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 Section 240.14a-11(c) or Section
240.14a-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.
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(3) Per unit price or other underlying value of transaction computed
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/ / Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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[LOGO]
NOTICE OF
2000
ANNUAL MEETING
AND PROXY STATEMENT
YOUR VOTE IS IMPORTANT!
Please complete and return the enclosed
proxy card in the enclosed envelope
or vote by phone or over the Internet.
SLM HOLDING CORPORATION
11600 SALLIE MAE DRIVE
RESTON, VIRGINIA 20193
[LOGO]
11600 Sallie Mae Drive
Reston, Virginia 20193
April 3, 2000
MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 2000
Dear Shareholder:
You are invited to attend SLM Holding Corporation's Annual Meeting of
Shareholders on Thursday, May 18, 2000 at 10:00 a.m. at the Company's offices
located at 11600 Sallie Mae Drive, Reston, Virginia 20193. 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 VOTE YOUR PROXY AT YOUR EARLIEST
CONVENIENCE. This will help establish a quorum for the meeting 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.
We look forward to seeing you on May 18.
Sincerely,
/s/ Edward A. Fox
-----------------
Edward A. Fox
CHAIRMAN OF THE BOARD OF
DIRECTORS
SLM HOLDING CORPORATION
11600 SALLIE MAE DRIVE
RESTON, VIRGINIA 20193
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2000
---------------------------------------------------
TIME................................. - 10:00 a.m. on Thursday, May 18, 2000
PLACE................................ - 11600 Sallie Mae Drive
Reston, Virginia 20193
ITEMS OF BUSINESS.................... At the Annual Meeting, shareholders will be asked to vote
on the following items:
(1) Amend the Certificate of Incorporation to change the
size of the Board of Directors and to permit the Board of
Directors to fill director vacancies;
(2) Elect the Board of Directors for a term of one year;
(3) Amend the SLM Holding Corporation Directors Stock Plan
(the "Directors Stock Plan") to increase the number of
shares authorized under the Directors Stock Plan and
to change the calculation of remaining authorized
shares;
(4) Amend the SLM Holding Corporation Management Incentive
Plan (the "Management Incentive Plan") to increase the
number of shares authorized under the Management
Incentive Plan and to change the calculation of
remaining authorized shares;
(5) Ratify the appointment of Arthur Andersen LLP as
independent auditors for 2000; and
(6) Conduct other business if properly introduced.
RECORD DATE.......................... - You can vote if you are a shareholder on March 20, 2000.
ANNUAL REPORT
AND FORM 10-K........................ - Our 1999 Annual Report and our 1999 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 vote your proxy at your earliest convenience to be sure
your vote is received and counted. You may vote by mail,
telephone or over the Internet, depending on how your
share ownership is recorded. Voting by any of these
means will help avoid the cost of further solicitation.
If you plan to attend the Annual Meeting, please check
the box on the proxy card, make the appropriate
telephone or Internet response or advise my office
directly at (703) 810-7567.
Mary F. Eure
CORPORATE SECRETARY
April 3, 2000
SLM HOLDING CORPORATION
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2000 PROXY STATEMENT
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TABLE OF CONTENTS
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PAGE
--------
QUESTIONS AND ANSWERS....................................... 1
PROPOSAL 1 -- AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION............................................. 3
PROPOSAL 2 -- ELECTION OF DIRECTORS......................... 4
Information Concerning Nominees........................... 4
Meetings of the Board..................................... 8
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO INCREASE SHARE
AUTHORIZATION AND TO CHANGE THE CALCULATION OF REMAINING
AUTHORIZED SHARES FOR THE SLM HOLDING CORPORATION
DIRECTORS STOCK PLAN...................................... 9
PROPOSAL 4 -- APPROVAL OF AMENDMENT TO INCREASE SHARE
AUTHORIZATION AND TO CHANGE THE CALCULATION OF REMAINING
AUTHORIZED SHARES FOR THE SLM HOLDING CORPORATION
MANAGEMENT INCENTIVE PLAN................................. 10
PROPOSAL 5 -- APPOINTMENT OF INDEPENDENT AUDITORS........... 12
COMMON STOCK INFORMATION.................................... 12
General Information....................................... 12
Board and Management Ownership............................ 13
Principal Shareholders.................................... 14
DIRECTOR COMPENSATION....................................... 14
EXECUTIVE OFFICERS.......................................... 15
EXECUTIVE COMPENSATION...................................... 16
Report of the Compensation and Personnel Committee on
Executive
Compensation.............................................. 16
Summary Compensation Table................................ 18
1999 Option Grant Table................................... 19
1999 Option Exercises and Year-End Value Table............ 19
Pension Plan Benefits..................................... 19
Employment Agreements..................................... 20
Certain Relationships and Related Transactions............ 21
STOCK PERFORMANCE GRAPH..................................... 22
OTHER MATTERS............................................... 23
Solicitation Costs........................................ 23
Shareholder Proposals for 2001 Annual Meeting............. 23
Section 16(a) Beneficial Ownership Reporting Compliance... 23
SLM HOLDING CORPORATION
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QUESTIONS AND ANSWERS ABOUT VOTING
WHO MAY VOTE?
Only SLM Holding Corporation shareholders that owned common stock at the close
of business on March 20, 2000, the record date for the Annual Meeting, can vote.
We refer to SLM Holding Corporation as Sallie Mae or the Company.
HOW ARE MY VOTES COUNTED?
In the election of directors, shares are entitled to cumulative voting, which
means that each share of your common stock is entitled to the number of votes
equal to the number of directors to be elected. If shareholders approve the
change in the size of the Board of Directors (Proposal 1), each share will be
entitled to 17 votes in the election of directors. If shareholders do not
approve this change, each share will be entitled to 15 votes in the election of
directors.
If you vote in person, you may cumulate your votes and give one nominee all of
your votes or you may distribute your votes among the nominees in any manner. If
you vote by proxy, your votes will be cast and cumulated so as to elect the
maximum number of the nominees named on the proxy card, except that no vote will
be cast for any nominee for whom you instruct that the vote be withheld. The 17
(or 15, if the change in Board size is not approved) nominees who receive the
greatest number of votes cast and entitled to be voted at the Annual Meeting
will be elected.
Approval of the amendment to the Company's Certificate of Incorporation requires
the affirmative vote of at least a majority of shares outstanding on the record
date, with each share of stock entitled to one vote. Abstentions and shares that
are not voted are counted as votes against this item.
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. Shares
considered present at the meeting, but not voted for an item are counted as
votes against the item. Shares considered not present at the meeting do not
affect the vote.
HOW DO I VOTE?
You may vote in person at the Annual Meeting or you may vote by proxy. We
recommend that you vote by proxy even if you plan to attend the Annual Meeting.
The process of voting by proxy differs slightly, based on how your share
ownership is recorded. Your share ownership is recorded in one of three ways:
direct ownership, recorded by the stock transfer agent for the Company, the Bank
of New York; beneficial ownership, recorded through a brokerage or bank account;
or beneficial ownership, recorded by the Company's 401(k) Plan Trustee.
If your ownership is recorded directly, you will receive a proxy card from the
Bank of New York. If your share ownership is beneficial, your broker, bank
and/or the 401(k) Plan Trustee will issue you a voting instruction form that you
use to instruct them how to vote your shares. Your
1
broker, bank or the 401(k) Plan Trustee must follow your voting instructions.
If you receive a voting instruction card from your broker, bank or the 401(k)
Plan Trustee, you may vote these shares telephonically by calling the telephone
number shown on the voting form, or via the Internet at the web site shown on
the voting form.
Votes submitted via the Internet or by telephone must be received by 12:00
midnight, Eastern Standard Time, on May 17, 2000. Voting by returning a paper
proxy, via the Internet or by telephone will not affect your right to vote in
person should you decide to attend the Annual Meeting. However, if your shares
are held through a bank, broker or the 401(k) Plan and you wish to vote those
shares in person at the Annual Meeting, you must obtain a legal proxy from your
bank, broker or the 401(k) Plan Trustee.
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 sign and return the enclosed proxy card or voting
instruction form but do not specify how to vote, the Board of Directors will
vote your shares in favor of all of the items on the Annual Meeting agenda.
However, if you are a participant in the 401(k) Plan, and do not vote your plan
shares, the Trustee will vote your plan shares in the same proportion as other
plan shares have been voted.
CAN I CHANGE MY VOTE?
A shareholder whose ownership is recorded directly has the power to change or
revoke a proxy 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. A shareholder whose shares are owned beneficially
through a bank, broker, or the 401(k) Plan should contact that entity to change
or revoke a previously given proxy.
2
PROPOSAL 1 -- AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
At the Annual Meeting, shareholders will be asked to approve amending
Article SIXTH of the Company's Certificate of Incorporation (the "Charter") to
temporarily increase the Board size, to establish a minimum and maximum number
of directors and to allow the Board of Directors to fill vacancies. The Board of
Directors has approved the proposed amendment and declared it to be advisable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT.
The proposed amendment is set forth in italics in a portion of the
Charter that is attached as Exhibit A. A summary of the proposed amendment is
described below. Shareholders are urged to read carefully Exhibit A. A copy of
the complete charter is available from the Corporate Secretary.
SUMMARY OF PROPOSED AMENDMENT
Article SIXTH of the Charter currently provides, in part, that the
number of directors shall be 15 unless changed by an affirmative vote of not
less than a majority of the voting power of the shares of capital stock of the
Company then entitled to vote at an election of directors. Article SIXTH further
provides that any vacancy on the Board of Directors may be filled only by the
Company's shareholders.
The proposed amendment to the Charter would instead:
- Establish a range for the number of directors consisting of a minimum of
11 and a maximum of 17. The maximum end of the range, however, will be
reduced from 17 to 16 at the 2001 Annual Meeting of Shareholders and
further reduced to 15 thereafter. The reduction in Board size coincides
with the scheduled retirement of current nominees under the retirement
policy for directors.
- Enable the Board of Directors to fill any vacancy on the Board until the
next annual meeting of shareholders, at which time the shareholders would
vote on the election of that individual. Reductions in the Board's size
described above--from 17 members to 16, and from 16 members to 15--are not
considered vacancies.
REASON FOR THE PROPOSAL
The Charter amendment enables the Board to determine the appropriate
size of the Board, within a shareholder-approved range, as business needs and
the availability of qualified individuals dictate. This will provide the Company
with greater flexibility to adjust the size of its Board in response to director
retirements and resignations and strategic business combinations or other
extraordinary opportunities to secure Board leadership. The amendment also
allows the Board to fill a vacancy or to add to its membership highly qualified
individuals who can contribute their knowledge, experience and expertise without
the expense or delay of calling a special meeting of shareholders or waiting for
the Company's next annual meeting.
The increase in Board size to 17 members will allow the Board to obtain
the services of highly qualified individuals associated with the Nellie Mae
Corporation ("Nellie Mae"), which the Company acquired in July of 1999. As part
of the acquisition, the Company agreed to seek shareholder approval to increase
the board size to allow for this. In July 1999, the Company requested that two
Nellie Mae directors, Ms. J. Bonnie Newman and Mr. Richard Dooley, serve as
advisors to the Board in order to receive the benefit of their knowledge of
Nellie Mae and the student loan industry. The Company believes that it is in the
best interest of the shareholders to increase the Board size so that Ms. Newman
and Mr. Dooley may serve as directors on the Board.
The increase in Board size to 17 members is temporary. Due to the Board
of Directors' retirement policy, one current Board member will not stand for
re-election at the 2001 Annual Meeting of Shareholders. Accordingly, we expect
that the nominee slate at that meeting will be no more than 16 nominees. Also,
based on the Board of Directors' retirement policy, a current nominee will not
stand for
3
election at the 2002 Annual Meeting of Shareholders, reducing the expected size
of the nominee slate at that meeting to no more than 15 nominees. The retirement
policy will, over the next three years, facilitate a reduction in the Board size
to a maximum of 15 members, which is the ultimate goal for the Company. This
range will provided a diversity of talent and experience for Board leadership
for the Company.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the common stock of
the Company outstanding on March 20, 2000 is required to amend the Charter.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR approval to amend the
Charter.
PROPOSAL 2 -- ELECTION OF DIRECTORS
If shareholders approve the change in Board size (Proposal 1),
shareholders will elect 17 directors to serve on the Board of Directors for a
one-year term or until their successors are elected or appointed. Upon the
recommendation of the Nominations and Governance Committee of the Board, the
Board has nominated each of the current directors for reelection. Under the
terms of the Company's acquisition of Nellie Mae, the Company agreed to nominate
for election two individuals selected by the Nellie Mae Foundation, the majority
shareholder of Nellie Mae prior to the acquisition. Upon the recommendation of
the Nominations and Governance Committee, the Board has nominated Ms. J. Bonnie
Newman and Mr. Richard G. Dooley, the individuals selected by the Nellie Mae
Foundation.
If shareholders do not approve the change in Board size (Proposal 1),
shareholders will elect 15 directors to the Board. In such a case, shares voted
by proxy will be cumulated and voted for the 15 nominees named below for whom
the fewest votes are withheld. Although the Company does not contemplate that
any nominee will decline or be unable to serve, in that event, shares will be
voted by the proxy holders in their discretion for another person.
INFORMATION CONCERNING NOMINEES
Biographical information about each nominee as of February 29, 2000 is
set forth below. Board service with the Company's predecessor entity, the
Student Loan Marketing Association, (the "GSE"), is included. There are no
family relationships among the nominees and the executive officers of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE 17
NOMINEES NAMED BELOW. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A
CONTRARY CHOICE ON THEIR PROXY CARD.
4
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 73 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 served two six-year
terms as trustee of Eureka College in Illinois that ended in
1999. 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 67 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 Partner with the law firm of Diefenderfer, Hoover & Wood,
Pittsburgh, PA. Prior to joining that firm,
Age 54 Mr. Diefenderfer was Deputy Director of the Office of
Director since May 20, 1999 Management and Budget from 1989 to 1991 by appointment of
President Bush. During that period Mr. Diefenderfer also
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 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.
RICHARD G. DOOLEY Consultant, Massachusetts Mutual Life Insurance Company,
where he served as Executive Vice President and Chief
Age 70 Investment Officer from 1978 through his retirement in 1993.
Mr. Dooley is a director of the Nellie Mae Corporation, a
subsidiary of the Company, Hartford Steam Boiler Inspection
and Insurance Co., Kimco Realty Corp., Jefferies Group, Inc.
and Advest Group, Inc. He is a trustee of MassMutual
Corporate Investors and MassMutual Participation Investors,
both closed-end investment companies and MML Series
Investment Fund, a variable annuity fund. Mr. Dooley serves
as a trustee of Saint Anselm College and as a director of
Nellie Mae Foundation.
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 63 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. Mr. Fox serves as a Trustee of the
New England Board of Higher Education and Trustee of the
University of Maine.
5
DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
DIANE SUITT GILLELAND Deputy Director of the Illinois Board of Higher Education.
Previously, Dr. Gilleland was senior associate, Institute
Age 53 for Higher Education Policy (1998-1999); senior fellow,
Director since March 25, 1994 American Council on Education, Washington, DC (1997);
director, Arkansas Department of Higher Education
(1990-1997) and chief finance officer for Arkansas Higher
Education (1986-1990). Dr. Gilleland is currently a director
and on the Executive Committee of the GSE and previously
served by appointment of the President of the United States
from 1994 to 1997. Dr. Gilleland serves on the boards of
several organizations including the Southern Regional
Education Board's Commission on Education Quality and as an
advisor to state, national and international higher
education organizations.
ANN TORRE GRANT Strategic and Financial Consultant. Ms. Grant is an
independent director of Franklin Mutual Series, a $25
Age 41 billion family of mutual funds, which is part of the
Director since July 31, 1997 Franklin Templeton mutual fund complex; U.S.A Floral
Products, Inc., the largest floral distributor in the U.S.;
Condor Technology Solutions, Inc., an information technology
consulting firm; and Training Devices, Inc., an aircraft
simulator manufacturing and training company. Ms. Grant was
Executive Vice President, Chief Financial Officer and
Treasurer of NHP Incorporated, a national real estate
services firm, from 1995 to1997. Ms. Grant was Vice
President and Treasurer of USAirways from 1991 until 1995,
and held other finance positions at USAirways from 1988
until 1991.
RONALD F. HUNT, ESQ. Attorney, and private investor. Mr. Hunt retired from the
GSE in 1990 after serving in a number of executive positions
Age 56 there, beginning in 1973. Mr. Hunt is a director and Vice
Director since July 5, 1995 Chairman of the GSE; 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 federal student loan
program; and a member of the Board of Directors of
e-Numerate Solutions, Inc., a software technology company.
BENJAMIN J. LAMBERT, III Senator of the Commonwealth of Virginia since 1986. As a
Senator, Dr. Lambert focuses on education issues and is
Age 63 Chairman of the General Government and Compensation
Director since July 5, 1995 Subcommittee of the Senate's Finance Committee. Dr. Lambert
has 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, the Dominion
Board (Holding Co.), 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 54 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. From July 1995 until August 1997, Mr. Lord was a
director of the GSE.
6
DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
MARIE V. MCDEMMOND President of Norfolk State University since July 1997. From
December 1988 to June 1997, Dr. McDemmond served Florida
Age 54 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 and
serves on the board of the National Association of College
and University Business Officers.
BARRY A. MUNITZ President and Chief Executive Officer, The J. Paul Getty
Trust, Los Angeles, CA. Dr. Munitz formerly served as
Age 58 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 a director of Kaufman and Broad, Inc., and
a member of the Executive Committee of Los Angeles' KCET
Public Television Station. Dr. Munitz also served as a
director of SunAmerica Corp. from 1994 to 1998. He currently
serves as a Fellow to the American Academy of Arts and
Sciences and as a member of the Public Agenda Foundation.
J. BONNIE NEWMAN Managing Director, The Commerce Group, a strategic
communications consultancy since 1999. Ms. Newman formerly
Age 54 served as interim Dean of the Whittemore School of Business
and Economics at the University of New Hampshire from 1998
to 1999 and as Executive Vice President at Exeter Trust
Company, where she remains as a director. Ms. Newman is the
former owner of Coastal Broadcasting Corporation founded in
1991. She served in the administrations of Presidents Ronald
Reagan and George Bush. Ms. Newman is a current director of
Citizens Advisors (since 1998); Markem Corporation (since
1991), Public Service Co. of New Hampshire (since 1991);
Exeter Trust Company (since 1995); Perini Corporation (since
1992); and Nellie Mae Corporation and Nellie Mae Foundation
(since 1998) and a former director of Consumers Water
Company (1991-1999); NYNEX Telecommunications (1991-1998);
and Fleet Bank of New Hampshire (1991-1995).
A. ALEXANDER PORTER, JR. Co-Founder and President of Porter, Felleman Inc., an
investment management company, since 1976. He is also
Age 61 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.
7
DESCRIPTION OF PRINCIPAL BUSINESS OR OCCUPATION
WOLFGANG SCHOELLKOPF Chief Executive Officer, Bank Austria Group's U.S.
operations. Formerly, Mr. Schoellkopf was Partner, Ramius
Age 67 Capital Group (1996-1998), Vice Chairman and Chief Financial
Director since July 31, 1997 Officer of First Financial 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 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 59 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, the
American Institute of Certified Public Accountants and the
New Jersey Society of CPAs. Mr. Shapiro also serves on the
board of the West Jersey Hospital Foundation (since 1993).
He was director of Carnegie Bancorp, a Princeton New Jersey
bank from 1992 to 1998, the New Jersey Casino Reinvestment
Development Authority from 1992 to 1998, First Peoples
Financial Corp. from 1990 to 1992 and Vice Chairman of the
Board of Jefferson Bank of New Jersey from 1988 to 1990.
RANDOLPH H. WATERFIELD, JR. Certified Public Accountant, self-employed accounting
consultant since 1990. Prior to 1990, Mr. Waterfield was
Age 68 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.
MEETINGS OF THE BOARD
During 1999, the Board of Directors met six times. Each of the incumbent
directors attended at least 75% of the total number of meetings of the Board and
committees on which they serve.
The Board uses committees to assist it in the performance of its duties.
Each of the committees has a charter approved by the Board, which 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 Nominations and Governance Committee,
the Operations Committee and the Executive Committee. The purposes of the
Audit/Risk Management, Compensation and Personnel, and Nominations and
Governance Committees, their current members, and the number of meetings held
during 1999 are set forth below.
AUDIT/RISK MANAGEMENT COMMITTEE. The Audit/Risk Management Committee
assists 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 by helping to monitor 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.
8
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 1999, is as follows: Ann Torre Grant, Chairman; James E.
Brandon, Vice Chairman; Benjamin J. Lambert, III; Marie V. McDemmond; A.
Alexander Porter, Jr.; and Randolph H. Waterfield, Jr.
COMPENSATION AND PERSONNEL COMMITTEE. The Compensation and Personnel
Committee assists 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
13 meetings in 1999, is as follows: Charles L. Daley, Chairman; Barry A. Munitz,
Vice Chairman; William M. Diefenderfer, III; Ann Torre Grant; Wolfgang
Schoellkopf; and Steven L. Shapiro.
NOMINATIONS AND GOVERNANCE COMMITTEE. The Nominations and Governance
Committee assists 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.
The Committee considers nominees for election to the Company's Board of
Directors at the 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 Corporate 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 eight
meetings in 1999, is as follows: A. Alexander Porter, Jr., Chairman and Lead
Independent Director; Benjamin J. Lambert, III, Vice Chairman; Diane Suitt
Gilleland; Marie V. McDemmond; and Randolph H. Waterfield, Jr. In addition, the
Nominations and Governance Committee has invited Ronald F. Hunt to attend its
meetings as a non-voting participant.
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO INCREASE SHARE AUTHORIZATION AND TO
CHANGE THE CALCULATION OF REMAINING AUTHORIZED SHARES FOR THE SLM HOLDING
CORPORATION DIRECTORS STOCK PLAN
At the Annual Meeting, shareholders will be asked to approve an
amendment to the SLM Holding Corporation Directors Stock Plan (the "Directors
Stock Plan") that would:
- Increase the number of shares authorized to be issued under the Directors
Stock Plan from 3 million shares to 3.5 million shares; and
- Provide that the grant of certain replacement options will not reduce the
total number of shares authorized under the Plan.
The proposed amendment to the Directors Stock Plan is described in the
resolution attached as Exhibit B. A summary of the proposed amendment and the
Directors Stock Plan is described below. We urge you to read carefully
Exhibit B. You may obtain a copy of the plan document from the Corporate
Secretary.
9
REASON FOR PROPOSAL
The Directors Stock Plan was approved by shareholders on May 21, 1998
with a total of 3,000,000 shares of Sallie Mae common stock authorized to be
issued under the Directors Stock Plan. Option grants under the Directors Stock
Plan have been the sole source of compensation for members of the Board of
Directors since the election of directors in 1997. This compensation approach,
which is consistent with Sallie Mae's compensation philosophy for its
executives, is based on the principle that a risk and reward compensation
structure tied to share ownership will best serve shareholder interests. In
1997, the Board of Directors granted options to compensate directors for their
contributions to the reorganization of the Company and also for a three-year
term of service. The Board has determined that annual option grants continue to
be an appropriate form of compensation for directors. The increase in the size
of the board has also increased the usage of authorized shares under the plan.
Accordingly, total usage of shares authorized under the Directors Stock Plan has
and will be significant.
The Board recently adopted a replacement option program to encourage
directors to convert their option holdings into stock holdings. The Company
strongly emphasizes stock ownership by both directors and officers. The Director
Compensation section of this proxy statement describes the replacement option
program. The Directors Stock Plan, as approved by shareholders in 1998, permits
the granting of replacement options. Under the proposed amendment, future grants
of "replacement options" will not reduce the number of shares authorized under
the Directors Stock Plan. These grants will be no more dilutive to shareholders
than the underlying options. The Directors Stock Plan's remaining share
authorization is 1,063,409 shares. As of March 20, 2000, the closing price of
the Company's common stock was $33.0625 per share.
No other terms of the Directors Stock Plan will be affected by the
proposed amendment.
SUMMARY OF THE DIRECTORS STOCK PLAN
The Directors Stock Plan provides for the granting of stock options
and/or stock grants to non-employee directors. The maximum number of shares of
Sallie Mae common stock that can be issued under the Directors Stock Plan is
currently 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 Stock Plan. The Directors Stock Plan is administered by the
Compensation and Personnel Committee of the Board. This committee has authority
to determine the form, timing, amount and terms of the awards. The exercise
price for each stock option will be determined by the Board of Directors, but
cannot be less than the fair market value of the Company's Common Stock on the
day the option is granted. The Directors Stock Plan specifically prohibits
repricing of outstanding options.
REQUIRED VOTE
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 amendment to this Directors Stock Plan. Unless marked to the contrary,
proxies received will be voted FOR approval.
BOARD RECOMMENDATION
The Board of Directors of the Corporation recommends a vote FOR the
approval of the amendment to the Directors Stock Plan.
PROPOSAL 4 -- APPROVAL OF AMENDMENT TO INCREASE SHARE AUTHORIZATION AND TO
CHANGE THE CALCULATION OF REMAINING AUTHORIZED SHARES FOR THE SLM HOLDING
CORPORATION MANAGEMENT INCENTIVE PLAN
At the Annual Meeting, shareholders will be asked to approve an
amendment to the SLM Holding Corporation Management Incentive Plan (the
"Management Incentive Plan") that would:
- Increase the number of shares authorized to be issued under the Management
Incentive Plan from 6 million shares to 11.5 million shares; and
10
- Provide that the grant of certain replacement options will not reduce the
total number of shares authorized under the Plan.
The proposed amendment to the Management Incentive Plan is described in
Exhibit C at the end of this proxy statement. A summary of the proposed
amendment and the current Management Incentive Plan are described below. We urge
you to read carefully Exhibit C. You may obtain a copy of the plan document from
the Corporate Secretary.
REASON FOR PROPOSAL
The Management Incentive Plan was approved by shareholders on May 21,
1998 and at that time, shareholders authorized 6,000,000 shares of the Company's
common stock to be issued under the Management Incentive Plan. Since that time,
the Company expanded its executive management team and focused executive pay on
stock compensation.
The Company's acquisition of Nellie Mae in 1999 resulted in the issuance
of approximately 1.7 million shares of performance stock and options to purchase
common stock under the Management Incentive Plan to all employees of Nellie Mae.
The Company anticipates other acquisitions in the future, which may result in
further utilization of the Management Incentive Plan. Accordingly, the usage of
shares originally authorized under the Management Incentive Plan has and will be
significant.
Also, the Company recently set share ownership targets for its executive
officers. To support this share ownership target, the Company established a
replacement option program, which is explained in the Director Compensation
section of this proxy. The Management Incentive Plan, as approved by
shareholders in 1998, permits the granting of replacement options. Under the
proposed amendment, future grants of "replacement options" will not reduce the
number of shares authorized under the Management Incentive Plan. These grants
will be no more dilutive to shareholders than the underlying options. The
Management Incentive Plan's remaining share authorization is 1,367,602 shares.
As of March 20, 2000, the closing price of the Company's common stock was
$33.0625 per share.
No other terms of the Management Incentive Plan will be affected by this
amendment.
MANAGEMENT INCENTIVE PLAN SUMMARY
The Management Incentive Plan provides for the grant of stock options,
incentive bonuses, performance stock and stock units ("Awards"). The aggregate
number of shares of Common Stock that can be issued under the Management
Incentive Plan may not exceed 6,000,000. The amendment to the Management
Incentive Plan would increase this maximum to 11.5 million shares. For purposes
of calculating the aggregate number of shares issued under the Management
Incentive Plan, only the number of shares actually issued upon exercise or
settlement of an award and not returned to Sallie Mae 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
is counted. The Management Incentive Plan is administered by the Compensation
and Personnel Committee, which has authority to grant Awards, and, consistent
with the Management Incentive Plan, to set the vesting and expiration provisions
of options, to interpret the Management Incentive Plan, to promulgate such rules
and regulations with respect to the Management Incentive Plan as it deems
desirable, to delegate its responsibilities under the Management Incentive Plan
to appropriate persons and to make all other determinations necessary or
desirable for the administration of the Management Incentive Plan. The exercise
price of the options can not be less than the fair market value of Sallie Mae's
common stock on the day an option is granted. The Management Incentive Plan
specifically prohibits repricing of outstanding options. The persons eligible to
participate in the Management Incentive Plan include key employees of Sallie Mae
and its subsidiaries who from time to time are selected by the Compensation and
Personnel Committee in its discretion to receive Awards. Currently,
approximately 450 employees participate in the Management Incentive Plan.
11
REQUIRED VOTE
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 amendment to the Management Incentive Plan. Unless marked to the contrary,
proxies received will be voted FOR approval.
BOARD RECOMMENDATION
The Board of Directors of the Corporation recommends a vote FOR the
approval of the amendment to the Management Incentive Plan.
PROPOSAL 5 --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 2000. 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.
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 the scope of and estimated fees for the audit engagement and evaluates
the independence of the internal audit function from other services provided to
the Company by the auditors. If the appointment of Arthur Andersen LLP is not
ratified, the Board will evaluate the basis for the shareholders' vote when
determining whether to renew the firm's engagement or expand the scope of
services the firm provides.
Representatives of Arthur Andersen LLP will attend the Annual Meeting of
Shareholders and will respond to appropriate questions from shareholders present
at the meeting.
REQUIRED VOTE
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 2000.
BOARD RECOMMENDATION
The Board of Directors of the Company recommends a vote FOR the
ratification of the appointment of Arthur Andersen LLP as independent auditors
for 2000.
COMMON STOCK INFORMATION
GENERAL INFORMATION
At December 31, 1999, 157,576,547 shares of the Company's common stock
par value $.20 per share, were outstanding. At March 20, 2000, the record date,
157,103,721 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."
12
BOARD AND MANAGEMENT OWNERSHIP
The following table provides information regarding shares owned by each
nominee to the Board of Directors and executive officer of the Company at
February 29, 2000.
TOTAL
VESTED BENEFICIAL PERCENT
SHARES OPTIONS OWNERSHIP OF
(1) (2) (3) CLASS
------- --------- --------- ---
DIRECTOR NOMINEES
James E. Brandon............................... 8,224 49,000 57,224 *
Charles L. Daley (4)........................... 14,858 49,000 63,858 *
William M. Diefenderfer, III................... 3,336 21,000 24,336 *
Richard G. Dooley (5).......................... 3,000 3,500 6,500 *
Edward A. Fox.................................. 189,000 52,500 241,500 *
Diane Suitt Gilleland.......................... 6,995 43,775 50,770 *
Ann Torre Grant (4)............................ 1,610 20,000 21,610 *
Ronald F. Hunt (4)............................. 20,769 38,500 59,269 *
Benjamin J. Lambert, III....................... 3,788 36,500 40,288 *
Albert L. Lord................................. 143,507 353,500 497,007 *
Marie V. McDemmond............................. 1,000 25,000 26,000 *
Barry A. Munitz................................ 1,000 35,000 36,000 *
J. Bonnie Newman (5)........................... 0 3,500 3,500 *
A. Alexander Porter, Jr. (4)................... 182,652 49,000 231,652 *
Wolfgang Schoellkopf (4)....................... 5,000 35,000 40,000 *
Steven L. Shapiro.............................. 10,876 49,000 59,876 *
Randolph H. Waterfield, Jr..................... 3,573 49,000 52,573 *
NAMED EXECUTIVE OFFICERS
Albert L. Lord................................. 143,507 353,500 497,007 *
J. Paul Carey.................................. 67,466 166,667 234,133 *
Anthony P. Dolanski............................ 9,571 164,668 174,239 *
Thomas J. Fitzpatrick.......................... 113,441 201,668 315,109 *
Lawrence W. O'Toole............................ 92,065 0 92,065 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(6).......................................... 966,904 1,755,864 2,722,768 1.7%
- ---------
* Less than one percent
(1) Shares held directly or indirectly by the individual, including shares
credited to Company-sponsored retirement plans.
(2) Shares that may be acquired within 60 days through the exercise of stock
options.
(3) Total of columns 1 and 2.
(4) Mr. Daley's indicated share ownership includes 875 shares held through a
limited partnership, in which he owns a 50% interest. Ms. Grant's indicated
share ownership includes 1,400 shares held by her spouse in an IRA Account.
Mr. Hunt's indicated share ownership includes 525 shares held solely in his
wife's name. Mr. Porter's indicated share ownership includes 180,000 shares
over which he shares investment and voting control through two limited
partnerships of which he is a general partner. Mr. Schoellkopf's indicated
share ownership is held through a limited partnership of which he is the
sole general partner.
(5) Options granted for service on the Board of Directors of the Nellie Mae
Corporation, a wholly-owned subsidiary of the Company.
(6) Includes the director nominees and Named Executive Officers listed above
plus three other executive officers.
13
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,
1999. 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, 1999 and March 20, 2000.
OWNERSHIP
PERCENTAGE AT
DECEMBER 31,
PRINCIPAL HOLDER AND ADDRESS SHARES(1) 1999
- ------------------------------------ ---------- ------
Capital Group International, Inc.(2) 17,614,860 11.10%
333 South Hope Street
55(th) Floor
Los Angeles, CA 90071
Capital Research and Management 16,037,000 10.10%
Company(3)
333 South Hope Street
55(th) Floor
Los Angeles, CA 90071
FMR Corp(4) 15,973,640 10.04%
82 Devonshire Street
Boston, MA 02109
- ---------
(1) Except as indicated, each institution has sole investment power with respect
to the shares listed.
(2) Capital Guardian Trust Company has sole power to vote 9,831,690 of these
shares.
(3) Capital Research and Management Company, a registered investment adviser,
does not have sole or shared power to vote any of these shares.
(4) Fidelity Management and Research Company, a wholly-owned subsidiary of FMR
Corp., beneficially owns 15,381,950 or 9.669% of the shares outstanding.
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.,
beneficially owns 362,290 or 0.227% of the shares outstanding. FMR Corp. has
sole power to vote 285,490 of these 362,290 shares. Fidelity International
Limited beneficially owns 229,220 of the shares included herein, over which
it has sole voting power.
DIRECTOR COMPENSATION
In 1997, the Company established an exclusively equity-based director
compensation plan and eliminated annual cash retainers and meeting fees. The
Chairman and other non-employee directors received 157,500 and 105,000
price-vesting options in 1997, respectively.
Upon Mr. Diefenderfer's election to the Board in May 1999, he was
granted an option covering 52,500 shares, representing a three-year grant for
service on the Board. Mr. Diefenderfer's options have an exercise price of
$43.31 and one-third of the options vested on the date of grant. As with the
other directors' options, the remaining two-thirds of Mr. Diefenderfer's options
vest in equal parts upon the common stock reaching a closing price of $57.14 and
$71.43, respectively, for five trading days. The options also vest on the eighth
anniversary of their grant, subject to the optionee's continued service as a
director.
In January 2000, each director and the two advisors to the Board
received compensation for service in the year 2000 in the form of option grants.
The Chairman received an option grant covering 30,000 shares of the Company's
common stock, the lead independent director received a grant covering 25,000
shares, and each director and advisor received a grant covering 20,000 shares.
These options vest upon the later of: 1) the Company's common stock reaching a
closing price of $51.60, an increase of 20 percent over the exercise price of
$43.00, for five trading days; or 2) separation from service from the Board,
whichever occurs first. The options also vest on the fifth anniversary of their
grant date. Options are cancelled if the optionee is not elected to the Board at
the 2000 Annual Meeting.
14
REPLACEMENT OPTION PROGRAM. In order to encourage option holders to convert
their interest in the Company's common stock to share ownership, the Company has
adopted a replacement option program. The program applies to directors, as well
as officers. The replacement option program recognizes the fact that option
holders typically must sell shares received through the exercise of an option to
cover the exercise price. The net result of an option exercise may be that
option holders' total potential investment in the Company's common stock is less
after an exercise than before, causing the option holder to forego further
appreciation on the sold shares and discouraging the option holder from
converting his or her option position into an ownership position. Under the
replacement program, the Company intends to grant new options to directors and
officers upon their exercise of existing in-the-money options in an amount equal
to the number of shares needed to pay the exercise price for the option,
approximately bringing the director or officer's total potential investment in
the Company's common stock back to the level in place before the exercise.
Replacement options will carry an exercise price equal to the fair market value
of the Company's common stock on the date of their grant and will vest one year
from the grant date. The term of the replacement option will equal the remaining
term of the underlying option. If a director fails to hold the shares acquired
through the exercise of the original option for at least one year, or if he or
she sells shares such that their ownership falls below 5,000 shares, the
replacement option will be cancelled. If any officer fails to hold the shares
acquired through the exercise of the original option for at least one year (and
for senior officers subject to the share ownership guidelines explained in the
Executive Compensation section, until they reach their ownership targets) the
replacement option is cancelled.
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 payment for additional approved work.
No such payments were made to directors in 1999. 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.
EXECUTIVE OFFICERS
Biographical information about each Named Executive Officer as of
February 29, 2000 is as follows:
Albert L. Lord, 54, 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, 41, 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, 54, 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 resigned from the Company effective
March 1, 2000.
Thomas J. Fitzpatrick, 51, Executive Vice President, was appointed an
executive officer of the Company in September 1998. From August 1997 until
September 1998 he served as a director of the Company. 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, established in 1990. Mr. Fitzpatrick was Vice Chairman of Consumer
Credit Co. from 1988 until 1989. From 1983 until 1988, Mr. Fitzpatrick was
President and Chief Operating Officer of Manufacturers Hanover Consumer
Services, where he had been employed since 1979. He currently serves on the
board of directors of MAB Paints.
15
Lawrence W. O'Toole, 49, Executive Vice President was appointed an
executive officer of the Company in July 1999. Mr. O'Toole is also President and
a director of the Nellie Mae Corporation, a wholly-owned subsidiary of the
Company. He served as President and Chief Executive Officer of Nellie Mae, Inc.
and the Nellie Mae Corporation from July 1982 to July 1999. Mr. O'Toole will
resign from the Company effective June 30, 2000.
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 1999 stock option grants to Named
Executive Officers; (4) a valuation of option exercises during the year and
remaining option holdings for Named Executive Officers; and (5) descriptions of
pension plan benefits, certain employment arrangements and related transactions.
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation and Personnel Committee of the Board of Directors. In this role,
the Committee reviews and approves the salaries of the executive officers and
administers the Management Incentive Plan and stock-based compensation programs.
The Committee is composed entirely of non-employee independent directors, as
defined in the Company's By-laws.
COMPENSATION POLICY. The Company's executive compensation policy is
based on a belief that compensation tied to corporate performance and share
price will enhance shareholder value. To implement this policy, the Committee
strives to strike a balance between fixed compensation, in the form of base
salary, and "at risk" compensation, in the form of annual bonuses based on the
attainment of pre-established corporate goals and long-term compensation in the
form of stock-based awards.
Another goal of the policy is to offer a total compensation potential
that is competitive with that offered at peer companies. The total compensation
package at the Company is designed, however, to attract and to retain executive
officers who are entrepreneurial and desire a "risk and reward" compensation
structure that is based on ownership principles, not the traditional
employee-employer relationship.
To further promote the principles of executives as Company owners, the
Company adopted stock ownership guidelines for its executive officers. The
three-year target ownership levels are:
STOCK OWNERSHIP AS A
POSITION MULTIPLE OF BASE SALARY
--- -------------------
CEO 10 X salary
EVP 10 X salary
SVP 7 X salary
Restricted shares and options, including vested options, are not counted
in calculating stock ownership.
As of February 29, 2000, Mr. Lord's stock ownership was equal to
approximately 700% of his 1999 base salary; Mr. Carey's, 400% and
Mr. Fitzpatrick's 500%. The Company's six senior vice presidents as a group, as
of February 29, 2000, owned shares equal to 300% of their aggregate 1999 annual
base salaries.
In order to assist the executive officers in meeting their share
ownership targets, the Company adopted a replacement option program, which is
explained in the Director Compensation section of this proxy.
BASE SALARY. Consistent with its goal of emphasizing "at risk"
compensation, the Committee maintained a flat salary structure for executive
officers for 1999, with the exception of an adjustment for the CEO effective as
of January 1999. Throughout 1999, the annual salaries for the senior vice
president
16
and executive vice president positions were not changed. In adjusting the CEO's
salary in 1999, the Company identified a group of peer S&P 500 financial
services companies, which includes most of the companies identified under the
"Stock Performance Graph" below. After adjustment, Mr. Lord's annual salary for
1999 remained below the 25th percentile for salaries paid to chief executive
officers at these peer companies.
PERFORMANCE BONUSES. The Compensation Committee believes that executive
officer bonuses should be tied to satisfaction of specified performance
criteria. For 1999, 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 established and 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 1999 bonus program, corporate performance goals
were established using the following four performance criteria: "cash basis"
earnings per share growth, "cash basis" net income growth, loan acquisition
volume and control channel origination volume. 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 reflected over the life of the underlying
pool of student loans. Under these performance criteria, Mr. Lord and the other
executive officers earned a corporate performance-based bonus equal to 120% of
their respective salaries. The Compensation Committee also awarded Mr. Lord an
individual performance bonus equal to 125% of his salary, based on his
accomplishments for the Company, including the successful completion and launch
of Laureate-Registered Trademark-, the reduction in loan servicing costs, the
enactment of legislation that changed the index upon which lender yields are
determined in the Federal Family Education Loan Program from the 91-day Treasury
bill rate to a 3-month commercial paper rate and the increase in the Company's
control channel student loan volume. The Compensation Committee approved other
executive officer individual performance bonuses at levels ranging from 66% to
150% 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. Consistent with the Compensation Committee's
preference for equity-oriented compensation, a minimum of 40% of each executive
officer's annual bonus (on a pre-tax or after-tax basis at the election of the
executive) was awarded in the form of common stock.
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. Options effectively put 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 August 1997 the
Compensation Committee granted options to the Company's executive officers to
motivate and reward executives for their performance over a two-year period.
Accordingly, except for options and performance stock granted to Mr. O'Toole
upon the acquisition of the Nellie Mae Corporation, which is discussed below,
the Compensation Committee did not grant options or performance stock to
executive officers in 1999. 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.
In 1999, the Compensation Committee granted options for 330,000 shares
and agreed to grant 150,000 shares of performance stock, with vesting criteria
based on performance goals tied to his business responsibilities, to
Mr. O'Toole in connection with the acquisition of the Nellie Mae Corporation.
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
named 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
17
situations may arise where other considerations may prevail over obtaining such
qualification. The Compensation Committee believes that the compensation that
the Company's named executive officers received under the 1999 Management
Incentive Plan and will realize upon exercise of stock options or upon vesting
of restricted stock granted to them in 1997, 1998 and 1999 will qualify as
"performance-based compensation," and therefore will not be subject to the
$1 million limitation.
COMPENSATION AND PERSONNEL COMMITTEE
Charles L. Daley, Chairman Barry A. Munitz, Vice Chairman
Ann Torre Grant Wolfgang Schoellkopf
Steven L. Shapiro
SUMMARY COMPENSATION TABLE
The tables below set forth certain compensation information for the
Company's Chief Executive Officer and the Company's next four most highly
compensated executive officers employed by the Company at the end of the 1999
fiscal year (collectively, the "Named Executive Officers").
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL
NAME AND PRINCIPAL ---------------------------------- STOCK UNDERLYING OTHER
POSITION YEAR SALARY BONUS(1) AWARD($)(2) OPTIONS COMPENSATION(3)
- ----------------------------------------- -------- -------- ---------- ---------- --------- ------------
Albert L. Lord........................... 1999 $650,000 $1,600,000 $ 0 -- $39,000
Chief Executive officer 1998 325,000 1,000,000 0 -- 20,077
and Vice Chairman of 1997 104,167(4) 600,000 0 1,053,500 5,645
the Board of Directors
J. Paul Carey............................ 1999 $400,000 $ 750,000 $ 0 -- $21,251
Executive Vice President 1998 275,000 600,000 1,118,750 150,000 16,962
1997 83,333(4) 400,000 0 350,000 4,523
Anthony P. Dolanski...................... 1999 $400,000 $ 810,000 $ 0 -- $18,462
Executive Vice President 1998 200,000(5) 655,000 0 500,000
Thomas J. Fitzpatrick.................... 1999 $400,000 $1,086,000 $ 58,289 -- $16,062
Executive Vice President 1998 100,000(6) 748,700(7) 3,425,480 500,000
Lawrence W. O'Toole...................... 1999 189,904(8) 1,215,700(9) $2,365,625 330,000 $ 3,916
Executive Vice President
- ----------
(1) Bonus is the amount earned for the year indicated and is typically paid in
the following year. A minimum of 40% of the bonus was awarded as shares of
the Company's common stock.
(2) Amounts reflect the grant date value of 50,000, 25,000 and 75,000 shares of
restricted stock awarded to Messrs. O'Toole, Carey and Fitzpatrick,
respectively. Mr. O'Toole's restricted stock vests in one-third increments
upon the achievement of loan origination volume targets and had a value of
$2,112,500, based upon the Company's stock price as of December 31, 1999.
Dividends are paid on restricted stock. No other Named Executive Officer
held any restricted stock as of the end of 1999.
(3) 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) Includes salary paid for service at the Company from July 12, 1999 through
December 31, 1999, at a salary of $395,000 per year following Sallie Mae's
acquisition of Nellie Mae.
(9) Includes a signing bonus of $615,700.
18
1999 OPTION GRANT TABLE
% OF
TOTAL
OPTIONS
GRANTED
NUMBER OF TO
MARKET SECURITIES EMPLOYEES
PRICE ON UNDERLYING IN GRANT DATE
GRANT EXPIRATION EXERCISE GRANT OPTIONS FISCAL PRESENT
NAME DATE DATE PRICE DATE GRANTED YEAR VALUE
- ---------------------- -------- -------- -------- -------- ------- ----- ----------
Lawrence W. O'Toole... 5/20/1999 5/20/2009 $43.3125 $43.3125 270,000 7.38% $3,539,970
-------- -------- -------- -------- ------- ----- ----------
5/26/1999 5/26/2009 $41.1875 $41.1875 60,000 1.64% $ 746,760
Of the Named Executive Officers, only Mr. O'Toole received an option
grant in 1999. One-third of the options vest on the first anniversary of their
grant; the remaining two-thirds vest upon the common stock reaching a closing
price of at least $57.14 and $71.43, respectively, on five trading days but not
before the first anniversary of their date of grant. The options also vest on
the eighth anniversary of their grant, subject to Mr. O'Toole's continued
service with the Company, or 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 of 5.99%, a weighted average 5-year historical dividend
yield of 1.79%, and annual stock price volatility of 33.88%. 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 vesting criteria tied to
the common stock price reaching certain levels and the absence of a trading
market for the options.
1999 OPTION EXERCISES AND YEAR-END VALUE TABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT 12/31/99 OPTIONS AT 12/31/99
ON VALUE ----------------------- ------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------- -------- --------- ----------- ---------- -----------
Albert L. Lord............ 0 $ 0 353,500 700,000 $1,058,620 $2,037,490
J. Paul Carey............. 0 $ 0 116,666 383,334 $ 339,580 $ 679,165
Anthony P. Dolanski....... 2,000 $14,000 164,668 335,332 $ 288,169 $ 586,831
Thomas J. Fitzpatrick..... 0 $ 0 201,668 369,923 $ 101,875 $ 106,505
Lawrence W. O'Toole....... 0 $ 0 0 330,000 $ 0 $ 63,750
Of the Named Executive Officers, only Mr. Dolanski exercised stock
options in 1999. 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), based
upon a year-end stock price of $42.25 per share.
PENSION PLAN BENEFITS
Effective October 1, 1999, the present value of accrued benefits for
executive officers under the Company's regular and supplemental pension plans
was converted to an opening "account balance" and benefits now accrue under a
cash balance formula. Under the cash balance formula, each participant has an
account, for record keeping purposes only, to which credits are allocated each
payroll period based on a percentage of the participant's compensation for the
current pay period. The applicable percentage is determined by the number of
years of service the participant has with the Company. If an individual
participated in the Company's prior pension plan as of September 30, 1999 and
met certain age and service
19
criteria, the participant ("grandfathered participant") will receive the greater
of the benefits calculated under the prior plan, which uses a final average pay
plan method, or under the cash balance formula. Mr. Lord and Mr. Carey qualify
as grandfathered participants.
The Company's 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. For grandfathered participants, the
amount of compensation considered covered compensation for the prior
supplemental pension plan is the sum of the individual's salary and his annual
bonus, up to 35% of the prior year's salary. For all participants in the new
supplemental cash balance plan, the amount of compensation is the sum of salary
and annual bonus.
The following table illustrates the approximate annual pension that may
be payable to an employee in the higher salary classifications under the
Company's prior pension plans, final average pay plans, at age 62, as a single
life annuity. The benefit amounts shown are not subject to any deduction for
social security or other offset amount. The credited years of service as of
December 31, 1999 for Mr. Lord is 14 years, 9 months; Mr. Carey, 14 years,
3 months; and Mr. Fitzpatrick 1 year, 3 months. The estimated annual benefit
payable upon retirement at normal retirement age under the new cash balance
plans for each of these individuals is $373,900, $724,600, and $119,200,
respectively. Mr. Dolanski resigned from the Company before he vested in any
benefits under the plan. Mr. O'Toole did not accrue a benefit under the plans as
of December 31, 1999.
ANNUAL NORMAL RETIREMENT BENEFIT
CALCULATED AS SINGLE LIFE ANNUITY
YEARS OF SERVICE
FINAL AVERAGE -----------------------------------------
COMPENSATION 15 20 25 30
- ---------------------- -------- -------- -------- --------
$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
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with
Messrs. Dolanski, Fitzpatrick and O'Toole. Each of these agreements provides for
a base annual salary of $400,000 and for Messrs. Dolanski and Fitzpatrick,
option grants to purchase 500,000 shares and for Mr. O'Toole option grants to
purchase 330,000 shares, as well as a commitment to grant 150,000 shares of
performance stock. Mr. Dolanski's agreement provides for a term commencing on
July 1, 1998 and continuing through March 31, 2001; Mr. Fitzpatrick's agreement
provides for a term commencing on October 1, 1998 and continuing through
September 30, 2001; Mr. O'Toole's agreement provides for a term commencing
July 12, 1999 and continuing through June 30, 2002, in each case unless
terminated earlier in accordance with certain specified events.
20
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, Mr. Fitzpatrick's or
Mr. O'Toole's employment so terminates prior to March 31, 1999, September 1,
1999, July 1, 2000, 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 at least $250,000 per year beginning as of the later of age 58 or
termination of employment, calculated as a straight single life annuity. 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 during 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1999, the Company loaned $100,000 to Mr. Lord, at a variable
interest rate equal to the current prime interest rate as reported in the Wall
Street Journal, for the purpose of funding his ownership of Company common
stock. The entire loan amount remained outstanding as of the end of the calendar
year.
21
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, 1994 and
reinvestment of dividends through December 31, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
SLM Holding Corporation 100.0 209.5 301.8 457.4 559.9 499.8
S&P Financial - Misc(1) (2) 100.0 160.2 208.7 318.3 416.4 531.9
S&P 500 Index (2) 100.0 137.5 168.9 225.2 289.4 350.3
Company/Index Base Year 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
SLM Holding Corporation................. 100.0 209.5 301.8 457.4 559.9 499.8
S&P Financial--Misc(1)(2)............... 100.0 160.2 208.7 318.3 416.4 531.9
S&P 500 Index(2)........................ 100.0 137.5 168.9 225.2 289.4 350.3
- ------------
(1) Companies included in Standard & Poor's Financial-Miscellaneous Index are:
AFLAC Inc, American Express, American General Finance, Associates First
Capital, Citigroup Inc, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, Franklin Resources Inc., MBIA Inc., MBNA Corporation,
Morgan Stanley Dean Witter, T. Rowe Price, and SLM Holding Corporation
(2) SOURCE: Bloomberg Comparative Return Table
22
OTHER MATTERS
As of the date of this proxy statement, there are no matters that the
Board of Directors intends to present for a vote at the Annual Meeting other
than the business items discussed in this proxy statement. 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. The Company has hired Georgeson Communication
Services Inc. to solicit proxies for a fee of $10,000 plus a reasonable amount
to cover expenses. 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 banks, brokers, custodians and other nominees in whose names shares are
registered to furnish to beneficial owners of the Company's common stock
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 FOR 2001 ANNUAL MEETING
A shareholder who intends to introduce a proposal for consideration at
the Company's year 2001 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 3, 2000 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 for the Company's 2001 Annual Meeting must be received by the
Company after January 19, 2001 and on or before April 18, 2001. If, however, the
Company's 2001 Annual Meeting is called for a date occurring on or before
April 18, 2001 or after June 17, 2001, such proposals or nominations must be
received by the Company not later than the close of business on the 10(th) day
following the day on which notice of the 2001 Annual Meeting is mailed in order
to be considered at the Company's 2001 Annual Meeting. Any such notice must
satisfy the other requirements with respect to such proposals and nominations
contained in the Company's Bylaws. If a shareholder fails to meet these
deadlines or 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
1999 all of the Company's executive officers and directors timely filed all
required reports under Section 16.
23
EXHIBIT A
AMENDMENT TO ARTICLE SIXTH OF THE
CERTIFICATE OF INCORPORATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SLM HOLDING CORPORATION
FIRST: The name of the Corporation is SLM Holding Corporation (hereinafter
the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 270,000,000 shares of capital stock, consisting of
(i) 250,000,000 shares of common stock, par value $.20 per share (the "Common
Stock"), and (ii) 20,000,000 shares of preferred stock, par value $.20 per share
(the "Preferred Stock").
a. COMMON STOCK. The powers, preferences and rights, and the
qualifications, limitations and restrictions, of the Common Stock are as
follows:
(1) VOTING. Except as otherwise expressly required by law or provided
in this Certificate of Incorporation, and subject to any voting rights
provided to holders of Preferred Stock at any time outstanding, at each
annual or special meeting of stockholders, each holder of record of
shares of Common Stock on the relevant record date shall be entitled to
cast one vote in person or by proxy for each share of the Common Stock
standing in such holder's name on the stock transfer records of the
Corporation; provided, however, that at all elections of directors of the
Corporation, each holder of record of shares of Common Stock on the
relevant record date shall be entitled to cast as many votes, in person
or by proxy, which (except for this provision) such holder would be
entitled to cast for the election of directors with respect to its shares
of stock multiplied by the number of directors to be elected at such
election, and that such holder may cast all such votes for a single
director or may distribute them among the number to be voted for, or for
any two or more of them as such holder sees fit.
(2) DIVIDENDS. Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of
Incorporation, as it may be amended from time to time, holders of shares
of Common Stock shall be entitled to receive such dividends and other
distributions in cash, stock or property of the Corporation when, as and
if declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.
(3) LIQUIDATION, DISSOLUTION, ETC. In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of the
Corporation, the holders of shares of Common Stock shall be entitled to
receive the assets and funds of the Corporation available for
distribution after payments to creditors and to the holders of any
Preferred Stock of the Corporation that may at the time be outstanding,
in proportion to the number of shares held by them.
24
(4) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No holder of shares of
Common Stock shall be entitled to preemptive or subscription rights.
b. PREFERRED STOCK. The Board of Directors is hereby expressly
authorized to provide for the issuance of all or any shares of the Preferred
Stock in one or more classes or series, and to fix for each such class or
series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions adopted by
the Board of Directors providing for the issuance of such class or series,
including, without limitation, the authority to provide that any such class
or series may be (i) subject to redemption at such time or times and at such
price or prices; (ii) entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (iii) entitled to such
rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of
any other class or classes of stock, or of any other series of the same or
any other class or classes of stock, of the Corporation at such price or
prices or at such rates of exchange and with such adjustments; all as may be
stated in such resolution or resolutions.
c. POWER TO SELL AND PURCHASE SHARES. Subject to the requirements of
applicable law, the Corporation shall have the power to issue and sell all
or any part of any shares of any class of stock herein or hereafter
authorized to such persons, and for such consideration, as the Board of
Directors shall from time to time, in its discretion, determine, whether or
not greater consideration could be received upon the issue or sale of the
same number of shares of another class, and as otherwise permitted by law.
Unless approved by the affirmative vote of not less than a majority of the
voting power of the shares of capital stock of the Corporation then entitled
to vote at an election of directors, the Corporation shall not take any
action that would result in the acquisition by the Corporation, directly or
indirectly, from any person or "group" (as defined in Section 13(d) of the
Securities Exchange Act of 1934) of five percent or more of the shares of
Common Stock issued and outstanding, at a price in excess of the prevailing
market price of such Common Stock, other than pursuant to a tender offer
made to all stockholders or to all stockholders owning less than 100 shares
of Common Stock.
d. LIMITATION ON STOCKHOLDER RIGHTS PLAN. Notwithstanding any other
powers set forth in this Certificate of Incorporation, the Board of
Directors shall not adopt a stockholders "rights plan" (which for this
purpose shall mean any arrangement pursuant to which, directly or
indirectly, Common Stock or Preferred Stock purchase rights may be
distributed to stockholders that provide all stockholders, other than
persons who meet certain criteria specified in the arrangement, the right to
purchase the Common Stock or Preferred Stock at less than the prevailing
market price of the Common Stock or Preferred Stock), unless (i) such rights
plan is ratified by the affirmative vote of a majority of the voting power
of the shares of capital stock of the Corporation then entitled to vote at
an election of directors at the next meeting (annual or special) of
stockholders; (ii) by its terms, such rights plan expires within
thirty-seven (37) months from the date of its adoption, unless extended by
the affirmative vote of a majority of the voting power of the shares of
capital stock of the Corporation then entitled to vote at an election of
directors; and (iii) at any time the rights issued thereunder will be
redeemed by the Corporation upon the affirmative vote of a majority of the
voting power of the shares of capital stock of the Corporation then entitled
to vote at an election of directors.
FIFTH: Reserved.
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
25
a. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
b. The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-laws of the Corporation.
c. (1) (i) The number of directors of the Corporation shall be NOT LESS
THAN ELEVEN (11) AND NO MORE THAN SEVENTEEN (17) FOR ELECTION AT THE 2000
ANNUAL MEETING OF STOCKHOLDERS; NO MORE THAN SIXTEEN (16) AT THE 2001 ANNUAL
MEETING OF STOCKHOLDERS; AND NO MORE THAN FIFTEEN (15) THEREAFTER.
(ii) Directors may be removed with or without cause by a vote of
the holders of shares entitled to vote at an election of directors at
a duly called meeting of such holders, provided that no director
shall be removed for cause except by the affirmative vote of not less
than a majority of the voting power of the shares then entitled to
vote at an election of directors, and provided further that if less
than the entire board of directors is to be removed, no director may
be removed without cause if the votes cast against his removal would
be sufficient to elect him if then cumulatively voted at an election
of the entire board of directors.
(iii) Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms
of this Certificate of Incorporation applicable thereto.
(2) A director shall hold office until the succeeding annual meeting
(or special meeting in lieu thereof) and until his or her successor shall
be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(3) ANY VACANCY ON THE BOARD OF DIRECTORS, REGARDLESS OF WHETHER
RESULTING FROM DEATH, RESIGNATION, RETIREMENT, DISQUALIFICATION, REMOVAL
FROM OFFICE, INCREASE IN THE SIZE OF THE BOARD OR OTHERWISE, MAY BE
FILLED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF DIRECTORS THEN IN OFFICE,
BUT ANY VACANCY FILLED IN SUCH MANNER SHALL BE FILLED ONLY UNTIL THE NEXT
ANNUAL MEETING OF STOCKHOLDERS.
d. No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
e. In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
GCL, this Certificate of Incorporation, and any By-laws adopted by the
stockholders; provided, however, that no such action by the Board of
Directors, unless approved by a majority of the voting shares of capital
stock of the Corporation then entitled to vote at an election of directors,
shall amend, alter, change or repeal the right of stockholders as provided
for in the By-laws to call a special meeting of stockholders; and provided
further that no By-laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such By-laws had not been adopted.
26
SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the By-laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation.
EIGHTH: Any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation delivery to its registered office, its
principal place of business or an officer or director of the Corporation having
custody of the book in which proceedings of meetings of members are recorded.
NINTH: Pursuant to Section 203(b)(1) of the GCL, the Corporation hereby
expressly opts not to be governed by GCL Section 203.
TENTH: Any action by the Board of Directors to make, alter, amend, change,
add to or repeal this Certificate of Incorporation shall be approved by the
affirmative vote of not less than a majority of the voting power of the shares
of capital stock of the Corporation then entitled to vote at an election of
directors. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
27
EXHIBIT B
AMENDMENT TO THE DIRECTORS STOCK PLAN
Section 3 of the SLM Holding Corporation Directors Stock Plan is hereby
deleted in its entirety and replaced with the following:
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 3,500,000; provided, however, that no more than 1,500,000 of
such shares may be issued in the form of stock grants under the plan.
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 be made subject to a stock option or stock grant under
the Plan. The number of shares of Common Stock issued upon the exercise
of "replacement options", i.e. options granted to purchase a number of
shares of Common Stock equal to the number of shares of Common Stock used
to exercise an underlying stock option (either shares previously owned or
shares acquired pursuant to the exercise of the underlying option and
sold in order to exercise e.g., such as in a so-called "cashless
exercise"), shall not reduce the aggregate number of shares authorized
under the Plan.
28
EXHIBIT C
AMENDMENT TO THE MANAGEMENT INCENTIVE PLAN
Section 3.1 of the SLM Holding Corporation Management Incentive Plan is
hereby deleted in its entirety and replaced with the following:
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, $.20 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 11,500,000; provided that
no more than 1,500,000 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. The number of shares of common stock
issued upon the exercise of "replacement options", i.e. options
granted to purchase a number of shares of common stock equal to the
number of shares of common stock used to exercise an underlying
stock option (either shares previously owned or shares acquired
pursuant to the exercise of the underlying option and sold in order
to exercise e.g., such as in a so-called "cashless exercise"), shall
not reduce the aggregate number of shares authorized under the Plan.
29
Please fold and detach card at perforation before mailing
SLM HOLDING CORPORATION
Instruction Card Solicited by Fidelity Management Trust Company
Annual Meeting - May 18, 2000
Each of the undersigned, revoking all other instructions heretofore given,
hereby directs Fidelity Management Trust Company ("Fidelity") to constitute
and appoint Albert L. Lord, A. Alexander Porter, Jr. 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") credited to the
account of 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 on this card. If no direction is made, if the card is not signed, or if
the card is not received by May 15, 2000, the shares credited to your account
will be voted in proportion to directions received by Fidelity. Your
directions will be treated confidentially by Fidelity.
Please Mark, Sign, Date and Mail Promptly
In the Enclosed Envelope.
Date:__________________
-------------------------------------------------
-------------------------------------------------
Signature
NOTE: Please sign exactly as name appears hereon.
Please manually date this card.
410
Please fold and detach card at perforation before mailing
Please vote by filling in the boxes below.
FOR AGAINST ABSTAIN
1. Amend the Certificate of Incorporation to change the size of the Board of / / / / / /
Directors and to permit the Board of Directors to fill director vacancies;
2. Elect all nominees listed to the Board of Directors, except as noted FOR WITHHOLD
(write the names of the nominee, if any, for whom you withhold authority all nominees authority for
to vote). Nominees: James E. Brandon; Charles L. Daley; William M. all nominees
Diefenderfer; Richard G. Dooley; Edward A. Fox; Diane Suitt Gilleland; / / / /
Ann Torre Grant; Ronald F. Hunt; Benjamin J. Lambert III; Albert L. Lord;
Marie V. McDemmond; Barry A. Munitz; J. Bonnie Newman; A. Alexander Porter,
Jr.; Wolfgang Schoellkopf; Steven L. Shapiro; Randolph H. Waterfield, Jr.
/ / For all except:
--------------------------------------------------------
FOR AGAINST ABSTAIN
3. Amend the SLM Holding Corporation Directors Stock Plan to increase the / / / / / /
number of shares authorized under the Plan and to change the calculation of
remaining authorized shares;
4. Amend the SLM Holding Corporation Management Incentive Plan to increase the / / / / / /
number of shares authorized under the Plan and to change the calculation
of remaining authorized shares;
5. Ratify the appointment of Arthur Andersen LLP as the Company's independent / / / / / /
auditors for the current year.
Please fold and detach card at perforation before mailing
SLM HOLDING CORPORATION
Proxy solicited by the Board of Directors for Annual Meeting - May 18, 2000
Each of the undersigned, revoking all other proxies heretofore given, hereby
constitutes and appoints Albert L. Lord, A. Alexander Porter, Jr. 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 adjournment 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 (Amendment of Certificate of
Incorporation), FOR Item 2 (Election of Directors), FOR Item 3 (Amendment of
Directors Stock Plan), FOR Item 4 (Amendment of Management Incentive Plan)
and FOR Item 5 (Ratification of 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.
Date:__________________
-------------------------------------------------
-------------------------------------------------
Signature
NOTE: Please sign exactly as name appears hereon.
Please manually date this card.
002
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING
PLEASE VOTE BY FILLING IN THE BOXES BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1-5 TO BE VOTED UPON AT THE
ANNUAL MEETING:
PLEASE MARK YOUR VOTE AS INDICATED IN THIS EXAMPLE: /X/
FOR AGAINST ABSTAIN
1. Amend the Certificate of Incorporation to change the size of the Board of / / / / / /
Directors and to permit the Board of Directors to fill director vacancies;
2. Elect all nominees listed to the Board of Directors, except as noted FOR WITHHOLD
(write the names of the nominee, if any, for whom you withhold authority all nominees authority for
to vote). Nominees: James E. Brandon; Charles L. Daley; William M. all nominees
Diefenderfer; Richard G. Dooley; Edward A. Fox; Diane Suitt Gilleland; / / / /
Ann Torre Grant; Ronald F. Hunt; Benjamin J. Lambert III; Albert L. Lord;
Marie V. McDemmond; Barry A. Munitz; J. Bonnie Newman; A. Alexander Porter,
Jr.; Wolfgang Schoellkopf; Steven L. Shapiro; Randolph H. Waterfield, Jr.
/ / For all except:
--------------------------------------------------------
FOR AGAINST ABSTAIN
3. Amend the SLM Holding Corporation Directors Stock Plan to increase the / / / / / /
number of shares authorized under the Plan and to change the calculation of
remaining authorized shares;
4. Amend the SLM Holding Corporation Management Incentive Plan to increase the / / / / / /
number of shares authorized under the Plan and to change the calculation
of remaining authorized shares;
5. Ratify the appointment of Arthur Andersen LLP as the Company's independent / / / / / /
auditors for the current year.
DETACH PROXY CARD HERE
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 - 5 TO BE VOTED UPON AT
THE ANNUAL MEETING.
1. Amend the Certificate of Incorporation to change the size of the Board of FOR / / AGAINST / / ABSTAIN / /
Directors and to permit the Board of Directors to fill director vacancies.
2. Elect all nominees listed to the Board of Directors FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS / /
listed below / / for all nominees listed
below / /
Nominees: James E. Brandon; Charles L. Daley; William M. Diefenderfer, III; Richard G. Dooley; Edward A. Fox; Diane Suitt
Gilleland; Ann Torre Grant; Ronald F. Hunt; Benjamin J. Lambert, III; Albert L. Lord; Marie V. McDemmond; Barry A. Munitz; J.
Bonnie Newman; A. Alexander Porter, Jr.; Wolfgang Schoellkopf; Steven L. Shapiro; Randolph H. Waterfield, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW.)
*For All Except:
--------------------------------------------------------
3. Amend the SLM Holding Corporation Directors Stock Plan to increase the FOR / / AGAINST / / ABSTAIN / /
number of shares authorized under the Plan and to change the calculation of
remaining authorized shares.
4. Amend the SLM Holding Corporation Management Incentive Plan to increase FOR / / AGAINST / / ABSTAIN / /
the number of shares authorized under the Plan and to change the calculation
of remaining authorized shares.
5. Ratify the appointment of Arthur Andersen LLP as the Company's independent FOR / / AGAINST / / ABSTAIN / /
auditors for the current year.
Address Change and/or
Comments Mark Here / /
Please sign exactly as name is
printed to the left. Joint owners,
co-executors or co-trustees should
both sign. Persons signing as
attorney, executor, administrator,
trustee or guardian should give
their full title as such.
Date ________________________, 2000
___________________________________
___________________________________
SIGNATURE(S)
VOTES MUST BE INDICATED
(PLEASE SIGN, DATE AND RETURN THIS (X) IN BLACK OR BLUE INK. / /
PROXY CARD IN THE ENCLOSED ENVELOPE.)
SLM HOLDING CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING - MAY 18, 2000
Each of the undersigned, revoking all other proxies heretofore given,
hereby constitutes and appoints Albert L. Lord, A. Alexandar Porter, Jr. 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 (Amendment of Certificate
of Incorporation), FOR Item 2 (Election of Directors), FOR Item 3 (Amendment
of Directors Stock Plan), FOR Item 4 (Amendment of Management Incentive Plan)
and FOR Item 5 (Ratification of 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.
