Freddie Mac 2009 Annual Report Download - page 273

stock-based compensation was awarded in accordance with the terms of the 1995 Stock Compensation Plan, or 1995
Employee Plan. Although grants are no longer made under the 1995 Employee Plan, we currently have awards outstanding
under this plan. We collectively refer to the 2004 Employee Plan and 1995 Employee Plan as the Employee Plans.
Common stock delivered under these plans may consist of authorized but previously unissued shares, treasury stock or
shares acquired in market transactions on behalf of the participants. No restricted stock units were granted in 2009, which,
discussed below, are generally forfeitable for at least one year after the grant date, with vesting provisions contingent upon
service requirements.
Stock Options
Stock options allow for the purchase of our common stock at an exercise price equal to the fair market value of our
common stock on the grant date. The 2004 Employee Plan was amended to change the definition of fair market value to the
closing sales price of a share of common stock from the average of the high and low sales prices, effective for all grants
after December 6, 2006. Options generally may be exercised for a period of 10 years from the grant date, subject to a
vesting schedule commencing on the grant date.
Stock options that we previously granted included dividend equivalent rights. Depending on the terms of the grant, the
dividend equivalents may be paid when and as dividends on our common stock are declared. Alternatively, dividend
equivalents may be paid upon exercise or expiration of the stock option. Subsequent to November 30, 2005, dividend
equivalent rights were no longer granted in connection with awards of stock options to grantees to address Internal Revenue
Code Section 409A.
Restricted Stock Units
A restricted stock unit entitles the grantee to receive one share of common stock at a specified future date. Restricted
stock units do not have voting rights, but do have dividend equivalent rights, which are (a) paid to restricted stock unit
holders who are employees as and when dividends on common stock are declared or (b) accrued as additional restricted
stock units for non-employee members of our Board of Directors.
Restricted Stock
Restricted stock entitles participants to all the rights of a stockholder, including dividends, except that the shares
awarded are subject to a risk of forfeiture and may not be disposed of by the participant until the end of the restriction
period established at the time of grant.
Stock-Based Compensation Plans
The following is a description of each of our stock-based compensation plans under which grants were made prior to
our entry into conservatorship on September 6, 2008. After such date, we suspended operation of our ESPP and will no
longer make grants under the Employee Plans or Director’s Plan.
ESPP
Our ESPP is qualified under Internal Revenue Code Section 423. Prior to conservatorship, under the ESPP, substantially
all full-time and part-time employees that chose to participate in the ESPP had the option to purchase shares of common
stock at specified dates, with an annual maximum market value of $20,000 per employee as determined on the grant date.
The purchase price was equal to 85% of the lower of the average price (average of the daily high and low prices) of the
stock on the grant date or the average price of the stock on the purchase (exercise) date.
At December 31, 2009, the maximum number of shares of common stock authorized for grant to employees totaled
6.8 million shares, of which approximately 1.0 million shares had been issued and approximately 5.8 million shares
remained available for grant. At December 31, 2009, no options to purchase stock were exercisable under the ESPP.
2004 Employee Plan
Prior to conservatorship, under the 2004 Employee Plan, we granted employees stock-based awards, including stock
options, restricted stock units and restricted stock. In addition, we have the right to impose performance conditions with
respect to these awards. Employees may have also been granted stock appreciation rights; however, at December 31, 2009,
no stock appreciation rights had been granted under the 2004 Employee Plan. At December 31, 2009, the maximum number
of shares of common stock authorized for grant to employees in accordance with the 2004 Employee Plan totaled
30.4 million shares, of which approximately 5.7 million shares had been issued and approximately 24.7 million shares
remained available for grant.
Directors’ Plan
Prior to conservatorship, under the Directors’ Plan, we were permitted to grant stock options, restricted stock units and
restricted stock to non-employee members of our Board of Directors. At December 31, 2009, the maximum number of
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