Sallie Mae 2009 Annual Report Download - page 201

13. Stock-Based Compensation Plans and Arrangements (Continued)
authorized but unissued. The Company also makes grants of stock-based awards under individually negotiated
arrangements.
The SLM 2009-2012 Incentive Plan was approved by shareholders on May 22, 2009, and expires on
May 22, 2012. At December 31, 2009, 12.1 million shares were authorized to be issued from this plan.
The SLM Corporation Directors Equity Plan, under which stock options and restricted stock are granted
to non-employee members of the board of directors, was approved on May 22, 2009, and expires on May 22,
2012. At December 31, 2009, 1 million shares were authorized to be issued from this plan. The Company’s
non-employee directors are considered employees under the provisions of ASC 718.
From January 1, 2007 through May 21, 2009, the Company granted stock options and restricted stock to
its employees and non-employee directors under the SLM Corporation Incentive Plan and the Directors Stock
Plan.
The total stock-based compensation cost recognized in the consolidated statements of income for the
years ended December 31, 2009, 2008 and 2007 was $51 million, $86 million, and $75 million, respectively.
The related income tax benefit for the years ended December 31, 2009, 2008 and 2007 was $19 million,
$32 million and $28 million, respectively. As of December 31, 2009, there was $36 million of total
unrecognized compensation cost related to stock-based compensation programs, which is expected to be
recognized over a weighted average period of 2.1 years.
Stock Options
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 grant date. The Company has granted time-vested,
price-vested and performance-vested options to its employees and non-employee directors. Time-vested
options granted to non-management employees vest one-half in 18 months from grant date and the second
one-half in 36 months from grant date. Time-vested options granted to management employees vest one-third
per year for three years. Price-vested options granted to management employees vest upon the Company’s
common stock price reaching a targeted closing price for a set number of days, with a cliff vesting on the
eighth anniversary of their grant date. Price-vested options granted to non-employee directors vest upon the
Company’s common stock price reaching a targeted closing price for a set number of days or the director’s
election to the Board, whichever occurs later, with a cliff vesting on the fifth anniversary of their grant date.
Performance-vested options granted to senior management employees vest one-third per year for three years
based on earnings-related performance targets.
The fair values of the options granted in the years ended December 31, 2009, 2008 and 2007 were
estimated as of the grant date using a Black-Scholes option pricing model with the following weighted average
assumptions:
2009 2008 2007
Years Ended December 31,
Risk-free interest rate ................................ 1.51% 2.50% 4.88%
Expected volatility .................................. 80% 44% 21%
Expected dividend rate ............................... 0.00% 0.00% 2.20%
Expected life of the option ............................ 3.5years 3.3 years 3.2 years
The expected life of the options is based on observed historical exercise patterns. Groups of employees
(including non-employee directors) that have received similar option grant terms are considered separately for
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)