Date To September 24, 2009 Ross J. Kari From Charles E. Haldeman Subject Your Compensation as Executive Vice President and Chief Financial Officer
Exhibit 10.1
| Date | To | |
| September 24, 2009 | Xxxx X. Xxxx | |
| From | ||
| Xxxxxxx X. Xxxxxxxx | ||
| Subject | ||
| Your Compensation as Executive Vice President and Chief Financial Officer | ||
On behalf of the Compensation Committee (“Committee”)
of Freddie Mac’s Board of Directors (“Board”),
this memorandum sets forth Freddie Mac’s agreement to
employ you as its Executive Vice President and Chief Financial
Officer, effective no later than October 15, 2009, pursuant
to the terms and conditions set forth herein. The terms and
conditions set forth herein supersede any previous
communications you may have had with Freddie Mac, the Federal
Housing Finance Agency (“FHFA”), or the Department of
the Treasury.
As you are aware, there has been substantial uncertainty
regarding executive compensation practices in the financial
services industry as a result of numerous government actions and
the recently issued regulations. Our regulator, the FHFA, after
consulting with the Department of the Treasury, has provided us
with preliminary guidance on the impact of the new regulations
on Freddie Mac’s compensation programs. FHFA has not yet
approved a final pay structure for Freddie Mac’s
executives, but this offer reflects commitments approved by FHFA
related to annual base salary, target annual total direct
compensation opportunity, and a transition payment.
The terms and conditions in this letter have been approved by
the Compensation Committee (the “Committee”) of
Freddie Mac’s Board of Directors and the Federal Housing
Finance Agency, which has also consulted with the Department of
the Treasury.
As Freddie Mac’s Executive Vice President and Chief
Financial Officer, you shall report to me, Freddie Mac’s
Chief Executive Officer, or my successor, and have the same
status, privileges, and responsibilities normally inherent in
such capacity in corporations of similar size and character. You
shall also perform such additional duties as the Board may from
time to time reasonably assign to you.
During your employment as Executive Vice President and Chief
Financial Officer, you agree to devote substantially your full
time, attention, and energies to Freddie Mac’s business,
and to not be engaged in any other business activity, whether or
not such business activity is pursued for gain, profit, or other
pecuniary advantage, other than service on outside Boards as
approved by the Committee. This restriction shall not prevent
you from devoting a reasonable amount of time to charitable or
public interest activities or from making passive
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investments of your assets in such form or manner as you desire,
consistent with Freddie Mac’s Personal Securities
Investments Policy.
Please review and confirm that such terms and conditions conform
to your understanding by returning to Xxxx Xxxxxx, Xxxxxxx
Xxx’s Executive Vice-President of Human Resources and
Corporate Services, a signed copy of this memorandum.
| I. | Compensation |
Freddie Mac agrees to provide you the following:
A. Base
Salary
Your annual base salary shall be no less than $675,000, and
shall be paid in cash each calendar year on a semi-monthly basis
while you are employed by Freddie Mac and will be paid subject
to Freddie Mac’s executive compensation plans, practices
and policies in effect as of the date of payment.
Subject to approval by FHFA after consulting with the Department
of the Treasury, the Committee has the discretion to determine
whether to implement a base salary increase.
If you terminate your employment with Freddie Mac at any time
for any reason, your annual base salary will terminate as of the
date your employment terminates.
B. Target
Annual Total Direct Compensation Opportunity
Your target annual total direct compensation opportunity will be
$3,500,000, and will consist of a base salary of $675,000, an additional annual salary of $1,658,333 paid over time in installments, and an annual
target incentive opportunity of $1,166,667. The incentive opportunity will have terms
and conditions consistent with those that will be approved by
FHFA and applicable to all Freddie Mac officers at the level of
senior vice president and above.
Your incentive opportunity for 2009 will be pro-rated based on
your date of hire.
The actual dollar amount of the incentive opportunity you
receive shall be determined in the sole discretion of the
Committee, subject to approval by FHFA after consulting with the
Department of the Treasury, as appropriate.
| II. | Transition Payments |
Subject to your beginning employment with Freddie Mac, you will
receive a cash sign-on award of $1,950,000 in recognition of the
forfeited annual incentive opportunity and unvested equity at
your current employer.
The cash sign-on award will be paid to you in installments. The
first installment will be paid to you in your first full
semi-monthly paycheck after your date of hire. The remaining
installments will be paid to you prior to the first anniversary
of your date of hire. If you are not an employee of Freddie Mac
on an installment payment date, the installment will be
forfeited.
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Each installment will be subject to repayment in the event that,
prior to the first anniversary of an installment payment date,
you terminate your employment with Freddie Mac for any reason or
Freddie Mac terminates your employment for a reason that
constitutes “Cause” (as defined in Attachment A
hereto). For each installment payment, the amount subject to
repayment will be equal to the amount of the installment payment
minus one-twelfth of the installment payment for each whole
month worked beginning on the installment payment date and
ending on the day prior to the first anniversary of the
installment payment date.
| III. | Relocation Benefit |
You shall receive the relocation benefit consistent with the
Company’s executive relocation package; however, the terms
below may either augment or supersede the parallel terms of the
executive relocation package.
We also agree to waive the required 60 day offer period
under our normal home purchase and to immediately provide you a
buy-out pursuant to the terms of our relocation policy as soon
as your employment commences and subject to an appraisal
conducted at Freddie Mac’s expense.
In lieu of the
90-day
temporary living program provided under our standard executive
relocation benefits, you will be provided with no more than six
months of temporary lodging for you and your family at a local
apartment and reimbursement for reasonable local commuting and
necessary living expenses.
In addition to the benefits provided under our standard
executive relocation program, you will be reimbursed for travel
to/from the Washington D.C. area and your residences in Ohio,
Oregon, and Washington State during the temporary living period.
Each member of your immediate family may make a single trip
every three weeks during the temporary living period to/from the
Washington D.C. area and your current residences for which you
will be reimbursed.
The Company will not provide a
gross-up of
any relocation expenses regardless of whether the benefit is
provided on an exception basis or pursuant to the Company’s
normal executive relocation benefit.
| IV. | Other Benefits |
You will be eligible to participate in all employee benefit
plans offered to Freddie Mac’s senior executive officers
(as may be modified or terminated from time to time by Freddie
Mac in its sole discretion) pursuant to the terms set forth in
the applicable plan. In summary, our benefit plans consist of
the following:
| • | Health and Welfare — Competitive and flexible medical benefits program for you and your eligible dependents with several options to choose from. Dental and vision coverage for you and your dependents that covers a wide variety of services. |
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| • | Thrift/401(k) Savings Plan — You will be able to contribute on a pre-tax basis and Freddie Mac will begin matching a portion of your contributions — based on years of service — up to 6% of pay. This plan also includes a Company annual discretionary contribution called the “Basic Contribution”, which is in addition to the matching contribution and is based on a defined formula with a five year vesting schedule. | |
| • | Pension Plan — Provides benefits based on a formula that takes into account your age, salary, and years of service. The formula is, in summary, 1% x Highest Average Monthly Pay for a Consecutive 36 Month Period x Years of Service. You will vest in this benefit after five-years of service. Benefits are normally paid out in the form of a monthly annuity beginning at age 65. | |
| • | Supplemental Executive Retirement Plan (SERP) — An unfunded non-qualified plan for officers intended to make up for employer provided contributions and/or benefits under the Pension Plan and Thrift/401(k) Savings Plan that are capped due to Internal Revenue Code limitations. | |
| • | Income Protection — Provides short-term disability and long-term disability income protection, life insurance, accidental death and personal loss insurance, and business travel accident coverage. |
Under a separate cover we are sending details of our employee
benefit plans. As a new employee, when you first become eligible
for benefits, you may select the plans that best meet your needs
and those of your family by logging on to
xxxx://xxxxxxxxxxx.xxxxxxxx.xxx.
Shortly after your start date, you will receive an email from
the “Benefits Center” instructing you to log on to
Fidelity NetBenefits to make your benefits elections.
You will not receive any information at your home address. Your
enrollment window is 30 days following your first date of
employment. During Orientation, our flexible benefits program
and information about enrollment will be explained in greater
detail. Please visit our new hire website, Step Inside,
xxxx://xxx.xxxxxxxxxx.xxx/xxxxxxx/xxxxxxxxxx/,
for information about working at Freddie Mac.
V. Vacation
As an officer, you are eligible to accrue up to 20 days of
core vacation during your first calendar year of employment.
This equates to 6.46 hours each pay period; you begin
accruing vacation starting your first complete pay period.
Starting in 2010 (your second calendar year of employment), you
will have the opportunity to continue to accrue 20 days
vacation during each calendar year. You will be provided more
information following your start of employment.
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VI. Compensation
In the Event of Termination
In the event that Freddie Mac terminates your employment for
reasons other than “Cause” (as defined in
Attachment A hereto), then Freddie Mac will provide you
with severance pay and other benefits in an amount equal to that
provided to Freddie Mac’s senior executive officers
pursuant to the terms of an applicable severance policy in
effect as of the date of your termination of employment.
In the event that Freddie Mac terminates your employment for any
reason or you voluntarily terminate your employment, then
Freddie Mac will provide you with any earned but unpaid annual
base salary (that is paid semi-monthly in cash) through the date
of termination, any accrued but unpaid vacation through the date
of termination, and any reasonable business expenses incurred
through the date of termination.
In the event that any compensation or benefit to be provided
pursuant to the terms of this Paragraph VI constitutes
nonqualified deferred compensation subject to section 409A
of the Internal Revenue Code, then any payment of such
compensation or benefit shall be delayed to the extent necessary
to comply with Internal Revenue Code
section 409A(a)(2)(B)(i) and accompanying Treasury
regulations and other applicable Treasury or Internal Revenue
Service guidance.
Your employment shall be deemed terminated within the meaning of
Paragraph VI in the event, for any reason other than
“Cause” (as defined in Attachment A hereto),
Freddie Mac no longer permits you to serve as the Executive Vice
President and Chief Financial Officer, your responsibilities as
Executive Vice President and Chief Financial Officer are
materially diminished, or your annual base salary (that is paid
semi-monthly in cash) is reduced.
VII. Restrictive
Covenant Agreement
The terms of compensation provided in this memorandum are
contingent on your agreement to be bound by the terms of the
enclosed Restrictive Covenant Agreement, which you must sign and
return together with a signed copy of this memorandum. It is
included as Attachment B.
VIII. Recapture
Agreement
The terms of compensation provided in this memorandum are
contingent on your agreement to be bound by the terms of the
enclosed Recapture Agreement, which you must sign and return
together with a signed copy of this memorandum. It is included
as Attachment C.
IX. Escrow
Agreement
You acknowledge that payments of compensation and benefits,
including any termination of employment payment pursuant to
Paragraph V, are subject to escrow in the event prior to
the first anniversary of the termination of your employment for
any reason FHFA files a Notice of
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Charges alleging misconduct by you that was knowing and caused
or would be likely to cause a substantial loss to Freddie Mac
and directs the company to escrow compensation and benefits that
otherwise may be paid to you. In the event it is subsequently
determined that no misconduct occurred, the amount placed in
escrow shall be paid to you, plus reasonable interest for the
period of escrow.
X. Indemnification
Agreement
Freddie Mac agrees to enter into an indemnification agreement
with you that has terms and conditions consistent with those
provided to all other executive officers of the Company.
XI. Assignment
by Freddie Mac
This Agreement is binding upon and shall inure to the benefit of
the Company’s successors and assigns. The Company may
assign this Agreement in connection with a merger,
consolidation, assignment, sale, operation of law, or other
disposition of substantially all of its assets or business,
without the consent of Employee, provided the assignee
acknowledges that the Agreement is binding upon it. This
Agreement may not be assigned by Employee.
XII. FHFA
Approval
Notwithstanding FHFA’s approval of the terms and conditions
of compensation provided herein, including compensation to be
paid to you in the event of the termination of your employment,
you acknowledge and understand that such approval is subject to
reassessment by FHFA. If a severance triggering event were to
occur, any future payout would be subject to the review and
approval of the Director of the FHFA at that time.
XIII. Reservation
of Rights
This memorandum is not intended, nor shall it be interpreted, to
constitute a contract of employment for a specified duration,
and each of you and Freddie Mac retain the discretion to
terminate the employment relationship at any time for any lawful
reason.
During the course of your review of this memorandum, Freddie Mac
expects that you have had the opportunity to consult and receive
assistance from appropriate advisors, including legal, tax, and
financial advisors.
This memorandum shall be construed, and the rights and
obligations herein determined, exclusively in accordance with
the substantive law of the Commonwealth of Virginia, excluding
provisions of Virginia law concerning choice-of-law that would
result in the law of any state other than Virginia being applied.
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You and Freddie Mac agree that this Agreement shall supersede the September 17, 2009 agreement between you and Freddie Mac
and, as a consequence, the September 17, 2009 agreement is null and void.
|
/s/ Xxxxxxx
X. Xxxxxxxx, Xx.
|
September 24, 2009 | |
|
Xxxxxxx X. Xxxxxxxx
|
Date | |
|
Chief Executive Officer
|
I agree to the terms of this memorandum, which includes
Attachments A, B, and C.
|
/s/ Xxxx
X. Xxxx
|
September 24, 2009 | |
|
Xxxx X. Xxxx
|
Date |
Attachments
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ATTACHMENT
A
TO
September 24, 2009 MEMORANDUM TO XXXX X. XXXX
TO
September 24, 2009 MEMORANDUM TO XXXX X. XXXX
Definition
of “Cause”
For purposes of the memorandum agreement, “Cause”
shall mean the occurrence of one or more of the following:
(i) You commit a felony or any crime involving moral
turpitude;
(ii) In carrying out your duties, you engage in conduct
that constitutes gross neglect or gross misconduct or any
material violation of applicable Freddie Mac rule or policy,
including any policy relating to investment by Freddie Mac
employees in securities, the violation of which amounts to gross
neglect or gross misconduct;
(iii) You materially breach any provision of this
memorandum agreement; or
(iv) Any other willful or malicious misconduct on your part
that is substantially injurious to Freddie Mac.
In each case, “Cause” shall not exist unless and until
Freddie Mac has delivered to you a copy of a resolution duly
adopted by a majority of the entire Board of Directors at a
meeting of the Board of Directors called and held for such
purpose (after reasonable notice to you and an opportunity for
you, together with counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board
an event set forth in subclauses (i), (ii), (iii) or
(iv) has occurred.
In the case of an event set forth in subclauses (ii) or
(iii), if Freddie Mac in its sole discretion determines that
remedial action is appropriate and feasible, Freddie Mac will
provide you with a reasonable opportunity to take such action
(i.e., not to be unreasonably withheld), and “Cause”
shall not exist if you make a good faith effort to remedy the
event.
During the period commencing on the date Freddie Mac notifies
you that it intends to call a meeting of the Board of Directors
to terminate your employment for “Cause” pursuant to
this memorandum agreement, Freddie Mac may reduce your
responsibilities and duties and any such reduction or
diminishment in your responsibilities and duties during such
period shall not constitute the termination of your employment.
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Attachment
B
RESTRICTIVE
COVENANT AND CONFIDENTIALITY AGREEMENT
In exchange for the mutual promises and consideration set forth
below, this Restrictive Covenant and Confidentiality Agreement
(“Agreement”) is entered into by and between the
Federal Home Loan Mortgage Corporation (“Xxxxxxx Xxx”
or “Company”) and Xxxx X. Xxxx
(“Executive”), effective on the date the Executive
assigns a personal signature to this agreement.
| I. | Definitions |
The following terms shall have the meanings indicated when used
in this Agreement.
A. Prohibited
Competition: Considering offers of employment from, seeking
or accepting employment with, directly or indirectly providing
professional services to, becoming a director of, or being an
investor (representing more than a five (5) percent equity
interest) in, (i) Xxxxxx Xxx (ii) all Federal Home
Loan Banks (including the Office of Finance); and
(iii) such other entities to which the Executive and the
Company may agree in writing from time-to-time.
B. Confidential
Information: Information or materials in written, oral,
magnetic, digital, computer, photographic, optical, electronic,
or other form, whether now existing or developed or created
during the period of Executive’s employment with Freddie
Mac, that constitutes trade secrets
and/or
proprietary or confidential information. This information
includes, but is not limited to: (i) all information marked
Proprietary or Confidential; (ii) information concerning
the components, capabilities, and attributes of Freddie
Mac’s business plans, methods, and strategies;
(iii) information relating to tactics, plans, or strategies
concerning shareholders, investors, pricing, investment,
marketing, sales, trading, funding, hedging, modeling, sales and
risk management; (iv) financial or tax information and
analyses, including but not limited to, information concerning
Freddie Mac’s capital structure and tax or financial
planning; (v) confidential information about Freddie
Mac’s customers, borrowers, employees, or others;
(vi) pricing and quoting information, policies, procedures,
and practices; (vii) confidential customer lists;
(viii) proprietary algorithms; (ix) confidential
contract terms; (x) confidential information concerning
Freddie Mac’s policies, procedures, and practices or the
way in which Freddie Mac does business; (xi) proprietary or
confidential data bases, including their structure and content;
(xii) proprietary Freddie Mac business software, including
its design, specifications and documentation;
(xiii) information about Freddie Mac products, programs,
and services which has not yet been made public;
(xiv) confidential information about Freddie Mac’s
dealings with third parties, including dealers, customers,
vendors, and regulators;
and/or
(xv) confidential information belonging to third parties to
which Executive received access in connection with
Executive’s employment with Freddie Mac. Confidential
Information does not include general skills, experience, or
knowledge acquired in connection with Executive’s
employment with Freddie Mac that otherwise are generally known
to the public or within the industry or trade in which Freddie
Mac operates.
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X. Xxxxxxxxx: Cash
compensation paid pursuant to Freddie Mac’s Xxxxxxxxx
Policy.
X. Xxxxxxxxx Policy:
Freddie Mac Policy 3-254.1 (Severance — Officers), or
any subsequent and superceding severance policy.
II. Non-Competition
Executive recognizes that as a result of Executive’s
employment with Freddie Mac, Executive has access to and
knowledge of critically sensitive Confidential Information, the
improper disclosure or use of which would result in grave
competitive harm to Freddie Mac. Therefore, Executive agrees
that during Executive’s employment with Freddie Mac and for
twenty-four (24) months immediately following termination
of Executive’s employment for any reason, Executive shall
not engage in Prohibited Competition. Executive acknowledges and
agrees that this covenant has unique, substantial and
immeasurable value to Freddie Mac, that Executive has sufficient
skills to provide a livelihood for Executive while this covenant
remains in force, and that this covenant will not interfere with
Executive’s ability to work consistent with
Executive’s experience, training and education. This
non-competition covenant applies regardless of whether
Executive’s employment is terminated by Executive, by
Freddie Mac, or by a joint decision.
III. Non-Solicitation
and Non-Recruitment
During Executive’s employment with Freddie Mac and for a
period of twelve (12) months after Executive’s
termination of employment for any reason, Executive shall not
directly or indirectly, on his own behalf of or on behalf of any
other person, corporation, partnership, firm, financial
institution or other business entity, recruit or solicit or
attempt to recruit or solicit or assist another to recruit or
solicit any person (who at such time is employed as a Freddie
Mac officer (or equivalent) to cease their employment
relationship with Freddie Mac for the purpose of their being
employed by or providing professional services to any other
entity or person; provided that this section shall not be
construed as a prohibition on the ability of Executive to
provide a reference to any person or entity with which Executive
has no affiliation provide the Freddie Mac employee has notified
Freddie Mac of their intent to terminated their employment with
Freddie Mac.
IV. Treatment
of Confidential Information
A. Non-Disclosure.
Executive recognizes that Freddie Mac is engaged in an extremely
competitive business and that, in the course of performing
Executive’s job duties, Executive will have access to and
gain knowledge about Confidential Information. Executive further
recognizes the importance of carefully protecting this
Confidential Information in order for Freddie Mac to compete
successfully. Therefore, Executive agrees that Executive will
neither divulge Confidential Information to any persons,
including to other Freddie Mac employees who do not have a
Freddie Mac business-related need to know, nor make use of the
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Confidential Information for the Executive’s own benefit or
for the benefit of anyone else other than Freddie Mac. Executive
further agrees to take all reasonable precautions to prevent the
disclosure of Confidential Information to unauthorized persons
or entities, and to comply with all Company policies,
procedures, and instructions regarding the treatment of such
information.
B. Return of
Materials. Executive agrees that upon termination of
Executive’s employment with Freddie Mac for any reason
whatsoever, Executive will deliver to Executive’s immediate
supervisor all tangible materials embodying Confidential
Information, including, but not limited to, any documentation,
records, listings, notes, files, data, sketches, memoranda,
models, accounts, reference materials, samples, machine-readable
media, computer disks, tapes, and equipment which in any way
relate to Confidential Information, whether developed by
Executive or not. Executive further agrees not to retain any
copies of any materials embodying Confidential Information.
C. Post-Termination
Obligations. Executive agrees that after the termination of
Executive’s employment for any reason, Executive will not
use in any way whatsoever, nor disclose any Confidential
Information learned or obtained in connection with
Executive’s employment with Freddie Mac without first
obtaining the written permission of the Executive Vice President
of Human Resources of Freddie Mac. Executive further agrees
that, in order to assure the continued confidentiality of the
Confidential Information, Freddie Mac may correspond with
Executive’s future employers to advise them generally of
Executive’s exposure to and knowledge of Confidential
Information, and Executive’s obligations and
responsibilities regarding the Confidential Information.
Executive understands and agrees that any such contact may
include a request for assurance and confirmation from such
employer(s) that Executive will not disclose Confidential
Information to such employer(s), nor will such employer(s)
permit any use whatsoever of the Confidential Information. To
enable Freddie Mac to monitor compliance with the obligations
imposed by this Agreement, Executive further agrees to inform in
writing Freddie Mac’s Executive Vice President of Human
Resources of the identity of Executive’s subsequent
employer(s) and Executive’s prospective job title and
responsibilities prior to beginning employment. Executive agrees
that this notice requirement shall remain in effect for twelve
(12) months following the termination of Executive’s
Freddie Mac employment.
D. Ability to Enforce
Agreement and Assist Government Investigations. Nothing in
this Agreement prohibits or otherwise restricts you from:
(1) making any disclosure of information required by law;
(2) assisting any regulatory or law enforcement agency or
legislative body to the extent you maintain a legal right to do
so notwithstanding this Agreement; (3) filing, testifying,
participating in or otherwise assisting in a proceeding relating
to the alleged violation of any federal, state, or local law,
regulation, or rule, to the extent you maintain a legal right to
do so notwithstanding this Agreement; or (4) filing,
testifying, participating in or otherwise assisting the
Securities and Exchange Commission or any other proper authority
in a proceeding relating to allegations of fraud.
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| V. | Consideration Given to Executive |
In exchange for agreeing to be bound by the terms, conditions,
and restrictions stated in this Agreement, Freddie Mac will
provide the Executive with the following consideration, each of
which itself is adequate consideration for Executive’s
agreement to be bound by the provisions of this Agreement:
A. Compensation Agreement.
Freddie Mac has agreed to compensate Executive as Executive
Vice President and Chief Financial Officer pursuant to the terms
and conditions set forth in the September 24, 2009
memorandum agreement between Executive and Freddie Mac.
X. Xxxxxxxxx. In the
event that Freddie Mac terminates your employment for reasons other than “Cause,” then Freddie Mac will
provide you with severance pay and other benefits in an
amount equal to that provided to Freddie Mac’s senior
executive officers pursuant to the terms of an applicable
severance policy in effect as of the date of your termination of employment.
Your receipt of Severance is contingent on any
legally required approval from the Director of the Federal
Housing Finance Agency in consultation with the Department of the Treasury.
VI. Compliance
with the Code of Conduct and Corporate Policies
As a Freddie Mac employee, Executive will be subject to Freddie
Mac’s Code of Conduct (“Code”) and to Corporate
Policy 3-206, Personal Securities Investments Policy
(“Policy”) that, among other things, limit the
investment activities of Freddie Mac employees. Executive agrees
to fully comply with the Code and the Policy.
VII. Absence
of Any Conflict of Interest
Executive represents that Executive does not have any
confidential information, trade secrets or other proprietary
information that Executive obtained as the result of
Executive’s employment with another employer that Executive
will be using in Executive’s position at Freddie Mac.
Executive also represents that Executive is not subject to any
employment, confidentiality or stock grant agreements, or any
other restrictions or limitations imposed by a prior employer,
which would affect Executive’s ability to perform the
duties and responsibilities of Chief Financial Officer of
Freddie Mac and that Executive has provided Freddie Mac with
copies of any such agreements or limitations so that Freddie Mac
can make an independent judgment that Executive’s
employment with Freddie Mac is not inconsistent with any of its
terms.
Executive further agrees to be bound by, and comply fully with,
his/her
obligations under the Personal Securities Investments Policy.
Executive agrees to consult with Freddie Mac’s Chief
Compliance Officer as soon as practical prior to beginning
employment about any investments that Executive or a “covered household
member,” as that term is defined in the
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Policy, may have
that may be prohibited by the Policy. Executive also agrees to
disclose prior to beginning employment any other matter or
situation that may create a conflict of interest as such term is
defined in the Code.
In addition, prior to beginning employment, Executive agrees to
disclose to Freddie Mac’s Human Resources Division the
terms of any employment, confidentiality or stock grant
agreements to which Executive may currently be subject that may
affect Executive’s future employment or recruiting
activities so that Freddie Mac may ensure that Executive’s
employment by Freddie Mac and conduct as a Freddie Mac employee
are not inconsistent with any of their terms.
VIII. Affect
of Termination of Employment
In the event that your employment terminates for any reason, you
agree that you shall be deemed to have resigned, effective as of
the date of such termination of employment with Freddie Mac and
from all positions, titles, duties, authorities and
responsibilities arising out of or relating to your employment,
including any directorships or fiduciary positions to which your
were serving at the request of, or appointment by, Freddie Mac.
You also agree that you will execute any such documents and take
any such further steps as Freddie Mac’s Board of Directors
reasonably may ask of you to effectuate such resignations.
IX. Reservation
of Rights
Executive agrees that nothing in this Agreement constitutes a
contract or commitment by Freddie Mac to continue
Executive’s employment in any job position for any period
of time, nor does anything in this Agreement limit in any way
Freddie Mac’s right to terminate Executive’s
employment at any time for any reason.
X. Enforcement
A. Executive acknowledges
that Executive may be subject to discipline, up to and including
termination of employment, for Executive’s breach or threat
of breach of any provision of this Agreement.
B. Executive agrees that
irreparable injury will result to Freddie Mac’s business
interests in the event of breach or threatened breach of this
Agreement, the full extent of Freddie Mac’s damages will be
impossible to ascertain, and monetary damages will not be an
adequate remedy for Freddie Mac. Therefore, Executive agrees
that in the event of a breach or threat of breach of any
provision(s) of this Agreement, Freddie Mac, in addition to any
other relief available, shall be entitled to temporary,
preliminary, and permanent equitable relief to restrain any such
breach or threat of breach by Executive and all persons acting
for and/or
in concert with Executive, without the necessity of posting bond
or security, which Executive expressly waives.
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C. Executive agrees that each
of Executive’s obligations specified in this Agreement is a
separate and independent covenant, and that all of
Executive’s obligations set forth herein shall survive any
termination, for any reason, of Executive’s Freddie Mac
employment. To the extent that any provision of this Agreement
is determined by a court of competent jurisdiction to be
unenforceable because it is overbroad, that provision shall be
limited and enforced to the extent permitted by applicable law.
Should any provision of this Agreement be declared or determined
by any court of competent jurisdiction to be unenforceable or
invalid under applicable law, the validity of the remaining
obligations will not be affected thereby and only the
unenforceable or invalid obligation will be deemed not to be a
part of this Agreement.
D. This Agreement is governed
by, and will be construed in accordance with, the laws of the
Commonwealth of Virginia, without regard to its or any other
jurisdiction’s conflict-of-law provisions. Executive agrees
that any action related to or arising out of this Agreement
shall be brought exclusively in the United States District Court
for the Eastern District of Virginia, and Executive hereby
irrevocably consents to personal jurisdiction and venue in such
court and to service of process by United States Mail or express
courier service in any such action.
E. If any dispute(s) arise(s)
between Freddie Mac and Executive with respect to any matter
which is the subject of this Agreement, the prevailing party in
such dispute(s) shall be entitled to recover from the other
party all of its costs and expenses, including its reasonable
attorneys’ fees.
Executive has been advised to discuss all aspects of this
Agreement with Executive’s private attorney. Executive
acknowledges that Executive has carefully read and understands
the terms and provisions of this Agreement and that they are
reasonable. Executive signs this Agreement voluntarily and
accepts all obligations contained in this Agreement in exchange
for the consideration to be given to Executive as outlined
above, which Executive acknowledges is adequate and
satisfactory, and which Executive further acknowledges Freddie
Mac is not otherwise obligated to provide to Executive. Neither
Freddie Mac nor its agents, representatives, directors, officers
or employees have made any representations to Executive
concerning the terms or effects of this Agreement, other than
those contained in this Agreement.
|
By:
|
Date: | |||||
| Xxxx X. Xxxx |
Compensation
Terms — September 24, 2009
Page 15 of 18
Page 15 of 18
Attachment
C
Recapture
Agreement
| Triggering Event | The recapture will be triggered if, at any time during the executive’s employment with Freddie Mac (or, under certain circumstances after termination of the executive’s employment, as described below), the Board determines and notifies you in writing that any of the following (“Triggering Events”) occurred: |
| 1. | The executive has obtained a legally binding right to bonus or incentive payment based on materially inaccurate financial statements (which includes, but is not limited to, statements of earnings, revenues, or gains) or any other materially inaccurate performance metric criteria. | |
| 2. | As a result of misconduct, Freddie Mac is required to prepare an accounting restatement due to the material noncompliance of Freddie Mac with any financial reporting requirements under the federal securities laws. | |
| 3. | The executive’s employment with Freddie Mac is terminated for “cause” under subclauses (i) or (iv) as defined below or, within two years of the termination of the executive’s employment at Freddie Mac, the Board makes a determination that circumstances existed at the time of the executive’s termination that would have justified termination for cause under subclauses (i) or (iv) or the executive was later convicted of or pleaded nolo contendere to a felony committed before the termination date and such felony resulted in material business or reputational harm to Xxxxxxx Mac. | |
| 4. | The executive’s employment with Freddie Mac is terminated for “cause” under subclauses (ii) or (iii) as defined below, or within two years of the termination of the executive’s employment at Freddie Mac, the Board makes a determination that circumstances existed at the time of the executive’s termination that would have justified a termination for cause under subclauses (ii) or (iii) as defined below and that actions of the executive resulted in material business or reputational harm to Freddie Mac. |
Compensation
Terms — September 24, 2009
Page 16 of 18
Page 16 of 18
|
Definition of Cause |
For purposes of this Recapture Agreement, “cause” shall mean the occurrence of one or more of the following: |
(i) The executive is convicted of or pleads nolo contendere
to a charge of a felony or any crime involving moral turpitude;
(ii) In carrying out his duties, the executive engages in
conduct that constitutes gross neglect or gross misconduct or
any material violation of applicable Freddie Mac rule or policy,
including any policy relating to investment by Freddie Mac
employees in securities, the violation of which amounts to gross
neglect or gross misconduct;
(iii) The executive materially breaches any provision of
the Memorandum Agreement dated September 24, 2009 from
Xxxxxxx X. Xxxxxxxx to the executive; or
(iv) Any other willful or malicious misconduct on the
executive’s part that is substantially injurious to Freddie
Mac.
| • | In each case, “cause” shall not exist unless and until Freddie Mac shall have provided: (i) reasonable notice to the executive setting forth Freddie Mac’s intention to make a determination that an event set forth in subclauses (i), (ii), (iii) or (iv) has occurred; (ii) where remedial action is appropriate and feasible, a reasonable opportunity for the executive to take such action; (iii) an opportunity for the executive, together with the executive’s counsel, to be heard before the Board; and (iv) executive with a copy of a resolution duly adopted by a majority of the entire Board of Directors at a meeting of the Board of Directors called and held for such purpose finding that in the good faith opinion of the Board an event set forth in subclauses (i), (ii), (iii) or (iv) has occurred. No act or failure to act by the executive will be considered “willful” unless it is done, or omitted to be done, by the executive in bad faith or without reasonable belief that the executive’s action or omission was in the best interests of Freddie Mac. |
Compensation
Terms — September 24, 2009
Page 17 of 18
Page 17 of 18
| Recapture Period |
| 1. | In the case of the first Triggering Event, compensation subject to recapture may include Recapture Eligible Compensation (as defined below) paid to the Executive for up to two years prior to the Triggering Event. | |
| 2. | In the case of the second Triggering Event, compensation is subject to recapture consistent with Section 304 of the Xxxxxxxx-Xxxxx Act of 2002. | |
| 3. | In the case of the third Triggering Event, compensation subject to recapture may include Recapture Eligible Compensation paid to the Executive for up to two years prior to the date that the executive is terminated or subsequent to the termination of employment. | |
| 4. | In the case of the fourth Triggering Event, compensation subject to recapture may include Recapture Eligible Compensation paid to the Executive at the time of termination of employment or subsequent to the date of termination. |
|
Compensation Subject to Recapture |
For purposes of this Recapture Agreement, “Recapture Eligible Compensation” shall consist of the following: |
| 1. | In the case of the first Triggering Event, Recapture Eligible Compensation consists of the annual short-term incentive (“STI”) (i.e., the annual bonus) and the annual long-term incentives (“LTI”). | |
| 2. | In the case of the second Triggering Event, Recapture Eligible Compensation consists of bonuses and profits described in section 304 of the Xxxxxxxx-Xxxxx Act of 2002. | |
| 3. | In the case of the third and fourth Triggering Events, Recapture Eligible Compensation consists of the annual STI, the annual LTI and any severance benefits paid. |
| In the event that the executive is terminated for cause under any of the subclauses (i), (ii), (iii) or (iv) specified in the Definition of Cause above, the executive forfeits rights to any future payment of annual STI, LTI or severance benefits that might otherwise have been due pursuant to the terms of applicable plans or awards from the date of executive’s termination forward. |
Compensation
Terms — September 24, 2009
Page 18 of 18
Page 18 of 18
| With respect to any recapture of compensation: |
| • | A recapture of STI or other cash paid, for such compensation that the Board determines is subject to repayment, would require the executive to repay the gross amount of the compensation previously paid. Additionally, any further obligation of Freddie Mac to make payments under such plans could be cancelled. | |
| • | A recapture of LTI or other stock-based award granted, for such awards that the Board determines, would require the executive to repay Freddie Mac the full fair market value of the award(s) based upon vesting date. Additionally, any unvested and/or unexercised stock-based awards could be cancelled. | |
| • | Base salary paid prior to the date of the Triggering Event is not subject to recapture. | |
| • | The executive’s assets acquired prior to employment by Freddie Mac or acquired from sources other than Freddie Mac directly are not subject to recapture under this agreement. The right to recapture is not retroactive prior to the date of employment. |
| Amount to be Recaptured | The Board has discretion to determine the appropriate amount required to be recaptured, if any, upon a Triggering Event, which is intended to be the compensation in excess of what Freddie Mac would have paid the executive had Freddie Mac taken into consideration the impact of the Triggering Event at the time such compensation was awarded. | |
| Any disputes between the executive and Freddie Mac concerning the occurrence of a Triggering Event or the amount subject to recapture shall be determined exclusively in accordance with the substantive laws of the Commonwealth of Virginia, excluding provisions of the Virginia law concerning choice-of-law that would result in the law of any state other than Virginia being applied. |
I agree to the terms of this Recapture Agreement
|
By:
|
Date: | |||||
| Xxxx X. Xxxx |
