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[LOGO]
NOTICE OF
1999
ANNUAL MEETING
AND PROXY STATEMENT
YOUR VOTE IS IMPORTANT!
Please complete, sign and return the enclosed
proxy card in the enclosed envelope.
SLM HOLDING CORPORATION
11600 SALLIE MAE DRIVE
RESTON, VIRGINIA 20193
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[LOGO]
11600 Sallie Mae Drive
Reston, Virginia 20193
April 5, 1999
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 20, 1999 at 10:00 a.m. at the Sheraton Premiere at Tysons
Corner, 8661 Leesburg Pike, Vienna, Virginia 22182. 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 20.
Sincerely,
/s/ Edward A. Fox
-----------------
Edward A. Fox
CHAIRMAN OF THE BOARD OF
DIRECTORS
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SLM HOLDING CORPORATION
11600 SALLIE MAE DRIVE
RESTON, VIRGINIA 20193
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
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TIME......................... 10:00 a.m. on Thursday, May 20, 1999
PLACE........................ Sheraton Premiere at Tysons Corner
8661 Leesburg Pike
Vienna, Virginia 22182
ITEMS OF BUSINESS............ (1) to elect 15 members to the Board of Directors for a
term of one year;
(2) to ratify the appointment of Arthur Andersen LLP as
independent auditors for 1999; and
(3) to conduct other business if properly raised.
RECORD DATE.................. You can vote if you are a shareholder of record on March
22, 1999.
ANNUAL REPORT
AND FORM 10-K................ Our 1998 Annual Report and our 1998 Form 10-K, which are
not part of the proxy soliciting material, are enclosed.
PROXY VOTING................. 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. PLEASE VOTE PROMPTLY.
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Mary F. Eure
CORPORATE SECRETARY
April 5, 1999
Reston, Virginia
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SLM HOLDING CORPORATION
--------------
1999 PROXY STATEMENT
--------------
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS...................................................................................... 1
COMMON STOCK INFORMATION................................................................................... 2
General Information...................................................................................... 2
Board and Management Ownership........................................................................... 2
Principal Shareholders................................................................................... 3
PROPOSAL 1 -- ELECTION OF DIRECTORS........................................................................ 4
Information Concerning Nominees.......................................................................... 4
Meetings of the Board.................................................................................... 7
DIRECTOR REMUNERATION...................................................................................... 8
EXECUTIVE OFFICERS......................................................................................... 9
EXECUTIVE COMPENSATION..................................................................................... 10
Report of the Compensation and Personnel Committee on Executive
Compensation............................................................................................. 10
Summary Compensation Table............................................................................... 12
1998 Option Grant Table.................................................................................. 13
1998 Option Exercises and Year-End Value Table........................................................... 13
Pension Plan Table....................................................................................... 14
Employment Agreements.................................................................................... 14
STOCK PERFORMANCE GRAPH.................................................................................... 16
PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT AUDITORS.......................................................... 17
OTHER MATTERS.............................................................................................. 18
Solicitation Costs....................................................................................... 18
Shareholder Proposals.................................................................................... 18
Section 16(a) Beneficial Ownership Reporting Compliance.................................................. 18
</TABLE>
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SLM HOLDING CORPORATION
--------------
1999 PROXY STATEMENT
--------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
--------------
QUESTIONS AND ANSWERS
WHO MAY VOTE?
Only Sallie Mae shareholders who owned common stock at the close of business on
March 22, 1999, the record date for the Annual Meeting, can vote.
ON WHAT MATTERS MAY I VOTE?
At the Annual Meeting you will be asked to elect 15 members to the Board for the
upcoming year, to ratify the appointment of Arthur Andersen LLP as independent
auditors for 1999 and to vote on any other business if properly raised.
HOW ARE MY VOTES COUNTED?
In the election of directors, shares are entitled to cumulative voting, meaning
that each share of your common stock is entitled to 15 votes--one vote for each
director to be elected. If you vote in person you may cumulate your votes and
give one nominee all of your votes or distribute your votes among the nominees
in any manner. 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 for whom authority was not withheld. If votes are cast
for a nominee not specified on the Proxy Card, all other votes will be cumulated
in a manner so as to assure the election of the maximum number of the nominees
specified on the Proxy Card. Votes that are withheld will not count toward the
election of a nominee. The 15 nominees who receive the greatest number of votes
cast and entitled to be voted at the Annual Meeting will be elected.
Approval of other matters at the Annual Meeting requires an affirmative vote of
at least a majority of the votes present or represented and entitled to be voted
at the Annual Meeting, with each share of stock entitled to one vote.
Abstentions have the effect of a vote against a matter. Shares held through a
brokerage or bank account that are represented at the meeting but not voted will
not affect whether a matter is approved.
WHAT MAKES A QUORUM?
In order to transact business at the Annual Meeting, a majority of Sallie Mae's
outstanding shares of common stock eligible to vote must be represented at the
Annual Meeting, whether in person or by proxy.
HOW DO I VOTE?
You may vote by proxy or in person at the meeting. We recommend that you vote by
proxy even if you plan to attend the Annual Meeting. You can change your vote at
the meeting. If you received a Proxy Card with this proxy statement, you do not
need to take any extra steps to vote at the meeting. If your stock is held
through a brokerage or bank account and you received a voting instructions form
with this proxy statement, you need to ask your broker or bank to issue you a
proxy card if you want to vote at the meeting.
HOW DO PROXIES WORK?
Sallie Mae's Board of Directors is requesting your proxy. Giving us your proxy
means that you authorize us to vote your shares at the Annual Meeting in the
manner you direct. If you appear in Sallie Mae's stock records as a shareholder,
a proxy card is included with this proxy statement. If you hold your Sallie Mae
stock through a brokerage or bank account, then your broker or bank has included
a voting instructions form that you may use to instruct them how to vote your
shares. If you sign and return the enclosed proxy card or voting instructions
form but do not specify how to vote, we will vote your shares in favor of the
director nominees specified on the accompanying Proxy Card, in favor of the
ratification of the appointment of Arthur Andersen LLP and, as we deem
appropriate, on any other business properly raised.
A shareholder giving a proxy has the power to revoke it prior to its exercise by
voting in person at the Annual Meeting, by giving written notice to the
Corporate Secretary prior to the meeting or by giving a later dated proxy.
1
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COMMON STOCK INFORMATION
GENERAL INFORMATION
The Company's 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").
At December 31, 1998, 164,126,653 shares of common stock, par value $.20
per share, were outstanding. At March 22, 1999, the record date, 162,974,373
shares of common stock were outstanding and eligible to be voted. The common
stock is listed on the New York Stock Exchange, under the symbol "SLM."
BOARD AND MANAGEMENT OWNERSHIP
The following table provides information regarding shares owned by
Nominees and management at January 31, 1999. 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 January 31, 1999.
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MAY BE POSITIONS(4)
ACQUIRED --------------------
WITHIN TOTAL TOTAL
60 BENEFICIAL OTHER EQUITY
OWNED(1) DAYS(2) OWNERSHIP(3) EQUITY INVESTMENT
--------- --------- ----------- --------- ---------
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DIRECTOR NOMINEES
James E. Brandon............................... 5,445 52,224 57,669 0 57,669
Charles L. Daley............................... 19,888 49,945 69,833 0 69,833
William M. Diefenderfer, III................... 560 3,611 4,171 0 4,171
Edward A. Fox.................................. 189,000 52,500 241,500 0 241,500
Diane Suitt Gilleland.......................... 3,456 51,121 54,577 0 54,577
Ann Torre Grant (5)............................ 1,400 35,108 36,508 0 36,508
Ronald F. Hunt(5).............................. 16,646 42,469 59,115 0 59,115
Benjamin J. Lambert, III....................... 2,388 38,194 40,582 0 40,582
Albert L. Lord................................. 115,754 355,440 471,194 9,581 480,775
Marie V. McDemmond............................. 0 35,000 35,000 0 35,000
Barry A. Munitz................................ 0 35,000 35,000 0 35,000
A. Alexander Porter, Jr.(5).................... 110,691 49,945 160,636 0 160,636
Wolfgang Schoellkopf(5)........................ 3,500 35,000 38,500 0 38,500
Steven L. Shapiro.............................. 8,288 51,542 59,830 0 59,830
Randolph H. Waterfield, Jr.(5)................. 2,275 51,168 53,443 0 53,443
NAMED EXECUTIVE OFFICERS
Albert L. Lord................................. 115,754 355,440 471,194 9,581 480,775
J. Paul Carey.................................. 46,159 117,036 163,195 3,574 166,769
Anthony P. Dolanski............................ 0 116,667 116,667 6,275 122,942
Thomas J. Fitzpatrick.......................... 80,496 35,000 115,496 13,700 129,196
Robert R. Levine............................... 25,589 109,886 135,475 0 135,475
DIRECTORS AND EXECUTIVE OFFICERS AS A
GROUP(6)..................................... 684,998 1,535,567 2,220,565 42,177 2,262,742
</TABLE>
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(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 January 31, 1999. 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 and
shares that may be acquired within 60 days through the exercise of stock
options.
(3) Consists of total of columns 1 and 2.
(4) Consists of share equivalents invested in the Officer Deferred Compensation
Plan.
(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.
Ms. Grant's shares shown are held by
2
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her spouse in an IRA Account. Mr. Hunt's shares shown include 525 shares
held solely in his wife's name. Mr. Waterfield's shares shown include 700
shares held solely in his wife's name.
(6) Includes the Director Nominees and Named Executive Officers listed above
plus two other executive officers.
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,
1998. 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, 1998 and March 22, 1999.
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<CAPTION>
OWNERSHIP
PERCENTAGE AT
DECEMBER 31,
PRINCIPAL HOLDER AND ADDRESS SHARES(1) 1998
- ------------------------------------ --------- ---------------
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FMR Corp (2) 14,536,309 8.77%
82 Devonshire Street
Boston, MA 02109
Capital Research and Management 14,287,000 8.62%
Company (3)
333 South Hope Street
55(th) Floor
Los Angeles, CA 90071
Capital Guardian Trust Companies(4) 12,928,440 7.80%
333 South Hope Street
55(th) Floor
Los Angeles, CA 90071
</TABLE>
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(1) Except as indicated, each institution has sole investment power with respect
to the shares listed.
(2) Fidelity Management and Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp., beneficially owns 13,872,910 or 8.372% of the
shares included herein. FMR Corp. has the power to vote 7,700 of these
shares. Fidelity Management Trust Company, a wholly owned subsidiary of FMR
Corp., beneficially owns 409,969 or 0.247% of the shares included herein.
FMR Corp. has sole power to vote 342,169 of these 409,969 shares. Fidelity
International Limited beneficially owns 261,330 of the shares included
herein (7,900 of which are also beneficially owned by Fidelity), over which
FMR has sole voting power.
(3) Capital Research and Management Company, a registered investment adviser,
does not have sole or shared power to vote any of these shares.
(4) Capital Guardian Trust Company has sole power to vote 10,472,540 of these
shares. Capital International Limited, Capital International S.A. and
Capital International, Inc. are affiliates of Capital Guardian Trust Company
and have sole power to vote and investment power over 946,950, 726,040
shares and 283,350, respectively, which shares are not included above. Each
entity disclaims membership in a group for all purposes other than making a
joint filing on Schedule 13G.
3
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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 except for Mr. Fitzpatrick, who will cease to serve as a
director as a result of his joining the Company as an executive. The Nominations
and Governance Committee recommended, and the Board nominated, William M.
Diefenderfer, III to fill the vacancy created by Mr. Fitzpatrick's ceasing to
serve as a director. Mr. Diefenderfer currently serves as a director of the GSE.
As indicated above, shareholders have the right to elect directors by
cumulative voting. Unless instructed to the contrary, the proxy agents named in
the Company's 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 agents
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 January 31,
1999 is set forth above under "Common Stock Information--Board and Management
Ownership." There are no family relationships among 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.
4
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DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
JAMES E. BRANDON, ESQ. Attorney and Certified Public Accountant. Mr. Brandon is
President and director of the following private companies:
Age 72 National Cattle Co., Inc., Automated Electronics Corp.,
Director since July 5, 1995 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. 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
Associates, Inc., a real estate finance company, since 1992.
Age 66 Mr. Daley was Executive Vice President and Chief Operating
Director since July 5, 1995 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.
WILLIAM M. DIEFENDERFER, III A partner with the law firm of Diefenderfer, Hoover & Wood
in Pittsburgh, PA. Prior to joining that firm, Mr.
Age 53 Diefenderfer was Deputy Director of the Office of Management
and Budget from 1989 to 1991 by appointment of President
Bush. In addition, during that period Mr. Diefenderfer
served on the Deputies Committee of the National Security
Council, as Chairman of the President's Council on
Management and Integrity, and as Chairman of the President's
Council on Improvement and Efficiency. Mr. Diefenderfer has
been a director of the GSE since August of 1997, a director
of Chart House Enterprises since 1991, and was a member of
the board of Trustees of Dickinson College from 1992 to
1994.
EDWARD A. FOX Mr. Fox retired from the GSE in 1990 after serving as its
President and Chief Executive Officer since its inception in
Age 62 1973. From 1990 until 1994, he was the Dean of the Amos Tuck
Director since July 31, 1997 School of Business Administration at Dartmouth College. Mr.
Fox is a director of Delphi Financial Group, Delphi
International Ltd., Greenwich Capital Management and New
England Life Insurance Co., and is Chairman of the Board of
Eldorado Bancshares Inc. 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
(1998-Present). Previously, Dr. Gilleland was Senior Fellow,
Age 52 American Council on Education, Washington, DC (1997);
Director since March 25, 1994 Director (1990-1997) and Chief Finance Officer (1986-1990)
of Arkansas Higher Education. 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.
</TABLE>
5
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DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
ANN TORRE GRANT Strategic and Financial Consultant. Previously, Ms. Grant
was Executive Vice President, Chief Financial Officer and
Age 40 Treasurer of NHP Incorporated, a broad-based, national real
Director since July 31, 1997 estate services firm, from 1995 until the company was
acquired in 1997. Ms. Grant was Vice President and Treasurer
of USAirways from 1991 until 1995. She is currently a
director of the GSE, Franklin Mutual Series, a $25 billion
family of mutual funds, Condor Technology Solutions, Inc.
and U.S.A. Floral, Inc.
RONALD F. HUNT, ESQ. Attorney in New Bern, North Carolina, where he has resided
since 1990. Mr. Hunt retired from the GSE in 1990 after
Age 55 serving in a number of executive positions there, beginning
Director since July 5, 1995 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 and other services for participants
in the FFELP.
BENJAMIN J. LAMBERT, III Senator of the Commonwealth of Virginia since 1986. As a
Senator, Dr. Lambert has focused on education issues and is
Age 61 Chairman of the General Government and Compensation
Director since July 5, 1995 Subcommittee of the Senate's Finance Committee. Dr. Lambert
has also been self-employed as an optometrist since1962. 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. Dr. Lambert is Secretary of the Medical College of
Virginia Hospital Authority Board.
ALBERT L. LORD Vice Chairman and Chief Executive Officer of the Company
(1997-present). Previously, Mr. Lord was President and
Age 53 principal shareholder of LCL Ltd., a Washington D.C. firm
Director since July 5, 1996 that provided 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
December 1988 to June 1997, Dr. McDemmond served Florida
Age 52 Atlantic University in various capacities, most recently as
Director since July 31, 1997 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
Trust, Los Angeles, CA. Dr. Munitz formerly served as
Age 57 Chancellor and Chief Executive Officer of the California
Director since July 31, 1997 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 served as a director of SunAmerica
Corp.
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6
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DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
A. ALEXANDER PORTER, JR. Co-Founder and President of Porter, Felleman Inc., an
investment management company, since 1976. He is also
Age 60 General Partner of Amici Associates, L.P. since 1976 and of
Director since July 5, 1995 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 Partner, Ramius Capital Group. Formerly, Mr. Schoellkopf was
Vice Chairman and Chief Financial Officer of First Fidelity
Age 66 Bancorporation from 1990 until 1996. From 1963 to 1988, Mr.
Director since July 31, 1997 Schoellkopf was with The Chase Manhattan Bank, last as
Executive Vice President and Treasurer. Mr. Schoellkopf is a
director of PMU Capital Management, LLC, Inner-City
Scholarship Fund and Marymount University.
STEVEN L. SHAPIRO Certified Public Accountant and Personal Financial
Specialist. Mr. Shapiro is Chairman of Alloy, Silverstein,
Age 58 Shapiro, Adams, Mulford & Co., an accounting firm, where he
Director since July 5, 1995 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 and N.J. Society of CPAs. Mr. Shapiro
also serves on the board of the West Jersey Hospital
Foundation.
RANDOLPH H. WATERFIELD, JR. Certified public accountant and self-employed accounting
consultant since 1990. Prior to 1990, Mr. Waterfield was
Age 67 with Ernst & Young for 40 years, during which time he served
Director since July 5, 1995 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. During 1998, six
meetings of the Board were held. Each of the incumbent directors attended at
least 75% of the total number of meetings of the Board and committees of which
they were members during 1998.
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
same day as the regular meetings of the Board and on such other dates as may be
necessary between regular meetings. Each of the Board committees has a charter
that has been approved by the Board and that sets forth the respective
committee's functions and responsibilities. Shareholders may obtain a copy of a
committee charter by contacting the Corporate Secretary. The present standing
committees of the Board 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 1998 are set forth below.
7
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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 any 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 six meetings in 1998, is as follows: Ann Torre Grant, Chairman; James E.
Brandon, Vice Chairman; Benjamin J. Lambert, III; Marie V. McDemmond; A.
Alexander Porter, Jr.; and Thomas J. Fitzpatrick (non-voting since October 1,
1998).
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.
The Company's By-Laws provide that 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
eleven meetings in 1998, is as follows: Charles L. Daley, Chairman; Barry A.
Munitz, Vice Chairman; Ann Torre Grant; Wolfgang Schoellkopf; and Steven L.
Shapiro.
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 five
meetings in 1998, is as follows: A. Alexander Porter, Jr., Chairman and Lead
Independent Director; Benjamin J. Lambert, III, Vice Chairman; Thomas J.
Fitzpatrick (non-voting since October 1, 1998); Diane Suitt Gilleland; Marie V.
McDemmond; and Randolph H. Waterfield, Jr. In addition, the Nomination and
Governance Committee has invited Ronald F. Hunt to attend its meetings as a
non-voting participant.
DIRECTOR REMUNERATION
At the time of the Reorganization, 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.
8
<PAGE>
The Company did not pay its non-employee directors any compensation in
1998. In 1997, each non-employee director received a two-part option grant. The
first component of the option grants was 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.
Pursuant to this arrangement, on August 13, 1997 each non-employee director
other than the Chairman received an option grant covering a total of 105,000
shares, and the Chairman received an option grant covering a total of 157,500
shares. 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, for five trading days. 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 were approved by the shareholders at last year's Annual Meeting,
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 1998. Mr. Lord who serves as Chief Executive
Officer and as Vice-Chairman on the Board, receives no separate compensation for
his service on the Board and was not a recipient of the above-described options.
In connection with Mr. Fitzpatrick joining the Company as an executive officer,
the Company canceled a portion of his non-employee director options covering
33,409 shares.
EXECUTIVE OFFICERS
The executive officers of the Company at December 31, 1998 and their
ages at March 22, 1999, titles, years of employment with the Company and its
predecessor, the GSE, and previous experience, including principal occupations
for the past five years, are as follows:
Albert L. Lord, 53, 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. From
July 1995 until August 1997, Mr. Lord was a director of the GSE.
J. Paul Carey, 40, Executive Vice President, 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.
Anthony P. Dolanski, 53, Executive Vice President, was appointed as an
executive officer of the Company on July 1, 1998. Prior to joining the Company,
Mr. Dolanski was a partner with KPMG Peat Marwick LLP where he was employed in
various capacities since 1968. Mr. Dolanski is also a director of the GSE.
Thomas J. Fitzpatrick, 50, was named Executive Vice President, in
September 1998. Before joining the Company's executive management team, Mr.
Fitzpatrick was the founder, President, Chief Executive Officer and Director of
Equity One, Inc., a consumer lending company, since 1990. Mr. Fitzpatrick was
Vice Chairman of Consumer Credit Co. from 1988 until 1989. From 1983 until 1988,
9
<PAGE>
Mr. Fitzpatrick was President and Chief Operating Officer of Manufactures
Hanover Consumer Services, where he had been employed since 1979. He currently
serves on the board of directors of MAB Paints.
Robert R. Levine, 43, 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.
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 1998 stock option grants; (4) a
valuation of option exercises during the year and remaining option holdings; and
(5) a description of pension plan benefits and certain employment and severance
arrangements.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICY. The Company's compensation policy relies on
equity-based compensation and objective performance criteria to further the goal
of creating a broad organizational focus on enhancing shareholder value. To
implement this, the Compensation Committee has followed a policy that seeks to
strike a balance among base salaries, performance-oriented annual bonus targets
and performance-accelerated stock and stock option awards, to provide a total
compensation potential that is competitive with that offered at peer companies.
The Company's compensation programs in 1998 also reflect the continued
development of the Company's executive management team, including the addition
of two new Executive Vice Presidents whose compensation is established pursuant
to employment agreements with the Company.
BASE SALARY. In early 1998, as the Company's management team was
implementing a new business plan, the Compensation Committee set base salaries
at levels significantly below those at peer companies and determined to review
executive officer salary levels annually in the context of its evaluation of
performance and goal attainment. For these purposes, the Company developed a
group of peer S&P 500 financial services companies, which includes most of the
companies identified under the "Stock Performance Graph" below. Consistent with
this determination and as part of its post-year end review of compensation, the
Compensation Committee adjusted Mr. Lord's annual salary for 1999 to $650,000,
which is below the 25th percentile for salaries paid to chief executive officers
at peer companies. In connection with hiring its two new Executive Vice
Presidents, the Compensation Committee approved annual salaries of $400,000, and
in January 1999 the Compensation Committee set Mr. Carey's salary at the same
level.
PERFORMANCE BONUSES. The Compensation Committee believes that executive
officer bonuses should be tied to satisfaction of specified performance
criteria. For 1998, the Compensation Committee established a bonus program under
the shareholder-approved Management Incentive Plan, pursuant to which bonuses
could be earned based in part on corporate performance, as judged under
specified criteria against preestablished performance goals, and in part on
individual performance, as judged based on goals discussed with each executive
early in the fiscal year. For the Chief Executive Officer and executive vice
presidents, the maximum bonus payable under the program was set at three times
salary. Under the 1998 bonus program, corporate performance goals were
established using the following five performance criteria: earnings per share
growth, net income growth, market share growth, reductions in average cash
acquisition costs for student loans and reductions in overhead expenses.
Beginning with the third quarter of 1998, the Company commenced presenting
financial results on a "cash" basis. Cash basis earnings exclude any gain on
sale from securitizations and any subsequent servicing or securitization
revenue. Instead, the earnings from the student loans in the securitization
trusts and related financing costs are
10
<PAGE>
reflected over the life of the underlying pool of student loans. Consistent with
this approach, the Company adjusted the bonus performance goals to measure
earnings per share growth and net income grown on a cash basis. Under these
performance criteria, Mr. Lord and the other executive officers earned a
corporate performance-based bonus equal to 85% of their respective salaries. The
Compensation Committee also awarded Mr. Lord an individual performance bonus
equal to 100% of his salary, based on his management of the Company through the
Congressional reauthorization of the Higher Education Act and his
accomplishments in assembling the executive management team and implementing the
Company's new business plan. In connection with the Compensation Committee's
decision to increase Mr. Lord's salary, it also awarded him a discretionary
bonus so that his total annual bonus for 1998 equaled $1 million. The
Compensation Committee approved other executive officer individual performance
bonuses at levels ranging from 75% to 100% of their respective salaries, as
recommended by Mr. Lord based on his assessment of individual performance and on
relative compensation levels within the executive officer ranks and, in the case
of Messrs. Dolanski's and Fitzpatrick's, prorated to reflect that they were not
salaried executives of the Company for the full fiscal year. The Compensation
Committee also approved transition payments to Messrs. Dolanski and Fitzpatrick
and awarded a discretionary bonus to Mr. Carey in connection with its decision
in January 1999 to increase his salary. Consistent with the Compensation
Committee's preference for equity-oriented compensation, 40% of each executive
officer's bonus (on a pre-tax or after-tax basis at the election of the
executive) was paid in the form of Common Stock. In addition, executive officers
could elect to defer receipt of these shares.
PERFORMANCE-BASED STOCK COMPENSATION. 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 the most significant element of compensation at risk
while presenting positive upside potential. In connection with implementation of
the Company's new business plan, in 1997 the Compensation Committee granted
options to the Company's executive officers representing at least two-year
grants to motivate and reward executives for performance. Accordingly, except in
the case of new hires and as discussed in this paragraph, the Compensation
Committee generally did not grant options to executive officers in 1998. In
1998, the Compensation Committee granted options for 500,000 shares to each of
Messrs. Dolanski and Fitzpatrick in connection with their being recruited to
join the Company as Executive Vice Presidents, and granted an option for 150,000
shares to Mr. Carey so that his total option holdings equaled the grants of the
other Executive Vice Presidents. All of the options granted to the executive
officers in 1997 and 1998 vest in one-third increments upon the Common Stock
reaching a closing price of at least $42.86, $57.14 and $71.43, respectively,
for five trading days or upon the eighth anniversary of their grant, subject to
the executive's continued service with the Company. Options granted to Messrs.
Dolanski and Fitzpatrick in 1998 in addition have a minimum one year service
requirement for vesting. In addition, the Compensation Committee approved grants
of 75,000 shares of restricted stock to Mr. Fitzpatrick and 25,000 shares of
restricted stock to Mr. Carey, in each case with vesting criteria based on
performance goals tied to their respective business responsibilities.
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 compensation." The Compensation Committee generally attempts
to have significant aspects of performance-based compensation that it awards
qualify under Section 162(m), although it recognizes that situations may arise
where other considerations may prevail over obtaining such qualification. The
Compensation Committee believes that the compensation that the Company's
executive officers will realize upon exercise of stock options or upon vesting
of restricted stock granted to them in 1997 and 1998 will qualify as
"performance-based compensation," and therefore will not be subject to the $1
million limitation.
COMPENSATION AND PERSONNEL COMMITTEE
<TABLE>
<S> <C>
Charles L. Daley, Chairman Barry A. Munitz, Vice Chairman
Ann Torre Grant Wolfgang Schoellkopf
Steven L. Shapiro
</TABLE>
11
<PAGE>
SUMMARY COMPENSATION TABLE
The tables below set forth certain compensation information as to (1)
the Company's chief executive officer and (2) the Company's next four highest
compensated executive officers employed by the Company at the end of the 1998
fiscal year (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL
NAME AND PRINCIPAL -------------------------------- STOCK UNDERLYING OTHER
POSITION YEAR SALARY BONUS(1) AWARD($)(2) OPTIONS COMPENSATION(3)
- -------------------------------------------------- --------- --------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert L. Lord.................................... 1998 $ 325,000 $1,000,000 -- -- $ 20,077
Chief Executive officer 1997 104,167(4) 600,000 -- 1,053,500 5,645
and Vice Chairman of
the Board of Directors
J. Paul Carey..................................... 1998 275,000 600,000 1,118,750 150,000 16,962
Executive Vice 1997 83,333(4) 400,000 -- 350,000 4,523
President,
Anthony P. Dolanski............................... 1998 200,000(5) 655,000 -- 500,000 --
Executive Vice
President
Thomas J. Fitzpatrick............................. 1998 100,000(6) 748,700(7) 3,425,480 500,000 --
Executive Vice
President
Robert R. Levine.................................. 1998 200,000 314,500 -- -- 12,376
Senior Vice President, 1997 163,000(8) 250,000 -- 249,886 9,767
Servicing
</TABLE>
- ----------
(1) Bonus is the amount paid for the year indicated and is typically paid in the
following year. Forty percent of the bonus was paid with shares of the
Company's Common Stock.
(2) Amounts reflect the grant date value of 25,000 and 75,000 shares of
restricted stock awarded to Messrs. Carey and Fitzpatrick, respectively, for
1998, which had a value of $1,200,000 and $3,600,000, respectively, based
upon the Company's stock price as of December 31, 1998. No other Named
Executive Officers held any restricted stock as of the end of the fiscal
year. One half of each of Messr. Carey's and Fitzpatrick's shares of
restricted stock vests if the Company's total servicing and acquisition
costs relative to the average dollar amount of loans serviced achieves a
specified target for two consecutive fiscal quarters. The other half vests
if the Company's non-GSE affiliates achieve a specified purchase and
origination volume by December 10, 2001. In addition, the restricted stock
vests upon a change in control of the Company. Dividends will be paid on the
restricted stock.
(3) Consists of employer matching contributions under the Sallie Mae 401(k)
Savings Plan and the Sallie Mae Supplemental 401(k) Savings Plan.
(4) 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.
(5) Salary paid for service from July 1 through December 31, 1998, at a salary
of $400,000 per year for Mr. Dolanski.
(6) Salary paid for service from October 1 through December 31, 1998, at a
salary of $400,000 per year for Mr. Fitzpatrick
(7) Included in this amount is a payment of $165,700 by the Company to Mr.
Fitzpatrick to reimburse him for the tax liability he incurred as a result
of his early withdrawal from the Equity One, Inc. Deferred Compensation
Plan.
(8) Reflects salary for all of 1997.
12
<PAGE>
1998 OPTION GRANT TABLE
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
MARKET UNDERLYING EMPLOYEES GRANT DATE
GRANT EXPIRATION EXERCISE PRICE ON OPTIONS IN FISCAL PRESENT
NAME DATE DATE PRICE GRANT DATE GRANTED YEAR VALUE
- ----------------------- --------- ----------- --------- ----------- ----------- ----------- ----------
J. Paul Carey.......... 07/16/98 07/16/08 $ 49.0000 $ 49.0000 150,000 5.16% $2,030,700
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony P. Dolanski.... 01/23/98 01/23/08 $ 40.5000 $ 40.5000 500,000 17.21% $5,330,500
Thomas J.
Fitzpatrick.......... 07/16/98 07/16/08 $ 49.0000 $ 49.0000 500,000 17.21% $6,769,000
</TABLE>
The table above sets forth information on stock options granted to the
Named Executive Officers for 1998. Options vest, but not before the first
anniversary of their date of grant, and upon the Common Stock reaching a closing
price of at least $42.86, $57.14 and $71.43, respectively, on five trading days.
The options also vest on the eighth anniversary of their grant I.E., on January
23, 2006 and July 16, 2006, subject to the optionee's continued service with the
Company. In addition, the options vest upon a change in control of the Company.
"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 5.91% used for the January grants to 5.74%
used for the July grants, a future dividend yield ranging from 2.30% used for
the January grants to 2.06% used for the July grants, and annual stock price
volatility ranging from 30.98% used for the January grants to 31.73% used for
the July grants based on 5-year historical time-weighted averages. The 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.
1998 OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/98 OPTIONS AT 12/31/98
ACQUIRED ON VALUE ------------------------ -----------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Albert L. Lord............. 0 $ 0.00 353,500 700,000 $3,091,245 $6,062,490
J. Paul Carey.............. 0 $ 0.00 116,666 383,334 $1,010,409 $2,020,836
Anthony P. Dolanski........ 0 $ 0.00 0 500,000 $ 0 $3,750,000
Thomas J. Fitzpatrick...... 0 $ 0.00 35,000 536,591 $ 303,125 $ 316,904
Robert R. Levine........... 0 $ 0.00 109,886 140,000 $1,301,065 $1,212,498
</TABLE>
None of the Named Executive Officers exercised stock options in 1998.
The table above sets forth information on the number and the value of
exercisable and unexercisable stock options held by the Named Executive Officers
as of the fiscal year-end (calculated by the difference between the Company's
fiscal year-end stock price and the option's exercise price).
13
<PAGE>
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............... $ 79,883 $ 106,511 $ 133,138 $ 159,766
300,000............... 96,383 128,511 160,638 192,766
350,000............... 112,883 150,511 188,138 225,766
400,000............... 129,383 172,511 215,635 258,766
450,000............... 145,883 194,511 243,138 291,766
500,000............... 162,383 216,511 270,638 324,766
550,000............... 178,883 238,511 298,138 357,766
600,000............... 195,383 260,511 325,638 390,766
650,000............... 211,883 282,511 353,138 423,766
700,000............... 228,383 304,511 380,638 456,766
750,000............... 244,883 326,511 408,138 489,766
800,000............... 261,383 348,511 435,638 522,766
</TABLE>
Amounts in the table above represent the annual annuity payable for life
to employees retiring in 1999 at age 62. The credited years of service as of
December 31, 1998 for the individuals named in the Summary Compensation Table
are: Mr. Lord 13 years, 9 months; Mr. Carey 13 years, 3 months; Mr. Dolanski,
six months; Mr. Fitzpatrick, three months; Mr. Levine 17 years, 9 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.
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.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Dolanski
and Fitzpatrick. Each of these agreements provides for a base annual salary of
$400,000 and for option grants to purchase 500,000 shares. Mr. Dolanski's
agreement provides for a term commencing on July 1, 1998 and continuing through
March 31, 2001 and Mr. Fitzpatrick's agreement provides for a term commencing on
October 1,
14
<PAGE>
1998 and continuing through September 30, 2001, in each case unless terminated
earlier in accordance with certain specified events.
Each agreement provides for certain payments if the Company terminates
the executive's employment or if his employment is terminated by reason of death
or disability or within 18 months after a "change in control" of the Company.
The payment amount equals $4.0 million if Mr. Dolanski's or Mr. Fitzpatrick's
employment so terminates prior to March 31, 1999 or September 1, 1999,
respectively; $3.0 million if the date of such termination occurs during the
following year; and $2.0 million if the date of such termination occurs during
the final year of the agreements.
The agreement with Mr. Dolanski provides for an annual retirement
supplement so that his retirement benefits from the Company under all plans
equal $250,000 per year, calculated as a straight single life annuity in the
event that his employment is terminated by reason of death, disability,
involuntary termination or following a change in control of the Company or the
term of the agreement. In addition, the agreement provides that Mr. Dolanski is
entitled to receive a lesser annual retirement supplement in the event of a
voluntary termination of employment during the term of the agreement. The
agreement with Mr. Fitzpatrick provides for an annual retirement supplement in
the event that his employment is terminated by reason of death, disability,
involuntary termination or following a change in control of the Company or the
term of the agreement, so that his retirement benefits equal the greater of what
is provided for under all of the Company's retirement plans or what he would
have received under the retirement plans of his prior employer.
Each agreement contains an agreement not to compete with the Company or
its affiliates for a period of two years following termination of employment for
any reason.
15
<PAGE>
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, 1993 and
reinvestment of dividends through December 31, 1998.
SLM HOLDING CORPORATION
FIVE YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS SLM HOLDING CORPORATION S&P FINANCIAL - MISC(1)(2) S&P 500 INDEX(2)
<S> <C> <C> <C>
12/31/93 100.0 100.0 100.0
12/31/94 75.4 96.3 101.4
12/31/95 157.9 154.2 139.3
12/31/96 227.4 201.0 171.2
12/31/97 344.7 306.5 228.3
12/31/98 421.9 401.0 293.4
</TABLE>
<TABLE>
<CAPTION>
Base Period
Company/Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
SLM Holding Corporation 100.0 75.4 157.9 227.4 344.7 421.9
S&P Financial--Misc(1)(2) 100.0 96.3 154.2 201.0 306.5 401.0
S&P 500 Index(2) 100.0 101.4 139.3 171.2 228.3 293.4
</TABLE>
--------------
(1) Companies included in Standard & Poor's Financial-Miscellaneous Index
are:
American Express, American General Finance, Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, Franklin
Resources Inc., MBIA Inc., MBNA Corporation, Morgan Stanley Dean Witter,
SLM Holding Corporation, and Transamerica Corporation
(2) SOURCE: Bloomberg Comparative Return Table
16
<PAGE>
PROPOSAL 2 -- 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 1999. 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 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 Andersen 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 1999. 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 1999.
17
<PAGE>
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 and ratification of the appointment of independent auditors for 1999.
In addition, the Company has not been notified of any other business that is
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.
SHAREHOLDER PROPOSALS
A shareholder who intends to introduce a proposal for consideration at
the Company's year 2000 Annual Meeting may seek to have that proposal and a
statement in support of the proposal included in the Company's Proxy Statement
if the proposal relates to a subject that is permitted under U.S. Securities and
Exchange Commission ("SEC") Rule 14a-8. To qualify for this, the shareholder
must submit the proposal and supporting statement to the Company not later than
December 5, 1999 and must satisfy the other requirements of Rule 14a-8. The
submission of a shareholder proposal does not guarantee that it will be
included.
A shareholder may otherwise propose business for consideration or
nominate persons for election to the Board of Directors, in compliance with
federal proxy rules, applicable state law and other legal requirements and
without seeking to have the proposal included in the Company's Proxy Statement
pursuant to Rule 14a-8. The Company's Bylaws provide that any such proposals or
nominations must be submitted to the Company between February 20, 2000 and April
20, 2000 in order to be considered at the Company's year 2000 Annual Meeting and
must satisfy the other requirements with respect to such proposals contained in
the Company's Bylaws. If a shareholder properly submits a proposal between
February 20, 2000 and April 20, 2000 but fails to comply with the requirements
of SEC Rule 14a-4, the Company may exercise discretionary voting authority under
proxies it solicits to vote on any such proposal.
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
1998 all of the Company's executive officers and directors timely filed all
required reports under Section 16.
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