THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated as of January 5, 2011 is entered into by and between Laurent C. Lutz, a resident of the State of Illinois (“Executive”), and SLM Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Company”).
WHEREAS, the Board of Directors of the Company (“Board”) wishes to retain Executive as Executive Vice President and General Counsel of the Company, and Executive wishes to accept such employment with the Company, in each case, on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the parties, subject to the terms and conditions set forth herein, agree as follows:
1. Employment and Term . Executive hereby agrees to be employed as Executive Vice President and General Counsel of the Company and the Company hereby agrees to retain Executive as Executive Vice President and General Counsel. Executive’s employment under this Agreement may be maintained through the Company or another wholly owned subsidiary of the Company used to employ the Company executives, and in such case any reference in this Agreement to employment or termination of employment with the Company shall be deemed to include employment or termination of employment with SLM Corporation or such other subsidiary. The term of this Agreement and of Executive’s employment as Executive Vice President and General Counsel under this Agreement shall be the period commencing on January 5, 2011 (the “Commencement Date”) and ending on the earlier of January 5, 2013 and the effective date of any termination pursuant to the provisions of Section 13 (the “Term”).
2. Duties and Title . During the Term, Executive will have the title of Executive Vice President and General Counsel of the Company. Executive agrees to assume such duties and responsibilities as may be reasonably assigned to Executive from time to time by the Board or the Company’s Chief Executive Officer, which duties shall include, but not be limited to, (i) day-to-day administrative and management oversight of the Company’s Legal and corporate secretarial functions, (ii) collaboration with the Company’s Chief Executive Officer and Chief Financial Officer with regard to relationships involving regulators, rating agencies and investor relations and (iii) assisting the Chief Executive Officer in the day-to-day administrative and management oversight of the Company’s Compliance and Internal Audit functions. The Executive shall report directly to the Company’s Chief Executive Officer and shall work based out of the Company’s Newark, Delaware offices. The Company agrees that Executive shall be permitted to work remotely in Chicago one business day per week for up to six months after the Commencement Date, and the Company acknowledges that Executive and/or Executive’s family may not relocate to the Delaware area prior to July, 2011. As requested by the Chief Executive Officer, Executive shall assume such additional
positions with respect to subsidiaries of the Company as necessary or appropriate in furtherance of his responsibilities.
3. Other Business Activities . During the Term, Executive agrees to devote such time, attention, skill and efforts to the business and affairs of the Company as may be required by the Chief Executive Officer or the Board and/or necessary to discharge the duties and responsibilities assigned to Executive hereunder. Executive shall serve the Company faithfully and to the best of his ability. In furtherance of the foregoing, and not by way of limitation, for so long as he remains employed by the Company hereunder, Executive shall not directly or indirectly engage in any other business activities or pursuits, except for (a) those arising from positions held as of the Commencement Date as a director or otherwise with charitable or business organizations, and (b) with prior notice to the Chief Executive Officer, activities in connection with (i) service as a volunteer, officer or director or in a similar capacity of any charitable or civic organization, and (ii) serving as a director, executor, trustee or in another similar fiduciary capacity for a non-commercial entity; provided, however, that any such activities do not conflict with or materially interfere with Executive’s performance of his responsibilities and obligations pursuant to this Agreement.
4. Base Salary . During the Term, the Company shall pay Executive a salary at the annual rate of $500,000 (the “Base Salary”). The Base Salary shall be inclusive of all applicable income, Social Security and other taxes and charges which are required by law or requested to be withheld by Executive and which shall be withheld and paid in accordance with the Company’s normal payroll practice for its similarly situated executives as in effect from time to time.
5. Annual Incentive Compensation . Executive shall participate in the Company’s annual incentive compensation program(s) for executive officers as provided in the SLM Corporation 2009-2012 Incentive Plan (or any successor plan) as such may be amended from time to time and (the “Incentive Plan”), subject to the limitations and conditions set forth therein or in any successor plan. During the Term, the maximum bonus opportunity available for Executive under the Incentive Plan shall not be less than one and one-half (1.5) times his Base Salary (“Annual Incentive Compensation Opportunity”). Executive’s Incentive Compensation shall, except as otherwise stated in this Agreement, be payable in the same form and proportions of cash and/or equity awards as the Company’s other executive officers.
6. Initial Stock Option Award . As a material inducement for Executive to accept employment with the Company, on the Commencement Date, Executive will be granted a stock option award covering two hundred thousand (200,000) shares of the Company’s common stock which will be granted under the Incentive Plan (the “Initial Stock Option” pursuant to a stock option agreement substantially in the form of Exhibit B hereto (the “Initial Stock Option Agreement”).
6.1 Exercise Price; Net Exercise of Option . The Initial Stock Option shall have a per share exercise price equal to the per share closing price of the
Company’s common stock on the Commencement Date and shall be net settled according to the standard terms and conditions applicable to officer options granted under the Incentive Plan.
6.2 Vesting and Exercisability . The extent to which the Initial Stock Option vests and becomes exercisable shall be determined under this Section 6.2 and Sections 8.1 and 8.2 and the form of stock option agreement. The Initial Stock Option shall become vested and exercisable ratably as follows: one-third on the first anniversary of the Commencement Date, one-third on the second anniversary of the Commencement Date and the remainder on the third anniversary of the Commencement Date; provided, however, provided, however, the Initial Stock Option shall earlier vest its entirety upon the Executive’s death or Disability (as defined herein).
7. Initial Restricted Stock Award . On the Commencement Date, Executive shall be granted a restricted stock award covering one hundred thousand (100,000) shares of the Company’s common stock and granted to Executive under the Incentive Plan (the “Restricted Stock” pursuant to a restricted stock award agreement substantially in the form of Exhibit C attached hereto (the “Restricted Stock Agreement”) and shall be net settled according to the standard terms and conditions applicable to officer restricted stock granted under the Incentive Plan.
7.1 Vesting . The extent to which the Restricted Stock vests shall be determined under this Section 7.1 and Sections 8.1 and 8.2 and the Restricted Stock Agreement. The Restricted Stock Award shall vest ratably one-third on the first anniversary of the Commencement Date, one-third on the second anniversary of the Commencement Date and the remainder on the third anniversary of the Commencement Date; provided, however , all of the shares of Restricted Stock shall earlier vest in their entirety upon the Executive’s death or Disability (as defined herein).
8. Additional Terms Applicable to the Initial Stock Option and the Restricted Stock .
8.1 Expiration . If the Executive’s employment is terminated during the term hereof (i) by the Company other than for Cause (as hereinafter defined) or (ii) by the Executive as a Termination For Good Reason (as hereinafter defined), the Initial Stock Option and the Restricted Stock shall continue to vest, become exercisable and settle as if the Executive continued in active employment with the Company until the relevant vesting dates and none of the Initial Stock Option or Restricted Stock shall be forfeited by reason of such termination. Except as provided in Section 8.2, upon a termination by the Company for Cause or by the Executive other than For Good Reason, any Initial Stock Options and any Restricted Stock shall be forfeited and shall immediately expire and terminate to the extent not vested on or before the date Executive’s employment with the Company as an executive officer terminates. In addition, to the extent that the Initial Stock Option has not been forfeited or previously exercised, the Initial
Stock Option shall expire on the earlier of (a) the tenth anniversary of the date of their grant, (b) the first anniversary of Executive’s termination of employment on account of death or Disability (as defined herein) or (c) the date Executive’s employment is terminated by the Company for Cause or by Executive other than a Termination for Good Reason.
8.2 Change of Control . Notwithstanding anything to the contrary in Section 6.2, Section 7.1 and Section 8.1, vesting, exercise, and expiration of the Initial Stock Options and vesting of the Restricted Stock in the context of any Equity Acceleration Change of Control or Cash Acceleration Change of Control, each as defined in the Change of Control Severance Plan for Senior Officers effective January 1, 2006, as amended by all of the amendments through and including December 8, 2010 but without regard to any amendments thereafter (the “Change in Control Severance Plan”), shall be governed by the terms of such Change in Control Severance Plan, the Initial Stock Option Agreement and the Restricted Stock Agreement.
8.3 Other Terms and Conditions . The Initial Stock Options and Restricted Stock shall be subject to all of the terms and provisions of the Incentive Plan and to the extent not inconsistent with the Incentive Plan, the terms and conditions set forth in this Agreement. To the extent not addressed or provided otherwise in this Agreement, the Initial Stock Option Award and the Restricted Stock Award shall also be subject to the terms and conditions of the Initial Stock Option Agreement and the Restricted Stock Agreement, respectively, pursuant to which they are issued.
(a) Retirement Plans . During the Term, to the extent permissible under the terms of the applicable plans, Executive shall be entitled to participate in all tax-qualified and non-tax-qualified pension plans maintained or contributed to by the Company or for the benefit of its executives, including without limitation, the Sallie Mae 401(k) Savings Plan and the Sallie Mae Supplemental 401(k) Savings Plan (collectively, “the Company Plans”), in accordance with the terms of the Company Plans as they may be amended from time to time in the discretion of the Company.
(b) Medical Insurance . During the Term, Executive shall be entitled to participate in any medical and dental insurance plans generally available to the senior management of the Company, in accordance with the terms of such plans as they may be amended from time to time in the discretion of the Company.
(c) Other Benefit Plans . Executive shall be entitled to receive or participate in such further retirement, savings, deferred compensation, matching gift program, life insurance, health or welfare benefit plans offered to the Company’s senior management generally, in accordance with the terms of such
plans as they may be amended from time to time in the discretion of the Company.
(d) Expenses . The Company agrees to reimburse Executive for all reasonable, ordinary and necessary business expenses incurred by Executive in performing his duties pursuant to this Agreement, in accordance with the Company’s reimbursement policies generally applicable to management personnel. In no event shall any such reimbursement be paid later than the end of the calendar year following the year in which the expense was incurred.
(e) Relocation . The Company shall pay Executive a relocation allowance of $27,500 a month for a period of six months from the Commencement Date, for Executive and Executive’s family’s relocation expenses, including, without limitation, moving expenses, real estate commissions and related real estate closing costs in connection with the sale of his Chicago area home and the purchase of a Wilmington area home, temporary living expenses, family house hunting trips, expenses to commute to and from Chicago until Executive and his family relocates and related expenses of Executive. In addition, the Company will reimburse Executive up to $100,000 in the event of a gross sales price from the sale of Executive’s Chicago home is below Seller’s adjusted cost basis of $750,000 in Executive’s existing Chicago home, which adjusted basis shall consist of the home’s original purchase price, as stated on the closing statement for Seller’s purchase of the home and documented additional costs for installation of central air conditioning, window installation and damaged floorboard replacements. In the event Executive voluntarily terminates employment with the Company other than a Termination For Good Reason within twelve (12) months after the Commencement Date, Executive shall promptly reimburse and pay the Company 100% of expenses actually expended by the Company on Executive’s behalf pursuant to this section.
(f) Indemnification . The Company shall indemnify Executive as provided in the Company’s Articles of Incorporation and Bylaws, to the fullest extent provided to directors and officers thereunder, as in effect as of the Commencement Date (regardless of any subsequent changes to such Articles or Bylaws) with respect to Executive’s activities on behalf of the Company.
10. No Other Compensation . Except as set forth in Sections 4 through 9 above, Executive shall have no right to any other remuneration from the Company in respect of his services as Executive Vice President and General Counsel of the Company during the Term.
11. Nondisclosure of Confidential Information .
(a) Executive and the Company acknowledge that Executive will, in the course of his employment, come into possession of confidential, proprietary business and technical information, and trade secrets of the Company and its subsidiaries (the “Proprietary Information”). Proprietary Information includes, but is not limited to, the following:
(i) Business Procedures . All information concerning or relating to the way the Company and its subsidiar