Sallie Mae 2014 Annual Report Download - page 70

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conducted in the various aspects of our business on matters as diverse as the launch of new products and services, our credit
underwriting activities and how we fund operations. Our public relations, marketing and media teams constantly monitor print,
electronic and social media to understand how we are perceived; actively provide assistance and support to our customers and
other constituencies; and maintain and promote the value of our considerable corporate brand. Significant political and
reputational risks are reported to and monitored by the management-level Enterprise Risk Committee and the Risk Committee
of our Board of Directors. Our Legal, Government Relations and Compliance groups regularly meet and collaborate with our
Media and Investor Relations teams to provide more coordinated monitoring and management of our political and reputational
risks.
Strategic Risk. Strategic risk is the risk to shareholder value and growth trajectory from adverse business decisions and/or
improper implementation of business strategies. Management must be able to develop and implement business strategies that
leverage the organization’s core competencies, are structured appropriately and are achievable. Oversight for this strategic
planning process is provided by the Executive Committee of the Board of Directors. Our performance, relative to our annual
business plan, is regularly reviewed by management, the Board of Directors and its various committees.
Common Stock
Our shareholders have authorized the issuance of 1.125 billion shares of common stock (par value of $.20). At
December 31, 2014, 423 million shares were issued and outstanding and 60 million shares were unissued but encumbered for
outstanding stock options, restricted stock units and dividend equivalent units for employee compensation and remaining
authority for stock-based compensation plans. See Note 12, “Stockholders' Equity” to the consolidated financial statements
contained in this Form 10-K, for additional details.
Arrangements with Navient Corporation
In connection with the Spin-Off, the Company entered into a separation and distribution agreement with Navient (the
“Separation and Distribution Agreement”). In connection therewith, the Company also entered into various other ancillary
agreements with Navient to effect the Spin-Off and provide a framework for its relationship with Navient thereafter, such as a
transition services agreement, a tax sharing agreement, an employee matters agreement, a loan servicing and administration
agreement, a joint marketing agreement, a key services agreement, a data sharing agreement and a master sublease agreement.
The majority of these agreements are transitional in nature with most having terms of two years or less from the date of the
Spin-Off.
We continue to have significant exposures to risks related to Navient’s loan originations and its creditworthiness. If we
are unable to obtain services, complete the transition of our origination operations as planned, or obtain indemnification
payments from Navient, we could experience higher than expected costs and operating expenses and our results of operations
and financial condition could be materially and adversely affected.
We briefly summarize below some of the most significant agreements and relationships we continue to have with
Navient. For additional information regarding the Separation and Distribution Agreement and the other ancillary agreements,
see our Current Report on Form 8-K filed on May 2, 2014.
Separation and Distribution Agreement
The Separation and Distribution Agreement addresses, among other things, the following ongoing activities:
• the obligation of each party to indemnify the other against liabilities retained or assumed by that party pursuant to the
Separation and the Distribution Agreement and in connection with claims of third parties;
• the allocation among the parties of rights and obligations under insurance policies;
• the agreement of the Company and Navient (i) not to engage in certain competitive business activities for a period of
five years, (ii) as to the effect of the non-competition provisions on post-spin merger and acquisition activities of the
parties and (iii) regarding “first look” opportunities; and
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