exv10w42







 




    Exhibit
    10.42



 




    Chief
    Executive Officer Special Performance Award




    Opportunity —
    Parameter Document






 




    Purpose



 



    The Compensation and Human Resources Committee (CHRC) and other
    non-employee members of the Board of Directors (Outside
    Directors) of Freddie Mac approved the establishment of a
    special, one-time cash performance award opportunity for its
    Chief Executive Officer, Richard Syron. The award opportunity
    was designed to provide additional incentive and recognition for
    the completion of key tasks over the 29 month-period
    starting June 1, 2007 through September 30, 2009.
    These key tasks are beyond the performance measures established
    by the 2007 Scorecard used for the corporate annual incentive
    plan. This award is consistent with our pay-for-performance
    philosophy, which requires the demonstration and evaluation of
    performance prior to payment.



 




    Timing of
    Award



 



    This award will be based on performance over the
    29-month
    period starting June 1, 2007 through September 30,
    2009. The performance determination will be approved by the CHRC
    at a meeting in the third quarter of 2009 after considering the
    views of the Outside Directors. The actual payment, if any, will
    be made as soon as administratively practicable following the
    determination of performance (see below) but no later than
    October 31, 2009.



 




    Main
    Design Provisions



 



    The maximum award is $6,000,000 and the specific award amount
    will be determined by the CHRC, in its sole discretion, based on
    a reasonable relationship to the number and relative
    significance
    and/or
    strategic value of “Performance Milestones” (described
    below) that the Company achieves either in whole or part. In
    determining the award amount, the CHRC shall obtain and consider
    the view of the Outside Directors. The CHRC will also consider
    Mr. Syron’s actual compensation under Freddie
    Mac’s standard annual compensation program during the
    performance period, and how it compares to the compensation of
    Chief Executive Officers in the Comparator Group.



 



    The amount of the actual award will range from $0 to
    $6 million, with no guarantee that any payment will be made.



 


	 	 	 	 	 
	
 
	
 
	
    Award Size

    
	
 
	
 

	

    Payout Level


	
 
	
    as % of Target
	
 
	
    Description

	 

	

    Minimum


	
 
	
    0%
	
 
	
    No milestones achieved

	
 
	
 
	
    1% - 99%
	
 
	
    Some, but not all milestones are achieved in whole or part as
    described above.

	

    Maximum


	
 
	
    100%
	
 
	
    All milestones achieved










    

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    Performance
    Milestones



 



    The performance milestones which shall be measured from June
    2007 through September 2009 are:



 



    (Note: Information/data listed in parentheses following
    certain measures are the type of information, both objective and
    subjective, which the CHRC will take into consideration in
    determining whether the milestone has been achieved.)



 



    • Remediate all material weaknesses and significant
    deficiencies disclosed in 2006 annual report dated
    March 23, 2007.



 



    • Return to timely and sustainable financial reporting
    with the expectation that we will achieve Sox 404(a)
    compliance (with the issuance of our 2009 financial statements
    and substantial completion of each element of the Comprehensive
    Plan listed in the material presented to the Governance,
    Nominating and Risk Oversight Committee on September 6,
    2007).



 



    • Make material improvements in the information
    technology infrastructure. (Sustained and reliable operation of
    IT General Controls, remediation of all technology-related
    material weaknesses and significant deficiencies, consistent
    application of SDLC, progress on the development of mortgage
    conduit for distributing credit risk exceeding the
    company’s risk profile, completion of systems work
    necessary to support SEC registrant reporting, timely completion
    of major system projects as reported from time to time to the
    Mission, Sourcing and Technology Committee, improving ability of
    legacy systems to interface easily with external, third-party IT
    solutions.)



 



    • Complete SEC registration and become an SEC
    reporting company.



 



    • Manage a smooth Chief Executive Officer succession
    process. (Quality of the CEO search process, speed and success
    of integrating the new CEO into the company’s management
    team, success in transitioning day-to-day business operations
    responsibilities to the new CEO.)



 



    • Substantially enhance the leadership strength of
    Freddie Mac’s executive team and the Board. Enhance the
    level of alignment and collaboration within both Freddie
    Mac’s executive team and the Board. (Increase in ready-now
    candidates for
    Tier 1-3
    critical succession roles, increase success in filling critical
    succession roles with internal candidates, increase
    representation of minority and female officers, success
    expanding key experience/competency needs when new Board members
    are selected.)



 



    • Position the company to be more proactive in its
    ability to identify and respond to new Mission needs and capital
    market changes and execute on those opportunities that enhance
    our housing mission and long-term shareholder value. (Success
    aligning the company’s efforts to improve its financial
    performance consistent with our mission, success helping shape
    the new affordable housing goals to focus on delivering housing
    opportunity directly to our Mission constituents, success
    developing and delivering to




    

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    market viable, non-predatory sub-prime loan products, providing
    liquidity, affordability and stability to residential mortgage
    markets.)



 



    • Demonstrate substantial progress toward imbedding a
    pay-for-performance culture. (Increasing the level of bonus
    differentiation versus 2005 results, maintaining an appropriate
    distribution of performance ratings that aligns with business
    performance, maintaining bonus payouts linked directly to actual
    performance against annual Scorecard, utilizing performance
    features in multiple elements of the pay structure for executive
    officers.)



 



    • Demonstrate substantial progress in managing the
    company within the current and future legislative and regulatory
    framework. (Informing regulators, Congress and industry groups
    on the impact of proposed legislative and regulatory actions on
    the GSEs and providing constructive solutions to respond to
    legislative and regulatory changes and concerns; addressing
    concerns raised by Congress, regulators and industry groups
    regarding how GSEs fulfill their mission as well as concerns
    regarding potential safety and soundness issues; achieving
    compliance with the rules and standards under which the GSEs
    will operate.)



 



    • Achieve meaningful enhancement of shareholder
    economic value. (Determining appropriate metrics to measure fair
    value; year-over-year adjusted GAAP results; return on capital;
    changes in market share; credit performance; quality and
    effectiveness of profitability measures.)



 



    The accomplishment of most or all of these milestones would
    result in a dramatic transformation of the company as compared
    to its position in late 2003, when Mr. Syron assumed
    leadership.



 



    The Compensation and Human Resources Committee of the Board is
    responsible to exercise its judgment at the end of the
    performance period in a responsible and deliberate fashion to
    assess all relevant information, including the information
    outlined above, to determine the extent to which the performance
    milestones have been achieved in whole or part (as defined
    above), in deciding what amount, if any, of the award
    opportunity should be paid.



 




    Form of
    Award



 



    The award will be paid in cash.



 




    Termination
    Provisions



 



    This is a special award intended to recognize the achievement of
    specific performance criteria prior to September 30, 2009.
    Freddie Mac’s normal plan termination provisions do not
    apply to this opportunity. In the event of death, disability or
    involuntary termination by Freddie Mac without cause or
    termination by Mr. Syron for Good Reason (as such term is
    defined in Mr. Syron’s Employment Agreement), the
    entire award will be forfeited unless the CHRC, in its sole
    discretion, determines that some or all of the performance
    milestones had been achieved prior to the event of death,
    disability, or involuntary termination by Freddie Mac without
    cause or termination by Mr. Syron for Good Reason. In
    determining whether




    

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    any of the performance milestones were achieved, the CHRC shall
    obtain and consider the view of the Outside Directors. In the
    event of termination by Freddie Mac for cause or voluntary
    termination by Mr. Syron other than for Good Reason, the
    entire award will be forfeited.



 




    Additional
    Design Features



 



    The award will not be considered “earnings” or
    “base salary” for purposes of any bonus or short-term
    incentive program calculations or for calculating any qualified
    or nonqualified retirement or retirement-related benefit
    provided by Freddie Mac. The award is subject to the conditions
    outlined in the Amendment to the Employment Agreement between
    Federal Home Loan Mortgage Corporation and Richard F. Syron
    dated December 6, 2003.



 



    The award will not be eligible for a deferral opportunity.




    

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