General Motors 2011 Annual Report Download - page 172

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Preferred Stock, the difference, if any, between the recorded amount of the Series A Preferred Stock being redeemed or purchased and
the consideration paid would be recorded as a charge to Net income attributable to common stockholders. If all of the Series A
Preferred Stock were to be redeemed or purchased at its par value, the amount of the charge would be $1.4 billion.
In December 2010 we purchased 84 million shares of Series A Preferred Stock, held by the UST, at a price equal to 102% of the
aggregate liquidation amount, for $2.1 billion. The purchase of the UST’s Series A Preferred Stock resulted in a charge of $0.7 billion
recorded in Cumulative dividends on and charge related to purchase of preferred stock.
Series B Preferred Stock
The Series B Preferred Stock, with respect to dividend rights and rights upon our liquidation, winding-up or dissolution, ranks:
(1) senior to our common stock and to each other class of capital stock or series of preferred stock the terms of which do not expressly
provide that such class or series ranks senior to, or on a parity with, the Series B Preferred Stock; (2) on a parity with any class of
capital stock or series of preferred stock the terms of which expressly provide that such class or series will rank on a parity with the
Series B Preferred Stock; and (3) junior to our Series A Preferred Stock and to each class of capital stock or series of preferred stock
the terms of which expressly provide that such class or series will rank senior to the Series B Preferred Stock.
Each share of the Series B Preferred Stock, unless previously converted, will automatically convert on December 1, 2013 into
shares of our common stock. The number of shares of our common stock issuable upon mandatory conversion of each share of
Series B Preferred Stock, is determined based on the applicable market value of our common stock subject to anti-dilution
adjustments and accumulated and unpaid dividends. The applicable market value of our common stock is the average of the closing
prices of our common stock over the 40 consecutive trading day period ending on the third trading day immediately preceding the
mandatory conversion date. Holders of the Series B Preferred Stock have the right to convert their shares at any time prior to the
mandatory conversion date at a conversion ratio of 1.2626 shares of our common stock for each share of the Series B Preferred Stock
that is optionally converted, subject to anti-dilution, make-whole and other adjustments.
If the applicable market value of our common stock upon mandatory conversion falls within a range of $33.00-$39.60 per common
share, the holder receives a variable number of shares of our common stock with a value equal to the liquidation preference plus
accumulated dividends. If the applicable market value is not within this range, there is a fixed conversion ratio equaling 1.2626 shares
of common stock for each share of Series B Preferred Stock when the applicable market value of our common stock is greater than
$39.60, and 1.5152 shares of common stock for each share of Series B Preferred Stock when the applicable market value of our
common stock is less than $33.00. The fixed conversion ratios will be adjusted for events that would otherwise dilute a Series B
Preferred Stockholder’s interest. These anti-dilution provisions provide a holder of the Series B Preferred Stock a right to participate
in our undistributed earnings because a dividend, if declared, would result in a transfer of value to the holder through an adjustment to
the fixed conversion ratios. Based on the nature of the Series B Preferred Stock and the nature of these anti-dilution provisions, we
have concluded that the Series B Preferred Stock is a participating security and, as such, the application of the two-class method for
computing earnings per share is required when the applicable market value of our common stock is below $33.00 or above $39.60 per
share. For purposes of calculating earnings per share, the applicable market value is calculated as the average of the closing prices of
our common stock over the 40 consecutive trading day period ending on the third trading day immediately preceding the date of our
financial statements. The calculation of the applicable market value at the date of our financial statements will apply to the full year,
irrespective of the applicable market value computed during the prior quarters of the current year. Refer to Note 26 for a description
of the effect of the two-class method on earnings per share.
Common Stock
Holders of our common stock are entitled to dividends at the sole discretion of our Board of Directors. However, the terms of the
Series A Preferred Stock and Series B Preferred Stock prohibit, subject to exceptions, the payment of dividends on our common stock,
unless all accrued and unpaid dividends on the Series A Preferred Stock and Series B Preferred Stock are paid in full. Holders of
common stock are entitled to one vote per share on all matters submitted to our stockholders for a vote. The liquidation rights of
170 General Motors Company 2011 Annual Report