Fannie Mae 2005 Annual Report Download - page 212

•Annual Bonus. Mr. Mudd will be considered for an annual cash bonus. The amount of any cash bonus
Mr. Mudd receives is subject to prior approval from OFHEO while the company is subject to its capital
restoration plan.
•Executive Pension Plan. Mr. Mudd is entitled to participate in our Executive Pension Plan and our
Supplemental Pension Plans described above. The Executive Pension Plan supplements the benefits
payable to key officers under the Fannie Mae Retirement Plan. Mr. Mudd’s employment agreement
provides that his pension goal will be at least 50% of the average total compensation for the 36
consecutive months of his last 120 months of employment when total compensation was the highest.
Mr. Mudd’s pension goal is currently set at 50%. Mr. Mudd’s total compensation for a given year includes
other taxable compensation up to 100%, not 50%, of his annual base salary for that year. If he retires
before reaching age 60, his pension goal will be reduced by 3 percentage points, rather than the
2 percentage points reduction generally applicable to participants in the plan, for each year in which he
receives benefits prior to age 60. In addition, if his benefit payment is in the form of a joint and 100%
survivor annuity, it will be actuarially reduced to reflect the joint life expectancy of Mr. Mudd and his
spouse.
•Equity and Incentive Awards. During the employment term, Mr. Mudd is eligible to be considered for
awards under our stock option, restricted stock, annual incentive and performance share programs, all in
accordance with our compensation philosophy and programs that are in effect from time to time. Under
our capital restoration plan, we must obtain the approval of OFHEO prior to providing Mr. Mudd with
any non-salary compensation awards.
•Life Insurance. During the employment term, Mr. Mudd is eligible to receive life insurance benefits in
accordance with our life insurance policies and programs that are in effect from time to time.
•Fringe Benefits. Mr. Mudd is eligible to receive certain fringe benefits in accordance with our policies,
including legal expenses incurred in negotiating his employment agreement and reimbursement for a
complete annual physical examination. He is also eligible to participate generally in company benefit
programs that are from time to time in effect and in which our other senior officers generally are entitled
to participate.
•Clawback. Mr. Mudd’s bonus and other incentive-based or equity-based compensation will be subject to
reimbursement to us if required by Section 304 of the Sarbanes-Oxley Act of 2002 or provisions of our
compensation plans and arrangements, notwithstanding any provisions of the agreement to the contrary.
Mr. Mudd’s employment agreement provides for certain benefits upon the termination of his employment with
us depending on the reason for his termination:
•Termination without Cause, for Good Reason or upon expiration of the agreement. Mr. Mudd’s
employment agreement provides that if we terminate him without “Cause,” or if Mr. Mudd terminates his
employment for any of the specified “Good Reason” events described below, or if Mr. Mudd’s
employment is terminated due to the expiration of the agreement term on December 31, 2009, he would
be entitled to receive his accrued but unpaid base salary, base salary for the period through the second
anniversary of the termination of his employment (subject to offset for income from other employment or
self-employment, other than board service), all amounts payable (but unpaid) under our annual incentive
plan with respect to any year ended on or prior to the date of termination of his employment, a prorated
annual incentive plan payment for the year of termination, all amounts payable (but unpaid) under any
performance share award with respect to a performance cycle that had ended as of the date of termination
of his employment, a prorated performance share program payment for any performance cycle as to which
at least 18 months had elapsed as of the date of termination, full vesting of any unvested restricted stock
and stock options, for his stock options granted on or after the date of the employment agreement an
exercise period of three years (or if earlier, until the expiration date of the stock options), and, only in the
cases of termination by us without “Cause” and termination by Mr. Mudd for a “Good Reason,” medical
and dental coverage for Mr. Mudd and his spouse and coverage for his dependents (so long as they remain
his dependents or, if later, until they reach the age of 21), at no cost to Mr. Mudd, until the earlier of the
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