Fannie Mae 2006 Annual Report Download - page 210

Mr. Mudd’s employment agreement also obligates him not to compete with us in the U.S., 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 may request a waiver from these non-competition
obligations, which the Board may grant if it determines in good faith that an activity proposed by Mr. Mudd
would not prejudice our interests. 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 these obligations. 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. We also agreed to
reimburse Mr. Mudd’s legal expenses incurred in connection with any subsequent negotiation, amendment or
discussion of his employment agreement and to reimburse him for a complete physical examination annually.
The following table quantifies the compensation that would have become payable to Mr. Mudd if his
employment had terminated on December 29, 2006, given his compensation as of that date and based on the
closing price of our common stock on that date. In the case of retirement, the table shows benefits that would
have become payable if Mr. Mudd had reached age 60 with 5 years of service or age 65 with no service
requirement; Mr. Mudd is currently 48.
Potential Payments to Mr. Mudd as of December 29, 2006
Payment Type
Without Cause,
for Good Reason
or upon Non-
Extension of the
Agreement
Serious Illness
or Disability
Acceptance of
Senior Position in
U.S. Federal
Government Death Retirement
Cash Severance . . . . . . . . . . . . . . . . . . $ 1,900,000 $ 1,900,000 N/A N/A N/A
Cash Bonus
(1)
. . . . . . . . . . . . . . . . . . . 3,500,000 3,500,000 $ 3,500,000 $ 3,500,000 $ 3,500,000
Accelerated Stock Awards
(2)
. . . . . . . . . 13,752,230 13,752,230 13,752,230 13,752,230 13,752,230
Performance Share Program Awards
(3)
. . 1,287,499 1,287,499 1,287,499 1,287,499 1,287,499
Medical Benefits
(4)
. . . . . . . . . . . . . . . 37,502 N/A N/A N/A N/A
(1)
The amounts of cash bonus shown assume that the Board would have determined to grant Mr. Mudd a cash bonus
award under our annual incentive plan in the amount he actually received for 2006. In the case of retirement,
Mr. Mudd’s employment agreement does not explicitly provide for a bonus, but he would have been entitled to a
bonus under the terms of our annual incentive plan as in effect on December 29, 2006. The plan also gives our
Compensation Committee discretion to award prorated bonuses to retirees who depart at other times of the year.
(2)
No value is shown for Mr. Mudd’s options subject to accelerated vesting because the exercise price of the options
exceeded the closing price of our common stock on December 29, 2006.
(3)
The reported amounts are for payments under our performance share program that normally would have been paid
subsequent to December 29, 2006 and to which Mr. Mudd would not have been entitled if he left in the absence of his
agreement. For more information regarding our performance share program, see “Compensation Discussion and
Analysis—What decisions have we made with regard to our Performance Share Program?”
(4)
These benefits would not be available to Mr. Mudd if his agreement was not extended. The amount shown assumes
that Mr. Mudd will receive medical and dental coverage for two years after his termination of employment and is
calculated using the assumptions used for financial reporting purposes under generally accepted accounting principles.
Agreement with Robert Levin
We have a letter agreement with Mr. Levin, dated June 19, 1990. The 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. If Mr. Levin had been terminated for reasons other than for “cause” as of December 29,
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