Freddie Mac 2010 Annual Report Download - page 312

Reports on Form 8-K filed on July 21 and September 24, 2009 with respect to each executive’s employment with us. We
have also entered into indemnification agreements with certain of our current directors and executive officers, each, an
indemnitee, including Messrs. Haldeman and Kari. A copy of the general form of indemnification agreement is filed as
Exhibit 10.2 to our Form 8-K filed on December 23, 2008.
The indemnification agreements provide that we will indemnify the indemnitee to the fullest extent permitted by our
Bylaws and Virginia law. This obligation includes, subject to certain terms and conditions, indemnification against all
liabilities and expenses (including attorneys’ fees) actually and reasonably incurred by the indemnitee in connection with any
threatened or pending action, suit or proceeding, except such liabilities and expenses as are incurred because of the
indemnitee’s willful misconduct or knowing violation of criminal law. The indemnification agreements provide that if
requested by the indemnitee, we will advance expenses, subject to repayment by the indemnitee of any funds advanced if it
is ultimately determined that the indemnitee is not entitled to indemnification. The rights to indemnification under the
indemnification agreements are not exclusive of any other right the indemnitee may have under any statute, agreement or
otherwise. Our obligations under the indemnification agreements will continue after the indemnitee is no longer a director or
officer of the company with respect to any possible claims based on the fact that the indemnitee was a director or officer,
and the indemnification agreements will remain in effect in the event the conservatorship is terminated. The indemnification
agreements also provide that indemnification for actions instituted by FHFA will be governed by the standards set forth in
FHFA’s Notice of Proposed Rulemaking published in the Federal Register on November 14, 2008, proposing an amendment
to FHFA’s interim final golden parachute payments regulation to address prohibited and permissible indemnification
payments. In January 2009, FHFA issued final regulations relating to golden parachute payments. Under those final
regulations, FHFA may limit golden parachute payments, and the regulations set forth factors to be considered by the
Director of FHFA in acting upon his authority to limit these payments. A proposed rule was published by FHFA in June
2009 that has not yet been adopted in final form. In general, this proposal would give FHFA the authority to prohibit
indemnification payments in cases involving administrative proceedings before FHFA or civil actions initiated by FHFA.
The compensation provisions of each executive’s Memorandum Agreement, in combination with provisions of the
Executive Compensation Program, are summarized separately below. Additional information about the components of
executive compensation is discussed above in “— Elements of Compensation and Total Direct Compensation.”
Mr. Haldeman’s compensation is as follows:
• A Semi-Monthly Base Salary of $900,000 per year;
• Deferred Base Salary in the amount of $3.1 million for each of 2009 and 2010, payable as described above; and
• A Target Incentive Opportunity in the amount of $2.0 million for each of 2009 and 2010, payable as described above.
Mr. Kari’s compensation is as follows:
• A Semi-Monthly Base Salary of no less than $675,000 per year;
• Deferred Base Salary of $1,658,333 for each of 2009 and 2010, payable as described above;
• A Target Incentive Opportunity of $1,166,667 for each of 2009 and 2010, payable as described above; and
• A cash sign-on award of $1,950,000 in recognition of the annual incentive opportunity and unvested equity that
Mr. Kari forfeited by leaving his previous employer. This award was paid in installments during Mr. Kari’s first year
of employment with us (25% in October 2009, 25% in April 2010, and 50% in October 2010). A portion of each
installment is subject to repayment in the event that, prior to the first anniversary of an installment payment date,
Mr. Kari terminates his employment with us for any reason or we terminate his employment for cause (as defined in
the Memorandum Agreement).
Their Memorandum Agreements provide that Messrs. Haldeman and Kari will receive the following additional forms of
compensation during their employment with us:
• The opportunity to participate in all employee benefit plans offered to our senior executive officers, including our
SERP, pursuant to the terms of these plans. For a description of these plans see “Compensation Tables” below; and
• If we terminate the employment of Mr. Haldeman or Mr. Kari for any reason other than cause (as defined in the
Memorandum Agreement), he will be eligible to receive termination benefits pursuant to the terms of any then-
applicable severance plan or policy, subject to the approval of FHFA. Executive Compensation Program participants,
including Messrs. Haldeman and Kari, are not currently entitled to a guaranteed level of severance benefits upon any
type of termination event other than death or disability. For additional information on compensation and benefits
payable in the event of a termination of employment, see “Potential Payments Upon Termination of Employment or
Change-in-Control” below.
We have also entered into recapture and restrictive covenant agreements with each of the executives. The recapture
requirements included in these agreements, and the similar recapture requirements applicable to all other Covered Officers
309 Freddie Mac