exv10w3







 




    Exhibit
    10.3



 




    FEDERAL
    HOME LOAN MORTGAGE CORPORATION

    NONQUALIFIED STOCK OPTION AGREEMENT



 



    This NONQUALIFIED STOCK OPTION AGREEMENT is dated
                   ,
    2005 (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 also granted to Grantee the right to receive
    from the Corporation an amount equivalent to the dividends
    declared on the number of shares of Common Stock with respect to
    which the Option is exercised or has expired, the record dates
    for which dividends have occurred during the period the Option
    was outstanding (“Dividend Equivalents”), subject to
    Sections 3 and 4 hereof. Such Dividend Equivalents shall be
    subject to all terms and conditions (including forfeitures)
    otherwise applicable to the Option. Payment of such Dividend
    Equivalents shall be made in cash upon exercise of the Option
    (in whole or in part) or, to the extent that the Option is not
    exercised, upon the Expiration Date (as defined below).
    Notwithstanding the foregoing, the amount so payable 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.



 



    (c)  Restrictions.  Grantee
    acknowledges and agrees that (i), the Option and related
    Dividend Equivalents rights are nontransferable, except as
    provided in Section 5(a) hereof and Section 6.6 of the
    Plan; (ii) the Option and related Dividend Equivalents
    rights are 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
    insider trading 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 4 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:



 


	 	 	 
	
 
	
 
	
    Additional percentage of shares in

    

	
    During the period

    
	
 
	
    respect of which the

    

	

    commencing


	
 
	

    Option may be exercised



	 

	

    1st
    anniversary of the Grant Date


	
 
	
      25%

	

    2nd
    anniversary of the Grant Date


	
 
	
      25%

	

    3rd
    anniversary of the Grant Date


	
 
	
      25%

	

    4th
    anniversary of the Grant Date


	
 
	
      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




    

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    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 during the thirty-six month
    period that begins as of the date of death (but ends not later
    than 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
    (except as limited under Section 2(c)(iv)).



 



    (iii)  Upon a Qualifying
    Retirement.  In the event Grantee ceases to be an
    employee of the Corporation on or before the Expiration Date by
    reason of a Qualifying 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 (except as limited under Section 2(c)(iv)).
    For purposes of this Agreement, a “Qualifying
    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), other than a
    Termination by the Corporation for Gross Misconduct (as defined
    in Corporate Policy
    No. 3-254.1
    or 3-254, as
    applicable (as 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), 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 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 to the
    maximum extent practicable the 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. 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)  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 or
    Qualifying Retirement, the portion of the Option which, as of
    the date of Termination, remains unvested and




    

    3








 






    subject to the exercise restrictions shall be forfeited, and
    Grantee shall have 90 days after the date of Termination in
    which to exercise any portion of the Option which, as of the
    date of Termination, was exercisable.



 



    (v)  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) or (iv) 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
    36-month
    period that begins as of the date of death; provided, however,
    that, at the end of such
    36-month
    period, the Option shall cease to be exercisable (the provisions
    of clauses (ii) and (iii) of this Section 2(c)
    notwithstanding). The foregoing notwithstanding, 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 Option 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.  Dividend
    Equivalents.  (a) Generally.  Dividend
    Equivalent rights granted under Section 1(b) hereof confer
    upon Grantee a right to receive Dividend Equivalents in respect
    of the Option, as follows:



 



    (i)  Relating to Cash Dividends.  If
    the Corporation declares and pays any cash dividend or
    distribution on Common Stock other than an extraordinary
    dividend, the record date of which occurs while all or a portion
    of the Option remains outstanding, the Corporation shall credit
    to a bookkeeping account maintained on behalf of Grantee, as
    promptly as practicable after the payment date of such dividend
    or distribution, a cash amount equal to the amount of cash
    actually paid as a dividend or distribution per share of Common
    Stock multiplied by the number of shares subject to the Option
    on such record date.



 



    (ii)  Relating to Extraordinary Stock Dividends,
    Stock Splits, and Other Extraordinary Dividends Resulting in
    Adjustments to Options.  If the Corporation
    declares and pays a dividend or distribution in the form of
    Common Stock payable on Common Stock, or if there occurs a
    forward stock split of the Common Stock, or if there occurs
    another extraordinary dividend resulting in an adjustment under
    Section 5(c) hereof, the record date of which occurs while
    all or a portion of the Option remains outstanding, the
    Corporation shall not credit any Dividend Equivalents to
    Grantee’s bookkeeping account in connection therewith,
    except as otherwise determined by the Committee in accordance
    with Section 5(c).



 



    (b)  Forfeiture.  In the event any
    portion of an Option is forfeited, the Dividend




    

    4








 






    Equivalents theretofore credited to Grantee’s bookkeeping
    account in respect of that portion of the Option shall likewise
    be forfeited.



 



    4.  Additional Forfeiture Provisions.



 



    (a)  Forfeiture of Option and Gains Realized Upon
    Prior Exercises.  The Option and related
    Dividend Equivalents rights are subject to the following
    additional forfeiture conditions, to which Grantee, by accepting
    the Option, agrees. If any of the events specified in
    Section 4(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)  Any unexercised portion of the Option and related
    Dividend Equivalents rights, 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 sum of
    (A) Dividend Equivalents paid to Grantee upon such exercise
    (including any portion withheld for taxes) plus (B) the
    product of (X) 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 (Y) 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 4(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 4(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




    

    5








 






    consequences hereunder if Grantee engages in an activity giving
    rise to any such Forfeiture Event or the forfeitures specified
    in Section 4(a).



 



    (c)  Monitoring
    Compliance.  In order to allow the
    Corporation to monitor Grantee’s compliance with the
    conditions imposed under this Section 4, 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.



 



    5. 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.



 



    (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,
    taking into account any Dividend Equivalents credited to Grantee
    in connection with such event under Sections 1(b) and 3
    hereof.



 



    (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 would result in Grantee’s
    constructive receipt of income relating to the Option prior to
    their actual exercise of the Option, such rights or elections
    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




    

    6








 






    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 by Grantee. The foregoing notwithstanding,
    equitable adjustments to the Options under Section 5(c),
    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.



 



    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/  Paul
    G. George







			
	 	    By:  
	
    Paul G. George





    Executive Vice President




    Human Resources




    

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