Sallie Mae 2009 Annual Report Download - page 196

11. Stockholders’ Equity (Continued)
property. Dividends on both series are not mandatory and are paid quarterly, when, as, and if declared by the
Board of Directors. Holders of Series A Preferred Stock are entitled to receive cumulative, quarterly cash
dividends at the annual rate of $3.485 per share. Holders of Series B Preferred Stock are entitled to receive
quarterly dividends based on 3-month LIBOR plus 70 basis points per annum in arrears, on and until June 15,
2011, increasing to 3-month LIBOR plus 170 basis points per annum in arrears after and including the period
beginning on June 15, 2011. Upon liquidation or dissolution of the Company, holders of the Series A and
Series B Preferred Stock are entitled to receive $50 and $100 per share, respectively, plus an amount equal to
accrued and unpaid dividends for the then current quarterly dividend period, if any, pro rata, and before any
distribution of assets are made to holders of the Company’s common stock.
On December 31, 2009, the Company had outstanding 810,000 shares of 7.25 percent Mandatory
Convertible Preferred Stock, Series C (the “Series C Preferred Stock”). The Series C Preferred Stock was
issued on December 31, 2007, and resulted in net proceeds of approximately $1.0 billion. An additional
150,000 shares were issued on January 9, 2008, as a result of the underwriters exercising their over-allotment
option, and resulted in net proceeds of $145.5 million. Each share of Series C Preferred Stock has a $1,000
liquidation preference and is subject to mandatory conversion on December 15, 2010. On the mandatory
conversion date, each share of the Series C Preferred Stock will automatically convert into shares of the
Company’s common stock based on a conversion rate calculated using the average of the closing prices per
share of the Company’s common stock during the 20 consecutive trading day period ending on the third
trading day immediately preceding the mandatory conversion date. If the applicable market value on the
mandatory conversion date is (i) greater than $23.97, the conversion rate is 41.7188 shares of the Company’s
common stock per share of Series C Preferred Stock, (ii) less than $19.65, the conversion rate is 50.8906 shares
of the Company’s common stock per share of Series C Preferred Stock, or (iii) equal to or less than $23.97
but greater than or equal to $19.65, the conversion rate is $1,000 divided by the applicable market value,
which is between 41.7188 shares and 50.8906 shares of the Company’s common stock per share of Series C
Preferred Stock. At any time prior to December 15, 2010, the holder may elect optional conversion in whole
or in part at the minimum conversion rate of 41.7188 shares of the Company’s common stock per share of
Series C Preferred Stock. Series C Preferred Stock is not redeemable. Dividends are not mandatory and are
paid quarterly, when, as, and if declared by the Board of Directors. Holders of Series C Preferred Stock are
entitled to receive cumulative, quarterly cash dividends at the annual rate of 7.25 percent per share.
During 2009, the Company converted $339 million of its Series C Preferred Stock to common stock. As
part of this conversion, the Company delivered to the holders of the preferred stock: (1) approximately
17 million shares (the number of common shares they would most likely receive if the preferred stock they
held mandatorily converted to common shares in the fourth quarter of 2010) plus (2) a discounted amount of
the preferred stock dividends the holders of the preferred stock would have received if they held the preferred
stock through the mandatory conversion date. The accounting treatment for this conversion resulted in
additional expense recorded as part of preferred stock dividends for the year of approximately $53 million.
Common Stock
The Company’s shareholders have authorized the issuance of 1.1 billion shares of common stock (par
value of $.20). At December 31, 2009, 485 million shares were issued and outstanding and 77 million shares
were unissued but encumbered for outstanding Series C Preferred Stock, outstanding stock options for
employee compensation, and remaining authority for stock-based compensation plans. The stock-based
compensation plans are described in Note 13, “Stock-Based Compensation Plans and Arrangements.”
On December 31, 2007, the Company issued 101,781,170 shares of its common stock at a price of
$19.65 per share. Net proceeds from the sale were approximately $1.9 billion. The Company used
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)