exv10w5










 




    Exhibit 10.5



 




    2009
    LONG-TERM INCENTIVE AWARD

    Parameters Document



 


			
	
    Objective 		
    The long-term incentive deferred cash award (LTI) is intended to
    provide a “forward looking” incentive award to
    eligible officers and directors.
	 
	
    Grant Date 		
    March 16, 2009
	 
	
    Performance Period 		
    LTI awards granted in March 2009 with performance measures
    covering the 2009 and 2010 performance period.
	 
	
    General Eligibility 		
    An employee who, as of the LTI grant date, is classified by
    Freddie Mac (in its sole discretion) as either (i) an
    active, full-time or part-time officer or director, or an
    officer or director on short term disability and/or approved
    leaves of absence or (ii) is classified by Freddie Mac as a
    LTI eligible non-officer in a market-priced position. However,
    Senior Vice Presidents, Executive Vice Presidents, and the Chief
    Executive Officer are not eligible to participate in this
    program until such time as Freddie Mac has additional guidance
    from the Federal Housing Finance Agency on the application of
    recent announcements by the U.S. Department of Treasury, as well
    the American Recovery and Reinvestment Act’s restrictions
    on executive compensation.
	 
	
    Aggregate Corporate LTI

    Pool 		
    The corporate-wide aggregate value of the LTI grants is equal to
    the sum of annualized LTI targets of employees eligible to
    participate in the LTI program. Each Division’s share of
    the corporate-wide pool is equal to the aggregate value of its
    eligible employees’ LTI targets as a percentage of the
    corporate LTI pool, less the aggregate value of the LTI targets
    for Division employees who are direct reports to the Chief
    Executive Officer, subject to any adjustment in the allocation
    by the Chief Executive Officer.
	 
	
    Individual LTI Targets 		
    Officers: LTI target is the employee’s target in
    effect on the date that the grant is approved.
	 
	
		
    Directors: For non-market priced director-level
    employees, the LTI target is the LTI target applicable to the
    position’s salary grade. For LTI eligible employees in a
    market priced position, the LTI target generally is the salary
    grade target that is closest to the median of the Estimated
    Market
    Distribution1

    of such position, subject to the protocol established by the
    Human Resources Division for market-priced positions LTI
    eligibility and targets.
	 
	
    LTI Grant Amount 		
    For LTI awards granted in 2009, an eligible employee’s
    grant shall be equal to their LTI target, except (a) an
    employee who receives a Business Results Rating (BRR) of 1 is
    not eligible to receive a LTI grant and an employee who receives
    a BRR of 2 may, subject to the Division Head’s
    approval, receive a LTI grant, which in most instances will be
    substantially below their target, and (b) no more than 5%
    of the participants can receive between 100% and 150% of their
    LTI target but in no event can the aggregate amount exceed the
    Aggregate Corporate LTI Pool approved by the Compensation
    Committee.
	 
	
    Vesting and Payment

    Amount 		
    Management shall provide a recommendation to the Compensation
    Committee of Freddie Mac’s Board of Directors regarding the
    level of achievement of the performance
    measure(s)
    described in Exhibit A (the “Performance
    Multiplier”) prior



 








    1 Estimated

    Market Distribution (EMD) is a range of market compensation
    (base salary and bonus) unique to each job and is based on data
    representing the median pay practice for a similar role in the
    comparative markets.




    

    Page 1 of 3








 





			
	
		
    to the first and the second anniversary of the grant date and,
    except as set forth below under “Treatment of Award Upon
    Termination,” upon the Compensation Committee’s
    approval an employee’s right to payment of that portion of
    the LTI award shall vest.
	 
	
		
    Based on Performance Multiplier, the LTI actual dollar amount of
    the LTI grant paid can range from 0% – 120% of
    the grant as determined on each of the
    1st and

    2nd

    anniversary of the grant date.
	 
	
		
    Performance
    Measure(s)
    and Performance Multiplier — See Exhibit A.
	 
	
    Payment Timing 		
    Any award to be paid shall be paid as soon as administratively
    practicable, but no later than March 15 of the calendar year
    following each calendar year performance period.
	 
	
    Form of Payout 		
    Cash less applicable withholding.
	 
	
    Treatment of Award

    Upon Termination 		
    Death and Long-Term Disability: If an employee’s
    employment is terminated due to either death or long-term
    disability, any vested but unpaid portion of the LTI award will
    be paid as soon as administratively possible. The amount paid
    will be based on the Performance Multiplier.
	 
	
		
    Any unvested portion of the LTI award will remain outstanding
    until the Compensation Committee approves the Performance
    Multiplier. Upon such approval, the employee’s right to
    receive any such award shall vest and the unpaid portion of the
    LTI award will be paid as soon as administratively possible. The
    amount paid will be based the Performance Multiplier.
	 
	
		
    Retirement: If an employee terminates employment due to
    retirement (either (i) age/years of service of 62/5 or
    (ii) sum of age and years of service equal no less than 70,
    with minimum age of 55) any vested but unpaid portion of
    the LTI award will be paid as soon as administratively possible.
    The amount paid will be based on the Performance Multiplier.
	 
	
		
    Any unvested portion of the LTI award will remain outstanding
    until the Compensation Committee approves the Performance
    Multiplier. Upon such approval, the employee’s right to
    receive a pro-rata payment shall vest. The pro rata payment
    shall be based on the following methodology:
	 
	
		
    Step 1. The number of whole months worked in the performance
    year
	 
	
		
    Step 2. Divided by twelve
	 
	
		
    Step 3. Multiplied by the employee’s portion of LTI
    grant scheduled to vest and be paid for that performance year
    and the Performance Multiplier
	 
	
		
    Other Terminations: If an employee’s employment
    terminates for any reason other than Death, Long-Term
    Disability, or Retirement, any unvested portion of the award
    will be forfeited.
	 
	
    Additional Forfeiture

    Provision 		
    Upon a “Forfeiture Event” (as defined below), any
    unvested or any unpaid LTI award will be cancelled and the
    employee or former employee will be required to immediately
    repay Freddie Mac the gross value of any LTI award payment that
    was made within 12 months prior to the Forfeiture Event




    

    Page 2 of 3








 





			
	
		
    A Forfeiture Event shall mean the employee or former employee
    directly or indirectly seeking or accepting employment with, or
    providing professional services to, a “Competitor” in
    violation of any non-competition covenant agreement between the
    employee and Freddie Mac in effect as of the date the employee
    receives an LTI grant.
	 
	
    Regulatory Approval and

    Reservation of Rights 		
    Notwithstanding the terms set forth above, with respect to
    certain designated officers Freddie Mac’s Conservator is
    required to approve the actual payment of compensation,
    including payment of this LTI grant. As a consequence, such
    officer’s right to payment of the LTI grant set forth
    herein is conditioned on the Conservator’s approval after
    Compensation Committee’s determination of the Performance
    Multiplier.
	 
	
		
    Amounts paid pursuant to this plan will not be considered
    compensation for purposes of the tax qualified
    Thrift/401(k)
    Savings Plan, the tax qualified Employees’ Pension Plan and
    the non-qualified Supplemental Executive Retirement Plan.
	 
	
		
    Nothing in this program is intended to create a contract to
    employ any employee for any particular term or period of time or
    otherwise abrogate Freddie Mac’s or the employee’s
    right to terminate the employment relationship at any time for
    any lawful reason.
	 
	
		
    Freddie Mac reserves the right to modify the terms and
    conditions set forth herein so long as such modifications
    reasonably and in good faith are not detrimental to the rights
    of the grantee.
	 
	
		
    The terms of this plan are subject to and shall be construed in
    accordance with applicable law and any regulation, guidance or
    interpretation issued by the Federal Housing Finance Agency or
    the U.S. Department of Treasury.




    

    Page 3 of 3








 











 




    Exhibit A:



 




    2009
    Long-Term Incentive Award Performance Measures and Performance
    Multiplier



 




    Performance
    Measures



 



    Corporate Performance Measures: Freddie Mac’s
    ability to remediate the subset of the ninety-seven matters
    requiring attention or other concerns identified at the
    Conservatorship date by the Federal Housing Finance Agency
    (FHFA) (together, “MRAs”) planned for 2009 or earlier
    completion will determine the LTI value that is ultimately
    delivered to recipients of the 2009 LTI grant (which will be
    granted in March 2009). The LTI grant is scheduled to vest 50%
    on each of the first and second anniversaries of the grant date.
    The value that a participant ultimately receives at each vest
    date is calibrated based on Freddie Mac’s performance
    against the performance objectives for each vesting cycle
    (identified below). This calibration is applied consistently to
    all employees (regardless of level) who receive an LTI grant.



 



    Business Infrastructure Performance
    Measures: In addition to the Corporate
    Performance Measures, all LTI participants will have performance
    measures based on successful completion of the 2010 Technology
    and Business Operation milestones presented to the relevant
    committee of Freddie Mac’s Board of Directors that support
    the implementation of the Technology and Single Family Strategic
    Initiative (hereinafter called “Advantage”).



 




    Performance
    Calibration for 1st LTI Vesting — Portion Scheduled to
    Vest in March 2010



 



    Corporate Performance Measures:  Based on the
    company’s remediation of MRAs that are scheduled to be
    remediated prior to January 1, 2010. The LTI grant date
    value that actually vests and is paid can range from
    0% – 120% (i.e., the Corporate Performance
    Measure Multiplier) as illustrated in Chart A.



 



    The Corporate Performance Measure Multiplier is applied
    consistently to all employees (regardless of level) who are
    recipients of the 2009 LTI grant. Once an assessment of
    performance is made, it applies to 100% of the LTI grant date
    value (i.e., the portion scheduled to vest and be paid in
    March 2010). Each of the MRAs scheduled to be remediated
    prior to January 1, 2010 has been classified into one of
    five categories and each category has been assigned a
    weighting/prioritization percentage (Column A), with the
    sum of all categories equaling 120%.



 



    The maximum Corporate Performance Measure Multiplier is equal to
    the sum of the Performance Multiplier Contribution Percentage
    for each MRA category (Column C), which is equal to the
    actual percentage of MRAs remediated prior to January 1,
    2010 that were scheduled to be remediated prior to
    January 1, 2010 (Column B) multiplied by the
    category’s weighting/prioritization percentage
    (Column A).



 



    As part of their assessment of performance, the Compensation
    Committee of the Freddie Mac Board of Directors reserves the
    right to adjust the Performance Multiplier Contribution
    Percentage upward for any category (to a maximum of the
    category’s weighting/prioritization percentage) based on a
    review of factors they deem appropriate, which may include
    completion status of MRAs that are not remediated, progress made
    toward remediating MRAs, scope/difficulty of remediating MRAs,
    and internal/external factors influencing the remediation of
    MRAs.




    

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    Chart A: 2009 Corporate
    Performance Measures

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
    (A)
	
 
	
 
	
    (B)
	
 
	
 
	
    (C) = (A) x (B)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Matters Requiring Attention

    Categories
	
 
	
 
	
    Category

    Weighting/

    Prioritization
	
 
	
 
	
    Multiplied by:

    Percentage of Matters Requiring Attention

    remediated prior to January 1, 2010 that were

    scheduled to be remediated prior to

    January 1, 2010
	
 
	
 
	
    Equals:

    Performance Multiplier

    Contribution Percentage

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Credit Risk Management and

    Governance/Loan Loss Reserves
	
 
	
 
	
    35%
	
 
	
 
	
    X%

    (To Be Determined)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Internal Controls (including End-To-End,

    Internal Audit, Contingency Planning)
	
 
	
 
	
    25%
	
 
	
 
	
    X%

    (To Be Determined)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Models and Model Governance
	
 
	
 
	
    20%
	
 
	
 
	
    X%

    (To Be Determined)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Accounting/Accounting

    Policy/Forecasting
	
 
	
 
	
    20%
	
 
	
 
	
    X%

    (To Be Determined)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Board Governance and Others
	
 
	
 
	
    20%
	
 
	
 
	
    X%

    (To Be Determined)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Total:

    Percentage of the 2009 LTI grant date value scheduled to vest in
    March 2010 that actually vests and is paid (Maximum Performance
    Multiplier of 120%)
	
 
	
 
	
    X%

    (To Be Determined)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 











 



    No payment will be made if the sum of the Performance Multiplier
    Contribution Percentages is less than 50%.



 




    Performance
    Calibration for 2nd LTI Vesting — Portion Scheduled to
    Vest in March 2011:



 



    Business Infrastructure Performance Measures:
    Based on the company’s successful completion of the 2010
    Advantage milestones presented to the relevant committee of
    Freddie Mac’s Board of Directors. The LTI grant date value
    that actually vests and is paid can range from
    0% – 120% (i.e., the Business Infrastructure
    Performance Measure Multiplier), based on achievement against
    milestones that will be presented to the relevant committee of
    Freddie Mac’s Board of Directors.



 



    The Business Infrastructure Performance Measure Multiplier is
    applied consistently to all employees (regardless of level) who
    are recipients of the 2009 LTI grant. No payment will be made if
    the Business Infrastructure Performance Measure Multiplier is
    less than 50%.



 



    Once an assessment of performance is made, it applies to 75% of
    the LTI award scheduled to vest and be paid in March 2011. The
    other 25% of the LTI award scheduled to vest and be paid in
    March 2011 will be based on the Corporate Performance Measure.
    Successful completion of the Business Infrastructure Performance
    Measures is not a prerequisite for vesting and payment of the
    portion of the LTI grant date value calibrated against the
    Corporate Performance Measures, and vice versa.




    

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    Corporate Performance Measures: Based on
    (i) the company’s remediation of MRAs that that are
    scheduled to be remediated in 2010 and (ii) avoidance of
    any repeat MRAs that are identical to MRAs that were remediated
    in 2009. The LTI value can range from 0% – 120%
    (i.e., the Corporate Performance Measure Multiplier), as
    illustrated in Chart B.



 



    The Corporate Performance Measure Multiplier is applied
    consistently to all employees (regardless of level) who are
    recipients of the 2009 LTI grant. Once an assessment of
    performance is made, it applies to the 25% of the LTI award
    scheduled to vest and be paid in March 2011.



 



    For the 2010 performance period, the Compensation Committee of
    the Freddie Mac’s Board of Directors reserves the right to
    include an additional Corporate Performance Measure pertaining
    to the company’s financial performance.



 


 


	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Chart B: 2010 Corporate
    Performance Measures

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Performance Level
	
 
	
 
	
    Below Threshold
	
 
	
 
	
    Threshold
	
 
	
 
	
    Below Plan
	
 
	
 
	
    On Plan
	
 
	
 
	
    Above Plan

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Percentage of Matters Requiring Attention

    remediated during 2010 that were scheduled to

    be remediated during 2010
	
 
	
 
	
    Less than 70%
	
 
	
 
	
    70%
	
 
	
 
	
    80%
	
 
	
 
	
    90%
	
 
	
 
	
    100%

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Equals:

    MRA Performance Multiplier
	
 
	
 
	
    0%
	
 
	
 
	
    50%
	
 
	
 
	
    75%
	
 
	
 
	
    100%
	
 
	
 
	
    120%

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Less:

    Repeat Identical Matters Requiring Attention

    Identified
	
 
	
 
	
    10% reduction for each Repeat Identical Matters Requiring
    Attention Identified

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Equals:

    Performance Multiplier (final) — Percentage of the

    2009 LTI award scheduled to vest in March 2011

    that actually vests and is paid.
	
 
	
 
	
    xx%

    To Be

    Determined
	
 
	
 
	
    xx%

    To Be

    Determined
	
 
	
 
	
    xx%

    To Be

    Determined
	
 
	
 
	
    xx%

    To Be

    Determined
	
 
	
 
	
    xx%

    To Be

    Determined

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 











 



    No payment will be made if either the Performance Multiplier
    (final) is less than 50% or there are more than
    five Repeat Identical Matters Requiring Attention.



 



    In the likely event that actual performance results in a value
    that is between two Performance Levels (e.g., greater than On
    Plan, but less than Above Plan), linear interpolation will be
    used to determine the appropriate Performance Multiplier.
    Specifically, a calculation will be performed to determine how
    far above or below (expressed in percentage terms) our actual
    performance is from the closest Performance Level. This
    percentage will then be used to adjust (either up or down) the
    Performance Multiplier of the closest Performance Level, which
    will result in the actual Performance Multiplier used to
    determine the LTI value delivered to LTI recipients.




    

    Page 3 of 3








 








 




    Exhibit B:



 




    2009
    Long-Term Incentive Award Grant Terms and Definitions



 




    General



 


			
	 	    1. 
	
    Matters Requiring Attention (“MRAs”) —
    The ninety-seven (97) control, accounting, and
    operational deficiencies identified by the Federal Housing
    Finance Agency (“FHFA”) at the time of Conservatorship
    as Matters Requiring Attention and other safety and soundness
    concerns as set forth in the FHFA’s 2008 draft mid-year
    examination letter.




 


			
	 	    • 
	
    As a result of a clarification process between Freddie Mac and
    FHFA, the total number of MRAs may change.




 


			
	 	    • 
	
    Items from the draft mid-year letter that lack clarity or
    specificity may be clarified by FHFA. This may result in a
    one-for-one substitution, in which case the number in the
    denominator of the performance level calculation will remain
    unchanged as well as the maximum number in the numerator.
    However, this may result in a substitution that is not
    one-for-one, in which case the number in the denominator of the
    performance level calculation as well as the maximum number in
    the numerator would change (up or down as the case may be).

	 
	 	    • 
	
    Items from the draft mid-year letter that reference issues
    related to an examination in process for which a conclusion
    letter with specific MRAs has not yet been issued may be
    substituted for the final MRAs documented in the exam conclusion
    letter. This may result in a one-for-one substitution, in which
    case the number in the denominator of the performance level
    calculation will remain unchanged as well as the maximum number
    in the numerator. However, this may result in a substitution
    that is not one-for-one, in which case the number in the
    denominator of the performance level calculation as well as the
    maximum number in the numerator would change (up or down as the
    case may be).




 


			
	 	    • 
	
    At some point during 2009 or 2010, FHFA may identify one or more
    new MRAs which were not identified at the time of
    Conservatorship. Freddie Mac and FHFA may agree that a newly
    identified MRA that has been defined and scoped in writing has a
    higher priority than one or more of the ninety-seven MRAs
    identified at the time of Conservatorship. If this is the case,
    the newly identified MRA will be added to the number of MRAs
    planned for remediation either prior to January 1, 2010 or
    prior to January 1, 2011 if Freddie Mac agrees that it can
    add the new MRA and still complete the original ninety-seven
    MRAs. However, Freddie Mac has the ability to reschedule the
    remediation date of an original MRA from prior to
    January 1, 2010 to prior to January 1, 2011 in order
    to accommodate remediation of new, higher priority MRAs.




 



    Value Ranking/Weighting of MRAs — While each of
    these ninety-seven MRAs is important, a weighting/prioritization
    framework is outlined in the “Performance Calibration for
    1st LTI Vesting.” This weighting/prioritization
    framework does not require that MRAs must be remediated in any
    particular order. Further, the Compensation Committee, in
    exercising its oversight of management’s authority in
    determining MRA completion under this framework, will place
    primary emphasis on relative criticality and impact of MRAs
    remediated, not simply the number of MRAs remediated.



 


			
	 	    2. 
	
    Remediation Determination — Remediation of an
    MRA is deemed to occur and be successful if:




 


			
	 	    • 
	
    Remediation was the result of Conservatorship;

	 
	 	    • 
	
    Determination by FHFA that an item was not a deficiency after
    all; or,

	 
	 	    • 
	
    Remediation actions have been completed by the deficiency owner,
    validated by Internal Audit, as appropriate, and communicated to
    FHFA (remediation does not require a formal closure letter or
    other response from FHFA).





    

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    Performance
    Calibration for Portion Scheduled to Vest in March
    2010:



 


			
	 	    1. 
	
    MRAs scheduled to be remediated prior to January 1,
    2010 — The subset of the MRAs scheduled to be
    remediated any time prior to January 1, 2010.




 


			
	 	    • 
	
    An MRA originally scheduled to be remediated prior to
    January 1, 2010, may be changed to a remediation date
    during 2010, but such a change would need to be reviewed by FHFA
    (with no objection) and approved by the Remediation Committee.
    If such a change is made, the MRA will not be included in the
    performance calibration for the LTI portion scheduled to vest in
    March 2010.




 


			
	 	    2. 
	
    Remediation Completion Timing — Remediation of
    an item scheduled to be completed prior to January 1, 2010
    is deemed to be successful if remediation was achieved prior to
    January 1, 2010, regardless of the date it was achieved
    (i.e., even if it was completed after the originally planned
    completion date).




 




    Performance
    Calibration for Portion Scheduled to Vest in March
    2011:



 


			
	 	    1. 
	
    MRAs scheduled to be remediated during 2010 —
    The subset of the MRAs scheduled to be remediated during
    2010.




 


			
	 	    • 
	
    An MRA scheduled to be remediated during 2010, may be changed to
    a remediation date prior to January 1, 2010, but such a
    change would need to be reviewed by FHFA (with no objection) and
    approved by the Remediation Committee. If such a change is made,
    the MRA will not be included in the performance calibration for
    the LTI portion scheduled to vest in March 2011.




 


			
	 	    2. 
	
    Repeat Identical Matters Requiring Attention —
    Any MRA scheduled to be remediated prior to January 1,
    2010 (that was actually remediated), but that identical MRA is
    identified by the Remediation Committee or FHFA as a control,
    accounting, and operational deficiency during calendar year 2010.





    

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