Fannie Mae 2006 Annual Report Download - page 211

2006, he would have been entitled to receive an aggregate cash severance payment of $750,000 and medical,
long-term disability and life insurance coverage with premiums and a related gross-up payment we estimate
would have cost us an aggregate of approximately $71,500.
Severance Program
On March 10, 2005, our Board of Directors approved a severance program that provided guidelines regarding
the severance benefits that management-level employees, including all of the named executives except for
Mr. Mudd, were entitled to receive if their employment with us was terminated as a result of corporate
restructuring, reorganization, consolidation, staff reduction, or other similar circumstances, where there were
no performance-related issues, and where termination was not for cause. Ms. St. John participated in the
severance program. The severance program expired on December 31, 2006 and was replaced with a program
that does not apply to our named executives or other executive officers. As effective for 2006, the severance
program provided for the following benefits, subject to OFHEO approval, for named executives (other than
Mr. Mudd):
• A severance payment of one year’s salary plus four weeks’ salary for each year of service with us up to a
maximum of one and a half years’ salary;
• For participants terminated after the first quarter of the fiscal year, a pro rata payout of the participant’s
annual cash incentive award target for the year in which termination occurred, adjusted for corporate
performance;
• Consistent with the terms of our applicable stock compensation plan, accelerated vesting of options that
were scheduled to vest within 12 months of termination and the extension of option exercise periods to
the earlier of the option expiration date or 12 months following the termination of employment;
• Accelerated vesting of restricted stock and restricted stock unit awards granted under our Stock
Compensation Plan of 2003 that would have otherwise vested within 12 months of termination;
• For the cash portion of long-term incentive awards for the 2005 performance year, which are payable in
four equal annual installments beginning in 2007, accelerated payment of the amount that would have
otherwise become payable within 12 months of termination; and
• Payment of unpaid performance shares for completed performance cycles.
The program was available only to employees who had served at least 13 weeks. Participants were required to
execute a separation agreement to receive these benefits containing, where permitted, a one-year non-compete
clause and also containing a waiver of claims against us. Participants found violating the competition
restriction would be required to return any severance payments that they received. The program also provided
for outplacement services and continued access to our medical and dental plans for up to five years, with the
first 18 months’ premiums to remain at a level no higher than they would be if the participant were still an
active employee.
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