FEDERAL HOME LOAN MORTGAGE CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT
Exhibit
10.4
This NONQUALIFIED STOCK OPTION AGREEMENT is dated
(the “Grant Date”) by and between the Federal Home
Loan Mortgage Corporation (the “Corporation”) and
(“Grantee”), pursuant to the Federal Home Loan
Mortgage Corporation 2004 Stock Compensation Plan (the
“Plan”).
1. Grants. (a) Nonqualified Stock
Options. The Corporation has granted to Grantee a
Nonqualified Stock Option (the “Option”) to purchase
shares
of the Common Stock of the Corporation ($0.21 par value) at a
purchase price of
$
per share. The Option is subject to all applicable provisions of
the Plan, the relevant resolution of the Compensation and Human
Resources Committee and to the terms and conditions set forth
herein. The Option is not intended to constitute an incentive
stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
(b) Dividend Equivalents. The
Corporation has not granted the Option with related dividend
equivalent rights.
(c) Restrictions. Grantee
acknowledges and agrees that: (i) the Option is
nontransferable, except as provided in Section 4(a) hereof
and Section 6.6 of the Plan; (ii) the Option is
subject to forfeiture in the event of Grantee’s Termination
in certain circumstances, as specified in Section 2 hereof;
(iii) Grantee is subject to the Corporation’s Code of
Conduct and related policies on xxxxxxx xxxxxxx which restrict
Grantee’s ability to sell shares of the Corporation’s
Common Stock received upon exercise of the Option, which may
include “blackout” periods during which Grantee may
not engage in such sales; and (iv) the Option, and certain
gains realized by Grantee upon exercise of the Option, are
subject to forfeiture in the event Grantee fails to meet
applicable requirements relating to non-competition,
non-solicitation of employees and others, and other provisions
protecting the Corporation’s business, as set forth in
Section 3 hereof.
(d) Coordination with Plan. All of
the terms, conditions and other provisions of the Plan are
hereby incorporated by reference into this Nonqualified Stock
Option Agreement (the “Agreement”). Capitalized terms
used in this Agreement but not defined herein shall have the
same meanings as in the Plan. If there is any conflict between
the provisions of this Agreement and the provisions of the Plan,
the provisions of the Plan shall govern. A copy of the Plan is
available on the Human Resources homepage of the
Corporation’s intranet site. Grantee hereby agrees to be
bound by the Plan (as presently in effect or hereafter amended)
and this Agreement, and by all decisions and determinations of
the Compensation and Human Resources Committee of the Board of
Directors (including any delegate) (the “Committee”)
thereunder.
2. Rights of
Exercise. (a) Exercisability and
Expiration Date. Any portion of the Option that
has become vested may be exercised by Grantee, in whole or in
part, at any time or from time to time on or before the tenth
anniversary of the Grant Date (the “Expiration Date”)
if Grantee remains continuously employed by the Corporation
through the date of such exercise, and the Option otherwise will
be exercisable if and to the extent so provided in
Section 2(c)
below. Except as provided in Section 2(c), the Option shall
become vested and exercisable at the times and to the extent set
forth below:
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Additional percentage of shares in |
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During the period |
respect of which the |
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Commencing on the
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Option may be exercised
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1st
anniversary of the Grant Date
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25% | |
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2nd
anniversary of the Grant Date
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25% | |
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3rd
anniversary of the Grant Date
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25% | |
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4th
anniversary of the Grant Date
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25% |
provided, however, that only whole shares shall vest, and
fractional shares (if any) produced by application of the
relevant percentage will be added to the number of shares
produced by application of the relevant percentage in the next
vesting period, and will vest when a whole number is attained.
Except as provided in this Agreement, the Option may not be
exercised at any time other than as specified in this
Section 2, and shall expire if not exercised in full on or
before the Expiration Date.
(b) Form of Exercise. The Option
shall be exercised by Grantee giving notice of such exercise to
the Corporation (or its designee), in such form as the
Corporation may require in its sole discretion. Such notice
shall specify the number of shares to be purchased and shall be
accompanied by full payment of the purchase price of such shares
(the “Exercise Price”) plus an additional amount equal
to the Federal, state, local and other taxes required to be
withheld by the Corporation with respect to the exercise of the
Option. Payment of the Exercise Price and related withholding
taxes shall be made in cash or by any other method then approved
by the Committee under Section 7.1(b) of the Plan. Unless
otherwise determined by the Committee, permitted exercise
methods shall include a method by which shares of Common Stock
of the Corporation may be surrendered in payment of the Exercise
Price and related withholding taxes. In addition, the Committee
may determine to permit (i) shares subject to the Option to
be withheld to pay the Exercise Price and related withholding
taxes, and/or (ii) payment of the Exercise Price and
related withholding taxes by Grantee irrevocably instructing a
broker-dealer to sell part or all of the shares subject to the
Option, simultaneously with such exercise or as soon as
practicable thereafter, at the market in a broker’s
transaction (within the meaning of Section 4(4) of the
Securities Act of 1933, as amended), with proceeds of such sale
to be remitted to the Corporation in an amount sufficient to pay
such Exercise Price and related withholding taxes. The
availability of any methods other than cash payment, and the
right of Grantee to use a combination of such methods, shall be
subject to the determinations and rules of the Committee under
Section 7.1(b) of the Plan and limitations under applicable
law.
(c) Termination Provisions.
(i) Upon Death While Employed. In
the event of the death of Grantee while in the employ of the
Corporation but on or before the Expiration Date, any
restrictions on exercise otherwise applicable to the Option
under Section 2(a) shall lapse immediately and
Grantee’s Beneficiary shall have the right to exercise the
unexercised portion of the Option at any time during the
thirty-six month period that begins as of the date of death (but
ends not later than
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the Expiration Date); provided, however, that, at the end of
such thirty-six month period (or the Expiration Date, if
earlier), the Option shall cease to be exercisable.
(ii) Upon Disability. In the event
Grantee ceases to be an employee of the Corporation on or before
the Expiration Date by reason of Disability (as defined in the
Plan), any restrictions on exercise otherwise applicable to the
Option under Section 2(a) shall lapse immediately and
Grantee shall have the right to exercise the unexercised portion
of the Option at any time on or before the Expiration Date.
(iii) Upon Retirement. In the event
Grantee ceases to be an employee of the Corporation on or before
the Expiration Date by reason of a Retirement (as defined
below), the Option shall not be forfeited upon such Termination,
but the restrictions on exercise under Section 2(a) (if
any) shall continue so that Grantee thereafter may exercise the
Option at such time and to the extent as it has become
exercisable in accordance with Section 2(a) at any time on
or before the Expiration Date. For purposes of this Agreement, a
“Retirement” shall mean Grantee’s ceasing to be
an employee of the Corporation (whether or not such Termination
is a “Retirement” as defined in the Plan), at least
one year after the date of grant of the Option, if, at the time
of such Termination, (A) Grantee has attained (or exceeded)
age 55 and has at least ten years of service with the
Corporation or has attained (or exceeded) age 62 and has at
least five years of service with the Corporation, and
(B) Grantee has executed and is subject to a written
agreement containing such non-competition, non-solicitation, and
other covenants, and a release of the Corporation, in form and
substance satisfactory to the Chief Executive Officer in order
to protect the business relationships and confidential and
proprietary business information of the Corporation. A
“Retirement” shall not include a Termination by the
Corporation for Gross Misconduct (as defined in Corporate Policy
No. 3-254.1
or 3-254, as
applicable (as it may be amended or replaced from time to time))
as determined by the Chief Executive Officer or a Termination
subject to Section 2(c)(i) or (ii). The Corporation’s
remedies under any such agreement may include but shall not be
limited to cancellation and forfeiture of the unexercised
portion of the Option. For purposes of this
Section 2(c)(iii), “years of service” shall be
defined (and calculated) in the same manner as “year of
qualifying service” under the Federal Home Loan Mortgage
Corporation Employees’ Pension Plan.
(iv) Special Circumstances
Terminations. If the Corporation terminates
Grantee’s employment due to Special Circumstances (as
defined below), the Option shall not be forfeited upon such
Termination, but the restrictions on exercise under
Section 2(a) (if any) shall continue so that Grantee
thereafter may exercise the Option at such time and to the
extent as it has become exercisable in accordance with
Section 2(a) at any time on or before the Expiration Date.
For purposes of this Agreement, a “Special Circumstances
Termination” shall mean Grantee’s ceasing to be an
employee of the Corporation by action of the Corporation, other
than the following Termination events: A Termination by the
Corporation for Gross Misconduct (as defined in Corporate Policy
No. 3-254.1
or 3-254, as
applicable (as it may be amended or replaced from time to time))
as determined by the Chief Executive Officer, a Termination for
violating any standard of performance, conduct or attendance
embodied in Exhibit A to Corporate Policy
No. 3-214
(as it may be amended or replaced from time to time) as
determined by the Chief Executive Officer or a Termination
subject to Section 2(c)(i), (ii) or (iii); provided,
however, “Special Circumstances” shall exist only if,
at the time of such Termination, (A)
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Grantee’s position with the Corporation was eliminated due
to a reorganization or job relocation or Grantee’s
employment was terminated due to a restructuring or other
no-fault displacement as determined in the absolute and sole
discretion of the Chief Executive Officer, and (B) Grantee
has executed and is subject to a written agreement containing
such non-competition, non-solicitation, and other covenants, and
a release of the Corporation, in form and substance satisfactory
to the Chief Executive Officer in order to protect the business
relationships and confidential and proprietary business
information of the Corporation. The Corporation’s remedies
under any such agreement may include but shall not be limited to
cancellation and forfeiture of the unexercised portion of the
Option.
(v) Forfeiture. In the event
Grantee ceases to be an employee of the Corporation prior to the
Expiration Date for any reason other than death, Disability,
Retirement or a Termination due to Special Circumstances
governed by
Section 2(c)(iv)
above, the portion of the Option which, as of the date of
Termination, remains unvested and subject to the exercise
restrictions shall be forfeited, and Grantee shall have
90 days after the date of Termination (but not beyond the
Expiration Date) in which to exercise any portion of the Option
which, as of the date of Termination, was exercisable, at which
time the Option shall terminate.
(vi) Upon Death After
Employment. In the event of the death of Grantee
after Grantee has ceased to be in the employ of the Corporation
but at a time that any portion of the Option remains exercisable
under clauses (ii), (iii), (iv) or (v) of this
Section 2(c), any restrictions on exercise otherwise
applicable to such portion of the Option under Section 2(a)
shall lapse immediately and Grantee’s Beneficiary shall
have the right to exercise the unexercised portion of the Option
during the thirty-six month period that begins as of the date of
death; provided, however, that, at the end of such thirty-six
month period, the Option shall cease to be exercisable (the
provisions of clauses (ii), (iii) and (iv) of this
Section 2(c) notwithstanding). The foregoing not
withstanding, nothing contained in this Section 2(c) shall
be deemed to permit the exercise of any portion of the Option
after the Expiration Date.
(d) Automatic Exercise at Expiration
Date. If, at the date on which the Option or any
portion thereof expires or terminates, the Fair Market Value of
a share exceeds the exercise price per share and the Option or
portion thereof that will expire or terminate is otherwise
exercisable (the “Exercisable Portion”), the
Exercisable Portion shall be automatically exercised by the
withholding of Option shares sufficient to pay the exercise
price and applicable withholding taxes, provided that this
automatic exercise provision shall not apply unless the
Corporation has previously implemented procedures permitting
elective exercises by the withholding of Option shares and such
procedures remain in effect and in compliance with applicable
law.
3. Additional Forfeiture Provisions.
(a) Forfeiture of Option and Gains Realized Upon
Prior Exercises. The Option is subject to
the following additional forfeiture conditions, to which
Grantee, by accepting the Option, agrees. If any of the events
specified in Section 3(b) occurs (a “Forfeiture
Event”), all of the following forfeitures will result, such
forfeitures to be effective at the time of the occurrence of the
Forfeiture Event:
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(i) Any unexercised portion of the Option, whether or
not vested, will be immediately forfeited and canceled upon the
occurrence of the Forfeiture Event; and
(ii) Grantee will be obligated to repay to the
Corporation, within five business days after demand is made
therefor by the Corporation, the total amount of After-Tax Gain
(as defined herein) realized by Grantee upon any exercise of the
Option that occurred on or after the date that is 12 months
prior to the occurrence of the Forfeiture Event. For purposes of
this Section, the term “After-Tax Gain” shall mean, in
respect of a given exercise of the Option, the product of
(A) the Fair Market Value per share acquired at the date of
such exercise (without regard to any subsequent change in the
market price of shares) times (B) the number of shares as
to which the Option was exercised at that date (treating any
shares withheld to cover the exercise price or taxes as acquired
by exercise), provided that, if the exercise occurred in a
calendar year prior to the Corporation making demand for
repayment, such sum shall be reduced by a percentage equal to
Grantee’s marginal tax rate at the time of exercise as
reasonably determined by the Committee. Such repayment may be in
cash or in shares having a Fair Market Value at the repayment
date equal to the After-Tax Gain.
(b) Events Triggering
Forfeiture. The forfeitures specified in
Section 3(a) will be triggered upon the occurrence of the
following Forfeiture Event at any time during Grantee’s
employment by the Corporation or during the noncompetition
period following Termination of Employment specified in any
agreement between the Corporation and Grantee in existence at
the Date of Grant (the “Restrictive Covenant
Agreement”):
Grantee, directly or indirectly, seeks or accepts employment
with or provides professional services, directly or indirectly,
to a “Competitor” in violation of the Restrictive
Covenant Agreement. For purposes of this Section 3(b) and
the second sentence of Section 2(c)(iii), references to the
“Corporation” include any subsidiary, affiliate or
joint venture of the Corporation.
The non-occurrence of the Forfeiture Event set forth herein is a
condition to Grantee’s right to realize and retain value
from the Option, shall remain a condition regardless of any
subsequent change or challenge to or termination of such other
agreement referenced herein and the consequences hereunder if
Grantee engages in an activity giving rise to any such
Forfeiture Event are the forfeitures specified in
Section 3(a).
(c) Monitoring
Compliance. In order to allow the
Corporation to monitor Grantee’s compliance with the
conditions imposed under this Section 3, beginning with
Grantee’s Termination of Employment Grantee shall provide
written notice to the Executive Vice-President, Human Resources,
of the identity of each new employer with whom Grantee accepts
employment or of any other entity to which Grantee provides
professional services, together with Grantee’s new job
title and a brief description of job duties, during the
noncompetition period specified in the Restrictive Covenant
Agreement.
4. Miscellaneous. (a) Limitations
on Transfer. The Option and Grantee’s rights
and interests therein shall be subject to the restrictions on
transferability and related terms set forth in Section 6.6
of the Plan.
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(b) No Right to Continued
Employment. Nothing contained herein or in the
Plan shall be construed as giving Grantee any right to be
retained in the employ of the Corporation, or interfere in any
way with the right of the Corporation to terminate the
employment of Grantee at any time, with or without cause,
without incurring any liability to Grantee due to the inability
of Grantee thereafter to exercise the Option.
(c) Adjustments. The number of
shares subject to the Option, the exercise price, and other
terms of the Option shall be appropriately adjusted, in order to
prevent substantial dilution or enlargement of Grantee’s
rights with respect to the Option, to reflect any changes in the
number and kind of outstanding shares of Common Stock resulting
from any event referred to in Section 4.4 of the Plan.
(d) Limitation on Rights Triggering Constructive
Receipt. The terms set forth or incorporated in
this Agreement notwithstanding, if, under U.S. federal income
tax laws as presently in effect or hereafter amended, and
regulations thereunder, any rights or elections of Grantee with
respect to the Option or retained authority of the Corporation
would result in Grantee’s constructive receipt of income
relating to the Option prior to Grantee’s actual exercise
of the Option, such rights or elections or retained authority of
the Corporation shall be automatically modified and limited to
the extent necessary such that Grantee will not be deemed to be
in constructive receipt of such income prior to the actual
exercise of the Option.
(e) No Stockholder Rights. Grantee
shall have no rights as a stockholder of the Corporation with
respect to any shares of Common Stock subject to the Option
prior to the valid exercise of the Option.
(f) Legal Effect. This Agreement
shall be legally binding when (i) executed by the
Corporation attaching the typed name and title of its authorized
officer as a legally binding electronic signature and
(ii) delivered to Grantee who has consented and agrees to
its terms electronically (or in such other manner as the
Corporation may provide). This Agreement is governed by
applicable federal law and, to the extent not governed by
federal law, the laws of the Commonwealth of Virginia (without
regard to conflicts of law provisions), and is deemed executed
in the Commonwealth of Virginia.
(g) Binding Agreement. This
Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties. This Agreement
constitutes the entire agreement between the parties with
respect to the Option, and supersedes any prior agreements or
documents with respect to the Option. Copies of this Agreement
shall not represent additional obligations of the Corporation.
No amendment, alteration, suspension, discontinuation or
termination of this Agreement which may impose any additional
obligation upon the Corporation or materially impair the rights
of Grantee with respect to the Option shall be valid unless in
each instance such amendment, alteration, suspension,
discontinuation or termination is expressed in a written
instrument duly executed in the name and on behalf of the
Corporation and, if it materially impairs the rights of Grantee,
by Grantee. The foregoing notwithstanding, equitable adjustments
to the Options under Section 4(c), including those
resulting from a transaction in which the Corporation’s
Common Stock is no longer publicly traded, and changes that
affect only
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the timing of federal income or other taxation to Grantee for
compensation received hereunder, shall not be deemed material
impairments and therefore shall not require approval of Grantee.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed by attaching the typed name and title of its
authorized officer as a legally binding electronic signature as
of the day and year first above written, and Grantee has
consented to and has acknowledged receipt of the Agreement
electronically (or in such other manner as the Corporation may
provide).
FEDERAL HOME LOAN
MORTGAGE CORPORATION
/s/ Xxxx
X. Xxxxxx
| By: | Xxxx X. Xxxxxx |
Executive Vice President
Human Resources
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