Fannie Mae 2005 Annual Report Download - page 211

Estimated Annual Pension Benefits
Estimated annual benefits payable under our combined plans upon retirement for each of the covered
executives, assuming full vesting at age 60 and that our corporate performance caused Mr. Mudd’s other
taxable compensation to equal or exceed 100% of his annual base salary and other participants’ other taxable
compensation to equal or exceed 50% of annual base salary, were as follows as of December 31, 2005:
Mr. Mudd (50% pension benefit), $950,000; Mr. Levin (40% pension benefit), $450,000; Mr. Williams (40%
pension benefit), $390,000; Mr. Niculescu (40% pension benefit), $310,034; Mr. Lund (40% pension benefit),
$283,200.
Employment Arrangements and Other Agreements with Our Covered Executives
The employment contracts, termination of employment and change-in-control arrangements that are currently
in place for our covered executives are described below.
Severance Program
On March 10, 2005, our Board of Directors approved a severance program that provides guidelines regarding
the severance benefits that management level employees, including executive officers, may receive if their
employment with us is terminated as a result of corporate restructuring, reorganization, consolidation, staff
reduction, or other similar circumstances, and only where there are no performance related issues, and the
termination has not been for cause. The program, which we described in a Form 8-K filed with the SEC on
March 11, 2005, expired on December 31, 2006 and was replaced with a program that does not apply to our
executive officers. Eligible participants in the 2005-2006 program received a severance payment of one year’s
salary plus two to four weeks’ salary (three to four weeks’ salary in the case of executive officers) for each
year of service with us up to a maximum of one and a half years’ salary. Participants terminated after the first
quarter of the fiscal year received a pro rata payout of their annual cash incentive award target for that year,
adjusted for corporate performance. Consistent with the terms of our stock compensation plans, the vesting of
options scheduled to vest within 12 months of termination was accelerated and the post-termination exercise
period of options was extended to the earlier of the option expiration date or 12 months following the
termination of employment. Restricted stock and restricted stock unit awards granted under the Stock
Compensation Plan of 2003 and vesting within 12 months of termination were subject to accelerated vesting,
and unpaid performance shares for completed cycles were paid out. As provided under the terms of our stock
compensation plans, participants in the severance program who attained a certain age and service received
additional accelerated vesting of their restricted stock and restricted stock units and options, in addition to the
full option exercise period. Participants were required to execute a separation agreement to receive these
benefits containing, where permitted, a one-year non-compete clause. 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. Employee eligibility for the program was determined by the Chairman of the Board, our Chief
Executive Officer, or a designee of either. In addition, OFHEO’s approval was required prior to the program
being offered to any OFHEO-designated executive officer.
Employment Agreement with Daniel Mudd, President and Chief Executive Officer
On November 15, 2005, we entered into a new employment agreement with Mr. Mudd, effective June 1, 2005
when he was appointed our President and Chief Executive Officer. We described this agreement in a Form 8-K
filed on November 15, 2005. The major terms of the agreement are as follows:
•Employment Term. Through December 31, 2009.
•Base Salary. Mr. Mudd’s annual base salary will be no lower than $950,000. This base salary is subject
to periodic review and possible increases, but not decreases, by the Board of Directors. Compensation
arrangements for Mr. Mudd are determined annually by the Board of Directors (excluding Mr. Mudd and
any other non-independent members of the Board) upon the recommendation of the Compensation
Committee of the Board of Directors. Mr. Mudd’s annual salary for 2007 is $990,000.
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