Prior to the offerings, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the perception that such sales may occur, could adversely affect the
prevailing market price of the common stock. Upon completion of the offerings,
there will be 467,271,909 shares of common stock outstanding, including
30,025,946 shares of common stock underlying the restricted stock units awarded
based on a formula but excluding 7,440,362 shares of nonvoting common stock. Of
these shares, 69,000,000 shares of common stock sold in the offerings will be
freely transferable without restriction or further registration under the
Securities Act of 1933. Of the remaining 398,271,909 shares of common stock
outstanding:
Goldman Sachs, Sumitomo Bank Capital Markets, Inc., Kamehameha
Activities Association, the parties to the shareholders' agreement, including
all of the directors and executive officers of The Goldman Sachs Group, Inc.,
and the retired limited partners have agreed not to dispose of or hedge any of
their common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of Goldman, Sachs & Co. This agreement does not apply to
the shares of common stock underlying any of the restricted stock units awarded
based on a formula, or the restricted stock units awarded on a discretionary
basis, the options to purchase shares of common stock awarded on a discretionary
basis or accounts in the defined contribution plan, in each case, received by
non-managing directors or to any future awards made under the stock incentive
plan.
We intend to file a registration statement with the SEC in order to
register the reoffer and resale of the shares of common stock issued pursuant to
the defined contribution plan, restricted stock units awarded based on a
formula, restricted stock units awarded on a discretionary basis and options to
purchase shares of common stock awarded on a discretionary basis. As a result,
any shares of common stock delivered under these awards will, subject to any
restrictions under the shareholders' agreement, be freely transferable to the
public unless the shares of common stock are acquired by an "affiliate" of
Goldman Sachs. Any shares of common stock acquired by an "affiliate" of Goldman
Sachs will be transferable to the public in accordance with the SEC's Rule
144.
The shares of common stock received by the managing directors who were
profit participating limited partners, Sumitomo Bank Capital Markets, Inc. and
Kamehameha Activities Association will constitute "restricted securities" for
purposes of the Securities Act of 1933. As a result, absent registration under
the Securities Act of 1933 or compliance with Rule 144 thereunder or an
exemption therefrom, these shares of common stock will not be freely
transferable to the public. For a description of the registration rights granted
to Sumitomo Bank Capital Markets, Inc. and Kamehameha Activities Association and
the restrictions on the transfer of their shares of common stock, see
" Sumitomo Bank Capital Markets, Inc. and Kamehameha Activities Association
Registration Rights" below and for a description of the registration rights that
may be granted to the managing directors who were profit participating limited
partners, see " Other Registration Rights" below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who beneficially owns
"restricted securities" may not sell those securities until they have been
beneficially owned for at least one year. Thereafter, the person would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
Under Rule 144(k), a person who is not, and has not been at any time
during the 90 days preceding a sale, an affiliate of Goldman Sachs and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate) is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. While the
shares of common stock received by the retired limited partners will constitute
"restricted securities", these shares will be freely transferable by the retired
limited partners in accordance with Rule 144(k) upon the lapse or waiver of the
transfer restrictions described above.
Goldman Sachs is a party to agreements with Sumitomo Bank Capital
Markets, Inc. and The Sumitomo Bank, Limited under which Sumitomo Bank Capital
Markets, Inc. and The Sumitomo Bank, Limited may require Goldman Sachs to
register under the Securities Act of 1933 certain of Sumitomo Bank Capital
Markets, Inc.'s shares of common stock, which includes shares of common stock
receivable upon the conversion of the nonvoting common stock. Goldman Sachs is a
party to similar agreements with Kamehameha Activities Association.
Except for certain transfers to wholly owned subsidiaries, each
registration rights holder has agreed that it will only dispose of common stock
(i) by means of a widely dispersed underwritten public offering and (ii)
pursuant to the exercise of the registration rights set forth below.
Each registration rights holder has the right:
These rights are not available for nonvoting common stock.
In addition to the rights described above, each registration rights
holder will also be entitled to sell additional shares of common stock to the
extent that managing directors who were profit participating limited partners
sell shares of common stock in an amount which in any one year period following
the offerings represents, in the aggregate, a greater percentage of the number
of shares of common stock issued to these managing directors in the
incorporation transactions than the percentages specified above (i.e., 0%
during year one, 20% during years two and three, and 33 1/3% thereafter). The
exercise by the registration rights holders of their respective rights under
their registration rights agreement may, if we determine that such exercise
would interfere with a public offering by us, be delayed by us for up to 90
days.
Goldman Sachs has agreed to bear certain customary expenses associated
with the offering of common stock by Sumitomo Bank Capital Markets, Inc. and
Kamehameha Activities Association. Thereafter, the registration rights
agreements provide that the expenses of an offering of common stock are
generally the responsibility of each participating registration rights holder
selling common stock, apportioned on a pro rata basis. Under the registration
rights agreements, Goldman Sachs has agreed to indemnify each participating
registration rights holder against certain liabilities, including those arising
under the Securities Act of 1933.
The registration rights agreements also provide that if Goldman Sachs
makes a general offer to purchase shares of common stock held by the managing
directors who were profit participating limited partners, then a registration
rights holder will be permitted to participate in such transaction on a pro rata
basis with these managing directors. In addition, a registration rights holder
may tender its shares of common stock in any tender or exchange offer
recommended for approval by our board of directors (or as to which our board of
directors makes no recommendation).
The managing directors who were profit participating limited partners
are not being granted the right to require Goldman Sachs to register the shares
of common stock that they received in connection with the incorporation
transactions under the Securities Act of 1933. However, the plan of
incorporation and our charter permit our board of directors to grant
registration rights to these managing directors. As a result, the board of
directors may at any time and from time to time grant registration rights to
these managing directors.
The ability of our board of directors to grant registration rights to the managing directors who were profit participating limited partners, together with the ability of the Shareholders' Committee under the shareholders' agreement to waive the transfer restrictions related to the managing directors who were profit participating limited partners thereunder and under the plan of incorporation, could, if exercised, permit these managing directors to sell significant amounts of common stock at any time following the expiration of the underwriters' lock-up. See "Risk Factors Our Share Price May Decline Due to the Large Number of Shares Eligible for Future Sale" for a further discussion of the risks associated with these actions.
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