<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SLM Holding Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[SALLIE MAE LOGO]
11600 Sallie Mae Drive
Reston, Virginia 20193
April 16, 1998
Dear Shareholder:
I am pleased to join the Board of Directors of SLM Holding Corporation in
inviting you to attend the Company's Annual Meeting of Shareholders to be held
Thursday, May 21, 1998 at 10:00 a.m. at the Hyatt Regency Reston Hotel at Reston
Town Center, 1800 Presidents Street, Reston, Virginia 20190. The Notice of the
Annual Meeting of Shareholders and the Proxy Statement accompanying this letter
describe the business to be transacted at the meeting.
YOUR PARTICIPATION IN THE ANNUAL MEETING IS IMPORTANT. REGARDLESS OF
WHETHER YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, AND RETURN THE
ENCLOSED PROXY CARD AT YOUR EARLIEST CONVENIENCE. This will help to establish a
quorum and avoid the cost of further solicitation. We hope that you will be able
to attend the meeting and encourage you to read the enclosed materials
describing the meeting agenda and the Company in detail.
We look forward to seeing you on May 21.
Sincerely,
/s/ EDWARD A. FOX
Edward A. Fox
Chairman of the Board of Directors
<PAGE> 3
SLM HOLDING CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1998
------------------------
Dear SLM Holding Corporation Shareholder:
Consistent with the By-laws of SLM Holding Corporation, notice is hereby
given on behalf of the Board of Directors that the Annual Meeting of
Shareholders of SLM Holding Corporation will be held on Thursday, May 21, 1998
at 10:00 a.m. at the Hyatt Regency Reston Hotel at Reston Town Center, 1800
Presidents Street, Reston, Virginia 20190, for purposes of considering and
voting on:
(1) The election of 15 members to the Board of Directors for a term of
one year;
(2) Approval of the SLM Holding Corporation Directors Stock Plan;
(3) Approval of the SLM Holding Corporation Management Incentive Plan;
(4) Approval of an amendment to the SLM Holding Corporation 1993-1998
Stock Option Plan;
(5) Ratification of certain option grants under the SLM Holding
Corporation 1993-1998 Stock Option Plan;
(6) Ratification of the appointment of Arthur Andersen LLP as
independent auditors for 1998; and
(7) Such other business as may properly come before the meeting or any
adjournment thereof.
Holders of record of SLM Holding Corporation's Common Stock at the close of
business on March 23, 1998 will be entitled to vote at the Annual Meeting of
Shareholders or any adjournment thereof. Accompanying this Notice of Annual
Meeting of Shareholders are the form of proxy, the Proxy Statement describing in
detail the business to come before the Annual Meeting of Shareholders, and the
1997 Annual Report.
THE BOARD OF DIRECTORS SOLICITS YOUR PROXY AND ASKS YOU TO COMPLETE, SIGN
AND RETURN THE ENCLOSED FORM OF PROXY AT YOUR EARLIEST CONVENIENCE IN ORDER TO
BE SURE YOUR VOTE IS RECEIVED AND COUNTED. RETURNING YOUR FORM OF PROXY WILL
HELP AVOID THE COST OF FURTHER SOLICITATION. PLEASE CHECK THE BOX ON THE FORM OF
PROXY IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS OR ADVISE MY
OFFICE DIRECTLY AT (703) 810-7567.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
Sincerely,
/s/ LUCY C. WEYMOUTH
Lucy C. Weymouth
Corporate Secretary
Enclosures
April 16, 1998
Reston, Virginia
<PAGE> 4
[SALLIE MAE LOGO]
11600 Sallie Mae Drive
Reston, Virginia 20193
1998
PROXY
STATEMENT
April 16, 1998
Reston, Virginia
<PAGE> 5
SLM HOLDING CORPORATION
------------------------
1998 PROXY STATEMENT
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VOTING RIGHTS AND PROXY INFORMATION......................... 1
COMMON STOCK INFORMATION.................................... 2
General Information....................................... 2
Board and Management Ownership............................ 3
Principal Shareholders.................................... 4
PROPOSAL 1 -- ELECTION OF DIRECTORS......................... 5
Information Concerning Nominees........................... 5
Meetings of the Board..................................... 8
BOARD GOVERNANCE GUIDELINES FOR SLM HOLDING CORPORATION..... 10
DIRECTOR REMUNERATION....................................... 12
EXECUTIVE OFFICERS.......................................... 13
Names and Titles.......................................... 13
Previous Experience....................................... 13
EXECUTIVE COMPENSATION...................................... 13
Report of the Compensation and Personnel Committee on
Executive Compensation.................................... 14
Summary Compensation Table................................ 16
1997 Option Grant Table................................... 17
1997 Option Exercises and Year-End Value Table............ 18
Pension Plan Table........................................ 18
Certain Transactions...................................... 19
Severance Arrangements.................................... 19
STOCK PERFORMANCE GRAPH..................................... 20
NEW PLAN BENEFITS........................................... 21
PROPOSAL 2 -- APPROVAL OF SLM HOLDING CORPORATION DIRECTORS
STOCK PLAN................................................ 21
PROPOSAL 3 -- APPROVAL OF SLM HOLDING CORPORATION MANAGEMENT
INCENTIVE PLAN............................................ 23
PROPOSAL 4 -- APPROVAL OF AN AMENDMENT TO THE SLM HOLDING
CORPORATION 1993-1998 STOCK OPTION PLAN................... 28
PROPOSAL 5 -- RATIFICATION OF CERTAIN OPTION GRANTS UNDER
THE SLM HOLDING CORPORATION 1993-1998 STOCK OPTION PLAN... 29
PROPOSAL 6 -- RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS...................................... 31
OTHER MATTERS............................................... 31
Solicitation Costs........................................ 32
Shareholder Proposals..................................... 32
Section 16(a) Beneficial Ownership Reporting Compliance... 32
EXHIBIT A -- SLM HOLDING CORPORATION DIRECTORS STOCK PLAN... A-1
EXHIBIT B -- SLM HOLDING CORPORATION MANAGEMENT INCENTIVE
PLAN...................................................... B-1
</TABLE>
<PAGE> 6
SLM HOLDING CORPORATION
------------------------
1998 PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1998
------------------------
This Proxy Statement is furnished to holders on the Record Date (as defined
below) of Common Stock (the "Shareholders") in connection with the solicitation
of proxies by the Board of Directors of SLM Holding Corporation (the "Company")
to be voted at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Thursday, May 21, 1998 at 10:00 a.m. at the Hyatt
Regency Reston Hotel at Reston Town Center, 1800 Presidents Street, Reston,
Virginia 20190, or at any adjournment thereof. This Proxy Statement and the
accompanying form of proxy (the "Proxy Card") and the 1997 Annual Report are
first being sent to Shareholders on or about April 16, 1998. The principal
offices of the Company are located at 11600 Sallie Mae Drive, Reston, Virginia
20193.
At the Annual Meeting, the Shareholders will be asked to elect 15 members
to the Board for the coming year; approve the SLM Holding Corporation Directors
Stock Plan; approve the SLM Holding Corporation Management Incentive Plan;
approve an amendment to the SLM Holding Corporation 1993-1998 Stock Option Plan;
ratify certain options granted under the SLM Holding Corporation 1993-1998 Stock
Option Plan; ratify the appointment of Arthur Anderson LLP as independent
auditors for 1998; and to transact such other business as may properly come
before the meeting or any adjournment thereof.
In order to transact business at the Annual Meeting, a majority of the
outstanding shares of the Company's Common Stock (the "Common Stock"), whether
represented in person or by proxy, must be present at the Annual Meeting. If
such a quorum is not present, a majority of shares so represented may adjourn
the Annual Meeting to a future date. Abstentions and broker non-votes are
counted when determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in tabulations of the votes cast on
proposals presented at the Annual Meeting, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
The only business that will be conducted at the Annual Meeting is business
that is brought forward either by the Board of Directors or by any Shareholder,
if such Shareholder has given timely written notice to the Secretary of the
Company. At the close of business on March 23, 1998 (the "Record Date"), the
Secretary had not received notice from any Shareholder of any proper business to
come before the Annual Meeting other than those items specified above.
VOTING RIGHTS AND PROXY INFORMATION
Shareholders are entitled to vote at the 1998 Annual Meeting and any
adjournment thereof. Shares may be voted in person or by proxy. A Shareholder
may revoke a proxy at any time before its exercise by giving written notice of
such revocation, by executing and delivering a new proxy or by voting in person
his or her shares at the Annual Meeting. Shares held on the Record Date through
a bank, brokerage firm or other intermediary may be voted in person at the
Annual Meeting by obtaining a legal proxy from such bank, brokerage firm or
other intermediary. At the Annual Meeting, the Chairman of the Board shall
designate the time that the polls shall close. Only those proxies received or
votes cast prior to the closing of the polls shall be valid.
In the election of directors, Shareholders are entitled to cumulative
voting, meaning that each share of Common Stock is entitled to a number of votes
equal to the number of directors to be elected. A Shareholder
1
<PAGE> 7
voting in person may cumulate votes and give one nominee all of his or her votes
or distribute such number of votes among the nominees in such manner as he or
she deems advisable. Unless other instructions are given in writing, the votes
of a Shareholder voting by proxy will be cast among the nominees specified on
the accompanying Proxy Card (the "Nominees") for whom authority was not withheld
and will be cumulated in a manner so as to assure the election of the maximum
number of the Nominees to the Board of Directors. The 15 nominees who receive
the greatest number of votes cast and entitled to be voted at the Annual Meeting
will be elected. Also, see "Proposal 1 -- Election of Directors" at page 5 with
respect to the voting on the election as a director.
Approval of other matters indicated above for consideration at the Annual
Meeting requires an affirmative vote of at least a majority of the votes cast
and entitled to be voted at the Annual Meeting, with each share of stock
entitled to one vote.
PROXIES THAT ARE PROPERLY EXECUTED AND TIMELY RECEIVED WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES AND FOR THE OTHER MATTERS DESCRIBED HEREIN, UNLESS
SHAREHOLDERS SPECIFY A CONTRARY CHOICE ON THEIR PROXY CARD.
COMMON STOCK INFORMATION
GENERAL INFORMATION
The Common Stock was issued on August 7, 1997 following shareholder
approval of the reorganization of Student Loan Marketing Association, a
government sponsored enterprise (the "GSE"), as a subsidiary of the Company (the
"Reorganization").
On January 2, 1998, the Company effected a 7-for-2 stock split through a
stock dividend of an additional five shares of Common Stock for every two shares
owned. Unless otherwise indicated, all share amounts and stock prices in this
Proxy Statement have been adjusted to reflect the stock split.
At December 31, 1997, 173,410,937 shares of Common Stock, par value $.20
per share, were outstanding. At March 23, 1998, the Record Date, 170,410,347
shares of Common Stock were outstanding and eligible to be voted. The Common
Stock is listed on the New York Stock Exchange, symbol "SLM."
2
<PAGE> 8
BOARD AND MANAGEMENT OWNERSHIP
The following table provides information regarding shares owned by Nominees
and management at February 28, 1998. Neither any individual officer or director
nor the directors and executive officers as a group was the beneficial owner of
more than 1% of the outstanding Common Stock at February 28, 1998.
<TABLE>
<CAPTION>
TOTAL
POSITION
OWNED AND MAY BE
CREDITED TO CREDITED TO ACQUIRED
BENEFIT PLAN BENEFIT PLAN WITHIN
OWNED(1) ACCOUNT(2) ACCOUNT(3) 60 DAYS(4)
-------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
DIRECTOR NOMINEES
James E. Brandon.................................... 6,209 3,178 9,387 14,000
Charles L. Daley.................................... 21,977 932 22,909 14,000
Thomas J. Fitzpatrick............................... 1,575 0 1,575 0
Edward A. Fox....................................... 189,000 0 189,000 0
Diane Suitt Gilleland............................... 3,055 3,191 6,246 12,775
Ann Torre Grant..................................... 1,400 0 1,400 0
Ronald F. Hunt...................................... 16,485 3,805 20,290 3,500
Benjamin J. Lambert III............................. 2,377 1,669 4,046 3,500
Albert L. Lord...................................... 115,745 1,787 117,532 3,500
Marie V. McDemmond.................................. 0 0 0 0
Barry A. Munitz..................................... 0 0 0 0
A. Alexander Porter, Jr.(5)......................... 92,690 932 93,622 14,000
Wolfgang Schoellkopf(5)............................. 3,500 0 3,500 0
Steven L. Shapiro................................... 7,277 2,506 9,783 14,000
Randolph H. Waterfield, Jr. ........................ 2,275 2,137 4,412 14,000
NAMED EXECUTIVE OFFICERS
Albert L. Lord...................................... 115,745 1,787 117,532 3,500
J. Paul Carey....................................... 18,718 0 18,718 0
Mark G. Overend..................................... 22,615 1,027 23,642 40,614
Robert R. Levine.................................... 23,892 0 23,892 39,886
Marianne M. Keler................................... 28,588 168 28,756 36,736
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP......... 557,378 21,332 578,710 210,511
</TABLE>
- ---------------
(1) Consists of shares held, directly or indirectly, by the individual and, in
the case of officers, shares credited directly to the individual's account
under the Sallie Mae 401(k) Savings Plan as of February 28, 1998. Unless
otherwise indicated and subject to shared ownership with spouses and under
applicable community property laws, each owner has sole voting and sole
investment power with respect to the stock listed.
(2) Consists of share equivalents credited under the Directors' Deferred
Compensation Plan and the Sallie Mae Supplemental 401(k) Savings Plan as of
February 28, 1998.
(3) Consists of total of columns 1 and 2.
(4) Consists of shares which may be acquired through currently exercisable stock
options. Does not include option grants which are subject to shareholder
approval or which do not vest within 60 days after February 28, 1998.
(5) Mr. Porter's beneficial ownership includes 91,000 shares over which he
shares investment and voting control through two limited partnerships of
which he is a general partner. Mr. Schoellkopf's shares shown as owned are
held through a limited partnership of which he is the sole general partner.
3
<PAGE> 9
PRINCIPAL SHAREHOLDERS
To the Company's knowledge based solely on Schedules 13G filed with the
Securities and Exchange Commission, the following institutions were beneficial
owners of 5% or more of the Company's outstanding Common Stock at December 31,
1997. The Company is not aware of any other beneficial owner who became the
beneficial owner of 5% or more of the Company's Common Stock between December
31, 1997 and March 23, 1998.
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE AT
PRINCIPAL HOLDER AND ADDRESS SHARES DECEMBER 31, 1997
---------------------------- ---------- -----------------
<S> <C> <C>
The Capital Group Companies, Inc.(1)
Los Angeles, CA 90071....................................... 21,005,880 12.11%
Janus Capital Corporation(2)
100 Fillmore Street
Denver, CO 80206............................................ 14,312,182 8.25%
Boston Partners Asset Management, L.P.(3)
One Financial Center, 43rd Floor
Boston, MA 02111............................................ 12,684,700 7.31%
Chancellor LGT Asset Management, Inc.
Chancellor LGT Trust Company
LGT Asset Management, Inc.(4)
1166 Avenue of the Americas
New York, NY 10036.......................................... 9,166,094 5.29%
FMR Corp.(5)
82 Devonshire Street
Boston, MA 02109............................................ 8,834,525 5.09%
</TABLE>
- ---------------
(1) Certain operating subsidiaries of The Capital Group Companies, Inc. held
investment power over various institutional accounts, which held, as of
December 31, 1997, 21,005,880 shares of the Common Stock (12.11% of the
shares outstanding). Capital Research and Management Company, a registered
investment adviser and a wholly owned subsidiary of The Capital Group
Companies, Inc., had investment power with respect to 13,412,000 of such
shares (7.73% of the shares outstanding).
(2) Thomas H. Bailey is President, Chairman of the Board of Directors and owner
of 12.2% of Janus Capital. Each of Janus Capital and Mr. Bailey shares
voting power over the shares included herein. Neither Janus Capital nor Mr.
Bailey has the right to receive any dividends from, or proceeds from the
sale of, the shares included herein, and each disclaims any ownership
associated with these rights.
(3) Boston Partners Asset Management, L.P. is the record owner of all of the
shares included herein. Boston Partners Inc. is the sole general partner of
Boston Partners Asset Management L.P., and Desmond John Heathwood is the
principal shareholder of Boston Partners Inc. Each of Boston Partners Asset
Management L.P., Boston Partners Inc. and Mr. Heathwood shares voting power
over the shares included herein. Boston Partners Inc. and Mr. Heathwood
disclaim beneficial ownership of the shares included herein.
(4) Chancellor LGT Trust Company is a wholly owned subsidiary of Chancellor LGT
Asset Management, Inc., which is in turn a wholly owned subsidiary of LGT
Asset Management, Inc. Chancellor LGT Asset Management, Inc. and Chancellor
LGT Trust Company have sole power to vote or to direct to vote all of the
shares included herein.
(5) Fidelity Management and Research Company, a wholly owned subsidiary of FMR
Corp., beneficially owns 8,493,100 of the shares included herein. FMR Corp.
does not have sole power to vote these shares. Fidelity Management Trust
Company, a wholly owned subsidiary of FMR Corp., beneficially owns 183,925
of the shares included herein. FMR Corp. has sole power to vote 177,275 of
these 183,925 shares.
4
<PAGE> 10
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will elect 15 directors to serve on the
Board of Directors for one year terms or until their successors are elected and
qualified. Upon the recommendation of the Nominations and Governance Committee
of the Board, each of the current directors has been nominated for reelection by
the Board. Each of the Nominees was first elected to the Corporation's Board of
Directors on July 31, 1997 as a nominee of the Committee to Restore Value at
Sallie Mae (the "CRV") in connection with shareholder approval of the
Reorganization.
As indicated above, shareholders have the right to elect directors by
cumulative voting. Unless instructed to the contrary, the persons named in the
accompanying Proxy Card intend to vote the shares equally for the election of
all of the Nominees named in this Proxy Statement. However, if votes are cast
for any nominee other than those named in this Proxy Statement, the proxy
holders will have full authority to vote cumulatively and to allocate votes
among any or all of the Nominees named herein (except to the extent that
authority to vote particular shares for any particular nominee(s) is withheld)
according to their sole discretion, in order to elect the maximum number of the
Nominees to the Board of Directors. Although it is not contemplated that any
Nominee will decline or be unable to serve, the shares will be voted by the
proxy holders in their discretion for another person if such a contingency
should arise.
INFORMATION CONCERNING NOMINEES
The name, age, year first elected to the Board of the Company or its
predecessor, the GSE, principal business or occupation through the past five
years and other public company directorships of each of the Nominees is set
forth below. The Nominee's ownership of stock of the Company as of February 28,
1998 is set forth above under "Common Stock Information -- Board and Management
Ownership." Albert L. Lord, Chief Executive Officer and Vice Chairman of the
Board of Directors is the only executive officer of the Company who is also a
member of the Board or a Nominee. There are no family relationships between the
directors or Nominees and the executive officers of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE 15
NOMINEES NAMED BELOW. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A
CONTRARY CHOICE ON THEIR PROXY CARD.
<TABLE>
<CAPTION>
NAME AND AGE AT DESCRIPTION OF PRINCIPAL
DECEMBER 31, 1997 BUSINESS OR OCCUPATION
----------------- ------------------------
<S> <C>
James E. Brandon, Esq. ........... Attorney and Certified Public Accountant. Mr. Brandon is
Director since 7/5/95 President and director of the following private companies:
Age 71 National Cattle Co., Inc., Automated Electronics Corp.,
Kirby Royalties, Inc., and El Paso Venezuela Company, each
an oil and gas company; Oldham Ranches, Inc., Grain
Properties, Inc., and Park-Princess, Inc., each a real
estate investment company. Mr. Brandon is a trustee of
Eureka College in Illinois, serving a six-year term that
commenced in 1993. He also served as a Trustee of Eureka
College from 1985 to 1991. Mr. Brandon served as director of
the GSE, by appointment of the President of the United
States, from 1982 through 1991.
Charles L. Daley.................. Director, Executive Vice President and Secretary of TEB
Director since 7/5/95 Associates, Inc., a real estate finance company, since 1992.
Age 65 Mr. Daley was Executive Vice President and Chief Operating
Officer of First Peoples Financial Corporation, a bank
holding company, from 1987 to 1992 and Executive Vice
President and Chief Operating Officer of First Peoples Bank
of New Jersey, a state-chartered commercial bank, from 1984
to 1992.
</TABLE>
5
<PAGE> 11
<TABLE>
<CAPTION>
NAME AND AGE AT DESCRIPTION OF PRINCIPAL
DECEMBER 31, 1997 BUSINESS OR OCCUPATION
----------------- ------------------------
<S> <C>
Thomas J. Fitzpatrick............. Founder, President and Chief Executive Officer of Equity
Director since 7/31/97 One, Inc., a consumer lending company, since 1990. Mr.
Age 49 Fitzpatrick was Vice Chairman of Commercial Credit Co. From
1988 until 1989. From 1983 until 1988, he was President and
Chief Operating Officer of Manufacturers Hanover Consumer
Services, where he had been employed since 1979. Mr.
Fitzpatrick currently serves on the board of directors of
MAB Paints and Equity One, Inc.
Edward A. Fox..................... Mr. Fox retired from the GSE in 1990 after serving as its
Director since 7/31/97 President and Chief Executive Officer since its inception in
Age 61 1973. From 1990 until 1994, he was the Dean of the Amos Tuck
School of Business Administration at Dartmouth College. Mr.
Fox is a director of Delphi Financial Group, Greenwich
Capital Management and New England Life Insurance Co., and
is Chairman of the Board of Commerce Security Bancorp. In
1997, the Governor of Maine appointed Mr. Fox to a
three-year term on the New England Board of Higher
Education.
Diane Suitt Gilleland............. Senior Associate, Institute for Higher Education Policy.
Director since 3/25/94 Previously, Dr. Gilleland was Senior Fellow, American
Age 51 Council on Education, Washington, DC (1997); Director of
Arkansas Higher Education (1990-1997) and Chief Finance
Officer (1986-1990). Dr. Gilleland is a director of the GSE
and serves on the boards of several organizations including
the Southern Regional Education Board's Commission on
Education Quality.
Ann Torre Grant................... Independent financial and strategic consultant. Previously,
Director since 7/31/97 Ms. Grant was Executive Vice President, Chief Financial
Age 39 Officer and Treasurer of NHP Incorporated, a broad-based
national real estate services firm, from 1995 until the
company was acquired in 1997. Ms. Grant was Vice President
and Treasurer of US Airways from 1991 until 1995. She is
currently a director of the GSE, Franklin Mutual Series, a
$30 billion family of mutual funds, Condor Technology
Solutions, Inc., and Manor Care Realty.
Ronald F. Hunt, Esq............... Attorney in New Bern, North Carolina, where he has resided
Director since 7/5/95 since 1990. Mr. Hunt retired from the GSE in 1990 after
Age 54 serving in a number of executive positions there, beginning
in 1973. Mr. Hunt is a director of the GSE and is Chairman
of the Board of Directors of the National Student Loan
Clearinghouse, a not-for-profit corporation that provides
loan status verification for participants in the FFELP.
Benjamin J. Lambert, III.......... Senator of the State of Virginia since 1986. As a Senator,
Director since 7/5/95 Dr. Lambert has focused on education issues and is Chairman
Age 60 of the Senate's Higher Education Subcommittee. Dr. Lambert
has also been self-employed as an optometrist since 1962.
Dr. Lambert is a director of the GSE and of the following
public companies: Consolidated Bank & Trust Company,
Virginia Electric and Power, and Dominion Resources. Dr.
Lambert is also Secretary of the Board of Trustees of
Virginia Union University, where he has served as a Trustee
for over 15 years.
</TABLE>
6
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND AGE AT DESCRIPTION OF PRINCIPAL
DECEMBER 31, 1997 BUSINESS OR OCCUPATION
----------------- ------------------------
<S> <C>
Albert L. Lord.................... Vice Chairman and Chief Executive Officer of the Company
Director since 7/5/95 (1997-present). Previously, Mr. Lord was President and
Age 52 principal shareholder of LCL Ltd., a Washington D.C. firm
that provides consulting services in investment and
financial services. Mr. Lord served as the Executive Vice
President and Chief Operating Officer of the GSE from 1990
to 1994. Mr. Lord serves as a director of First Alliance
Corporation, Irvine, CA.
Marie V. McDemmond................ President of Norfolk State University since July 1997. From
Director since 7/31/97 December 1988 to June 1997, Dr. McDemmond served Florida
Age 52 Atlantic University in various capacities, most recently as
Vice President for Finance and Chief Fiscal Officer. She is
also a frequent author and lecturer on women and minority
issues and financial management of colleges and
universities. Dr. McDemmond is a director of the GSE.
Barry A. Munitz................... President and Chief Executive Officer, The J. Paul Getty
Director since 7/31/97 Trust, Los Angeles, CA. Dr. Munitz formerly served as
Age 56 Chancellor and Chief Executive Officer of the California
State University System from 1991 to 1997. Dr. Munitz is a
former chair of the American Council on Education and Vice
Chair of the National Commission on the Cost of Higher
Education. He is Chairman of the National Advisory Group for
the Ford Foundation-supported Project on Higher Education
Costs, Pricing and Productivity, and a member of the
Executive Committee of Los Angeles' KCET Public Television
Station. Dr. Munitz also serves as a director of SunAmerica
Corp.
A. Alexander Porter, Jr. ......... Co-Founder and President of Porter, Felleman, Inc., an
Director since 7/5/95 investment management company, since 1976. He is also
Age 59 General Partner of Amici Associates, L.P. since 1976 and of
the Collectors' Fund since 1984. Amici and the Collectors'
Fund are investment partnerships in which Mr. Porter has
investment discretion to buy and sell securities. Mr. Porter
is a director of the GSE, a trustee of Davidson College in
North Carolina, a Founder and Director of Distribution
Technology, Inc., a privately held company, and a trustee of
The John Simon Guggenheim Memorial Foundation.
Wolfgang Schoellkopf.............. Principal, Ramius Capital Group. Formerly, Mr. Schoellkopf
Director since 7/31/97 was Vice Chairman and Chief Financial Officer of First
Age 65 Fidelity Bancorporation from 1990 until 1996. From 1963 to
1988, Mr. Schoellkopf was with The Chase Manhattan Bank,
last as Executive Vice President and Treasurer. Mr.
Schoellkopf currently serves on the Boards of Directors of
Inner-City Scholarship Fund and Marymount University.
Steven L. Shapiro................. Certified Public Accountant and Personal Financial
Director since 7/5/95 Specialist. Mr. Shapiro is Chairman of Alloy, Silverstein,
Age 57 Shapiro, Adams, Mulford & Co., an accounting firm, where he
has been employed since 1960, and has served on its board of
directors since 1966. Mr. Shapiro is a member of the
executive advisory council of Rutgers University, and is a
federal key person of the American Institute of Certified
Public Accountants. Mr. Shapiro also serves on the boards of
the following companies: Carnegie Bancorp, the Casino
Reinvestment Development Authority and the West Jersey
Hospital Foundation.
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
NAME AND AGE AT DESCRIPTION OF PRINCIPAL
DECEMBER 31, 1997 BUSINESS OR OCCUPATION
----------------- ------------------------
<S> <C>
Randolph H. Waterfield, Jr. ...... Certified public accountant and self-employed accounting
Director since 7/5/95 consultant since 1990. Prior to 1990, Mr. Waterfield was
Age 66 with Ernst & Young for 40 years, during which time he served
as the audit partner with a number of major clients,
including the GSE, and was the East Region Director of
Accounting and auditing and managing partner of Ernst &
Young's Washington, D.C. office. Mr. Waterfield is a Trustee
of Drexel University.
</TABLE>
MEETINGS OF THE BOARD
The Board of Directors conducts regular meetings on a bi-monthly basis and
special meetings as may be required from time to time. As noted above, the
current Board was elected on July 31, 1997. Between that date and December 31,
1997, three meetings of the Board were held. Each of the Nominees attended at
least 75% of the total number of meetings of the Board and committees of which
they were members between July 31, 1997 and December 31, 1997, except for Mr.
Munitz who attended five of eight Board and committee meetings between such
dates.
The Board uses a number of committees to assist it in the performance of
its duties. Meetings of the committees of the Board are generally held on the
day prior to the regular meetings of the Board and on such other dates as may be
necessary between regular meetings. The present standing committees are the
Audit/Risk Management Committee, the Compensation and Personnel Committee, the
Executive Committee, the Nominations and Governance Committee, and the
Operations Committee. The purposes of the Audit/Risk Management, Compensation
and Personnel, and Nominations and Governance Committees, the identity of their
current members, and the number of meetings held during 1997 are set forth
below.
Audit/Risk Management Committee
The Audit/Risk Management Committee was established for the purpose of
assisting the Board in fulfilling its responsibilities by providing oversight
relating to corporate integrity and management of financial risk, adequacy of
internal controls, adherence to relevant accounting standards and financial
reporting requirements, and to help assure the objectivity and independence of
the Company's independent accountants and audit function. The Committee is also
responsible for reviewing major risk positions of the Company.
Pursuant to the Company's By-Laws, each member of the Audit/Risk Management
Committee must be an "independent director" as defined in the By-Laws. The
current membership of the Audit/Risk Management Committee, which held two
meetings between July 31, 1997 and December 31, 1997, is as follows: Thomas J.
Fitzpatrick, Chairman; James E. Brandon, Vice Chairman; Ann Torre Grant;
Benjamin J. Lambert, III; and Marie V. McDemmond.
Compensation and Personnel Committee
The Compensation and Personnel Committee was established for the purpose of
assisting the Board in fulfilling its responsibilities relating to human
resources, compensation and benefit matters concerning the Company and its
subsidiaries. The Committee makes recommendations to the Board as to
compensation and other benefits for members of the Board, reviews annually the
performance of the CEO and the executive officers of the Company and establishes
compensation terms for such individuals, and generally oversees the programs and
policies of the Company relating to compensation and the development and
retention of capable management.
Pursuant to the Company's By-Laws, each member of the Compensation and
Personnel Committee must be an "independent director" as defined in the By-Laws.
The current membership of the Compensation and Personnel Committee, which held
three meetings between July 31, 1997 and December 31, 1997, is as follows: Ann
Torre Grant, Chairman; Wolfgang Schoellkopf, Vice Chairman; Charles L. Daley;
and Barry A. Munitz.
8
<PAGE> 14
Nominations and Governance Committee
The Nominations and Governance Committee was established for the purpose of
assisting the Board in establishing appropriate standards for the governance of
the Company, the operations of the Board and the qualifications of directors, as
well as proposing candidates for Board membership. The Committee reviews the
composition, diversity and operation of the Board, and evaluates the performance
and contributions of individual directors and the Board as a whole. At its first
meeting of each calendar year, the Committee considers nominees for election to
the Company's Board of Directors at the upcoming annual meeting of shareholders.
Shareholders may recommend candidates for nomination to the Company's Board by
sending their recommendation to the Lead Independent Director (care of the
Company's Secretary). Shareholders are encouraged to submit any recommendation
no later than January 1 in order to permit the recommendation to be considered
by the Committee in connection with that year's annual meeting of shareholders.
Pursuant to the Company's By-Laws, each member of the Nominations and
Governance Committee must be an "independent director" as defined in the
By-Laws, and the Committee is chaired by the Lead Independent Director. The
current membership of the Nominations and Governance Committee, which held four
meetings between July 31, 1997 and December 31, 1997, is as follows: A.
Alexander Porter, Jr., Chairman and Lead Independent Director; Benjamin J.
Lambert, III, Vice Chairman; Thomas J. Fitzpatrick; and Marie V. McDemmond.
9
<PAGE> 15
BOARD GOVERNANCE GUIDELINES
FOR
SLM HOLDING CORPORATION
In the Fall of 1997, the Nominations and Governance Committee undertook to
develop a set of guidelines for the Board of Directors. The Committee consulted
with outside advisors and reviewed a variety of materials addressing corporate
governance practices. The Committee recommended the following Guidelines to the
Board, which unanimously approved these Guidelines on November 21, 1997.
* * *
The directors of SLM Holding Corporation (the "Company") share a strong
commitment to principles of genuine accountability to shareholders. This
commitment is reflected in the terms of the Charter and By-Laws that the Board
of Directors instituted for the Company.
The Board recognizes the importance of Governance Guidelines in
establishing a framework to promote responsible and responsive leadership. The
Board also recognizes that, having been elected as a group, it will experience a
variety of dynamics as directors' talents, time and effort are called upon.
Accordingly, the Board intends to review these Guidelines at least annually, and
to reevaluate, revise and reaffirm these guidelines as appropriate.
1. BOARD MEMBERSHIP. The Board will establish membership objectives to
provide guidance in filling vacancies. The Nominations and Governance
Committee will recommend nominees for election to the Board and establish a
procedure for accepting nominations from directors, management and
shareholders.
When selecting nominees, the Nominations and Governance Committee will
consider the need for individuals who have the skills necessary to fully
participate in Board decision-making. The Committee will also consider the
needs of the Board as a whole; individuals will be assessed based on the
contribution they can make to the breadth of relevant experience and
knowledge represented on the Board.
At the recommendation of the Nominations and Governance Committee, the
Board has established a recommended retirement age for directors. The
Nominations and Governance Committee will also consider establishment of
term limits for directors.
2. BOARD LEADERSHIP. The Board currently has separated the roles of Chairman
of the Board and CEO. However, in the future the Board may wish to consider
alternative structures. Subject to the requirements under the Company's
By-Laws, the Board will be free to decide how to structure its leadership,
for instance by either joining or separating the roles of Chairman and CEO,
in the way that is best for the Company at a given point in time.
The Board has chosen an independent director as Lead Director to
facilitate coordination of the activities of the independent members of the
Board.
The Chairman and Lead Director will be elected annually, typically at
the first meeting following the annual meeting of shareholders.
3. INDIVIDUAL COMMITMENT TO THE BOARD. The Board will endeavor to nominate
members who have sufficient time and dedication to fulfill their
responsibilities to the Company. The Board also recommends that members
limit the number of other directorships or senior executive positions they
hold to a number that allows them to adequately fulfill their
responsibilities to the entities with which they have such a position of
responsibility. The Board requires that all members inform the Board of any
change in their outside positions and responsibilities during their tenure.
4. REVIEW OF THE CEO. The Board will review the performance of the CEO at
least annually in meetings of independent directors not attended by the
CEO. This review and report will be conducted independently of any
compensation review. The results of this review preferably will be
communicated to the CEO by the Lead Director.
10
<PAGE> 16
5. PLANNING FOR MANAGEMENT SUCCESSION. The CEO will report to the Board
annually regarding succession planning and management development. The
Board, assisted by the Nominations and Governance Committee and the
Compensation and Personnel Committee, will take an active role in ensuring
that the Company is developing management talent and that succession plans,
for both emergencies and long-term replacement planning, are in place.
6. BOARD REVIEW OF BUSINESS OPERATIONS AND STRATEGIC PLANS. The Board will
review the Company's financial objectives and will take an active oversight
role with respect to strategic planning by annually reviewing and approving
management's one-year operating plan and overseeing the development of a
multi-year strategic plan.
7. RELATIONSHIP BETWEEN THE BOARD AND MANAGEMENT. The Company believes that
open communication between Board members and management serves the best
interests of the Company and results in the highest quality corporate
governance. To encourage such communication, the Board intends regularly to
invite members of management to participate in Board meetings. The Board
also encourages members of management to suggest the participation of other
individuals who could contribute to the Board's complete understanding of
an issue.
Board members and management have complete access to one another for
purposes of more informal, one-on-one, communication. Board members also
have complete access to the Company's outside legal counsel and other
professional advisors, and in recognition of its accountability to
shareholders, the Board may seek independent advice at any time.
8. EXECUTIVE SESSIONS. The Board will meet in Executive Session, without the
presence of management or the CEO, at the end of each Board meeting.
9. RELATIONSHIP BETWEEN THE BOARD AND SHAREHOLDERS AND THE PUBLIC. Individual
directors when speaking with shareholders and the public should be mindful
of their obligation not to disclose material non-public information and of
the fact that their views may not represent the views of the full Board or
management. Subject to such considerations, directors should feel free to
respond to shareholders and the public to openly express their views on
matters affecting the Company.
10. MEETINGS OF THE INDEPENDENT BOARD. The independent members of the Board
will meet as a group at least once annually. The Lead Director may, if
appropriate, invite non-independent members of the Board to attend such
meetings (other than the CEO).
11. BOARD AND COMMITTEE MEETING AGENDAS. The Chairman of the Board, in
consultation with the Committee Chairmen and management, will determine the
agenda for Board meetings. The Chairman of each Committee, in consultation
with management, will determine the agenda for Committee meetings.
Individual Board members and members of management are free to suggest
additional Board and Committee meeting agenda items. In order to facilitate
full participation in setting the agenda, the Chairman of the Board will
make every effort to distribute a tentative agenda in advance of the
meeting and actively solicit and consider the requests for additions by
Board members and management.
The Board expects meeting materials will be distributed sufficiently in
advance of a Board meeting to allow Board members sufficient time for a
thorough review of the materials. The Nominations and Governance Committee
will monitor whether target distribution dates are satisfied.
12. MEMBERSHIP AND RESPONSIBILITIES OF BOARD COMMITTEES. The Board relies
heavily on its Committees to accomplish its substantive work. Because of
the responsibility given to the Committees, the Board will select the
members of each Committee, and will articulate clear delegations of
authority and responsibility to each of the Committees. Committee chairs
will be responsible for deciding whether to take action on a particular
item at the Committee level or at a meeting of the full Board, although any
director (whether or not a Committee member) may request that a matter be
presented for a full Board vote. At or before each Board meeting, Committee
chairs (including the Executive Committee chair) will report to the full
Board significant Committee actions since the last Board meeting.
11
<PAGE> 17
After each annual shareholder meeting, the Board will vote on the
composition of its Committees. The Nominations and Governance Committee
shall make recommendations to the Board regarding adjustments in Committee
composition.
The Nominations and Governance Committee will present to the Board
annual recommendations regarding the areas of responsibility and specific
tasks that will be delegated to each Committee. The Committee's
recommendations with respect to such delegations will then be reviewed and,
if the Board considers them appropriate, revised or approved by the full
Board and reflected in the respective Committees' charters.
13. DIRECTOR COMPENSATION POLICY. The compensation of the members of the Board
of Directors, for performance of their regular duties as directors, shall
be in the form of stock or other equity-linked compensation.
14. BOARD SELF-REVIEW. The Board will undertake an annual self-review,
consisting primarily of individual Committee evaluations which will be
presented to the full Board at a Board meeting. In these reports, each
Committee Chairman will address the extent to which the Committee has
fulfilled its delegated responsibilities, and the strengths and weaknesses
of the Committee's operation during that year. The Chairman's report will
also include Committee goals for the upcoming year, particularly with
respect to addressing unfulfilled tasks or identified weaknesses. The
Chairman of the Board and/or the Lead Independent Director, may make a
similar report as to the operation of the Board as a whole.
15. REVIEW OF THE GUIDELINES. The Board will publish these guidelines in its
1998 annual meeting proxy statement and invite shareholder comments
thereon, to be directed to the Lead Director. The full Board will annually
review these guidelines to consider whether they continue to reflect the
goals, functions and needs of the Company, the Board and the shareholders.
DIRECTOR REMUNERATION
Consistent with the commitment of the CRV in connection with the
Reorganization, effective as of August 1, 1997, the Company eliminated annual
cash retainers and meeting fees for non-employee directors and established a
program that compensates non-employee directors exclusively through the grant of
stock options.
Under the Company's director compensation program, each non-employee
director other than the Chairman received a two-part option grant, totaling
105,000 options per director, and the Chairman of the Board received a two-part
option grant totaling 157,500 options. The first component of the option grants
is a special one-time award made in consideration of the directors' leadership
in promoting shareholder interests in connection with the shareholders' vote on
the Reorganization. The second component represents a three-year grant for the
directors' service on the Board. All of these options have an exercise price of
$39.34 and vest in one-third increments upon the Common Stock reaching a closing
price of $42.86, $57.14 and $71.43, respectively, on five trading days ($150,
$200 and $250 pre-split). The options also vest on the eighth anniversary of
their grant (i.e., on August 13, 2005), subject to the optionee's continued
service as a director. The Board believes that these option grants, which are
contingent on shareholder approval of the Directors Stock Plan (see Proposal 2),
represent "at risk" compensation in two respects. First, vesting of the options
during the first eight years is contingent upon the Common Stock reaching the
levels described above on five trading days. Second, once the options are
vested, their continued value is dependent on the extent to which the Company's
stock price remains above the options' exercise price. Thus, the Board believes
that they will be compensated through these options only if the Company is able
to enhance its business through superior service to borrowers, educational
institutions and its bank partners, so as to produce increased value to the
Company's shareholders.
The Company's non-employee directors are provided with $50,000 of life
insurance, are covered by a travel insurance plan while traveling on Company
business and may receive a $1,500 per diem for additional approved work. No such
payments were made to directors in 1997. Mr. Lord, the sole director who also is
employed by the Company, receives no separate compensation for his service on
the Board and was not a recipient of the above-described options.
12
<PAGE> 18
Prior to the Reorganization, Ms. Gilleland and Messrs. Brandon, Daley,
Hunt, Lambert, Lord, Porter, Shapiro and Waterfield were compensated for their
service on the GSE Board. Pursuant to the GSE Board's compensation arrangements,
which were modified in September 1997, each of the above named directors
received three quarters ($15,000) of his or her annual retainer of $20,000, a
grant of 525 shares of restricted Common Stock and 3,500 options. In addition,
each chairman of a standing committee of the GSE Board earned three quarters
($1,500) of an additional annual retainer of $2,000, and each director earned
$1,500 for each GSE Board meeting which they attended and $1,500 for each
regularly scheduled GSE Board committee meeting which they attended (with only a
single fee paid for Board and committee meetings on the same day). At least 50%
of the annual retainer, and at a director's election up to 100% of all cash
fees, were subject to deferral into an interest or phantom stock account under
the GSE's Board of Directors Deferred Compensation Plan. In addition, elected
members of the GSE's Board of Directors on July 31, 1997, who were also elected
members of the Company's or the GSE's Board on November 20, 1997, received a
grant of 350 shares of Common Stock.
EXECUTIVE OFFICERS
The executive officers of the Company at December 31, 1997, their ages at
March 23, 1998, their titles, their years of employment with the Company and its
predecessor, the GSE, their previous experience, including principal occupations
for the past five years, are as follows:
Albert L. Lord, 52, was named Vice Chairman and Chief Executive Officer of
the Company in August 1997. From 1994 to 1997, Mr. Lord was President and
principal shareholder of LCL, Ltd., a Washington, DC firm that provided
consulting services in investment and financial services. From 1990 to 1994, Mr.
Lord was Executive Vice President and Chief Operating Officer of the GSE.
J. Paul Carey, 39, Executive Vice President, Marketing and Servicing, was
appointed as an executive officer of the Company in August 1997. Mr. Carey is
also President and a director of the GSE. From 1994 to 1997, Mr. Carey was an
officer and shareholder of LCL, Ltd., a Washington, DC firm that provided
consulting services in investment and financial services. From 1990 to 1994, Mr.
Carey was Vice President, Institutional Finance of the GSE.
Marianne M. Keler, 43, Senior Vice President and General Counsel, joined
the GSE in 1985. Prior to her current appointment in January 1998, Ms. Keler was
Vice President and General Counsel of the Company since August 1997. Prior to
that time, Ms. Keler was Vice President and Associate General Counsel of the
GSE. Ms. Keler is also a director of the GSE.
Robert R. Levine, 42, Senior Vice President, Servicing, and President and
Chief Operating Officer, Sallie Mae Servicing Corporation, joined the GSE in
1981. Prior to his current appointment in January 1998, Mr. Levine had served as
Vice President, Servicing, of the Company since August 1997. From 1990 to 1997,
Mr. Levine was Vice President and Treasurer of the GSE. Mr. Levine is also a
director of the GSE.
Mark G. Overend, 41, Senior Vice President and Chief Financial Officer,
joined the GSE in 1986. Prior to his current appointment in January 1998, Mr.
Overend had been named Vice President and Chief Financial Officer of the Company
in August 1997. From 1991 to 1997, Mr. Overend was Vice President and Controller
of the GSE. Mr. Overend is also a director of the GSE.
In addition, on January 26, 1998, the Company announced that Anthony P.
Dolanski will be joining the Company as Executive Vice President, Systems and
Finance. Mr. Dolanski is a member of the Board of Directors of KPMG Peat
Marwick, was previously senior partner in charge of assurance services for
KPMG's high technology practice and was responsible for risk management for
KPMG's financial services clients.
EXECUTIVE COMPENSATION
This section includes (1) a report made by the Compensation and Personnel
Committee (the "Compensation Committee") regarding the Company's executive
compensation policy; (2) a summary presentation in tabular form of executive
compensation; (3) a summary of 1997 stock option grants; (4) a
13
<PAGE> 19
valuation of option exercises and remaining option holdings; and (5) a
description of pension plan benefits and certain severance arrangements.
On January 2, 1998, the Company effected a 7-for-2 stock split through a
stock dividend of an additional five shares of Common Stock for every two shares
owned. Unless otherwise indicated, all share amounts and stock prices in this
Proxy Statement have been adjusted to reflect the stock split.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICY: The Compensation Committee strongly believes that
compensation should be tied to the financial gains of shareholders and the
success of the Company in meeting the needs of its customers. Consistent with
the proposals advocated by the Committee to Restore Value at Sallie Mae (the
"CRV") in connection with the Reorganization, the Compensation Committee is
implementing a number of pay-for-performance programs. These programs rely
heavily on equity-based compensation and objective performance-based bonuses to
create a broad organizational focus on enhancing shareholder value by promoting
the Company's delivery of superior service to borrowers, educational
institutions and its bank partners.
The centerpiece of the Company's equity-based compensation structure is the
Company's "Shared Value Option Program," which provided for Company-wide stock
option grants. The Company's "Shared Value Option Program" has three components:
First, in 1997, every full-time employee received an option grant for 700
shares, which vests in two installments over the next two years. Second, the
Company's non-employee directors received their compensation exclusively in the
form of stock options that become exercisable when the Company's stock price
reaches certain target levels. Third, as discussed below, the Company's officers
received a significant portion of their compensation in the form of these same
performance accelerated vesting stock options.
Following the Reorganization, the Board in August 1997 appointed an interim
compensation committee consisting of Ms. Grant and Messrs. Brandon and Daley. In
September 1997, the Board established the Compensation Committee and selected
Ms. Grant and Messrs. Daley, Munitz and Schoellkopf to serve on the committee.
To assist it in evaluating and formulating new compensation policies for the
Company's executive officers and directors, the Compensation Committee retained
a compensation consulting firm. In addition, with the assistance of the
consultant, the Committee reviewed compensation arrangements at a "peer group"
of other S&P 500 financial services companies, including most of the companies
identified under the "Stock Performance Graph" below, as well as compensation
arrangements provided in various "corporate turnaround" situations and at other
companies which focused heavily on equity incentive compensation. In light of
the CRV's commitment to implement a new post-Reorganization business plan, the
Compensation Committee determined that it should put in place compensation
arrangements that will provide a significant incentive for the Company's
executives that is directly contingent on the creation of shareholder value in
future years. Therefore, the Compensation Committee established base salaries
and annual bonus target payouts that are below the median levels at peer
companies, and granted long-term incentives in the form of performance
accelerated vesting stock options so as to provide a total compensation
potential that is competitive with that offered at peer companies.
BASE SALARY: The Compensation Committee determined that, coincident with
the Company's new management team implementing a new business plan, base
salaries should represent a less significant portion of target compensation.
Accordingly, the Compensation Committee set 1997 salary levels below those paid
to the Company's executive officers in the past. At Mr. Lord's recommendation,
his initial salary was set at $250,000 per year, Mr. Carey's salary was set at
$200,000 per year and other executives' base salaries were maintained at levels
reflecting their prior positions with the Company. After reviewing the
executives' efforts and performance from the date of the Reorganization through
the end of 1997 and based on information learned during its study of other
companies' compensation practices, the Compensation Committee determined to
increase executive officer salaries. The Compensation Committee set Mr. Lord's
1998 salary at $325,000 after reviewing Mr. Lord's activities and achievements
between August 1 and the end of 1997 and consideration of the fact that his base
salary was and remains at a level that is low relative to that paid at peer
companies. The Committee intends to review executive officer salary levels
annually in the context of its
14
<PAGE> 20
evaluation of performance and goal attainment. The Company's compensation
consultant determined those salary levels to be significantly below median
levels set at peer companies.
PERFORMANCE BONUSES: The Compensation Committee believes that executive
officer bonuses should be based on satisfaction of specified performance
criteria, and as discussed below has established an objective performance-based
bonus program for 1998. The Compensation Committee was not in the position to
apply pre-established performance criteria in determining 1997 executive officer
bonuses due to the fact that the majority of the current members of the
Compensation Committee were first elected to the Board at the time of the
Reorganization. Accordingly, the Compensation Committee established 1997
executive officer bonuses, following a briefing and review by Mr. Lord, based on
the Committee's evaluation of each officer's contribution to and performance in
implementing the Company's post-Reorganization business plan and each officer's
salary level. The Compensation Committee established Mr. Lord's 1997 bonus after
evaluating his performance in the following areas: his significant personal
commitment in developing and advocating a post-Reorganization business plan for
the Company, his accomplishment in quickly assembling a post-Reorganization
management team, his success in managing, without disruption in the Company's
business, a smooth transition to the Company's post-Reorganization business
structure, and his success in implementing several significant steps in the
Company's post-Reorganization business plan. Consistent with the Compensation
Committee's preference for equity-oriented compensation, 40% of each executive
officer's bonus (on an after-tax basis) was paid in the form of Common Stock
that is not transferable for one year. For 1998, the Compensation Committee has
established an annual bonus program under which bonuses will be based in part on
corporate performance and in part on individual performance, in each case as
judged under specified criteria against preestablished performance goals. For
this purpose, corporate performance will be measured against the five
performance criteria announced by the CRV in connection with its proxy
solicitation for the Reorganization. Those performance criteria are: core
earnings per share growth, core net income growth, market share growth,
reductions in average cash acquisition costs for student loans and reductions in
overhead expenses.
STOCK OPTION GRANTS: The Compensation Committee believes that stock options
provide an appropriate incentive to promote long-term stable growth while
aligning executives' interests with those of shareholders by putting an element
of compensation at risk while presenting positive upside potential. Accordingly,
the Compensation Committee determined that target total compensation should be
competitive with that paid at peer companies, but that a significant portion of
the executives' compensation package should be in the form of stock options.
Because the Company's management is just beginning to implement its long-term
business plan for the Company, the number of options granted to the Company's
executive officers represents two-year grants to motivate and reward executives
for performance in 1997 and 1998. The Compensation Committee does not intend to
grant further options to the senior executives until at least 1999. The number
of options granted was established based on information provided by the
compensation consultant indicating that, when allocated over the two year
period, the options would bring target total compensation to a level generally
at or slightly below the median peer group level, except that Mr. Lord's option
grants would place his target total compensation at the seventy-fifth percentile
compared to the Company's peer group (with stock options expressed as a present
value determined using the Black-Scholes Option Pricing Model). The Compensation
Committee determined that the level of option grants is appropriate considering
that the options represent "at risk" compensation in two respects. First, all of
the options granted to the executive officers vest in one-third increments on or
after August 13, 1998 and upon the Common Stock reaching a closing price of
$42.86, $57.14 and $71.43, respectively, on five trading days. These vesting
levels represent price targets of $150, $200 and $250 before being adjusted to
reflect the effect of the stock split. In the event these price hurdles are not
met, the options vest on the eighth anniversary of their grant (i.e., on August
13, 2005), subject to the optionee's continued service with the Company. Second,
once the options are vested, their continued value is dependent on the extent to
which the Company's stock price remains above the options' exercise price, which
was set at the fair market value on the date of grant.
SECTION 162(M): Section 162(m) of the Internal Revenue Code limits to $1
million the deductibility of compensation paid to each of the Company's five
senior executive officers, unless the compensation satisfies one of the
exceptions set forth in the Code, which includes an exception for
"performance-based compensa-
15
<PAGE> 21
tion." The Compensation Committee believes that the compensation which the
Company's executive officers will realize upon exercise of options granted under
the Shared Value Option Program will qualify as "performance-based
compensation," and therefore will not be subject to the $1 million limitation,
except that one-half of the options granted to Mr. Lord will qualify as
"performance-based compensation" only if shareholders approve an amendment to
the Company's 1993-1998 Stock Option Plan at the Annual Meeting.
Compensation and Personnel Committee
<TABLE>
<S> <C>
Ann Torre Grant, Chairman Wolfgang Schoellkopf, Vice Chairman
Charles L. Daley Barry A. Munitz
</TABLE>
SUMMARY COMPENSATION TABLE
The tables below set forth certain compensation information as to (1) the
Company's chief executive officer, (2) the Company's next four highest
compensated executive officers employed by the Company at the end of the 1997
fiscal year, and (3) the Company's former chief executive officer (collectively,
the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------- ------------------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(1) OPTIONS(2) PAYOUT COMPENSATION
--------------------------- ---- -------- -------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albert L. Lord............... 1997 $104,167(3) $600,000(4) -- -- 1,053,500 -- $ 5,654(5)
Chief Executive Officer and
Vice Chairman of the
Board of Directors
J. Paul Carey................ 1997 83,333(3) 400,000(4) -- -- 350,000 -- 4,523(5)
Executive Vice President,
Marketing and Servicing
Marianne M. Keler............ 1997 154,000(6) 250,000(4) -- -- 246,736 -- 9,231(5)
Senior Vice President and
General Counsel
Robert R. Levine............. 1997 163,000(6) 250,000(4) -- -- 249,886 -- 9,767(5)
Senior Vice President,
Servicing
Mark G. Overend.............. 1997 160,000(6) 250,000(4) -- -- 250,614 -- 9,582(5)
Senior Vice President and
Chief Financial Officer
FORMER EXECUTIVES(7)
- -----------------------------
Lawrence A. Hough............ 1997 441,410 456,288 -- -- 94,500 $1,077,249 446,923(8)
President and 1996 540,000 220,036 -- $219,964 105,000 329,656 54,578
Chief Executive Officer 1995 525,000 210,052 -- 209,948 175,000 372,078 31,465
</TABLE>
- ---------------
(1) As of the end of the fiscal year, none of the Named Executive Officers held
any shares of restricted stock.
(2) Options awarded to current executives represent grants for 1997 and 1998
compensation. Accordingly, the Compensation Committee does not intend to
grant further options to the executives until at least 1999. Options awarded
to Mr. Hough by the GSE Board prior to the Reorganization relate to the
previous year's compensation.
(3) Salary paid for service from August 1 through December 31, 1997, at a salary
of $250,000 per year for Mr. Lord and $200,000 per year for Mr. Carey.
(4) Bonus is the amount paid for the year indicated and is typically paid in the
following year. For the current executives, 40% of the bonus (on an
after-tax basis) was paid with shares of the Company's Common Stock which
may not be transferred for one year.
(5) Consists of employer matching contributions under the Sallie Mae 401(k)
Savings Plan, and with respect to Messrs. Overend and Levine and Ms. Keler,
the Sallie Mae Supplemental 401(k) Savings Plan.
(6) Reflects salary paid for all of 1997. Messrs. Overend and Levine and Ms.
Keler assumed their current positions as executive officers following the
Reorganization.
16
<PAGE> 22
(7) Mr. Hough served as an executive of the Company until July 31, 1997 and
ceased to be employed with the Company following the Reorganization. Amounts
reported as 1997 salary include payments for unused vacation time.
(8) Consists of severance payments in the amount of $210,000, reimbursement of
legal expenses in the amount of $80,000, office space and miscellaneous
items in the amount of $135,000 and employer matching contributions under
the Sallie Mae 401(k) Savings Plan and the Supplemental Sallie Mae 401(k)
Savings Plan in the amount of $21,923. See "Severance Arrangements" below.
1997 OPTION GRANT TABLE
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
MARKET UNDERLYING EMPLOYEES
EXPIRATION EXERCISE PRICE ON OPTIONS IN FISCAL GRANT DATE
NAME GRANT DATE DATE PRICE GRANT DATE GRANTED YEAR PRESENT VALUE
---- ---------- ---------- -------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert L. Lord........ 01/23/97 01/23/07 $30.8571 $30.8571 3,500 $ 39,340
08/13/97 08/13/07 39.3393 39.3393 1,050,000 12.47% 11,194,050
J. Paul Carey......... 08/13/97 08/13/07 39.3393 39.3393 350,000 4.14 3,731,350
Marianne M. Keler..... 01/23/97 01/23/07 30.8571 30.8571 17,150 192,766
01/31/97 01/31/07 31.1071 31.1071 19,586 228,177
08/13/97 08/13/07 39.3393 39.3393 210,000 2.92 2,238,810
Robert R. Levine...... 01/23/97 01/23/07 30.8571 30.8571 19,250 216,370
02/21/97 02/21/07 30.3214 30.3214 20,636 229,060
08/13/97 08/13/07 39.3393 39.3393 210,000 2.96 2,238,810
Mark G. Overend....... 01/23/97 01/23/07 30.8571 30.8571 20,300 228,172
02/20/97 02/20/07 29.6429 29.6429 20,314 225,485
08/13/97 08/13/07 39.3393 39.3393 210,000 2.97 2,238,810
FORMER EXECUTIVES
- ----------------------------------
Lawrence A. Hough..... 01/23/97 01/23/07 30.8571 30.8571 94,500 1.12 1,062,180
</TABLE>
The table above sets forth information on stock options granted to the
Named Executive Officers for 1997. The August 1997 option grants to the current
executive officers of the Company are intended to cover a two year period of
service. Thus, no new option grants to the executive officers named above are
expected to be made in 1998. All of the options vest in one-third increments on
or after August 13, 1998 and upon the Common Stock reaching a closing price of
at least $42.86, $57.14 and $71.43, respectively, on five trading days ($150,
$200 and $250 pre-split). Based on the number of shares outstanding on the date
the options were granted, if the Company's stock price reaches the $71.43 ($250
pre-split) vesting target, shareholder wealth will have increased by
approximately $5.6 billion. The options also vest on the eighth anniversary of
their grant (i.e., on August 13, 2005), subject to the optionee's continued
service with the Company. One-half of Mr. Lord's option grant is contingent upon
shareholder approval of an amendment to the Company's 1993-1998 Stock Option
Plan. See Proposal 4 below. Options awarded to Mr. Hough by the GSE Board prior
to the Reorganization relate to previous year's compensation.
"Grant Date Present Value" represents a hypothetical present value under
the Black-Scholes Option Pricing Model, calculated using the following
assumptions: a 10-year term, a risk-free interest rate based on the 10-year
Treasury Receipt Rate, ranging from 6.67% used for the January grants to 6.53%
used for the August grants, a future dividend yield ranging from 2.70% used for
the January grants to 2.48% used for the August grants, and annual stock price
volatility ranging from 29.13% used for the January grants to 30.97% used for
the August grants based on 5-year historical time weighted averages. The August
1997 option grant valuations include the effects of an additional 30% discount
to reflect the risk that the options will not become exercisable due to the
three-tier vesting criteria tied to the Common Stock price reaching certain
levels and the absence of a trading market for the options.
17
<PAGE> 23
1997 OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/97 OPTIONS AT 12/31/97
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert L. Lord.......... 10,500 $ 131,250 0 1,053,500 $ 0.00 $462,360
J. Paul Carey........... 0 0.00 0 350,000 0.00 143,745
Marianne M. Keler....... 63,000 743,252 0 246,736 0.00 408,040
Robert R. Levine........ 46,375 457,907 0 249,886 0.00 452,004
Mark G. Overend......... 42,000 441,126 0 250,614 0.00 472,088
FORMER EXECUTIVES
- ------------------------
Lawrence A. Hough....... 623,875 16,692,450 94,500 0 840,375.00 0.00
</TABLE>
The table above sets forth information on the value of stock options
exercised by the Named Executive Officers during 1997 (calculated by the
difference between the Company's closing stock price on the date of exercise and
the option's exercise price) and the fiscal year-end value of exercisable and
unexercisable stock options held by the Named Executive Officers (calculated by
the difference between the Company's fiscal year-end stock price and the
option's exercise price). 525,000 of Mr. Lord's stock options are contingent
upon shareholder approval of an amendment to the Company's 1993-1998 Stock
Option Plan. See Proposal 4 below.
PENSION PLAN TABLE
ANNUAL NORMAL RETIREMENT BENEFIT
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------------------------
COMPENSATION 15 20 25 30
- ----------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$250,000.......................... $ 80,034 $106,712 $133,391 $160,069
300,000.......................... 96,534 128,712 160,891 193,069
350,000.......................... 113,034 150,712 188,391 226,069
400,000.......................... 129,534 172,712 215,891 259,069
450,000.......................... 146,034 194,712 243,391 292,069
500,000.......................... 162,534 216,712 270,891 325,069
550,000.......................... 179,034 238,712 298,391 358,069
600,000.......................... 195,534 260,712 325,891 391,069
650,000.......................... 212,034 282,712 353,391 424,069
700,000.......................... 228,534 304,712 380,891 457,069
750,000.......................... 245,034 326,712 408,391 490,069
800,000.......................... 261,534 348,712 435,891 523,069
</TABLE>
Amounts in the table above represent the annual annuity payable for life to
employees retiring in 1998 at age 62. The credited years of service for the
individuals named in the Summary Compensation Table are: Mr. Lord 13 years; Mr.
Carey 12 years, 6 months; Ms. Keler 13 years, 3 months; Mr. Levine 17 years; and
Mr. Overend 11 years, 3 months.
The SLM Holding Corporation Employees' Pension Plan (the "Pension Plan")
provides monthly benefits upon retirement to employees who complete five years
of service or retire at normal retirement age. Benefits are calculated according
to a formula which is based on an employee's highest consecutive five-year
average base salary and length of credited service, and are integrated with
social security benefits. The maximum number of years for which a participant
receives credit for service under the Pension Plan is 30 years, and normal
retirement age is 62. The Pension Plan also provides early retirement benefits
at age 55, as well as joint and survivor benefits. The Pension Plan is funded
solely by corporate contributions. Annual contributions to the Pension Plan
trust are determined on an actuarial basis.
18
<PAGE> 24
The SLM Holding Corporation Supplemental Pension Plan (the "Supplemental
Pension Plan") assures that designated participants receive the full amount of
benefits to which they would have been entitled under the Pension Plan but for
limits on compensation and benefit levels imposed by the Internal Revenue Code.
The amount of compensation considered covered compensation for the Supplemental
Pension Plan for each named executive officer is the sum of the named executive
officer's salary and the lesser of his or her annual bonus and 35% of the prior
year's salary.
Benefit amounts under both the Pension Plan and the Supplemental Pension
Plan are computed on an actuarial basis, and neither plan utilizes allocations
to individual accounts. The table above shows estimated annual benefits payable
under the Pension Plan and the Supplemental Pension Plan to an employee for life
upon retirement at age 62 in specified years-of-service and remuneration
classes, using assumptions about compensation increases, under a straight life
annuity option. The benefit amounts shown in the table are not subject to any
deduction for social security or other offset amount.
CERTAIN TRANSACTIONS
Pursuant to an agreement between the Company and the CRV, dated May 27,
1997, the Company paid $400,000 to J. Paul Carey during 1997 for financial
advisory and other services that Mr. Carey rendered to the CRV in connection
with the CRV's proxy solicitation prior to the Reorganization.
SEVERANCE ARRANGEMENTS
The Company's policy with regard to resignations and termination of
employment of its executive officers is to consider each on a case-by-case
basis. Following the Reorganization, in connection with Mr. Hough's resignation
from employment with the Company, the Company and Mr. Hough entered into a
release and severance agreement. Under the agreement, Mr. Hough was vested under
the Company's Incentive Performance Plan as if he had retired, and certain stock
options and restricted stock that had been granted to him during the year were
vested. Mr. Hough also was paid a lump sum severance amount to cover expenses
such as legal fees, financial and other planning services, and office expenses.
In addition, Mr. Hough was paid a pro-rata annual bonus based on his previous
year's bonus level and was granted a pension plan allowance. Mr. Hough granted a
release of employment-related claims against the Company, and agreed not to
compete with the Company for a period of twelve months.
The Company has entered into confidentiality acknowledgments with each of
its current and former executive officers in which the officers acknowledge and
agree that distribution of the Company's confidential and/or proprietary
information to unauthorized persons, either during or following termination of
employment, is prohibited.
19
<PAGE> 25
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on the Common Stock to that of Standard &
Poor's 500 Stock Index and Standard & Poor's Financial-Miscellaneous Index. The
graph assumes a base investment of $100 at December 31, 1992 and reinvestment of
dividends through December 31, 1997.
SLM HOLDING CORPORATION
FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
SLM Holding Corp. S&P Financial - Misc S&P 500 Index
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 67 119.4 110
12/31/94 50.5 115 111.5
12/31/95 105.7 184.1 153.3
12/31/96 152.3 239.9 188.4
12/31/97 230.9 365.9 251.1
</TABLE>
- ---------------
(1) Companies included in Standard & Poor's Financial-Miscellaneous Index:
American Express, American General Finance, Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Green Tree Financial,
MBNA Corporation, Morgan Stanley Dean Witter, SunAmerica Inc., and
Transamerica Corporation
(2) Source: Bloomberg Comparative Return Table
20
<PAGE> 26
NEW PLAN BENEFITS
Proposals 2, 4 and 5 relate to shareholder approval of the proposed SLM
Holding Corporation Directors Stock Plan and to certain actions under the SLM
Holding Corporation 1993-1998 Stock Option Plan. Pursuant to the SEC's proxy
disclosure requirements, the following table sets forth the total number of
options granted to certain participants under the foregoing plans which are the
subject of shareholder action and identifies the plan with respect to which
shareholder approval is sought.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING PROPOSAL
NAME AND POSITION OPTIONS PLAN NAME NUMBER
----------------- ---------- --------- --------
<S> <C> <C> <C>
Albert L. Lord............................... 525,000 1993-1998 Stock Option Plan 4
J. Paul Carey................................ 0
Mark G. Overend.............................. 0
Robert R. Levine............................. 0
Marianne M. Keler............................ 0
Executive Group (excluding those named
above)..................................... 0
Non-Executive Officer Employee Group......... 1,749,713 1993-1998 Stock Option Plan 5
Non-Executive Director Group................. 1,522,500 Directors Stock Plan 2
</TABLE>
PROPOSAL 2 -- APPROVAL OF THE
SLM HOLDING CORPORATION DIRECTORS STOCK PLAN
BACKGROUND OF THE PLAN
At the Annual Meeting, shareholders will be asked to approve the SLM
Holding Corporation Directors Stock Plan (the "Directors Plan"). Following the
Reorganization, the Board of Directors adopted the Directors Plan, subject to
approval by the Company's shareholders, to allow the Board to fulfill its
commitment to shareholders to implement a stock-based compensation structure for
directors. The Compensation Committee has suspended the Company Board of
Directors Restricted Stock Plan and the Company Board of Directors Stock Option
Plan, contingent on shareholder approval of the Directors Plan.
The Board of Directors is strongly committed to the principle that
directors and executive officers should be compensated with stock-based
arrangements to more closely align their interests and views with those of the
Company's other shareholders. Consistent with this commitment, the Board of
Directors at the recommendation of the Compensation Committee, eliminated cash
retainer fees and Board and committee meeting fees for directors of the Company.
In lieu thereof, and subject to shareholder approval of the Directors Plan, the
Compensation Committee determined to compensate directors through grants of
stock options that vest upon the earlier of the Company's stock price reaching
certain levels or the eighth anniversary of their grant, subject to the
optionee's continued service with the Company. The Board believes that options
best align director compensation with an appreciation in stock price that
results from prudent management and good corporate governance. The Directors
Plan will allow the Board to implement these and other stock-based forms of
compensation for the Board.
SUMMARY OF THE PLAN
The following summary of the main features of the Directors Plan is
qualified in its entirety by reference to the complete text of the plan, which
appears at Exhibit A to this Proxy Statement.
PURPOSE. The purpose of the Directors Plan is to assist the Company in
attracting, retaining and motivating qualified individuals to serve on the
Company's Board of Directors and to align their financial interests with those
of the Company's shareholders by providing for or increasing their proprietary
interest in the Company.
21
<PAGE> 27
ELIGIBILITY. Any person who is a member of the Company's Board of
Directors or of the board of directors of a subsidiary of the Company and who is
not at the time also an employee of the Company or any of its subsidiaries is
eligible for the award of stock options and/or stock grants under the Directors
Plan. For purposes of the Directors Plan, the Chairman of the Board's status as
an employee will be determined by the Board of Directors. There are currently 14
Non-Employee Directors on the Company's Board of Directors, all of whom are
eligible to participate in the Directors Plan.
ADMINISTRATION. The Directors Plan is administered by the Board or, as to
certain aspects provided for in the Plan, by a committee of the Board. Subject
to the express provisions of the Plan, the committee will be authorized and
empowered to do all things which are necessary or desirable in connection with
the administration of the Plan. However, the Board of Directors may at any time
limit the authority of the committee to administer the Plan. The Directors Plan
is intended to operate in a manner that exempts grants of stock under the Plan
from Section 16(b) of the Securities Exchange Act of 1934.
STOCK SUBJECT TO THE DIRECTORS STOCK OPTION PLAN. The maximum number of
shares of the Company's Common Stock that can be issued under the Directors Plan
is 3,000,000. Any shares subject to a stock option or stock grant which for any
reason are not issued or are reacquired under the stock option or stock grant
are not counted against the number of shares that can be issued under the
Directors Plan. All references in the Directors Plan and in outstanding options
and stock grants to the number and type of shares or other securities subject
thereto will be adjusted appropriately if the outstanding securities of the
class of stock then subject to the Plan are affected through a reorganization,
reclassification, dividend (other than regular, quarterly cash dividends), or
other distribution, stock split, reverse stock split, spin-off or similar
transaction, or if substantially all of the property and assets of the Company
are sold, unless the terms of the transaction provide otherwise.
AWARDS UNDER THE DIRECTORS PLAN. Under the Directors Plan, the committee
may provide for stock options and/or stock grants to be awarded to Non-Employee
Directors. Except as otherwise provided in the Directors Plan, the committee has
discretion to determine the form, timing, amount and terms of such awards. These
determinations do not have to be the same for each grant or for each
Non-Employee Director. The Directors Plan allows the committee to condition the
receipt of stock options or stock grants upon a Non-Employee Director electing
to forego any other form of compensation, including any cash retainers if then
paid by the Company. The committee may also provide that the shares of stock
issued upon exercise of an option will be subject to additional conditions or
agreements as the committee in its discretion may specify before the exercise of
the option, including deferrals on issuance of shares, conditions on vesting or
the transferability of options, and forfeiture or repurchase provisions. The
maximum number of shares of stock subject to stock options and stock awards
granted under the Directors Plan for any calendar year to any person on account
of his or her service as a Non-Employee Director, other than stock options or
stock grants that a Non-Employee Director has elected to receive in lieu of cash
retainer or other fees, may not exceed 262,500 shares.
EXERCISE PRICE AND TRANSFERABILITY OF OPTIONS. The exercise price for each
stock option will be determined by the Board of Directors, but can not be less
than the closing price of the Company's Common Stock on the day the option is
granted. Stock options are transferable by will or the laws of descent and
distribution and on such other terms as the committee may provide.
LOANS. The Company may, if authorized by the committee, make loans for the
purpose of enabling an optionee to exercise options or receive stock awarded
under the Directors Plan and to pay the taxes resulting from an option exercise
or stock grant under the Plan. The committee has authority to determine the
terms and conditions of the loans, which may be secured by the shares of stock
received upon exercise of the options.
AMENDMENTS AND TERMINATION. The Directors Plan provides that, unless
approved by the Company's shareholders, the exercise price of stock options
outstanding under the Directors Plan may not be reduced or adjusted downward,
and the Directors Plan may not be amended to materially increase the number of
shares of Common Stock authorized for issuance. Subject to the foregoing
limitation and except as otherwise required by law, the Board of Directors may
periodically amend the Directors Plan without further shareholder approval. No
options may be granted after the tenth anniversary of the date of approval by
the shareholders of the Plan, and it may be terminated earlier than that date by
the Board of Directors. Termination and
22
<PAGE> 28
expiration of the Directors Plan will not affect the rights and obligations
arising under the options granted before termination or expiration which are
then in effect.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. A Non-Employee Director who is
granted a stock option under the Plan will not recognize taxable income at the
time of the grant, but will generally recognize taxable income upon the exercise
of the option. The amount of income recognized upon the exercise of the stock
option will be measured by the excess, if any, of the market value of the shares
of stock at the time of exercise over the exercise price. The Company will
generally be entitled to a deduction corresponding to the amount of income
recognized by the Non-Employee Director.
INITIAL GRANTS
Under the Company's director compensation program, which is contingent on
shareholder approval of the Directors Plan, each non-employee director other
than the Chairman received a two-part option grant, totaling 105,000 options per
director, and the Chairman of the Board received a two-part option grant
totaling 157,500 options. One of the option grants received by each of the
non-employee directors is a special one-time award made in consideration of the
directors' contributions and commitment to the Company as evidenced through
their participation in the 1997 proxy contest. The other options represent
three-year grants for the non-employee directors' service on the Board until the
earlier of the year 2000 annual meeting or the date when the price of the common
stock reaches $71.43. All of the options have an exercise price of $39.34 and
vest in one-third increments upon the Common Stock reaching a closing price of
at least $42.86, $57.14 and $71.43, respectively, on five trading days ($150,
$200 and $250 pre-split). The options also vest on the eighth anniversary of
their grant (i.e., on August 13, 2005), subject to the director's continued
service. In no case may an option vest more than one year after the director has
ceased to serve on the Board. All of the options have a ten year term, except
that they may not be exercised more than two years after the director ceases to
serve on the Board. Options are transferable by will or the laws of descent or
distribution and to certain immediate family members and trusts, partnerships or
other entities all of the beneficiaries of which are immediate family members.
On March 23, 1998, the closing price of the Common Stock was $46.125.
REQUIRED APPROVAL
The Board of Directors of the Company recommends a vote FOR the approval of
the Company's Directors Plan. The affirmative vote of the holders of a majority
of the shares of Common Stock represented and voting at the Annual Meeting is
required to approve the Directors Plan. Unless marked to the contrary, proxies
received will be voted FOR approval of the Company's Directors Plan.
PROPOSAL 3 -- APPROVAL OF THE
SLM HOLDING CORPORATION MANAGEMENT INCENTIVE PLAN
At the Annual Meeting, shareholders will be asked to approve the SLM
Holding Corporation Management Incentive Plan (the "MIP"). In January 1998, the
Board of Directors adopted the MIP, subject to approval by the Company's
shareholders.
The MIP is intended to supersede the Company's Stock Compensation Plan, the
Company's Incentive Performance Plan and the Company's 1993-1998 Stock Option
Plan (the "1993 Plan"), which ceased to be available for new option grants on
March 18, 1998. The following summary of the main features of the MIP is
qualified in its entirety by reference to the complete text of the MIP, which
appears as Exhibit B to this Proxy Statement.
SUMMARY OF THE PLAN
GENERAL. The MIP is designed to enable the Company to attract, retain and
motivate its management and other key employees, and to further align the
interests of such employees with those of the shareholders of the Company, by
providing for or increasing the proprietary interest of such employees in the
Company.
23
<PAGE> 29
The MIP authorizes the grant and issuance of awards that may take the form
of Stock Options, Incentive Bonuses, Performance Stock and Stock Units (any such
arrangement, an "Award"). The MIP has various provisions so that Awards under it
may, but need not, qualify for an exemption from the "short swing liability"
provisions of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 and/or
qualify as "performance based compensation" that is exempt from the $1 million
limitation on the deductibility of compensation under Section 162(m) of the
Internal Revenue Code (the "Code"). Shareholder approval of the MIP is required
in order for the exemption from Section 162(m) to be satisfied. The following
summary of the main features of the MIP is qualified in its entirety by the
complete text of the MIP, which is set out as Exhibit B to this Proxy Statement.
ELIGIBILITY. Any person, including any director of the Company, who is an
employee, prospective employee, consultant or advisor of the Company or any of
its affiliates is eligible to be selected as a recipient of an Award (a
"Participant") under the MIP. While it is generally expected that executives and
middle managers will be eligible to participate, Awards may from time to time be
granted to employees who are not in these groups but who have otherwise
distinguished themselves for their contributions to the Company. Currently,
there are approximately six hundred executives and middle managers covered under
the MIP.
ADMINISTRATION. The MIP will be administered by one or more committees
(any such committee, a "Committee") of the Board of Directors of the Company
(the "Board"). With respect to any Award that is not intended to satisfy the
conditions of Exchange Act Rule 16b-3 or Code Section 162(m)(4)(C), the
Committee may delegate all or any of its responsibilities to one or more
directors or officers of the Company, including individuals who participate in
the MIP.
Subject to the express provisions of the MIP, the Committee has broad
authority to administer and interpret the MIP, including, without limitation,
authority to determine who is eligible to participate in the MIP and to which of
such persons, and when, Awards are granted under the MIP, to determine the
number of shares of Common Stock subject to Awards and the exercise or purchase
price of such shares under an Award, to establish and verify the extent of
satisfaction of any performance goals applicable to Awards, to prescribe and
amend the terms of the agreements evidencing Awards made under the MIP, and to
make all other determinations deemed necessary or advisable for the
administration of the MIP.
STOCK SUBJECT TO THE MIP. The aggregate number of shares of the Company's
Common Stock ("Shares") that can be issued under the MIP may not exceed
6,000,000. Of the 6,000,000 shares authorized under the MIP, the aggregate
number of Shares that can be issued pursuant to all Incentive Bonus and
Performance Stock Awards under the MIP may not exceed 1,000,000. The number of
Shares subject to the MIP and to outstanding Awards under the MIP will be
appropriately adjusted by the Board of Directors if the Company's Common Stock
is affected through a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than quarterly cash dividends)
or other distribution, stock split, spin-off or sale of substantially all of the
Company's assets. For purposes of calculating the aggregate number of Shares
issued under the MIP, only the number of Shares actually issued upon exercise or
settlement of an Award and not returned to the Company upon cancellation,
expiration or forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an Award shall
be counted.
AWARDS. The MIP authorizes the grant and issuance of the following types
of Awards: Stock Options, Incentive Bonuses, Performance Stock and Stock Units:
Stock Options: Subject to the express provisions of the MIP and as
discussed in this paragraph, the Committee has discretion to grant options, to
determine the vesting schedule of options, the events causing an option to
expire, the number of shares subject to any option, the restrictions on
transferability of an option, and such further terms and conditions, in each
case not inconsistent with the MIP, as may be determined from time to time by
the Committee. Options granted under the MIP may be either Incentive Stock
Options qualifying under Code Section 422 ("ISOs") or options which are not
intended to qualify as Incentive Stock Options ("NQSOs"). The exercise price for
options may not be less than 100% of the fair market value of the Company's
Stock on the date the option is granted, except that in the case of options
granted in assumption and substitution of options held by employees of a company
acquired by the Company, the exercise price of such options may be above or
below the fair market value of the Company's Stock on the date the option is
24
<PAGE> 30
granted. The exercise price of an option may be paid through various means
specified by the Committee, including in cash or check, by delivering to the
Company shares of the Company's stock, by a reduction in the number of Shares
issuable pursuant to such option, or by a promissory note or other commitment to
pay (including such a commitment by a stock broker). The Committee may, but need
not, provide that the holder of an Award has a right (such as a stock
appreciation right) to receive a number of Shares or cash, or a combination
thereof, the amount of which is determined by reference to the value of the
Award.
Incentive Bonus: The MIP authorizes the grant of Incentive Bonuses pursuant
to which a Participant may become entitled to receive an amount -- which may be
paid in cash, stock or stock units -- based on satisfaction of such performance
criteria as are specified by the Committee. Subject to the express provisions of
the MIP and as discussed in this paragraph, the Committee has discretion to
determine the terms of any Incentive Bonus, including the target and maximum
amount payable to a Participant as an Incentive Bonus, the performance criteria
(which may be based on financial performance and/or personal performance
evaluations) and level of achievement versus these criteria which determines the
amount payable under an Incentive Bonus, the fiscal year(s) as to which
performance will be measured for determining the amount of any payment, the
timing of any payment earned by virtue of performance, restrictions on the
alienation or transfer of an Incentive Bonus prior to actual payment, forfeiture
provisions, and such further terms and conditions, in each case not inconsistent
with the MIP, as the Committee may determine from time to time. All or any
portion of an Incentive Bonus may be designed to qualify as "performance based
compensation" that is exempt from the $1 million limit on deductible
compensation under Section 162(m) of the Code. The performance criteria for any
portion of an Incentive Bonus that is intended to satisfy the requirements for
"performance-based compensation" will be a measure based on one or more
"Qualifying Performance Criteria," as that term is defined below.
Notwithstanding satisfaction of any performance goals, the amount paid under an
Incentive Bonus may be reduced by the Committee on the basis of such further
considerations as the Committee in its sole discretion shall determine.
Performance Stock: Performance Stock is an Award of Shares, the grant,
issuance, retention and/or vesting of which is subject to such performance and
other conditions as are specified by the Committee. Subject to the express
provisions of the MIP and as discussed in this paragraph, the Committee has
discretion to determine the terms of any Performance Stock Award, including the
number of Shares subject to a Performance Stock Award or a formula for
determining such, the performance criteria and level of achievement versus these
criteria which determine the number of Shares granted, issued, retainable and/or
vested, the period as to which performance shall be measured for determining
achievement of performance, forfeiture provisions, the effect of termination of
employment for various reasons, and such further terms and conditions, in each
case not inconsistent with the MIP, as may be determined from time to time by
the Committee. The performance criteria upon which Performance Shares are
granted, issued, retained and/or vested may be based on financial performance
and/or personal performance evaluations, except that for any Performance Stock
that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) the performance
criteria shall be a measure based on one or more Qualifying Performance Criteria
(as defined below). Notwithstanding satisfaction of any performance goals, the
number of Shares granted, issued, retainable and/or vested under a Performance
Stock Award may be reduced by the Committee on the basis of such further
considerations as the Committee in its sole discretion shall determine.
Stock Units: A "Stock Unit" is a bookkeeping entry representing an amount
equivalent to the fair market value of one share of Common Stock, which may be
settled in Common Stock or cash. Stock Units may be issued upon exercise of
Stock Options, may be granted in payment and satisfaction of Incentive Bonus
Awards and may be issued in lieu of any other compensation that the Committee
elects to be paid in the form of Stock Units. Unless provided otherwise by the
Committee, settlement of Stock Units shall be made by issuance of Common Stock
and shall occur within 60 days after an Employee's termination of employment for
any reason, except that the Committee may provide for Stock Units to be settled
in cash (at the election of the Company or the Participant, as specified by the
Committee) and to be made at such other times as it determines appropriate or as
it permits a Participant to choose.
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QUALIFYING PERFORMANCE CRITERIA AND SECTION 162(M) LIMITS. Subject to
shareholder approval of the MIP, the performance criteria for any Incentive
Bonus or any Performance Stock that is intended to satisfy the requirements for
"performance based compensation" under Code Section 162(m) shall be any one or
more of the following performance criteria, either individually, alternatively
or in any combination, applied to either the Company as a whole or to a business
unit or subsidiary, either individually, alternatively or in any combination,
and measured either annually or cumulatively over a period of years, on an
absolute basis or relative to a pre-established target, to previous years'
results or to a designated comparison group, in each case as specified by the
Committee in the Award: (a) cash flow, (b) earnings per share (including
earnings before interest, taxes and amortization), (c) return on equity, (d)
total stockholder return, (e) return on capital, (f) return on assets or net
assets, (g) revenue, (h) income or net income, (i) operating income or net
operating income, (j) operating profit or net operating profit, (k) operating
margin, (l) return on operating revenue, (m) market share, (n) loan volume and
(o) overhead or other expense reduction. The Committee shall appropriately
adjust any evaluation of performance under a Qualifying Performance Criteria to
exclude any of the following events that occurs during a performance period: (i)
asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other laws or provisions
affecting reported results, (iv) accruals for reorganization and restructuring
programs, and (v) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in the
Company's annual report to stockholders for the applicable year. The aggregate
number of Shares subject to options granted under the MIP during any calendar
year to any one Participant may not exceed 1,000,000, unless such limitation is
not required under Section 162(m) of the Code. The aggregate number of Shares
issued or issuable under any Incentive Bonus or Performance Stock Awards granted
under the MIP during any calendar year to any one Participant shall not exceed
50,000. The maximum amount payable pursuant to that portion of an Incentive
Bonus Award granted for any fiscal year to any person that is intended to
satisfy the requirements for "performance based compensation" under Code Section
162(m) shall not exceed $5 million.
CHANGE OF CONTROL. The Committee may provide that in connection with a
Change of Control, Awards will become exercisable, payable, vested, paid, or
canceled, and may provide for an absolute or conditional exercise, payment or
lapse of conditions or restrictions on an Award which would be effective only
if, upon the announcement of a transaction intended or reasonably expected to
result in a Change of Control, no provision is made under the terms of such
transaction for the holder of an Award to realize the full benefit of the Award.
TRANSFERABILITY OF AWARDS. Generally, Awards granted under the MIP may not
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner prior to the vesting or lapse of any and all
restrictions applicable thereto, other than by will or the laws of descent and
distribution, except that the Committee may permit an Award to be transferable
to a member or members of the Participant's family or to entities owned or
established for the benefit of a Participant's family.
AMENDMENTS AND TERMINATION. The Board may amend, alter or discontinue the
Plan or any agreement evidencing an Award made under the Plan, but no such
amendment shall, without the approval of the shareholders of the Company: (a)
materially increase the maximum number of shares of Common Stock for which
Awards may be granted under the Plan; (b) reduce the price at which Stock
Options may be granted below the price specified in the Plan; (c) take any
action to reduce or adjust downward the exercise price of outstanding Stock
Options; (d) impair the rights of any Award holder, without such holder's
consent, under any Award granted prior to the date of any Change of Control; (e)
extend the term of the Plan; or (f) change the class of persons eligible to be
Participants. No Award granted under the MIP shall be granted pursuant to the
MIP more than ten years after the date of the Board's adoption of the MIP.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion of the federal
income tax consequences of the MIP is intended to be a summary of applicable
federal law as currently in effect. State and local tax consequences may differ
and may be amended or interpreted differently during the term of the MIP or of
options granted thereunder. Because the federal income tax rules governing
options and related payments are complex and subject to frequent change,
optionees are advised to consult their tax advisors prior to exercise of options
or dispositions of stock acquired pursuant to option exercise.
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ISOs and NQSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of Section 422 of the Code.
NQSOs need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an ISO. The difference
between the exercise price and the fair market value of the shares on the
exercise date will, however, be a preference item for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon exercise
of an ISO for at least two years following the option grant date and at least
one year following exercise, the optionee's gain, if any, upon a subsequent
disposition of such shares is long term capital gain. The measure of the gain is
the difference between the proceeds received on disposition and the optionee's
basis in the shares (which generally equals the exercise price). If an optionee
disposes of stock acquired pursuant to exercise of an ISO before satisfying the
one and two-year holding periods described above, the optionee will recognize
both ordinary income and capital gain in the year of disposition. The amount of
the ordinary income will be the lesser of (i) the amount realized on disposition
less the optionee's adjusted basis in the stock (usually the option price) or
(ii) the difference between the fair market value of the stock on the exercise
date and the option price. The balance of the consideration received on such a
disposition will be long term capital gain if the stock had been held for at
least one year following exercise of the ISO. The Company is not entitled to an
income tax deduction on the grant or exercise of an ISO or on the optionee's
disposition of the shares after satisfying the holding period requirement
described above. If the holding periods are not satisfied, the Company will be
entitled to a deduction in the year the optionee disposes of the shares in an
amount equal to the ordinary income recognized by the optionee.
An optionee is not taxed on the grant of an NQSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares acquired on the date of exercise.
The Company is entitled to an income tax deduction in the year of exercise in
the amount recognized by the optionee as ordinary income. Any gain on subsequent
disposition of the shares is long term capital gain if the shares are held for
at least one year following exercise. The Company does not receive a deduction
for this gain.
As described above, options granted under the MIP may qualify as
"performance-based compensation" under Section 162(m) of the Code in order to
preserve federal income tax deductions by the Company with respect to any
compensation required to be taken into account under Section 162 of the Code
that is in excess of $1 million and paid to a "Covered Employee" (as defined
under the Section 162 regulations). To so qualify, options must have an exercise
price at least equal to the fair market value of the underlying shares on the
date of grant, be awarded by a committee consisting of two or more "outside
directors" (as defined under the Section 162 regulations) and satisfy the 1998
Plan's limit on the total number of shares subject to options that may be
awarded to any one participant during any calendar year.
INITIAL GRANTS
The Committee has full discretion to determine the timing and recipients of
any stock option grants under the MIP and the number of shares subject to any
such options which may be granted under the MIP, subject to an annual limitation
on the total number of options that may be granted to any optionee. Therefore,
the benefits and amounts that will be received by each of the named executive
officers, the executive officers as a group, the non-employee directors as a
group and all other key employees under the MIP are not presently determinable.
As discussed in the Report of the Compensation and Personnel Committee on
Executive Compensation, in light of the options granted to the Company's
executive officers in 1997 under the 1993 Plan, the Compensation Committee does
not intend to grant further options to such individuals until at least 1999.
For 1998, the Compensation Committee has established an annual bonus
program under which bonuses will be based in part on corporate performance and
in part on individual performance, in each case as judged under specified
criteria against preestablished performance goals. The corporate performance
portion of the bonus program will be administered under the MIP, contingent upon
shareholder approval of the MIP. For 1998, corporate performance bonus criteria
will be measured against the five performance criteria announced by the CRV in
connection with its proxy solicitation for the Reorganization. Those performance
criteria are:
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core earnings per share growth, core net income growth, market share growth,
reductions in average cash acquisition costs for student loans and reductions in
overhead expenses. For 1998, the maximum performance-based payout is equal to
two times annual salary. Because payouts under the 1998 bonus arrangements will
depend on actual performance relative to goals established at the beginning of
the year, it is not possible to determine the benefits that participants would
have received had the MIP been in effect in the last fiscal year.
REQUIRED APPROVAL
The Board of Directors of the Company recommends a vote FOR the approval of
the Company's Management Incentive Plan. The affirmative vote of the holders of
a majority of the shares of Common Stock represented and voting at the Annual
Meeting is required to approve the MIP. Unless marked to the contrary, proxies
received will be voted FOR approval of the Company's MIP.
PROPOSAL 4 -- APPROVAL OF AN AMENDMENT TO THE SLM HOLDING CORPORATION
1993-1998 STOCK OPTION PLAN
At the Annual Meeting, shareholders will be asked to approve an amendment
to the SLM Holding Corporation 1993-1998 Stock Option Plan (the "1993 Plan") to
raise the limit on annual option grants under the 1993 Plan. Shareholder
approval of the amendment will result in all of the options granted to Mr. Lord
qualifying for an exemption to Code Section 162(m), and accordingly one-half of
Mr. Lord's option is subject to shareholder approval of the amendment.
Section III of the 1993 Plan provides that, during any calendar year
beginning on or after January 1, 1997, no participant in the 1993 Plan may be
granted options for more than 525,000 shares. Subject to shareholder approval,
the Board of Directors has amended this provision to increase the annual option
grant limitation from 525,000 shares to 1,750,000 shares, and the Compensation
Committee has granted Mr. Lord an option for 1,050,000 shares, representing two
annual grants for 1997 and 1998. Because no options may be granted under the
1993 Plan after March 18, 1998, the amendment to the 1993 Plan will not affect
any options other than the particular grant to Mr. Lord.
The 525,000 annual option grant limitation was added to the 1993 Plan on
January 25, 1996 and was approved by shareholders at the May 16, 1996 Annual
Meeting of Shareholders. The reason for adding the provision to the 1993 Plan
was so that options granted under the Plan to the Company's chief executive
officer and four next most highly compensated executive officers would satisfy
an exception from the $1 million limit on deductible compensation imposed by
Code Section 162(m). Code Section 162(m) places a $1 million limit on
deductibility of compensation paid to such employees, unless the compensation
satisfies one of the exemptions set forth in the Code, which includes an
exemption for "performance-based compensation." To qualify as "performance-based
compensation," options must have an exercise price at least equal to the fair
market value of the underlying shares on the date of grant, be awarded by a
committee consisting of two or more "outside directors" (as defined in Section
162) and satisfy a shareholder-approved limit on the total number of shares
subject to options that may be awarded to any one participant during any
calendar year. Thus, in order for options granted under the 1993 Plan to qualify
under an exception from Section 162(m), the 1993 Plan was required to have a
shareholder-approved limit on annual option grants. However, Section 162(m) does
not prescribe what that limit may be.
As discussed in the Report of the Compensation and Personnel Committee on
Executive Compensation, instead of granting options annually, the Compensation
Committee determined to make significant multi-year option grants in 1997 in
order to effectuate the share price targets that were presented as part of the
CRV's proposed compensation structure. Accordingly, instead of granting Mr. Lord
options for 525,000 shares in each of two years, in 1997 the Compensation
Committee granted Mr. Lord an option for 1,050,000 shares, subject to
shareholder approval. As noted above, Mr. Lord's options have an exercise price
of $39.34 and vest in one-third increments upon the Common Stock reaching a
closing price of at least $42.86, $57.14 and $71.43, respectively, on five
trading days ($150, $200 and $250 pre-split). The options also vest on the
eighth anniversary of their grant (i.e., on August 13, 2005), subject to Mr.
Lord's continued service with the Company. In light of the level of options
granted to the Company's executive officers in 1997 under the 1993
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Plan, the Compensation Committee does not intend to grant further options to
such individuals until at least 1999. On March 23, 1998, the closing price of
the Common Stock was $46.125.
If shareholders approve the amendment of Section III of the 1993 Plan to
increase the annual option share limit to 1,750,000 shares from 525,000 shares,
no other terms of the 1993 Plan will be affected. In addition, no options may be
granted under the 1993 Plan after March 18, 1998. If shareholders approve the
amendment of Section III of the 1993 Plan, the federal income tax treatment of
Mr. Lord's option will be as discussed above under "Proposal 3: Approval of the
SLM Holding Corporation Management Incentive Plan -- Federal Income Tax
Consequences." Depending on when Mr. Lord's options vest, up to 7,623 of Mr.
Lord's options may qualify as ISOs and the remainder will be treated as NQSOs.
The following is a brief description of the material terms of the 1993 Plan as
proposed to be amended.
The 1993 Plan provides for the grant of Stock Options, which may be either
ISOs or NQSOs, except that no options may be granted under the 1993 Plan after
March 18, 1998. The aggregate number of shares of Common Stock that can be
issued under the 1993 Plan may not exceed 17,820,075. For purposes of
calculating the aggregate number of shares issued under the 1993 Plan, only the
number of shares actually issued upon exercise or settlement of an award and not
returned to the Company upon cancellation, expiration, forfeiture or termination
of an award or in payment or satisfaction of the purchase price, exercise price
or tax withholding obligation of an award shall be counted. The 1993 Plan is
administered by the Compensation Committee, which has authority to grant
Options, and, consistent with the 1993 Plan, to set the vesting and expiration
provisions of options, to interpret the 1993 Plan, to promulgate such rules and
regulations with respect to the 1993 Plan as it deems desirable, to delegate its
responsibilities under the 1993 Plan to appropriate persons and to make all
other determinations necessary or desirable for the administration of the 1993
Plan. The exercise price of the Options can not be less than the closing price
of the Company's Common Stock on the day the Option is granted. The persons
eligible to participate in the 1993 Plan include key employees of the Company
and its subsidiaries who from time to time are selected by the Compensation
Committee in its discretion to receive grants of Options. Also, the Compensation
Committee may grant Options to key individuals who have accepted offers of
employment with the Company or its subsidiaries. As of March 23, 1998,
approximately 225 employees hold options granted under the 1993 Plan. The 1993
Plan and any outstanding Option or Options may be amended at any time for the
purpose of satisfying the requirements of any change in applicable law or
regulations or for any other purpose permitted by law, except that certain
amendments require approval of the Company's shareholders.
REQUIRED APPROVAL
The Board of Directors of the Company recommends a vote FOR the approval of
the amendment to Section III of the 1993 Plan to increase the annual option
share limit to 1,750,000 shares. The affirmative vote of the holders of a
majority of the shares of Common Stock represented and voting at the Annual
Meeting is required to approve amendment to the 1993 Plan. Unless marked to the
contrary, proxies received will be voted FOR approval of the amendment to the
1993 Plan.
PROPOSAL 5 -- RATIFICATION OF CERTAIN OPTION GRANTS
UNDER THE SLM HOLDING CORPORATION
1993-98 STOCK OPTION PLAN
At the Annual Meeting, shareholders will be asked to ratify grants of
certain options to non-executive officers (the "Non-Executive Options"), which
were made in connection with the cancellation of other options (the "Original
Options") that had been granted two months earlier.
Following the Reorganization, on August 13, 1997, the Compensation
Committee granted options to the Company's directors and executive officers,
including the Company's five most senior executive officers. Consistent with the
terms of the Company's 1993-1998 Stock Option Plan (the "1993 Plan"), which
requires options to have an exercise price not lower than the Company's closing
stock price on the date the options are granted, those options have an exercise
price of $39.34 (reflecting the Company's pre-split stock price of
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$137.6875 on the date of grant). Although the Compensation Committee and Company
management at that time anticipated granting options to a broader group of the
Company's officers and key employees, no further employee stock option grants
were approved in August because management was developing a restructuring and
downsizing program that eventually would result in the termination of employment
of approximately 100 officers and senior staff. After the management downsizing
was announced, the Compensation Committee on September 18, 1997 granted the
Original Options to 195 officers and key employees. The Original Options had an
exercise price equal to $45.3751 (reflecting the Company's pre-split stock price
of $158.8125 per share), which was equal to the Company's closing stock price on
the date of grant. On November 20, 1997 the Compensation Committee approved
canceling the Original Options and granting as of November 21, 1997 the
Non-Executive Options in lieu thereof, and determined to submit grant of the
Non-Executive Options for shareholder ratification. The Non-Executive Options
have an exercise price of $39.34 per share, which is the same exercise price
applicable to the options granted to the Company's directors and executive
officers in August 1997 under the Shared Value Option Program. On the date the
Non-Executive Options were granted, the Company's closing stock price was
$37.7031 (reflecting the Company's pre-split stock price of $131.9609 per
share).
While the terms of the 1993 Plan do not address the need for shareholder
approval of the Non-Executive Options, the Compensation Committee recognizes
that granting options with a lower exercise price in connection with the
cancellation of options with a higher exercise price in some circumstances may
be viewed as inconsistent with the objective of rewarding optionees for their
contribution in generating increased shareholder value. Accordingly, the
Compensation Committee and Board of Directors have provided in the new
Management Incentive Plan (see Proposal 3) that any action to reduce or adjust
downward the exercise price of outstanding options requires shareholder
approval. Nevertheless, the Compensation Committee approved granting the
Non-Executive Options and seeking shareholder ratification thereof because they
believe that the existence of a disparity between exercise prices for the
Non-Executive Options and the options granted to the Company's directors and
executive officers under the Shared Value Option Program could frustrate the
objective of creating a broad organizational focus on enhancing shareholder
value by promoting the Company's delivery of superior service to borrowers,
educational institutions and its bank partners. In addition, the Compensation
Committee was concerned that the officers and key employees to whom the Original
Options were granted should not be adversely impacted by the timing of their
option grants vis a vis the management downsizing, since the officers and key
employees had no control over the timing of the option grants.
The Non-Executive Options are held by 196 officers and key employees and in
the aggregate are potentially exercisable for 1,749,713 shares. None of the
Company's directors or executive officers hold any of the Non-Executive Options.
The terms of the Non-Executive Options are substantially the same as the terms
of the Original Options, other than for changes resulting from the difference in
exercise prices and the different grant dates. The options' share price vesting
targets, ten year term and provisions regarding early expiration following
certain terminations of employment were not changed. All of the Original Options
were granted with an effective exercise price of $45.3751 per share, while the
Non-Executive Options have an exercise price of $39.34. On March 23, 1998, the
closing price of the Common Stock was $46.125. All of the Non-Employee Options
vest in one-third increments upon the Common Stock reaching a closing price of
at least $42.86, $57.14 and $71.43, respectively, on five trading days, provided
that none of the Non-Executive Options may be exercised until on or after
November 21, 1998. In addition, the Non-Executive Options, as with the Original
Options, also vest on the eighth anniversary of their grant (i.e., on November
21, 2005), subject to the optionee's continued service with the Company. To the
maximum extent allowed under the Code, the Non-Executive Options will qualify as
ISOs, and the remaining will be NQSOs.
Based on present Federal income tax laws, there generally are no Federal
income tax consequences to either the optionees or the Company as a result of
cancellation of the Original Options, grant of the Non-Executive Options or
shareholder ratification of the grant of the Non-Executive Options. Thereafter,
the tax effects to optionees and the Company of the exercise of the
Non-Executive Options and sale of the underlying shares will be as discussed
above under "Proposal 3: Approval of the SLM Holding Corporation Management
Incentive Plan -- Federal Income Tax Consequences."
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REQUIRED APPROVAL
The Board of Directors of the Company recommends a vote FOR ratification of
the grant of the Non-Executive Options under the 1993 Plan. If the grant of the
Non-Executive Options is not ratified, the Board will evaluate the basis for the
shareholders' vote in determining whether to maintain the Non-Executive Options.
The affirmative vote of the holders of a majority of the shares of Common Stock
represented and voting at the Annual Meeting is required to ratify the grant of
the Non-Executive Options. Unless marked to the contrary, proxies received will
be voted FOR ratification of the grant of the Non-Executive Options.
PROPOSAL 6 -- APPOINTMENT OF INDEPENDENT AUDITORS
The independent public accounting firm of Arthur Andersen LLP, which has
served as auditor for the Company since October 23, 1997, has been selected by
the Board as independent auditor for 1998. This proposal is put before the
Shareholders because the Board believes that it is a good corporate practice to
seek Shareholder ratification of the selection of independent auditors.
Ratification requires an affirmative vote of at least a majority of the
outstanding shares of Common Stock of the Company represented and entitled to be
voted at the meeting.
The appointment of independent auditors is approved annually by the Board
of Directors based upon the recommendation of the Audit/Risk Management
Committee. In making its recommendation, the Audit/Risk Management Committee
reviews both the scope of and estimated fees for the audit engagement. If the
appointment of Arthur Anderson LLP is not ratified, the Board will evaluate the
basis for the shareholders' vote when evaluating whether to renew the firm's
engagement or expand the scope of services the firm provides.
Effective October 23, 1997, the Company dismissed Ernst & Young LLP and
engaged Arthur Andersen LLP as its certifying accountant. The decision to change
accountants was recommended and approved by the Audit/Risk Management Committee.
During the two most recent fiscal years and all subsequent interim periods
preceding Ernst & Young LLP's dismissal and Arthur Andersen LLP's engagement,
(i) there have been no disagreements over Ernst & Young LLP's reports on the
Company's financial statements on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure that,
if not resolved to Ernst & Young LLP's satisfaction, would have caused it to
make reference to the subject matter of the disagreements in connection with its
reports, and (ii) did not contain any adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
Representatives of Arthur Andersen LLP are expected to attend the Annual
Meeting of Shareholders, will have the opportunity to make a statement if they
desire to do so, and can be expected to respond to appropriate questions from
Shareholders present at the meeting.
REQUIRED APPROVAL
The Board of Directors of the Company recommends a vote FOR the
ratification of the appointment of Arthur Andersen LLP as independent auditors
for 1998. The affirmative vote of the holders of a majority of the shares of
Common Stock represented and voting at the Annual Meeting is required to ratify
the appointment of Arthur Andersen LLP. Unless marked to the contrary, proxies
received will be voted FOR the ratification of the appointment of Arthur
Andersen LLP as independent auditors for 1998.
OTHER MATTERS
As of the date hereof, there are no matters that the Board of Directors
intends to present for a vote at the Annual Meeting other than the election of
directors; approval of the SLM Holding Corporation Directors Stock Plan;
approval of the SLM Holding Corporation Management Incentive Plan; approval of
an amendment to the SLM Holding Corporation 1993-1998 Stock Option Plan;
ratification of certain option grants under the SLM Holding Corporation
1993-1998 Stock Option Plan; and ratification of the appointment of independent
auditors for 1998. In addition, the Company has not been notified of any other
business that is
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proposed to be presented at the Annual Meeting. If other matters now unknown to
the Board come before the Annual Meeting, the accompanying Proxy Card confers
discretionary authority on the persons named therein to vote such proxies on any
such matters in accordance with their best judgment.
SOLICITATION COSTS
All expenses in connection with the solicitation of the enclosed proxy will
be paid by the Company. In addition to solicitation by mail, officers,
directors, regular employees or other agents of the Company may solicit proxies
by telephone, telefax, personal calls, or other electronic means. The Company
will request of banks, brokers, custodians and other nominees in whose names
shares are registered to furnish material related to the Annual Meeting,
including the Annual Report, this Proxy Statement and the Proxy Card to the
beneficial owners of such shares and, upon request, the Company will reimburse
such registered holders for their out-of-pocket and reasonable expenses in
connection therewith. The Company has retained Georgeson & Co. to solicit
proxies on its behalf. Georgeson & Co. will be paid a fee, estimated not to
exceed $12,000 and will be reimbursed its reasonable out-of-pocket expenses in
connection with such solicitation services.
SHAREHOLDER PROPOSALS
Any person who is a Shareholder on both the Record Date for the 1998 Annual
Meeting and the date that notice of the Annual Meeting is given by the Company
and who wishes to submit either a proposal of business to be conducted or
nominations for election at the Annual Meeting must provide notice of such
proposal or nomination to the Secretary not less than 60 nor more than 90 days
prior to the date of the Annual Meeting or within ten days after the date on
which notice or prior public disclosure of the date of the Annual Meeting is
given, whichever is earlier.
Nominations and/or Shareholder proposals must contain specified information
regarding the nominee or other business proposed and regarding the proposing
Shareholder. These requirements are set forth in the By-Laws of the Company, a
copy of which is available from the Secretary at no cost. To be included in the
Company's Proxy Statement and Proxy Card for the 1999 Annual Meeting,
Shareholder proposals must be received by the Secretary prior to December 17,
1998 and must conform to the requirements set forth in the By-Laws of the
Company and the rules and regulations of the U.S. Securities and Exchange
Commission. The submission of a Shareholder proposal does not guarantee that it
will be included.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file reports on their holdings of and
transactions in the Company's Common Stock. To the Company's knowledge, during
1997 all of the Company's executive officers and directors timely filed all
required reports under Section 16, except that Forms 3 reporting the security
holdings of Mr. Levine and Ms. Keler were not filed on a timely basis.
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EXHIBIT A
SLM HOLDING CORPORATION
DIRECTORS STOCK PLAN
1. PURPOSE
The purpose of the SLM Holding Corporation Directors Stock Plan (the
"Plan") is to advance the interests of SLM Holding Corporation, a Delaware
corporation (hereinafter the "Company"), by enabling the Company to attract,
retain and motivate qualified individuals to serve on the Company's Board of
Directors and to align the financial interests of such individuals with those of
the Company's stockholders by providing for or increasing their proprietary
interest in the Company. The stock options granted pursuant to this Plan are not
qualified under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. DEFINITIONS
"Board" means the Board of Directors of the Company.
"Committee" means the Board and/or a committee of the Board acting pursuant
to its authorization to administer this Plan under Section 7.
"Common Stock" means the Company's Common Stock, par value $.20, as
presently constituted, subject to adjustment as provided in Section 9.
"Fair Market Value" means, as of any date, and unless the Committee shall
specify otherwise, the closing market price for the Common Stock reported for
that date on the composite tape for securities listed on the New York Stock
Exchange or, if the Common Stock did not trade on the New York Stock Exchange on
the date in question, then for the next preceding date for which the Common
Stock traded on the New York Stock Exchange.
"Non-Employee Director" means a member of the Board or a member of the
Board of Directions of a subsidiary of the Company who is not at the time also
an employee of the Company or any of its direct or indirect majority-owned
subsidiaries (regardless of whether such subsidiary is organized as a
corporation, partnership or other entity). For purposes of this Plan, the
Chairman of the Board's status as an employee shall be determined by the
Committee.
3. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 9, the maximum number of
shares of Common Stock which may be issued pursuant to this Plan shall not
exceed 3,000,000. Shares issued under this Plan may be authorized and unissued
shares of Common Stock or shares of Common Stock reacquired by the Company. All
or any shares of Common Stock subject to a stock option or stock grant which for
any reason are not issued or are reacquired under the stock option or stock
grant may again be made subject to a stock option or stock grant under the Plan.
4. PARTICIPANTS
Any person who is a Non-Employee Director shall be eligible for the award
of stock options and/or stock grants hereunder.
5. NON-EMPLOYEE DIRECTOR AWARDS
The Committee may provide for stock options and/or stock grants to be
awarded to Non-Employee Directors in consideration for their service to the
Company. The Committee shall determine to which Non-Employee Directors any such
stock options and/or stock grants shall be awarded hereunder (any such person, a
"Participant"). The Committee shall specify the number of shares subject to each
stock option or stock grant provided for under this Section 5, or the formula
pursuant to which such number shall be determined,
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the Participants to receive any such award, the date of award and the vesting
and expiration terms applicable to such stock option or stock grant. The
Committee may provide that the exercisability of a stock option or the vesting
of a stock award or of shares issued or issuable upon exercise of a stock option
is subject to the satisfaction of such conditions or the occurrence of such
other events as the Committee specifies, including, without limitation, the
passage of time, continued service, the price of the Common Stock meeting or
exceeding a specified level, the achievement of other performance goals or the
satisfaction of an event or condition within the control of the Participant or
within the control of others. The award of stock options or stock grants
hereunder may, but need not, be conditioned on the Non-Employee Director
electing to forego his or her right to all or any part of his or her cash
retainer or other fees. Subject to adjustment pursuant to Section 9, the maximum
number of shares of Common Stock subject to stock options and stock grants
awarded under this Plan during any calendar year to any person on account of his
or her service as a Non-Employee Director, other than stock options or stock
grants that a Non-Employee Director has elected to receive in lieu of cash
retainer or other fees, shall not exceed 262,500 shares.
6. TERMS AND CONDITIONS OF STOCK OPTIONS AND STOCK GRANTS
(a) General Terms and Conditions: Stock options and stock grants awarded
pursuant to the Plan need not be identical but each stock option and stock grant
shall be subject to the following general terms and conditions:
(1) Terms and Restrictions Upon Shares: The Committee may provide
that the shares of Common Stock issued upon exercise of a stock option or
receipt of a stock grant shall be subject to such further conditions,
restrictions or agreements as the Committee in its discretion may specify
prior to the exercise of such stock option or receipt of such stock grant,
including without limitation, deferrals on issuance, conditions on vesting
or transferability, and forfeiture or repurchase provisions. The Committee
may establish rules for the deferred delivery of Common Stock upon exercise
of a stock option or receipt of a stock grant with the deferral evidenced
by use of "Stock Units" equal in number to the number of shares of Common
Stock whose delivery is so deferred. A "Stock Unit" is a bookkeeping entry
representing an amount equivalent to the Fair Market Value of one share of
Common Stock. Stock Units represent an unfunded and unsecured obligation of
the Corporation except as otherwise provided by the Committee. Settlement
of Stock Units upon expiration of the deferral period shall be made in
Common Stock or otherwise as determined by the Committee. The amount of
Common Stock, or other settlement medium, to be so distributed may be
increased by an interest factor or by dividend equivalents. Until a Stock
Unit is settled, the number of shares of Common Stock represented by a
Stock Unit shall be subject to adjustment pursuant to Section 9.
(2) Transferability of Option: Unless otherwise provided by the
Committee, each stock option shall be transferable only by will or the laws
of descent and distribution.
(3) Other Terms and Conditions: No holder of a stock option or stock
grant shall have any rights as a stockholder with respect to any shares of
Common Stock subject to a stock option or stock grant hereunder until said
shares have been issued. Stock options and stock grants may also contain
such other provisions, which shall not be inconsistent with any of the
foregoing terms, as the Board or the Committee shall deem appropriate. The
Committee may waive conditions to and/or accelerate exercisability of a
stock option or stock grant, either automatically upon the occurrence of
specified events (including in connection with a change of control of the
Company) or otherwise in its discretion. No stock option or stock grant,
however, nor anything contained in the Plan, shall confer upon any
Participant any right to serve as a director of the Company.
(b) Stock Option Price: The exercise price for each stock option shall be
established by the Committee or under a formula established by the Committee.
The exercise price shall not be less than the Fair Market Value of the stock on
the date of grant. The exercise price shall be payable in cash, by payment under
an arrangement with a broker where payment is made pursuant to an irrevocable
direction to the broker to deliver all or part of the proceeds from the sale of
the option shares to the Company, by the surrender of shares of Common Stock
owned by the optionholder exercising the option and having a fair market value
on the date of
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exercise equal to the exercise price but only if such will not result in an
accounting charge to the Company, or by any combination of the foregoing. In
addition, the exercise price shall be payable in such other form(s) of
consideration as the Committee in its discretion shall specify, including
without limitation by loan (as described in Section 8) or by techniques that may
result in an accounting charge to the Company.
(c) Stock Grant Terms: Stock grants under the Plan may, in the sole
discretion of the Committee, but need not, be conditioned upon the Participant
paying cash or cash-equivalent consideration or agreeing to forego other
compensation for the Shares covered by the stock grant. Stock grants under the
Plan may be subject to such conditions, restrictions or other vesting terms as
are established in the sole discretion of the Committee, including, without
limitation, the passage of time, continued service, the price of the Common
Stock meeting or exceeding a specified level, the achievement of other
performance goals or the satisfaction of an event or condition within the
control of the Participant or within the control of others.
7. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board, except that as provided herein
the Plan may be administered by a Committee of the Board, as appointed from time
to time by the Board. The Board shall fill vacancies on and from time to time
may remove or add members to the Committee. The Committee shall act pursuant to
a majority vote or unanimous written consent.
Subject to the express provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation: (a) to
prescribe, amend and rescind rules relating to this Plan and to define terms not
otherwise defined herein; (b) to prescribe the form of documentation used to
evidence any stock option or stock grant awarded hereunder, including provision
for such terms as it considers necessary or desirable, not inconsistent with the
terms established by the Board; (c) to establish and verify the extent of
satisfaction of any conditions to exercisability applicable to stock options or
to receipt or vesting of stock grants; (d) to determine whether, and the extent
to which, adjustments are required pursuant to Section 9 hereof; and (e) to
interpret and construe this Plan, any rules and regulations under the Plan and
the terms and conditions of any stock option or stock grant awarded hereunder,
and to make exceptions to any procedural provisions in good faith and for the
benefit of the Company. Notwithstanding any provision of this Plan, the Board
may at any time limit the authority of the Committee to administer this Plan.
All decisions, determinations and interpretations by the Board or, except
as to the Board, the Committee regarding the Plan, any rules and regulations
under the Plan and the terms and conditions of any stock option or stock grant
awarded hereunder, shall be final and binding on all Participants and holders of
stock options and stock grants. The Board and the Committee may consider such
factors as it deems relevant, in its sole and absolute discretion, in making
such decisions, determinations and interpretations including, without
limitation, the recommendations or advice of any officer or other employee of
the Company and such attorneys, consultants and accountants as it may select.
8. LOANS
The Company may, if authorized by the Committee, make loans for the purpose
of enabling a Participant to exercise stock options and, if applicable, receive
stock awarded under the Plan and to pay the tax liability resulting from a stock
option exercise or stock grant under the Plan. The Committee shall have full
authority to determine the terms and conditions of such loans. Such loans may be
secured by the shares of Common Stock received upon exercise of such stock
option or receipt of such stock grant.
9. ADJUSTMENT OF AND CHANGES IN THE STOCK
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, reclassification, dividend (other
than a regular, quarterly cash dividend) or other distribution, stock split,
reverse stock split, spin-off or the like, or if substantially all of the
property and assets of the
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Company are sold, then, unless the terms of such transaction shall provide
otherwise, the maximum number and type of shares or other securities that may be
issued under this Plan shall be appropriately adjusted. The Committee shall
determine in its sole discretion the appropriate adjustment to be effected
pursuant to the immediately preceding sentence. In addition, in connection with
any such change in the class of securities then subject to this Plan, the
Committee may make appropriate and proportionate adjustments in the number and
type of shares or other securities or cash or other property that may be
acquired pursuant to stock options and stock grants theretofore awarded under
this Plan and the exercise price of such stock options or price, if any, of such
stock grants.
No right to purchase or receive fractional shares shall result from any
adjustment in stock options or stock grants pursuant to this Section 9. In case
of any such adjustment, the shares subject to the stock option or stock grant
shall be rounded up to the nearest whole share of Common Stock.
10. REGISTRATION, LISTING OR QUALIFICATION OF STOCK
In the event that the Board or the Committee determines in its discretion
that the registration, listing or qualification of the shares of Common Stock
issuable under the Plan on any securities exchange or under any applicable law
or governmental regulation is necessary as a condition to the issuance of such
shares under the stock option or stock grant, the stock option or stock grant
shall not be exercisable or exercised in whole or in part unless such
registration, listing, qualification, consent or approval has been
unconditionally obtained.
11. TAXES
The Board or Committee may make such provisions or impose such conditions
as it may deem appropriate for the withholding or payment by a Participant of
any taxes which it determines are necessary or appropriate in connection with
any issuance of shares under this Plan, and the rights of a holder of a stock
option or stock grant in any shares are subject to satisfaction of such
conditions. The Company shall not be required to issue shares of Common Stock or
to recognize the disposition of such shares until such obligations are
satisfied. At the Participant's election, any such obligations may be satisfied
by having the Company withhold a portion of the shares of Common Stock that
otherwise would be issued to the holder of the stock option or stock grant upon
exercise of the stock option or vesting or receipt of the stock grant or by
surrendering to the Company shares of Common Stock previously acquired. The
Company and any affiliate of the Company shall not be liable to a Participant or
any other persons as to any tax consequence expected, but not realized, by any
Participant or other person due to the receipt of any stock options or shares
awarded hereunder.
12. ARBITRATION AND APPLICABLE LAW
Any claim, dispute or other matter in question of any kind relating to this
Plan shall be settled by arbitration before a single arbitrator and otherwise
conducted in accordance with the Rules of the American Arbitration Association,
which proceedings shall be held in the city in which the Company's executive
offices are located. Notice of demand for arbitration shall be made in writing
to the opposing party and to the American Arbitration Association within a
reasonable time after the claim, dispute or other matter in question has arisen.
In no event shall a demand for arbitration be made after the date when the
applicable statute of limitations would bar the institution of a legal or
equitable proceeding based on such claim, dispute or other matter in question.
The decision of the arbitrator shall be final and may be enforced in any court
of competent jurisdiction. This Plan and any rights hereunder shall be
interpreted and construed in accordance with the laws of the State of Delaware
and applicable federal law.
13. EFFECTIVE DATE, AMENDMENT AND TERMINATION OF PLAN
This Plan shall become effective upon its adoption by the Board, subject to
approval by a majority of the outstanding shares of the Company present, or
represented by proxy, and entitled to vote at a meeting of the Company's
stockholders.
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Unless earlier suspended or terminated by the Board, no stock options or
stock grants may be awarded after the tenth anniversary of the date the Plan is
approved by the Company's stockholders. The Board may periodically amend the
Plan as determined appropriate, without further action by the Company's
stockholders except to the extent required by applicable law. Notwithstanding
the foregoing, and subject to adjustment pursuant to Section 9, unless approved
by the Company's stockholders, (a) the Plan may not be amended to materially
increase the number of shares of Common Stock authorized for issuance under the
Plan and (b) the exercise price of stock options outstanding under the Plan may
not be reduced or adjusted downward, whether through amendment, cancellation or
replacement grants or any other means.
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EXHIBIT B
SLM HOLDING CORPORATION
MANAGEMENT INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this Management Incentive Plan ("Plan") of the SLM Holding
Corporation, a Delaware corporation, is to enable the Company, as defined in
Section 2.2(a)(iii) hereof, to attract, retain and motivate its officers,
management and other key personnel, and to further align the interests of such
persons with those of the stockholders of the Company, by providing for or
increasing their proprietary interest in the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
2.1 Composition of Committee. The Plan shall be administered by the
Board of Directors and/or by a committee of the Board of Directors of SLM,
as appointed from time to time by the Board of Directors (the "Committee").
The Board of Directors shall fill vacancies on, and from time to time may
remove or add members to, the Committee. The Committee shall act pursuant
to a majority vote or unanimous written consent. Notwithstanding the
foregoing, with respect to any Award that is not intended to satisfy the
conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or Section 162(m)(4)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Committee may appoint
one or more separate committees (any such committee, a "Subcommittee")
composed of one or more directors of SLM (who may but need not be members
of the Committee) and may delegate to any such Subcommittee(s) the
authority to grant Awards, as defined in Section 5.1 hereof, under the Plan
to Employees, to determine all terms of such Awards, and/or to administer
the Plan or any aspect of it. Any action by any such Subcommittee within
the scope of such delegation shall be deemed for all purposes to have been
taken by the Committee. The Committee may designate the Secretary of the
Company or other Company employees to assist the Committee in the
administration of the Plan, and may grant authority to such persons to
execute agreements evidencing Awards made under this Plan or other
documents entered into under this Plan on behalf of the Committee or the
Company.
2.2 Powers of the Committee. Subject to the express provisions of
this Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable in connection with the administration of this Plan
with respect to the Awards over which such Committee has authority,
including, without limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating
to this Plan and to define terms not otherwise defined herein; provided
that, unless the Committee shall specify otherwise, for purposes of this
Plan (i) the term "fair market value" shall mean, as of any date, the
closing price for a Share, as defined in Section 3.1 hereof, reported
for that date on the composite tape for securities listed on the New
York Stock Exchange or, if no Shares traded on the New York Stock
Exchange on the date in question, then for the next preceding date for
which Shares traded on the New York Stock Exchange; and (ii) the term
"Company" shall mean the SLM Holding Corporation and its subsidiaries
and affiliates, unless the context otherwise requires.
(b) to determine which persons are Employees (as defined in Section
4 hereof), to which of such Employees, if any, Awards shall be granted
hereunder and the timing of any such Awards;
(c) to determine the number of Shares subject to Awards and the
exercise or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any
performance goals applicable to Awards;
(e) to prescribe and amend the terms of the agreements evidencing
Awards made under this Plan (which need not be identical);
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(f) to determine whether, and the extent to which, adjustments are
required pursuant to Section 11 hereof;
(g) to interpret and construe this Plan, any rules and regulations
under the Plan and the terms and conditions of any Award granted
hereunder, and to make exceptions to any such provisions in good faith
and for the benefit of the Company; and
(h) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
2.3 Determinations of the Committee. All decisions, determinations
and interpretations by the Committee or the Board regarding the Plan shall
be final and binding on all Employees and Participants, as defined in
Section 3 hereof. The Committee or the Board, as applicable, shall consider
such factors as it deems relevant, in its sole and absolute discretion, to
making such decisions, determinations and interpretations including,
without limitation, the recommendations or advice of any officer of the
Company or Employee and such attorneys, consultants and accountants as it
may select.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. Subject to adjustment as provided in Section
11, at any time, the aggregate number of shares of the Company's common
stock, $.020 par value ("Shares"), issued and issuable pursuant to all
Awards (including all ISOs (as defined in Section 5.1 hereof)) granted
under this Plan shall not exceed 6,000,000; provided that no more than
1,000,000 of such Shares may be issued pursuant to all Incentive Bonuses
and Performance Stock Awards granted under the Plan. The Shares subject to
the Plan may be either Shares reacquired by the Company, including Shares
purchased in the open market, or authorized but unissued Shares.
3.2 Code Section 162(m) Limits. The aggregate number of Shares
subject to Options granted under this Plan during any calendar year to any
one Employee shall not exceed 1,000,000. The aggregate number of Shares
issued or issuable under any Incentive Bonus or Performance Stock Awards
granted under this Plan during any calendar year to any one Employee shall
not exceed 50,000. Notwithstanding anything to the contrary in the Plan,
the foregoing limitations shall be subject to adjustment under Section 11
only to the extent that such adjustment will not affect the status of any
Award intended to qualify as "performance based compensation" under Code
Section 162(m).
3.3 Issuance of Shares. For purposes of Section 3.1, the aggregate
number of Shares issued under this Plan at any time shall equal only the
number of Shares actually issued upon exercise or settlement of an Award
and not returned to the Company upon cancellation, expiration or forfeiture
of an Award or delivered (either actually or by attestation) in payment or
satisfaction of the purchase price, exercise price or tax obligation of an
Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee,
prospective employee, consultant or advisor of the Company (an "Employee") shall
be eligible to be considered for the grant of Awards hereunder. For purposes of
this Plan, the Chairman of the Board's status as an Employee shall be determined
by the Board. For purposes of the administration of Awards, the term "Employee"
shall also include a former Employee or any person (including any estate) who is
a beneficiary of a former Employee. A "Participant" is any Employee to whom an
Award has been made and any person (including any estate) to whom an Award has
been assigned or transferred pursuant to Section 10.1.
SECTION 5. PLAN AWARDS
5.1 Award Types. The Committee, on behalf of the Company, is
authorized under this Plan to enter into certain types of arrangements with
Employees and to confer certain benefits on them. The following such
arrangements or benefits are authorized under the Plan if their terms and
conditions are not inconsistent with the provisions of the Plan: Stock
Options, Incentive Bonuses and Performance
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Stock. Such arrangements and benefits are sometimes referred to herein as
"Awards." The authorized types of arrangements and benefits for which
Awards may be granted are defined as follows:
Stock Options: A Stock Option is a right granted under Section 6
to purchase a number of Shares at such exercise price, at such times,
and on such other terms and conditions as are specified in or determined
pursuant to the agreement evidencing the Award (the "Option Agreement").
Options intended to qualify as Incentive Stock Options ("ISOs") pursuant
to Code Section 422 and Options which are not intended to qualify as
ISOs ("Non-qualified Options") may be granted under Section 6 as the
Committee in its sole discretion shall determine.
Incentive Bonus: An Incentive Bonus is a bonus opportunity awarded
under Section 7 pursuant to which a Participant may become entitled to
receive an amount based on satisfaction of such performance criteria as
are specified in the document evidencing the Award (the "Incentive Bonus
Agreement").
Performance Stock: Performance Stock is an award of Shares made
under Section 8, the grant, issuance, retention and/or vesting of which
is subject to such performance and other conditions as are expressed in
the document evidencing the Award (the "Performance Stock Agreement").
5.2 Grants of Awards. An Award may consist of one such arrangement or
benefit or two or more of them in tandem or in the alternative.
SECTION 6. STOCK OPTION GRANTS
The Committee may grant an Option or provide for the grant of an Option,
either from time-to-time in the discretion of the Committee or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award, within the control of others
or not within the any person's control.
6.1 Option Agreement. Each Option Agreement shall contain provisions
regarding (a) the number of Shares which may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for
the Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, and
(f) such further terms and conditions, in each case not inconsistent with
the Plan as may be determined from time to time by the Committee. Option
Agreements evidencing ISOs shall contain such terms and conditions as may
be necessary to comply with the applicable provisions of Section 422 of the
Code.
6.2 Option Price. The purchase price per Share of the Shares subject
to each Option granted under the Plan shall equal or exceed 100% of the
fair market value of such Stock on the date the Option is granted, except
that (i) the Committee may specifically provide that the exercise price of
an Option may be higher or lower in the case of an Option granted to
employees of a company acquired by the Company in assumption and
substitution of options held by such employees at the time such company is
acquired, and (ii) in the event an Employee is required to pay or forego
the receipt of any cash amount in consideration of receipt of an option,
the exercise price plus such cash amount shall equal or exceed 100% of the
fair market value of such Stock on the date the Option is granted.
6.3 Option Term. The "Term" of each Option granted under the Plan,
including any ISOs, shall not exceed ten (10) years from the date of its
grant.
6.4 Option Vesting. Options granted under the Plan shall be
exercisable at such time and in such installments during the period prior
to the expiration of the Option's Term as determined by the Committee in
its sole discretion. The Committee shall have the right to make the timing
of the ability to exercise any Option granted under the Plan subject to
such performance requirements as deemed appropriate by the Committee. At
any time after the grant of an Option the Committee may, in its sole
discretion, reduce or eliminate any restrictions surrounding any
Participant's right to exercise all or part of
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the Option, except that no Option shall first become exercisable within six
(6) months from its date of grant, other than upon death, Disability (as
defined in Section 6.5 hereof), a Change of Control (as defined in Section
12.2 hereof) or upon satisfaction of such performance requirements as
deemed appropriate by the Committee.
6.5 Termination of Employment. Subject to Section 12, upon a
termination of employment by a Participant prior to the full exercise of an
Option, the following procedures shall apply unless determined otherwise by
the Committee in its sole discretion or, in the case of an ISO, unless
other procedures are necessary to comply with the provisions of Section
422, 424 or 425 of the Code:
(a) Death or Disability. If an Employee terminates service on
account of becoming disabled, the Participant may exercise the Option in
whole or in part within one year after the date of the Employee's
disability, but in no event later than the date on which it would have
expired if the Employee had not become disabled. Unless provided
otherwise by the Committee, an Employee shall be deemed to be disabled
if he or she is determined to be disabled for purposes of meeting any
insurance requirements under long-term disability policies
("Disability") provided by the Company. If an Employee dies during a
period in which he or she is entitled to exercise an Option (including
the periods referred to in the first sentence of this paragraph (a) or
in paragraph (c) of this Section), the Participant may exercise the
Option in whole or in part within one year after the date of the
Employee's death, but in no event later than the date on which it would
have expired if the Employee had lived, or one year after the Employee's
death, whichever date is earlier.
(b) Cause. If a Participant's employment with the Company or a
subsidiary shall be terminated for cause, as determined by the Committee
in its sole discretion, he or she shall forfeit any and all outstanding
option rights and such rights shall be deemed to have lapsed for
purposes hereof as of the date of the Participant's termination of
service.
(c) Other Forms of Termination. If a Participant ceases to be
employed by the Company or a subsidiary for any reason other than
Disability, death or termination for cause during a period in which he
or she is entitled to exercise an Option, the Participant's Option shall
terminate three months after the date of such cessation of employment,
but in no event later than the date on which it would have expired if
such cessation of employment had not occurred. During such period the
Option may be exercised only to the extent that the Participant was
entitled to do so at the date of cessation of employment unless the
Committee, in its sole discretion, permits exercise of the Option to a
greater extent. The employment of a Participant shall not be deemed to
have ceased upon his or her absence from the Company on a leave of
absence granted in accordance with the usual procedures of the Company.
6.6 Option Exercise.
(a) Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with
respect to fractional Shares and the Committee may require, by the terms
of the Option Agreement, a partial exercise to include a minimum number
of Shares.
(b) Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery to the representative of the
Company designated for such purpose by the Committee all of the
following: (i) notice of exercise in such form as the Committee
authorizes specifying the number of Shares to be purchased by the
Participant, (ii) payment or provision for payment of the exercise price
for such number of Shares, (iii) such representations and documents as
the Committee, in its sole discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act
of 1933, as amended, and any other federal, state or foreign securities
laws or regulations, (iv) in the event that the Option shall be
exercised pursuant to Section 10.1 by any person or persons other than
the Employee, appropriate proof of the right of such person or persons
to exercise the Option, and (v) such representations and documents as
the Committee, in its sole discretion, deems necessary or advisable to
provide for the tax withholding pursuant to Section 13. Unless provided
otherwise by the Committee, no Participant shall have any
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right as a stockholder with respect to any Shares purchased pursuant to
any Option until the registration of Shares in the name of such person,
and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date such Shares are so registered.
(c) Payment of Exercise Price. To the extent authorized by the
Committee, the exercise price of an Option may be paid in the form of
one of more of the following, either through the terms of the Option
Agreement or at the time of exercise of an Option: (i) cash or certified
or cashiers' check, (ii) shares of capital stock of the Company that
have been held by the Participant for such period of time as the
Committee may specify, (iii) other property deemed acceptable by the
Committee, (iv) a reduction in the number of Shares or other property
otherwise issuable pursuant to such Option, (v) a promissory note of or
other commitment to pay by the Participant or of a third party, the
terms and conditions of which shall be determined by the Committee, or
(vi) any combination of (i) through (v).
SECTION 7. INCENTIVE BONUS
Each Incentive Bonus Award will confer upon the Employee the opportunity to
earn a future payment tied to the level of achievement with respect to one or
more performance criteria established for a performance period of not less than
one year.
7.1 Incentive Bonus Award. Each Incentive Bonus Award shall contain
provisions regarding (a) the target and maximum amount payable to the
Participant as an Incentive Bonus, (b) the performance criteria and level
of achievement versus these criteria which shall determine the amount of
such payment, (c) the period as to which performance shall be measured for
determining the amount of any payment, (d) the timing of any payment earned
by virtue of performance, (e) restrictions on the alienation or transfer of
the Incentive Bonus prior to actual payment, (f) forfeiture provisions, and
(g) such further terms and conditions, in each case not inconsistent with
the Plan as may be determined from time to time by the Committee. The
maximum amount payable as an Incentive Bonus may be a multiple of the
target amount payable, but the maximum amount payable pursuant to that
portion of an Incentive Bonus Award granted under this Plan for any fiscal
year to any Participant that is intended to satisfy the requirements for
"performance based compensation" under Code Section 162(m) shall not exceed
five million dollars ($5,000,000).
7.2 Performance Criteria. The Committee shall establish the
performance criteria and level of achievement versus these criteria which
shall determine the target and maximum amount payable under an Incentive
Bonus Award, which criteria may be based on financial performance and/or
personal performance evaluations. The Committee may specify the percentage
of the target Incentive Bonus that is intended to satisfy the requirements
for "performance-based compensation" under Code Section 162(m).
Notwithstanding anything to the contrary herein, the performance criteria
for any portion of an Incentive Bonus that is intended by the Committee to
satisfy the requirements for "performance-based compensation" under Code
Section 162(m) shall be a measure based on one or more Qualifying
Performance Criteria (as defined in Section 10.2 hereof) selected by the
Committee and specified at the time the Incentive Bonus Award is granted.
The Committee shall certify the extent to which any Qualifying Performance
Criteria has been satisfied, and the amount payable as a result thereof,
prior to payment of any Incentive Bonus that is intended by the Committee
to satisfy the requirements for "performance-based compensation" under Code
Section 162(m).
7.3 Timing and Form of Payment. The Committee shall determine the
timing of payment of any Incentive Bonus. The Committee may provide for or,
subject to such terms and conditions as the Committee may specify, may
permit a Participant to elect for the payment of any Incentive Bonus to be
deferred to a specified date or event. The Committee may provide for a
Participant to have the option for his or her Incentive Bonus, or such
portion thereof as the Committee may specify, to be paid in whole or in
part in Shares or Stock Units.
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7.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Bonus Award on
account of either financial performance or personal performance evaluations
may be reduced by the Committee on the basis of such further considerations
as the Committee in its sole discretion shall determine.
SECTION 8. PERFORMANCE STOCK
Performance Stock consists of an award of Shares, the grant, issuance,
retention and/or vesting of which shall be subject to such performance
conditions and to such further terms and conditions as the Committee deems
appropriate.
8.1 Performance Stock Award. Each Performance Stock Award shall
contain provisions regarding (a) the number of Shares subject to such Award
or a formula for determining such, (b) the performance criteria and level
of achievement versus these criteria which shall determine the number of
Shares granted, issued, retainable and/or vested, (c) the period as to
which performance shall be measured for determining achievement of
performance , (d) forfeiture provisions, and (e) such further terms and
conditions, in each case not inconsistent with the Plan as may be
determined from time to time by the Committee.
8.2 Performance Criteria. The grant, issuance, retention and/or
vesting of each Performance Share shall be subject to such performance
criteria and level of achievement versus these criteria as the Committee
shall determine, which criteria may be based on financial performance
and/or personal performance evaluations. Notwithstanding anything to the
contrary herein, the performance criteria for any Performance Stock that is
intended by the Committee to satisfy the requirements for "performance-
based compensation" under Code Section 162(m) shall be a measure based on
one or more Qualifying Performance Criteria selected by the Committee and
specified at the time the Performance Stock Award is granted.
8.3 Timing and Form of Payment. The Committee shall determine the
timing of payment of any Incentive Bonus. The Committee may provide for or,
subject to such terms and conditions as the Committee may specify, may
permit a Participant to elect for the payment of any Performance Stock to
be deferred to a specified date or event. The Committee may provide for a
Participant to have the option for his or her Performance Stock, or such
portion thereof as the Committee may specify, to be granted in whole or in
part in Shares or Stock Units.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under a Performance Stock Award on account of either financial
performance or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the Committee in
its sole discretion shall determine.
SECTION 9. STOCK UNITS
9.1 Stock Units. A "Stock Unit" is a bookkeeping entry representing
an amount equivalent to the fair market value of one share of Common Stock.
Stock Units represent an unfunded and unsecured obligation of the Company,
except as otherwise provided for by the Committee.
9.2 Grant of Stock Units. Stock Units may be issued upon exercise of
Options, may be granted in payment and satisfaction of Incentive Bonus
Awards and may be issued in lieu of, Performance Stock or any other Award
that the Committee elects to be paid in the form of Stock Units.
9.3 Settlement of Stock Units. Unless provided otherwise by the
Committee, settlement of Stock Units shall be made by issuance of Shares
and shall occur within 60 days after an Employee's termination of
employment for any reason. The Committee may provide for Stock Units to be
settled in cash (at the election of the Company or the Participant, as
specified by the Committee) and to be made at such other times as it
determines appropriate or as it permits a Participant to choose. The amount
of Shares, or other settlement medium, to be so distributed may be
increased by an interest factor or by dividend equivalents,
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which may be valued as if reinvested in Shares. Until a Stock Unit is
settled, the number of shares of Shares represented by a Stock Unit shall
be subject to adjustment pursuant to Section 11.
SECTION 10. OTHER PROVISIONS APPLICABLE TO AWARDS
10.1 Transferability. Unless the agreement evidencing an Award (or an
amendment thereto authorized by the Committee) expressly states that the
Award is transferable as provided hereunder, no Award granted under the
Plan, nor any interest in such Award, may be sold, assigned, conveyed,
gifted, pledged, hypothecated or otherwise transferred in any manner prior
to the vesting or lapse of any and all restrictions applicable thereto,
other than by will or the laws of descent and distribution. The Committee
may in its sole discretion grant an Award or amend an outstanding Award to
provide that the Award is transferable or assignable to a member or members
of the Employee's "immediate family," as such term is defined under
Exchange Act Rule 16a-1(e), or to a trust for the benefit solely of a
member or members of the Employee's immediate family, or to a partnership
or other entity whose only owners are members of the Employee's family,
provided that (i) no consideration is given in connection with the transfer
of such Award, and (2) following any such transfer or assignment the Award
will remain subject to substantially the same terms applicable to the Award
while held by the Employee, as modified as the Committee in its sole
discretion shall determine appropriate, and the Participant shall execute
an agreement agreeing to be bound by such terms.
10.2 Qualifying Performance Criteria. For purposes of this Plan, the
term "Qualifying Performance Criteria" shall mean any one or more of the
following performance criteria, either individually, alternatively or in
any combination, applied to either the Company as a whole or to a business
unit or subsidiary, either individually, alternatively or in any
combination, and measured either annually or cumulatively over a period of
years, on an absolute basis or relative to a pre-established target, to
previous years' results or to a designated comparison group, in each case
as specified by the Committee in the Award: (a) cash flow, (b) earnings per
share (including earnings before interest, taxes, depreciation and
amortization), (c) return on equity, (d) total stockholder return, (e)
return on capital, (f) return on assets or net assets, (g) revenue, (h)
income or net income, (i) operating income or net operating income, (j)
operating profit or net operating profit, (k) operating margin, (l) return
on operating revenue, (m) market share, (n) loan volume and (o) overhead or
other expense reduction. The Committee may appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to
exclude any of the following events that occurs during a performance
period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles
or other laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs, and (v) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No.
30 and/or in management's discussion and analysis of financial condition
and results of operations appearing in the Company's annual report to
stockholders for the applicable year.
10.3 Dividends. Unless otherwise provided by the Committee, no
adjustment shall be made in Shares issuable under Awards on account of cash
dividends which may be paid or other rights which may be issued to the
holders of Shares prior to their issuance under any Award. The Committee
shall specify whether dividends or dividend equivalent amounts shall be
paid to any Participant with respect to the Shares subject to any Award
that have not vested or been issued or that are subject to any restrictions
or conditions on the record date for dividends.
10.4 Agreements Evidencing Awards. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted, which
for purposes of this Plan shall not be affected by the fact that an Award
is contingent on subsequent stockholder approval of the Plan. The Committee
or, except to the extent prohibited under applicable law, its delegate(s)
may establish the terms of agreements evidencing Awards under this Plan and
may, but need not, require as a condition to any such agreement's
effectiveness that such agreement be executed by the Participant and that
such Participant agree to such further terms and conditions as specified in
such agreement. The grant of an Award under this Plan shall not confer any
rights upon the Participant holding such Award other than such terms, and
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subject to such conditions, as are specified in this Plan as being
applicable to such type of Award (or to all Awards) or as are expressly set
forth in the Agreement evidencing such Award.
10.5 Tandem Stock or Cash Rights. Either at the time an Award is
granted or by subsequent action, the Committee may, but need not, provide
that an Award shall contain as a term thereof, a right, either in tandem
with the other rights under the Award or as an alternative thereto, of the
Participant to receive, without payment to the Company, a number of Shares,
cash or a combination thereof, the amount of which is determined by
reference to the value of the Award.
10.6 Financing. The Committee may in its discretion provide financing
to a Participant in a principal amount sufficient to pay the purchase price
of any Award and/or to pay the amount of taxes required by law to be
withheld with respect to any Award. Any such loan shall be subject to all
applicable legal requirements and restrictions pertinent thereto, including
Regulation G promulgated by the Federal Reserve Board. The grant of an
Award shall in no way obligate the Company or the Committee to provide any
financing whatsoever in connection therewith.
SECTION 11. CHANGES IN CAPITAL STRUCTURE
11.1 If the outstanding securities of the class then subject to this
Plan are increased, decreased or exchanged for or converted into cash,
property or a different number or kind of shares or securities, or if cash,
property or shares or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification,
dividend (other than a regular, quarterly cash dividend) or other
distribution, stock split, reverse stock split, spin-off or the like, or if
substantially all of the property and assets of the Company are sold, then,
unless the terms of such transaction shall provide otherwise, the Committee
shall make appropriate and proportionate adjustments in (i) the number and
type of shares or other securities or cash or other property that may be
acquired pursuant to Awards theretofore granted under this Plan and the
exercise or settlement price of such Awards, provided, however, that such
adjustment shall be made in such a manner that will not affect the status
of any Award intended to qualify as an ISO under Code Section 422 or as
"performance based compensation" under Code Section 162(m), and (ii) the
maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
SECTION 12. CHANGE OF CONTROL
12.1 Effect of Change of Control. The Committee may through the terms
of the Award or otherwise provide that any or all of the following shall
occur, either immediately upon the Change of Control or a Change of Control
Transaction, or upon termination of the Employee's employment within
twenty-four (24) months following a Change of Control or a Change of
Control Transaction: (a) in the case of an Option, the Participant's
ability to exercise any portion of the Option not previously exercisable,
(b) in the case of an Incentive Bonus, the right to receive a payment equal
to the target amount payable or, if greater, a payment based on performance
through a date determined by the Committee prior to the Change of Control,
and (c) in the case of Shares issued in payment of any Incentive Bonus,
and/or in the case of Performance Stock or Stock Units, the lapse and
expiration on any conditions to the grant, issuance, retention, vesting or
transferability of, or any other restrictions applicable to, such Award.
The Committee also may, through the terms of the Award or otherwise,
provide for an absolute or conditional exercise, payment or lapse of
conditions or restrictions on an Award which shall only be effective if,
upon the announcement of a Change of Control Transaction, no provision is
made in such Change of Control Transaction for the exercise, payment or
lapse of conditions or restrictions on the Award, or other procedure
whereby the Participant may realize the full benefit of the Award.
12.2 Definitions. Unless the Committee or the Board shall provide
otherwise, "Change of Control" shall mean an occurrence of any of the
following events: (a) an acquisition (other than directly from the Company)
of any voting securities of the Company (the "Voting Securities") by any
"person or group"
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(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
other than an employee benefit plan of the Company, immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of more than fifty percent (50%) of the combined
voting power of the Company's then outstanding Voting Securities; (b)
approval by the stockholders of (i) a merger, consolidation or
reorganization involving the Company, unless the company resulting from
such merger, consolidation or reorganization (the "Surviving Corporation")
shall adopt or assume this Plan and a Participant's Awards under the Plan
and either (A) the stockholders of the Company immediately before such
merger, consolidation or reorganization own, directly or indirectly
immediately following such merger, consolidation or reorganization, at
least seventy-five percent (75%) of the combined voting power of the
Surviving Corporation in substantially the same proportion as their
ownership immediately before such merger, consolidation or reorganization,
or (B) at least a majority of the members of the Board of Directors of the
Surviving Corporation were directors of the Company immediately prior to
the execution of the agreement providing for such merger, consolidation or
reorganization, or (ii) a complete liquidation or dissolution of the
Company; or (c) such other events as the Committee or the Board from time
to time may specify. "Change of Control Transaction" shall include any
tender offer, offer, exchange offer, solicitation, merger, consolidation,
reorganization or other transaction which is intended to or reasonably
expected to result in a change of control.
SECTION 13. TAXES
13.1 Withholding Requirements. The Committee may make such provisions
or impose such conditions as it may deem appropriate for the withholding or
payment by the Employee or Participant, as appropriate, of any taxes which
it determines are required in connection with any Awards granted under this
Plan, and a Participant's rights in any Award are subject to satisfaction
of such conditions.
13.2 Payment of Withholding Taxes. Notwithstanding the terms of
Section 13.1 hereof, the Committee may provide in the agreement evidencing
an Award or otherwise that all or any portion of the taxes required to be
withheld by the Company or, if permitted by the Committee, desired to be
paid by the Participant, in connection with the exercise of a Non-qualified
Option or the exercise, vesting, settlement or transfer of any other Award
shall be paid or, at the election of the Participant, may be paid by the
Company withholding shares of the Company's capital stock otherwise
issuable or subject to such Award, or by the Participant delivering
previously owned shares of the Company's capital stock, in each case having
a fair market value equal to the amount required or elected to be withheld
or paid. Any such elections are subject to such conditions or procedures as
may be established by the Committee and may be subject to disapproval by
the Committee.
SECTION 14. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no such amendment shall, without
the approval of the shareholders of the Company:
(a) materially increase the maximum number of shares of Common
Stock for which Awards may be granted under the Plan;
(b) reduce the price at which Options may be granted below the
price provided for in Section 6.2;
(c) reduce or adjust downward the exercise price of outstanding
Options, whether through amendment, cancellation or replacement grants,
or any other means;
(d) impair the rights of any Award holder, without such holder's
consent, under any Award granted prior to the date of any Change of
Control;
(e) extend the term of the Plan; or
(f) change the class of persons eligible to be Participants.
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SECTION 15. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
The Plan, the grant and exercise of Awards thereunder, and the obligation
of the Company to sell, issue or deliver Shares under such Awards, shall be
subject to all applicable federal, state and foreign laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a Participant's name
or deliver any Shares prior to the completion of any registration or
qualification of such Shares under any federal, state or foreign law or any
ruling or regulation of any government body which the Committee shall, in its
sole discretion, determine to be necessary or advisable. This Plan is intended
to constitute an unfunded arrangement for a select group of management or other
key employees.
No Option shall be exercisable unless a registration statement with respect
to the Option is effective or the Company has determined that such registration
is unnecessary. Unless the Awards and Shares covered by this Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person receiving an Award
and/or Shares pursuant to any Award may be required by the Company to give a
representation in writing that such person is acquiring such Shares for his or
her own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
SECTION 16. OPTION GRANTS BY SUBSIDIARIES
In the case of a grant of an option to any eligible Employee employed by a
Subsidiary, such grant may, if the Committee so directs, be implemented by the
Company issuing any subject shares to the Subsidiary, for such lawful
consideration as the Committee may determine, upon the condition or
understanding that the Subsidiary will transfer the shares to the optionholder
in accordance with the terms of the option specified by the Committee pursuant
to the provisions of the Plan. Notwithstanding any other provision hereof, such
option may be issued by and in the name of the Subsidiary and shall be deemed
granted on such date as the Committee shall determine.
SECTION 17. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The Award agreements may contain such
provisions as the Committee may approve with reference to the effect of approved
leaves of absence.
SECTION 18. EFFECTIVENESS AND EXPIRATION OF PLAN
The Plan shall be effective on the date the Board adopts the Plan. All
Awards granted under this Plan are subject to, and may not be exercised before,
the approval of this Plan by the stockholders prior to the first anniversary
date of the effective date of the Plan, by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present, or represented
by proxy, and entitled to vote, at a meeting of the Company's stockholders or by
written consent in accordance with the laws of the State of Delaware; provided
that if such approval by the stockholders of the Company is not forthcoming, all
Awards previously granted under this Plan shall be void. No Awards shall be
granted pursuant to the Plan more than ten (10) years after the effective date
of the Plan.
SECTION 19. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as it or they may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
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SECTION 20. GOVERNING LAW
This Plan and any agreements hereunder shall be interpreted and construed
in accordance with the laws of the State of Delaware and applicable federal law.
The Committee may provide that any dispute as to any Award shall be presented
and determined in such forum as the Committee may specify, including through
binding arbitration. Any reference in this Plan or in the agreement evidencing
any Award to a provision of law or to a rule or regulation shall be deemed to
include any successor law, rule or regulation of similar effect or
applicability.
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[SALLIE MAE LOGO]
<PAGE> 55
The Board of Directors recommends a vote FOR Items [X]Please mark
1, 2, 3, 4, 5 and 6 to be voted upon at the Annual Meeting: your votes
as this
<TABLE>
<S> <C> <C> <C> <C> <C>
1. To elect all nominees FOR WITHHOLD
listed to the Board of all nominees authority for all
Directors, except as noted nominees 4. To approve an amendment to FOR AGAINST ABSTAIN
(write the names of the [ ] [ ] the SLM Holding Corporation [ ] [ ] [ ]
nominees, if any, for whom you 1993-1998 Stock Option Plan.
withhold authority to vote).
Nominees: James E. Brandon; 5. To ratify certain option FOR AGAINST ABSTAIN
Charles L. Daley; Thomas J. grants under the SLM Holding [ ] [ ] [ ]
Fitzpatrick; Edward A. Fox, Corporation 1993-1998 Stock
Dianne Suitt Gilleland; Option Plan.
Ann Torre Grant; Ronald F. Hunt;
Benjamin J. Lambert III; 6. To ratify the appointment FOR AGAINST ABSTAIN
Albert L. Lord; Marie V. of Arthur Andersen LLP as the [ ] [ ] [ ]
McDemmond; Barry A. Munitz; A. Company's independent auditors
Alexander Porter, Jr.; for the current year.
Wolfgang Schoellkopf; Steven
L. Shapiro; Randolph H.
Waterfield, Jr.
[ ] For all except:
------------
2. To approve the SLM Holding FOR AGAINST ABSTAIN
Corporation Directors [ ] [ ] [ ]
Stock Plan.
3. To approve the SLM Holding FOR AGAINST ABSTAIN
Corporation Management [ ] [ ] [ ]
Incentive Plan.
Signature: ____________________________________Signature:______________________________________________Date:__________________
</TABLE>
NOTE: Please sign exactly as name appears hereon. Please manually date this
card. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
<PAGE> 56
SLM HOLDING CORPORATION
Proxy solicited by the Board of Directors for Annual Meeting -- May 21, 1998.
Each of the undersigned, revoking all other proxies heretofore given, hereby
constitutes and appoints Albert L. Lord, J. Paul Carey and Marianne M. Keler,
and each of them, with full power of substitution, as proxy or proxies to
represent and vote all shares of Common Stock, par value $.20 per share (the
"Common Stock"), of SLM Holding Corporation (the "Company") owned by the
undersigned at the Annual Meeting and any adjournments or postponements thereof.
The shares represented hereby will be voted in accordance with the directions
given in this proxy. If not otherwise directed herein, shares represented by
this proxy will be voted FOR Item 1 (Election of Directors), FOR Item 2
(Approval of the SLM Holding Corporation Directors Stock Plan), FOR Item 3
(Approval of the SLM Holding Corporation Management Incentive Plan), FOR Item 4
(Approval of an Amendment to the SLM Holding Corporation 1993-1998 Stock Option
Plan), FOR Item 5 (Ratification of Certain Option Grants under the SLM Holding
Corporation 1993-1998 Stock Option Plan), and FOR Item 6 (Ratification of the
Appointment of Independent Auditors). If any other matters are properly brought
before the Annual Meeting, proxies will be voted on such matters as the proxies
named herein, in their sole discretion, may determine.
Please Mark, Sign, Date and Mail Promptly in the Enclosed Envelope.
