Sallie Mae 2006 Annual Report Download - page 179

16. Stock-Based Compensation Plans
The Company has various stock-based compensation plans which provide for grants of stock, stock
options, restricted stock and restricted stock units.
The SLM Corporation Incentive Plan (the “Incentive Plan”) was approved by shareholders in 2004 and
amended in 2005 and 2006. A total of 17.7 million shares are authorized to be issued from this plan. Upon
approval of the Incentive Plan, the Company discontinued the Employee Stock Option Plan (the “ESOP”) and
Management Incentive Plan (the “MIP”). Shares available for future issuance under the ESOP and MIP were
canceled; however, terms of outstanding grants remain unchanged. Commitments made to certain option
holders to receive replacement options under the MIP will be honored.
Awards under the Incentive Plan may be in the form of stock, stock options, restricted stock and restricted
stock units.
The Company also offers all employees participation in the Employee Stock Purchase Plan (the “ESPP”).
Stock-based compensation is also granted to non-employee directors of the Company under the
shareholder-approved Directors Stock Plan. A total of 9.3 million shares are authorized to be issued from this
plan and awards may be in the form of stock and stock options. The Company’s non-employee directors are
considered employees under the provisions of SFAS No. 123(R). The shares issued under the Incentive Plan,
the Directors Stock Plan and the ESPP may be either shares reacquired by the Company or shares that are
authorized but unissued.
An amount equal to dividends payable on the Company’s common stock (“dividend equivalents”) is
credited on “full value” stock-based compensation awards, which are nonvested restricted stock and restricted
stock units, and on share amounts credited under deferred compensation arrangements. Dividend equivalents
are not credited on stock option awards.
The total stock-based compensation cost recognized in the consolidated statements of income for the year
ended December 31, 2006 was $81 million. The related income tax benefit for the year ended December 31,
2006 was $30 million. As of December 31, 2006, there was $57 million of total unrecognized compensation
cost related to stock-based compensation programs, which is expected to be recognized over a weighted
average period of 2.0 years.
Stock Options
Under the Incentive Plan, ESOP and MIP, the maximum term for stock options is 10 years and the
exercise price must be equal to or greater than the market price of SLM common stock on the date of grant.
Stock options granted to officers and management employees under the plans generally vest upon the
Company’s common stock price reaching a closing price equal to or greater than 20 percent above the fair
market value of the common stock on the date of grant for five days, but no earlier than 12 months from the
grant date. Stock options granted to members of executive management have included more difficult price
vesting targets. In any event, all price vested options vest upon the eighth anniversary of their grant date.
Options granted to rank-and-file employees are time-vested with the grants vesting one-half in 18 months from
their grant date and the second one-half vesting 36 months from their grant date.
Under the Directors Stock Plan, the maximum term for stock options is 10 years and the exercise price
must be equal to or greater than the market price of the Company’s common stock on the date of grant. Stock
options granted to directors are generally subject to the following vesting schedule: all options vest upon the
Company’s common stock price reaching a closing price equal to or greater than 20 percent above the fair
market value of the common stock on the date of grant for five days or the director’s election to the Board,
whichever occurs later. In any event, all options vest upon the fifth anniversary of their grant date.
F-60
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)