FEDERAL HOME LOAN MORTGAGE CORPORATION EMPLOYMENT AGREEMENT WITH RICHARD F. SYRON
Exhibit
10.37
EXECUTION
COPY
FEDERAL
HOME LOAN MORTGAGE CORPORATION
EMPLOYMENT AGREEMENT WITH XXXXXXX X. XXXXX
EMPLOYMENT AGREEMENT WITH XXXXXXX X. XXXXX
This Agreement provides the terms and conditions of the
employment of Xxxxxxx X. Xxxxx (“Executive”) as
Chief Executive Officer of the Federal Home Loan Mortgage
Corporation, a government-sponsored enterprise created pursuant
to the Federal Home Loan Mortgage Corporation Act
(Title III of the Emergency Home Finance Act of 1970, as
amended) (“Xxxxxxx Mac”).
The provisions of this Agreement represent the understanding of
Executive and Xxxxxxx Mac with respect to the duties,
responsibilities, and terms of employment for Executive in his
capacity as Chief Executive Officer of Xxxxxxx Mac. In
consideration of the mutual promises set forth in this
Agreement, and other valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Executive and Xxxxxxx
Mac agree as follows:
SECTION 1.
TERMS OF EMPLOYMENT
During the Term (as defined in the next sentence) Xxxxxxx Mac
agrees to employ Executive, and Executive agrees to serve
Xxxxxxx Mac, in accordance with the terms provided in this
Agreement. The Term of his Agreement shall be the period
commencing on December 31, 2003, and ending on the earlier
to occur of (a) December 31, 2008 (the “Scheduled
Termination Date”) or (b) the occurrence of an event
described in Section 5 hereof. The Term, and
Executive’s employment hereunder, maybe terminated only as
a result of the occurrence of the Scheduled Termination Date or
in accordance with the provisions of Section 5 hereof. The
compensation and other terms of Executive’s employment as
set forth in this Agreement were contingent upon the approval of
the Human Resources Committee of the Board of Directors (the
“Committee”). The termination benefits of the
Agreement were also contingent upon the prior approval of the
Office of Federal Housing Enterprise Oversight
(“OFHEO”), which also has authority to prohibit any
compensation of any executive officer of Xxxxxxx Mac that is not
reasonable and comparable with that paid by other similar
businesses to executives doing similar work. Such approvals were
obtained from the Committee on December 4, 2003 and from
OFHEO on December 5, 2003.
SECTION 2.
POSITION AND RESPONSIBILITIES
During the Term, Executive agrees to serve as Chief Executive
Officer of Xxxxxxx Mac. In such capacity, Executive shall be the
highest-ranking officer of Xxxxxxx Mac and shall have the same
status, privileges, and responsibilities normally inherent in
such capacity in public corporations of similar size and
character. Executive shall also perform such additional duties
as the Board of Directors of Xxxxxxx Mac (the “Board of
Directors”) may from time to time reasonably assign to him.
In addition, for so long as Executive remains Chief Executive
Officer, the Board of Directors shall nominate him as a director
of Xxxxxxx Mac and, provided he is elected as a director, shall
elect him to serve as Chairman of the Board of Directors. If so
elected, Executive agrees to serve as Chairman of the Board of
Directors throughout his employment hereunder and to perform
such duties and responsibilities as are customary for such
position. As Chief Executive Officer and Chairman of the Board
of Directors, Executive shall abide by Xxxxxxx Mac’s Code
of Conduct and any rules or restrictions applicable to senior
executives of Xxxxxxx Mac regarding the purchase or sale of
securities of Xxxxxxx Mac. In addition, Executive shall actively
assist Xxxxxxx Mac in developing a succession plan for the
replacement of Executive as Chief Executive Officer by a
successor chief executive officer (the “Successor
CEO”) of Xxxxxxx Mac to occur prior to the Scheduled
Termination Date. Upon the appointment of the Successor CEO,
Executive shall cease to be Chief Executive Officer of Xxxxxxx
Mac and shall remain Chairman of the Board of Directors through
the Scheduled Termination Date (such period during which
Executive serves as Chairman of the Board of Directors following
the appointment of the Successor CEO, the “Transition
Period”), and shall continue to perform such duties and
responsibilities as are customary for the Chairman of the Board
of Directors. During the Transition Period, Executive shall
continue to be an employee of Xxxxxxx Mac entitled to receive
the compensation and benefits payable during the Term of this
Agreement on the terms and conditions set forth in this
Agreement, and the provisions relating to the termination of
Executive’s employment set forth in this Agreement shall
continue to apply.
SECTION 3.
DEVOTION TO DUTIES
During his employment hereunder, Executive agrees to devote
substantially his full time, attention, and energies to Xxxxxxx
Mac’s business, and not be engaged in any other business
activity, whether or not such business activity is pursued for
gain, profit, or other pecuniary advantage. This restriction
shall not prevent Executive from devoting a reasonable amount of
time to charitable or public interest activities or from making
passive investments of his assets in such form or manner as he
desires, provided that such investments: (i) do not require
his services in the operations or the affairs of the entities in
which such investments are made; and (ii) are not made in
entities that compete with Xxxxxxx Mac or otherwise cause or
create a conflict of interest or the appearance of a conflict of
interest on the part of Executive, unless the stock (or other
voting security) or any such entity is listed on a national
securities exchange or traded in the over-the-counter market and
the Executive owns no more than one (1) percent of the
outstanding voting securities thereof. In addition, this
restriction shall not prevent Executive from serving on the
boards of directors of two other corporations subject to the
approval of the Board of Directors in each case (which approval
has been given as to the two boards set forth on Exhibit A
attached hereto) and continued compliance by Executive with
Xxxxxxx Mac’s Code of Conduct.
SECTION 4.
COMPENSATION
In consideration for all services to be rendered by Executive
under this Agreement, Xxxxxxx Mac shall pay Executive total
compensation consisting of the following:
4.1 Base Salary. During the Term, Xxxxxxx Mac
shall pay Executive a Base Salary at an annual rate of
$1,100,000, which amount may be increased in the discretion of
the human resources committee of the Board of Directors or its
successor (the “Committee”). The Base Salary shall be
paid to Executive in equal installments throughout the year,
consistent with the normal payroll practices of Xxxxxxx Mac.
4.2 Annual Bonus. In addition to the Base
Salary, during each calendar year of Xxxxxxx Mac during the Term
commencing with calendar year 2004, Executive shall have the
opportunity to earn an annual cash bonus (the
“Bonus”), pro-rated in the case of any partial
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calendar year, based on performance criteria determined by the
Committee. During the Term, the targeted annual Bonus will be
120% of Base Salary (the “Target Bonus”) and the
maximum annual Bonus will be 200% of the Target Bonus (the
“Maximum Bonus”). The annual Bonus in respect of a
calendar year will only be payable if Executive remains actively
employed with Xxxxxxx Mac through the end of the applicable
calendar year, and shall be paid to Executive at the same time
that other senior executives of Xxxxxxx Mac are paid their
annual cash incentive awards. The actual amount of
Executive’s bonus in respect of any calendar year shall be
determined based on a variety of subjective and objective
factors, as determined by the Committee; provided, that,
notwithstanding the foregoing the minimum Annual Bonus payable
to Executive in respect of calendar year 2004 shall be
$1,320,000.
4.3 Initial Equity Award. As soon as
practicable after the commencement of the Term and
Executive’s employment under this Agreement and in no event
later than December 31,2003 (assuming that the Term and
Executive’s employment under this Agreement has commenced
prior to such date), Xxxxxxx Mac shall grant Executive a number
of Restricted Stock Units (the “Initial RSUs”)
pursuant to the Federal Home Loan Mortgage Corporation 1995
Stock Compensation Plan, as amended (the “Stock
Compensation Plan”) having a value on the date of grant, as
determined by the Committee, of $8,800,000. The Initial RSUs
shall vest in three equal annual installments of thirty-three
and one-third percent
(331/3%)
each on each of the first, second and third anniversaries of the
date of grant, subject to Executive’s continued employment
with Xxxxxxx Mac through the applicable vesting dates. In
addition, the vesting of the Initial RSUs shall be subject to
acceleration upon the terms and conditions described in
Sections 4.4 and 6 of this Agreement. Except as expressly
provided in this Agreement, all other terms and conditions of
the Initial RSUs shall be as set forth in the Stock Compensation
Plan, the resolution making the grant and the related award
agreement.
4.4 Annual Equity Grants. During each year of
the Term, Xxxxxxx Mac shall make a grant to Executive of a
long-term equity incentive award (the “Annual Equity
Grant”) pursuant to the Stock Compensation Plan (or any
successor plan) at the same time annual long-term equity
incentive awards are granted to other senior executives. Each
Annual Equity Grant shall have an aggregate value on the date of
grant, as determined by the Committee, equal to $8,800,000. 50%
of each Annual Equity Grant shall be restricted stock units
(“RSUs”) and 50% of each Annual Equity Grant shall be
stock options to acquire shares of Xxxxxxx Mac
(“Options”), provided that the Committee may in its
discretion from time to time, grant a higher percentage of the
Annual Equity Grant in RSUs. The exercise price of the Options
shall be determined by the Committee in accordance with the
terms of the Stock Compensation Plan.
The RSUs shall vest on the fifth anniversary of the date of
grant, and the Options shall vest in four equal annual
installments of approximately 25% each beginning on the first
anniversary of the date of grant, in each case subject to
Executive’s continued employment with Xxxxxxx Mac through
the applicable vesting date, provided that the Committee may in
its discretion from time to time (a) permit the
acceleration of the vesting of the RSUs or the Options and
(b) provide for a different vesting schedule for the RSUs
or Options, provided, however, that in no event shall the
vesting schedule applicable for the RSUs provide for a vesting
period longer than five years and in no event shall the vesting
schedule applicable to the Options provide for the Options to
vest less frequently than 25% each year over a four year vesting
period. In addition, the vesting of the Options and RSUs shall
be subject to acceleration upon the terms and
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conditions described in the following paragraph and
Section 6 of this Agreement. Except as expressly provided
in this Agreement, all other terms and conditions of the RSUs
and Options shall be as set forth in the Stock Compensation
Plan, the resolution making the grant and the related award
agreement.
In addition to the foregoing, upon the occurrence of a Change in
Control (as defined below) during the Term: (a) the Initial
RSUs, if they were granted to Executive at least twelve months
prior to such Change in Control, and all other RSUs that were
granted to Executive pursuant to this Agreement at least twelve
months prior to such Change in Control shall immediately vest
and be paid-out subject to any right of Executive to defer
payment of the Initial RSUs and RSUs under any non-qualified
deferred compensation arrangement in which senior executives of
Xxxxxxx Mac are permitted to defer payment of restricted stock
units, (b) all Options that were granted to Executive
pursuant to this Agreement at least twelve months prior to such
Change in Control shall immediately vest and remain exercisable
until the scheduled expiration date applicable to such Options,
(c) the Initial RSUs, if they were granted to Executive
less than twelve months prior to such Change in Control, shall
be cancelled immediately upon the occurrence of such Change in
Control in consideration for a cash payment by Xxxxxxx Mac to
Executive in the amount of $8,800,000, and (d) with respect
to each Annual Equity Grant that was granted to Executive less
than twelve months prior to such Change in Control, all Options
and RSUs that formed part of such Annual Equity Grant shall be
cancelled immediately upon the occurrence of the Change in
Control and in consideration for such cancellation, Xxxxxxx Mac
shall pay to Executive a lump sum cash payment in the amount of
$8,800,000. For purposes of this Section 4.4, a Change in
Control shall mean: (i) any person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”))
becomes the “beneficial owner” (as such term is
defined in
Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
securities of Xxxxxxx Mac representing 50% or more of the
combined voting power of Xxxxxxx Mac’s then outstanding
securities, other than (A) beneficial ownership by Xxxxxxx
Mac, any employee benefit plan of Xxxxxxx Mac or any person or
entity organized, appointed or established pursuant to the terms
of any such benefit plan and (B) beneficial ownership by
any person or group with respect to which more than 50% of the
total combined voting power of such person or group is
beneficially owned, directly or indirectly, by the persons who
beneficially owned Xxxxxxx Mac’s outstanding voting
securities immediately prior to such acquisition; or
(ii) consummation of a merger of Xxxxxxx Mac unless
securities representing more than 50% of the total combined
voting power of the voting securities of the successor
corporation are, immediately after the consummation of such
merger, beneficially owned, directly or indirectly, in
substantially the same proportion, by the persons who
beneficially owned Xxxxxxx Mac’s outstanding voting
securities immediately prior to such transaction, or
(iii) if, during any period, a majority of the members of
the Board of Directors are elected by any person or entity other
than Xxxxxxx Mac’s shareholders or a majority of the
members of the Board of Directors are appointed by any
governmental entity.
4.5 Term Life Insurance Policy. During the
Term: (a) so long as Executive remains employed by Xxxxxxx
Mac, Xxxxxxx Mac shall maintain, at its cost, term life
insurance on the life of Executive for the benefit of his
beneficiaries with a face amount equal to $10,000,000, and
(b) provided that Executive remains employed by Xxxxxxx Mac
through the Scheduled Termination Date, upon the later to occur
of the Scheduled Termination Date and Executive’s
attainment of age 65, Xxxxxxx Mac shall deliver to Executive a
fully paid-up permanent life insurance policy
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with a face amount equal to $4,000,000. In each case, Xxxxxxx
Mac’s obligation to provide such term life insurance and
permanent life insurance to Executive shall be subject to the
provision by Executive of proof of Executive’s insurability
at standard rates.
4.6 Relocation Expenses. Xxxxxxx Mac shall
reimburse Executive for all costs reasonably incurred by
Executive in connection with Executive’s relocation to the
Washington, D.C. metropolitan area, in accordance with Xxxxxxx
Mac’s written relocation policy applicable to senior
executives of Xxxxxxx Mac.
4.7 Other Compensation. Executive shall be
eligible to participate in all other incentive and other
compensation programs adopted from time to time by Xxxxxxx Mac
and generally applicable to senior executives, subject to the
applicable terms, conditions and limitations of such programs.
4.8 Executive Benefits. During the Term,
Executive shall be entitled to participate in all executive and
employee benefit plans or programs of Xxxxxxx Mac at a level
that is commensurate with his position and duties with Xxxxxxx
Mac. Xxxxxxx Mac does not guarantee the adoption or continuance
of any particular executive or employee benefit plan or program
during the Term and Executive’s participation in any such
plan or program shall be subject to the provisions, rules and
regulations applicable thereto.
4.9 Perquisites. During the Term, Executive
shall be entitled to participate in all special benefit or
perquisite programs generally available from time to time to
senior executives of Xxxxxxx Mac, on the terms and conditions
then prevailing under each such program and shall be entitled to
a number of weeks of paid vacation on an annualized basis equal
to the number of weeks of paid vacation per year applicable to
senior executives of Xxxxxxx Mac in accordance with its vacation
policy as in effect from time to time.
4.10 Expenses. Xxxxxxx Mac shall pay or
reimburse Executive for all ordinary and necessary business
expenses that Executive reasonably incurs in performing his
duties under this Agreement, subject to the presentment by
Executive of appropriate vouchers in accordance with Xxxxxxx
Mac’s normal executive policies for expense verification.
SECTION 5.
TERMINATION OF EMPLOYMENT
5.1 Termination Due to Disability. In the
event of any Disability of Executive during the Term and his
employment under this Agreement that causes him to become
eligible to receive benefits under Xxxxxxx Mac’s long-term
disability policy in which Executive participates,
Executive’s employment under this Agreement shall terminate
as of the date of such eligibility. For purposes of this
Agreement, “Disability” shall have the meaning
applicable to senior executives who participate in Xxxxxxx
Mac’s long-term disability policy in which Executive
participates.
In the event that Executive is absent from work more than thirty
consecutive work days due to incapacity or disability, the Board
of Directors or its designee, after considering such medical
advice, if any, as the Board or its designee deems appropriate,
may determine that, as a result of such incapacity or
disability, some or all of Executive’s duties and
responsibilities as described in Section 2 shall be
delegated to one or more other persons. Such delegation shall
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terminate upon the earliest to occur of: (i) the date or
event specified by the Board of Directors or its designee;
(ii) the date on which Executive’s employment under
this Agreement terminates by reason of Disability (under this
Section 5.1); or (iii) a determination by the Board of
Directors or its designee, upon receipt of such medical advice,
if any, as the Board or its designee deems appropriate, that
Executive is able to resume the duties and responsibilities so
delegated. It is expressly understood that any delegation of
Executive’s duties and responsibilities pursuant to this
paragraph shall not constitute Good Reason for termination of
employment by Executive (under Section 5.3 hereof) and
shall not be deemed a breach or default by Xxxxxxx Mac.
5.2 Termination Due to Death. In the event of
Executive’s death prior to the Scheduled Termination Date,
the Term and Executive’s employment under this Agreement
shall terminate as of the date of Executive’s death.
5.3 Termination for Good Reason. Prior to the
Scheduled Termination Date, Executive may terminate the Term and
his employment under this Agreement for Good Reason by giving
the Board of Directors thirty (30) days prior written
notice of his intent to terminate. Such notice shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for such termination. The Term and
Executive’s employment under this Agreement shall terminate
upon the expiration of the
30-day
notice period.
For purposes of this Agreement, “Good Reason” shall
mean, without Executive’s express written consent, the
occurrence of anyone or more of the following:
(i) A reduction in Executive’s then current Base
Salary or Target Bonus or Maximum Bonus opportunity;
(ii) The removal by the Board of Directors of
Executive from the position of Chief Executive Officer of
Xxxxxxx Mac or Chairman of the Board of Directors or otherwise
from the Board of Directors;
(iii) A material diminution or change in
Executive’s duties or responsibilities as contemplated by
Section 2 of this Agreement;
(iv) A change in the reporting structure so that
Executive reports to any person or entity other than the Board
of Directors;
(v) A request by Xxxxxxx Mac that Executive resign
his employment, unless such resignation is requested as a result
of conduct by Executive that would constitute Cause (as defined
below);
(vi) Executive is not elected to the Board of
Directors or, if Executive is so elected, Executive is not
appointed as Chairman of the Board of Directors;
(vii) The failure of Xxxxxxx Mac to obtain the
assumption in writing of its obligation to perform this
Agreement by any successor to all or substantially all of the
assets of Xxxxxxx Mac within 15 days after the occurrence
of a Change in Control (as defined in Section 4.4);
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(viii) A material breach of this Agreement by Xxxxxxx
Mac.
Notwithstanding the foregoing, Executive expressly acknowledges
and agrees that it shall not constitute Good Reason as defined
in this Section 5.3 (including without limitation under
5.3(ii), (iii) or (viii)) if, during the Term, a Successor
CEO who is reasonably acceptable to Executive is appointed, and
Executive ceases to be Chief Executive Officer and remains
Chairman of the Board of Directors under the circumstances
described in Section 2 of this Agreement.
5.4 Termination by Xxxxxxx Mac without Cause.
Prior to the Scheduled Termination Date, Xxxxxxx Mac may
terminate the Term and Executive’s employment under this
Agreement without Cause (which, for purposes of clarification,
shall not include: (a) a termination of the Term or
Executive’s employment under this Agreement due to
Executive’s death or Disability, or (b) if a Successor
CEO is appointed during the Term, Executive ceases to be Chief
Executive Officer and remains Chairman of the Board of Directors
under the circumstances described in Section 2 of this
Agreement). Any termination by Xxxxxxx Mac pursuant to this
Section 5.4 shall be communicated by a written ”Notice
of Termination” addressed to Executive stating that the
Term and Executive’s employment under this Agreement has
been or will be terminated.
5.5 Termination for Cause. Prior to the
Scheduled Termination Date, Xxxxxxx Mac may terminate the Term
and Executive’s employment under this Agreement for Cause.
The Term and Executive’s employment under this Agreement
shall terminate upon the determination by the Board of Directors
of the existence of Cause.
For purposes of this Agreement, “Cause” shall mean the
occurrence of one or more of the following:
(i) Executive commits a felony or any crime involving
moral turpitude;
(ii) In carrying out his duties, Executive engages in
conduct that constitutes gross neglect or gross misconduct or
any material violation of applicable Xxxxxxx Mac rule or policy,
including any policy relating to investment by Xxxxxxx Mac
employees in securities, the violation of which amounts to gross
neglect or gross misconduct;
(iii) A material breach of this Agreement by
Executive; or
(iv) Any other willful or malicious misconduct on the
part of Executive that is substantially injurious to Xxxxxxx Mac.
In each case, Cause shall not exist unless and until Xxxxxxx Mac
has delivered to Executive a copy of a resolution duly adopted
by a majority of the entire Board of Directors (excluding the
Executive if Executive is a Board member) at a meeting of the
Board of Directors called and held for such purpose (after
reasonable notice to the Executive and an opportunity for
Executive, together with counsel, to be heard before the Board
of Directors), finding that in the good faith opinion of the
Board of Directors an event set forth in subclauses (i), (ii),
(iii) or (iv) has occurred and specifying the
particulars thereof in detail. Notwithstanding the foregoing,
during the period commencing on the date Xxxxxxx Mac notifies
the Executive that it intends to call a meeting of the Board of
Directors to terminate the Term and Executive’s employment
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under this Agreement for Cause until such meeting is held,
Xxxxxxx Mac may reduce Executive’s responsibilities and
duties and any such reduction or diminishment in
Executive’s responsibilities and duties during such period
shall not give rise to “Good Reason.”
SECTION 6.
COMPENSATION UPON TERMINATION
6.1 Disability or Death. In the event the Term
and Executive’s employment under this Agreement is
terminated prior to the Scheduled Termination Date by reason of
Executive’s Disability (under Section 5.1 hereof) or
by reason of Executive’s death (under Section 5.2
hereof), Xxxxxxx Mac’s obligations to Executive (or his
assigns as provided in Section 8.2 hereof) shall be as
follows:
(i) Base Salary. Executive’s Base Salary
shall be paid to Executive (or his assigns) through the end of
the month in which the termination of employment occurs within
five (5) days following such termination. Xxxxxxx Mac shall
have no further obligation to make payments of Base Salary to
Executive (or his assigns).
(ii) Bonus. Xxxxxxx Mac shall pay Executive
(or his assigns) any and all earned but unpaid bonus amounts
from the most recent completed calendar year of Xxxxxxx Mac. In
addition, Xxxxxxx Mac shall pay Executive (or his assigns) a
prorated percentage of Executive’s Target Bonus for the
calendar year in which the employment termination occurs, based
upon the number of months elapsed in such year through the last
day of the month in which such termination occurs. All such
amounts shall be paid to Executive (or his assigns) within
thirty (30) days after the termination of the Term and
Executive’s employment under this Agreement.
(iii) Long-Term Incentives. At the date of
termination of the Term and Executive’s employment under
this Agreement for Disability or death, the Initial RSUs and all
other RSUs awarded to Executive pursuant to this Agreement shall
immediately vest and be paid-out, subject to any right of
Executive to defer payment of such Initial RSUs or RSUs under
any non-qualified deferred compensation arrangement in which
senior executives of Xxxxxxx Mac are permitted to defer payment
of restricted stock units, and all Options granted to Executive
pursuant to this Agreement shall become immediately exercisable
and shall remain outstanding: (A) in the event such
termination occurs as a result of Executive’s death, until
the earlier to occur of (1) the third anniversary of such
termination of employment and (2) the scheduled expiration
date applicable to such Options, and (B) in the event such
termination occurs as a result of Executive’s Disability,
until the scheduled expiration date applicable to such Options.
To the extent there is any inconsistency between the terms of
the long term incentive plan under which the Initial RSUs, the
RSUs and the Options were granted on the one hand and this
Section 6.1(iii), on the other hand, this
Section 6.1(iii) shall supersede such plans.
Except as provided in this Section 6.1 and for any vested
benefits to which Executive is entitled under any benefit plans
maintained by Xxxxxxx Mac in which Executive participated during
the Term (other than the Xxxxxxx Xxx Xxxxxxxxx Policy and any
other plan providing for benefits in the nature of severance,
which Executive is not entitled to participate in by virtue of
having entered into this Agreement), continuation of health
insurance benefits under
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the law commonly referred to as “COBRA” and any other
similar benefits required to be provided by law, Xxxxxxx Mac
shall have no additional obligations to Executive.
(iv) Long Term Disability Benefits. In
addition, in the event that such termination of the Term and
Executive’s employment hereunder occurs as a result of
Executive’s Disability, Xxxxxxx Mac shall provide Executive
with long-term disability benefits equal to 70% of
Executive’s Base Salary during the period beginning on the
first day of the month that immediately follows the month in
which such termination occurred through the earlier to occur of
(a) the Scheduled Termination Date or (b) the date
Executive no longer has a Disability. Notwithstanding the
foregoing, Xxxxxxx Mac’s obligation to provide such long
term disability benefits to Executive shall be subject to the
provision by Executive of proof of Executive’s insurability
at standard rates.
6.2 For Good Reason or by Xxxxxxx Mac without
Cause. In the event the Term and Executive’s employment
under this Agreement is terminated prior to the Scheduled
Termination Date by Executive for Good Reason (under
Section 5.3 hereof), or by Xxxxxxx Mac without Cause (under
Section 5.4 hereof), Xxxxxxx Mac’s obligations to
Executive shall be as follows, in each case, subject to
Executive’s execution of a general release and waiver in a
form provided to Executive by Xxxxxxx Mac which conforms to the
requirements of the officer severance policy in effect as of the
date hereof (the “Release”):
(i) Base Salary. Xxxxxxx Mac shall pay
Executive a lump sum cash payment equal to the Base Salary that
would have been payable to Executive for the period beginning on
the termination of the Term and Executive’s employment
under this Agreement and ending on the Scheduled Termination
Date if the Executive had remained employed during such period.
All such amounts shall be paid to Executive on the effective
date of Executive’s Release.
(ii) Bonus. Xxxxxxx Mac shall pay Executive
any and all earned but unpaid bonus amounts from the most recent
complete calendar year of Xxxxxxx Mac. In addition, Xxxxxxx Mac
shall pay Executive a lump sum cash payment equal to the sum of
the Target Bonuses that would have been paid to Executive in
respect of each calendar year of Xxxxxxx Mac that ends during
the period beginning on the termination of the Term and
Executive’s employment under this Agreement and ending on
the Scheduled Termination Date. All such amounts shall be paid
to Executive on the effective date of Executive’s Release.
(iii) Long-Term Incentives. On the effective
date of Executive’s Release, (a) the Initial RSUs, if
they were granted to Executive at least twelve months prior to
such termination, and all other RSUs that were granted to
Executive pursuant to this Agreement at least twelve months
prior to such termination, shall immediately vest and be
paid-out subject to any right of Executive to defer payment of
the Initial RSUs and RSUs under any non-qualified deferred
compensation arrangement in which senior executives of Xxxxxxx
Mac are permitted to defer payment of restricted stock units,
(b) the Initial RSUs, if they were granted to Executive
less than twelve months prior to such termination, shall be
cancelled immediately upon such termination in consideration for
a cash payment by Xxxxxxx Mac to Executive on the effective date
of Executive’s Release in the amount of $8,800,000,
(c) all Options that were granted to Executive pursuant to
this Agreement at least twelve months prior to such termination
shall vest and become immediately exercisable and shall remain
outstanding until the earlier to occur of
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(A) three (3) years following such termination of the
Term and Executive’s employment under this Agreement and
(B) the scheduled expiration date applicable to such
Options, and (d) with respect to each Annual Equity Grant
that was granted to Executive less than twelve months prior to
such termination, all Options and RSUs that formed part of such
Annual Equity Grant shall be cancelled immediately upon the
occurrence of the termination and in consideration for such
cancellation, Xxxxxxx Mac shall pay to Executive on the
effective date of Executive’s Release a lump sum cash
payment in the amount of $8,800,000. To the extent there is any
inconsistency between the terms of the stock compensation plan
under which the Initial RSUs, the RSUs and the Options were
granted on the one hand and this Section 6.2(iii), on the
other hand, this Section 6.2(iii) shall supersede such
plans.
In addition, in the event such termination of the Term and
Executive’s employment hereunder occurs prior to the date
on which Xxxxxxx Mac grants Executive his Annual Equity Grant
for calendar year 2004, in lieu of such xxxxx Xxxxxxx Mac shall
pay Executive, on the effective date of Executive’s
Release, a lump sum cash payment in the amount of $8,800,000.
(iv) Supplemental Nonqualified Retirement
Plans. Executive shall participate in and receive benefits
under Xxxxxxx Mac’s non-qualified Supplemental Executive
Retirement Plan (the “SERP”) in accordance with the
terms of such plan; provided that, for purposes of this
Section 6.2, if upon Executive’s termination of
employment he is not entitled to the “Restoration
Benefit” (as such term is defined in the SERP) under the
SERP solely because he is not yet vested under the FHLMC
Employees’ Pension Plan (“Pension Plan”), then
Xxxxxxx Mac will pay Executive the Restoration Benefit that
would have been payable under the SERP as of the date of such
termination without regard to such vesting requirement, and
Executive will be entitled to the Make Up Contribution (as
defined in the SERP) in accordance with the terms of the SERP.
The terms of the Pension Plan shall not be affected by this
Agreement, and this Agreement does not contemplate a payment of
unvested Pension Plan benefits (or any equivalent thereof).
(v) Health Benefits. Xxxxxxx Mac shall provide
continued coverage for Executive and his eligible dependents
under Xxxxxxx Mac’s medical, dental and other similar
welfare benefit plans in which Executive and such dependents
participated immediately prior to the termination of the Term
and Executive’s employment under this Agreement (the
“Continued Benefits”) during the period commencing on
the termination of the Term and Executive’s employment
under this Agreement and ending on the Scheduled Termination
Date, or, in the event that Executive’s participation in
such plans is prohibited or impracticable under the terms of
such plans, Xxxxxxx Mac shall arrange to provide Executive with
benefits substantially similar to those available under the
applicable plans in which Executive participated prior to the
termination of the Term and Executive’s employment under
this Agreement. In either case, the provision of such benefits
by Xxxxxxx Mac shall be subject to timely payment by Executive
of all premiums, contributions and other co-payments required to
be paid by senior executives of Xxxxxxx Mac under the terms of
such plans as in effect from time to time (or the equivalent
thereto in the case Xxxxxxx Mac arranges to provide Executive
with substantially similar benefits to those available under the
Xxxxxxx Mac plans), and shall be considered to be part of, and
not in addition to, the benefit continuation required by the
federal law commonly referred to as “COBRA.”
Notwithstanding the foregoing, such continued coverage (or
provision of substantially similar benefits) described in this
paragraph 6.2(v) shall cease prior to the
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Scheduled Termination Date with respect to any plan at the time
that Executive is eligible to obtain substantially similar
coverage to that provided by such plan from a subsequent
employer. Executive shall notify Xxxxxxx Mac promptly upon his
employment with a subsequent employer, and shall provide Xxxxxxx
Mac with such information as Xxxxxxx Mac reasonably requests
regarding his coverage under medical, dental and life insurance
plans of such employer.
Except as provided in this Section 6.2 and for any vested
benefits to which Executive is entitled under any benefit plans
maintained by Xxxxxxx Mac in which Executive participated during
the Term (other than the Xxxxxxx Xxx Xxxxxxxxx Policy and any
other plan providing for benefits in the nature of severance,
which Executive is not entitled to participate in by virtue of
having entered into this Agreement), continuation of health
insurance benefits under the law commonly referred to as
“COBRA” and any other similar benefits required to be
provided by law, Xxxxxxx Mac shall have no additional
obligations to Executive.
6.3 Termination for Cause. In the event the
Term and Executive’s employment under this Agreement is
terminated by Xxxxxxx Mac for Cause (under Section 5.5
hereof), Xxxxxxx Mac’s obligations to Executive shall be as
follows:
(i) Base Salary. Xxxxxxx Mac shall pay
Executive within five (5) days following such termination
his earned but unpaid Base Salary through the date of the
termination of the Term and Executive’s employment under
this Agreement.
(ii) Bonus. Xxxxxxx Mac shall pay Executive
within thirty (30) days following such termination any
earned but unpaid bonus from the most recent complete calendar
year of Xxxxxxx Mac. Executive shall not be entitled to any
portion of his bonus in the year in which employment termination
occurs.
Except as provided in this Section 6.3 and for any vested
benefits to which Executive is entitled under any benefit plans
maintained by Xxxxxxx Mac in which Executive participated during
the Term (other than the Xxxxxxx Xxx Xxxxxxxxx Policy and any
other plan providing for benefits in the nature of severance,
which Executive is not entitled to participate in by virtue of
having entered into this Agreement), continuation of health
insurance benefits under the law commonly referred to as
“COBRA” and any other similar benefits required to be
provided by law, Xxxxxxx Mac shall have no additional
obligations to Executive.
6.4 Termination following the Scheduled
Termination Date. In the event Executive remains employed by
Xxxxxxx Mac through the Scheduled Termination Date and the
termination of the Term and, thereafter, Executive terminates
his employment with Xxxxxxx Mac by reason of his retirement (and
Xxxxxxx Mac at the time of such termination of employment by
reason of Executive’s retirement could not have terminated
the employment of Executive for Cause), (a) all RSUs
awarded to Executive pursuant to this Agreement shall vest
immediately as of the date of Executive’s retirement, but
such RSUs shall be paid-out at the time such RSUs would have
vested and been paid-out to Executive had his employment with
Xxxxxxx Mac not been terminated, or at such earlier time as the
Committee in its discretion may permit, subject to any right of
Executive to defer payment of such RSUs under any non-qualified
deferred compensation arrangement in which senior executives of
Xxxxxxx Mac are permitted to defer payment of restricted stock
units and (b) all Options granted to Executive pursuant to
this
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Agreement shall become immediately exercisable and shall remain
outstanding until the scheduled expiration date applicable to
such Options.
Except as provided in this Section 6.4 and for any vested
benefits to which Executive is entitled under any benefit plans
maintained by Xxxxxxx Mac in which Executive participated during
the Term (other than the Xxxxxxx Xxx Xxxxxxxxx Policy and any
other plan providing for benefits in the nature of severance,
which Executive is not entitled to participate in by virtue of
having entered into this Agreement), continuation of health
insurance benefits under the law commonly referred to as
“COBRA” and any other similar benefits required to be
provided by law, Xxxxxxx Mac shall have no additional
obligations to Executive.
SECTION 7.
RESTRICTIONS ON EXECUTIVE
7.1 Disclosure of Information. Executive
recognizes that he has access to and knowledge of confidential
and proprietary information of Xxxxxxx Mac and/or its customers
which is essential to the performance of his duties under this
Agreement. Except as required by law, Executive shall not,
during or after his employment of Xxxxxxx Mac, in whole or in
part, disclose such information to any person, firm,
corporation, association or other entity (other than
(i) to, or as directed by, Xxxxxxx Mac or (ii) during
his employment by Xxxxxxx Mac, as he shall determine to be in
the best interests of Xxxxxxx Mac) for any reason or purpose
whatsoever or use such information for his own or another’s
purposes, unless and until such information has become generally
known to the public.
Executive agrees to hold as Xxxxxxx Mac’s property, all
memoranda, books, papers, letters, and other data in any way
relation to Xxxxxxx Mac’s business and affairs, whether
made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of Xxxxxxx Mac at
any time, to deliver the same to Xxxxxxx Mac.
7.2 Covenant Not to Compete. During
Executive’s employment under this Agreement, and for two
(2) years following the termination of his employment under
this Agreement, without prior written consent of the Board of
Directors (which shall not be unreasonably withheld), Executive
shall not compete with Xxxxxxx Mac or interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise,
between Xxxxxxx Mac and any customer, client, supplier or
consultant of Xxxxxxx Mac. For purposes of this Agreement,
prohibited competition shall mean becoming an employee, officer,
consultant or director of, or being an investor (representing
more than a five (5) percent equity interest) in, any
entity or person engaged in a business that directly competes
with all or some material portion of the business that directly
competes with all or some material portion of the business then
engaged in by Xxxxxxx Mac.
In addition, Executive agrees that for the one (1) year
period following the termination of employment under this
Agreement, he 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, solicit or induce any person who, at the time of such
solicitation or inducement, is employed as an officer (or the
equivalent) of Xxxxxxx Mac to leave or cease their employment
relationship with Xxxxxxx Mac for any reason whatsoever or hire
or otherwise engage such employees of Xxxxxxx Mac; provided that
this section shall not be construed as a prohibition on
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the ability of Executive to provide references on an officer (or
equivalent) to persons or entities with which Executive has no
affiliation.
SECTION 8.
ASSIGNMENT
8.1 Assignment by Xxxxxxx Mac. This Agreement
may and shall be assigned or transferred to, and shall be
binding upon and shall inure to the benefit of any successor of
Xxxxxxx Mac, and any such successor shall be deemed substituted
for Xxxxxxx Mac for all purposes of this Agreement. As used in
this Agreement, the term “successor” shall mean any
person, firm, corporation, or business entity which at any time,
whether by merger, purchase, operation of law or otherwise,
acquires all or essentially all of the assets or business of
Xxxxxxx Mac. Notwithstanding such assignment, Xxxxxxx Mac shall
remain, with such successor, jointly and severally liable for
all its obligations hereunder.
8.2 Assignment by Executive. This Agreement
shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors,
administrators, heirs, distributes devisees, and legatees. If
Executive shall die while any amounts payable to Executive
hereunder remain outstanding, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement to Executive’s devisees, legatees, or other
designee or, in the absence of such designee, to
Executive’s estate.
The rights and duties of Executive hereunder are personal and
may not be assigned or transferred.
SECTION 9.
MISCELLANEOUS
9.1 Entire Agreement. This document contains
the entire Agreement of the parties relating to the subject
matter hereof.
9.2 Representations. Subject to approval by
the HRC and, to the extent applicable OFHEO, Xxxxxxx Mac
represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any
agreement between it and any other person or organization.
Executive represents that he is fully authorized and empowered
to enter into this Agreement and that the performance of his
obligations hereunder will not violate any agreement between him
and any other person, firm or organization.
Executive hereby represents and warrants to Xxxxxxx Mac that
Executive is not bound by the terms of any agreement with any
previous employer or other party to refrain from competing,
directly or indirectly, with the business of such previous
employer or other party that would be violated by
Executive’s entering into this Agreement and/or providing
services to Xxxxxxx Mac pursuant to the terms of this Agreement.
Executive further represents and warrants that Executive’s
performance of all the terms of this Agreement and as an
employee of Xxxxxxx Mac does not and will not breach any
agreement to keep in confidence proprietary information,
knowledge or data acquired by Executive in confidence or in
trust prior to Executive’s employment with Xxxxxxx Mac.
Executive will not disclose to Xxxxxxx Mac or induce Xxxxxxx Mac
to use any confidential or proprietary information or material
belonging to any previous
13
employer or others. Executive will not hereafter grant anyone
any rights inconsistent with the terms of this Agreement.
9.3 Modification. This Agreement shall not be
amended except by mutual agreement of the parties in a written
instrument executed by the parties hereto or their legal
representatives.
9.4 Exclusive Remedies. This Agreement is
intended to encompass all obligations of Xxxxxxx Mac to
Executive: (a) for compensation and benefits in respect of
his employment, and (b) arising out of the termination of
his employment. Executive shall not be entitled to any
compensation, benefits, damages or other remedies not provided
for herein. Executive hereby waives, to the maximum extent
permitted by law, the right to bring any action against Xxxxxxx
Mac, in law, equity or otherwise for compensation for his
employment, other than for the enforcement of Xxxxxxx Mac’s
obligations to pay the compensation, benefits and other amounts
provided for herein.
9.5 Taxes. Xxxxxxx Mac may withhold from any
payments made under this Agreement all applicable taxes,
including but not limited to income, employment and social
insurance taxes, as shall be required by law.
9.6 Severability. In the event that any
provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining
provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
9.7 Notice. Any notices, requests, demands and
other communications provide for by this Agreement shall be
sufficient if in writing and if sent by registered or certified
mail to Executive at the last address he filed in writing with
Xxxxxxx Mac or, in the case of Xxxxxxx Mac, addressed to the
Secretary of Xxxxxxx Mac, and sent to its principal executive
offices.
9.8 Governing Law. The provisions of this
Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Virginia.
Remainder
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of December 6, 2003.
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FEDERAL HOME LOAN MORTGAGE CORPORATION |
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ATTEST: /s/ Xxxxxx
X. Xxx Assistant Secretary |
By:
/s/ Xxxx X. XxXxx
Title: Chairman — Compensation Committee
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|
|
/s/ Xxxxxxx
X. Xxxxx Xxxxxxx X. Xxxxx |
Exhibit A
The Board of Directors has approved Executive’s service on
the following two boards of directors:
1. Xxxx Xxxxxxx Financial Services, Inc./Manulife Financial
Corporation
2. Thermo Electron Corporation
