Freddie Mac 2008 Annual Report Download - page 238

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, 2008, 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, 2008, 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, 2008,
no stock appreciation rights had been granted under the 2004 Employee Plan. At December 31, 2008, the maximum number
of shares of common stock authorized for grant to employees in accordance with the 2004 Employee Plan totaled
29.9 million shares, of which approximately 7.0 million shares had been issued and approximately 22.9 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, 2008, the maximum number of shares
of common stock authorized for grant to members of our Board of Directors in accordance with the Directors’ Plan totaled
2.4 million shares, of which approximately 0.9 million shares had been issued and approximately 1.5 million shares remained
available for grant.
See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for a description of the accounting
treatment for stock-based compensation, including grants under the ESPP, Employee Plans and Directors’ Plan.
Estimates used to determine the assumptions noted in the table below are determined as follows:
(a) the expected volatility is based on the historical volatility of the stock over a time period equal to the expected life;
(b) the weighted average volatility is the weighted average of the expected volatility;
(c) the weighted average expected dividend yield is based on the most recent dividend announcement relative to the
grant date and the stock price at the grant date;
(d) the weighted average expected life is based on historical option exercise experience; and
(e) the weighted average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the
grant.
Changes in the assumptions used to calculate the fair value of stock options could result in materially different fair
value estimates. The actual value of stock options will depend on the market value of our common stock when the stock
options are exercised.
Table 11.1 summarizes the assumptions used in determining the fair values of options granted under our stock-based
compensation plans using a Black-Scholes option-pricing model as well as the weighted average grant-date fair value of
options granted and the total intrinsic value of options exercised.
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