Fannie Mae 2007 Annual Report Download - page 248

13. Stock-Based Compensation Plans
We have two stock-based compensation plans, the 1985 Employee Stock Purchase Plan and the Stock
Compensation Plan of 2003. Under these plans, we offer various stock-based compensation programs where
we provide employees an opportunity to purchase Fannie Mae common stock or we periodically make stock
awards to certain employees in the form of nonqualified stock options, performance share awards, restricted
stock awards, restricted stock units or stock bonus awards. In connection with our stock-based compensation
plans, we recorded compensation expense of $118 million, $116 million and $33 million for the years ended
December 31, 2007, 2006 and 2005, respectively. The compensation expense amount for 2005 included a
$64 million benefit related to the reversal of amounts previously recorded under our Performance Share
Program as discussed below. In both 2007 and 2006, we recognized $2 million of compensation cost related to
stock awards granted prior to the adoption of SFAS 123R to employees eligible for retirement.
Stock-Based Compensation Plans
The 1985 Employee Stock Purchase Plan (the “1985 Purchase Plan”) provides employees an opportunity to
purchase shares of Fannie Mae common stock at a discount to the fair market value of the stock during
specified purchase periods. Our Board of Directors sets the terms and conditions of offerings under the 1985
Purchase Plan, including the number of available shares and the size of the discount. The aggregate maximum
number of shares of common stock available for employee purchase is 50 million. Since inception, we have
made available 38,039,742 shares under the 1985 Purchase Plan. In any purchase period, the maximum
number of shares available for purchase by an eligible employee is the largest number of whole shares having
an aggregate fair market value on the first day of the purchase period that does not exceed $25,000. The
shares offered under the 1985 Purchase Plan are authorized and unissued shares of common stock or treasury
shares.
The Stock Compensation Plan of 2003 (the “2003 Plan”) is the successor to the Stock Compensation Plan of
1993 (the “1993 Plan”). The 2003 Plan enables us to make stock awards in various forms and combinations.
Under the 2003 Plan, these include stock options, stock appreciation rights, restricted stock, restricted stock
units, performance share awards and stock bonus awards. The aggregate maximum number of shares of
common stock available for award to employees and non-management directors under the 2003 Plan is
40 million. Including the effects of cancellations, we have awarded 9,854,414 shares under this plan since
inception. The shares awarded under the 2003 Plan may be authorized and unissued shares, treasury shares or
shares purchased on the open market.
Stock-Based Compensation Programs
Nonqualified Stock Options
Under the 2003 Plan, we may grant stock options to eligible employees and non-management members of the
Board of Directors. Generally, employees and non-management directors cannot exercise their options until at
least one year subsequent to the grant date, and they expire ten years from the date of grant. Typically, options
vest 25% per year beginning on the first anniversary of the date of grant. The exercise price of each option is
equal to the fair market value of our common stock on the date we grant the option.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)