Fannie Mae 2010 Annual Report Download - page 234

employment other than for cause, any determination by the Board to pay unpaid deferred pay or long-term
incentive awards to the named executive is subject to the approval of FHFA in consultation with Treasury.
Potential Payments to Named Executives
We have not entered into employment agreements with any of our named executives that would entitle our
executives to severance benefits. Below we discuss various elements of compensation that may become
payable in the event a named executive dies or retires, or that may be paid in the event his employment is
terminated by Fannie Mae. We then quantify the amounts that might have been paid to our named executives
in these circumstances, in each case as of December 31, 2010.
•Deferred Pay and Long-Term Incentive Awards. In general, an executive officer, including our named
executives, must continue to be employed to receive payments of deferred pay or the long-term incentive
award, and will forfeit any unpaid amounts upon termination of his or her employment. Exceptions to this
general rule apply in the case of an executive officer’s death or retirement, and may apply in the event an
executive officer’s employment is terminated by Fannie Mae other than for cause, as follows:
•Death. In the event an executive officer’s employment is terminated due to his or her death, his or her
estate will receive the remaining installment payments of deferred pay for the prior year, as well as a
pro rata portion of deferred pay for the current year, based on time worked during the year. In addition,
his or her estate will receive any remaining installment payment of a long-term incentive award for a
completed performance year and a pro rata portion of a long-term incentive award for the current
performance year, based on time worked during the year; provided that the executive officer was
employed at least one complete calendar quarter during the current performance year.
•Retirement. If an executive officer retires from Fannie Mae at or after age 65 with at least 5 years of
service, he or she will receive the remaining installment payments of deferred pay for the prior year. In
addition, he or she will receive any remaining installment payment of a long-term incentive award for a
completed performance year.
•Termination by Fannie Mae. If Fannie Mae terminates an executive officer’s employment other than
for cause, the Board of Directors may determine, subject to the approval of FHFA in consultation with
Treasury, that he or she may receive certain unpaid deferred pay or long-term incentive awards. The
determination to pay amounts of unpaid deferred pay or long-term incentive awards is in the discretion
of the Board of Directors and FHFA; the named executives do not have any contractual right or right
under the terms of the deferred pay plan or the long-term incentive plan to receive any unpaid deferred
pay or long-term incentive awards in the event of a termination by Fannie Mae.
In each case, for any portion of a long-term incentive award or any performance-based portion of a deferred
pay award that has not been finally determined, the award will be adjusted based on performance relative to
the applicable performance goals and, in the case of a termination by Fannie Mae, cannot exceed 100% of
the target award. In addition, installment payments of the awards will be made on the original payment
schedule, rather than being provided in a lump sum. In the case of a termination by Fannie Mae, an
executive officer must agree to the terms of a standard termination agreement with the company in order to
receive these post-termination of employment payments. More information about deferred pay and the long-
term incentive awards is provided above in “Compensation Discussion and Analysis—2010 Executive
Compensation Program—Elements of 2010 Compensation Program.”
•Stock Compensation Plans. Under the Fannie Mae Stock Compensation Plan of 2003, stock options,
restricted stock and restricted stock units held by our employees, including our named executives, fully vest
upon the employee’s death, total disability or retirement. Under both the Fannie Mae Stock Compensation
Plan of 2003 and the Fannie Mae Stock Compensation Plan of 1993, upon the occurrence of these events, or
if an option holder leaves our employment after age 55 with at least 5 years of service, the option holder, or
the holder’s estate in the case of death, can exercise any stock options until the initial expiration date of the
stock option, which is generally 10 years after the date of grant. For these purposes, “retirement” generally
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