View all text of Part B [§ 1071 - § 1087-4]
§ 1087–3. Reorganization of Student Loan Marketing Association through formation of Holding Company
(a) Actions by Association’s Board of Directors
The Board of Directors of the Association shall take or cause to be taken all such action as the Board of Directors deems necessary or appropriate to effect, upon the shareholder approval described in subsection (b), a restructuring of the common stock ownership of the Association, as set forth in a plan of reorganization adopted by the Board of Directors (the terms of which shall be consistent with this section) so that all of the outstanding common shares of the Association shall be directly owned by a Holding Company. Such actions may include, in the Board of Director’s discretion, a merger of a wholly owned subsidiary of the Holding Company with and into the Association, which would have the effect provided in the plan of reorganization and the law of the jurisdiction in which such subsidiary is incorporated. As part of the restructuring, the Board of Directors may cause—
(1) the common shares of the Association to be converted, on the reorganization effective date, to common shares of the Holding Company on a one for one basis, consistent with applicable State or District of Columbia law; and
(2) Holding Company common shares to be registered with the Securities and Exchange Commission.
(b) Shareholder approval
(c) Transition
In the event the shareholders of the Association approve the plan of reorganization under subsection (b), the following provisions shall apply beginning on the reorganization effective date:
(1) In general
(2) Transfer of certain property
(A) In general
Except as provided in this section, on the reorganization effective date or as soon as practicable thereafter, the Association shall use the Association’s best efforts to transfer to the Holding Company or any subsidiary of the Holding Company (or both), as directed by the Holding Company, all real and personal p
(i) direct or indirect subsidiaries of the Association (excluding special purpose funding companies in existence on September 30, 1996, and any interest in any government-sponsored enterprise);
(ii) contracts, leases, and other agreements of the Association;
(iii) licenses and other intellectual property of the Association; and
(iv) any other property of the Association.
(B) Construction
(3) Transfer of personnel
(4) Dividends
(5) Certification prior to dividend
(6) Restrictions on new business activity or acquisition of assets by Association
(A) In general
After the reorganization effective date, the Association shall not engage in any new business activities or acquire any additional program assets described in section 1087–2(d) of this title other than in connection with—
(i) student loan purchases through September 30, 2007;
(ii) contractual commitments for future warehousing advances, or pursuant to letters of credit or standby bond purchase agreements, which are outstanding as of the reorganization effective date;
(iii) the Association serving as a lender-of-last-resort pursuant to section 1087–2(q) of this title; and
(iv) the Association’s purchase of loans insured under this part, if the Secretary, with the approval of the Secretary of the Treasury, enters into an agreement with the Association for the continuation or resumption of the Association’s secondary market purchase program because the Secretary determines there is inadequate liquidity for loans made under this part.
(B) Agreement
(7) Issuance of debt obligations during the transition period; attributes of debt obligations
(8) Monitoring of safety and soundness
(A) Obligation to obtain, maintain, and report information
The Association shall obtain such information and make and keep such records as the Secretary of the Treasury may from time to time prescribe concerning—
(i) the financial risk to the Association resulting from the activities of any associated person, to the extent such activities are reasonably likely to have a material impact on the financial condition of the Association, including the Association’s capital ratio, the Association’s liquidity, or the Association’s ability to conduct and finance the Association’s operations; and
(ii) the Association’s policies, procedures, and systems for monitoring and controlling any such financial risk.
(B) Summary reports
(C) Separate operation of corporations
(i) In general
(ii) Books and records
(iii) Corporate office
(iv) Director
(v) One officer requirement
(vi) Transactions
(vii) Credit prohibition
(viii) Amounts collected
(D) Encumbrance of assets
(E) Holding Company activities
(F) Confidentiality
(G) Definition
(9) Issuance of stock warrants
(A) In general
On the reorganization effective date, the Holding Company shall issue to the District of Columbia Financial Responsibility and Management Assistance Authority a number of stock warrants that is equal to one percent of the outstanding shares of the Association, determined as of the last day of the fiscal quarter preceding September 30, 1996, with each stock warrant entitling the holder of the stock warrant to purchase from the Holding Company one share of the registered common stock of the Holding Company or the Holding Company’s successors or assigns, at any time on or before September 30, 2008. The exercise price for such warrants shall be an amount equal to the average closing price of the common stock of the Association for the 20 business days prior to September 30, 1996, on the exchange or market which is then the primary exchange or market for the common stock of the Association. The number of shares of Holding Company common stock subject to each stock warrant and the exercise price of each stock warrant shall be adjusted as necessary to reflect—
(i) the conversion of Association common stock into Holding Company common stock as part of the plan of reorganization approved by the Association’s shareholders; and
(ii) any issuance or sale of stock (including issuance or sale of treasury stock), stock split, recapitalization, reorganization, or other corporate event, if agreed to by the Secretary of the Treasury and the Association.
(B) Authority to sell or exercise stock warrants; deposit of proceeds
(10) Restrictions on transfer of Association shares and bankruptcy of Association
(d) Termination of Association
In the event the shareholders of the Association approve a plan of reorganization under subsection (b), the Association shall dissolve, and the Association’s separate existence shall terminate on September 30, 2008, after discharge of all outstanding debt obligations and liquidation pursuant to this subsection. The Association may dissolve pursuant to this subsection prior to such date by notifying the Secretary of Education and the Secretary of the Treasury of the Association’s intention to dissolve, unless within 60 days after receipt of such notice the Secretary of Education notifies the Association that the Association continues to be needed to serve as a lender of last resort pursuant to section 1087–2(q) of this title or continues to be needed to purchase loans under an agreement with the Secretary described in subsection (c)(6). On the dissolution date, the Association shall take the following actions:
(1) Establishment of a trust
(2) Use of trust assets
(3) Obligations not transferred to the trust
(4) Transfer of remaining assets
(e) Operation of Holding Company
In the event the shareholders of the Association approve the plan of reorganization under subsection (b), the following provisions shall apply beginning on the reorganization effective date:
(1) Holding Company Board of Directors
(2) Holding Company name
The names of the Holding Company and any subsidiary of the Holding Company (other than the Association)—
(A) may not contain the name “Student Loan Marketing Association”; and
(B) may contain, to the extent permitted by applicable State or District of Columbia law, “Sallie Mae” or variations thereof, or such other names as the Board of Directors of the Association or the Holding Company deems appropriate.
(3) Use of Sallie Mae name
(4) Disclosure required
Until 3 years after the dissolution date, the Holding Company, and any subsidiary of the Holding Company (other than the Association), shall prominently display—
(A) in any document offering the Holding Company’s securities, a statement that the obligations of the Holding Company and any subsidiary of the Holding Company are not guaranteed by the full faith and credit of the United States; and
(B) in any advertisement or promotional materials which use the “Sallie Mae” name or mark, a statement that neither the Holding Company nor any subsidiary of the Holding Company is a government-sponsored enterprise or instrumentality of the United States.
(f) Strict construction
(g) Right to enforce
(h) Deadline for reorganization effective date
(i) Definitions
For purposes of this section:
(1) Association
(2) Dissolution date
(3) Holding Company
(4) Remaining obligations
(5) Remaining property
The term “remaining property” means the following assets and liabilities of the Association which are outstanding as of the reorganization effective date:
(A) Debt obligations issued by the Association.
(B) Contracts relating to interest rate, currency, or commodity positions or protections.
(C) Investment securities owned by the Association.
(D) Any instruments, assets, or agreements described in section 1087–2(d) of this title (including, without limitation, all student loans and agreements relating to the purchase and sale of student loans, forward purchase and lending commitments, warehousing advances, academic facilities obligations, letters of credit, standby bond purchase agreements, liquidity agreements, and student loan revenue bonds or other loans).
(E) Except as specifically prohibited by this section or section 1087–2 of this title, any other nonmaterial assets or liabilities of the Association which the Association’s Board of Directors determines to be necessary or appropriate to the Association’s operations.
(6) Reorganization
(7) Reorganization effective date
(8) Subsidiary
(Pub. L. 89–329, title IV, § 440, as added Pub. L. 104–208, div. A, title I, § 101(e) [title VI, § 602(a)], Sept. 30, 1996, 110 Stat. 3009–233, 3009–275.)