Fannie Mae 2004 Annual Report Download - page 232

in his agreement or a voluntary termination to accept an appointment to a senior position in the
U.S. federal government), he would be entitled only to accrued but unpaid base salary plus such vested
benefits or awards, if any, which have vested prior to such date; provided, however, that if he is
terminated for “Cause,” he would not be entitled to any amounts payable (but unpaid) of any bonus or
under any performance share award with respect to a performance cycle if the reason for such termination
for “Cause” is substantially related to the earning of such bonus or to the performance over the
performance cycle upon which the payment was based.
Mr. Mudd’s employment agreement defines “Good Reason” as any of the following circumstances that remains
uncured after 30 days notice: (a) a material reduction of his authority or a material change in his functions,
duties or responsibilities that in any material way would cause his position to become less important, (b) a
reduction in his base salary, (c) a requirement that he report to anyone other than the Chairman of the Board
of Directors, (d) a requirement that he relocate his office outside of the Washington, DC area, or (e) our
breach of any material obligation we have under the agreement. Under the agreement, we would have “Cause”
if Mr. Mudd (A) materially harmed us by, in connection with his service under his employment agreement,
engaging in dishonest or fraudulent actions or willful misconduct, or performing his duties in a grossly
negligent manner, or (B) were convicted of, or pleaded nolo contendere with respect to, a felony. The
agreement further provides that no act or failure to act will be considered “willful” unless it is done, or
omitted to be done, in bad faith or without reasonable belief that the action or omission was in our best
interests.
Mr. Mudd’s employment agreement also obligates him not to compete with us in the United States, solicit any
officer or employee of ours or our affiliates to terminate his or her relationship with us or to engage in
prohibited competition, or to assist others to engage in activities in which Mr. Mudd would be prohibited from
engaging, in each case for two years following termination. Mr. Mudd’s employment agreement provides us
with the right to seek and obtain injunctive relief from a court of competent jurisdiction to restrain Mr. Mudd
from any actual or threatened breach of the obligations described in the preceding sentence. Disputes arising
under the employment agreement are to be resolved through arbitration, and we bear Mr. Mudd’s legal
expenses unless he does not prevail.
Agreement with Robert Levin, Executive Vice President and Chief Business Officer
We have a letter agreement with Mr. Levin, dated June 19, 1990. That agreement provides that if he is
terminated for reasons other than for “cause,” he will continue to receive his base salary for a period of
12 months from the date of termination and will continue to be covered by our life, medical, and long-term
disability insurance plans for a 12-month period, or until re-employment that provides certain coverage for
benefits, whichever occurs first. For the purpose of this agreement, “cause” means a termination based upon
reasonable evidence that Mr. Levin has breached his duties as an officer by engaging in dishonest or fraudulent
actions or willful misconduct. Any disability benefits that he receives during the 12-month period will reduce
the amount otherwise payable by us, but only to the extent the benefits are attributable to payments made by
us. A description of this letter agreement was included in a Form 8-K we filed on December 27, 2004.
Employment Agreement with Franklin Raines, Former Chairman and Chief Executive Officer
In May 2004, we entered into a new employment agreement with Franklin Raines, our former Chairman and
Chief Executive Officer, as amended in June and again in September 2004. OFHEO approved the termination
benefits in Mr. Raines’ agreement and notified us of this approval on November 17, 2004.
On December 21, 2004, Mr. Raines tendered his resignation and ceased performing his duties as Chairman
and Chief Executive Officer. We described Mr. Raines’ agreement and his compensation upon termination in
our December 27, 2005 Form 8-K and in a Form 8-K we filed on November 14, 2006. On December 23,
2004, we received a letter from OFHEO informing us that OFHEO would review Mr. Raines’ termination
benefits and requesting information regarding those benefits. OFHEO indicated that, among other matters, it
was concerned with whether, at the time of termination, there had been enhancements or modifications to
benefits since the termination package was agreed upon. OFHEO also stated in the December 23 letter that we
should not pay any termination benefits to Mr. Raines until OFHEO completed its review of the termination
227