tax under Section 409A) the date that is six months after your
termination of Employment (or, if the latter date is not during a Window Period, the first trading
day of the next Window Period) (but not earlier than the second anniversary of the Date of Grant).
For purposes of Paragraph 7, references in this Award Agreement to termination of Employment mean
separation from service (as defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding Year-End French Alternative
RSUs shall be paid to you within the calendar year that includes the date of distribution of any
-11-
corresponding regular cash dividends paid by GS Inc. in respect of a Share the record date for
which occurs on or after the Date of Grant. The payment shall be in an amount (less applicable
withholding) equal to such regular dividend payment as would have been made in respect of the
Shares underlying such Outstanding Year-End French Alternative RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(h) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC.
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By: |
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By: |
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Name: |
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EX-10.41
11
y74032exv10w41.htm
EX-10.41: FORM OF NON-EMPLOYEE DIRECTOR OPTION AWARD AGREEMENT
EX-10.41
Exhibit 10.41
THE GOLDMAN SACHS AMENDED AND RESTATED STOCK INCENTIVE PLAN
OUTSIDE DIRECTOR __________
This Award Agreement sets forth the terms and conditions of an award granted to you under The
Goldman Sachs Amended and Restated Stock Incentive Plan (the Plan) of Options to purchase shares
of Common Stock (Shares).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan.
2. Award. The Award Statement sets forth (i) the Date of Grant, (ii) the number of
Options granted, (iii) the per-Share Exercise Price and (iv) the Initial Exercise Date. Until the
Shares are delivered to you pursuant to Paragraph 6, you have no rights as a shareholder of GS Inc.
This Award is subject to all terms and provisions of the Plan and this Award Agreement.
3. Expiration Date. Subject to the terms of the Plan, the Options shall expire and no
longer be exercisable on the Expiration Date (as identified on your Award Statement).
4. Vesting. You shall be fully Vested in the Options on the Date of Grant.
5. Exercisability of Vested Options.
(a) General. To the extent Outstanding and unexercised, but subject to Paragraph 5(d)
hereof, the Options may be exercised in accordance with procedures established by the Committee,
but not earlier than the Initial Exercise Date. The Committee may from time to time prescribe
periods during which the Options shall not be exercisable.
(b) Death. Notwithstanding any other provision of this Award Agreement, if you die
and any Options remain unexercised, and provided your rights in respect of such Options have not
previously terminated, such Options shall be exercisable by the representative of your estate or,
to the extent you specifically bequeath any such Options under your will in accordance with such
procedures, if any, as may be adopted by the Committee to an organization described in Sections
501(c)(3) and 2055(a) of the Code (or such other similar charitable organization as may be approved
by the Committee) (a Charitable Beneficiary), by the Charitable Beneficiary, in either case in
accordance with the procedures described in Paragraph 5(a) as soon as practicable after the date of
death and after such documentation as may be requested by the Committee is provided to the
Committee and shall, unless earlier terminated or cancelled in accordance with the terms of this
Agreement, remain exercisable until the Expiration Date and shall thereafter terminate. The
Transfer Restrictions described in Paragraph 5(d) shall be removed.
(c) Other Terminations. Upon your separation from the Board of Directors of GS Inc.
for any reason, your Outstanding and unexercised Options shall remain exercisable until the
Expiration Date, and shall thereafter terminate.
(d) Certain Restrictions on Transfer of Shares and Exercise of Options. Until the
earlier of (I) the date on which you cease to be a director of the GS Inc. Board, or (II) ___
(the Transferability Date): (i) (A) no sale, exchange, transfer, assignment, pledge,
hypothecation, fractionalization, hedge or other disposition of (including through the use of any
cash-settled instrument) any Shares acquired in connection with the exercise of your Options,
whether voluntarily or involuntarily by you; and (B) no exercise of any Options involving the sale
of Shares acquired in respect of such exercise (the restrictions in clauses (i)(A) and (i)(B) of
this Paragraph 5(d) being referred to collectively as the Transfer Restrictions) may be
effected, and any purported sale, exchange, transfer, assignment, pledge, hypothecation,
fractionalization, hedge, other disposition or exercise in violation of the Transfer Restrictions
shall be void; and (ii) if and to the extent Shares subject to your Options are certificated, the
certificates representing such Shares shall bear a legend specifying that such Shares are subject
to the restrictions described in this Paragraph 5(d) and GS Inc. may advise its transfer agent to
place a stop order against the transfer of such Shares in violation of such Transfer Restrictions.
Any Shares acquired in connection with any exercise of your Options prior to the Transferability
Date shall be held in a custody or other account designated by the Firm. Within 30 Business Days
after the Transferability Date (or any other date for which removal of the Transfer Restrictions is
called for), GS Inc. shall take, or shall cause to be taken, such steps as may be necessary to
remove the Transfer Restrictions.
6. Delivery. Without limiting the application of Paragraph 5(d), unless otherwise
determined by the Committee, or as otherwise provided in this Award Agreement, and except as
provided in Paragraph 8, upon receipt of payment of the Exercise Price for Shares subject to one or
more Options, delivery of the appropriate number of Shares shall be effected by book-entry credit
to the Custody Account or to a brokerage account, as approved or required by the Firm. No delivery
of Shares shall be made unless you have timely established the Custody Account or a brokerage
account, as approved or required by the Firm. You shall be the beneficial owner of any Shares
properly credited to the Custody Account or delivered to a brokerage account, as approved or
required by the Firm. You shall have no right to any dividend or distribution with respect to such
Shares if the record date for such dividend or distribution is prior to the date the Custody
Account or brokerage account, as approved or required by the Firm, is properly credited with such
Shares. The Firm may deliver cash or other property in lieu of all or any portion of the Shares
otherwise deliverable in accordance with this Paragraph 6.
7. Conflicted Employment. Without otherwise limiting the application of Paragraph
5(d), if you accept employment at any U.S. Federal, state or local government, any non-U.S.
government, any supranational or international organization, any self-regulatory organization or
any agency, or instrumentality of any such government or organization, or any other employer
determined by the Committee, and as a result of such employment, your continued holding of your
Options would result in an actual or perceived conflict of interest (Conflicted Employment) then
the Transfer Restrictions set forth in Paragraph 5(d) shall cease to apply and, at the sole
discretion of the Firm: (a) such Outstanding Options shall be cancelled and as soon as practicable
after the Committee has received satisfactory documentation relating to your Conflicted Employment
(the Release Date) you shall receive a payment equal to the excess (if any) of (x) the Fair
Market Value of a Share on the Business Day immediately prior to the Release Date multiplied by the
number of your Options that were Outstanding immediately prior to such cancellation over (y) the
Exercise Price multiplied by the number of such Options;
(b) the Initial Exercise Date with respect to your Outstanding Options shall become the
Release Date; or (c) if and to the extent provided in any procedures adopted by the Committee, you
may be permitted to transfer your Outstanding Options for value to a party or parties acceptable to
the Firm (which may include the Firm). Notwithstanding anything else herein, the actions described
in this Paragraph 7 shall be permitted only at such time and if and to the extent as would not
result in the imposition of any additional tax to you under Section 409A of the Code (which governs
taxation of certain deferred compensation).
8. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, and without limiting any permitted transfer in
accordance with Paragraph 7, the limitations set forth in Section 3.5 of the Plan shall apply with
respect to the Options. Any purported transfer or assignment in violation of the provisions of
this Paragraph 8 or Section 3.5 of the Plan shall be void. The Committee may adopt procedures
pursuant to which you may transfer some or all of your Options through a gift for no consideration
to any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the recipients household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, and any
other entity in which these persons (or the recipient) own more than 50% of the voting interests.
9. Withholding, Consents and Legends.
(a) The delivery of Shares upon exercise of your Outstanding Options is conditioned on your
satisfaction of any applicable withholding taxes (in accordance with Section 3.2 of the Plan,
provided that the Committee may determine not to apply the minimum withholding rate specified in
Section 3.2.2 of the Plan).
(b) Your rights in respect of the Options are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable, and by accepting this Award you
shall be deemed to consent and agree to the items specified in Section 3.3.3(d) of the Plan.
(c) In addition to the restrictions listed in Paragraph 5(d), GS Inc. may affix to
Certificates representing Shares issued pursuant to this Award Agreement any legend that the
Committee determines to be necessary or advisable (including to reflect any restrictions to which
you may be subject under a separate agreement with GS Inc.). GS Inc. may advise the transfer agent
to place a stop order against any legended Shares.
10. Successors and Assigns of GS Inc. The terms and conditions of this Award
Agreement shall be binding upon and shall inure to the benefit of GS Inc. and its successors and
assigns.
11. Committee Discretion. The Committee shall have full discretion with respect to
any actions to be taken or determinations to be made in connection with this Award
Agreement, and its determinations shall be final, binding and conclusive in accordance with
Section 1.3 of the Plan.
12. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement in any respect in accordance with Section 1.3 of the
Plan, and the Board may amend the Plan in any respect in accordance with Section 3.1 of the Plan.
13. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
14. Section 409A of the Code. This Award is intended to be exempt from the provisions
of Section 409A of the Code (Section 409A). Notwithstanding anything else herein or in the Plan,
no action described herein, including without limitation Paragraphs 6 and 7, or in the Plan shall
be permitted if the Firm determines such action would result in the imposition of additional tax
under Section 409A.
15. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of ___.
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THE GOLDMAN SACHS GROUP, INC. |
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Accepted and Agreed: |
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EX-10.42
12
y74032exv10w42.htm
EX-10.42: FORM OF NON-EMPLOYEE DIRECTOR RSU AWARD AGREEMENT
EX-10.42
Exhibit 10.42
THE GOLDMAN SACHS
AMENDED AND RESTATED STOCK INCENTIVE PLAN
OUTSIDE DIRECTOR __________
This Award Agreement sets forth the terms and conditions of an Award of RSUs granted to you
under The Goldman Sachs Amended and Restated Stock Incentive Plan (the Plan) as of ___.
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement which are not
defined in this Award Agreement have the meanings as used or defined in the Plan. In light of
the U.S. tax rules relating to deferred compensation in Section 409A of the Code, to the extent
that you are a United States taxpayer, certain provisions of this Award Agreement and of the Plan
shall apply only as provided in Paragraph 11.
2. Award. ___RSUs are subject to this Award. Each RSU constitutes an unfunded
and unsecured promise of GS Inc. to deliver (or cause to be delivered) to you, subject to the terms
and conditions of this Award Agreement, a share of Common Stock (a Share) (or cash or other
property equal to the Fair Market Value thereof) on the Delivery Date as provided herein. Until
such delivery, you have only the rights of a general unsecured creditor and no rights as a
shareholder of GS Inc. This Award is subject to all terms and provisions of the Plan and this
Award Agreement.
3. Delivery.
(a) In General. Except as provided below in this Paragraph 3 and subject to
Paragraphs 6, 7 and 11, the Delivery Date shall be on the last Business Day in May in the year
following the year in which you cease to be a director of the GS Inc. Board. The Firm may deliver
cash or other property in lieu of all or any portion of the Shares otherwise deliverable on the
Delivery Date. Unless otherwise determined by the Committee, or as otherwise provided in this
Award Agreement, delivery of Shares shall be effected by book-entry credit to the Custody Account
or to a brokerage account, as approved or required by the Firm. No delivery of Shares shall be
made unless you have timely established the Custody Account or a brokerage account, as approved or
required by the Firm. You shall be the beneficial owner of any Shares properly credited to the
Custody Account or delivered to a brokerage account, as approved or required by the Firm. You
shall have no right to any dividend or distribution with respect to such Shares if the record date
for such dividend or distribution is prior to the date the Custody Account or brokerage account, as
approved or required by the Firm, is properly credited with such Shares.
(b) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraph 11), if you die prior to the Delivery Date, the Shares (or cash or other property in lieu
of all or any portion thereof) corresponding to your Outstanding RSUs shall be delivered to the
representative of your estate as soon as practicable after the date of death and after such
documentation as may be requested by the Committee is provided to the Committee. The Committee may
adopt procedures pursuant to which you may be permitted to specifically
bequeath some or all of your Outstanding RSUs under your will to an organization described in
Sections 501(c)(3) and 2055(a) of the Code (or such other similar charitable organization as may be
approved by the Committee).
4. Dividend Equivalent Rights. Prior to the delivery of Shares (or cash or other
property in lieu thereof) pursuant to this Award Agreement, at or after the time of distribution of
any regular cash dividend paid by GS Inc. in respect of the Common Stock, you shall be entitled to
receive an amount in cash or other property equal to such regular cash dividend payment as would
have been made in respect of the Shares not yet delivered, as if the Shares had been actually
delivered.
5. Non-transferability. Except as may otherwise be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations set forth in Section 3.5 of the Plan
shall apply to this Award. Any purported transfer or assignment in violation of the provisions of
this Paragraph 5 or Section 3.5 of the Plan shall be void. The Committee may adopt procedures
pursuant to which you may transfer some or all of your RSUs through a gift for no consideration to
any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the recipients household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, and any
other entity in which these persons (or the recipient) own more than 50% of the voting interests.
6. Conflicted Employment. Notwithstanding anything in this Award Agreement to the
contrary, if you accept employment at any U.S. Federal, state or local government, any non-U.S.
government, any supranational or international organization, any self-regulatory organization or
any agency, or instrumentality of any such government or organization, or any other employer
determined by the Committee, and as a result of such employment, your continued holding of your
Outstanding RSUs would result in an actual or perceived conflict of interest (Conflicted
Employment), then you shall receive, at the sole discretion of the Firm, either a lump sum cash
payment in respect of, or delivery of Shares underlying, your then Outstanding RSUs, in each case
as soon as practicable after the Committee has received satisfactory documentation relating to your
Conflicted Employment.
7. Withholding, Consents and Legends.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan, provided that the Committee may determine not to
apply the minimum withholding rate specified in Section 3.2.2 of the Plan.
(b) Your rights in respect of the RSUs are conditioned on the receipt to the full satisfaction
of the Committee of any required consents (as described in Section 3.3 of the Plan) that the
Committee may determine to be necessary or advisable, and, by accepting this Award, you agree to
the matters described in Section 3.3.3(d) of the Plan.
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(c) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable. GS Inc. may
advise the transfer agent to place a stop order against any legended Shares.
8. Successors and Assigns of GS Inc. The terms and conditions of this Award
Agreement shall be binding upon and shall inure to the benefit of GS Inc. and its successors and
assigns.
9. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement in any respect in accordance with Section 1.3 of the
Plan, and the Board may amend the Plan in any respect in accordance with Section 3.1 of the Plan.
Notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(h) and 3.1 of the Plan, no such
amendment shall materially adversely affect your rights and obligations under this Award Agreement
without your consent (or the consent of your estate, if such consent is obtained after your death),
except that the Committee reserves the right to accelerate the delivery of the Shares and in its
discretion provide that such Shares may not be transferable until the Delivery Date. Any amendment
of this Award Agreement shall be in writing signed by an authorized member of the Board or any
other person or persons authorized by the Board.
10. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
11. Compliance of Award Agreement and Plan with Section 409A. The provisions of this
Paragraph 11 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 11 and
the other provisions of this Award Agreement, this Paragraph 11 shall govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 7(a) and (b), and the consents and
other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by December 31 of
the calendar year in which the Delivery Date occurs unless, in order to permit
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such conditions or restrictions to be satisfied, the Committee elects, pursuant to Treasury
Regulations section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance
with Section 409A, to delay delivery of Shares to a later date as may be permitted under Section
409A, including, without limitation, Regs. 1.409A-2(b)(7) (in conjunction with Section 3.21.3 of
the Plan pertaining to Code Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(a) and Section 1.3.2(i) of the Plan, to the
extent necessary to comply with Section 409A, any securities, other Awards or other property that
the Firm may deliver in respect of your RSUs shall not have the effect of deferring delivery or
payment, income inclusion, or a substantial risk of forfeiture, beyond the date on which such
delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with respect to
the Shares that would otherwise have been deliverable (unless the Committee elects a later date for
this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted under Section
409A, including, without limitation and to the extent applicable, the subsequent election
provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(b), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) Notwithstanding any provision of Paragraph 4 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding RSUs shall be paid to you
within the calendar year that includes the date of distribution of any corresponding regular cash
dividends paid by GS Inc. in respect of a Share the record date for which occurs on or after the
Date of Grant. The payment shall be in an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding RSUs.
(f) The timing of delivery or payment referred to in Paragraph 6 shall be the earlier of (i)
the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(g) Section 3.4 of the Plan shall not apply to Awards that are 409A deferred compensation.
(h) Delivery of Shares in respect of this Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
12. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
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IN WITNESS WHEREOF, GS Inc. and you have caused this Award Agreement to be duly executed and
delivered.
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THE GOLDMAN SACHS GROUP, INC. |
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Accepted and Agreed: |
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EX-10.43
13
y74032exv10w43.htm
EX-10.43: DESCRIPTION OF NON-EMPLOYEE DIRECTOR COMPENSATION
EX-10.43
Exhibit 10.43
Description of Non-Employee Director Compensation
For fiscal 2008, the compensation for the non-employee directors of The Goldman Sachs Group,
Inc. (Group Inc.) consisted of:
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a $75,000 annual retainer awarded on December 17, 2008 as 953 fully vested
restricted stock units (RSUs) to each non-employee director of Group Inc., other than
Lakshmi N. Mittal, who became a director in late June 2008 and received a prorated
retainer of $37,500 as 477 fully vested RSUs, and Edward M. Liddy, who resigned as a
director in early October 2008 and received a prorated cash retainer of $62,500; |
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a $25,000 committee chair fee awarded on December 17, 2008 as 318 fully vested RSUs
to each committee chair, other than Stephen Friedman, who became Chair of the Audit
Committee in early October 2008 and received a prorated committee chair fee of $4,167
as 53 fully vested RSUs, and Mr. Liddy, who resigned as Chair of the Audit Committee in
early October 2008 and received a prorated cash committee chair fee of $20,833; and |
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the following grants awarded on December 17, 2008: |
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2,900 fully vested RSUs for each of Claes Dahlbäck, Mr. Friedman, William
W. George, Lois D. Juliber and Ruth J. Simmons; |
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1,450 fully vested RSUs and 5,800 fully vested stock options (Options)
for John H. Bryan and James A. Johnson; |
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11,600 fully vested Options for Rajat K. Gupta; |
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a prorated grant of 1,450 fully vested RSUs for Mr. Mittal; and |
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$190,385 in cash in lieu of a prorated annual equity grant for Mr. Liddy, a retired director. |
Non-employee directors (other than Mr. Mittal, who joined during the year) elected whether to
receive RSUs, Options or a combination of RSUs and Options.
RSUs awarded in connection with non-employee director compensation provide for delivery of the
underlying shares of common stock, par value $0.01 per share (Common Stock), of Group Inc. on the
last business day in May in the year following the year of the non-employee directors retirement
from the Group Inc. Board of Directors. Options awarded in connection with non-employee director
compensation for fiscal 2008 have an exercise price of $78.78 (the closing price per share of
Common Stock on the NYSE on the date of grant). One-third of the Options awarded generally become
exercisable in each of January 2010, January 2011 and January 2012, provided that all of the
Options granted to a non-employee director become exercisable on the date the non-employee director
ceases to be a director of Group Inc. For so long as the non-employee director remains a director
of Group Inc., the Common Stock underlying any exercised Option cannot be transferred before
January 2014.
The Group Inc. Board of Directors, upon the recommendation of the Corporate Governance and
Nominating Committee, has a policy on stock ownership that requires each non-employee director to
beneficially own at least 5,000 shares of Common Stock or fully vested RSUs within two years of
becoming a director. All non-employee directors of Group Inc. are in compliance with this policy.
Non-employee directors of Group Inc. are permitted to participate in Group Inc.s employee
matching gift program on the same terms as employees. Under the program for 2008, Group Inc.
matched gifts of up to $20,000 in the aggregate per participating individual.
Non-employee directors receive no compensation other than directors fees.
EX-10.49
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y74032exv10w49.htm
EX-10.49: FORM OF SIGNATURE CARD FOR EQUITY AWARDS
EX-10.49
Exhibit 10.49
The Goldman Sachs Group, Inc.
Signature Card For ____ Year-End Awards and the BNY Mellon Custody Account
and Consent to Receive Electronic Delivery
IMPORTANT: PLEASE REVIEW, EXECUTE AND RETURN THIS FORM TO: EQUITY COMPENSATION
(DIVISION OF HCM), 30 HUDSON STREET, 35TH FLOOR, JERSEY CITY, NJ
07302.
YOU MUST PROPERLY EXECUTE THIS FORM TO ACKNOWLEDGE ACCEPTANCE OF THE
TERMS AND
CONDITIONS OF YOUR AWARD(S) AND RELATED MATTERS.
1. I have received and agree to be bound by The Goldman Sachs Amended and Restated Stock
Incentive Plan (the SIP) and the Award Agreement(s) applicable to me in connection with the ___
Year-End Award(s) (the Award(s)) that I have been granted by the Firm (as defined below). I
confirm that I have accepted the Award(s) subject to the terms and conditions contained in the SIP
and the Award
Agreement(s), including but not limited to, the requirement that disputes relating to
the Award(s) and the Award Agreement(s) be decided through arbitration in New York City and be
governed by New York law.
As a condition of this grant, I understand that the Award(s) (as well as any other award that the
Firm may grant to me under the SIP) is/are subject to other governing law provisions (as outlined
in this signature card, in the current or otherwise then current Award Summary (as defined below)
or otherwise as may be required under applicable law) and, as a condition to receiving such awards,
I agree to be bound thereby. I also understand that the Firm may grant to me other awards under the
SIP that also may contain (among other terms and conditions) arbitration and other governing law
provisions and, as a condition to receiving such awards, I agree to be bound thereby. As a
condition of this grant, I agree to provide upon request an appropriate certification regarding my
U.S. tax status on Form W-8BEN, Form W-9, or other appropriate form, and I understand that failure
to supply a required form may result in the imposition of backup withholding on certain payments I
receive pursuant to this grant.
Further, as a condition of this grant, if I am a person who has worked in the United
Kingdom at any time during the earnings period relating to any award under the SIP, as
determined by the Firm, when requested and as directed by the Firm, I will agree to a Joint
Election under s431 ITEPA 2003 of the laws of the United Kingdom for full or partial disapplication
of Chapter 2 Income Tax (Earnings and Pension) Act 2003 under the laws of the United Kingdom and
will sign and return such election in respect of all future deliveries of shares underlying the
Award(s) and any previous grants made to me under the SIP and understand that the Firm intends to
meet its delivery obligations in shares with respect to my Award(s), except as may be prohibited by
law or described in the accompanying Award Agreement or supplementary materials.
If I have worked in Switzerland at any time during the earnings period relating to the
Award(s) granted to me as determined by the Firm, (i) I acknowledge that my Award(s) are subject to
tax in accordance with the rulings and method of calculation of taxable values to be agreed by the
Firm with the Federal and/or Zurich/Geneva cantonal/communal tax authorities or as otherwise
directed by the Firm, and (ii) I hereby agree to be bound by any rulings agreed by the Firm in
respect of any Award(s), which is expected to result in taxation at the time of delivery of shares
(or cash or other property in lieu thereof), and (iii) I undertake to declare and make a full and
accurate income tax declaration in respect of my Award(s) in accordance with the above ruling or as
directed by the Firm.
I understand and acknowledge that any transfer provisions (including, where applicable, escrow and
other similar provisions, but specifically excluding any transfer restrictions imposed on any
Award(s) in the Award Agreement(s) or the SIP) in the SIP or related documents will not apply to me
(i) to the extent that the applicability of those provisions would affect the availability of
relevant exemptions or tax favorable treatment, or (ii) otherwise in circumstances determined by
the Firm in its sole discretion.
2. I have read and understand the Firms Notice Periods for Recipients of Year-End Equity-Based
Awards (the Notice Policy), pursuant to which I am required to provide certain specified advance
notice of my intent to leave employment with the Firm. I understand that in executing this form, I
will be agreeing to provide my employing entity with advance notice of my intention to leave
employment with the Firm as follows:
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In the Americas, Japan and Asia Ex-Japan (excluding India): 60 days in advance of my
termination date |
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In Europe, the Middle East, Africa and India: 90 days in advance of my termination date |
and that, where applicable (see the provisions in the Award Summary), the provisions of the Notice
Policy constitute a permanent change to my terms and conditions of employment. I agree to this
change in consideration of my continued employment with the Firm and my acceptance of the Award(s),
and I agree to be bound by the Notice Policy as in effect from time-to-time.
I also understand that the terms and conditions of my employment shall be permanently changed so
that, in the event that I resign from the Firm, the Firm may either:
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Unilaterally waive or reduce the notice period otherwise applicable to my employment, or |
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Take such other action as shall have that effect. |
I acknowledge that the Firm retains its right to bring forward the end of the notice period to such
earlier date, and that I will not be entitled to any salary, wages, or benefits after such earlier
date. In addition, I understand that I will not receive pay in lieu for any period of notice that
has been waived or reduced.
This agreement concerning my notice period is being made for and on behalf of my Goldman Sachs
employing entity, and implementation of the Notice Policy does not create an employment
relationship between me and The Goldman Sachs Group, Inc.
I understand that unless the notice period is waived by agreement or unilaterally as set out above,
or I have exercised a statutory right to make a payment in lieu of my notice period, I will be paid
my base salary and will continue to receive all mandatory benefits during the notice period. I
understand that during my notice period I may (subject to any local laws to the contrary) be
required to remain away from the Firms offices, and/or be removed from any assigned duties or
assigned to other suitable duties during my notice period.
I understand that if I fail to give the full amount of notice as set out above, or to comply in any
respect with the Notice Policy, I will have failed to meet an obligation I have under an agreement
with the Firm, as a result of which the Firm may have certain rights and I may be subject to
certain legal and equitable rights and remedies, including, without limitation, the forfeiture of
the Award(s) and any other awards granted to me (whether before or after the Award(s)) under the
SIP. The forfeiture of such Award(s) will also apply where I fail to give the full amount of notice
by exercising any right I may have under applicable legislation to make a payment in lieu of such
notice. I also understand that, if I fail to comply with the Notice Policy, the Firm may be
entitled to an injunction from a court restraining me from violating it.
I understand that, for employees of Archon Group, L.P., the Notice Policy applies only to Senior
Executives.
3. I have read and understand the Firms hedging and pledging policies (including, without
limitation, the Firms Policies With Respect to Transactions Involving GS Shares, Equity Awards
and GS Options by Persons Affiliated with GS Inc.), and agree to be bound by them (with respect to
the Award(s) and any prior awards under the SIP), both during and following my employment with the
Firm.
4. If a custody account is required, I request that The Bank of New
York Mellon (BNY Mellon) (successor in interest to Mellon Bank, N.A.) open a custody account for
me as described in the enclosed Custody Agreement among BNY Mellon (as successor in interest to
Mellon Bank N.A.), The Goldman Sachs Group, Inc., and myself. I have received and agree to be bound
by the Custody Agreement (or any other such custody agreement previously entered into by me or on
my behalf), including the applicable restrictions on transfers, pledges and withdrawals of Common
Stock, the provisions permitting the Firm to monitor my custody account, and the limitations on the
liability of BNY Mellon and the Firm. I also agree to open an account with any other custodian or
broker selected by the Firm, if the Firm, in its sole discretion, requires me to open an account
with such custodian or broker as a condition to delivery of shares (or cash or other property)
underlying the Award(s).
5. If the Firm advanced or loaned me funds to pay certain taxes (including income taxes and Social
Security, or similar contributions) in connection with the Award(s) (or does so in the future), and
if I have not signed a separate loan agreement governing repayment, I authorize the Firm to
withhold from my compensation any amounts required to reimburse it for any such advance or loan to
the extent permitted by applicable law.
I understand and agree that, if I leave the Firm, I am required immediately to repay any
outstanding amount. I further understand and agree that the Firm has the right to offset, to the
extent permitted by the Award Agreement and applicable law (including Section 409A of the U.S.
Internal Revenue Code of 1986, as amended, which limits the
Firms ability to offset in the case of United States taxpayers under certain circumstances), any
outstanding amounts that I then owe the Firm against its delivery obligations under the Award(s) or
against any other amounts the Firm then owes me. I understand that the delivery of shares pursuant
to the Award(s) is conditioned on my satisfaction of any applicable taxes or social security
contributions (collectively referred to as tax or taxes for purposes of the SIP and all related
documents) in accordance with the SIP. To the extent permitted by applicable law, the Firm, in its
sole discretion, may require me to provide amounts equal to all or a portion of any Federal, State,
local, foreign or other tax obligations imposed on me or the Firm in connection with the grant,
vesting or delivery of the Award(s) by requiring me to choose
Year End
(General)
between remitting such amount (i) in
cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from the Firms
executing a sale of shares delivered to me pursuant to the Award(s). However, in no event shall any
such choice or the choice specified in paragraph 6, below, determine, or give me any discretion to
affect, the timing of the delivery of shares or payment of tax obligations. I understand and agree
that the Firm may reduce any year-end cash bonus that I may receive by an amount equal to the
estimated Indian Fringe Benefit Tax applicable to any award (whether or not vested), as determined
by the Firm in its sole discretion.
6. If I am an individual with separate employment contracts (at any time during and/or after the
Firms ___fiscal year), I acknowledge and agree that the Firm may, in its sole discretion,
require (to the extent permitted by applicable law) that I provide for a reserve in an amount the
Firm determines is advisable or necessary in connection with any actual, anticipated or potential
tax consequences related to my separate employment contracts by requiring me to choose between
remitting such amount (i) in cash (or through payroll deductions or otherwise) or (ii) in the form
of proceeds from the Firms executing a sale of shares delivered to me pursuant to the Award(s) (or
any other of my awards outstanding under the SIP).
7. In connection with any Award Agreement or other interest I may receive in the SIP or any shares
of Common Stock of The Goldman Sachs Group, Inc. that I may receive in connection with the Award(s)
or any award I have previously received or may receive, or in connection with any amendment or
variation thereof or any documents listed in paragraph 8, I hereby consent to (a) the acceptance by
me of the Award(s) electronically, (b) the giving of instructions in electronic form whether by me
or the Firm, and (c) the receipt in electronic form at my email address maintained at Goldman Sachs
or via Goldman Sachs intranet site (or, if I am no longer employed by the Firm, at such other
email address as I may specify, or via such other electronic means as the Firm and I may agree) all
notices and information that the Firm is required by law to send to me in connection therewith
including, without limitation, any document (or part thereof) constituting part of a prospectus
covering securities that have been registered under the U.S. Securities Act of 1933, the
information contained in any such document and any information required to be delivered to me under
Rule 428 of the U.S. Securities Act of 1933, including, for example, the annual report to security
holders or the annual report on Form 10-K of The Goldman Sachs Group, Inc. for its latest fiscal
year, and that all prior elections that I may have made relating to the delivery of any such
document in physical form are hereby revoked and superseded. I agree to check Goldman Sachs
intranet site (or, if I am no longer employed by the Firm, such other electronic site as the Firm
and I may agree) periodically as I deem appropriate for any new notices or information concerning
the SIP. I understand that I am not required to consent to the receipt of such documents in
electronic form in order to receive the Award(s) and that I may decline to receive such documents
in electronic form by contacting Equity Compensation (division of HCM), 30 Hudson Street, 35th
Floor, Jersey City, NJ 07302, telephone (212) 357-1444, which will provide me with hard copies of
such documents upon request. I also understand that this consent is voluntary and may be revoked at
any time on three business days written notice.
8. I hereby acknowledge that I have received in electronic form in accordance with my consent in
paragraph 7 the following documents:
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The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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Summary of The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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The ___Annual Report for The Goldman Sachs Group, Inc.; |
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The annual report on Form 10-K for The Goldman Sachs Group, Inc. for the fiscal year
ended ___, filed with the Securities Exchange Commission on ___; |
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The Award Agreement(s); and |
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Summaries of the Award(s) (Award Summary). |
9. I expressly authorize any appropriate representative of the Firm to make any notifications,
filings or remittances of funds that may be required in connection with the SIP or otherwise on my
behalf. Further, if I am an employee who is resident in South Africa at the time of share
acquisition, by accepting my Award(s), I expressly authorize any appropriate representative of the
Firm to make any required notification on my behalf to the Reserve Bank of South Africa (or its
authorized dealer) in relation to any acquisition of shares for no consideration under the SIP or
other similar filing that may otherwise be required in South Africa. I acknowledge that any such
authorization is effective from the date of acceptance of my Award(s) until such time as I
expressly revoke the authorization by written notice to any appropriate representative of the Firm.
I understand that this authorization does not create any obligation on the Firm to deal with any
such notifications, filings or remittances of funds that I may be required to make in connection
with the SIP and I accept full responsibility in this regard.
Consent to Data Collection, Processing and Transfers:
I understand and agree that in connection with the SIP and any other Firm benefit plan (the
Programs), to the extent permitted under the laws of the applicable jurisdiction, the Firm may
collect and process various data that is personal to me, including my name, address, work location,
hire date, Social Security or Social Insurance or taxpayer identification number (required for tax
purposes), type and amount of SIP or other benefit plan award, citizenship or residency (required
for tax purposes) and other similar information reasonably necessary for the administration of such
Programs (collectively referred to as Information) and provide such Information to its affiliates
and BNY Mellon (and its affiliates) or any other service provider, whether in the United States or
elsewhere, as is reasonably necessary for the administration of the Programs and under the laws of
these jurisdictions. I understand that, in certain circumstances, foreign courts, law enforcement
agencies or regulatory agencies may be entitled to access the Information. I understand that,
unless I explicitly authorize otherwise, the Firm, its affiliates and its service providers
(through their respective employees in charge of the relevant electronic and manual processing)
will use this Information only for purposes of administering the Programs. I understand that, in
the United States and in other countries to which such Information may be transferred for the
administration of the Programs, the level of data protection is not equivalent to data protection
standards in the member states of the European Union. I understand that, upon request, to Equity
Compensation (division of HCM), 30 Hudson Street, 35th Floor, Jersey City, NJ 07302, telephone
(212) 357-1444, to the extent required under the laws of the applicable jurisdiction, I may have
access to and obtain communication of the Information and may exercise any of my rights in respect
of such Information, including objecting to the processing of the Information and requesting that
the Information be corrected (if wrong), completed or clarified (if incomplete or equivocal), or
erased (if cannot legally be collected or kept). Upon request, to the extent required under the
laws of the applicable jurisdiction, Equity Compensation (division of HCM) will also provide me,
free of charge, with a list of all the service providers used in connection with the Programs at
the time of request. I understand that, if I refuse to authorize the use and transfer of the
Information consistent with the above, I may not benefit from the Programs. I authorize the use and
transfer of the Information consistent with the above for the period of administration of the
Programs. In particular, I authorize (within the limits described above): (i) the data processing
by the Firm (which means The Goldman Sachs Group, Inc. and its subsidiaries and affiliates); (ii)
the data processing by BNY Mellon and its affiliates; (iii) the data processing by the Firms other
service providers; and (iv) the data transfer to the United States and other countries. I further
acknowledge that the Information may be retained by such persons beyond the period of
administration of the Programs to the extent permitted under the laws of the applicable
jurisdiction and I so authorize.
Other Legal Notices:
FOR ARGENTINA EMPLOYEES ONLY
This is a private offer. It is not subject to the supervision of the Comision Nacional de Valores
(CNV) or any other governmental authority in Argentina.
FOR AUSTRALIA EMPLOYEES ONLY
This document is provided for your information only. This document does not constitute an offer of
securities. Your individual offer of participation will be given to you directly with a printed
copy of the disclosure document.
FOR BRAZIL EMPLOYEES ONLY
Please note that the offer of an award under the SIP does not constitute a public offer in Brazil,
and therefore it is not subject to registration with the Brazilian authorities.
According to Brazilian regulations, individuals resident in Brazil must inform the Central Bank of
Brazil yearly the amounts of any nature, the assets and rights (including cash and other deposits)
held outside of the Brazilian territory. Please consult your own legal counsel on the terms and
conditions for presentation of such information.
By accepting the Award(s), you acknowledge that the Firm has provided you with Portuguese
translations of the Award Summary, Award Agreement and Signature Card, but that the original
English version of these documents controls. (Ao aceitar esta outorga, Você reconhece que a Empresa
Ihe disponibilizou a versão em português do Award Summary, do Award Agreement e do Signature Card;
porém a versão original em inglês desses documentos prevalecerá.)
FOR CANADA EMPLOYEES IN QUEBEC ONLY
By accepting the Award(s), you acknowledge and agree that you and the Firm expressly wish that all
documents related to the Award(s) (including, without limitation, the Plan document, this Signature
Card, the Award Agreement and the Award Summary) be in English.
FOR THE PEOPLES REPUBLIC OF CHINA EMPLOYEES ONLY
All documentation in relation to the Award(s) is intended for your personal use and in your
capacity as an employee of the Firm (and/or its affiliate) and is being given to you solely for the
purpose of providing you with information concerning
Year End
(General)
-2-
the Award(s) which the Firm may grant to you
as an employee of the Firm (and/or its affiliate) in accordance with the terms of the SIP, this
documentation and the applicable Award Agreement(s). The grant of the Award(s) has not been and
will not be registered with the China Securities Regulatory Commission of the Peoples Republic of
China pursuant to relevant securities laws and regulations, and the Award(s) may not be offered or
sold within the mainland of the Peoples Republic of China by means of any of the documentation in
relation to the Award(s) through a public offering or in circumstances which require a registration
or approval of the China Securities Regulatory Commission of the Peoples Republic of China in
accordance with the relevant securities laws and regulations.
FOR FRANCE EMPLOYEES ONLY
Disclaimer: The current award is not covered by any prospectus which is the subject of the AMFs
approval. Grantees can only receive this award for their own account (compte propre) in the
conditions laid down by articles D. 411-1, D. 411-2, D.411-3, D.411-4, D. 734-1, D. 744-1, D. 754-1
and D. 764-1 of the French Monetary and Financial Code. Any direct or indirect dissemination into
the public of the financial instruments acquired can only take place within the conditions of
articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Monetary and
Financial Code.
By accepting this award, you acknowledge that the Firm has provided you with French translations of
the Award Summary, Award Agreement and Signature Card, but that the original English version of
these documents control.
Avertissement: La présente attribution ne donne pas lieu à un prospectus soumis au visa de
lAutorité des marches financiers. Les personnes qui y participent ne peuvent le faire que pour
compte propre dans les conditions fixées par les articles D.
411-1, D. 411-2, D.411-3, D.411-4, D.734-1, D. 744-1, D. 754-1 et D. 764-1 du Code monetaire et financier. La diffusion, directe ou
indirecte, dans le public des instruments financiers ainsi acquis, ne peut être réalisée que dans
les conditions prévues aux articles L. 411-1, L. 411-2 L. 412-1 et L. 621-8 à L. 621-8-3 du Code
monétaire et financier.
En acceptant cet octroi, vous reconnaissez que la Société vous á transmis une version français de
lAward Summary (Résumé de lOctroi), lAward Agreement (Contrat dOctroi) et de la Signature Card
(Carte de Signature), mais que seule la version originale en langue anglaise fait foi.
FOR GERMANY EMPLOYEES ONLY
The
Award(s) are offered to you by The Goldman Sachs Group, Inc. (GS Inc.) in accordance with the
terms of the SIP which are summarized in the Award Summary. More information about GS Inc. is
available on www.gs.com. You are being offered Award(s) under the SIP in order to provide an
additional incentive and to encourage employee share ownership and so increase your interest in the
Firms success. Please refer to the section entitled Shares Available for Awards in the SIP for
information on the maximum number of GS Inc. shares that can be offered under the SIP. The
obligation to publish a prospectus under the Prospectus Directive does not apply to the offer
because of Article 4(1)(e) of that directive.
Die
Prämien werden lhnen von der The Goldman Sachs Group, Inc. (,,GS Inc.) gemäß den in der
Prämienübersicht aufgeführten Bestimmungen des Erwerbsplans angeboten. Weitere Informationen über
GS Inc. finden Sie unter www.gs.com. Die Prämien werden lhnen im Rahmen des Erwerbsplans angeboten,
um einen zusätzlichen Anreiz darzustellen und Sie als Mitarbeiter zum Erwerb von Aktien zu
ermutigen, um so Ihren Anteil am Erfolg des Unternehmens zu vergrößern. Informationen zur Anzahl
der im Rahmen des Plans angebotenen GS Inc.-Aktien entnehmen Sie bitte dem Abschnitt als Prämien
erhältliche Aktien im Erwerbsplan. Die Verpflichtung zur Veröffentlichung eines Emissionsprospekts
gemäß der europäischen Prospektrichtlinie trifft auf Grund von Artikel 4(1)(e) dieser Richtlinie
nicht auf dieses Angebot zu.
FOR HONG KONG EMPLOYEES ONLY
WARNING:
The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You
are advised to exercise caution in relation to the offer. If you are in doubt about any of the
contents of this document, you should obtain independent professional advice.
By accepting the Award(s), you acknowledge and accept that you will not be permitted to transfer
awards to persons who fall outside the definition of qualifying persons in the Companies
Ordinance (i.e., a person who is not a current or former director, employee, officer, consultant of
the Firm or a person other than the offerees wife, husband, widow, widower, child or step-child
under the age of 18 years, or as otherwise defined), even if otherwise permitted under the SIP or
any of the related documents.
FOR INDIA EMPLOYEES ONLY
This website does not invite offers from the public for subscription or purchase of the securities
of any body corporate under any law for the time being in force in India. The website is not a
prospectus under the applicable laws for the time being in force in India. Goldman Sachs does not
intend to market, promote, invite offers for subscription or purchase of the securities of any body
corporate by this website. The information provided on this website is for the record only. Any
person who subscribes or purchases securities of any body corporate should consult his own
investment advisers before making any investments. Goldman Sachs shall not be liable or responsible
for any such investment decision made by any person.
FOR MONACO EMPLOYEES ONLY
By accepting your Award(s), you expressly renounce the jurisdiction of Monaco (and, if applicable,
France and notably the application of articles 14 and 15 of the French Civil Code) in connection
with any dispute relating to your Award(s).
FOR RUSSIA EMPLOYEES ONLY
None of the information contained in the documents referred to in paragraph 8 of this signature
card or in this signature card constitutes an advertisement of the Award(s) in Russia and must not
be passed on to third parties or otherwise be made publicly available in Russia. The Award(s) have
not been and will not be registered in Russia and are not intended for placement or public
circulation in Russia.
FOR SWEDEN EMPLOYEES ONLY
By accepting the Award(s), you acknowledge and accept that any transfer provisions (including,
where applicable, escrow and other similar provisions) in the SIP or any related documents do not
apply to you.
FOR UK EMPLOYEES ONLY
This document is approved by Goldman Sachs International (GSI), Peterborough Court, 133 Fleet
Street, London EC4A 2BB, which is authorized and regulated by the Financial Services Authority. The
document relates to investments and investment services of The Goldman Sachs Group Inc. and other
institutions, including BNY Mellon, relating to custodial and delivery operations. In some or all
respects, the regulatory system applying to these entities, including any compensation arrangements
and rules made under the Financial Services and Markets Act 2000 for the protection of private
customers, will be different from that of the United Kingdom.
This document does not have regard to the specific investment objectives, financial situation and
particular needs of any specific person who may receive it. Recipients should seek their own
financial advice.
The Award(s) is/are subject to the terms and conditions set forth in the SIP and the Award
Agreement. The price of shares and the income from such shares (if any) can fluctuate and may be
affected by changes in the exchange rate for U.S. Dollars. Past performance will not necessarily be
repeated. Levels and bases of taxation may change from time to time. Investors should consult their
own tax advisers in order to understand tax consequences. The Goldman Sachs Group, Inc. has (and
its associates, including GSI, may have) a material interest in the shares and the investments that
are the subject of this document.
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Year End
(General)
-3-
EX-10.58
15
y74032exv10w58.htm
EX-10.58: FORM OF LETTER AGREEMENT
EX-10.58
Exhibit 10.58
[Letterhead of The Goldman Sachs Group, Inc.]
October 28, 2008
[Name of Senior Executive Officer],
c/o The Goldman Sachs Group, Inc.,
85 Broad Street,
New York, New York 10004.
Dear _____,
The Goldman Sachs Group, Inc. (GS Group) has entered into a letter agreement, dated October
26, 2008 (including the Securities Purchase Agreement Standard Terms incorporated by reference
therein, the Securities Purchase Agreement), with the United States Department of Treasury
(Treasury) as part of GS Groups participation in the Treasurys TARP Capital Purchase Program
(the CPP).
For GS Group to participate in the CPP and as a condition to the closing of the investment
contemplated by the Securities Purchase Agreement, GS Group is required to establish specified
standards for incentive compensation to its senior executive officers (as defined below), and to
make changes to certain of its compensation arrangements. To comply with these requirements, and
in consideration of the benefits that you will receive as a result of GS Groups participation in
the CPP, you agree as follows:
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No Golden Parachute Payments. GS Group is prohibiting any golden parachute payment
(as defined below) to you during any CPP Covered Period. A CPP Covered Period is any
period during which (A) you are a senior executive officer and (B) Treasury holds an
equity or debt position acquired from GS Group in the CPP. |
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(2) |
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Recovery of Bonus and Incentive Compensation. Any bonus or incentive compensation
payments to you during a CPP Covered Period is subject to recovery or clawback by GS
Group if the payments were based on materially inaccurate financial statements or any
other materially inaccurate performance metric criteria. |
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(3) |
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Compensation Program Amendments. Each of GS Groups compensation, bonus, incentive
and other benefit plans, programs, arrangements and |
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agreements (including, without limitation, the Amended and Restated Stock Incentive Plan
and each RSU, stock option and other agreement thereunder, the Partner Compensation Plan,
the Restricted Partner Compensation Plan and any document governing any employee special
investment) (collectively, Benefit Plans) applicable to you hereby is amended if and to
the extent necessary to give effect to provisions (1) and (2) and as required under the
Securities Purchase Agreement. |
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In addition, the CPP requires the Compensation Committee of GS Groups Board of Directors
to review annually with GS Groups senior risk officers the features of the Benefit Plans
to ensure that they do not encourage senior executive officers to take unnecessary and
excessive risks that threaten the value of GS Group. If and to the extent that, as a
result of any such review, the Compensation Committee determines any revision to any
Benefit Plan is appropriate, you hereby agree to any such revisions and you agree to
execute such additional documents as GS Group deems necessary or appropriate to effect
such revisions. |
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(4) |
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Definitions and Interpretation. This letter shall be interpreted as follows: |
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Senior executive officer means GS Groups senior executive officers as
defined in subsection 111(b)(3) of EESA and the regulations governing the CPP. |
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Golden parachute payment has the same meaning in subsection 111(b)(2)(C) of
EESA. |
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EESA means the Emergency Economic Stabilization Act of 2008 as implemented by
guidance or regulation that has been issued and is in effect as of the Closing
Date as defined in the Securities Purchase Agreement. |
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GS Group includes any entities treated as a single employer with GS Group under
31 C.F.R. § 30.1(b) (as in effect on the Closing Date). (We note that you also are
delivering a waiver pursuant to the Securities Purchase Agreement, and, as between
GS Group and you, the term employer in that waiver will be deemed to mean GS Group
as used in this letter). |
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The term CPP Covered Period shall be limited by, and interpreted in a manner
consistent with, 31 C.F.R. § 30.11 (as in effect on the Closing Date). |
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Provisions (1) and (2) of this letter are intended to, and will be interpreted,
administered and construed to, comply with Section 111 of EESA and the regulations
thereunder and the regulations governing the CPP (as in effect on the Closing
Date)and, to the maximum extent consistent with the preceding, to permit operation
of the Benefit Plans in accordance with their terms before giving effect to this
letter. |
This letter is subject to the provisions of Annex A, which is part hereof.
* * *
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Very truly yours,
The Goldman Sachs Group, Inc.
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By: |
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Name: |
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Title: |
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Intending to be legally bound, I agree
with and accept the foregoing terms.
ANNEX A
Section 1. Arbitration
(a) Any dispute, controversy or claim between the The Goldman Sachs Group, Inc and its
subsidiaries and affiliates (the Firm) and the Senior Executive Officer Grantee, arising out of
or relating to or concerning this letter (this Agreement), shall be finally settled by
arbitration in New York City before, and in accordance with the rules then obtaining of, the New
York Stock Exchange, Inc. (the NYSE) or, if the NYSE declines to arbitrate the matter in New York
City (or if the matter otherwise is not arbitrable by it), the American Arbitration Association
(the AAA) in accordance with the commercial arbitration rules of the AAA. Prior to arbitration,
all claims maintained by the Senior Executive Officer must first be submitted to the Compensation
Committee (the Committee) in accordance with claims procedures determined by the Committee. This
Section 1 is subject to the provisions of paragraphs (b) and (c) below.
(b) The Firm and the Senior Executive Officer irrevocably submit to the exclusive jurisdiction
of any state or federal court located in the city of New York over any suit, action or proceeding
arising out of or relating to or concerning this Agreement that is not otherwise arbitrated or
resolved according to paragraph (a) above. This includes any suit, action or proceeding to compel
arbitration or to enforce an arbitration award. The Senior Executive Officer acknowledges that the
forum designated by this paragraph (b) has a reasonable relation to this Agreement and to the
Senior Executive Officers relationship with the Firm. Notwithstanding the foregoing, nothing
herein shall preclude the Firm from bringing any suit, action or proceeding in any other court for
the purpose of enforcing the provisions of this Section 1 or otherwise.
(c) The agreement by the Senior Executive Officer and the Firm as to forum is independent of
the law that may be applied in the suit, action or proceeding and the Senior Executive Officer and
the Firm agree to such forum even if the forum may under applicable law choose to apply non-forum
law. The Senior Executive Officer hereby (i) waives, to the fullest extent permitted by applicable
law, any objection which the Senior Executive Officer may have to personal jurisdiction or to the
laying of venue of any such suit, action or proceeding in any court referred to in Section 1(b),
(ii) undertakes not to commence any action arising out of or relating to or concerning this
Agreement in any forum other than a forum described in this Section 1 and (iii) agrees that, to the
fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit,
action or proceeding in any such court shall be conclusive and binding upon the Senior Executive
Officer and the Firm.
(d) The
Senior Executive Officer irrevocably appoints each General Counsel of
GS Group as his
or her agent for service of process in connection with any suit, action or proceeding arising out
of or relating to or concerning this Agreement which is not arbitrated pursuant to the provisions
of Section 1(a), who shall promptly advise the Senior Executive Officer of any such service of
process.
(e) The Senior Executive Officer agrees to keep confidential the existence of, and any
information concerning, a dispute, controversy or claim described in this Section 1, except that
the Senior Executive Officer may disclose information concerning such dispute, controversy or claim
to the arbitrator or court that is considering such dispute, controversy or claim or to his or her
legal counsel (provided that such counsel
agrees not to disclose any such information other than as necessary to the prosecution or
defense of the dispute, controversy or claim).
Section 2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
EX-10.59
16
y74032exv10w59.htm
EX-10.59: GENERAL GUARANTEE AGREEMENT - GS BANK EUROPE
EX-10.59
Exhibit 10.59
GENERAL GUARANTEE AGREEMENT
This General Guarantee Agreement, dated November 24, 2008 (this Guarantee), is made by The
Goldman Sachs Group, Inc. (the Guarantor), a corporation duly organized under the laws of the
State of Delaware, in favor of each person (each, a Party) to whom Goldman Sachs Bank (Europe)
PLC, a public company with limited liability incorporated in Ireland and a subsidiary of the
Guarantor (the Company), may owe any Obligations (as defined below) from time to time. In this
Guarantee, the Company shall also mean any banking subsidiary of the Guarantor, whether now
existing or hereafter formed, that succeeds to the business of Goldman Sachs Bank (Europe) PLC.
1. Guarantee. For value received, the Guarantor hereby unconditionally and, subject to the
provisions of paragraphs number six and seven, irrevocably guarantees to each Party, the complete
payment when due, whether by acceleration or otherwise, of all payment obligations, whether now in
existence or hereafter arising (other than non-recourse payment obligations) of the Company,
including, without limitation, all payment obligations (other than non-recourse payment
obligations) in connection with any deposit, loan, letter of credit or similar borrowing or lending
obligation or arising under any swap, futures, option, forward or other derivative instrument (the
Obligations). This Guarantee is one of payment and not of collection.
2. Waiver of Notice, etc. Except as may be required by the contract, agreement or
instrument creating the Obligations, the Guarantor hereby waives notice of acceptance of this
Guarantee and notice of the Obligations, and waives proof of reliance, diligence, presentment,
demand for payment, protest, notice of dishonor or non-payment of the Obligations, suit, and the
taking of any other action by any Party against, and any other notice to, the Company, the
Guarantor or others.
3. Nature of Guarantee. This Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or enforceability of any
Obligation or right of offset with respect thereto at any time and from time to time held by any
Party or (b) any other circumstance whatsoever (with or without notice to or knowledge of the
Company or the Guarantor) which might constitute an equitable or legal discharge of the Company for
the Obligations, or of the Guarantor under this Guarantee, in bankruptcy, insolvency, dissolution,
examinership, reorganization or in any other instance; provided, however, that under no
circumstances will the Guarantor be liable to any Party hereunder for any amount in excess of the
amount which the Company actually owes to such Party and that the Guarantor may
assert any defense to payment available to the Company, other than those arising in a bankruptcy,
examinership or insolvency proceeding.
A Party may at any time and from time to time without notice to or consent of the Guarantor and
without impairing or releasing the obligations of the Guarantor hereunder: (1) agree with the
Company to make any change in the terms of the Obligations; (2) take or fail to take any action of
any kind in respect of any security for any obligation or liability of the Company to such Party,
(3) exercise or refrain from exercising any rights against the Company or others in respect of the
Obligations; or (4) compromise or subordinate the Obligations. Any other suretyship defenses are
hereby waived by the Guarantor.
4. Reinstatement. The Guarantor further agrees that this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any
of the Obligations, or interest thereon is rescinded or must otherwise be restored or returned by
such Party upon the bankruptcy, insolvency, examinership dissolution or reorganization of the
Company.
5. Subrogation. The Guarantor will not exercise any rights which it may acquire hereunder
by way of subrogation, as a result of a payment hereunder, until all due and unpaid Obligations to
such Party shall have been paid in full. Any amount paid to the Guarantor in violation of the
preceding sentence shall be held by the Guarantor for the benefit of such Party and shall forthwith
be paid to such Party to be credited and applied to the due and unpaid Obligations. Subject to the
foregoing, upon payment of all such due and unpaid Obligations, the Guarantor shall be subrogated
to the rights of such Party against the Company with respect to such Obligations, and such Party
agrees to take at the Guarantors expense such steps as the Guarantor may reasonably request to
implement such subrogation.
6. Amendment and Termination. This Guarantee may be amended or terminated, as to one Party,
all Parties or a group of specified Parties and as to one Obligation, all Obligations or specified
Obligations, at any time by (i) issuance by the Guarantor of a press release reported by the Dow
Jones News Service, the Associated Press or a comparable national news service, or (ii) written
notice signed by the Guarantor, with such amendment or termination effective with respect to a
Party on the opening of business on the fifth New York business day after earlier of the issuance
of such press release or the receipt of such written notice, as applicable; provided, however, that
no such amendment or termination may adversely affect the rights of any Party relating to any
Obligations incurred prior to the effectiveness of such amendment or termination; provided further,
that any such amendment or termination may become effective as to one Party whether or not it
becomes effective with respect to another Party.
7. Assignment. The Guarantor may not assign its rights nor delegate its obligations under
this Guarantee with respect to a Party, in whole or in part, without prior written consent of such
Party, and any purported assignment or delegation absent such consent is void, except for an
assignment and delegation of all of the Guarantors rights and obligations hereunder in whatever
form the Guarantor determines may be appropriate to a partnership, corporation, trust or other
organization in whatever form that succeeds to all
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or substantially all of the Guarantors assets and business and that assumes such obligations by
contract, operation of law or otherwise. Upon any such delegation and assumption of obligations,
the Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether
such obligations arose before or after such delegation and assumption.
8. Governing Law and Jurisdiction. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW YORK,
UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTEE.
IN WITNESS WHEREOF, the Guarantor has duly executed this Guarantee as of the day and year first
above written.
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THE GOLDMAN SACHS GROUP, INC. |
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By:
Name:
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/s/ Elizabeth E. Beshel
Elizabeth E. Beshel
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Title:
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Authorized Officer |
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EX-10.60
17
y74032exv10w60.htm
EX-10.60: GUARANTEE AGREEMENT - GS BANK USA
EX-10.60
Exhibit 10.60
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT, dated as of November 28, 2008 (this Agreement), between The
Goldman Sachs Group, Inc., a Delaware corporation (the Parent), and Goldman Sachs Bank
USA, a bank chartered under the Laws of the State of New York (together with its predecessors, the
Bank).
RECITALS:
WHEREAS, in connection with the Parent becoming a bank holding company under the U.S. Bank
Holding Company Act of 1956, as amended, on September 21, 2008, Goldman Sachs Capital Markets,
L.P., a limited partnership organized under the Laws of the State of New York, was merged with and
into The Goldman Sachs Trust Company, a limited-purpose trust chartered under the Laws of the State
of New York (GS Trust), then Goldman Sachs Capital Markets L.L.C., a Delaware limited
liability company, was merged with and into GS Trust, and then Goldman Sachs Bank USA, an
industrial bank chartered under the Laws of the State of Utah, was merged with and into GS Trust,
in each case with GS Trust as the surviving entity (collectively, the Merger);
WHEREAS, upon consummation of the Merger, GS Trust changed its name to Goldman Sachs Bank USA
and received approval to become a member bank of the Federal Reserve System (the Federal
Reserve System) and to expand its banking powers;
WHEREAS, the Bank is a wholly owned subsidiary of the Parent;
WHEREAS, in connection with the restructuring described above, the Board of Governors of the
Federal Reserve System (the Federal Reserve Board) has provided guidance to the Bank via
teleconference and in a written summary, issued October 10, 2008, that sets forth the principal
terms of the exemption that it has granted to the Bank from the provisions of Section 23A of the
Federal Reserve Act, as amended (the Section 23A Exemption), to permit the Parent or
another Affiliate to transfer certain assets to the Bank without complying with the provisions of
Regulation W that would otherwise apply to such transfers (such assets, as further defined below,
the Transferred Assets), and has indicated that it will provide to the Bank a formal
written statement of all the terms of the Section 23A Exemption in due course;
WHEREAS, as a further condition to granting the Section 23A Exemption, the Federal Reserve
Board has imposed the requirement that the Parent provide certain guarantees in respect of the
Transferred Assets, and the Parent has agreed to provide such guarantees (collectively, the
Guarantee);
WHEREAS, this Agreement is intended to satisfy that condition; and
WHEREAS, upon receipt by the Bank of the final written statement of the terms of the Section
23A Exemption, the parties hereto intend to amend this Agreement and the Collateral Agreement (as
defined below), as necessary, to reflect the terms of such Section 23A Exemption;
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this
Agreement, intending to be legally bound, hereby agree as follows:
1. Definitions; Interpretation.
(a) The following terms have the following meanings:
Action means any claim, action, suit, arbitration or proceeding by or before
any Governmental Authority or arbitral body.
Affiliate means any affiliate of the Bank, as defined in Regulation W.
Agreement has the meaning given to that term in the Preamble.
Bank has the meaning given to that term in the Preamble.
Bank Subsidiary means any Subsidiary of the Bank.
Business Day means any day that (x) is not a Saturday, a Sunday or other day
on which commercial banks in The City of New York, State of New York, are required or
authorized by Law to be closed and (y) is a day on which the New York Stock Exchange, Inc.
is open for trading during its regular trading session (notwithstanding its closing prior to
its scheduled closing time).
Collateral Agreement means the Collateral Agreement, dated as of November 28,
2008, between the Bank and the Parent and certain of its Subsidiaries from time to time.
Credit-Related Losses means any losses (any such loss to be calculated as the
difference, if negative, between the Original Transfer Value of such Transferred Asset and
its sale price) incurred upon the sale of any Transferred Assets by the Bank or any Bank
Subsidiary to any party other than the Bank or any other Bank Subsidiary, except to the
extent that the Bank determines, by reference to credit spreads applicable to the relevant
obligor and using the valuation methods used in the Banks market and risk management
activities, that such losses do not arise from any deterioration in the creditworthiness of
any obligor in respect of such Transferred Asset.
Derivatives means any swaps, options, futures, forwards, and other assets
arising from similar transactions.
Federal Reserve Board has the meaning given to that term in the Recitals.
Federal Reserve System has the meaning given to that term in the Recitals.
Governmental Authority means any domestic or foreign governmental or
regulatory authority, agency, commission, body, court or other legislative, executive or
judicial governmental entity.
GS Trust has the meaning given to that term in the Recitals.
Guarantee has the meaning given to that term in the Recitals.
Law means any federal, state, local or foreign law, statute or ordinance, or
any rule, regulation, standard or agency requirement, of any Governmental Authority.
Low-Quality Asset has the meaning specified in Regulation W.
Merger has the meaning given to that term in the Recitals.
Mortgage Servicing Rights means the right to service a mortgage and collect a
fee.
Non-Bank Subsidiary means any Subsidiary of the Parent other than the Bank or
any Bank Subsidiary.
"Non-Performing Asset" means any Transferred Asset that the Bank has identified
as non-performing on the basis that, under the relevant documentation relating to such
Transferred Asset, a Default or Event of Default (each defined in such documentation) or any
similar event, however described, has occurred.
Original Transfer Value means, with respect to any Transferred Asset, (x) if
that Transferred Asset was purchased by the Bank or any Bank Subsidiary from the Parent or
any Non-Bank Subsidiary, the purchase price paid by the Bank or such Bank Subsidiary for
such Transferred Asset, and (y) if that Transferred Asset was contributed to the Bank or any
Bank
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Subsidiary by the Parent or any Non-Bank Subsidiary, either directly or by contributing
the equity of or other interests in any Person that owns such Transferred Asset to the Bank
or any Bank Subsidiary, the fair value of the Transferred Asset as of the date initially
recognized by the Bank.
Parent has the meaning given to that term in the Preamble.
Person means a natural person, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or Governmental
Authority.
Regulation W means the Federal Reserve regulation pursuant to Section 23A
codified at 12 C.F.R. Part 223.
Section 23A Exemption has the meaning given to that term in the Recitals.
Servicing Advances means a payment of funds by the Bank, as servicer of a
mortgage pursuant to any Transferred Mortgage Servicing Rights, for the purpose of
preserving collateral or enforcing rights.
Subsidiary has the meaning given to that term in Regulation W.
Termination Date means, with respect to any Transferred Asset, the earlier of
(x) the date on which all amounts due under or in respect of such Transferred Asset have
been paid in full, and (y) the date on which such Transferred Asset is sold by the Bank or
any Bank Subsidiary to any Person other than the Bank or any other Bank Subsidiary;
provided, however, that the Termination Date with respect to any Transferred Derivative
shall be the fifth anniversary of the date on which such Transferred Derivative was
transferred by the Parent or any Non-Bank Subsidiary to the Bank or any Bank Subsidiary.
Transferred Assets has the meaning given to that term in the Recitals;
provided, however, that for the avoidance of doubt, Transferred Assets shall not
include any loans that are held by any Bank Subsidiary in which a participation has been
granted pursuant to the Master Participation Agreement entered into by certain Bank
Subsidiaries and certain Non-Bank Subsidiaries in connection with the Mergers.
Transferred Derivatives means any Transferred Assets that are Derivatives.
Transferred Mortgage Servicing Rights means any Transferred Assets that are
Mortgage Servicing Rights.
In interpreting this Agreement:
(i) words in the singular shall include the plural and vice versa, and words of one
gender shall include the other gender as the context requires;
(ii) references to Articles, Sections, paragraphs, Exhibits, Annexes and Schedules are
references to the Articles, Sections and paragraphs of, and Exhibits, Annexes and Schedules
to, this Agreement unless otherwise specified;
(iii) references to $ shall mean U.S. dollars;
(iv) the words includes and including and words of similar import
shall be deemed to be followed by the words without limitation unless otherwise
specified;
(v) the word or shall not be exclusive;
(vi) the words herein, hereof and hereunder, and similar
terms, are to be deemed to refer to this Agreement as a whole and not to any specific
section;
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(vii) the headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement;
(viii) this Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing any
instrument to be drafted;
(ix) if a word or phrase is defined, the other grammatical forms of such word or phrase
have a corresponding meaning; and
(x) references to any statute, listing rule, rule, standard, regulation or other law
(a) include a reference to the corresponding rules and regulations and (b) include a
reference to each of them as amended, modified, supplemented, consolidated, replaced or
rewritten from time to time; and
(xi) references to any section of any statute, listing rule, rule, standard, regulation
or other law include any successor to such section.
2. Parent Guarantee.
The Guarantee shall consist of the following commitments of the Parent:
(a) Repurchase of Low-Quality Assets.
(i) The Parent hereby irrevocably and unconditionally agrees to purchase or cause a
Non-Bank Subsidiary to purchase from the Bank or any Bank Subsidiary (A) any Transferred
Asset, other than any Transferred Derivative or Transferred Mortgage Servicing Right, that
becomes a Low-Quality Asset at any time subsequent to the transfer of such Transferred Asset
to the Bank or any Bank Subsidiary and prior to the Termination Date with respect to such
Transferred Asset, and (B) any Transferred Asset that the Federal Reserve Bank of New York
or the Federal Reserve Board may require the Parent to purchase in the discretion of the
staff of either the Federal Reserve Bank of New York or the Federal Reserve Board;
(ii) The purchase price payable by the Parent or Non-Bank Subsidiary for any
Transferred Asset pursuant to this Section 2(a) shall be the Original Transfer Value of the
Transferred Asset.
(iii) Any purchases required to be made pursuant to this Section 2(a) shall occur not
later than fifteen (15) days following the end of the calendar quarter in which the
Transferred Asset became a Low-Quality Asset; provided that, to the extent the Transferred
Asset is a Non-Performing Asset, any such repurchase shall occur not later than fifteen (15)
days following its identification as such by the Bank.
(b) Reimbursement.
(i) Credit-Related Losses.
(A) The Parent hereby irrevocably and unconditionally agrees to reimburse the
Bank or any Bank Subsidiary for any Credit-Related Losses incurred by the Bank or
such Bank Subsidiary upon the sale of any Transferred Asset other than a Transferred
Derivative or a Transferred Mortgage Servicing Right to any Person other than the
Bank or any other Bank Subsidiary.
(B) The Parent shall pay all such reimbursements that it is required to pay to
the Bank pursuant to this Section 2(b)(i) no later than fifteen (15) days following
the end of the calendar quarter in which the sale was made; provided that, to the
extent the Transferred Asset is a Non-Performing Asset, any such reimbursement shall
occur not later than fifteen (15) days following its identification as such by the
Bank.
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(ii) Derivatives.
(A) The Parent hereby irrevocably and unconditionally agrees that, if the Bank
or any Bank Subsidiary downgrades the counterparty to any Transferred Derivative to
a seven or below in the Banks internal credit rating system in any calendar quarter
during the five years immediately following the transfer of the Transferred
Derivative from the Parent or any Non-Bank Subsidiary to the Bank or any Bank
Subsidiary, the Parent will pay to the Bank or such Bank Subsidiary an amount equal
to any change in the credit valuation adjustment (minus the value of any hedge or
offsets held by the Bank or such Bank Subsidiary) relating to such Transferred
Derivative from the time of such transfer to the time of the downgrade.
(B) The Parent hereby further irrevocably and unconditionally agrees that, if
the counterparty to any Transferred Derivative defaults at any time during the five
years following the transfer of the Transferred Asset from Parent or any Non-Bank
Subsidiary to the Bank or any Bank Subsidiary, the Parent will pay the Bank or such
Bank Subsidiary an amount equal to the then-replacement cost of all of the Banks
or such Bank Subsidiarys Transferred Derivative transactions with such
counterparty, net of proceeds from any liquidation of collateral applied by the
Bank or such Bank Subsidiary to the obligations of such counterparty under any such
Transferred Derivatives and any amounts recovered from the defaulting counterparty.
(C) In calculating the Parents payment obligations upon a counterparty
default, as set forth in Section 2(b)(ii)(B), the Parent may reduce such
obligations:
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by the amount of any previous
payment made by the Parent to the Bank or any Bank Subsidiary as
a result of an internal rating downgrade of the applicable
counterparty pursuant to Section 2(b)(ii)(A); |
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to the extent that the Bank or any
Bank Subsidiary has received payment under any hedge or other
credit loss protection arrangement put in place with respect to
such Transferred Derivative (i) prior to the time at which such
Transferred Derivative was transferred to the Bank or any Bank
Subsidiary or (ii) after the time at which such Transferred
Derivative was transferred to the Bank or any Bank Subsidiary, if
the cost of such hedge or other credit loss protection
arrangement was paid by the Parent or any Non-Bank Subsidiary. |
In addition, to the extent that, after the time at which the Parent has made such a
payment to the Bank, the Bank receives payment under a hedge or other credit loss
protection arrangement meeting the criteria set forth in (i) or (ii) of the
foregoing clause (II) or otherwise receives payment from the defaulting
counterparty, the Bank or the relevant Bank Subsidiary shall reimburse the Parent
for any such payment so received by it.
(D) The Parent shall pay all such reimbursements that it is required to pay to
the Bank or any Bank Subsidiary pursuant to Section 2(b)(ii) no later than fifteen
(15) days following the end of the calendar quarter in which the derivatives
counterparty is downgraded by the Bank or such Bank Subsidiary or defaults, as
applicable; provided, however, that (A) to the extent the Transferred Asset is a
Non-Performing Asset, any such payment shall occur not later than fifteen (15) days
following its identification as such, and (B) with respect to any payment required
pursuant to Section 2(b)(ii)(B), such payment shall be made promptly following the
later of the date of such default and the date on which any collateral relating to
such counterparty has been liquidated and the
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proceeds, if any, of such liquidation have been received by the Bank but in no
event later than 180 days following the date of such default.
(E) As an alternative to the Parent making any payment that would otherwise be
required pursuant to this Section 2(b)(ii), the Parent may, at its option,
(I) repurchase by way of assignment, novation, participation or total return swap
the Transferred Derivative in respect of which the Parent would be required to make
such payment for an amount equal to the Original Transfer Value of such Transferred
Derivative or (II) to the extent permitted under the Federal Reserve Boards final
written statement of the terms of the Section 23A Exemption, post collateral of the
type set forth in Section 223.42(c)(1) of Regulation W with respect to any
Transferred Derivative in an amount equal to the then-current replacement cost of
all the Banks derivative transactions with the relevant counterparty minus the
value of any collateral held and/or the mark-to-market value notional amount of any
credit loss protection owned by the Bank, which collateral would be returned to the
Parent upon the expiration of the Transferred Derivative.
(iii) Mortgage Servicing Rights.
(A) The Parent hereby irrevocably and unconditionally agrees to reimburse the
Bank or any Bank Subsidiary an amount equal to any impairment recognized or direct
write-downs related to any Transferred Mortgage Servicing Rights or related
Servicing Advances.
(B) The Parent shall pay all such reimbursements that it is required to pay to
the Bank pursuant to this Section 2(b)(iii) no later than thirty (30) days
following the end of the calendar quarter in which the impairment was recognized or
the write-down taken.
(C) The Bank will hold an amount of risk-based capital equal to the impairment
recognized or direct write-down taken on any Transferred Mortgage Servicing Rights
or related Servicing Advances so long as the Bank retains ownership or control of
such Transferred Mortgage Servicing Rights or Servicing Advances, in lieu of the
risk-based capital that would otherwise apply to a similar asset that is not a
Transferred Mortgage Servicing Right or related Servicing Advance.
(D) As an alternative to the Parent making any payment that would otherwise be
required pursuant to this Section 2(b)(iii) and the maintenance of capital by the
Bank in accordance with Section 2(b)(iii)(C), the Parent may, at its option,
purchase the applicable Transferred Mortgage Servicing Rights and Servicing
Advances at an amount equal to the Original Transfer Value of such Transferred
Mortgage Servicing Rights or Servicing Advances, as applicable.
(E) In calculating the Parents payment obligations pursuant to this Section
2(b)(iii), the Parent may reduce such obligations to the extent that the Bank or
any Bank Subsidiary has received payment under any hedge or other credit loss
protection arrangement put in place with respect to such Transferred Mortgage
Servicing Rights or Servicing Advances, as applicable, (i) prior to the time at
which such Transferred Mortgage Servicing Rights or Servicing Advances, as
applicable, was transferred to the Bank or any Bank Subsidiary or (ii) after the
time at which such Transferred Mortgage Servicing Rights or Servicing Advances, as
applicable, was transferred to the Bank or any Bank Subsidiary, if the cost of such
hedge or other credit loss protection arrangement was paid by the Parent or any
Affiliate of the Parent other than the Bank or any Bank Subsidiary.
3. Collateral.
The Parent shall secure its obligations pursuant to this Agreement as set forth in the
Collateral Agreement.
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4. Termination.
This Agreement shall terminate on the Business Day after the Termination Date of the last
Transferred Asset held by the Bank or any Bank Subsidiary.
5. Notices.
Unless otherwise provided herein, all notices and other communications provided to either
party under this Agreement shall be in writing and addressed to such party at its address as set
forth below. Unless otherwise provided herein, any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given three (3) Business Days after being sent; if hand delivered,
shall be deemed given on the date of such delivery; and if delivered by overnight courier, shall be
deemed given on the date of such delivery.
If to the Parent:
The Goldman Sachs Group, Inc.
1 New York Plaza
New York, NY 10004
Telephone: (212) 902-1000
Attention: Treasury
If to the Bank:
Goldman Sachs Bank USA
85 Broad Street
New York, New York 10004
Telephone: (212) 902-1000
Attention: General Counsel
6. Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being
enforced under any Law or as a matter of public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party to this Agreement. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties to this Agreement shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner in order that the transactions contemplated
by this Agreement be consummated as originally contemplated to the greatest extent possible.
7. Entire Agreement.
This Agreement, together with the Collateral Agreement, constitutes the entire agreement of
the parties hereto with respect to the subject matter of this Agreement and supersedes all prior
agreements and undertakings, both written and oral.
8. Assignment.
This Agreement may not be assigned, in whole or in part, by either party, by operation of Law
or otherwise, without the express written agreement of the other party hereto. Any attempted
assignment in violation of this Section 8 shall be void, except that each party shall have the
right to assign all of its rights and obligations to any entity that succeeds, directly or
indirectly, to substantially all of such partys assets by merger or otherwise. This Agreement
shall be binding upon, shall inure to the benefit of, and shall be enforceable by the parties
hereto and their permitted successors and assigns.
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9. Amendment or Modification.
This Agreement may be amended or modified only by an agreement in writing executed by both of
the parties hereto; provided that the parties hereto agree that, upon receipt by the Bank of the
final written statement of the terms of the Section 23A Exemption, they shall amend this Agreement
as necessary to reflect the terms and conditions contained in such statement.
10. No Third-Party Beneficiaries.
This Agreement is for the sole benefit of the parties to this Agreement and their permitted
successors and assigns and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person or party any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
11. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall in all respects be governed by, and construed in accordance with, the
Laws of the State of New York.
(b) Each of the Parent and the Bank irrevocably and unconditionally:
(i) submits for itself and its property in any Action arising out of or relating to the
interpretation and enforcement of the provisions of this Agreement and of the documents
referred to in this Agreement and in respect of the transactions contemplated by this
Agreement, to the exclusive jurisdiction of the Courts of the State of New York sitting in
the County of New York, the United States District Court for the Southern District of New
York, and appellate courts having jurisdiction of appeals from any of the foregoing, and
agrees that all claims in respect of any such Action shall be heard and determined in such
New York State court or, to the extent permitted by Law, in such federal court;
(ii) consents that any such Action may and shall be brought in such courts and waives
any objection that it may now or hereafter have to the venue or jurisdiction of any such
Action in any such court or that such Action was brought in an inconvenient court and agrees
not to assert, plead or claim the same;
(iii) agrees that service of process in any such Action may be effected by mailing a
copy of such process by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such party at its address as provided in Section 5; and
(iv) agrees that nothing in this Agreement shall affect the right to effect service of
process in any other manner permitted by the Laws of the State of New York.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
12. Counterparts.
This Agreement may be executed in one or more counterparts, and by the different parties to
each such agreement in separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by facsimile or in Portable Document
File (PDF) format shall be as effective as delivery of a manually executed counterpart of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Guarantee Agreement as of the date
set forth below.
Date: November 28, 2008
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PARENT:
THE GOLDMAN SACHS GROUP, INC.
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By: |
/s/ Elizabeth E. Beshel
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Name: |
Elizabeth E. Beshel |
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Title: |
Treasurer |
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THE BANK:
GOLDMAN SACHS BANK USA
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By: |
/s/ Peter OHagan
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Name: |
Peter OHagan |
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Title: |
Chief Executive Officer |
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EX-10.61
18
y74032exv10w61.htm
EX-10.61: COLLATERAL AGREEMENT
EX-10.61
Exhibit 10.61
COLLATERAL AGREEMENT
dated as of November 28, 2008
between
GOLDMAN SACHS BANK USA,
and
THE GOLDMAN SACHS GROUP, INC., AS PARENT,
EACH SUBSIDIARY OF THE GOLDMAN SACHS GROUP, INC.
THAT IS A SIGNATORY HERETO, AS PLEDGORS
and
EACH OTHER PLEDGOR WHO BECOMES PARTY
TO THIS AGREEMENT FROM TIME TO TIME
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of November 28, 2008 (this Agreement), is made
between Goldman Sachs Bank USA, a bank chartered under the Laws of the State of New York (the
Bank), and The Goldman Sachs Group, Inc., a Delaware corporation (the Parent),
each Subsidiary of the Parent that is a signatory hereto and, each other party who becomes a
Pledgor pursuant to this Agreement from time to time (each of the Parent, each such Subsidiary and
each such other pledgor, a Pledgor).
RECITALS:
WHEREAS, in connection with the Parent becoming a bank holding company under the U.S. Bank
Holding Company Act of 1956, as amended, on September 21, 2008, Goldman Sachs Capital Markets,
L.P., a limited partnership organized under the Laws of the State of New York, was merged with and
into The Goldman Sachs Trust Company, a limited-purpose trust chartered under the Laws of the State
of New York (GS Trust), then Goldman Sachs Capital Markets L.L.C., a Delaware limited
liability company, was merged with and into GS Trust, and then Goldman Sachs Bank USA, an
industrial bank chartered under the Laws of the State of Utah, was merged with and into GS Trust,
in each case with GS Trust as the surviving entity (collectively, the Merger);
WHEREAS, upon consummation of the Merger, GS Trust changed its name to Goldman Sachs Bank USA
and received approval to become a member bank of the Federal Reserve System (the Federal
Reserve System) and to expand its banking powers;
WHEREAS, the Bank is a wholly owned Subsidiary of the Parent;
WHEREAS, in connection with the restructuring described above, the Board of Governors of the
Federal Reserve System (the Federal Reserve Board) has provided guidance to the Bank via
teleconference and in a written summary, issued October 10, 2008, that sets forth the principal
terms of the exemption it has granted the Bank from the provisions of Section 23A of the Federal
Reserve Act, as amended (the Section 23A Exemption), to permit the Parent or another
Affiliate to transfer certain assets to the Bank without complying with the provisions of
Regulation W that would otherwise apply to such transfers (such assets, the Transferred
Assets), and has indicated that it will provide to the Bank a formal written statement of all
the terms of the Section 23A Exemption in due course;
WHEREAS, as a condition to granting the Section 23A Exemption, the Federal Reserve Board has
imposed the requirement that the Parent provide certain guarantees in respect of the Transferred
Assets, and the Parent has agreed to provide such guarantees (collectively, the
Guarantee), pursuant to the Guarantee Agreement, dated as of November 28, 2008 (the
Guarantee Agreement), between the Parent and the Bank;
WHEREAS, as a further condition to granting the Section 23A Exemption, the Federal Reserve
Board has required that the Parent pledge or cause its subsidiaries to pledge certain Collateral to
the Bank to secure the obligations of the Parent pursuant to the Guarantee Agreement;
WHEREAS, this Agreement is intended to satisfy such condition; and
WHEREAS, upon receipt by the Bank of the final written statement of the terms of the Section
23A Exemption, the parties hereto intend to amend this Agreement and the Guarantee Agreement, as
necessary to reflect the terms of such Section 23A Exemption;
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parent, the Bank
and each other Pledgor from time to time, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION
1.1 General Definitions. For purposes of this Agreement, the following terms have the
following meanings:
Affiliate means any affiliate of the Bank as defined in Regulation W.
Agreement has the meaning specified in the Preamble.
Bank has the meaning specified in the Preamble.
Business Day means any day that (x) is not a Saturday, a Sunday or other day on
which commercial banks in The City of New York, State of New York, are required or authorized by
Law to be closed and (y) is a day on which the New York Stock Exchange, Inc. is open for trading
during its regular trading session (notwithstanding its closing prior to its scheduled closing
time).
Cash Collateral Account means any deposit accounts at the Bank identified on
Schedule 1 from time to time, including any successor or replacement accounts acquired after the
date of this Agreement.
Certificated Security has the meaning specified in Article 8 of the UCC.
Collateral has the meaning specified in Section 2(a).
Commodities Accounts has the meaning specified in Article 9 of the UCC.
Federal Reserve Board has the meaning specified in the Recitals.
Federal Reserve System has the meaning specified in the Recitals.
Fund means any investment vehicle created in the ordinary course of the private
equity, mezzanine lending or hedge fund business of the Parent or any of its Subsidiaries and in
which equity interests are sold to third parties.
General Intangibles has the meaning specified in Article 9 of the UCC.
Governmental Authority means any domestic or foreign governmental or regulatory
authority, agency, commission, body, court or other legislative, executive or judicial governmental
entity.
GS Trust has the meaning specified in the Recitals.
Guarantee has the meaning specified in the Recitals.
Guarantee Agreement has the meaning specified in the Recitals.
Haircut means, with respect to any Security, Pledged Equity Interest, General
Intangible or Instrument, the percentage specified with respect to such Security in Schedule 1 from
time to time.
-2-
Instruments has the meaning specified in Article 9 of the UCC.
Investment Property has the meaning specified in Article 9 of the UCC.
Law means any federal, state, local or foreign law, statute or ordinance, or any
rule, regulation, standard or agency requirement, of any Governmental Authority.
Lien means any mortgage, deed of trust, pledge, hypothecation, security interest,
encumbrance, claim, lien or charge of any kind.
Merger has the meaning specified in the Recitals.
Original Transfer Value has the meaning specified in the Guarantee Agreement.
Outstanding Aggregate Transfer Value means, on any date, the aggregate Original
Transfer Value of all the Transferred Assets with respect to which the Termination Date has not
occurred on or prior to that date.
Parent has the meaning specified in the Preamble.
Permitted Filings means any financing statements or other instruments similar in
effect, whether already filed or filed hereafter, in connection with Permitted Liens.
Permitted Liens means any Liens, whether now existing or hereafter arising, granted
by any Pledgor with respect to Pledged Equity Interests owned by such Pledgor, to secure the
performance of the obligations of such Pledgor or any other Person under any agreement entered into
by such Pledgor in connection with its acquisition of or ownership of such Pledged Equity
Interests.
Person means an individual, corporation, association, partnership, trust, joint
venture, business trust or incorporated organization or other entity or organization, or a
Governmental Authority.
Pledged Equity Interests has the meaning specified in Section 2(a)(iii).
Pledgor has the meaning specified in the Preamble.
Proceeds means: (i) all proceeds as defined in Article 9 of the UCC and
(ii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected
or otherwise disposed of, whether such disposition is voluntary or involuntary.
Record has the meaning specified in Article 9 of the UCC.
Regulation W means Regulation W of the Federal Reserve Board, 12 C.F.R. Part 223.
Section 23A Exemption has the meaning specified in the Recitals.
Secured Obligations has the meaning specified in Section 3.
Securities has the meaning specified in Section 2(a)(ii).
Securities Account has the meaning specified in Article 8 of the UCC.
Subsidiary has the meaning given to that term in Regulation W.
-3-
Termination Date has the meaning specified in the Guarantee Agreement.
Transferred Assets has the meaning specified in the Recitals.
UCC means at any time the Uniform Commercial Code as in effect in the State of New
York; provided, however, that if, by reason of mandatory provisions of Law, the validity or
perfection of the Banks security interest in any item of Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, UCC means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such validity or perfection.
Uncertificated Securities has the meaning specified in Article 8 of the UCC.
Value has the meaning specified in Section 5.
Valuation Date means the last Business Day in each calendar quarter beginning with
the last such Business Day in December 2008, for so long as this Agreement shall be in effect.
1.2 Interpretation.
In interpreting this Agreement:
(a) words in the singular shall include the plural and vice versa, and words of one gender
shall include the other gender as the context requires;
(b) references to Articles, Sections, paragraphs, Exhibits, Annexes and Schedules are
references to the Articles, Sections and paragraphs of, and Exhibits, Annexes and Schedules to,
this Agreement unless otherwise specified;
(c) references to $ shall mean U.S. dollars;
(d) the words includes and including and words of similar import shall be
deemed to be followed by the words without limitation unless otherwise specified;
(e) the word or shall not be exclusive;
(f) the words herein, hereof or hereunder, and similar terms,
are to be deemed to refer to this Agreement as a whole and not to any specific section;
(g) the headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement;
(h) this Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any instrument to be drafted;
(i) if a word or phrase is defined, the other grammatical forms of such word or phrase have a
corresponding meaning;
(j) references to any statute, listing rule, rule, standard, regulation or other law
(i) include a reference to the corresponding rules and regulations and
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(ii) include a reference to each of them as amended, modified, supplemented, consolidated,
replaced or rewritten from time to time;
(k) references to any section of any statute, listing rule, rule, standard, regulation or
other law include any successor to such section; and
(l) all references herein to provisions of the UCC shall include all successor provisions
under any subsequent version or amendment to any Article of the UCC.
SECTION 2. GRANT OF SECURITY INTEREST
(a) Each Pledgor hereby grants to the Bank, for the Banks benefit, a security interest in
and continuing lien on all of such Pledgors right, title and interest in, to and under all of the
following types of collateral listed in Schedule 1 with respect to such Pledgor from time to time,
in each case whether now owned or existing or hereafter acquired or arising and wherever located
(all of which are collectively referred to as the Collateral):
(i) all Cash Collateral Accounts and all deposits credited to the Cash Collateral
Accounts;
(ii) all Securities Accounts and all stocks, bonds, security entitlements, financial
assets or other securities, financial assets or investment property (as such terms are
defined in the UCC) now or hereafter in the possession, custody or control of the Bank,
including any of the foregoing from time to time deposited in or credited to such Securities
Accounts (the Securities);
(iii) interests in general or limited partnerships, limited liability companies and
shares or other equity interests in companies or business trusts (collectively, Pledged
Equity Interests);
(iv) all General Intangibles;
(v) all Instruments; and
(vi) all Proceeds, products, accessions and profits of or in respect of the foregoing.
(b) All the Collateral shall be subject to review and approval by the Federal Reserve Board.
(c) For the avoidance of doubt, the parties agree that in the case of Pledged Equity
Interests, the Collateral includes any obligations associated with such Pledged Equity Interests.
SECTION 3. SECURITY FOR GUARANTEE
This Agreement shall secure, and the Collateral shall be collateral security for, the prompt
and complete payment and performance when due of all of the Parents obligations under the
Guarantee Agreement (the Secured Obligations).
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SECTION 4. COLLATERAL REQUIREMENT; SUBSTITUTIONS
(a) The Parent shall, at all times prior to the termination of the Guarantee Agreement, cause
Collateral to be maintained subject to a fully perfected security interest under this Agreement
with an aggregate Value not less than five percent (5%) of the Outstanding Aggregate Transfer
Value.
(b) If the aggregate Value of the Collateral on any Valuation Date, as determined pursuant to
Section 5, is less than five percent (5%) of the Outstanding Aggregate Transfer Value as of that
date, then not later than five (5) Business Days following such determination the Parent shall
pledge or cause one or more of its Subsidiaries to pledge additional Collateral to the Bank in an
amount that will restore the total Value of the Collateral to not less than five percent (5%) of
such Outstanding Aggregate Transfer Value as determined on such Valuation Date.
(c) If the aggregate Value of the Collateral on any Valuation Date, as determined pursuant to
Section 5, is greater than five percent (5%) of the Outstanding Aggregate Transfer Value, then the
Bank shall, without unreasonable delay, take such measures as may be necessary to release the Lien
of the Bank on those portions of the Collateral designated by the Parent and having a Value as of
such Valuation Date not greater than the amount of the excess; provided, however, that if the
aggregate Value of the Collateral immediately after giving effect to the release of the Collateral
so designated would be less than the amount required pursuant to Sections 4(a) and 4(b), then the
Bank will have no obligation to release any Collateral pursuant to this Section 4(c).
(d) If any Pledgor wishes to obtain the release of any Collateral that has been pledged by it
pursuant hereto, then it may provide or cause another Pledgor to provide replacement Collateral to
the Bank with a Value at the time of such substitution, as determined pursuant to Section 5, not
less than the Value of the Collateral that is to be released. Upon the delivery of such
replacement Collateral to the Bank and/or the completion of all measures necessary to provide to
the Bank a fully perfected security interest in such replacement Collateral, the Bank shall,
without unreasonable delay, take such measures as may be necessary to release the Lien of the Bank
on the Collateral to be released; provided, however, that if the aggregate Value of the Collateral
immediately after giving effect to the delivery of such replacement Collateral and the release of
the Collateral to be released would be less than the amount required pursuant to Sections 4(a) and
4(b), then the Bank will have no obligation to release any Collateral pursuant to this Section
4(d).
SECTION 5. VALUATION
(a) For purposes of this Agreement, the Value of each type of Collateral on any
date shall be determined by the Bank as follows:
(i) the Value of any Cash Collateral Accounts or deposit credited to any Cash
Collateral Account shall be the balance thereof as of the close of business on the Business
Day immediately preceding the relevant date; and
(ii) the Value of any other Collateral shall be (i) if the asset is recorded
in the books and records on which the consolidated audited financial statements of the
Parent are based, the valuation assigned to such Collateral as of the close of business on
the most recent regular valuation date prior to the relevant date on which The Goldman Sachs
Group Inc. has determined such valuation for purposes
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of maintaining its books and records or applying its market and risk management systems
to such asset, and (ii) if such asset is not so recorded, the valuation assigned to such
asset by the Bank in the exercise of its reasonable discretion, multiplied by, in either
case, 1 minus the applicable Haircut;
provided, however, that if any Collateral is subject to any Permitted Lien and the Valuation
of such Collateral has not already been reduced to reflect such Permitted Lien, the Bank may
reduce the Value allocated to such Collateral as it deems appropriate to reflect the prior
obligation secured by such Permitted Lien.
(b) The Bank shall determine the aggregate Value of the Collateral as of the close of
business on each Valuation Date and provide notice of such aggregate Value to the Parent not later
than 11:00 a.m., New York time, on the next Business Day.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 General.
(a) Representations and Warranties. Each Pledgor represents and warrants that:
(i) it owns the Collateral purported to be owned by it and otherwise has the rights it
purports to have in each item of Collateral pledged by it and, as to all such Collateral
whether now existing or hereafter acquired, will continue to own or have such rights in each
item of such Collateral, in each case free and clear of any and all Liens, rights or claims
of all other Persons, except for the (i) security interest created by or in connection with
this Agreement, including liens arising as a result of such Pledgor becoming bound (as a
result of merger or otherwise) as debtor under a security agreement entered into by another
Person and (ii) Permitted Liens;
(ii) other than any financing statements filed in favor of the Bank pursuant to or in
connection with this Agreement, no effective UCC financing statement, fixture filing or
other Instrument similar in effect under any applicable Law covering all or any part of the
Collateral is on file in any filing or recording office except for Permitted Filings;
(iii) except for those that have been obtained or made, no authorization, approval or
other action by, and no notice to or filing with, any Governmental Authority or Person is
required for either (x) the pledge or grant by it of the Liens purported to be created in
favor of the Bank hereunder or (y) except as set forth in Schedule 1 or as referred to in
Section 8.4 from time to time with respect to any item of Collateral, the exercise by the
Bank of any rights or remedies in respect of any Collateral (whether specifically granted or
created hereunder or created or provided for by applicable Law);
(iv) except with regard to cash and cash equivalents, the pledge of and grant of a
security interest in the Collateral pursuant to this Agreement together with the delivery of
the relevant certificates to the Bank, the filing of the appropriate UCC financing
statements in the jurisdictions agreed with the Bank, the entry into appropriate control
agreements, compliance with requirements under the laws in which the issuers of any Pledged
Equity Interests are formed and compliance with any other requirements set forth in this
Section 6.1, will constitute all actions and consents necessary to create and perfect
security interests in all of the Collateral,
-7-
and all actions and consents necessary to create and perfect the security interests in
all of the Collateral granted under this Agreement have been made or obtained or will, at or
prior to the time at which any substitute or additional Collateral is pledged hereunder, be
made or obtained, and the security interests granted to the Bank hereunder will constitute
valid and perfected security interests in all of the Collateral;
(v) as of the date hereof, the chief place of business of the Parent and the office at
which the Parent keeps all records concerning the Collateral pledged by it and all
certificates evidencing the Collateral pledged by it is located in the State of New York,
and the chief place of business of each other Pledgor and the office at which such other
Pledgor keeps all records concerning the Collateral pledged by it and all certificates, if
any, evidencing the Collateral pledged by it is specified on Schedule 1;
(vi) all information supplied by it with respect to any of the Collateral pledged by it
(in each case taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects; and
(vii) the pledge of the Collateral by it pursuant to this Agreement does not violate
any of the regulations of the Federal Reserve Board.
(b) Covenants and Agreements. Each Pledgor hereby covenants and agrees that:
(i) except for the security interests (i) created by or in connection with this
Agreement and (ii) Permitted Liens, it shall not create or suffer to exist any Lien upon or
with respect to any of the Collateral and it shall defend the Collateral against all Persons
at any time claiming any interest therein;
(ii) it shall not produce, use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable Law or any policy of
insurance covering the Collateral;
(iii) it shall pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the Collateral, except
to the extent the validity thereof is being contested in good faith in accordance with the
rights set forth below. In the event the Parent chooses to contest the validity of any
taxes, assessments, governmental charges, levies imposed upon, and any claim against it, it
may only do so if, at the time of commencement of any such action or proceeding and during
the pendency thereof, adequate reserves with respect thereto, shall have been deposited with
the applicable court or other relevant authority or with the Bank or otherwise made in
accordance with generally accepted accounting principles;
(iv) upon any of such Pledgors officers obtaining knowledge thereof, it shall promptly
notify the Bank in writing of any levy of any legal process against the Collateral pledged
by such Pledgor or any portion thereof;
(v) it shall not take or permit any action that could reasonably be expected to
materially impair the Banks rights in the Collateral;
-8-
(vi) except for Permitted Liens, it shall not directly or through any other Person
sell, assign, pledge or otherwise transfer or seek to transfer (by operation of law or
otherwise) any Collateral or any interest therein;
(vii) without the prior written consent of the Bank, it shall not become bound under
Section 9-203 of the UCC by any other security agreement with any other Person with respect
to the Collateral; and
(viii) it shall, at any time and from time to time, give, execute and/or deliver any
notice, certificates or other Instruments evidencing any Collateral, powers of assignment,
document, agreement or other papers that the Bank shall reasonably deem necessary or
advisable to create, preserve, perfect or validate the security interest created hereby or
to enable the Bank to exercise and enforce its rights hereunder with respect to such
security interest.
6.2 Investment Property; Pledged Equity Interests.
(a) Representations and Warranties. Each Pledgor hereby represents and warrants as follows:
(i) it is the record and beneficial owner of all of the Securities and Pledged Equity
Interests, free of Liens, rights or claims of other Persons, other than the security
interest (i) created by or in connection with this Agreement and (ii) Permitted Liens, and
there are no warrants, options or other rights to purchase, or shareholder voting trusts or
similar agreements outstanding with respect to, or property that is convertible into, or
that requires the issuance or sale of, any Pledged Equity Interests;
(ii) no default by such Pledgor exists under any partnership agreement, limited
liability company agreement or similar agreement related to any Pledged Equity Interest to
which it is a party and no event has occurred or exists that, with notice or lapse of time
or both, would constitute a default by the Parent thereunder; and to its best knowledge, no
defaults by any partner or partners other than such Pledgor under any of the partnership
agreements exist that, individually or in the aggregate, would be materially adverse to the
Bank and no events have occurred or exist that, with the giving of notice or lapse of time
or both, would constitute such defaults; each of the partnership or limited liability
agreements relating to any Pledged Equity Interests pledged by it, a true and complete copy
of which will be furnished to the Bank upon the pledge of any interest in such partnership
by such Pledgor, has been duly authorized, executed and delivered by such Pledgor and is in
full force and effect and has not been amended or modified except as disclosed in writing to
the Bank; and
(iii) it has taken all actions necessary (x) to establish the Banks control (within
the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of the Collateral that
constitutes Certificated Securities, Uncertificated Securities, Securities Accounts or
Commodities Accounts (each as defined in the UCC) and (y) to deliver all Instruments to the
Bank.
(b) Covenants and Agreements. Each Pledgor hereby covenants and agrees that:
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(i) without the prior written consent of the Bank, it shall not vote to enable or take
any other action to: (a) amend or terminate any partnership agreement, limited liability
company agreement, certificate of incorporation, by-laws or other organizational documents
in any way that materially and adversely affects the validity, perfection or priority of the
Banks security interest; (b) permit any issuer of any Pledged Equity Interest that is a
Subsidiary of such Pledgor and that is not a Fund to issue any additional stock, partnership
interests, limited liability company interests or other equity interests of any nature or to
issue securities convertible into or granting the right of purchase or exchange for any
stock or other equity interest of any nature of such issuer in any way that materially and
adversely affects the validity, perfection or priority of the Banks security interest;
(c) permit any issuer of any Pledged Equity Interest that is a Subsidiary of such Pledgor
and that is not a Fund to dispose of all or a material portion of its assets; (d) during the
continuance of any breach by the Parent of its obligations under or pursuant to the
Guarantee Agreement, waive any material default under or breach of any material terms of any
organizational document relating to the issuer of any Pledged Equity Interest; or (e) cause
any issuer of any Pledged Equity Interests that is a Subsidiary of such Pledgor that are not
securities (for purposes of the UCC) on the date on which such interests are pledged
pursuant to this Agreement to elect or otherwise take any action to cause such Pledged
Equity Interests to be treated as securities for purposes of the UCC or to cause the
issuance of certificates or other evidence of Pledged Equity Interests, respectively,
without the consent of the Bank; provided, however, that notwithstanding the foregoing, if
any issuer of any Pledged Equity Interests takes any such action in violation of the
foregoing in this clause (e), such Pledgor shall promptly notify the Bank in writing of any
such election or action and, in such event, shall take all steps necessary or advisable to
establish the Banks control thereof;
(ii) if such Pledgor receives any dividends, interest or distributions on any
Investment Property, or any securities or other property, in each case upon the merger,
consolidation, liquidation or dissolution of any issuer of any Investment Property, then
(x) such dividends, interest or distributions and securities or other property shall be
included in the definition of Collateral without further action and (y) such Pledgor shall
either (A) within thirty (30) days take all steps, if any, necessary or advisable to ensure
the validity, perfection, priority and, if applicable, control of the Bank over such
dividends, interest or distributions and securities or other property (including delivery
thereof to the Bank), or (B) arrange for replacement Collateral pursuant to Section 4(d) of
this Agreement, and pending any such action such Pledgor shall be deemed to hold such
dividends, interest, distributions, securities or other property in trust for the benefit of
the Bank and such property shall be segregated from all other property of such Pledgor.
Notwithstanding the foregoing, so long as no breach by the Parent of its obligations under
or pursuant to the Guarantee Agreement shall have occurred and be continuing, the Bank
authorizes such Pledgor to retain all cash dividends and distributions and all payments of
interest and principal;
(iii) it shall comply in all material respects with all of its obligations under any
partnership agreement, limited liability company agreement or similar agreement related to
any Pledged Equity Interest and shall enforce in all material respects all of its rights
with respect to any Investment Property;
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(iv) without the prior written consent of the Bank, it shall not permit any issuer of
any Pledged Equity Interest which is a Subsidiary to merge or consolidate unless all the
outstanding capital stock or other equity interests of the surviving or resulting
corporation, limited liability company, partnership or other entity is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding equity interests of any other constituent company other than in
compliance herewith; and
(v) it shall take all actions necessary to register the pledge of any partnership
interest on the books and records of the appropriate partnership.
(c) Voting and Distributions.
(i) So long as no breach by the Parent of its obligations under or pursuant to the
Guarantee Agreement shall have occurred and be continuing:
(A) except as otherwise provided in Section 6.2(b)(i), such Pledgor shall be
entitled to exercise or refrain from exercising any and all voting and other
consensual rights pertaining to the Investment Property or any part thereof,
provided that such Pledgor shall not exercise or refrain from exercising any such
right for any purpose inconsistent with the terms of this Agreement or the Guarantee
Agreement; it being understood, however, that for the purpose of this proviso,
neither the voting by such Pledgor of any Pledged Equity Interests for, or such
Pledgors consent to, the election of directors (or similar governing body) at any
meeting of stockholders (or similar body) or action by written consent in lieu
thereof or with respect to incidental matters at any such meeting or in such
consent, nor such Pledgors consent to or approval of any action otherwise permitted
under this Agreement and the Guarantee Agreement, shall be deemed inconsistent with
the terms of this Agreement or the Guarantee Agreement within the meaning of this
Section 6.2(c)(i)(A); and
(B) the Bank shall promptly execute and deliver (or cause to be executed and
delivered) to such Pledgor all proxies, and other Instruments as such Pledgor may
from time to time reasonably request for the purpose of enabling such Pledgor to
exercise the voting and other consensual rights when and to the extent which it is
entitled to exercise pursuant to clause (A) above.
(ii) Upon the occurrence and during the continuation of a breach by the Parent of its
obligations under or pursuant to the Guarantee Agreement:
(A) all rights of such Pledgor to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to exercise
pursuant hereto shall cease and all such rights shall thereupon become vested in the
Bank who shall thereupon have the sole right but not the obligation to exercise such
voting and other consensual rights; and
(B) in order to permit the Bank to exercise the voting and other consensual
rights that it may be entitled to exercise pursuant hereto and to receive all
dividends and other distributions which it may be entitled to receive hereunder:
(A) such Pledgor shall promptly execute and deliver (or
cause to be executed and delivered) to the Bank all proxies, dividend
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payment
orders and other Instruments as the Bank may from time to time reasonably request
and (B) such Pledgor acknowledges that the Bank may utilize the power of attorney
set forth in Section 8.1(a).
6.3 General Intangibles.
(a) Representations and Warranties. Each Pledgor hereby represents and warrants that the
General Intangibles, true and complete copies (including any amendments or supplements thereof) of
which will be furnished to the Bank at the time that such General Intangibles are pledged by such
Pledgor, have been duly authorized, executed and delivered by such Pledgor and (to the knowledge
of such Pledgor) the other parties thereto, are in full force and effect and are binding upon and
enforceable against such Pledgor and (to the knowledge of such Pledgor) the other parties thereto,
in accordance with their respective terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting rights of creditors generally and
general principles of equity.
(b) Covenants and Agreements. Each Pledgor hereby covenants and agrees that:
(i) upon the occurrence and during the continuation of a breach by the Parent of its
obligations under or pursuant to the Guarantee Agreement, the Bank may if it deems
reasonably necessary at any time, notify, or require the Parent to so notify, the
counterparty on any General Intangible of the security interest of the Bank therein. In
addition, after the occurrence and during the continuance of such breach, the Bank may upon
written notice to such Pledgor, notify, or require such Pledgor to notify, the counterparty
to make all payments under the General Intangibles directly to the Bank;
(ii) after the occurrence and during the continuance of a breach by the Parent of its
obligations under or pursuant to the Guarantee Agreement, such Pledgor shall deliver
promptly to the Bank a copy of each material demand, notice or document received by it
relating in any way to any instrument, contract or agreement forming a part of the
Collateral;
(iii) it shall perform in all material respects all of its obligations with respect to
the General Intangibles except where failure to do so could not reasonably be expected to
have a material adverse effect on the value of such Collateral or the validity, perfection
or priority of the Banks security interest;
(iv) it shall in its reasonable business judgment and consistent with its past practice
exercise each material right it may have under any General Intangible at its own expense,
and in connection with such collections and exercise, such Pledgor shall take such action as
such Pledgor or, after the occurrence and during the continuance of a breach by the Parent
of its obligations under or pursuant to the Guarantee Agreement, the Bank may deem necessary
or advisable;
(v) it shall use its commercially reasonable business judgment, consistent with its
past practice, in deciding whether or not to keep in full force and effect any General
Intangible pledged hereunder.
-12-
SECTION 7. FURTHER ASSURANCES
7.1 Further Assurances by the Pledgors. Each Pledgor agrees that, upon request from time to
time, at such Pledgors expense, it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or advisable, or that the Bank may
reasonably request, in order to create and/or maintain the validity, perfection or priority of and
protect any security interest granted hereby or to enable the Bank to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting the generality of
the foregoing, each Pledgor agrees that it will:
(a) file such financing or continuation statements, or amendments thereto, and execute and
deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be
necessary or advisable, or as the Bank may reasonably request, in order to perfect and preserve
the security interests granted or purported to be granted hereby; and
(b) at the Banks request, appear in and defend any action or proceeding that may affect such
Pledgors title to or the Banks security interest in all or any part of the Collateral.
7.2 Further Filings by the Bank. Each Pledgor hereby authorizes the Bank to file a Record or
Records, including financing or continuation statements, and amendments thereto, in any
jurisdictions and with any filing offices as the Bank may determine, in its sole discretion, are
necessary or advisable to perfect the security interest granted to the Bank herein. Such financing
statements may describe the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any other manner as the
Bank may determine, in its sole discretion, is necessary, advisable or prudent to ensure the
perfection of the security interest in the Collateral granted to the Bank herein.
SECTION 8. REMEDIES
8.1 Remedies.
(a) If at any time the Parent has failed to comply with its repurchase or reimbursement
obligations under Section 2 of the Guarantee Agreement, which failure has continued without remedy
or waiver for more than thirty (30) days following notice from the Bank of such failure, the Bank
may exercise in respect of the Collateral, in addition to all other rights and remedies provided
herein or otherwise available to it at law or in equity, all the rights and remedies of a secured
party under the UCC in effect in the State of New York (whether or not the UCC applies to the
affected Collateral) to collect, enforce or satisfy any obligations then owing, and also may
pursue any of the following separately, successively or simultaneously:
(i) take possession of the Collateral or any part thereof by directing each Pledgor, in
writing, to assemble all or part of the Collateral and deliver the identified Collateral to
the Bank at any place or places reasonably designated by the Bank;
(ii) transfer any of the Collateral into the name of the Bank or its nominee(s);
-13-
(iii) upon written notice to each Pledgor, exercise all voting rights attributable to
the Collateral (whether or not transferred into the name of the Bank) and give all consents,
waivers and ratifications in respect of such Collateral and otherwise act with respect
thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably
constituting and appointing the Bank the proxy and attorney-in-fact of such Pledgor for such
purposes, with full power of substitution to do so);
(iv) sell, lease, assign, license (on an exclusive or nonexclusive basis) or otherwise
dispose of all or any part of the Collateral, at such place or places as the Bank deems
best, and for cash or for credit or for future delivery (without the Bank thereby assuming
any credit risk), at a public or private sale, at any of the Banks offices or elsewhere,
without demand of performance or notice of intention to effect any such disposition or of
the time or place thereof (except such notice as is required above or by applicable statute
and cannot be waived), for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as the Bank may deem commercially
reasonable. The Bank may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the sale may be
so adjourned; and
(v) demand, sue for, collect or receive, in its name or in the name of such Pledgor or
otherwise, any money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do so.
(b) Any Person may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral disposed of at any public sale (or, to the extent permitted by Law, at any private
sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise), of such Pledgor, any such
demand, notice and right or equity being hereby expressly waived and released.
(c) To the extent the Bank may take remedies under Section 8.1(a), during the continuance of
a breach by the Parent of its obligations under or pursuant to the Guarantee Agreement (and only
during such continuance), the Bank may sell the Collateral without giving any warranties as to the
Collateral. The Bank may specifically disclaim or modify any warranties of title or the like. This
procedure will not be considered to adversely affect the commercial reasonableness of any sale of
the Collateral.
(d) If, during the continuance of a breach by the Parent of its obligations under or pursuant
to the Guarantee Agreement (and only during such continuance) and to the extent the Bank may take
remedies under Section 8.1(a), any Pledgor receives any dividends, distributions or other payments
from Securities or Pledged Equity Interests pledged by such Pledgor as Collateral, such Pledgor
shall, without any further demand from the Bank, pay such dividends, distributions or other
payments to the Bank immediately upon receipt of such dividends, distributions or other payments.
8.2 Remedies Cumulative. Each and every right, power and remedy of the Bank provided for in
this Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every
-14-
other such right, power or remedy. The exercise or beginning of the exercise by the Bank of
any one or more of the rights, powers or remedies provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Bank of all such other rights, powers or remedies, and no
failure or delay on the part of the Bank to exercise any such right, power or remedy shall impair
any such right, power or remedy or operate as a waiver thereof or preclude the further exercise of
any such right, power or remedy. No notice to or demand on any Pledgor in any case shall entitle
such Pledgor to any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Bank to any other or further action in any
circumstances without notice or demand.
8.3 Deficiencies and Excess Proceeds. The Bank shall transfer or cause to be transferred to
applicable Pledgor any Proceeds and Collateral remaining after sale, collection or other
realization of all or any part of the Collateral in accordance with Section 8.1 after satisfaction
in full of the Guarantee; the Parent in all events will remain liable for any amounts remaining
unpaid after any sale, collection or other realization of all or any part of the Collateral in
accordance with Section 8.1.
8.4 Consents Required Prior to Exercise of Remedies. The Bank acknowledges that the terms and
conditions of some or all of the Pledged Equity Interests and certain other Collateral hereunder,
or of instruments, contracts, agreements or Laws relating to the issuers of such Pledged Equity
Interests or to which such issuers are parties or are subject require or may require that certain
consents, authorizations and approvals be obtained from, or notices be made to or filings be made
with, such issuers, other holders of interests in such issuers, lenders or other creditors of such
issuers, certain Governmental Authorities and certain other Persons. The Bank acknowledges that
exercising its rights to foreclose on any such Collateral pursuant to this Section 8 prior to the
receipt of any or all of those consents, authorizations or approvals, or the making of such notices
or filings, may result in a substantial and precipitous impairment in the Value of such Collateral,
which impairment would not occur if the Bank obtained such consents, authorizations or approvals or
made such notices or filings. The Bank further acknowledges that the existence of such requirements
has been disclosed to it, that it has taken such requirements into account in determining the Value
of such Collateral for purposes of this Agreement and the related Haircuts, and that in evaluating
whether any proposed disposition of any Collateral is commercially reasonable, within the meaning
of the UCC, it must assess the impact that foreclosure without obtaining such consents,
authorizations or approvals, or making such notices or filings, would have on the proceeds that the
Bank would obtain as a result of such foreclosure.
8.5 Obligations Relating to Pledged Equity Interests. For the avoidance of doubt, the parties
agree that upon (but only upon, and not in any event prior to) any foreclosure upon any Pledged
Equity Interests, the Bank or any other purchaser of such Pledged Equity Interests shall be
required to assume any obligations associated with such Pledged Equity Interests.
SECTION 9. CONTINUING SECURITY INTEREST
This Agreement shall create a continuing security interest in the Collateral and shall remain
in full force and effect, be binding upon the Pledgors, their respective successors and assigns,
and inure, together with the rights and remedies of the Bank hereunder, to the benefit of the Bank
and to its respective successors, transferees and assigns until the Termination Date.
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SECTION 10. TERMINATION
This Agreement shall terminate on the Business Day after the Termination Date of the last
Transferred Asset held by the Bank.
SECTION 11. MISCELLANEOUS
(a) If any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner materially adverse to any
party to this Agreement. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties to this Agreement shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the greatest extent possible.
(b) If any Person who is not a Pledgor under this Agreement intends to become a Pledgor
hereunder, it may do so by executing a joinder agreement with the Bank in form and substance
satisfactory to the Bank, and upon such execution by such Person and the Bank, such Person shall
become a Pledgor hereunder with all the rights and obligations set forth in this Agreement.
(c) This Agreement shall be binding upon and inure to the benefit of the Bank and the Pledgors
and their respective successors and assigns. The Parent and each Pledgor shall not, without the
prior written consent of the Bank, assign any right, duty or obligation hereunder and any purported
assignment without such consent shall be void, except that Parent shall have the right to assign
all of its rights and obligations to any entity that succeeds, directly or indirectly, to
substantially all of Parents assets by merger or otherwise.
(d) This Agreement, together with the Guarantee Agreement, embodies the entire agreement and
understanding between the Pledgors and the Bank, and supersedes all prior agreements and
understandings between such parties, relating to the subject matter hereof and thereof (other than
the Agreement).
(e) This Agreement may be executed in two or more counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same instrument; signature
pages may be detached from multiple separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same document.
(f) This Agreement may be amended or modified only by an agreement in writing executed by each
of the parties hereto; provided, however, that the parties hereto agree that, upon receipt by the
Bank of the final written statement of the terms of the Section 23A Exemption, they shall amend
this Agreement as necessary to reflect the terms and conditions contained in such statement.
(g) This Agreement is for the sole benefit of the parties to this Agreement and their
permitted successors and assigns and nothing in this Agreement, express or implied,
-16-
is intended to or shall confer upon any other person or party any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
(h) Each party hereto irrevocably and unconditionally waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating this Agreement or the transactions contemplated hereby.
(i) This Agreement and the rights and obligations of the parties hereunder shall be governed
by, and shall be construed and enforced in accordance with, the Laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Collateral Agreement to be duly
executed and delivered personally or by their respective officers thereunto duly authorized, as
applicable, as of the date first written above.
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GOLDMAN SACHS BANK USA
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/s/ Peter OHagan
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Peter OHagan |
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Chief Executive Officer |
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THE GOLDMAN SACHS GROUP, INC.
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/s/ Elizabeth E. Beshel
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Elizabeth E. Beshel |
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Title: |
Treasurer |
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GSEM (DEL) HOLDINGS, L.P. |
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By: Goldman Sachs Global Holdings L.L.C. |
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By:
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/s/ Manda J. DAgata |
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Manda J. DAgata
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Title:
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Assistant Treasurer |
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GOLDMAN SACHS GLOBAL HOLDINGS L.L.C. |
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By:
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/s/ Manda J. DAgata |
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Name:
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Manda J. DAgata
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Title:
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Assistant Treasurer |
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SITE 26 HOLDINGS INC. |
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By:
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/s/ Dino Fusco |
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Dino Fusco
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GSJC LAND L.L.C. |
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Dino Fusco
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Vice President |
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GSIP HOLDCO A LLC |
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By: THE GOLDMAN SACHS GROUP, INC. |
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-6-
EX-10.62
19
y74032exv10w62.htm
EX-10.62: FORM OF PERFORMANCE-BASED ONE-TIME RSU AWARD AGREEMENT
EX-10.62
Exhibit 10.62
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
____ PERFORMANCE-BASED ONE-TIME RSU AWARD
This Award Agreement sets forth the terms and conditions of this special ___
performance-based one-time award (this Award) of restricted stock units (One-time RSUs) granted
to you under The Goldman Sachs Amended and Restated Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award. The number of One-time RSUs subject to this Award is set forth in the Award
Statement delivered to you. An RSU is an unfunded and unsecured promise to deliver (or cause to be
delivered) to you, subject to the terms and conditions of this Award Agreement, a share of Common
Stock (a Share) on the Delivery Date or as otherwise provided herein. Until such delivery, you
have only the rights of a general unsecured creditor, and no rights as a shareholder of GS Inc.
This Award is conditioned on your executing the related signature card and returning it to the
address designated on the signature card and/or by the method designated on the signature card by
the date specified, and is subject to all terms, conditions and provisions of the Plan and this
Award Agreement, including, without limitation, the arbitration and choice of forum provisions set
forth in Paragraph 12. By executing the related signature card (which, among other
things, opens the custody account referred to in paragraph 3(b) if you have not done so
already), you will have confirmed your acceptance of all of the terms and conditions of this Award
Agreement.
3. Vesting and Delivery.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of One-time
RSUs specified next to such Vesting Date on the Award Statement (which may be rounded to avoid
fractional Shares). While continued active Employment is not required in order to receive delivery
of the Shares underlying your Outstanding One-time RSUs that are or become Vested, all other terms
and conditions of this Award Agreement shall continue to apply to such Vested One-time RSUs, and
failure to meet such terms and conditions may result in the termination of this Award (as a result
of which no Shares underlying such Vested One-time RSUs would be delivered).
(b) Delivery.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of One-time RSUs) as such on your Award Statement if such date is during a
Window Period or, if such date is not during a Window Period, the first Trading Day of the first
Window Period beginning after such date. For this purpose, a Trading Day is a day on which
Shares trade regular way on the New York Stock Exchange.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and 15, in
accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than thirty (30)
Business Days) after each date specified as a Delivery Date (or any other date delivery of Shares
is called for hereunder), Shares underlying the number or percentage of your then Outstanding
One-time RSUs with respect to which such Delivery Date (or other date) has occurred (which number
of Shares may be rounded to avoid fractional Shares) shall be delivered by book entry credit to
your Custody Account or to a brokerage account, as approved or required by the Firm.
Notwithstanding the foregoing, if you are or become considered by GS Inc. to be one of its covered
employees within the meaning of Section 162(m) of the Code, then you shall be subject to Section
3.21.3 of the Plan, as a result of which delivery of your Shares may be delayed.
(iii) In accordance with Section 1.3.2(i) of the Plan, in the discretion of the Committee, in
lieu of all or any portion of the Shares otherwise deliverable in respect of all or any portion of
your One-time RSUs, the Firm may deliver cash, other securities, other Awards or other property,
and all references in this Award Agreement to deliveries of Shares shall include such deliveries of
cash, other securities, other Awards or other property.
(iv) In the discretion of the Committee, delivery of Shares may be made initially into an
escrow account meeting such terms and conditions as are determined by the Firm and may be held in
that escrow account until such time as the Committee has received such documentation as it may have
requested or until the Committee has determined that any other conditions or restrictions on
delivery of Shares required by this Award Agreement have been satisfied. By accepting your
One-time RSUs, you have agreed on behalf of yourself (and your estate or other permitted
beneficiary) that the Firm may establish and maintain an escrow account on such terms and
conditions (which may include, without limitation, your executing any documents related to, and
your paying for any costs associated with, such escrow account) as the Firm may deem necessary or
appropriate. Any such escrow arrangement shall, unless otherwise determined by the Firm, provide
that (A) the escrow agent shall have the exclusive authority to vote such Shares while held in
escrow and (B) dividends paid on such Shares held in escrow may be accumulated and shall be paid as
determined by the Firm in its discretion.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(i) and 15), if you die prior to the Delivery Date, the Shares underlying your then
Outstanding One-time RSUs shall be delivered to the representative of your estate as soon as
practicable after the date of death and after such documentation as may be requested by the
Committee is provided to the Committee. The Committee may adopt procedures pursuant to which you
may be permitted to specifically bequeath some or all of your Outstanding One-time RSUs under your
will to an organization described in Sections 501(c)(3) and 2055(a) of the Code (or such other
similar charitable organization as may be approved by the Committee).
4. Termination of One-time RSUs and Non-Delivery of Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your One-time RSUs that were Outstanding but that
had not yet become Vested immediately prior to your termination of Employment immediately shall
terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall be delivered in
respect thereof.
(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding One-time RSUs (whether or not Vested)
immediately shall terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall
be delivered in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
-2-
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, any offer letter, employment
agreement or any shareholders agreement to which other similarly situated employees of the Firm
are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding One-time RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (i) any Firm employee or
consultant (A) with whom you personally worked while employed by the Firm, or (B) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (ii) any Managing Director of the Firm. For the avoidance
of doubt, failure to pay or reimburse the Firm, upon demand, for any amount you owe to the Firm
shall constitute (i) failure to meet an obligation you have under an agreement referred to in
Paragraph 4(b)(v) regardless of whether such obligation arises under a written agreement, and/or
(ii) a material violation of Firm policy constituting Cause referred to in Paragraph 4(b)(ii).
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such delivery were not satisfied) shall
apply to this Award.
6. Extended Absence.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
6(b), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence, the condition set forth in Paragraph 4(a) shall be
waived with
-3-
respect to any One-time RSUs that were Outstanding but that had not yet become Vested
immediately prior to such termination of Employment (as a result of which such One-time RSUs shall
become Vested), but all other terms and conditions of this Award Agreement shall continue to apply.
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding One-time RSUs that become Vested in accordance with Paragraph 6(a) immediately shall
terminate, such Outstanding One-time RSUs shall cease to be Outstanding, and no Shares shall be
delivered in respect thereof if, prior to the original Vesting Date with respect to such One-time
RSUs, you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation
interest in, any Competitive Enterprise, or (ii) associate in any capacity (including, but not
limited to, association as an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise. Notwithstanding the foregoing, unless otherwise determined by the
Committee in its discretion, this Paragraph 6(b) will not apply if your termination of Employment
by reason of Extended Absence is characterized by the Firm as involuntary or by mutual
agreement other than for Cause and if you execute such a general waiver and release of claims and
an agreement to pay any associated tax liability, both as may be prescribed by the Firm or its
designee. No termination of Employment initiated by you, including any termination claimed to be a
constructive termination or the like or a termination for good reason, will constitute an
involuntary termination of Employment or a termination of Employment by mutual agreement.
7. Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraphs 9(i) and 15), in the event a Change in Control shall occur and within
18 months thereafter the Firm terminates your Employment without Cause or you terminate your
Employment for Good Reason, all Shares underlying your then Outstanding One-time RSUs, whether or
not Vested, shall be delivered.
8. Dividend Equivalent Rights. Each One-time RSU shall include a Dividend Equivalent
Right. Accordingly, with respect to each of your Outstanding One-time RSUs, at or after the time
of distribution of any regular cash dividend paid by GS Inc. in respect of a Share the record date
for which occurs on or after the Date of Grant, you shall be entitled to receive an amount (less
applicable withholding) equal to such regular dividend payment as would have been made in respect
of the Share underlying such Outstanding One-time RSU. Payment in respect of a Dividend Equivalent
Right shall be made only with respect to One-time RSUs that are Outstanding on the relevant record
date. Each Dividend Equivalent Right shall be subject to the provisions of Section 2.8.2 of the
Plan.
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to provide for a reserve in an
amount the Firm determines is advisable or necessary in connection with any actual, anticipated or
potential tax consequences related to your separate employment contracts by requiring you to choose
between remitting such amount (i) in cash (or through payroll deduction or otherwise) or (ii) in
the form
of proceeds from the Firms executing a sale of Shares delivered to you pursuant to this Award
(or any other Outstanding Awards under the Plan). In no event, however, shall any choice you may
have under the preceding two sentences determine, or give you any discretion to affect, the timing
of the delivery of Shares or the timing of payment of tax obligations.
-4-
(b) If you are or become a Managing Director, your rights in respect of the One-time RSUs are
conditioned on your becoming a party to any shareholders agreement to which other similarly
situated employees of the Firm are a party.
(c) Your rights in respect of your One-time RSUs are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your One-time
RSUs in accordance with such rules and procedures as may be adopted from time to time with respect
to sales of such Shares (which may include, without limitation, restrictions relating to the timing
of sale requests, the manner in which sales are executed, pricing method, consolidation or
aggregation of orders and volume limits determined by the Firm). In addition, you understand and
agree that you shall be responsible for all brokerage costs and other fees or expenses associated
with your One-time RSU Award, including without limitation, such brokerage costs or other fees or
expenses in connection with the sale of Shares delivered to you hereunder.
(f) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable (including to
reflect any restrictions to which you may be subject under a separate agreement with GS Inc.). GS
Inc. may advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding One-time RSUs would result in
an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 9(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding One-time RSUs;
then, in the case of Paragraph 9(g)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any One-time RSUs you then hold that had not yet become Vested (as a
result of which such One-time RSUs shall become Vested) and, in the case of Paragraphs 9(g)(i) and
9(g)(ii) above, at the sole discretion of the Firm, you shall receive either a lump sum cash
payment in respect of, or delivery of the Shares
underlying, your then Outstanding Vested One-time RSUs, in each case as soon as practicable after
the Committee has received satisfactory documentation relating to your Conflicted Employment.
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(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your One-time RSUs, you understand and agree that, if you are or become a senior
executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your One-time RSUs to the extent that such term or
condition would result in a violation of the Firms obligations under the U.S. Treasurys TARP
Capital Purchase Program (the CPP), as determined by the Firm in its sole discretion;
(ii) The Firm reserves the right to add any terms or conditions to your One-time RSUs as the
Firm deems necessary in its sole discretion to satisfy the Firms obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any One-time RSUs, in
accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems necessary in its sole
discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your One-time RSUs that the Firm deems necessary in its sole discretion to satisfy its obligations
under the CPP. This waiver includes all claims you may have under the laws of the United States or
any state related to the requirements imposed by the EESA, including without limitation a claim for
any compensation or other payments you would otherwise receive, any challenge to the process by
which the EESA was adopted and any tort or constitutional claim about the effect of the EESA on
your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares under this Award Agreement is subject to Section 3.4 of the Plan, which provides for the
Firms right to offset against such obligation any outstanding amounts you owe to the Firm and any
amounts the Committee deems appropriate pursuant to any tax equalization policy or agreement.
11. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and provided further that the Committee expressly reserves its
rights to amend the Award Agreement and the Plan as described in Sections 1.3.2(h)(1), (2) and (4)
of the Plan. For the avoidance of doubt, your acceptance of Paragraph 9(i) constitutes your
consent to any amendments (including amendments which materially adversely affect your rights and
obligations) to your One-time RSUs contemplated under such Paragraph. Any amendment of this Award
Agreement shall be in writing signed by an authorized member of the Committee or a person or
persons designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO
OR CONCERNING THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW
YORK CITY, PURSUANT TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
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13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of One-time RSUs may transfer some or all
of their One-time RSUs through a gift for no consideration to any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any
person sharing the recipients household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, and any other entity in which these persons
(or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern; provided, however, in
the case of any conflict or potential inconsistency between this Paragraph 15 and Paragraph 9(i),
Paragraph 9(i) shall govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your One-time RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) (execution of
waiver and release of claims and agreement to pay associated tax liability) and 9 and the consents
and other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by March 15 of
the calendar year in which the Delivery Date occurs unless, in order to permit such conditions or
restrictions to be satisfied, the Committee elects, pursuant to Treasury Regulations section
(Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance with Section 409A, to
delay delivery of Shares to a later date within the same calendar year or to such later date as may
be permitted under Section 409A, including, without limitation, Regs. 1.409A-2(b)(7) (in
conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your One-time RSUs shall not have the effect of deferring
delivery or
payment, income inclusion, or a substantial risk of forfeiture, beyond the date on which such
delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with respect to
the Shares that would otherwise have been deliverable (unless the Committee elects a later date for
this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted under Section
409A, including, without limitation and to the
-7-
extent applicable, the subsequent election
provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified employee (as defined by the Firm in accordance
with Section 409A(a)(2)(i)(B) of the Code), delivery shall occur on the earlier of the Delivery
Date or (to the extent required to avoid the imposition of additional tax under Section 409A) the
date that is six months after your termination of Employment (or, if the latter date is not during
a Window Period, the first trading day of the next Window Period). For purposes of Paragraph 7,
references in this Award Agreement to termination of Employment mean separation from service (as
defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding One-time RSUs shall be paid
to you within the calendar year that includes the date of distribution of any corresponding regular
cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or after
the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding One-time RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
-8-
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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By:
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Name:
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Title:
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-9-
EX-10.63
20
y74032exv10w63.htm
EX-10.63: FORM OF MAKE-WHOLE ONE-TIME RSU AWARD AGREEMENT
EX-10.63
Exhibit 10.63
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
MAKE-WHOLE ONE-TIME RSU AWARD
This Award Agreement sets forth the terms and conditions of this special ___make-whole
one-time award (this Award) of restricted stock units (One-time RSUs) granted to you under The
Goldman Sachs Amended and Restated Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award. The number of One-time RSUs subject to this Award is set forth in the Award
Statement delivered to you. An RSU is an unfunded and unsecured promise to deliver (or cause to be
delivered) to you, subject to the terms and conditions of this Award Agreement, a share of Common
Stock (a Share) on the Delivery Date or as otherwise provided herein. Until such delivery, you
have only the rights of a general unsecured creditor, and no rights as a shareholder of GS Inc.
This Award is conditioned on your executing the related signature card and returning it to the
address designated on the signature card and/or by the method designated on the signature card by
the date specified, and is subject to all terms, conditions and provisions of the Plan and this
Award Agreement, including, without limitation, the arbitration and choice of forum provisions set
forth in Paragraph 12. By executing the related signature card (which, among other
things, opens the custody account referred to in paragraph 3(b) if you have not done so
already), you will have confirmed your acceptance of all of the terms and conditions of this Award
Agreement.
3. Vesting and Delivery.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of One-time
RSUs specified next to such Vesting Date on the Award Statement (which may be rounded to avoid
fractional Shares). While continued active Employment is not required in order to receive delivery
of the Shares underlying your Outstanding One-time RSUs that are or become Vested, all other terms
and conditions of this Award Agreement shall continue to apply to such Vested One-time RSUs, and
failure to meet such terms and conditions may result in the termination of this Award (as a result
of which no Shares underlying such Vested One-time RSUs would be delivered).
(b) Delivery.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of One-time RSUs) as such on your Award Statement if such date is during a
Window Period or, if such date is not during a Window Period, the first Trading Day of the first
Window Period beginning after such date. For this purpose, a Trading Day is a day on which
Shares trade regular way on the New York Stock Exchange.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and 15, in
accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than thirty (30)
Business Days) after each date specified as a Delivery Date (or any other date delivery of Shares
is called for hereunder), Shares underlying the number or percentage of your then Outstanding
One-time RSUs with respect to which such Delivery Date (or other date) has occurred (which number
of Shares may be rounded to avoid fractional Shares) shall be delivered by book entry credit to
your Custody Account or to a brokerage account, as approved or required by the Firm.
Notwithstanding the foregoing, if you are or become considered by GS Inc. to be one of its covered
employees within the meaning of Section 162(m) of the Code, then you shall be subject to Section
3.21.3 of the Plan, as a result of which delivery of your Shares may be delayed.
(iii) In accordance with Section 1.3.2(i) of the Plan, in the discretion of the Committee, in
lieu of all or any portion of the Shares otherwise deliverable in respect of all or any portion of
your One-time RSUs, the Firm may deliver cash, other securities, other Awards or other property,
and all references in this Award Agreement to deliveries of Shares shall include such deliveries of
cash, other securities, other Awards or other property.
(iv) In the discretion of the Committee, delivery of Shares may be made initially into an
escrow account meeting such terms and conditions as are determined by the Firm and may be held in
that escrow account until such time as the Committee has received such documentation as it may have
requested or until the Committee has determined that any other conditions or restrictions on
delivery of Shares required by this Award Agreement have been satisfied. By accepting your
One-time RSUs, you have agreed on behalf of yourself (and your estate or other permitted
beneficiary) that the Firm may establish and maintain an escrow account on such terms and
conditions (which may include, without limitation, your executing any documents related to, and
your paying for any costs associated with, such escrow account) as the Firm may deem necessary or
appropriate. Any such escrow arrangement shall, unless otherwise determined by the Firm, provide
that (A) the escrow agent shall have the exclusive authority to vote such Shares while held in
escrow and (B) dividends paid on such Shares held in escrow may be accumulated and shall be paid as
determined by the Firm in its discretion.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(i) and 15), if you die prior to the Delivery Date, the Shares underlying your then
Outstanding One-time RSUs shall be delivered to the representative of your estate as soon as
practicable after the date of death and after such documentation as may be requested by the
Committee is provided to the Committee. The Committee may adopt procedures pursuant to which you
may be permitted to specifically bequeath some or all of your Outstanding One-time RSUs under your
will to an organization described in Sections 501(c)(3) and 2055(a) of the Code (or such other
similar charitable organization as may be approved by the Committee).
4. Termination of One-time RSUs and Non-Delivery of Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your One-time RSUs that were Outstanding but that
had not yet become Vested immediately prior to your termination of Employment immediately shall
terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall be delivered in
respect thereof.
(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding One-time RSUs (whether or not Vested)
immediately shall terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall
be delivered in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
-2-
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, any offer letter, employment
agreement or any shareholders agreement to which other similarly situated employees of the Firm
are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding One-time RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (i) any Firm employee or
consultant (A) with whom you personally worked while employed by the Firm, or (B) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (ii) any Managing Director of the Firm. For the avoidance
of doubt, failure to pay or reimburse the Firm, upon demand, for any amount you owe to the Firm
shall constitute (i) failure to meet an obligation you have under an agreement referred to in
Paragraph 4(b)(v) regardless of whether such obligation arises under a written agreement, and/or
(ii) a material violation of Firm policy constituting Cause referred to in Paragraph 4(b)(ii)).
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such delivery were not satisfied) shall
apply to this Award.
6. Extended Absence, Retirement and Downsizing.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
6(b), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence or Retirement (as defined below), the condition set
forth in
-3-
Paragraph 4(a) shall be waived with respect to any One-time RSUs that were Outstanding but
that had not yet become Vested immediately prior to such termination of Employment (as a result of
which such One-time RSUs shall become Vested), but all other terms and conditions of this Award
Agreement shall continue to apply. Notwithstanding anything to the contrary in the Plan or
otherwise, Retirement means termination of your Employment (other than for Cause) on or after the
Date of Grant at a time when (i) the sum of your age plus years of service with the Firm (as
determined by the Committee in its sole discretion) equals or exceeds 60 and (ii) you have
completed at least ten (10) years of service with the Firm (as determined by the Committee in its
sole discretion).
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding One-time RSUs that become Vested in accordance with Paragraph 6(a) immediately shall
terminate, such Outstanding One-time RSUs shall cease to be Outstanding, and no Shares shall be
delivered in respect thereof if, prior to the original Vesting Date with respect to such One-time
RSUs, you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation
interest in, any Competitive Enterprise, or (ii) associate in any capacity (including, but not
limited to, association as an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise. Notwithstanding the foregoing, unless otherwise determined by the
Committee in its discretion, this Paragraph 6(b) will not apply if your termination of Employment
by reason of Extended Absence or Retirement is characterized by the Firm as involuntary or by
mutual agreement other than for Cause and if you execute such a general waiver and release of
claims and an agreement to pay any associated tax liability, both as may be prescribed by the Firm
or its designee. No termination of Employment initiated by you, including any termination claimed
to be a constructive termination or the like or a termination for good reason, will constitute an
involuntary termination of Employment or a termination of Employment by mutual agreement.
(c) Notwithstanding any other provision of this Award Agreement and subject to your executing
such general waiver and release of claims and an agreement to pay any associated tax liability,
both as may be prescribed by the Firm or its designee, if your Employment is terminated without
Cause solely by reason of a downsizing, the condition set forth in Paragraph 4(a) shall be waived
with respect to your One-time RSUs that were Outstanding but that had not yet become Vested
immediately prior to such termination of Employment (as a result of which such One-time RSUs shall
become Vested), but all other conditions of this Award Agreement shall continue to apply. Whether
or not your Employment is terminated solely by reason of a downsizing shall be determined by the
Firm in its sole discretion. No termination of Employment initiated by you, including any
termination claimed to be a constructive termination or the like or a termination for good
reason, will be solely by reason of a downsizing.
7. Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraphs 9(i) and 15), in the event a Change in Control shall occur and within
18 months thereafter the Firm terminates your Employment without Cause or you terminate your
Employment for Good Reason, all Shares underlying your then Outstanding One-time RSUs, whether or
not Vested, shall be delivered.
8. Dividend Equivalent Rights. Each One-time RSU shall include a Dividend Equivalent
Right. Accordingly, with respect to each of your Outstanding One-time RSUs, at or after the time
of distribution of any regular cash dividend paid by GS Inc. in respect of a Share the record date
for which occurs on or after the Date of Grant, you shall be entitled to receive an amount (less
applicable withholding) equal to such regular dividend payment as would have been made in respect
of the Share underlying such Outstanding One-time RSU. Payment in respect of a Dividend Equivalent
Right shall be made only with respect to One-
time RSUs that are Outstanding on the relevant record date. Each Dividend Equivalent Right
shall be subject to the provisions of Section 2.8.2 of the Plan.
-4-
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to provide for a reserve in an
amount the Firm determines is advisable or necessary in connection with any actual, anticipated or
potential tax consequences related to your separate employment contracts by requiring you to choose
between remitting such amount (i) in cash (or through payroll deduction or otherwise) or (ii) in
the form of proceeds from the Firms executing a sale of Shares delivered to you pursuant to this
Award (or any other Outstanding Awards under the Plan). In no event, however, shall any choice you
may have under the preceding two sentences determine, or give you any discretion to affect, the
timing of the delivery of Shares or the timing of payment of tax obligations.
(b) If you are or become a Managing Director, your rights in respect of the One-time RSUs are
conditioned on your becoming a party to any shareholders agreement to which other similarly
situated employees of the Firm are a party.
(c) Your rights in respect of your One-time RSUs are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your One-time
RSUs in accordance with such rules and procedures as may be adopted from time to time with respect
to sales of such Shares (which may include, without limitation, restrictions relating to the timing
of sale requests, the manner in which sales are executed, pricing method, consolidation or
aggregation of orders and volume limits determined by the Firm). In addition, you understand and
agree that you shall be responsible for all brokerage costs and other fees or expenses associated
with your One-time RSU Award, including without limitation, such brokerage costs or other fees or
expenses in connection with the sale of Shares delivered to you hereunder.
(f) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable (including to
reflect any restrictions to which you may be subject under a separate agreement with GS Inc.). GS
Inc. may advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any
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supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding One-time RSUs would result in
an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 9(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding One-time RSUs;
then, in the case of Paragraph 9(g)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any One-time RSUs you then hold that had not yet become Vested (as a
result of which such One-time RSUs shall become Vested) and, in the case of Paragraphs 9(g)(i) and
9(g)(ii) above, at the sole discretion of the Firm, you shall receive either a lump sum cash
payment in respect of, or delivery of the Shares underlying, your then Outstanding Vested One-time
RSUs, in each case as soon as practicable after the Committee has received satisfactory
documentation relating to your Conflicted Employment.
(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your One-time RSUs, you understand and agree that, if you are or become a senior
executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your One-time RSUs to the extent that such term or
condition would result in a violation of the Firms obligations under the U.S. Treasurys TARP
Capital Purchase Program (the CPP), as determined by the Firm in its sole discretion;
(ii) The Firm reserves the right to add any terms or conditions to your One-time RSUs as the
Firm deems necessary in its sole discretion to satisfy the Firms obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any One-time RSUs, in
accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems necessary in its sole
discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your One-time RSUs that the Firm deems necessary in its sole discretion to satisfy its obligations
under the CPP. This waiver includes all claims you may have under the laws of the United States or
any state related to the requirements imposed by the EESA, including without limitation a claim for
any compensation or other payments you would otherwise receive, any challenge to the process by
which the EESA was adopted and any tort or constitutional claim about the effect of the EESA on
your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares under this Award Agreement is subject to Section 3.4 of the Plan, which provides for the
Firms right to offset against such obligation any outstanding amounts you owe to the Firm and any
amounts the Committee deems appropriate pursuant to any tax equalization policy or agreement.
11. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that,
notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan, no such
amendment shall materially adversely affect your rights and obligations under this Award Agreement
without your consent; and
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provided further that the Committee expressly reserves its rights to
amend the Award Agreement and the Plan as described in Sections 1.3.2(h)(1), (2) and (4) of the
Plan. For the avoidance of doubt, your acceptance of Paragraph 9(i) constitutes your consent to
any amendments (including amendments which materially adversely affect your rights and obligations)
to your One-time RSUs contemplated under such Paragraph. Any amendment of this Award Agreement
shall be in writing signed by an authorized member of the Committee or a person or persons
designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of One-time RSUs may transfer some or all
of their One-time RSUs through a gift for no consideration to any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any
person sharing the recipients household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, and any other entity in which these persons
(or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern; provided, however, in
the case of any conflict or potential inconsistency between this Paragraph 15 and Paragraph 9(i),
Paragraph 9(i) shall govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your One-time RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) and (c) (execution
of waiver and
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release of claims and agreement to pay associated tax liability) and 9 and the
consents and other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by
March 15 of the calendar year in which the Delivery Date occurs unless, in order to permit such
conditions or restrictions to be satisfied, the Committee elects, pursuant to Treasury Regulations
section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance with Section
409A, to delay delivery of Shares to a later date within the same calendar year or to such later
date as may be permitted under Section 409A, including, without limitation, Regs. 1.409A-2(b)(7)
(in conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your One-time RSUs shall not have the effect of deferring
delivery or payment, income inclusion, or a substantial risk of forfeiture, beyond the date on
which such delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with
respect to the Shares that would otherwise have been deliverable (unless the Committee elects a
later date for this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted
under Section 409A, including, without limitation and to the extent applicable, the subsequent
election provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified employee (as defined by the Firm in accordance
with Section 409A(a)(2)(i)(B) of the Code), delivery shall occur on the earlier of the Delivery
Date or (to the extent required to avoid the imposition of additional tax under Section 409A) the
date that is six months after your termination of Employment (or, if the latter date is not during
a Window Period, the first trading day of the next Window Period). For purposes of Paragraph 7,
references in this Award Agreement to termination of Employment mean separation from service (as
defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding One-time RSUs shall be paid
to you within the calendar year that includes the date of distribution of any corresponding regular
cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or after
the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding One-time RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
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16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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By:
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EX-10.64
21
y74032exv10w64.htm
EX-10.64: FORM OF INCENTIVE ONE-TIME RSU AWARD AGREEMENT
EX-10.64
Exhibit 10.64
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
____ INCENTIVE ONE-TIME RSU AWARD
This Award Agreement sets forth the terms and conditions of this special ___incentive
one-time award (this Award) of restricted stock units (One-time RSUs) granted to you under The
Goldman Sachs Amended and Restated Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award. The number of One-time RSUs subject to this Award is set forth in the Award
Statement delivered to you. An RSU is an unfunded and unsecured promise to deliver (or cause to be
delivered) to you, subject to the terms and conditions of this Award Agreement, a share of Common
Stock (a Share) on the Delivery Date or as otherwise provided herein. Until such delivery, you
have only the rights of a general unsecured creditor, and no rights as a shareholder of GS Inc.
This Award is conditioned on your executing the related signature card and returning it to the
address designated on the signature card and/or by the method designated on the signature card by
the date specified, and is subject to all terms, conditions and provisions of the Plan and this
Award Agreement, including, without limitation, the arbitration and choice of forum provisions set
forth in Paragraph 12. By executing the related signature card (which, among other
things, opens the custody account referred to in paragraph 3(b) if you have not done so
already), you will have confirmed your acceptance of all of the terms and conditions of this Award
Agreement.
3. Vesting and Delivery.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of One-time
RSUs specified next to such Vesting Date on the Award Statement (which may be rounded to avoid
fractional Shares). While continued active Employment is not required in order to receive delivery
of the Shares underlying your Outstanding One-time RSUs that are or become Vested, all other terms
and conditions of this Award Agreement shall continue to apply to such Vested One-time RSUs, and
failure to meet such terms and conditions may result in the termination of this Award (as a result
of which no Shares underlying such Vested One-time RSUs would be delivered).
(b) Delivery.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of One-time RSUs) as such on your Award Statement if such date is during a
Window Period or, if such date is not during a Window Period, the first Trading Day of the first
Window Period beginning after such date. For this purpose, a Trading Day is a day on which
Shares trade regular way on the New York Stock Exchange.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and 15, in
accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than thirty (30)
Business Days) after each date specified as a Delivery Date (or any other date delivery of Shares
is called for hereunder), Shares underlying the number or percentage of your then Outstanding
One-time RSUs with respect to which such Delivery Date (or other date) has occurred (which number
of Shares may be rounded to avoid fractional Shares) shall be delivered by book entry credit to
your Custody Account or to a brokerage account, as approved or required by the Firm.
Notwithstanding the foregoing, if you are or become considered by GS Inc. to be one of its covered
employees within the meaning of Section 162(m) of the Code, then you shall be subject to Section
3.21.3 of the Plan, as a result of which delivery of your Shares may be delayed.
(iii) In accordance with Section 1.3.2(i) of the Plan, in the discretion of the Committee, in
lieu of all or any portion of the Shares otherwise deliverable in respect of all or any portion of
your One-time RSUs, the Firm may deliver cash, other securities, other Awards or other property,
and all references in this Award Agreement to deliveries of Shares shall include such deliveries of
cash, other securities, other Awards or other property.
(iv) In the discretion of the Committee, delivery of Shares may be made initially into an
escrow account meeting such terms and conditions as are determined by the Firm and may be held in
that escrow account until such time as the Committee has received such documentation as it may have
requested or until the Committee has determined that any other conditions or restrictions on
delivery of Shares required by this Award Agreement have been satisfied. By accepting your
One-time RSUs, you have agreed on behalf of yourself (and your estate or other permitted
beneficiary) that the Firm may establish and maintain an escrow account on such terms and
conditions (which may include, without limitation, your executing any documents related to, and
your paying for any costs associated with, such escrow account) as the Firm may deem necessary or
appropriate. Any such escrow arrangement shall, unless otherwise determined by the Firm, provide
that (A) the escrow agent shall have the exclusive authority to vote such Shares while held in
escrow and (B) dividends paid on such Shares held in escrow may be accumulated and shall be paid as
determined by the Firm in its discretion.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(i) and 15), if you die prior to the Delivery Date, the Shares underlying your then
Outstanding One-time RSUs shall be delivered to the representative of your estate as soon as
practicable after the date of death and after such documentation as may be requested by the
Committee is provided to the Committee. The Committee may adopt procedures pursuant to which you
may be permitted to specifically bequeath some or all of your Outstanding One-time RSUs under your
will to an organization described in Sections 501(c)(3) and 2055(a) of the Code (or such other
similar charitable organization as may be approved by the Committee).
4. Termination of One-time RSUs and Non-Delivery of Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your One-time RSUs that were Outstanding but that
had not yet become Vested immediately prior to your termination of Employment immediately shall
terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall be delivered in
respect thereof.
(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding One-time RSUs (whether or not Vested)
immediately shall terminate, such One-time RSUs shall cease to be Outstanding and no Shares shall
be delivered in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
-2-
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, any offer letter, employment
agreement or any shareholders agreement to which other similarly situated employees of the Firm
are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding One-time RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (i) any Firm employee or
consultant (A) with whom you personally worked while employed by the Firm, or (B) who at any time
during the year immediately preceding your termination of Employment with the Firm, worked in the
same division in which you worked; and (ii) any Managing Director of the Firm. For the avoidance
of doubt, failure to pay or reimburse the Firm, upon demand, for any amount you owe to the Firm
shall constitute (i) failure to meet an obligation you have under an agreement referred to in
Paragraph 4(b)(v) regardless of whether such obligation arises under a written agreement, and/or
(ii) a material violation of Firm policy constituting Cause referred to in Paragraph 4(b)(ii)).
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such delivery were not satisfied) shall
apply to this Award.
6. Extended Absence and Retirement.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
6(b), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence or Retirement (as defined below), the condition set
forth in
-3-
Paragraph 4(a) shall be waived with respect to any One-time RSUs that were Outstanding but
that had not yet become Vested immediately prior to such termination of Employment (as a result of
which such One-time RSUs shall become Vested), but all other terms and conditions of this Award
Agreement shall continue to apply. Notwithstanding anything to the contrary in the Plan or
otherwise, Retirement means termination of your Employment (other than for Cause) on or after the
Date of Grant at a time when (i) the sum of your age plus years of service with the Firm (as
determined by the Committee in its sole discretion) equals or exceeds 60 and (ii) you have
completed at least ten (10) years of service with the Firm (as determined by the Committee in its
sole discretion).
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding One-time RSUs that become Vested in accordance with Paragraph 6(a) immediately shall
terminate, such Outstanding One-time RSUs shall cease to be Outstanding, and no Shares shall be
delivered in respect thereof if, prior to the original Vesting Date with respect to such One-time
RSUs, you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation
interest in, any Competitive Enterprise, or (ii) associate in any capacity (including, but not
limited to, association as an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise. Notwithstanding the foregoing, unless otherwise determined by the
Committee in its discretion, this Paragraph 6(b) will not apply if your termination of Employment
by reason of Extended Absence or Retirement is characterized by the Firm as involuntary or by
mutual agreement other than for Cause and if you execute such a general waiver and release of
claims and an agreement to pay any associated tax liability, both as may be prescribed by the Firm
or its designee. No termination of Employment initiated by you, including any termination claimed
to be a constructive termination or the like or a termination for good reason, will constitute an
involuntary termination of Employment or a termination of Employment by mutual agreement.
7. Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraphs 9(i) and 15), in the event a Change in Control shall occur and within
18 months thereafter the Firm terminates your Employment without Cause or you terminate your
Employment for Good Reason, all Shares underlying your then Outstanding One-time RSUs, whether or
not Vested, shall be delivered.
8. Dividend Equivalent Rights. Each One-time RSU shall include a Dividend Equivalent
Right. Accordingly, with respect to each of your Outstanding One-time RSUs, at or after the time
of distribution of any regular cash dividend paid by GS Inc. in respect of a Share the record date
for which occurs on or after the Date of Grant, you shall be entitled to receive an amount (less
applicable withholding) equal to such regular dividend payment as would have been made in respect
of the Share underlying such Outstanding One-time RSU. Payment in respect of a Dividend Equivalent
Right shall be made only with respect to One-time RSUs that are Outstanding on the relevant record
date. Each Dividend Equivalent Right shall be subject to the provisions of Section 2.8.2 of the
Plan.
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to
you pursuant to this Award. In addition, if you are an individual with separate employment
contracts (at any time during and/or after the Firms ___fiscal year), the Firm may, in its sole
discretion, require you to provide for a reserve in an amount the Firm determines is advisable or
necessary in connection with any actual, anticipated or potential tax consequences related to your
separate employment contracts by requiring you to choose between remitting such amount (i) in cash
(or through payroll deduction or otherwise) or (ii) in the form of proceeds from the Firms
executing a sale of Shares delivered to you pursuant to this Award (or any other
-4-
Outstanding Awards
under the Plan). In no event, however, shall any choice you may have under the preceding two
sentences determine, or give you any discretion to affect, the timing of the delivery of Shares or
the timing of payment of tax obligations.
(b) If you are or become a Managing Director, your rights in respect of the One-time RSUs are
conditioned on your becoming a party to any shareholders agreement to which other similarly
situated employees of the Firm are a party.
(c) Your rights in respect of your One-time RSUs are conditioned on the receipt to the full
satisfaction of the Committee of any required consents (as described in Section 3.3 of the Plan)
that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your One-time
RSUs in accordance with such rules and procedures as may be adopted from time to time with respect
to sales of such Shares (which may include, without limitation, restrictions relating to the timing
of sale requests, the manner in which sales are executed, pricing method, consolidation or
aggregation of orders and volume limits determined by the Firm). In addition, you understand and
agree that you shall be responsible for all brokerage costs and other fees or expenses associated
with your One-time RSU Award, including without limitation, such brokerage costs or other fees or
expenses in connection with the sale of Shares delivered to you hereunder.
(f) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable (including to
reflect any restrictions to which you may be subject under a separate agreement with GS Inc.). GS
Inc. may advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding One-time RSUs would result in
an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 9(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding One-time RSUs;
then, in the case of Paragraph 9(g)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any One-time RSUs you then hold that had not yet become Vested (as a
result of which such One-time RSUs shall become Vested) and, in the case of Paragraphs 9(g)(i) and
9(g)(ii) above, at the sole discretion of the Firm, you shall receive either a lump sum cash
payment in respect of, or delivery of the Shares
-5-
underlying, your then Outstanding Vested One-time
RSUs, in each case as soon as practicable after the Committee has received satisfactory
documentation relating to your Conflicted Employment.
(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your One-time RSUs, you understand and agree that, if you are or become a senior
executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your One-time RSUs to the extent that such term or
condition would result in a violation of the Firms obligations under the U.S. Treasurys TARP
Capital Purchase Program (the CPP), as determined by the Firm in its sole discretion;
(ii) The Firm reserves the right to add any terms or conditions to your One-time RSUs as the
Firm deems necessary in its sole discretion to satisfy the Firms obligations under the CPP;
(iii) You will be required to repay any Shares delivered pursuant to any One-time RSUs, in
accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems necessary in its sole
discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your One-time RSUs that the Firm deems necessary in its sole discretion to satisfy its obligations
under the CPP. This waiver includes all claims you may have under the laws of the United States or
any state related to the requirements imposed by the EESA, including without limitation a claim for
any compensation or other payments you would otherwise receive, any challenge to the process by
which the EESA was adopted and any tort or constitutional claim about the effect of the EESA on
your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares under this Award Agreement is subject to Section 3.4 of the Plan, which provides for the
Firms right to offset against such obligation any outstanding amounts you owe to the Firm and any
amounts the Committee deems appropriate pursuant to any tax equalization policy or agreement.
11. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and provided further that the Committee expressly reserves its
rights to amend the Award Agreement and the Plan as described in Sections 1.3.2(h)(1), (2) and (4)
of the Plan. For the avoidance of doubt, your acceptance of Paragraph 9(i) constitutes your
consent to any amendments (including amendments which materially adversely affect your rights and
obligations) to your One-time RSUs contemplated under such Paragraph. Any amendment of this Award
Agreement shall be in writing signed by an authorized member of the Committee or a person or
persons designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY
-6-
ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of One-time RSUs may transfer some or all
of their One-time RSUs through a gift for no consideration to any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any
person sharing the recipients household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, and any other entity in which these persons
(or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern; provided, however, in
the case of any conflict or potential inconsistency between this Paragraph 15 and Paragraph 9(i),
Paragraph 9(i) shall govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your One-time RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) (execution of
waiver and release of claims and agreement to pay associated tax liability) and 9 and the consents
and other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by March 15 of
the calendar year in which the Delivery Date occurs unless, in order to permit such conditions or
restrictions to be satisfied, the Committee elects, pursuant to Treasury Regulations section
(Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance with Section 409A, to
delay delivery of Shares to a later date within the same calendar year or to
such later date as may be permitted under Section 409A, including, without limitation, Regs.
1.409A-2(b)(7) (in conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m))
and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your One-time RSUs shall not have the effect of deferring
delivery or payment, income inclusion, or a substantial risk of forfeiture, beyond the date on
which such delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with
respect to the Shares that would otherwise
-7-
have been deliverable (unless the Committee elects a
later date for this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted
under Section 409A, including, without limitation and to the extent applicable, the subsequent
election provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified employee (as defined by the Firm in accordance
with Section 409A(a)(2)(i)(B) of the Code), delivery shall occur on the earlier of the Delivery
Date or (to the extent required to avoid the imposition of additional tax under Section 409A) the
date that is six months after your termination of Employment (or, if the latter date is not during
a Window Period, the first trading day of the next Window Period). For purposes of Paragraph 7,
references in this Award Agreement to termination of Employment mean separation from service (as
defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding One-time RSUs shall be paid
to you within the calendar year that includes the date of distribution of any corresponding regular
cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or after
the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to such
regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding One-time RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
-8-
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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By:
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Name: |
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Title: |
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-9-
EX-10.65
22
y74032exv10w65.htm
EX-10.65: FORM OF YEAR-END SUPPLEMENTAL RSU AWARD AGREEMENT (FRANCE)
EX-10.65
Exhibit 10.65
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
____ YEAR-END SUPPLEMENTAL RSU AWARD
This Award Agreement sets forth the terms and conditions of the ___Year-End award (this
Award) of Supplemental RSUs (Year-End Supplemental RSUs) granted to you under The Goldman Sachs
Amended and Restated Stock Incentive Plan (the Plan).
1. The Plan. This Award is made pursuant to the Plan, the terms of which are
incorporated in this Award Agreement. Capitalized terms used in this Award Agreement that are not
defined in this Award Agreement have the meanings as used or defined in the Plan. References in
this Award Agreement to any specific Plan provision shall not be construed as limiting the
applicability of any other Plan provision. In light of the U.S. tax rules relating to deferred
compensation in Section 409A of the Code, to the extent that you are a United States taxpayer,
certain provisions of this Award Agreement and of the Plan shall apply only as provided in
Paragraph 15.
2. Award. The number of Year-End Supplemental RSUs subject to this Award is set forth
(as ___Year-End Supplemental RSUs) in the
Award Statement delivered to you. An RSU is an
unfunded and unsecured promise to deliver (or cause to be delivered) to you, subject to the terms
and conditions of this Award Agreement, a share of Common Stock (a Share) on the Delivery Date or
as otherwise provided herein. Until such delivery, you have only the rights of a general unsecured
creditor, and no rights as a shareholder of GS Inc. This Award is conditioned on your executing
the related signature card and returning it to the address designated on the signature card and/or
by the method designated on the signature card by the date specified, and is subject to all terms,
conditions and provisions of the Plan and this Award Agreement, including, without limitation, the
arbitration and choice of forum provisions set forth in Paragraph 12. By executing the
related signature card (which, among other things, opens the custody account referred to in
paragraph 3(b) if you have not done so already), you will have confirmed your acceptance
of all of the terms and conditions of this Award Agreement.
3. Vesting and Delivery.
(a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 6, 7, 9,
10 and 15, on each Vesting Date you shall become Vested in the number or percentage of Year-End
Supplemental RSUs specified next to such Vesting Date on the Award Statement (which may be rounded
to avoid fractional Shares). While continued active Employment is not required in order to receive
delivery of the Shares underlying your Outstanding Year-End Supplemental RSUs that are or become
Vested, all other terms and conditions of this Award Agreement shall continue to apply to such
Vested Year-End Supplemental RSUs, and failure to meet such terms and conditions may result in the
termination of this Award (as a result of which no Shares underlying such Vested Year-End
Supplemental RSUs would be delivered).
(b) Delivery.
(i) The Delivery Dates with respect to this Award shall be the dates specified (next to the
number or percentage of Year-End Supplemental RSUs) as such on your Award Statement if such date is
during a Window Period or, if such date is not during a Window Period, the first Trading Day of
the first Window Period beginning after that date. For this purpose, a Trading Day is a day
on which Shares trade regular way on the New York Stock Exchange.
(ii) Except as provided in this Paragraph 3 and in Paragraphs 2, 4, 5, 6, 7, 9, 10 and
15, in accordance with Section 3.23 of the Plan, reasonably promptly (but in no case more than
thirty (30) Business Days) after each date specified as a Delivery Date (or any other date delivery
of Shares is called for hereunder), Shares underlying the number or percentage of your then
Outstanding Year-End Supplemental RSUs with respect to which such Delivery Date (or other date) has
occurred (which number of Shares may be rounded to avoid fractional Shares) shall be delivered by
book entry credit to your Custody Account or to a brokerage account, as approved or required by the
Firm. Notwithstanding the foregoing, if you are or become considered by GS Inc. to be one of its
covered employees within the meaning of Section 162(m) of the Code, then you shall be subject to
Section 3.21.3 of the Plan, as a result of which delivery of your Shares may be delayed.
(iii) In accordance with Section 1.3.2(i) of the Plan, in the discretion of the
Committee, in lieu of all or any portion of the Shares otherwise deliverable in respect of all or
any portion of your Year-End Supplemental RSUs, the Firm may deliver cash, other securities, other
Awards or other property, and all references in this Award Agreement to deliveries of Shares shall
include such deliveries of cash, other securities, other Awards or other property.
(iv) In the discretion of the Committee, delivery of Shares may be made initially into an
escrow account meeting such terms and conditions as are determined by the Firm and may be held in
that escrow account until such time as the Committee has received such documentation as it may have
requested or until the Committee has determined that any other conditions or restrictions on
delivery of Shares required by this Award Agreement have been satisfied. By accepting your
Year-End Supplemental RSUs, you have agreed on behalf of yourself (and your estate or other
permitted beneficiary) that the Firm may establish and maintain an escrow account on such terms and
conditions (which may include, without limitation, your executing any documents related to, and
your paying for any costs associated with, such escrow account) as the Firm may deem necessary or
appropriate. Any such escrow arrangement shall, unless otherwise determined by the Firm, provide
that (A) the escrow agent shall have the exclusive authority to vote such Shares while held in
escrow and (B) dividends paid on such Shares held in escrow may be accumulated and shall be paid as
determined by the Firm in its discretion.
(c) Death. Notwithstanding any other Paragraph of this Award Agreement (except
Paragraphs 9(i) and 15), if you die prior to the Delivery Date, the Shares underlying your then
Outstanding Year-End Supplemental RSUs shall be delivered to the representative of your estate as
soon as practicable after the date of death and after such documentation as may be requested by the
Committee is provided to the Committee. The Committee may adopt procedures pursuant to which you
may be permitted to specifically bequeath some or all of your Outstanding Year-End Supplemental
RSUs under your will to an organization described in Sections 501(c)(3) and 2055(a) of the Code (or
such other similar charitable organization as may be approved by the Committee).
4. Termination of Year-End Supplemental RSUs and Non-Delivery of Shares.
(a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c), 6,
7, and 9(g), if your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm, your rights in respect of your Year-End Supplemental RSUs that were
Outstanding but that had not yet become Vested immediately prior to your termination of Employment
- 2 -
immediately shall terminate, such Year-End Supplemental RSUs shall cease to be Outstanding and
no Shares shall be delivered in respect thereof.
(b) Unless the Committee determines otherwise, and except as provided in Paragraphs 6 and 7,
your rights in respect of all of your Outstanding Year-End Supplemental RSUs (whether or not
Vested) immediately shall terminate, such Year-End Supplemental RSUs shall cease to be Outstanding
and no Shares shall be delivered in respect thereof if:
(i) you attempt to have any dispute under the Plan or this Award Agreement resolved in any
manner that is not provided for by Paragraph 12 or Section 3.17 of the Plan;
(ii) any event that constitutes Cause has occurred;
(iii) (A) you, in any manner, directly or indirectly, (1) Solicit any Client to transact
business with a Competitive Enterprise or to reduce or refrain from doing any business with the
Firm, (2) interfere with or damage (or attempt to interfere with or damage) any relationship
between the Firm and any Client, (3) Solicit any person who is an employee of the Firm to resign
from the Firm or to apply for or accept employment with any Competitive Enterprise or (4) on behalf
of yourself or any person or Competitive Enterprise hire, or participate in the hiring of, any
Selected Firm Personnel or identify, or participate in the identification of, Selected Firm
Personnel for potential hiring, whether as an employee or consultant or otherwise, or (B) Selected
Firm Personnel are Solicited, hired or accepted into partnership, membership or similar status (1)
by a Competitive Enterprise that you form, that bears your name, in which you are a partner, member
or have similar status, or in which you possess or control greater than a de minimis equity
ownership, voting or profit participation or (2) by any Competitive Enterprise where you have, or
are intended to have, direct or indirect managerial or supervisory responsibility for such Selected
Firm Personnel;
(iv) you fail to certify to GS Inc., in accordance with procedures established by the
Committee, that you have complied, or the Committee determines that you in fact have failed to
comply, with all the terms and conditions of the Plan and this Award Agreement. By accepting the
delivery of Shares under this Award Agreement, you shall be deemed to have represented and
certified at such time that you have complied with all the terms and conditions of the Plan and
this Award Agreement;
(v) the Committee determines that you failed to meet, in any respect, any obligation you may
have under any agreement between you and the Firm, or any agreement entered into in connection with
your Employment with the Firm, including, without limitation, the Firms notice period requirement
applicable to you, any offer letter, employment agreement or any shareholders agreement to which
other similarly situated employees of the Firm are a party;
(vi) as a result of any action brought by you, it is determined that any of the terms or
conditions for delivery of Shares in respect of this Award Agreement are invalid; or
(vii) your Employment terminates for any reason or you otherwise are no longer actively
employed with the Firm and an entity to which you provide services grants you cash, equity or other
property (whether vested or unvested) to replace, substitute for or otherwise in respect of any
Outstanding Year-End Supplemental RSUs.
For purposes of the foregoing, the term Selected Firm Personnel means: (A) any Firm employee or
consultant (1) with whom you personally worked while employed by the Firm, or (2) who at any time
during the year
- 3 -
immediately preceding your termination of Employment with the Firm, worked in the same division in
which you worked; and (B) any Managing Director of the Firm.
(c) For the avoidance of doubt, failure to pay or reimburse the Firm, upon demand, for any
amount you owe to the Firm shall constitute (i) failure to meet an obligation you have under an
agreement referred to in Paragraph 4(b)(v), regardless of whether such obligation arises under a
written agreement, and/or (ii) a material violation of Firm policy constituting Cause referred to
in Paragraph 4(b)(ii)).
5. Repayment. The provisions of Section 2.6.3 of the Plan (which requires Award
recipients to repay to the Firm amounts delivered to them if the Committee determines that all
terms and conditions of this Award Agreement in respect of such delivery were not satisfied) shall
apply to this Award.
6. Extended Absence, Retirement, Downsizing and Approved Termination for Program Analysts.
(a) Notwithstanding any other provision of this Award Agreement, but subject to Paragraph
6(b), in the event of the termination of your Employment (determined as described in Section 1.2.19
of the Plan) by reason of Extended Absence or Retirement (as defined below), the condition set
forth in Paragraph 4(a) shall be waived with respect to any Year-End Supplemental RSUs that were
Outstanding but that had not yet become Vested immediately prior to such termination of Employment
(as a result of which such Year-End Supplemental RSUs shall become Vested), but all other terms and
conditions of this Award Agreement shall continue to apply. Notwithstanding anything to the
contrary in the Plan or otherwise, Retirement means termination of your Employment (other than
for Cause) on or after the Date of Grant at a time when (i) the sum of your age plus years of
service with the Firm (as determined by the Committee in its sole discretion) equals or exceeds 60,
(ii) you have completed at least ten (10) years of service with the Firm (as determined by the
Committee in its sole discretion), and (iii) you have completed one year of service with the Firm
following the Date of Grant (as determined by the Committee in its sole discretion).
(b) Without limiting the application of Paragraph 4(b), your rights in respect of your
Outstanding Year-End Supplemental RSUs that become Vested in accordance with Paragraph 6(a)
immediately shall terminate, such Outstanding Year-End Supplemental RSUs shall cease to be
Outstanding, and no Shares shall be delivered in respect thereof if, prior to the original Vesting
Date with respect to such Year-End Supplemental RSUs, you (i) form, or acquire a 5% or greater
equity ownership, voting or profit participation interest in, any Competitive Enterprise, or (ii)
associate in any capacity (including, but not limited to, association as an officer, employee,
partner, director, consultant, agent or advisor) with any Competitive Enterprise. Notwithstanding
the foregoing, unless otherwise determined by the Committee in its discretion, this Paragraph 6(b)
will not apply if your termination of Employment by reason of Extended Absence or Retirement is
characterized by the Firm as involuntary or by mutual agreement other than for Cause and if you
execute such a general waiver and release of claims and an agreement to pay any associated tax
liability, both as may be prescribed by the Firm or its designee. No termination of Employment
initiated by you, including any termination claimed to be a constructive termination or the like
or a termination for good reason, will constitute an involuntary termination of Employment or a
termination of Employment by mutual agreement.
(c) Notwithstanding any other provision of this Award Agreement and subject to your executing
such general waiver and release of claims and an agreement to pay any associated tax liability,
both as may be prescribed by the Firm or its designee, if your Employment is terminated without
Cause solely by reason of a downsizing, the condition set forth in Paragraph 4(a) shall be waived
with respect to your Year-End Supplemental RSUs that were Outstanding but that had not yet become
Vested immediately prior to such
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termination of Employment (as a result of which such Year-End Supplemental RSUs shall become
Vested), but all other conditions of this Award Agreement shall continue to apply. Whether or not
your Employment is terminated solely by reason of a downsizing shall be determined by the Firm in
its sole discretion. No termination of Employment initiated by you, including any termination
claimed to be a constructive termination or the like or a termination for good reason, will be
solely by reason of a downsizing.
(d) Notwithstanding any other provision of this Award Agreement, if you are classified by the
Firm as a program analyst, and your Employment is terminated without Cause solely by reason of an
approved termination with respect to your participation in the program prior to any Vesting Date
specified on your Award Statement, the condition set forth in Paragraph 4(a) shall be waived with
respect to any Year-End Supplemental RSUs that were Outstanding but had not yet become Vested
immediately prior to such termination of Employment (as a result of which such Year-End
Supplemental RSUs shall become Vested), but all other conditions of this Award Agreement shall
continue to apply. Unless otherwise determined by the Committee, for purposes of this Paragraph
6(d), an approved termination shall mean a termination of Employment from the analyst program
where: (i) you complete your analyst program, (ii) you receive a bonus for completing the analyst
program and (iii) you terminate Employment with the Firm immediately after you complete the analyst
program, without any stay-on or other agreement or understanding to continue Employment with the
Firm. If you agree to stay with the Firm as an employee after your analyst program ends and then
later terminate Employment, you will not have an approved termination.
7. Change in Control. Notwithstanding anything to the contrary in this Award
Agreement (except Paragraphs 9(i) and 15), in the event a Change in Control shall occur and within
18 months thereafter the Firm terminates your Employment without Cause or you terminate your
Employment for Good Reason, all Shares underlying your then Outstanding Year-End Supplemental RSUs,
whether or not Vested, shall be delivered.
8. Dividend Equivalent Rights. Each Year-End Supplemental RSU shall include a
Dividend Equivalent Right. Accordingly, with respect to each of your Outstanding Year-End
Supplemental RSUs, at or after the time of distribution of any regular cash dividend paid by GS
Inc. in respect of a Share the record date for which occurs on or after the Date of Grant, you
shall be entitled to receive an amount (less applicable withholding) equal to such regular dividend
payment as would have been made in respect of the Share underlying such Outstanding Year-End
Supplemental RSU. Payment in respect of a Dividend Equivalent Right shall be made only with
respect to Year-End Supplemental RSUs that are Outstanding on the relevant record date. Each
Dividend Equivalent Right shall be subject to the provisions of Section 2.8.2 of the Plan.
9. Certain Additional Terms, Conditions and Agreements.
(a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding
taxes in accordance with Section 3.2 of the Plan. To the extent permitted by applicable law, the
Firm, in its sole discretion, may require you to provide amounts equal to all or a portion of any
Federal, State, local, foreign or other tax obligations imposed on you or the Firm in connection
with the grant, vesting or delivery of this Award by requiring you to choose between remitting such
amount (i) in cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from
the Firms executing a sale of Shares delivered to you pursuant to this Award. In addition, if you
are an individual with separate employment contracts (at any time during and/or after the Firms
___fiscal year), the Firm may, in its sole discretion, require you to provide for a reserve in an
amount the Firm determines is advisable or necessary in connection with any actual, anticipated or
potential tax consequences related to your separate employment contracts by requiring you to choose
between remitting such amount (i) in cash (or through payroll deduction or otherwise) or (ii) in
the form
- 5 -
of proceeds from the Firms executing a sale of Shares delivered to you pursuant to this Award (or
any other Outstanding Awards under the Plan). In no event, however, shall any choice you may have
under the preceding two sentences determine, or give you any discretion to affect, the timing of
the delivery of Shares or the timing of payment of tax obligations.
(b) If you are or become a Managing Director, your rights in respect of the Year-End
Supplemental RSUs are conditioned on your becoming a party to any shareholders agreement to which
other similarly situated employees of the Firm are a party.
(c) Your rights in respect of your Year-End Supplemental RSUs are conditioned on the receipt
to the full satisfaction of the Committee of any required consents (as described in Section 3.3 of
the Plan) that the Committee may determine to be necessary or advisable.
(d) You understand and agree, in accordance with Section 3.3 of the Plan, by accepting this
Award, you have expressly consented to all of the items listed in Section 3.3.3(d) of the Plan,
which are incorporated herein by reference.
(e) You understand and agree, in accordance with Section 3.22 of the Plan, by accepting this
Award you have agreed to be subject to the Firms policies in effect from time to time concerning
trading in Shares and hedging or pledging Shares and equity-based compensation or other awards
(including, without limitation, the Firms Policies With Respect to Transactions Involving GS
Shares, Equity Awards and GS Options by Persons Affiliated with GS Inc.), and confidential or
proprietary information, and to effect sales of Shares delivered to you in respect of your Year-End
Supplemental RSUs in accordance with such rules and procedures as may be adopted from time to time
with respect to sales of such Shares (which may include, without limitation, restrictions relating
to the timing of sale requests, the manner in which sales are executed, pricing method,
consolidation or aggregation of orders and volume limits determined by the Firm). In addition, you
understand and agree that you shall be responsible for all brokerage costs and other fees or
expenses associated with your Year-End Supplemental RSU Award, including without limitation, such
brokerage costs or other fees or expenses in connection with the sale of Shares delivered to you
hereunder.
(f) GS Inc. may affix to Certificates representing Shares issued pursuant to this Award
Agreement any legend that the Committee determines to be necessary or advisable (including to
reflect any restrictions to which you may be subject under a separate agreement with GS Inc.). GS
Inc. may advise the transfer agent to place a stop order against any legended Shares.
(g) Without limiting the application of Paragraph 4(b), if:
(i) your Employment with the Firm terminates solely because you resigned to accept employment
at any U.S. Federal, state or local government, any non-U.S. government, any supranational or
international organization, any self-regulatory organization or any agency, or instrumentality of
any such government or organization, or any other employer determined by the Committee, and as a
result of such employment, your continued holding of your Outstanding Year-End Supplemental RSUs
would result in an actual or perceived conflict of interest (Conflicted Employment); or
(ii) following your termination of Employment other than described in Paragraph 9(g)(i), you
notify the Firm that you have accepted or intend to accept Conflicted Employment at a time when you
continue to hold Outstanding Year-End Supplemental RSUs;
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then, in the case of Paragraph 9(g)(i) above only, the condition set forth in Paragraph 4(a) shall
be waived with respect to any Year-End Supplemental RSUs you then hold that had not yet become
Vested (as a result of which such Year-End Supplemental RSUs shall become Vested) and, in the case
of Paragraphs 9(g)(i) and 9(g)(ii) above, at the sole discretion of the Firm, you shall receive
either a lump sum cash payment in respect of, or delivery of Shares underlying, your then
Outstanding Vested Year-End Supplemental RSUs, in each case as soon as practicable after the
Committee has received satisfactory documentation relating to your Conflicted Employment.
(h) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
(i) Notwithstanding any other provision of this Award Agreement, the Plan or otherwise, by
accepting your Year-End Supplemental RSUs, you understand and agree that, if you are or become a
senior executive officer (as defined in the regulations promulgated under the Emergency Economic
Stabilization Act of 2008 (the Act, together with the regulations, the EESA)):
(i) No term or condition will apply to your Year-End Supplemental RSUs to the extent that such
term or condition would result in a violation of the Firms obligations under the U.S. Treasurys
TARP Capital Purchase Program (the CPP), as determined by the Firm in its sole discretion;
(ii) The Firm reserves the right to add any terms or conditions to your Year-End Supplemental
RSUs as the Firm deems necessary in its sole discretion to satisfy the Firms obligations under the
CPP;
(iii) You will be required to repay any Shares delivered pursuant to any Year-End Supplemental
RSUs, in accordance with Paragraph 5 and Section 2.6.3 of the Plan, as the Firm deems necessary in
its sole discretion to satisfy the Firms obligations under the CPP; and
(iv) You agree to waive any claim against the United States or the Firm for any amendments to
your Year-End Supplemental RSUs that the Firm deems necessary in its sole discretion to satisfy its
obligations under the CPP. This waiver includes all claims you may have under the laws of the
United States or any state related to the requirements imposed by the EESA, including without
limitation a claim for any compensation or other payments you would otherwise receive, any
challenge to the process by which the EESA was adopted and any tort or constitutional claim about
the effect of the EESA on your employment relationship.
10. Right of Offset. Except as provided in Paragraph 15(h), the obligation to deliver
Shares under this Award Agreement is subject to Section 3.4 of the Plan, which provides for the
Firms right to offset against such obligation any outstanding amounts you owe to the Firm and any
amounts the Committee deems appropriate pursuant to any tax equalization policy or agreement.
11. Amendment. The Committee reserves the right at any time to amend the terms and
conditions set forth in this Award Agreement, and the Board may amend the Plan in any respect;
provided that, notwithstanding the foregoing and Sections 1.3.2(f), 1.3.2(g) and 3.1 of the Plan,
no such amendment shall materially adversely affect your rights and obligations under this Award
Agreement without your consent; and provided further that the Committee expressly reserves its
rights to amend the Award Agreement and the Plan as
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described in Sections 1.3.2(h)(1), (2) and (4) of the Plan. For the avoidance of doubt, your
acceptance of Paragraph 9(i) constitutes your consent to any amendments (including amendments which
materially adversely affect your rights and obligations) to your Year-End Supplemental RSUs
contemplated under such Paragraph. Any amendment of this Award Agreement shall be in writing
signed by an authorized member of the Committee or a person or persons designated by the Committee.
12. Arbitration; Choice of Forum. BY ACCEPTING THIS AWARD, YOU UNDERSTAND AND AGREE
THAT THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN SECTION 3.17 OF THE PLAN, WHICH
ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY
DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE FIRM AND YOU ARISING OUT OF OR RELATING TO OR CONCERNING
THE PLAN OR THIS AWARD AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK CITY, PURSUANT
TO THE TERMS MORE FULLY SET FORTH IN SECTION 3.17 OF THE PLAN, SHALL APPLY.
13. Non-transferability. Except as otherwise may be provided in this Paragraph or as
otherwise may be provided by the Committee, the limitations on transferability set forth in Section
3.5 of the Plan shall apply to this Award. Any purported transfer or assignment in violation of
the provisions of this Paragraph 13 or Section 3.5 of the Plan shall be void. The Committee may
adopt procedures pursuant to which some or all recipients of Year-End Supplemental RSUs may
transfer some or all of their Year-End Supplemental RSUs through a gift for no consideration to any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the recipients household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, and any
other entity in which these persons (or the recipient) own more than 50% of the voting interests.
14. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
15. Compliance of Award Agreement and Plan With Section 409A. The provisions of this
Paragraph 15 apply to you only if you are a United States taxpayer.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern; provided, however, in
the case of any conflict or potential inconsistency between this Paragraph 15 and Paragraph 9(i),
Paragraph 9(i) shall govern.
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(b) Delivery of Shares shall not be delayed beyond the date on which all applicable conditions
or restrictions on delivery of Shares in respect of your Year-End Supplemental RSUs required by
this Agreement (including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) and
(c) (execution of waiver and release of claims and agreement to pay associated tax liability) and 9
and the consents and other items specified in Section 3.3 of the Plan) are satisfied, and shall
occur by March 15 of the calendar year in which the Delivery Date occurs unless, in order to permit
such conditions or restrictions to be satisfied, the Committee elects, pursuant to Treasury
Regulations section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance
with Section 409A, to delay delivery of Shares to a later date within the same calendar year or to
such later date as may be permitted under Section 409A, including, without limitation, Regs.
1.409A-2(b)(7) (in conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m))
and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan, to
the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your Year-End Supplemental RSUs shall not have the effect
of deferring delivery or payment, income inclusion, or a substantial risk of forfeiture, beyond the
date on which such delivery, payment or inclusion would occur or such risk of forfeiture would
lapse, with respect to the Shares that would otherwise have been deliverable (unless the Committee
elects a later date for this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be
permitted under Section 409A, including, without limitation and to the extent applicable, the
subsequent election provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified employee (as defined by the Firm in accordance
with Section 409A(a)(2)(i)(B) of the Code), delivery shall occur on the earlier of the Delivery
Date or (to the extent required to avoid the imposition of additional tax under Section 409A) the
date that is six months after your termination of Employment (or, if the latter date is not during
a Window Period, the first trading day of the next Window Period). For purposes of Paragraph 7,
references in this Award Agreement to termination of Employment mean separation from service (as
defined by the Firm in accordance with Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the contrary,
the Dividend Equivalent Rights with respect to each of your Outstanding Year-End Supplemental RSUs
shall be paid to you within the calendar year that includes the date of distribution of any
corresponding regular cash dividends paid by GS Inc. in respect of a Share the record date for
which occurs on or after the Date of Grant. The payment shall be in an amount (less applicable
withholding) equal to such regular dividend payment as would have been made in respect of the
Shares underlying such Outstanding Year-End Supplemental RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
- 9 -
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
16. Headings. The headings in this Award Agreement are for the purpose of convenience
only and are not intended to define or limit the construction of the provisions hereof.
IN WITNESS WHEREOF, GS Inc. has caused this Award Agreement to be duly executed and delivered
as of the Date of Grant.
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THE GOLDMAN SACHS GROUP, INC. |
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EX-10.66
23
y74032exv10w66.htm
EX-10.66: FORM OF SIGNATURE CARD FOR EQUITY AWARDS (ASIA EX CHINA)
EX-10.66
Exhibit 10.66
The Goldman Sachs Group, Inc.
Signature Card For ____ Year-End Awards (Asia) and the BNY Mellon Custody Account
and Consent to Receive Electronic Delivery
IMPORTANT: PLEASE REVIEW, EXECUTE AND RETURN THIS FORM TO: EQUITY COMPENSATION
(DIVISION OF HCM), 30 HUDSON STREET, 35TH FLOOR, JERSEY CITY, NJ 07302.
YOU MUST PROPERLY EXECUTE THIS FORM TO ACKNOWLEDGE ACCEPTANCE OF THE TERMS AND
CONDITIONS OF
YOUR AWARD(S) AND RELATED MATTERS.
1. I have received and agree to be bound by The Goldman Sachs Amended and Restated Stock
Incentive Plan (the SIP) and the Award Agreement(s) applicable to me in connection with the ___
Year-End Award(s) (the Award(s)) that I have been granted by the Firm (as defined below). I
confirm that I have accepted the Award(s) subject to the terms and conditions contained in the SIP
and the Award
Agreement(s), including but not limited to, the requirement that disputes relating to
the Award(s) and the Award Agreement(s) be decided through arbitration in New York City and be
governed by New York law.
As a condition of this grant, I understand that the Award(s) (as well as any other award that the
Firm may grant to me under the SIP) is/are subject to other governing law provisions (as outlined
in this signature card, in the current or otherwise then current Award Summary (as defined below)
or otherwise as may be required under applicable law) and, as a condition to receiving such awards,
I agree to be bound thereby. I also understand that the Firm may grant to me other awards under the
SIP that also may contain (among other terms and conditions) arbitration and other governing law
provisions and, as a condition to receiving such awards, I agree to be bound thereby. As a
condition of this grant, I agree to provide upon request an appropriate certification regarding my
U.S. tax status on Form W-8BEN, Form W-9, or other appropriate form, and I understand that failure
to supply a required form may result in the imposition of backup withholding on certain payments I
receive pursuant to this grant.
Further, as a condition of this grant, if I am a person who has worked in the United
Kingdom at any time during the earnings period relating to any award under the SIP, as
determined by the Firm, when requested and as directed by the Firm, I will agree to a Joint
Election under s431 ITEPA 2003 of the laws of the United Kingdom for full or partial disapplication
of Chapter 2 Income Tax (Earnings and Pension) Act 2003 under the laws of the United Kingdom and
will sign and return such election in respect of all future deliveries of shares underlying the
Award(s) and any previous grants made to me under the SIP and understand that the Firm intends to
meet its delivery obligations in shares with respect to my Award(s), except as may be prohibited by
law or described in the accompanying Award Agreement or supplementary materials.
If I have worked in Switzerland at any time during the earnings period relating to the
Award(s) granted to me as determined by the Firm, (i) I acknowledge that my Award(s) are subject to
tax in accordance with the rulings and method of calculation of taxable values to be agreed by the
Firm with the Federal and/or Zurich/Geneva cantonal/communal tax authorities or as otherwise
directed by the Firm, and (ii) I hereby agree to be bound by any rulings agreed by the Firm in
respect of any Award(s), which is expected to result in taxation at the time of delivery of shares
(or cash or other property in lieu thereof), and (iii) I undertake to declare and make a full and
accurate income tax declaration in respect of my Award(s) in accordance with the above ruling or as
directed by the Firm.
I understand and acknowledge that any transfer provisions (including, where applicable, escrow and
other similar provisions, but specifically excluding any transfer restrictions imposed on any
Award(s) in the Award Agreement(s) or the SIP) in the SIP or related documents will not apply to me
(i) to the extent that the applicability of those provisions would affect the availability of
relevant exemptions or tax favorable treatment, or (ii) otherwise in circumstances determined by
the Firm in its sole discretion.
2. I have read and understand the Firms Notice Periods for Recipients of Year-End Equity-Based
Awards (the Notice Policy), pursuant to which I am required to provide certain specified advance
notice of my intent to leave employment with the Firm. I understand that in executing this form, I
will be agreeing to provide my employing entity with advance notice of my intention to leave
employment with the Firm as follows:
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In the Americas, Japan and Asia Ex-Japan (excluding India): 60 days in advance of my
termination date |
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In Europe, the Middle East, Africa and India: 90 days in advance of my termination date |
and that, where applicable (see the provisions in the Award Summary), the provisions of the Notice
Policy constitute a permanent change to my terms and conditions of employment. I agree to this
change in consideration of my continued employment with the Firm and my acceptance of the Award(s),
and I agree to be bound by the Notice Policy as in effect from time-to-time.
I also understand that the terms and conditions of my employment shall be permanently changed so
that, in the event that I resign from the Firm, the Firm may either:
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Unilaterally waive or reduce the notice period otherwise applicable to my employment, or |
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Take such other action as shall have that effect. |
I acknowledge that the Firm retains its right to bring forward the end of the notice period to such
earlier date, and that I will not be entitled to any salary, wages, or benefits after such earlier
date. In addition, I understand that I will not receive pay in lieu for any period of notice that
has been waived or reduced.
This agreement concerning my notice period is being made for and on behalf of my Goldman Sachs
employing entity, and implementation of the Notice Policy does not create an employment
relationship between me and The Goldman Sachs Group, Inc.
I understand that unless the notice period is waived by agreement or unilaterally as set out above,
or I have exercised a statutory right to make a payment in lieu of my notice period, I will be paid
my base salary and will continue to receive all mandatory benefits during the notice period. I
understand that during my notice period I may (subject to any local laws to the contrary) be
required to remain away from the Firms offices, and/or be removed from any assigned duties or
assigned to other suitable duties during my notice period.
I understand that if I fail to give the full amount of notice as set out above, or to comply in any
respect with the Notice Policy, I will have failed to meet an obligation I have under an agreement
with the Firm, as a result of which the Firm may have certain rights and I may be subject to
certain legal and equitable rights and remedies, including, without limitation, the forfeiture of
the Award(s) and any other awards granted to me (whether before or after the Award(s)) under the
SIP. The forfeiture of such Award(s) will also apply where I fail to give the full amount of
notice by exercising any right I may have under applicable legislation to make a payment in lieu of
such notice. I also understand that, if I fail to comply with the Notice Policy, the Firm may be
entitled to an injunction from a court restraining me from violating it.
I understand that, for employees of Archon Group, L.P., the Notice Policy applies only to Senior
Executives.
3. I have read and understand the Firms hedging and pledging policies (including, without
limitation, the Firms Policies With Respect to Transactions Involving GS Shares, Equity Awards
and GS Options by Persons Affiliated with GS Inc.), and agree to be bound by them (with respect to
the Award(s) and any prior awards under the SIP), both during and following my employment with the
Firm.
4. If a custody account is required, I request that The Bank of New
York Mellon (BNY Mellon) (successor in interest to Mellon Bank, N.A.) open a custody account for
me as described in the enclosed Custody Agreement among BNY Mellon (as successor in interest to
Mellon Bank N.A.), The Goldman Sachs Group, Inc., and myself. I have received and agree to be bound
by the Custody Agreement (or any other such custody agreement previously entered into by me or on
my behalf), including the applicable restrictions on transfers, pledges and withdrawals of Common
Stock, the provisions permitting the Firm to monitor my custody account, and the limitations on the
liability of BNY Mellon and the Firm. I also agree to open an account with any other custodian or
broker selected by the Firm, if the Firm, in its sole discretion, requires me to open an account
with such custodian or broker as a condition to delivery of shares (or cash or other property)
underlying the Award(s).
5. If the Firm advanced or loaned me funds to pay certain taxes (including income taxes and Social
Security, or similar contributions) in connection with the Award(s) (or does so in the future), and
if I have not signed a separate loan agreement governing repayment, I authorize the Firm to
withhold from my compensation any amounts required to reimburse it for any such advance or loan to
the extent permitted by applicable law.
I understand and agree that, if I leave the Firm, I am required immediately to repay any
outstanding amount. I further understand and agree that the Firm has
the right to offset, to the extent permitted by the Award Agreement and applicable law (including
Section 409A of the U.S. Internal Revenue Code of 1986, as amended, which limits the Firms ability
to offset in the case of United States taxpayers under certain circumstances), any outstanding
amounts that I then
Year End
(Asia)
-1-
owe the Firm against its delivery obligations under the Award(s) or against any
other amounts the Firm then owes me. I understand that the delivery of shares pursuant to the
Award(s) is conditioned on my satisfaction of any applicable taxes or social security contributions
(collectively referred to as tax or taxes for purposes of the SIP and all related documents) in
accordance with the SIP. To the extent permitted by applicable law, the Firm, in its sole
discretion, may require me to provide amounts equal to all or a portion of any Federal, State,
local, foreign or other tax obligations imposed on me or the Firm in connection with the grant,
vesting or delivery of the Award(s) by requiring me to choose between remitting such amount (i) in
cash (or through payroll deduction or otherwise) or (ii) in the form of proceeds from the Firms
executing a sale of shares delivered to me pursuant to the Award(s). However, in no event shall any
such choice or the choice specified in paragraph 6, below, determine, or give me any discretion to
affect, the timing of the delivery of shares or payment of tax obligations. I understand and agree
that the Firm may reduce any year-end cash bonus that I may receive by an amount equal to the
estimated Indian Fringe Benefit Tax applicable to any award (whether or not vested), as determined
by the Firm in its sole discretion.
6. If I am an individual with separate employment contracts (at any time during and/or after the
Firms ___fiscal year), I acknowledge and agree that the Firm may, in its sole discretion,
require (to the extent permitted by applicable law) that I provide for a reserve in an amount the
Firm determines is advisable or necessary in connection with any actual, anticipated or potential
tax consequences related to my separate employment contracts by requiring me to choose between
remitting such amount (i) in cash (or through payroll deductions or otherwise) or (ii) in the form
of proceeds from the Firms executing a sale of shares delivered to me pursuant to the Award(s) (or
any other of my awards outstanding under the SIP).
7. In connection with any Award Agreement or other interest I may receive in the SIP or any shares
of Common Stock of The Goldman Sachs Group, Inc. that I may receive in connection with the Award(s)
or any award I have previously received or may receive, or in connection with any amendment or
variation thereof or any documents listed in paragraph 8, I hereby consent to (a) the acceptance by
me of the Award(s) electronically, (b) the giving of instructions in electronic form whether by me
or the Firm, and (c) the receipt in electronic form at my email address maintained at Goldman Sachs
or via Goldman Sachs intranet site (or, if I am no longer employed by the Firm, at such other
email address as I may specify, or via such other electronic means as the Firm and I may agree) all
notices and information that the Firm is required by law to send to me in connection therewith
including, without limitation, any document (or part thereof) constituting part of a prospectus
covering securities that have been registered under the U.S. Securities Act of 1933, the
information contained in any such document and any information required to be delivered to me under
Rule 428 of the U.S. Securities Act of 1933, including, for example, the annual report to security
holders or the annual report on Form 10-K of The Goldman Sachs Group, Inc. for its latest fiscal
year, and that all prior elections that I may have made relating to the delivery of any such
document in physical form are hereby revoked and superseded. I agree to check Goldman Sachs
intranet site (or, if I am no longer employed by the Firm, such other electronic site as the Firm
and I may agree) periodically as I deem appropriate for any new notices or information concerning
the SIP. I understand that I am not required to consent to the receipt of such documents in
electronic form in order to receive the Award(s) and that I may decline to receive such documents
in electronic form by contacting Equity Compensation (division of HCM), 30 Hudson Street, 35th
Floor, Jersey City, NJ 07302, telephone (212) 357-1444, which will provide me with hard copies of
such documents upon request. I also understand that this consent is voluntary and may be revoked at
any time on three business days written notice.
8. I hereby acknowledge that I have received in electronic form in accordance with my consent in
paragraph 7 the following documents:
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The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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Summary of The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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Custody Agreement with BNY Mellon; |
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The ___Annual Report for The Goldman Sachs Group, Inc.; |
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The annual report on Form 10-K for The Goldman Sachs Group, Inc. for the fiscal year
ended ___, filed with the Securities Exchange Commission on ___; |
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The Award Agreement(s); and |
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Summaries of the Award(s) (Award Summary). |
9. I expressly authorize any appropriate representative of the Firm to make any notifications,
filings or remittances of funds that may be required in connection with the SIP or otherwise on my
behalf. Further, if I am an employee who is resident in South Africa at the time of share
acquisition, by accepting my Award(s), I expressly authorize any appropriate representative of the
Firm to make any required notification on my behalf to the Reserve Bank of South Africa (or its
authorized dealer) in relation to any acquisition of shares for no consideration under the SIP or
other similar filing that may otherwise be required in South Africa. I acknowledge that any such
authorization is effective from the date of acceptance of my Award(s) until such time as I
expressly revoke the authorization by written notice to any appropriate representative of the Firm.
I understand that this authorization does not create any obligation on the Firm to deal with any
such notifications, filings or remittances of funds that I may be required to make in connection
with the SIP and I accept full responsibility in this regard.
Consent to Data Collection, Processing and Transfers:
I understand and agree that in connection with the SIP and any other Firm benefit plan (the
Programs), to the extent permitted under the laws of the applicable jurisdiction, the Firm may
collect and process various data that is personal to me, including my name, address, work location,
hire date, Social Security or Social Insurance or taxpayer identification number (required for tax
purposes), type and amount of SIP or other benefit plan award, citizenship or residency (required
for tax purposes) and other similar information reasonably necessary for the administration of such
Programs (collectively referred to as Information) and provide such Information to its affiliates
and BNY Mellon (and its affiliates) or any other service provider, whether in the United States or
elsewhere, as is reasonably necessary for the administration of the Programs and under the laws of
these jurisdictions. I understand that, in certain circumstances, foreign courts, law enforcement
agencies or regulatory agencies may be entitled to access the Information. I understand that,
unless I explicitly authorize otherwise, the Firm, its affiliates and its service providers
(through their respective employees in charge of the relevant electronic and manual processing)
will use this Information only for purposes of administering the Programs. I understand that, in
the United States and in other countries to which such Information may be transferred for the
administration of the Programs, the level of data protection is not equivalent to data protection
standards in the member states of the European Union. I understand that, upon request, to Equity
Compensation (division of HCM), 30 Hudson Street, 35th Floor, Jersey City, NJ 07302, telephone
(212) 357-1444, to the extent required under the laws of the applicable jurisdiction, I may have
access to and obtain communication of the Information and may exercise any of my rights in respect
of such Information, including objecting to the processing of the Information and requesting that
the Information be corrected (if wrong), completed or clarified (if incomplete or equivocal), or
erased (if cannot legally be collected or kept). Upon request, to the extent required under the
laws of the applicable jurisdiction, Equity Compensation (division of HCM) will also provide me,
free of charge, with a list of all the service providers used in connection with the Programs at
the time of request. I understand that, if I refuse to authorize the use and transfer of the
Information consistent with the above, I may not benefit from the Programs. I authorize the use and
transfer of the Information consistent with the above for the period of administration of the
Programs. In particular, I authorize (within the limits described above): (i) the data processing
by the Firm (which means The Goldman Sachs Group, Inc. and its subsidiaries and affiliates); (ii)
the data processing by BNY Mellon and its affiliates; (iii) the data processing by the Firms other
service providers; and (iv) the data transfer to the United States and other countries. I further
acknowledge that the Information may be retained by such persons beyond the period of
administration of the Programs to the extent permitted under the laws of the applicable
jurisdiction and I so authorize.
Other Legal Notices:
FOR HONG KONG EMPLOYEES ONLY
WARNING:
The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You
are advised to exercise caution in relation to the offer. If you are in doubt about any of the
contents of this document, you should obtain independent professional advice.
By accepting the Award(s), you acknowledge and accept that you will not be permitted to transfer
awards to persons who fall outside the definition of qualifying persons in the Companies
Ordinance (i.e., a person who is not a current or former director, employee, officer, consultant of
the Firm or a person other than the offerees wife, husband, widow, widower, child or step-child
under the age of 18 years, or as otherwise defined), even if otherwise permitted under the SIP or
any of the related documents.
FOR INDIA EMPLOYEES ONLY
This website does not invite offers from the public for subscription or purchase of the securities
of any body corporate under any law for the time being in force in India. The website is not a
prospectus under the applicable laws for the time being in force in India. Goldman Sachs does not
intend to market, promote, invite offers for subscription or purchase of the securities of any body
corporate by this website. The information provided on this website is for the record only. Any
person who subscribes or purchases securities of any body corporate should consult his own
investment advisers before making any investments. Goldman
Sachs shall not be liable or responsible for any such investment decision made by any person.
NON-COMPETITION AND NON-SOLICITATION RESTRICTIONS FOR EMPLOYEES PROVIDING SERVICES
Year End
(Asia)
-2-
IN HONG KONG, SINGAPORE, INDIA, TAIWAN, INDONESIA, KOREA AND JAPAN
In addition to and without limiting any provisions in the SIP or the applicable Award Agreement(s)
(including without limitation the Award forfeiture, termination or repayment provisions), I hereby
agree to and acknowledge the following:
(a) If I am providing services to the Firm in Hong Kong, Singapore, India, Taiwan, Indonesia, Korea
or Japan, in view of my importance to the Firm, I hereby agree that the Firm would likely suffer
significant harm from me competing with the Firm for some period of time after my employment ends.
Accordingly, I hereby agree that I will not, without the written consent of the Firm, during the
Restricted Period in the Geographic Area:
(i) form, or acquire a 5% or greater equity ownership, voting or profit participation interest
in, any Covered Competitive Enterprise; or
(ii) associate (including, but not limited to, association as an officer, employee, partner,
director, consultant, agent or advisor) with any Covered Competitive Enterprise and in connection
with such association engage in, or directly or indirectly manage or supervise personnel engaged
in, any activity:
i. which is similar or substantially related to any activity in which I was engaged, in whole
or in part, at the Firm,
ii. for which I had direct or indirect managerial or supervisory responsibility at the Firm,
or
iii. which calls for the application of the same or similar specialized knowledge or skills as
those utilized by me in my activities with the Firm,
at any time during the one-year period immediately prior to termination of my employment, and, in
any such case, irrespective of the purpose of the activity or whether the activity is or was in
furtherance of advisory, agency, proprietary or fiduciary business of either the Firm or the
Covered Competitive Enterprise.
(By way of example only, this provision precludes an advisory investment banker from joining a
leveraged-buyout firm, a research analyst from becoming a proprietary trader or joining a hedge
fund, or an information systems professional from joining a management or other consulting firm and
providing information technology consulting services or advice to any Covered Competitive
Enterprise, in each case without the written consent of the Firm.)
(b) I hereby agree that during the Restricted Period, I will not, in any manner, directly or
indirectly, (1) Solicit a Covered Client to transact business with a Covered Competitive Enterprise
or to reduce or refrain from doing any business with the Firm, or (2) interfere with or damage (or
attempt to interfere with or damage) any relationship between the Firm and a Covered Client.
(c) I hereby agree that during the Restricted Period, I will not, in any manner, directly or
indirectly:
(i) Solicit any Covered Personnel to resign from the Firm or to apply for or accept
employment, consultancy, partnership, membership or similar status with a Covered Competitive
Enterprise;
(ii) hire or participate in the hiring of any Covered Personnel (whether as an employee,
consultant, or otherwise) by a Covered Competitive Enterprise;
(iii) participate in the decision to offer Covered Personnel employment, consultancy,
admission into partnership, membership or similar status with a Covered Competitive Enterprise; or
(iv) participate in the identification of Covered Personnel for potential hiring, consultancy
or admission into partnership, membership or similar status with a Covered Competitive Enterprise.
(d) I acknowledge that I will have violated this provision if, during the Restricted Period, any
Covered Personnel are Solicited, hired, made a consultant or are accepted into partnership,
membership or similar status:
(i) by any Covered Competitive Enterprise which I form, which bears my name, or in which I am
an owner, a partner, a member or have similar status; or
(ii) by any Covered Competitive Enterprise, and I have, or are intended to have, managerial
or supervisory responsibility for such Covered Personnel.
(e) Prior to accepting employment with any other person or entity during the Restricted Period, I
will provide any prospective employer with written notice of these Restrictions with a copy
delivered simultaneously to the Firm.
(f) I understand that the Restrictions may limit my ability to earn a livelihood in a business
similar to the business of the Firm. I acknowledge that a violation on my part of any of the
Restrictions would cause immeasurable and irreparable damage to the Firm. Accordingly, I agree
that the Firm will be entitled to injunctive relief in any court of competent jurisdiction for any
actual or threatened violation of any of Restrictions in addition to any other remedies it may
have. I also acknowledge that a violation of any of the Restrictions would constitute my failure
to meet an obligation I have under an agreement between me and the Firm that was entered into in
connection with my employment with the Firm, and may constitute Cause for purposes of any
equity-based awards granted to me by the Firm and will result in my forfeiting such equity-based
awards.
(g) If any provision (or part of a provision) of the Restrictions is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable (whether in whole or in part), such provision
will be deemed modified or severed to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining such provisions will not be affected thereby;
provided, however, that if any of the Restrictions are held by a court of competent jurisdiction to
be invalid, illegal or unenforceable because it exceeds the maximum time period such court
determines is acceptable to permit such provision to be enforceable, such Restrictions will be
deemed to be modified to the minimum extent necessary to modify such time period in order to make
such provision enforceable hereunder.
(h) Any benefit that I give or am deemed to have given by virtue of the Restrictions is received
jointly and severally by The Goldman Sachs Group Inc. and its subsidiaries and affiliates
(including any Firm entity to which I provide services from time to time).
(i) Any benefit that The Goldman Sachs Group, Inc. gives or is deemed to have given to me by virtue
of the SIP and Award Agreement(s) is rendered jointly on its own behalf and on behalf of its
subsidiaries and affiliates (including any Firm entity to which I provide services from time to
time).
(j) I acknowledge that the Restrictions set out in this clause are reasonable and necessary for the
protection of the legitimate interests of the Firm, and that, having regard to those interests,
such restrictions do not impose an unreasonable burden on me.
(k) The Restrictions shall remain in full force and effect and survive the termination of my
employment for any reason whatsoever.
(l) If I am a Managing Director subject to a Managing Director Agreement, the Restrictions shall
not apply to me.
(m) If I am a Private Wealth Management employee subject to an Employee Agreement Regarding
Confidential and Proprietary Information and Materials and Non-Solicitation, I will not be subject
to the restrictions contained in clause (b) of the Restrictions.
(n) For the purposes of these Restrictions only, the following terms have the following meanings:
Asia means the PRC, Hong Kong SAR, Taiwan, Japan, Korea, India, Singapore, Indonesia,
Malaysia, Thailand, Philippines, Brunei and Vietnam.
Covered Client means any client or prospective client of the Firm (i) to whom I provided
services in the 12 months prior to the Notice Date, or (ii) for whom I transacted business in the
12 months prior to the Notice Date, or (iii) whose identity became known to me in connection with
my relationship with or employment by the Firm in the 12 months prior to the Notice Date and with
respect to whom I had access to confidential information.
Covered Competitive Enterprise means a business enterprise that (i) engages in any activity,
or (ii) owns or controls a significant interest in any entity that engages in any activity that, in
either case, competes anywhere with any activity in which the Firm is engaged. The activities
covered by the previous sentence include, without limitation, financial services such as investment
banking, public or private finance, lending, financial advisory services, private investing (for
anyone other than me and members of my family), merchant banking, asset or hedge fund management,
insurance or reinsurance underwriting or brokerage, property management, or securities, futures,
commodities, energy, derivatives or currency brokerage, sales, lending, custody, clearance,
settlement or trading.
Employment Period means the period from the commencement of my employment with, or transfer,
assignment or secondment to, any member of the Firm in Hong Kong SAR, Singapore, India, Taiwan,
Indonesia, Korea or Japan (GS Asia excluding PRC) and ending with the date of termination of my
employment with, or transfer, assignment or secondment to, any such member of the Firm in GS Asia
excluding PRC. The Employment Period does not terminate when I commence employment with, or am
transferred, assigned or seconded to, another member of the Firm in GS Asia excluding PRC.
Covered Extended Absence means my absence from active employment for at least 180 days in
any 12-month period as a result of my incapacity due to mental or physical illness, as determined
by the Firm.
Firm means The Goldman Sachs Group, Inc., its subsidiaries and affiliates and its and their
respective successors.
Geographic Area means (i) the jurisdiction in Asia in which I am located as of the date of
execution of this signature card; and/or (ii) any other jurisdiction in Asia in relation to which I
have substantial product and/or
Year End
(Asia)
-3-
geographical market responsibilities; and/or (iii) any other
jurisdiction in Asia in relation to which I have substantial employee managerial responsibilities
as of the date of execution of this signature card.
Notice Date means the date on which either I or the Firm gives notice of (i) the conclusion
of my transfer, assignment or secondment to any member of the Firm in GS Asia excluding PRC, or
(ii) the termination of my employment with any member of the Firm in GS Asia excluding PRC or, if
the termination is for cause or Covered Extended Absence, the date on which such termination
occurs.
PRC means, for the purpose of the Restrictions, the Peoples Republic of China, excluding
Hong Kong SAR, Macau SAR and Taiwan.
Restricted Period means (i) during the Employment Period; and (ii) for the period of notice
in my employment contract or the period stated in this signature card commencing from the Notice
Date (whichever is longer), irrespective of whether the termination is for cause or Covered
Extended Absence or whether I receive a payment in lieu of all or part of that notice period.
Restrictions means the non-competition and non-solicitation restrictions for employees
providing services in Hong Kong, Singapore, India, Taiwan, Indonesia, Korea and Japan as set out in
(a) to (n) of this section of this signature card.
Covered Personnel means any Firm employee, consultant or Managing Director with whom I had
material contact or dealings in the last 12 months of my employment or in relation to whom I had
access to confidential information.
Solicit means any direct or indirect communication of any kind whatsoever, regardless of by
whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner,
to take or refrain from taking any action.
(n) These Restrictions shall be governed by and construed in accordance with the laws of the
jurisdiction in which I am located and providing services to the Firm at the date of execution of
this signature card.
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Year End
(Asia)
-4-
EX-10.67
24
y74032exv10w67.htm
EX-10.67: FORM OF SIGNATURE CARD FOR EQUITY AWARDS (CHINA)
EX-10.67
Exhibit 10.67
The Goldman Sachs Group, Inc.
Signature Card For ____ Year-End Awards (China) and the BNY Mellon Custody Account
and Consent to Receive Electronic Delivery
IMPORTANT: PLEASE REVIEW, EXECUTE AND RETURN THIS FORM TO: EQUITY COMPENSATION
(DIVISION OF HCM), 30 HUDSON STREET, 35TH FLOOR, JERSEY CITY, NJ 07302.
YOU MUST PROPERLY EXECUTE THIS FORM TO ACKNOWLEDGE ACCEPTANCE OF THE TERMS AND
CONDITIONS OF
YOUR AWARD(S) AND RELATED MATTERS.
1. I have received and agree to be bound by The Goldman Sachs Amended and Restated Stock
Incentive Plan (the SIP) and the Award Agreement(s) applicable to me in connection with the ___
Year-End Award(s) (the Award(s)) that I have been granted by the Firm (as defined below). I
confirm that I have accepted the Award(s) subject to the terms and conditions contained in the SIP
and the Award
Agreement(s), including but not limited to, the requirement that disputes relating to
the Award(s) and the Award Agreement(s) be decided through arbitration in New York City and be
governed by New York law.
As a condition of this grant, I understand that the Award(s) (as well as any other award that the
Firm may grant to me under the SIP) is/are subject to other governing law provisions (as outlined
in this signature card, in the current or otherwise then current Award Summary (as defined below)
or otherwise as may be required under applicable law) and, as a condition to receiving such awards,
I agree to be bound thereby. I also understand that the Firm may grant to me other awards under the
SIP that also may contain (among other terms and conditions) arbitration and other governing law
provisions and, as a condition to receiving such awards, I agree to be bound thereby. As a
condition of this grant, I agree to provide upon request an appropriate certification regarding my
U.S. tax status on Form W-8BEN, Form W-9, or other appropriate form, and I understand that failure
to supply a required form may result in the imposition of backup withholding on certain payments I
receive pursuant to this grant.
Further, as a condition of this grant, if I am a person who has worked in the United
Kingdom at any time during the earnings period relating to any award under the SIP, as
determined by the Firm, when requested and as directed by the Firm, I will agree to a Joint
Election under s431 ITEPA 2003 of the laws of the United Kingdom for full or partial disapplication
of Chapter 2 Income Tax (Earnings and Pension) Act 2003 under the laws of the United Kingdom and
will sign and return such election in respect of all future deliveries of shares underlying the
Award(s) and any previous grants made to me under the SIP and understand that the Firm intends to
meet its delivery obligations in shares with respect to my Award(s), except as may be prohibited by
law or described in the accompanying Award Agreement or supplementary materials.
If I have worked in Switzerland at any time during the earnings period relating to the
Award(s) granted to me as determined by the Firm, (i) I acknowledge that my Award(s) are subject to
tax in accordance with the rulings and method of calculation of taxable values to be agreed by the
Firm with the Federal and/or Zurich/Geneva cantonal/communal tax authorities or as otherwise
directed by the Firm, and (ii) I hereby agree to be bound by any rulings agreed by the Firm in
respect of any Award(s), which is expected to result in taxation at the time of delivery of shares
(or cash or other property in lieu thereof), and (iii) I undertake to declare and make a full and
accurate income tax declaration in respect of my Award(s) in accordance with the above ruling or as
directed by the Firm.
I understand and acknowledge that any transfer provisions (including, where applicable, escrow and
other similar provisions, but specifically excluding any transfer restrictions imposed on any
Award(s) in the Award Agreement(s) or the SIP) in the SIP or related documents will not apply to me
(i) to the extent that the applicability of those provisions would affect the availability of
relevant exemptions or tax favorable treatment, or (ii) otherwise in circumstances determined by
the Firm in its sole discretion.
2. I have read and understand the Firms Notice Periods for Recipients of Year-End Equity-Based
Awards (the Notice Policy), pursuant to which I am required to provide certain specified advance
notice of my intent to leave employment with the Firm. I understand that in executing this form, I
will be agreeing to provide my employing entity with advance notice of my intention to leave
employment with the Firm as follows:
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In the Americas, Japan and Asia Ex-Japan (excluding India): 60 days in advance of my
termination date |
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In Europe, the Middle East, Africa and India: 90 days in advance of my termination date |
and that, where applicable (see the provisions in the Award Summary), the provisions of the Notice
Policy constitute a permanent change to my terms and conditions of employment. I agree to this
change in consideration of my continued employment with the Firm and my acceptance of the Award(s),
and I agree to be bound by the Notice Policy as in effect from time-to-time.
I also understand that the terms and conditions of my employment shall be permanently changed so
that, in the event that I resign from the Firm, the Firm may either:
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Unilaterally waive or reduce the notice period otherwise applicable to my employment, or |
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Take such other action as shall have that effect. |
I acknowledge that the Firm retains its right to bring forward the end of the notice period to such
earlier date, and that I will not be entitled to any salary, wages, or benefits after such earlier
date. In addition, I understand that I will not receive pay in lieu for any period of notice that
has been waived or reduced.
This agreement concerning my notice period is being made for and on behalf of my Goldman Sachs
employing entity, and implementation of the Notice Policy does not create an employment
relationship between me and The Goldman Sachs Group, Inc.
I understand that unless the notice period is waived by agreement or unilaterally as set out above,
or I have exercised a statutory right to make a payment in lieu of my notice period, I will be paid
my base salary and will continue to receive all mandatory benefits during the notice period. I
understand that during my notice period I may (subject to any applicable laws to the contrary) be
required to remain away from the Firms offices, and/or be removed from any assigned duties or
assigned to other suitable duties during my notice period.
I understand that if I fail to give the full amount of notice as set out above, or to comply in any
respect with the Notice Policy, I will have failed to meet an obligation I have under an agreement
with the Firm, as a result of which the Firm may have certain rights and I may be subject to
certain legal and equitable rights and remedies, including, without limitation, the forfeiture of
the Award(s) and any other awards granted to me (whether before or after the Award(s)) under the
SIP. The forfeiture of such Award(s) will also apply where I fail to give the full amount of notice
by exercising any right I may have under applicable legislation to make a payment in lieu of such
notice. I also understand that, if I fail to comply with the Notice Policy, the Firm may be
entitled to an injunction from a court restraining me from violating it.
I understand that, for employees of Archon Group, L.P., the Notice Policy applies only to Senior
Executives.
3. I have read and understand the Firms hedging and pledging policies (including, without
limitation, the Firms Policies With Respect to Transactions Involving GS Shares, Equity Awards
and GS Options by Persons Affiliated with GS Inc.), and agree to be bound by them (with respect to
the Award(s) and any prior awards under the SIP), both during and following my employment with the
Firm.
4. If a custody account is required, I request that The Bank of New
York Mellon (BNY Mellon) (successor in interest to Mellon Bank, N.A.) open a custody account for
me as described in the enclosed Custody Agreement among BNY Mellon (as successor in interest to
Mellon Bank N.A.), The Goldman Sachs Group, Inc., and myself. I have received and agree to be bound
by the Custody Agreement (or any other such custody agreement previously entered into by me or on
my behalf), including the applicable restrictions on transfers, pledges and withdrawals of Common
Stock, the provisions permitting the Firm to monitor my custody account, and the limitations on the
liability of BNY Mellon and the Firm. I also agree to open an account with any other custodian or
broker selected by the Firm, if the Firm, in its sole discretion, requires me to open an account
with such custodian or broker as a condition to delivery of shares (or cash or other property)
underlying the Award(s).
5. If the Firm advanced or loaned me funds to pay certain taxes (including income taxes and Social
Security, or similar contributions) in connection with the Award(s) (or does so in the future), and
if I have not signed a separate loan agreement governing repayment, I authorize the Firm to
withhold from my compensation any amounts required to reimburse it for any such advance or loan to
the extent permitted by applicable law.
I understand and agree that, if I leave the Firm, I am required immediately to repay any
outstanding amount. I further understand and agree that the Firm has the right to offset, to the
extent permitted by the Award Agreement and applicable law (including Section 409A of the U.S.
Internal Revenue Code of 1986, as amended, which limits the Firms ability to offset in the case of
United States taxpayers under certain circumstances), any outstanding amounts that I then owe the
Firm against its delivery obligations under the Award(s) or against any other amounts the Firm then
owes me. I understand that the delivery of shares pursuant to the Award(s) is conditioned on my
satisfaction of any applicable taxes or social security contributions (collectively referred to as
tax or taxes for purposes of the SIP and all related documents) in accordance with the SIP. To
the extent permitted by applicable law, the Firm, in its sole discretion, may require me to provide
amounts equal to all or a portion of any Federal, State, local, foreign or other tax obligations
imposed on me or the Firm in connection with the grant, vesting or delivery of the Award(s) by
requiring me to choose
Year End (China)
between remitting such amount (i) in cash (or through payroll deduction or
otherwise) or (ii) in the form of proceeds from the Firms executing a sale of shares delivered to
me pursuant to the Award(s). However, in no event shall any such choice or the choice specified in
paragraph 6, below, determine, or give me any discretion to affect, the timing of the delivery of
shares or payment of tax obligations. I understand and agree that the Firm may reduce any year-end
cash bonus that I may receive by an amount equal to the estimated Indian Fringe Benefit Tax
applicable to any award (whether or not vested), as determined by the Firm in its sole discretion.
6. If I am an individual with separate employment contracts (at any time during and/or after the
Firms ___fiscal year), I acknowledge and agree that the Firm may, in its sole discretion,
require (to the extent permitted by applicable law) that I provide for a reserve in an amount the
Firm determines is advisable or necessary in connection with any actual, anticipated or potential
tax consequences related to my separate employment contracts by requiring me to choose between
remitting such amount (i) in cash (or through payroll deductions or otherwise) or (ii) in the form
of proceeds from the Firms executing a sale of shares delivered to me pursuant to the Award(s) (or
any other of my awards outstanding under the SIP).
7. In connection with any Award Agreement or other interest I may receive in the SIP or any shares
of Common Stock of The Goldman Sachs Group, Inc. that I may receive in connection with the Award(s)
or any award I have previously received or may receive, or in connection with any amendment or
variation thereof or any documents listed in paragraph 8, I hereby consent to (a) the acceptance by
me of the Award(s) electronically, (b) the giving of instructions in electronic form whether by me
or the Firm, and (c) the receipt in electronic form at my email address maintained at Goldman Sachs
or via Goldman Sachs intranet site (or, if I am no longer employed by the Firm, at such other
email address as I may specify, or via such other electronic means as the Firm and I may agree) all
notices and information that the Firm is required by law to send to me in connection therewith
including, without limitation, any document (or part thereof) constituting part of a prospectus
covering securities that have been registered under the U.S. Securities Act of 1933, the
information contained in any such document and any information required to be delivered to me under
Rule 428 of the U.S. Securities Act of 1933, including, for example, the annual report to security
holders or the annual report on Form 10-K of The Goldman Sachs Group, Inc. for its latest fiscal
year, and that all prior elections that I may have made relating to the delivery of any such
document in physical form are hereby revoked and superseded. I agree to check Goldman Sachs
intranet site (or, if I am no longer employed by the Firm, such other electronic site as the Firm
and I may agree) periodically as I deem appropriate for any new notices or information concerning
the SIP. I understand that I am not required to consent to the receipt of such documents in
electronic form in order to receive the Award(s) and that I may decline to receive such documents
in electronic form by contacting Equity Compensation (division of HCM), 30 Hudson Street, 35th
Floor, Jersey City, NJ 07302, telephone (212) 357-1444, which will provide me with hard copies of
such documents upon request. I also understand that this consent is voluntary and may be revoked at
any time on three business days written notice.
8. I hereby acknowledge that I have received in electronic form in accordance with my consent in
paragraph 7 the following documents:
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The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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Summary of The Goldman Sachs Amended and Restated Stock Incentive Plan; |
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Custody Agreement with BNY Mellon; |
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The ___Annual Report for The Goldman Sachs Group, Inc.; |
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The annual report on Form 10-K for The Goldman Sachs Group, Inc. for the fiscal year
ended ___, filed with the Securities Exchange Commission on ___; |
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The Award Agreement(s); and |
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Summaries of the Award(s) (Award Summary). |
9. I expressly authorize any appropriate representative of the Firm to make any notifications,
filings or remittances of funds that may be required in connection with the SIP or otherwise on my
behalf. Further, if I am an employee who is resident in South Africa at the time of share
acquisition, by accepting my Award(s), I expressly authorize any appropriate representative of the
Firm to make any required notification on my behalf to the Reserve Bank of South Africa (or its
authorized dealer) in relation to any acquisition of shares for no consideration under the SIP or
other similar filing that may otherwise be required in South Africa. I acknowledge that any such
authorization is effective from the date of acceptance of my Award(s) until such time as I
expressly revoke the authorization by written notice to any appropriate representative of the Firm.
I understand that this authorization does not create any obligation on the Firm to deal with any
such notifications, filings or remittances of funds that I may be required to make in connection
with the SIP and I accept full responsibility in this regard.
Consent to Data Collection, Processing and Transfers:
I understand and agree that in connection with the SIP and any other Firm benefit plan (the
Programs), to the extent permitted under the laws of the applicable jurisdiction, the Firm may
collect and process various data that is personal to me, including my name, address, work location,
hire date, Social Security or Social Insurance or taxpayer identification number (required for tax
purposes), type and amount of SIP or other benefit plan award, citizenship or residency (required
for tax purposes) and other similar information reasonably necessary for the administration of such
Programs (collectively referred to as Information) and provide such Information to its affiliates
and BNY Mellon (and its affiliates) or any other service provider, whether in the United States or
elsewhere, as is reasonably necessary for the administration of the Programs and under the laws of
these jurisdictions. I understand that, in certain circumstances, foreign courts, law enforcement
agencies or regulatory agencies may be entitled to access the Information. I understand that,
unless I explicitly authorize otherwise, the Firm, its affiliates and its service providers
(through their respective employees in charge of the relevant electronic and manual processing)
will use this Information only for purposes of administering the Programs. I understand that, in
the United States and in other countries to which such Information may be transferred for the
administration of the Programs, the level of data protection is not equivalent to data protection
standards in the member states of the European Union. I understand that, upon request, to Equity
Compensation (division of HCM), 30 Hudson Street, 35th Floor, Jersey City, NJ 07302, telephone
(212) 357-1444, to the extent required under the laws of the applicable jurisdiction, I may have
access to and obtain communication of the Information and may exercise any of my rights in respect
of such Information, including objecting to the processing of the Information and requesting that
the Information be corrected (if wrong), completed or clarified (if incomplete or equivocal), or
erased (if cannot legally be collected or kept). Upon request, to the extent required under the
laws of the applicable jurisdiction, Equity Compensation (division of HCM) will also provide me,
free of charge, with a list of all the service providers used in connection with the Programs at
the time of request. I understand that, if I refuse to authorize the use and transfer of the
Information consistent with the above, I may not benefit from the Programs. I authorize the use and
transfer of the Information consistent with the above for the period of administration of the
Programs. In particular, I authorize (within the limits described above): (i) the data processing
by the Firm (which means The Goldman Sachs Group, Inc. and its subsidiaries and affiliates); (ii)
the data processing by BNY Mellon and its affiliates; (iii) the data processing by the Firms other
service providers; and (iv) the data transfer to the United States and other countries. I further
acknowledge that the Information may be retained by such persons beyond the period of
administration of the Programs to the extent permitted under the laws of the applicable
jurisdiction and I so authorize.
Other Legal Notices:
FOR THE EMPLOYEES ASSIGNED TO A REPRESENTATIVE OFFICE IN THE PEOPLES REPUBLIC OF CHINA
All documentation in relation to the Award(s) is intended for your personal use and in your
capacity as an employee of the Firm (and/or its affiliate) and is being given to you solely for the
purpose of providing you with information concerning the Award(s) which the Firm may grant to you
as an employee of the Firm (and/or its affiliate) in accordance with the terms of the SIP, this
documentation and the applicable Award Agreement(s). The grant of the Award(s) has not been and
will not be registered with the China Securities Regulatory Commission of the Peoples Republic of
China pursuant to relevant securities laws and regulations, and the Award(s) may not be offered or
sold within the mainland of the Peoples Republic of China by means of any of the documentation in
relation to the Award(s) through a public offering or in circumstances which require a registration
or approval of the China Securities Regulatory Commission of the Peoples Republic of China in
accordance with the relevant securities laws and regulations.
NON-COMPETITION AND NON-SOLICITATION RESTRICTIONS FOR EMPLOYEES PROVIDING SERVICES IN THE PEOPLES
REPUBLIC OF CHINA
In addition to and without limiting any provisions in the SIP or the applicable Award Agreement(s)
(including without limitation the Award forfeiture, termination or repayment provisions), I hereby
agree to and acknowledge the following:
(a) If I am providing services to the Firm in Asia, in view of my importance to the Firm and BGH,
I hereby agree that the Firm or BGH would likely suffer significant harm from me competing with the
Firm or BGH for some period of time after my employment ends. Accordingly, I hereby agree that I
will not, without the written consent of the Firm or BGH, during the Restricted Period in the
Geographic Area:
(i) form, or acquire a 5% or greater equity ownership, voting or profit participation
interest in, any Covered Competitive Enterprise; or
(ii) associate (including, but not limited to, association as an officer, employee, partner,
director, consultant, agent or advisor) with any Covered Competitive Enterprise and in connection
with such association engage in, or directly or indirectly manage or supervise personnel engaged
in, any activity:
i. which is similar or substantially related to any activity in which I was engaged, in whole
or in part, at the Firm,
ii. for which I had direct or indirect managerial or supervisory responsibility at the Firm,
or
Year End (China)
-2-
iii. which calls for the application of the same or similar specialized knowledge or skills as
those utilized by me in my activities with the Firm,
at any time during the one-year period immediately prior to termination of my employment, and, in
any such case, irrespective of the purpose of the activity or whether the activity is or was in
furtherance of advisory, agency, proprietary or fiduciary business of either the Firm or BGH or the
Covered Competitive Enterprise.
(By way of example only, this provision precludes an advisory investment banker from joining a
leveraged-buyout firm, a research analyst from becoming a proprietary trader or joining a hedge
fund, or an information systems professional from joining a management or other consulting firm and
providing information technology consulting services or advice to any Covered Competitive
Enterprise, in each case without the written consent of the Firm or BGH.)
(b) (i) I hereby agree that during the Restricted Period, I will not, in any manner, directly
or indirectly, in Asia (1) Solicit a Covered Client to transact business with a Covered Competitive
Enterprise or to reduce or refrain from doing any business with the Firm or BGH, or (2) interfere
with or damage (or attempt to interfere with or damage) any relationship between the Firm or BGH
and a Covered Client.
(ii) To the extent that separate financial consideration may be necessary in order to enforce
the restrictive covenants set forth in Section (a) or Section (b) (1) above, the Firm will pay you
up to 50% of your base salary for the period in which these provisions are in effect after
termination of your employment.
(c) I hereby agree that during the Restricted Period, I will not, in any manner, directly or
indirectly in Asia:
(i) Solicit any Covered Personnel to resign from the Firm or BGH or to apply for or accept
employment, consultancy, partnership, membership or similar status with a Covered Competitive
Enterprise;
(ii) hire or participate in the hiring of any Covered Personnel (whether as an employee,
consultant, or otherwise) by a Covered Competitive Enterprise;
(iii) participate in the decision to offer Covered Personnel employment, consultancy,
admission into partnership, membership or similar status with a Covered Competitive Enterprise; or
(iv) participate in the identification of Covered Personnel for potential hiring or admission
into partnership, membership or similar status with a Covered Competitive Enterprise.
(d) I acknowledge that I will have violated this provision if, during the Restricted Period, any
Covered Personnel are Solicited, hired, made a consultant or are accepted into partnership,
membership or similar status:
(i) by any Covered Competitive Enterprise which I form, which bears my name, or in which I am
an owner, a partner, a member or have similar status; or
(ii) by any Covered Competitive Enterprise, and I have, or are intended to have, managerial or
supervisory responsibility for such Covered Personnel.
(e) I understand that the Restrictions may limit my ability to earn a livelihood in a business
similar to the business of the Firm or BGH. I acknowledge that a violation on my part of any of
the Restrictions would cause immeasurable and irreparable damage to the Firm or BGH. Accordingly,
I agree that the Firm and/or BGH will be entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any of the Restrictions in addition to any
other remedies it or they may have.
I also acknowledge that a violation of any of the Restrictions would constitute my failure to meet
an obligation I have under an agreement between me and the Firm that was entered into in connection
with my employment with the Firm, and may constitute Cause for purposes of any equity-based
awards granted to me by the Firm and/or BGH and will result in my forfeiting such equity-based
awards.
(f) If any provision (or part of a provision) of the Restrictions is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable (whether in whole or in part), such provision
will be deemed modified or severed to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining such provisions will not be affected thereby;
provided, however, that if any of the Restrictions are held by a court of competent jurisdiction to
be invalid, illegal or unenforceable because it exceeds the maximum time period such court
determines is acceptable to permit such provision to be enforceable, such Restriction will be
deemed to be modified to the minimum extent necessary to modify such time period in order to make
such provision enforceable hereunder.
(g) Any benefit that I give or am deemed to have given by virtue of the Restrictions is received
jointly and severally by the Firm (including any entity of the Firm to which I provide services
from time to time) or BGH.
(h) Any benefit that the Firm gives or is deemed to have given to me by virtue of the SIP and
Award Agreement(s) is rendered jointly on its own behalf and on behalf of the Firm (including any
entity of the Firm to which I provide services from time to time) and BGH.
(i) I acknowledge that the Restrictions set out in this clause are reasonable and necessary for
the protection of the legitimate interests of the Firm and BGH, and that, having regard to those
interests, such restrictions do not impose an unreasonable burden on me.
(j) The Restrictions shall remain in full force and effect and survive the termination of my
employment for any reason whatsoever.
(k) If I am a Managing Director subject to a Managing Director Agreement, the Restrictions shall
not apply to me.
(l) If I am a Private Wealth Management employee subject to an Employee Agreement Regarding
Confidential and Proprietary Information and Materials and Non-Solicitation, I will not be subject
to the restrictions contained in clause (b) of the Restrictions.
(m) For the purposes of the Restrictions only, the following terms have the following meanings:
Asia means the PRC, Hong Kong SAR, Taiwan, Japan, Korea, India, Singapore, Indonesia,
Malaysia, Thailand, Philippines, Brunei and Vietnam.
BGH means Beijing Gao Hua Securities Company Limited, its subsidiaries and affiliates, and
its respective successors.
Covered Client means any client or prospective client of the Firm or BGH (i) to whom I
provided services in the 12 months prior to the Notice Date, or (ii) for whom I transacted business
in the 12 months prior to the Notice Date, or (iii) whose identity became known to me in connection
with my relationship with or employment by the Firm or BGH in the 12 months prior to the Notice
Date and with respect to whom I had access to confidential information.
Covered Competitive Enterprise means a business enterprise that (i) engages in any activity,
or (ii) owns or controls a significant interest in any entity that engages in any activity that, in
either case, competes anywhere with any activity in which the Firm or BGH is engaged. The
activities covered by the previous sentence include, without limitation, financial services such as
investment banking, public or private finance, lending, financial advisory services, private
investing (for anyone other than me and members of my family), merchant banking, asset or hedge
fund management, insurance or reinsurance underwriting or brokerage, property management, or
securities, futures, commodities, energy, derivatives or currency brokerage, sales, lending,
custody, clearance, settlement or trading.
Covered Personnel means any Firm or BGH employee, consultant or Managing Director with whom
I had material contact or dealings within the last 12 months of my employment with the Firm or in
relation to whom I had access to confidential information.
Employment Period means the period from the commencement of my employment with, or transfer,
assignment or secondment to the Firm and ending with the date of termination of my employment with,
or transfer, assignment or secondment to the Firm.
Covered Extended Absence means my absence from active employment for at least 180 days in
any 12-month period as a result of my incapacity due to mental or physical illness, as determined
by the Firm.
Geographic Area means (i) the PRC, including Hong Kong, Macao and Taiwan; and/or (ii) any
other country in Asia in relation to which I have substantial product and/or geographical market
responsibilities; and/or (iii) any other country in Asia in relation to which I have substantial
employee managerial responsibilities as of the date of execution of this signature card.
Notice Date means the date on which either I or the Firm gives notice of (i) the conclusion
of my transfer, assignment or secondment to any member of the Firm, or (ii) the termination of my
employment with the Firm, or if the termination is for cause or Covered Extended Absence, the date
on which such termination occurs.
PRC means the Peoples Republic of China.
Restricted Period means (i) during the Employment Period; and (ii) for the period of notice
in my employment contract or the period stated in this signature card commencing from the Notice
Date (whichever is longer), irrespective of whether the termination is for cause or Covered
Extended Absence or whether I receive a payment in lieu of all or part of that notice period.
Restrictions means the non-competition and non-solicitation restrictions for employees
providing services in the PRC as set out in (a) to (n) of this section of this signature card.
Solicit means any direct or indirect communication of any kind whatsoever, regardless of by
whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner,
to take or refrain from taking any action.
(n) The Restrictions shall be governed by and construed in accordance with the laws of the
jurisdiction in which my employment relationship governed.
Year End (China)
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Print Name:
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Year End (China)
-4-
EX-10.68
25
y74032exv10w68.htm
EX-10.68: AMENDMENTS TO CERTAIN EQUITY AWARD AGREEMENTS
EX-10.68
Exhibit 10.68
AMENDMENTS TO
EQUITY AWARD AGREEMENTS UNDER
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(Effective December 31, 2008)
Each of the Award Agreements is hereby amended, as set forth below, effective December 31,
2008. The Award Agreements are the agreements specified in List 1 and List 2 below. The
provisions of these Amendments apply only to United States taxpayers.
Capitalized terms used but not defined in these Amendments have the meanings ascribed thereto
in the applicable Award Agreement or in The Goldman Sachs Amended and Restated Stock Incentive Plan
(the SIP or Plan). References to RSUs shall mean One-time RSUs, Broad-Based RSUs,
Year-End RSUs, French Alternative Year-End RSUs, or DSP RSUs, as may be applicable to any
particular Award Agreement.
The Award Agreements specified in List 1 below are those to which these Amendments apply
without modification. The Award Agreements specified in List 2 below are those to which these
Amendments apply with the modifications specified in List 2. In the case of the Award Agreements
specified in List 2 below, references in Paragraph 15 of these Amendments to provisions of the
Award Agreement shall refer to the corresponding provisions specified in List 2 below
(Corresponding Provisions). If and to the extent that an Award Agreement does not include a
provision (including any Corresponding Provision) referred to in Paragraph 15 of these Amendments,
the specific portion of these Amendments that refers to that provision shall not apply to that
Award Agreement.
Text of Amendments:
The Award Agreements are amended as follows: Paragraph 15, as set forth below, shall replace
in its entirety the existing Paragraph 15 of each Award Agreement specified in List 1 or the
Corresponding Provision (if any) of each Award Agreement specified in List 2, and shall be added to
each Award Agreement specified in List 2 that has no Corresponding Provision that corresponds to
Paragraph 15.
15. Compliance of Award Agreement and Plan with Section 409A. To comply with Section
409A (as defined in Paragraph 15(a), below), including exemptions thereunder, if you are a U.S.
taxpayer, certain provisions of this Award Agreement and of the Plan shall apply only as modified
as provided in this Paragraph 15.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative
guidance. This Award Agreement and the Plan provisions that apply to this Award are intended and
shall be construed to comply with Section 409A (including the requirements applicable to, or the
conditions for exemption from treatment as, a deferral of compensation or deferred compensation
as those terms are defined in the regulations under Section 409A (409A deferred compensation),
whether by reason of short-term deferral treatment or other exceptions or provisions). The
Committee shall have full authority to give effect to this intent. To the extent necessary to give
effect to this intent, in the case of any conflict or potential inconsistency between the
provisions of the Plan and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 15 and
the other provisions of this Award Agreement, this Paragraph 15 shall govern.
(b) The Delivery of Shares shall not be delayed beyond the date on which all applicable
conditions or restrictions on delivery of Shares in respect of your RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 3(b) and (c), 6(b) and (c) (execution
of waiver and release of claims and agreement to pay associated tax liability) and 9 of this Award
Agreement and the consents and other items specified in Section 3.3 of the Plan) are satisfied, and
shall occur by March 15 of the calendar year in which the Delivery Date occurs unless, in order to
permit such conditions or restrictions to be satisfied, the Committee elects, pursuant to Treasury
Regulations section (Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance
with Section 409A, to delay delivery of Shares to a later date within the same calendar year or to
such later date as may be permitted under Section 409A, including, without limitation, Regs.
1.409A-2(b)(7) (in conjunction with Section 3.21.3 of the Plan pertaining to Code Section 162(m))
and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(b)(iii) and Section 1.3.2(i) of the Plan,
to the extent necessary to comply with Section 409A, any securities, other Awards or other property
that the Firm may deliver in respect of your RSUs shall not have the effect of deferring delivery
or payment, income inclusion, or a substantial risk of forfeiture, beyond the date on which such
delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with respect to
the Shares that would otherwise have been deliverable (unless the Committee elects a later date for
this purpose pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted under Section
409A, including, without limitation and to the extent applicable, the subsequent election
provisions of Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
(d) Notwithstanding the timing provisions of Paragraph 3(c), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) The delivery of Shares referred to in Paragraph 7 shall occur on the earlier of (i) the
Delivery Date or (ii) within the calendar year in which the termination of Employment occurs;
provided, however, that, if you are a specified
2
employee (as defined by the Firm in accordance with Section 409A(a)(2)(i)(B) of the Code),
delivery shall occur on the earlier of the Delivery Date or (to the extent required to avoid the
imposition of additional tax under Section 409A) the date that is six months after your termination
of Employment (or, if the latter date is not during a Window Period, the first trading day of the
next Window Period). For purposes of Paragraph 7, references in this Award Agreement to
termination of Employment mean separation from service (as defined by the Firm in accordance with
Section 409A).
(f) Notwithstanding any provision of Paragraph 8 or Section 2.8.2 of the Plan to the
contrary, the Dividend Equivalent Rights with respect to each of your Outstanding RSUs shall be
paid to you within the calendar year that includes the date of distribution of any corresponding
regular cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or
after the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to
such regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding RSUs.
(g) The timing of delivery or payment referred to in Paragraph 9(g) shall be the earlier of
(i) the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(h) Paragraph 10 and Section 3.4 of the Plan shall not apply to Awards that are 409A deferred
compensation.
(i) Delivery of Shares in respect of any Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
(j) In addition to and without limiting the generality of the provisions of Section 1.3.5 of
the Plan, neither the Firm nor any Covered Person shall have any liability to you or any other
person for any action taken or omitted in respect of this or any other Award.
List 1: Award Agreements to which these Amendments apply without modification:
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The Goldman Sachs Amended and Restated Stock Incentive Plan 2008 One-Time RSU
Award Agreements |
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The Goldman Sachs Amended and Restated Stock Incentive Plan 2008 Broad Based
Equity Program Award Agreement |
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The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreement (from 2007) |
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The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Broad Based
Equity Program Award Agreement |
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The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Year End RSU
Award Agreement |
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The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreements (from 2006) |
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The Goldman Sachs Amended and Restated Stock Incentive Plan 2006 Year-End RSU
Award Agreement |
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The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreement (from 2005, includes prior 409A language) |
List 2: Award Agreements to which these Amendments apply with the following modifications:
I The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Year-End RSU Award
Agreement (fully vested)
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(1) |
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The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 6(b)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 9 of this Award Agreement.... |
II The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Year-End French Alternative
RSU Award Agreement; and
The Goldman Sachs Amended and Restated Stock Incentive Plan 2006 Year-End French
Alternative RSU Award Agreement
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(1) |
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Paragraph 15(c) shall not apply; and |
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(2) |
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References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
9(h). |
III The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Year-End French
Alternative RSU Award Agreement
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Paragraph 15(c) shall not apply; |
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References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
9(h); and |
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There is no Corresponding Provision to Paragraph 15. This amendment therefore adds a
new Paragraph 15, rather than amending an existing Paragraph 15. |
IV The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Discount Stock Program
Award Agreement (pre-tax); and
The Goldman Sachs Amended and Restated Stock Incentive Plan 2006 Discount Stock Program
Award Agreement (pre-tax)
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(1) |
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The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 6(c)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 9 of this Award Agreement.... |
V The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Discount Stock Program Award
Agreement (pre-tax)
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(1) |
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The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 6(c)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 9 of this Award Agreement...; and |
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(2) |
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In Paragraph 15(g), the words delivery or shall be deleted both times those words
appear together. |
VI The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Discount Stock Program
Award Agreement (French alternative, pre-tax)
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(1) |
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The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 6(c)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 9 of this Award Agreement...; |
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(2) |
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Paragraph 15(c) shall not apply; and |
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(3) |
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References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
9(h). |
VII The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Discount Stock Program
Award Agreement (after-tax); and
The Goldman Sachs Amended and Restated Stock Incentive Plan 2006 Discount Stock Program
Award Agreement (after-tax)
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(iv); |
|
|
(3) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8;
|
|
|
(4) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(5) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(g); |
|
|
(6) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(7) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
VIII The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Discount Stock Program
Award Agreement (after-tax)
5
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(iv); |
|
|
(3) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8; |
|
|
(4) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(5) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(g) and, because Paragraph 10(g) does not provide for delivery of Shares, Paragraph
15(g) shall be read to only apply to payments; |
|
|
(6) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(7) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
IX The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Discount Stock Program
Award Agreement (French alternative, after-tax)
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b) and (c), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(iv)(A); |
|
|
(3) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8; |
|
|
(4) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(5) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(h); |
|
|
(6) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(7) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
X The Goldman Sachs Amended and Restated Stock Incentive Plan 2007 Discount Stock Program Award
Agreement for Certain Persons Participating in the Goldman Sachs 2007 Employee Benefits Trust;
and
The Goldman Sachs Amended and Restated Stock Incentive Plan 2006 Discount Stock Program
Award Agreement (Japan SRP)
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b), (d) and (e), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(v); |
6
|
(3) |
|
References in Paragraph 15(d) to Paragraph 3(c) shall instead refer to Paragraph
3(e); |
|
|
(4) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8; |
|
|
(5) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(6) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(g); |
|
|
(7) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(8) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
XI The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Discount Stock Program
Award Agreement (Japan SRP)
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b), (d) and (e), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(v); |
|
|
(3) |
|
References in Paragraph 15(d) to Paragraph 3(c) shall instead refer to Paragraph
3(e); |
|
|
(4) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8; |
|
|
(5) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(6) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(g) and, because Paragraph 10(g) does not provide for delivery of Shares, Paragraph
15(g) shall be read to only apply to payments; |
|
|
(7) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(8) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
XII The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Discount Stock Program
Award Agreement (Germany and Italy)
|
(1) |
|
The references in Paragraph 15(b) shall read Paragraphs 3(b), (d) and (e), 7(b)(i)
(execution of waiver and release of claims and agreement to pay associated tax liability)
and 10 of this Award Agreement...; |
|
|
(2) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b)(iv); |
|
|
(3) |
|
References in Paragraph 15(d) to Paragraph 3(c) shall instead refer to Paragraph
3(e); |
|
|
(4) |
|
References in Paragraph 15(e) to Paragraph 7 shall instead refer to Paragraph 8; |
7
|
(5) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 9; |
|
|
(6) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
10(g) and, in Paragraph 15(g), the words delivery or shall be deleted both times those
words appear together; |
|
|
(7) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 11;
and |
|
|
(8) |
|
All references to paragraph 15 shall instead refer to Paragraph 16. |
XIII The Goldman Sachs Amended and Restated Stock Incentive Plan One-Time RSU Award
Agreement (Hope Team)
|
(1) |
|
References in Paragraph 15(b) shall read Paragraphs 3(b), (c) and (d), and 7 of this
Award Agreement...; |
|
|
(2) |
|
Paragraph 15(e) shall not apply; |
|
|
(3) |
|
References in Paragraph 15(f) to Paragraph 8 shall instead refer to Paragraph 6; |
|
|
(4) |
|
References in Paragraph 15(g) to Paragraph 9(g) shall instead refer to Paragraph
7(g); |
|
|
(5) |
|
References in Paragraph 15(h) to Paragraph 10 shall instead refer to Paragraph 8; and |
|
|
(6) |
|
All references to Paragraph 15 shall instead refer to Paragraph 13. |
XIV The Goldman Sachs Amended and Restated Stock Incentive Plan 2005 Year-End RSU Award
Agreement
|
(1) |
|
In Paragraph 15(g), the words delivery or shall be deleted both times those words
appear together. |
XV The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreements (from 2005, no prior 409A language);
The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreement (from 2004); and
The Goldman Sachs Amended and Restated Stock Incentive Plan 2004 Year-End RSU Award
Agreement
|
(1) |
|
Paragraph 15(g) shall not apply; and |
|
|
(2) |
|
There is no Corresponding Provision to Paragraph 15. This Amendment therefore adds a
new Paragraph 15, rather than amending an existing Paragraph 15. |
XVI The Goldman Sachs Amended and Restated Stock Incentive Plan One Time RSU Award
Agreement (from 2003)
|
(1) |
|
References in Paragraph 15(c) to Paragraph 3(b)(iii) shall instead refer to Paragraph
3(b); |
|
|
(2) |
|
Paragraph 15(g) shall not apply; and |
8
|
(3) |
|
There is no Corresponding Provision to Paragraph 15. This amendment therefore adds a
new Paragraph 15, rather than amending an existing Paragraph 15. |
9
EX-10.69
26
y74032exv10w69.htm
EX-10.69: AMENDMENTS TO CERTAIN NON-EMPLOYEE DIRECTOR EQUITY AWARD AGREEMENTS
EX-10.69
Exhibit 10.69
AMENDMENTS TO
DIRECTOR AWARD AGREEMENTS UNDER
THE GOLDMAN SACHS AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(Effective December 31, 2008)
Each of the Director Award Agreements (as defined below) for awards of restricted stock
units granted under The Goldman Sachs Amended and Restated Stock Incentive Plan is hereby amended,
as set forth below, effective December 31, 2008. These Amendments apply only to United States
taxpayers.
Capitalized terms used but not defined in these Amendments have the meanings ascribed thereto
in the applicable Director Award Agreement or in The Goldman Sachs Amended and Restated Stock
Incentive Plan. The Director Award Agreements to which these Amendments apply are as follows:
|
1. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2007
Annual Grant Award Agreement; |
|
|
2. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2007
Annual Retainer Fee Award Agreement; |
|
|
3. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2007
Annual Retainer and Committee Chair Fee Award Agreement; |
|
|
4. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2006
Annual Grant Award Agreement; |
|
|
5. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2006
Annual Retainer Fee Award Agreement; |
|
|
6. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2006
Annual Retainer and Committee Chair Fee Award Agreement; |
|
|
7. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director Fiscal
2005 Annual Grant Award Agreement; |
|
|
8. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2005
Annual Retainer and Committee Chair Fee Award Agreement; and |
|
|
9. |
|
The Goldman Sachs Amended and Restated Stock Incentive Plan Outside Director 2005
Annual Retainer Fee Award Agreement. |
Text of Amendments:
Each Director Award Agreement is amended by adding to each a new Paragraph 12, to read as
provided below, except in the case of the Outside Director Fiscal
2005 Annual Grant Award Agreement. In the case of the Outside Director Fiscal 2005 Annual
Grant Award Agreement, this new Paragraph shall be number 11 instead of 12, all references therein
to Paragraph 12 shall refer instead to Paragraph 11, the references in subparagraph (b) of the new
Paragraph 11 to Paragraphs 7(a) and (b) shall refer instead
to Paragraphs 6(a) and (b), and the new
Paragraph 11 shall not include a subparagraph (f) corresponding to Paragraph 12(f) below.
12. Compliance of Award Agreement and Plan with Section 409A. To comply with Section
409A (as defined in Paragraph 12(a), below), including exemptions thereunder, if you are a U.S.
taxpayer, certain provisions of this Award Agreement and of the Plan shall apply only as modified
as provided in this Paragraph 12.
(a) References in this Award Agreement to Section 409A refer to Section 409A of the Code,
including any amendments or successor provisions to that Section and any regulations and other
administrative guidance thereunder, in each case as they, from time to time, may be amended or
interpreted through further administrative guidance. This Award Agreement and the Plan provisions
that apply to this Award are intended and shall be construed to comply with Section 409A (including
the requirements applicable to, or the conditions for exemption from treatment as, a deferral of
compensation or deferred compensation as those terms are defined in the regulations under
Section 409A (409A deferred compensation), whether by reason of short-term deferral treatment or
other exceptions or provisions). The Committee shall have full authority to give effect to this
intent. To the extent necessary to give effect to this intent, in the case of any conflict or
potential inconsistency between the provisions of the Plan (including, without limitation, Sections
1.3.2 and 2.1 thereof) and this Award Agreement, the provisions of this Award Agreement shall
govern, and in the case of any conflict or potential inconsistency between this Paragraph 12 and
the other provisions of this Award Agreement, this Paragraph 12 shall govern.
(b) Delivery of Shares shall not be delayed beyond the date on which all applicable
conditions or restrictions on delivery of Shares in respect of your RSUs required by this Agreement
(including, without limitation, those specified in Paragraphs 7(a) and (b) and the consents and
other items specified in Section 3.3 of the Plan) are satisfied, and shall occur by December 31 of
the calendar year in which the Delivery Date occurs unless, in order to permit such conditions or
restrictions to be satisfied, the Committee elects, pursuant to Treasury Regulations section
(Reg.) 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted in accordance with Section 409A, to
delay delivery of Shares to a later date as may be permitted under Section 409A, including, without
limitation, Regs. 1.409A-2(b)(7) (in conjunction with Section 3.21.3 of the Plan pertaining to Code
Section 162(m)) and 1.409A-3(d).
(c) Notwithstanding the provisions of Paragraph 3(a) and Section 1.3.2(i) of the Plan, to the
extent necessary to comply with Section 409A, any securities, other Awards or other property that
the Firm may deliver in respect of your RSUs shall not have the effect of deferring delivery or
payment, income inclusion, or a substantial risk of forfeiture, beyond the date on which such
delivery, payment or inclusion would occur or such risk of forfeiture would lapse, with respect to
the Shares that would
otherwise have been deliverable (unless the Committee elects a later date for this purpose
pursuant to Reg. 1.409A-1(b)(4)(i)(D) or otherwise as may be permitted under Section 409A,
including, without limitation and to the extent applicable, the subsequent election provisions of
Section 409A(a)(4)(C) of the Code and Reg. 1.409A-2(b)).
2
(d) Notwithstanding the timing provisions of Paragraph 3(b), the delivery of Shares referred
to therein shall be made after the date of death and during the calendar year that includes the
date of death (or on such later date as may be permitted under Section 409A).
(e) Notwithstanding any provision of Paragraph 4 or Section 2.8.2 of the Plan to the
contrary, the Dividend Equivalent Rights with respect to each of your Outstanding RSUs shall be
paid to you within the calendar year that includes the date of distribution of any corresponding
regular cash dividends paid by GS Inc. in respect of a Share the record date for which occurs on or
after the Date of Grant. The payment shall be in an amount (less applicable withholding) equal to
such regular dividend payment as would have been made in respect of the Shares underlying such
Outstanding RSUs.
(f) The timing of delivery or payment referred to in Paragraph 6 shall be the earlier of (i)
the Delivery Date or (ii) within the calendar year in which the Committee receives satisfactory
documentation relating to your Conflicted Employment, provided that such delivery or payment shall
be made only at such time as, and if and to the extent that it, as reasonably determined by the
Firm, would not result in the imposition of any additional tax to you under Section 409A.
(g) Section 3.4 of the Plan shall not apply to Awards that are 409A deferred compensation.
(h) Delivery of Shares in respect of this Award may be made, if and to the extent elected by
the Committee, later than the Delivery Date or other date or period specified hereinabove (but, in
the case of any Award that constitutes 409A deferred compensation, only to the extent that the
later delivery is permitted under Section 409A).
3
EX-12.1
27
y74032exv12w1.htm
EX-12.1: STATEMENT RE: COMPUTATION OF RATIOS
EX-12.1
EXHIBIT 12.1
THE GOLDMAN SACHS
GROUP, INC. and SUBSIDIARIES
COMPUTATION OF
RATIOS OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November
|
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
|
($ in millions)
|
Net earnings
|
|
$
|
2,322
|
|
|
$
|
11,599
|
|
|
$
|
9,537
|
|
|
$
|
5,626
|
|
|
$
|
4,553
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for taxes
|
|
|
14
|
|
|
|
6,005
|
|
|
|
5,023
|
|
|
|
2,647
|
|
|
|
2,123
|
|
Portion of rents representative of an interest factor
|
|
|
146
|
|
|
|
137
|
|
|
|
135
|
|
|
|
119
|
|
|
|
118
|
|
Interest expense on all indebtedness
|
|
|
31,357
|
|
|
|
41,981
|
|
|
|
31,688
|
|
|
|
18,153
|
|
|
|
8,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings, as adjusted
|
|
$
|
33,839
|
|
|
$
|
59,722
|
|
|
$
|
46,383
|
|
|
$
|
26,545
|
|
|
$
|
15,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
charges (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of rents representative of an interest factor
|
|
$
|
146
|
|
|
$
|
137
|
|
|
$
|
135
|
|
|
$
|
119
|
|
|
$
|
118
|
|
Interest expense on all indebtedness
|
|
|
31,444
|
|
|
|
42,051
|
|
|
|
31,755
|
|
|
|
18,161
|
|
|
|
8,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges
|
|
$
|
31,590
|
|
|
$
|
42,188
|
|
|
$
|
31,890
|
|
|
$
|
18,280
|
|
|
$
|
9,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend requirements
|
|
|
283
|
|
|
|
291
|
|
|
|
212
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total combined fixed charges and preferred stock dividends
|
|
$
|
31,873
|
|
|
$
|
42,479
|
|
|
$
|
32,102
|
|
|
$
|
18,305
|
|
|
$
|
9,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
|
|
|
1.07
|
x
|
|
|
1.42
|
x
|
|
|
1.45
|
x
|
|
|
1.45
|
x
|
|
|
1.74
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to combined fixed charges and preferred stock
dividends
|
|
|
1.06
|
x
|
|
|
1.41
|
x
|
|
|
1.44
|
x
|
|
|
1.45
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Fixed charges include capitalized interest of $87 million,
$70 million, $67 million, $8 million and
$5 million as of November 2008, November 2007,
November 2006, November 2005 and November 2004,
respectively.
|
EX-21.1
28
y74032exv21w1.htm
EX-21.1: LIST OF SIGNIFICANT SUBSIDIARIES
EX-21.1
EXHIBIT 21.1
Significant Subsidiaries of the Registrant
The following are significant subsidiaries of The Goldman Sachs Group, Inc. as of November 28, 2008
and the states or jurisdictions in which they are organized. Indentation indicates the principal
parent of each subsidiary. Except as otherwise specified, in each case The Goldman Sachs Group,
Inc. owns, directly or indirectly, at least 99% of the voting securities of each subsidiary. The
names of particular subsidiaries have been omitted because, considered in the aggregate as a single
subsidiary, they would not constitute, as of the end of the year covered by this report, a
significant subsidiary as that term is defined in Rule 1-02(w) of Regulation S-X under the
Securities Exchange Act of 1934.
|
|
|
|
|
State or Jurisdiction
|
Name
|
|
of Entity
|
The Goldman Sachs Group, Inc. |
|
Delaware |
Goldman, Sachs & Co. |
|
New York |
Goldman Sachs (Asia) Finance Holdings L.L.C. |
|
Delaware |
Goldman Sachs Paris Inc. ET CIE |
|
France |
Goldman Sachs Services Limited |
|
British Virgin Islands |
GS Power Holdings LLC |
|
Delaware |
Goldman Sachs (UK) L.L.C. |
|
Delaware |
Goldman Sachs Group Holdings (U.K.) |
|
United Kingdom |
Scadbury UK Limited |
|
United Kingdom |
Scadbury Funding Limited |
|
Cayman Islands |
Scadbury II Assets Limited |
|
Cayman Islands |
Killingholme Generation Limited |
|
United Kingdom |
KPL Acquisitions Limited |
|
United Kingdom |
GS Killingholme Cayman Investments Ltd. |
|
Cayman Islands |
GS Killingholme Cayman Investments II Ltd |
|
Cayman Islands |
GS Killingholme Cayman Investments III |
|
Cayman Islands |
GS Killingholme Cayman Investments IV, L.P. |
|
Cayman Islands |
KPL Finance Limited |
|
Cayman Islands |
Goldman Sachs Holdings (U.K.) |
|
United Kingdom |
Goldman Sachs International |
|
United Kingdom |
Goldman Sachs Asset Management International |
|
United Kingdom |
Forres LLC |
|
Delaware |
Shire UK Limited |
|
United Kingdom |
GS Funding Investments Limited |
|
Cayman Islands |
GS Liquid Trading Platform II Limited |
|
Isle of Jersey |
GS Capital Funding (Cayman) II Limited |
|
Cayman Islands |
MLQ Investors, L.P. |
|
Delaware |
Goldman Sachs Realty Japan Ltd. |
|
Japan |
Nephrite Equity Co., Ltd. |
|
Japan |
GK Blue Square (1) |
|
Japan |
GK Frangipani (1) |
|
Japan |
K.K. Minato Saiken Kaishu |
|
Japan |
GS Financial Services L.P. (Del) |
|
Delaware |
Chiltern Trust |
|
Isle of Jersey |
Laffitte Participation 10 |
|
France |
Laffitte Participation 12 |
|
France |
GS Longport Investment Corporation |
|
Delaware |
|
|
|
GSFS Investments I Corp |
|
Delaware |
GS Leasing (KCSR 2007-1) LLC |
|
Delaware |
GS Global Investments, Co. |
|
Delaware |
GS Global Investments UK, Inc. |
|
Delaware |
County UK Limited |
|
Cayman Islands |
County Funding Limited |
|
United Kingdom |
County Assets Limited |
|
Cayman Islands |
Goldman Sachs Global Holdings L.L.C. |
|
Delaware |
GS Asian Venture (Delaware) L.L.C. |
|
Delaware |
Brasilia Cayman Investments Limited |
|
Cayman Islands |
Goldman Sachs (Japan) Ltd. |
|
British Virgin Islands |
Goldman Sachs Japan Co., Ltd. |
|
Japan |
J. Aron Holdings, L.P. |
|
Delaware |
J. Aron & Company |
|
New York |
Prop
GS Fundo de Investimento Multimercado Credito Privado -
|
|
|
Investimento No Exterior |
|
Brazil |
Goldman Sachs Asset Management, L.P. |
|
Delaware |
Goldman Sachs Asset Management Co., Ltd. |
|
Japan |
Goldman Sachs Hedge Fund Strategies LLC |
|
Delaware |
Goldman Sachs (Cayman) Holding Company |
|
Cayman Islands |
Goldman, Sachs & Co. oHG |
|
Germany |
Goldman Sachs (Cayman) Trust, Limited |
|
Cayman Islands |
Goldman Sachs Global Services II Limited |
|
Cayman Islands |
Goldman Sachs Services (B.V.I.) Limited |
|
British Virgin Islands |
Goldman Sachs (Asia) Corporate Holdings L.P. |
|
Delaware |
Goldman Sachs Holdings (Hong Kong) Limited |
|
Hong Kong |
Goldman Sachs Foreign Exchange (Singapore) Pte. |
|
Singapore |
J Aron & Company (Singapore) Pte. |
|
Singapore |
Goldman Sachs (Asia) Securities Limited |
|
Hong Kong |
Goldman Sachs (Asia) Finance |
|
Mauritius |
Goldman Sachs Financial Markets, L.P. |
|
Delaware |
MTGLQ Investors, L.P. |
|
Delaware |
ELQ Investors, Ltd |
|
United Kingdom |
GS European Opportunities Investment Fund B.V. (1) |
|
Netherlands |
Matterhorn Acquisitions Ltd. |
|
United Kingdom |
NEG (TPL) Limited |
|
United Kingdom |
South Wales TPL Investments Limited |
|
United Kingdom |
Western Power Investments Limited |
|
United Kingdom |
Poseidon Acquisitions Ltd |
|
United Kingdom |
Goldman
Sachs Lending Partners LLC |
|
Delaware |
Liquidity Assets Holding Limited |
|
Cayman Islands |
Liquidity Assets Limited |
|
Cayman Islands |
GS Macro Investments LLC |
|
Delaware |
GS Macro Investments II, LLC |
|
Delaware |
GS Mehetia LLC |
|
Delaware |
Mehetia Holdings Inc. |
|
Delaware |
Mehetia Inc. |
|
Delaware |
Goldman Sachs Bank USA |
|
New York |
|
|
|
Goldman Sachs Mortgage Company |
|
New York |
William Street Equity LLC |
|
Delaware |
William Street Funding Corporation |
|
Delaware |
GSCP (DEL) Inc. |
|
Delaware |
Goldman Sachs Credit Partners L.P. |
|
Bermuda |
Litton Mortgage Servicing, LLC |
|
Utah |
Litton Loan Servicing, L.P. |
|
Delaware |
Goldman
Sachs Holdings (Netherlands) B.V. |
|
Netherlands |
Goldman Sachs Mitsui Marine Derivative Products, L.P.(1) |
|
Delaware |
GSSM Holding II LLC |
|
Delaware |
GSSM Holding II Corp. |
|
Delaware |
GSTM LLC |
|
Delaware |
SLK LLC |
|
New York |
Goldman Sachs Execution & Clearing, L.P. |
|
New York |
GS Financial Services II, LLC |
|
Delaware |
GS Funding Europe Limited |
|
United Kingdom |
Amagansett II Assets Limited |
|
Cayman Islands |
GS European Funding I LTD. |
|
Cayman Islands |
GS Funding Europe II Ltd. |
|
Cayman Islands |
Commonwealth Annuity and Life Insurance Company |
|
Massachusetts |
GS Diversified Funding LLC |
|
Delaware |
GS
Diversified Investments Limited |
|
Delaware |
GS Capital Funding (UK) 1 Limited |
|
United Kingdom |
Reserve Liquid Performance Money Market Fund |
|
New York |
GS Ayco Holding LLC |
|
Delaware |
The Ayco Company, L.P. |
|
Delaware |
Rothesay Pensions Management Limited |
|
United Kingdom |
Eastport Capital Corp. |
|
Delaware |
EPF Financial, LLC |
|
Delaware |
GS Investment Strategies, LLC |
|
Delaware |
GS Mezzanine Partners 2006, L.P. |
|
Delaware |
Goldman Sachs Canada Credit Partners Co. |
|
Canada |
|
|
|
|
|
(1) These entities are partially owned by third-party investors. |
EX-23.1
29
y74032exv23w1.htm
EX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EX-23.1
EXHIBIT 23.1
CONSENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the
Registration Statements on
Form S-3
(File Nos.
333-49958,
333-74006,
333-101093,
333-110371,
333-112367,
333-122977,
333-128461,
333-130074,
333-135453
and
333-154173)
and on
Form S-8
(File Nos.
333-80839,
333-42068,
333-106430
and
333-120802)
of The Goldman Sachs Group, Inc. of our report dated
January 22, 2009 relating to the financial statements and the effectiveness of
internal control over financial reporting, which appears in
Part II, Item 8 of this
Form 10-K.
We also consent to the incorporation by reference in such
Registration Statements of our report dated
January 22, 2009 relating to Selected Financial Data,
which appears in Exhibit 99.1 of this
Form 10-K.
/s/ PricewaterhouseCoopers
LLP
New York, New York
January 22, 2009
EX-31.1
30
y74032exv31w1.htm
EX-31.1: RULE 13A-14(A) CERTIFICATIONS
EX-31.1
EXHIBIT 31.1
CERTIFICATIONS
I, Lloyd C. Blankfein, certify that:
1. I have reviewed this Annual Report on
Form 10-K
for the year ended November 28, 2008 of The Goldman
Sachs Group, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s)
and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act
Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the
registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s)
and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Name: Lloyd C. Blankfein
Title: Chief Executive Officer
Date: January 26, 2009
CERTIFICATIONS
I, David A. Viniar, certify that:
1. I have reviewed this Annual Report on
Form 10-K
for the year ended November 28, 2008 of The Goldman
Sachs Group, Inc.;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s)
and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act
Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the
registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s)
and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Name: David A. Viniar
|
|
|
|
Title: Chief Financial Officer
|
|
Date: January 26, 2009
EX-32.1
31
y74032exv32w1.htm
EX-32.1: SECTION 1350 CERTIFICATIONS
EX-32.1
EXHIBIT 32.1
Certification
Pursuant to 18 U.S.C. § 1350, the undersigned officer of
The Goldman Sachs Group, Inc. (the Company) hereby
certifies that the Companys Annual Report on
Form 10-K
for the year ended November 28, 2008 (the
Report) fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934 and that the information contained in the
Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
|
|
Dated: January 26, 2009
|
|
/s/ Lloyd
C. Blankfein
Lloyd
C. Blankfein
Chief Executive Officer
|
The foregoing certification is being furnished solely pursuant
to 18 U.S.C. § 1350 and is not being filed as part of the
Report or as a separate disclosure document.
Certification
Pursuant to 18 U.S.C. § 1350, the undersigned officer of
The Goldman Sachs Group, Inc. (the Company) hereby
certifies that the Companys Annual Report on
Form 10-K
for the year ended November 28, 2008 (the
Report) fully complies with the requirements of
Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934 and that the information contained in the
Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
|
|
Dated: January 26, 2009
|
|
/s/ David
A. Viniar
David
A. Viniar
Chief Financial Officer
|
The foregoing certification is being furnished solely pursuant
to 18 U.S.C. § 1350 and is not being filed as part of the
Report or as a separate disclosure document.
EX-99.1
32
y74032exv99w1.htm
EX-99.1: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EX-99.1
EXHIBIT 99.1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SELECTED FINANCIAL DATA
To the Board of Directors and the Shareholders of
The Goldman Sachs Group, Inc.:
We have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the
consolidated financial statements of The Goldman Sachs Group,
Inc. and subsidiaries (the Company) at
November 28, 2008 and November 30, 2007, and
for each of the three fiscal years in the period ended
November 28, 2008 and the effectiveness of the
Companys internal control over financial reporting as of
November 28, 2008, and in our report dated
January 22, 2009, we expressed unqualified opinions
thereon. We have also previously audited, in accordance with the
standards of the Public Company Accounting Oversight Board
(United States), the Companys consolidated statements of
financial condition at November 24, 2006,
November 25, 2005 and November 26, 2004, and
the related consolidated statements of earnings, changes in
shareholders equity, cash flows and comprehensive income
for the years ended November 25, 2005 and
November 26, 2004 (none of which are presented
herein), and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the
information set forth in the selected financial data for each of
the five fiscal years in the period ended November 28, 2008,
appearing on page 211 in Part II, Item 8 of this
Form 10-K,
is fairly stated, in all material respects, in relation to the
consolidated financial statements from which it has been derived.
/s/ PricewaterhouseCoopers
LLP
New York, New York
January 22, 2009
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33
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M.$N%*+R3W"@W#K!O<7;F.\>K(Y3D;L!Y*(4L`00A[&IZ"/A9L&X.IP"QNFH<
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D+WF?..$*F-D$0/'SH"@DP#6-L#&!(O2A$```[
`
end
-----END PRIVACY-ENHANCED MESSAGE-----