Freddie Mac 2012 Annual Report Download - page 349

• A Target Opportunity of $1,166,667 for 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.
Mr. Kari’s Memorandum Agreement provides for the following additional forms of compensation during his
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
• Eligibility to receive termination benefits pursuant to the terms of any then-applicable severance plan or policy,
subject to the approval of FHFA.
Mr. Haldeman’s compensation, as provided in his Memorandum Agreement, was as follows:
• A Semi-Monthly Base Salary of $900,000 per year;
• Deferred Base Salary in the amount of $3.1 million for 2010, payable as described above; and
• A Target Opportunity in the amount of $2 million for 2010, payable as described above.
Executive Compensation Program participants, including Mr. Kari, are not currently entitled to a guaranteed level of
severance benefits upon any type of termination event. Mr. Haldeman did not receive any such benefits in connection with
his departure from the company in June 2012. 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 also entered into a restrictive covenant agreement with Mr. Layton and recapture and restrictive covenant
agreements with Messrs. Kari and Haldeman. We did not enter into a recapture agreement with Mr. Layton because he only
receives base salary, which is not subject to recapture. The recapture requirements included in the agreements with Messrs.
Kari and Haldeman, and the similar recapture requirements applicable to all other participants in the Executive
Compensation Program, are described below under “Other Executive Compensation Considerations — Recapture and
Forfeiture Agreement.” The non-competition and non-solicitation provisions included in the restrictive covenant agreement
are described in “Potential Payments Upon Termination of Employment or Change-in-Control.”
We have also entered into indemnification agreements with certain of our current and former directors and executive
officers, each an indemnitee, including Messrs. Layton, Kari, and Haldeman. With respect to indemnification agreements
entered into with executive officers in or after August 2011, the form of agreement has been revised to provide that
indemnification rights under the agreement would terminate if and when the executive officer remained with Freddie Mac
after ceasing to report directly to the CEO with respect to any claims arising from matters occurring after the officer was no
longer a direct CEO report. Similar indemnification rights would continue to be available to such executive officers under the
Bylaws going forward.
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
344 Freddie Mac