exv10w4







 




    Exhibit
    10.4



 




    FEDERAL
    HOME LOAN MORTGAGE CORPORATION

    NONQUALIFIED STOCK OPTION AGREEMENT



 



    This NONQUALIFIED STOCK OPTION AGREEMENT is dated
                          
    (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 not granted the Option with related dividend
    equivalent rights.



 



    (c)  Restrictions.  Grantee
    acknowledges and agrees that: (i) the Option is
    nontransferable, except as provided in Section 4(a) hereof
    and Section 6.6 of the Plan; (ii) the Option is
    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 3 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 on the


	
 
	

    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 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 at any time during the
    thirty-six month period that begins as of the date of death (but
    ends not later than




    

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    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.



 



    (iii)  Upon Retirement.  In the event
    Grantee ceases to be an employee of the Corporation on or before
    the Expiration Date by reason of a 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. For purposes of this Agreement, a
    “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 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 has 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 the business relationships and confidential and
    proprietary business information of the Corporation. A
    “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)(i) or (ii). 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)  Special Circumstances
    Terminations.  If the Corporation terminates
    Grantee’s employment due to Special Circumstances (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.
    For purposes of this Agreement, a “Special Circumstances
    Termination” 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)(i), (ii) or (iii); provided,
    however, “Special Circumstances” shall exist only if,
    at the time of such Termination, (A)




    

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    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. 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.



 



    (v)  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,
    Retirement or a Termination due to Special Circumstances
    governed by
    Section 2(c)(iv)
    above, the portion of the Option which, as of the date of
    Termination, remains unvested and subject to the exercise
    restrictions shall be forfeited, and Grantee shall have
    90 days after the date of Termination (but not beyond the
    Expiration Date) in which to exercise any portion of the Option
    which, as of the date of Termination, was exercisable, at which
    time the Option shall terminate.



 



    (vi)  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), (iv) or (v) 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 thirty-six month period that begins as of the date of
    death; provided, however, that, at the end of such thirty-six
    month period, the Option shall cease to be exercisable (the
    provisions of clauses (ii), (iii) and (iv) of this
    Section 2(c) notwithstanding). The foregoing not
    withstanding, 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 “Exercisable Portion”), the
    Exercisable Portion 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.  Additional Forfeiture Provisions.



 



    (a)  Forfeiture of Option and Gains Realized Upon
    Prior Exercises.  The Option is subject to
    the following additional forfeiture conditions, to which
    Grantee, by accepting the Option, agrees. If any of the events
    specified in Section 3(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:




    

    4








 






    (i)  Any unexercised portion of the Option, 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 product of
    (A) 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 (B) 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 3(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 3(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 consequences hereunder if
    Grantee engages in an activity giving rise to any such
    Forfeiture Event are the forfeitures specified in
    Section 3(a).



 



    (c)  Monitoring
    Compliance.  In order to allow the
    Corporation to monitor Grantee’s compliance with the
    conditions imposed under this Section 3, 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.



 



    4. 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.




    

    5








 






    (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.



 



    (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 or retained authority of the Corporation
    would result in Grantee’s constructive receipt of income
    relating to the Option prior to Grantee’s actual exercise
    of the Option, such rights or elections or retained authority of
    the Corporation 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
    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, if it materially impairs the rights of Grantee,
    by Grantee. The foregoing notwithstanding, equitable adjustments
    to the Options under Section 4(c), including those
    resulting from a transaction in which the Corporation’s
    Common Stock is no longer publicly traded, and changes that
    affect only




    

    6








 






    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




    

    7