FEDERAL HOME LOAN MORTGAGE CORPORATION PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT
Exhibit 10.7
This PERFORMANCE RESTRICTED STOCK UNITS AGREEMENT is dated
(the “Grant Date”) by and between the Federal Home
Loan Mortgage Corporation (the “Corporation”) and
(the “Grantee”), pursuant to the Federal Home Loan
Mortgage Corporation 2004 Stock Compensation Plan (the
“Plan”).
1. Grant of Performance Restricted Stock Units and
Receipt by Grantee.
(a) Grant. The Corporation hereby confirms the
grant, under and pursuant to the Plan, including
Sections 7.4 and 8.1 thereof, to Grantee on the date hereof
of
Performance
Restricted Stock Units (the “PRSUs”). The PRSUs are
subject to all of the terms and conditions set forth in the
Plan, the relevant resolution of the Compensation and Human
Resources Committee of the Board of Directors and this
Performance Restricted Stock Units Agreement (the
“Agreement”). The Corporation shall maintain a
bookkeeping account for Grantee (the “Account”)
reflecting the number of PRSUs then credited to Grantee
hereunder as a result of such grant of PRSUs and any additional
PRSUs attributable to Dividend Equivalents (not paid out in
cash) as described in Section 5 hereof.
(b) Restrictions. Grantee acknowledges and
agrees that: (i) until a PRSU has become earned in
accordance with Section 2(a) and vested in accordance with
Section 2(b), such PRSU shall be subject to a risk of
forfeiture as provided in the Plan and Section 2 hereof;
(ii) until such time as each PRSU becomes earned and
vested and is settled, such PRSU shall be generally
nontransferable, as provided in the Plan and Section 3
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 in
settlement of PRSUs, which may include “blackout”
periods during which Grantee may not engage in such sales; and
(iv) the PRSUs, and certain gains realized by Grantee
upon settlement of the PRSUs, 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 6 hereof.
(c) Coordination with Plan. All of the terms,
conditions and other provisions of the Plan are hereby
incorporated by reference into this 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 delegatee) (the “Committee”)
thereunder.
2. Earning, Vesting and Forfeiture.
The PRSUs shall be forfeited and shall not be settled unless
they have both been earned and become vested under this
Section 2.
(a) Performance Condition to the Earning of the
PRSUs. The PRSUs shall be deemed earned at such time as the
Committee has determined that the Performance Goal (as defined
in this Section 2(a)) has been met. The Performance Goal
shall be that the performance of the Corporation’s
management during calendar year 2007 improves the
Corporation’s competitive position when considering the
Corporation’s shareholders, Mission Objectives, and safety
and soundness considerations. The determination of whether the
Performance Goal has been met shall be in the sole and absolute
discretion of the Committee, and the Committee’s
determination shall be final. The Committee shall make this
determination before the first anniversary of the date of grant
of the PRSUs.
(b) Vesting Date. Subject to
Sections 2(c), 2(d), 2(e) and 2(f), the vesting schedule
for PRSUs that have been earned under Section 2(a) shall be
as follows:
| • | 25% of such PRSUs shall vest on the first anniversary of the Grant Date; | |
| • | an additional 25% of such PRSUs shall vest on the second anniversary of the Grant Date; | |
| • | an additional 25% of such PRSUs shall vest on the third anniversary of the Grant Date; and | |
| • | the remaining 25% of such PRSUs shall vest on the fourth anniversary of the Grant Date. |
Each PRSU credited as a result of Dividend Equivalents under
Section 5(a)(ii) and (iii) (“Dividend Equivalent
PRSU”) shall vest at the time of vesting of the forfeitable
PRSU which gives rise, directly or indirectly, to the crediting
of such Dividend Equivalent PRSU, or shall be immediately vested
if credited on a previously vested PRSU.
(c) Death or Disability. If Grantee terminates
employment with the Corporation as a result of Grantee’s
death or Disability (as defined in the Plan), all PRSUs not
previously forfeited shall be deemed earned (i.e., the PRSUs
will be deemed earned if such termination precedes the
Committee’s determination regarding achievement of the
Performance Goal), and all earned but unvested PRSUs shall vest
and become nonforfeitable immediately upon such termination.
(d) Retirement Other Than Qualifying Normal
Retirement. If Grantee terminates employment with the
Corporation due to Retirement (as defined in the Plan) other
than a Qualifying Normal Retirement (as defined below), the
earning and/or vesting of any unvested PRSUs may be accelerated
at the discretion of the Committee; if the Committee does not
accelerate such earning and/or vesting, the unearned and/or
unvested PRSUs will be forfeited.
(e) Qualifying Normal Retirement. If Grantee
terminates employment with the Corporation due to a Qualifying
Normal Retirement (as defined below), all previously earned but
unvested PRSUs shall not be forfeited at that time but shall
continue to settle under Section 4 below after a Qualifying
Normal Retirement in accordance with the dates in the vesting
schedule in
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Section 2(b) above. For purposes of this
Agreement, a “Qualifying Normal 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 PRSUs, if, at the time of such Termination,
(A) Grantee has attained (or exceeded) age 62
and has at least five years of service, 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
“Qualifying Normal 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). The Corporation’s remedies
under any such agreement may include but shall not be limited to
the forfeiture of PRSUs not theretofore settled. For purposes of
this Section 2(e), “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.
(f) Special Circumstances Terminations. If the
Corporation terminates Grantee’s employment due to Special
Circumstances (as defined below), all previously earned but
unvested PRSUs shall not be forfeited at that time but shall
settle under Section 4 below after Termination in
accordance with dates in the vesting schedule in
Section 2(b) above. For purposes of this Agreement,
“Special Circumstances” 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), 2(d) or 2(e); provided, however,
“Special Circumstances” shall exist only if, at the
time of such Termination, (A) 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.
(g) Other Terminations. If Grantee terminates
employment with the Corporation for any reason other than death,
Disability, Retirement (to the extent subject to
Section 2(d) above), or Qualifying Normal Retirement, or if
the Corporation terminates Grantee’s employment for any
reason other than Special Circumstances, any unvested PRSUs,
whether or not earned, will be forfeited.
3. Nontransferability. Until PRSUs have
settled under Section 4 hereof, the PRSUs 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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4. Settlement. PRSUs granted hereunder,
together with PRSUs credited as a result of Dividend Equivalents
under Section 5(a)(ii) and (iii), shall be settled by
delivery of one share of the Corporation’s Common Stock
($0.21 par value) for each PRSU being settled. Settlement of
each PRSU granted hereunder shall occur for PRSUs that have been
earned upon the vesting of such PRSU under Section 2,
provided, however, that, in the case of Qualifying Normal
Retirement pursuant to Section 2(e) or Termination by the
Corporation due to Special Circumstances pursuant to
Section 2(f), settlement of each such PRSU shall instead
occur at the time the PRSU becomes vested under
Section 2(b) (i.e., the time PRSUs would have become vested
under Section 2(b) if Grantee’s employment by the
Corporation had not terminated). Notwithstanding the previous
sentence, if Grantee completed an Election Form for Deferral of
Restricted Stock Units (the “Deferral Election”)
regarding this Agreement prior to the Grant Date, settlement of
each such PRSU granted hereunder shall occur in accordance with
the terms of the Deferral Election. 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 PRSUs would result in Grantee’s
constructive receipt of income relating to the PRSUs prior to
their actual settlement by the Corporation, such rights or
elections, and any reserved power of the Corporation, shall be
automatically modified and limited to the extent necessary such
that Grantee will not recognize taxable income prior to the
settlement of the PRSUs. In particular, distribution to a
“key employee” as specified in
Section 409A(a)(2)(B)(i)
of the Internal Revenue Code upon a Disability may in some cases
have to be delayed for six months after Termination, and the
Corporation shall have no power to accelerate the distribution
of shares of Common Stock except in conformity with
Section 409A and regulations thereunder.
5. Dividend Equivalents and Adjustments.
(a) Dividend Equivalents. Dividend Equivalents
shall be paid or credited on PRSUs (other than PRSUs that, at
the relevant record date, previously have been settled or
forfeited) in accordance with Section 7.6 of the Plan, as
follows:
| (i) | Cash Dividends. If the Corporation declares and pays a dividend or distribution on Common Stock in the form of cash, then an amount of cash shall be paid to Grantee, as promptly as possible after the payment date for such dividend or distribution, equal to the number of PRSUs credited to Grantee’s Account hereunder as of the record date for such dividend or distribution multiplied by the amount of cash actually paid as a dividend or distribution on each outstanding share of Common Stock at such payment date. |
| (ii) | Non-Common Stock Dividends. If the Corporation declares and pays a dividend or distribution on Common Stock in the form of property other than shares of Common Stock, then a number of additional PRSUs shall be credited to Grantee’s Account as of the payment date for such dividend or distribution equal to the number of PRSUs credited to the Account as of the record date for such dividend or distribution multiplied by the Fair Market Value of such property actually paid as a dividend or distribution on each outstanding share of Common Stock at such |
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| payment date, divided by the Fair Market Value of a share of Common Stock at such payment date. | ||
| (iii) | Common Stock Dividends and Splits. If the Corporation declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then a number of additional PRSUs shall be credited to Grantee’s Account as of the payment date for such dividend or distribution or forward split equal to the number of PRSUs credited to the Account as of the record date for such dividend or distribution or split multiplied by the number of additional shares of Common Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Common Stock. |
The foregoing notwithstanding, any payment of Dividend
Equivalents shall be reduced by the amount of all Federal,
state, local and other taxes that may be required to be withheld
by the Corporation with respect to such payment. In addition,
the Committee may vary the manner and terms of crediting
Dividend Equivalents from that specified in clause (i),
(ii) or (iii) above, for administrative
convenience or any other reason, provided that the Committee
determines that any alternative manner and terms result in
equitable treatment of Grantee.
(b) Adjustments to PRSUs. The number of PRSUs
credited to Grantee’s Account shall be appropriately
adjusted, in order to prevent substantial dilution or
enlargement of Grantee’s rights with respect to PRSUs, 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, taking into account any PRSUs
credited to Grantee in connection with such event under
Section 5(a) hereof.
6. Additional Forfeiture Provisions.
(a) Forfeiture of PRSUs and Gains Realized Upon
Prior Settlement of PRSUs. The PRSUs are subject to
the following additional forfeiture conditions, to which
Grantee, by accepting the PRSUs, agrees. If any of the events
specified in Section 6(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:
| (i) | The PRSUs then outstanding, 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 settlement of the PRSUs 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 settlement of PRSUs, the product of (X) the Fair Market Value per share delivered at the date of such settlement (without regard to |
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| any subsequent change in the market price of shares) times (Y) the number of shares delivered in such settlement, provided that, if the settlement occurred in a calendar year prior to the Corporation making demand for repayment, such product shall be reduced by a percentage equal to Grantee’s marginal tax rate at the time of settlement 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 6(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 6(b) and
the second sentence of Sections 2(e) and 2(f), 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 PRSUs, and 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 6(a).
(c) Monitoring Compliance. In order to
allow the Corporation to monitor Grantee’s compliance with
the conditions imposed under this Section 6, 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.
7. Other Terms Relating to PRSUs.
(a) Fractional PRSUs and Shares. The number of
PRSUs credited to a Grantee’s Account shall include
fractional PRSUs calculated to at least three decimal places,
unless otherwise determined by the administrator (which shall be
the Human Resources Division, unless otherwise specified by the
Committee). Upon settlement of PRSUs, Grantee shall be paid, in
cash, an amount equal to the value of any fractional share that
would have otherwise been deliverable in settlement of such
PRSUs.
(b) Statements. An individual statement of
each Grantee’s Account will be made available to each
Grantee in such form and in such manner as the administrator may
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determine. Such statements may include information such as the
amount of PRSUs credited to Grantee’s Account, transactions
therein during the period covered by the statement, and other
information deemed relevant by the administrator. Such statement
may include information regarding other plans and compensatory
arrangements for Grantee. A Grantee’s statements shall be
deemed a part of this Agreement, and shall evidence the
Corporation’s obligations under the Plan, including the
number of PRSUs credited as a result of Dividend Equivalents (if
any). Any statement containing an error shall not, however,
represent a binding obligation to the extent of such error,
notwithstanding the inclusion of such statement as part of this
Agreement.
(c) Tax Withholding. The Corporation may make
such provisions and take such steps as it may deem necessary or
appropriate for the withholding of all Federal, state, local and
other taxes required by law to be withheld upon the earning and
vesting or settlement of PRSUs including, but not limited to,
(i) reducing the number of shares of Common Stock
otherwise to be delivered to Grantee at that time, based on
their value determined in accordance with Section 9.3(a) of
the Plan, to permit deduction of the amount of any such
withholding taxes from the amount otherwise payable under the
Plan, (ii) deducting the amount required to be
withheld from any other amount then or thereafter payable to
Grantee, a beneficiary or legal representative, and
(iii) requiring Grantee, a beneficiary or legal
representative to pay to the Corporation the amount required to
be withheld as a condition of delivering Common Stock in
settlement of the PRSUs or any other distributions related
thereto.
8. Miscellaneous.
(a) Modifications. The Corporation acting
through the Committee shall have the authority to modify or
remove any or all restrictions or conditions on the earning,
vesting or settlement of the PRSUs whenever it may determine
that, by reason of a change in applicable laws or other change
in circumstances arising after the date hereof, or for any other
reason, such action is appropriate.
(b) 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 PRSUs, and supersedes
any prior agreements or documents with respect to the PRSUs. 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 PRSUs 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 party
to be bound thereby. The foregoing notwithstanding, equitable
adjustments to the PRSUs under Section 5(b), including
those resulting from a transaction in which the
Corporation’s Common Stock is no longer publicly traded,
and changes that affect only 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.
(c) Beneficiary Designations. All designations
of Beneficiary shall be on such forms as are specified by and
filed with the administrator. Any Beneficiary designation made by
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Grantee in accordance with this provision may be changed from
time to time, without the consent of any previously designated
Beneficiary (but subject to any spousal consent as may be
required), by filing with the administrator a notice of such
change on the form provided by the administrator and such change
of Beneficiary designation shall become effective upon receipt
by the administrator. In the event Grantee’s Beneficiary
would otherwise become entitled to a distribution hereunder, and
all Beneficiaries designated by Grantee are not then living, or
if no valid Beneficiary designation is in effect, Grantee’s
estate or duly authorized personal representative shall be
deemed to have been designated by Grantee.
(d) No Security Interest or
Trust Created. Any provision for distribution in
settlement of Grantee’s Account hereunder shall be by means
of bookkeeping entries on the books of the Corporation and shall
not create in Grantee or any Beneficiary any right to, or claim
against any, specific assets of the Corporation, nor result in
the creation of any trust or escrow account for Grantee or any
Beneficiary. Grantee or any Beneficiary entitled to any
distribution hereunder shall be a general creditor of the
Corporation.
(e) 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 forfeiture of the PRSUs.
(f) 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 PRSUs prior to the
settlement of the PRSUs.
(g) Notices. Any notice hereunder to the
Corporation shall be in writing and addressed to it at its
office, 0000 Xxxxx Xxxxxx Xxxxx, XxXxxx, XX 00000, Attn: Human
Resources Division, and any notice to Grantee shall be in
writing and addressed to him or her at the latest address
appearing in the records of the Corporation, subject to the
right of either party to designate in writing another address at
any time hereafter.
(h) 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.
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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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