EX-10.39 LETTER TO MR. WILLIAM W. GEORGE



 



EXHIBIT 10.39


The Goldman Sachs Group, Inc. • 85 Broad Street • New York, New York 10004

Tel: 212-902-5904

 

Henry M. Paulson, Jr.

Chairman

Chief Executive Officer


December 18, 2002


PERSONAL AND CONFIDENTIAL



William W. George

Medtronic, Inc.

4900 IDS Center

80 South 8th Street

Minneapolis, MN 55402


Dear Bill:


     We are all very pleased that you have agreed to join the Board of
Directors of The Goldman Sachs Group, Inc. (“GS Inc.”) and look forward to
seeing you at the January 15th and 16th meetings in New York, if not before. I
am writing to set forth the terms of your compensation as a director. The
terms of directors’ compensation are, of course, subject to future modification
by the Board.


     Your term as a director commenced on December 18, 2002 and will run
through the 2003 annual meeting of shareholders of GS Inc. You have also been
appointed a member of the Audit, Compensation and Corporate Governance and
Nominating Committees as of December 18, 2002.


     You will receive an initial grant of 3,000 fully vested restricted stock
units (“RSUs”) under The Goldman Sachs 1999 Stock Incentive Plan (the “SIP”).


     As additional compensation for your services, you will receive:



	 	•	 	$35,000 per year (the “Annual Retainer”);
	 
	 	•	 	$15,000 per year for serving on each Board committee of which you
are a member (the “Committee Fees”);
	 
	 	•	 	$1,000 for each meeting of the Board or of a Board committee that
you attend (the “Meeting Fees”); and



 






 







	 	•	 	an annual grant (the “Annual Grant”), at your election, of (a)
2,000 fully vested RSUs; (b) fully vested options (“Options”) to
purchase 6,000 shares of GS Inc. common stock; or (c) 1,000 RSUs and
Options to purchase 3,000 shares of GS Inc. common stock.



     The Annual Retainer and the Committee Fees are paid annually in arrears in
the form of RSUs unless GS Inc. determines to pay them in cash. The Meeting
Fees are payable in cash, also annually in arrears. The Annual Grant is paid
annually in advance of the fiscal year to which it pertains in the form of RSUs
and/or Options as elected by you.


     For fiscal year 2003, you will receive the Annual Retainer, Committee Fees
and Annual Grant pro rated from the date of your appointment. Meeting Fees
will be calculated based on the number of meetings you attend for the remainder
of 2003 and will be paid in cash in arrears. I enclose a form for the 2003
Annual Grant election as between RSUs and Options.


     The terms of the Options for the 2003 Annual Grant were set in November
2002 and have the same exercise price ($78.87) as the options that were granted
to employees for the 2002 fiscal year; will become exercisable on the earlier
of (a) the first trading day in January 2006 unless that day is not during an
“access person window period” (“Window Period”) under GS Inc.’s trading policy,
in which case, the first trading day of the first Window Period that begins
thereafter, and (b) the date on which you cease to be a director of GS Inc.;
and will expire on November 30, 2012.


     Any Options granted to you as part of the Annual Grant for 2004 and
thereafter will:



	 	(i)	 	be granted on the same date as the date of grant of
any year-end equity awards granted to employees of GS Inc. and
its affiliates who are subject to Section 16 of the Securities
Exchange Act (“Section 16 Persons”) for the prior fiscal year
or, if no such equity awards are granted, on the last business
day of December in the fiscal year to which the Annual Grant
pertains;
	 
	 	(ii)	 	first become exercisable on the earlier of (a) the
same date that year-end options granted to Section 16 Persons
for the prior fiscal year become exercisable or, if no such
options are granted, on the first trading day in January three
years after the date of grant unless that date is not during a
Window Period, in which case the first trading day of the first
Window Period that begins thereafter, and (b) the date on which
you cease to be a director of GS Inc.;
	 
	 	(iii)	 	have an exercise price equal to the exercise price
of any year-end options granted to Section 16 Persons for the
prior fiscal year or, if no such options are granted, the
closing price of GS Inc.’s common stock on the New York Stock
Exchange on the date of grant of the Annual Grant; and
	 
	 	(iv)	 	will expire ten years after the date of grant.



 






 






     RSUs for the Annual Retainer, the Committee Fees and, if applicable, the
Annual Grant will:



	 	(i)	 	be granted to you as of the date of grant of any
year-end equity award granted to Section 16 Persons or, if no
such award is granted, as of the last business day of December
of such fiscal year (or, in the case of RSUs for the Annual
Grant, as of the last business day of December in the fiscal
year to which the grant pertains); and
	 
	 	(ii)	 	provide for delivery of shares of GS Inc. common
stock on the last business day in May in the year following the
date on which you cease to be a director of GS Inc.



The number of RSUs you receive for the Annual Retainer and the Committee Fees
will be determined in the same manner as grants to employees for year-end RSUs
for that fiscal year or, if no such RSUs are granted, at a grant price equal to
the average closing price of GS Inc.’s common stock on the New York Stock
Exchange over the 10 trading days up to and including the last day of the
fiscal year.


     All Options and RSUs will be subject to the terms and conditions of the
SIP and the relevant award agreements.


     I have enclosed various documents in connection with these arrangements.
Please complete them as necessary, sign where indicated and return them in the
enclosed envelope. The remaining copies are for your records.



	 	 	 
	 	 	
Very truly yours,
	 	 	 
	 	 	
/s/ HENRY M. PAULSON, JR.
	 	 	 
	 	 	
Henry M. Paulson, Jr.




	 	 	 
	Enclosures:	 	
The Goldman Sachs 1999 Stock Incentive Plan (and Prospectus
Materials)

Outside Director Initial RSU Award Agreement

Custody Agreement

Signature Card

Election Form for 2003 Annual Grant

Form W-9