xþ¨¨ PreliminaryProxy Statement¨ Confidential, For Use of the Commission Only(as permitted by Rule 14a-6(e)(2))x Definitive Proxy Statement¨ Definitive Additional Materials¨ Soliciting Material Under Rule 14a-12x No fee required.¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.þ No fee required. 1.o Title of each class of securities to which transaction applies:Fee computed on table below per Exchange ActRules 14a-6(i)(1) and0-11. 2. Aggregate number of securities to which transaction applies: 3. Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4. Proposed maximum aggregate value of transaction: 5. Total fee paid: ¨ Fee paid previously with preliminary materials:o Fee paid previously with preliminary materials: ¨o Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. 1.Amount previously paid:
April 14, 2003
Hilton Washington, 1919 Connecticut Avenue, NW, Washington, DC 20009.
Franklin D. Raines
and Chief Executive Officer
being mailedsent to Fannie Maeour common shareholders on or about April 17, 2003.November 2, 2007.
Washington, DC 20009.
• | elect 12 directors, each for a term ending on the date of our next annual meeting, | |
• | ratify the selection by the Audit Committee of Deloitte & Touche LLP as our independent registered public accounting firm for 2007, | |
• | approve an amendment to the Fannie Mae Stock Compensation Plan of | |
• | act on certain shareholder proposals, and | |
• | consider any other business that may properly come before the meeting. |
The close of business on April 1, 2003October 22, 2007, is the record date for determining shareholders entitled to notice of, and to vote at, the annual meeting.
Thomas E. Donilon
Secretary
April 14, 2003
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Proposal 2: Ratification of |
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• | Election of 12 directors (see page 17) |
• | Ratification of Deloitte & Touche, LLP, as Fannie Mae’s independent registered public accounting firm for 2007 (see page 61) |
• | Approval of an amendment to the Fannie Mae Stock Compensation Plan of 2003 (see page 62) |
• | Two shareholder proposals (see page 71) |
• | you can attend the annual meeting and votein person(you will need personal identification for admission to the annual meeting), or |
• | you can voteby proxy,whether or not you attend the annual meeting |
• | Vote by Internet. To vote on the Internet, go to www.proxyvote.com to complete an electronic |
proxy card. You will need the12-digit Control Number included on your Notice of Internet Availability and on your proxy card. | |
• | Vote by telephone. To vote by telephone, dial(800) 690-6903 using a touch-tone telephone and follow the recorded instructions. You will need the12-digit Control Number included on your Notice of Internet Availability and on your proxy card. |
• | Vote by Mail. To vote by mail, complete, sign, date and return your proxy card in the postage-paid envelope provided. |
• | you can attend the annual meeting and votein persononly if you (1) present evidence of your ownership of Fannie Mae common stock as of the close of business on the Record Date, such as a bank or brokerage account statement, (2) present personal identification for admission to the meeting, and (3) obtain a proxy from the nominee that holds your shares, or |
• | you can voteby proxy,whether or not you attend the annual meeting, in any of the following ways: |
• | Vote by Internet. To vote on the Internet, go to the internet address provided on your voting instruction card and complete an electronic voting instruction card. | |
• | Vote by telephone. To vote over the telephone, dial the toll-free number provided on your voting instruction card using a touch-tone telephone and follow the recorded instructions. | |
• | Vote by Mail. To vote by mail, complete, sign, date, and return your voting instruction card in the envelope provided. |
the Record Date.everyeach share of Fannie Mae common stock you owned on April 1, 2003 (the record date).981,768,907,Mae’s shares ofMae common stock that was outstanding on the record date.Record Date. The number of shares of common stock outstanding include the number of
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Do I need proof of ownership to attend the annual meeting?
Yes, you will need proof of ownership of Fannie Mae stock to enter the meeting. If you are a shareholder of record on the record date, you will be admitted to the meeting. If your shares are not registered in your name, you must present evidence of ownership (such as a recent bank or brokerage firm account statement, together with proper identification) for admission to the meeting.
A
Does any shareholder control as much as five percent of any class of Fannie Mae’s voting stock?
FMR Corp. has reported beneficial ownership of approximately 9.8 percent of Fannie Mae’s common stock. No other shareholder controls more than five percent of any class of Fannie Mae’s voting stock.
How do I vote?
You can vote either in person at the annual meeting or by proxy without attending the annual meeting.
To vote by proxy, you must either:
What if I hold shares indirectly?
If you hold your shares in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker or nominee. You may not vote directly any shares held in street name, but as the beneficial owner you have the right to direct your broker how to vote.
If you hold shares in street name and you want to vote in person at the annual meeting, you must obtain a proxy from your broker and bring that proxy to the meeting.
Can I change my vote?
• | submitting a new proxy over the Internet or by telephone, |
• | sending, or presenting in person at the annual meeting, a new, more recently dated proxy or voting instruction card that has been signed by the person executing the prior proxy or voting instruction card, |
• | delivering a written statement to the Secretary of Fannie Mae at the address in the Notice of the Annual Meeting stating that the proxy is revoked, or |
• | attending the annual meeting and voting in person as described above under “How do I vote?” |
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What if I hold my shares through a Fannie Mae benefit plan?
Except as noted below, Fannie Mae employees who participate in Fannie Mae’s benefit plans may receive their proxy cards separately.
Only Equiserve Trust Company, N.A., Escrow Agentrequired to tender his or her
Whatother proposals will pass if I don’t vote for somea majority of the matters listedvotes cast on the particular proposal are voted FOR that proposal. Therefore, abstentions will not have any effect on the outcome of a vote on such proposal.
• | FOR the director nominees listed on the card, |
• | FOR ratification of Deloitte & Touche LLP as Fannie Mae’s independent registered public accounting firm for 2007, |
• | FOR approval of an amendment to the Fannie Mae Stock Compensation Plan of 2003, and |
• | AGAINST the shareholder proposals. |
What if I vote “abstain”?
Abstentions will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Abstentions do not constitute a vote “for” or “against” any matter and thus will have no effect on the outcome of a vote on a proposal.
proxy in their discretion.
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matter.
If you don’t vote shares held in your name, your sharescast as it relates to a particular proposal and, therefore, they will not be voted.
have any effect on the outcome of a vote on such proposal.
Our proxy statement and annual report
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We delivered Fannie Mae’s 2002 annual report to shareholders to you with this proxy statement. We urge you to read it carefully.
The following graph and table compareattend the annual changes in Fannie Mae’s cumulative total returnmeeting. See“How do I vote?” for the last five years with the cumulative total return of:
The following graph and table show the value at year-end of $100 invested at the closing price on December 31, 1997 in Fannie Mae common stock, the S&P 500, and the S&P Financials. The comparisons in this graph and table are set forth in response to Securities and Exchange Commission (“SEC”) disclosure requirements, and therefore are not intended to forecast or to be indicative of future performance of our common stock.
December 31 | Fannie Mae | S&P 500 | S&P Financials | ||||||
1997 | $ | 100 | $ | 100 | $ | 100 | |||
1998 |
| 132 |
| 129 |
| 111 | |||
1999 |
| 113 |
| 156 |
| 116 | |||
2000 |
| 160 |
| 141 |
| 146 | |||
2001 |
| 149 |
| 125 |
| 133 | |||
2002 |
| 123 |
| 97 |
| 113 |
* “Cumulative Total Return”
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Fannie Mae encourages its directors, officers, and employees to own Fannie Mae stock to align their interests with the interest of shareholders. As such, a significant portion of the compensation paid to directors and officers is paid in Fannie Mae common stock, as described in more detail later in the proxy statement. Employees of Fannie Mae also have the opportunity to own Fannie Mae stock through our employee stock purchase plan, bonus stock opportunities, and our ESOP. We believe that the stock ownership of our directors, officers, and employees has played a valuable role in Fannie Mae’s outstanding performance.
In April 2003, the Board of Directors added another key component to our stock ownership principles—formal stock ownership guidelines for our executive officers.Under the guidelines, executive officers of Fannie Mae are required to hold sharesbeneficial owner of Fannie Mae common stock on the Record Date, you must present evidence of your authority to act as the legal representative of that entity.
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• | separating the positions of Chief Executive Officer and Chairman and, as a result of the Board’s emphasis on the independence of our directors, structuring the Board so that all but one of our directors are independent; | |
• | recruiting eight new members of our Board of Directors to fill vacancies caused by normal turnover, with an emphasis on constituting the Board with directors having the combination of skills, backgrounds, and expertise needed to oversee and guide the company most effectively; | |
• | the establishment of stock ownership requirements for our senior executives and stock ownership guidelines for our non-management directors; and | |
• | the adoption of majority vote standards for elections of directors. |
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• | the director was employed by us; or | |
• | an immediate family member of the director was employed by us as an executive officer; |
• | the director is a current partner or employee of our outside auditor, or within the preceding five years, was (but is no longer) a partner or employee of our outside auditor and personally worked on our audit within that time; or | |
• | an immediate family member of the director is a current partner of our outside auditor, or is a current employee of our outside auditor participating in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or within the preceding five years, was (but is no longer) a partner or employee of our outside auditor and personally worked on our audit within that time. |
• | the director was employed by a company other than Fannie Mae at a time when any of our current executive officers was a member of that company’s compensation committee; or | |
• | an immediate family member of the director was employed as an officer by a company other than Fannie Mae at a time when any of our current executive officers was a member of that company’s compensation committee. |
• | the director received any compensation from us, directly or indirectly, other than fees for service as a director; or | |
• | an immediate family member of the director received any compensation from us, directly or indirectly, other than compensation received for service as a non-executive employee of our company. |
• | the director is a current executive officer, employee, controlling shareholder or partner of an entity that does or did business with us if, within the preceding five years, we made payments to, or received payments from, that entity, and, in any single fiscal year, those payments exceeded $1,000,000 or 2% of the entity’s consolidated gross annual revenues, whichever is greater; or | |
• | an immediate family member of the director is a current executive officer of a corporation or other entity that does or did business with us if, within the preceding five years, we made payments to, or received |
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payments from, the entity that, in any single fiscal year were in excess of $1,000,000 or 2% of the entity’s consolidated gross annual revenues, whichever is greater. |
• | Ms. Gaines’ past service as an independent director of a corporation that provides insurance services to the Fannie Mae Foundation, for which an immaterial amount of premiums is paid; | |
• | Our payments of substantially less than $1,000,000, pursuant to our bylaws and indemnification obligations, of legal fees to a law firm with which Ms. Rahl’s husband is a partner, as a result of the law firm’s representation of Ms. Rahl in connection with various lawsuits and regulatory investigations arising from Ms. Rahl’s service on our Board; | |
• | Contributions by the Fannie Mae Foundation of over $100,000 in 2004 and 2006 (before Mr. Sites became a Fannie Mae director) to an affiliate of Covenant House where Mr. Sites served as a director through 2006, and Mr. Sites’ role as a consultant to a financial institution that could in the future invest in mortgage businesses or mortgages; | |
• | Contributions totaling less than $100,000 in 2006 by usand/or the Fannie Mae Foundation to Howard University, where Mr. Swygert serves as President; and | |
• | Mr. Wulff’s service as an independent director of Moody’s Corporation, which provides specific research and investor services to us, and for which we make payments of substantially less than 2% of Moody’s and our consolidated gross annual revenues. |
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• | Code of Conduct and Conflicts of Interest Policy for Members of the Board of Directors; | |
• | Board of Directors’ delegation of authorities and reservation of powers; | |
• | Code of Conduct for employees; | |
• | Conflict of Interest Policy and Conflict of Interest Procedure for employees; and | |
• | Employment of Relatives Practice. |
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Amount and Nature of Beneficial Ownership(1) | ||||||||||||
Stock Options | ||||||||||||
Exercisable and | ||||||||||||
Other Shares | ||||||||||||
Common Stock | Obtainable | Total | ||||||||||
Beneficially | Within 60 Days | Common Stock | ||||||||||
Owned Excluding | of October 22, | Beneficially | ||||||||||
Name and Position | Stock Options | 2007(2) | Owned | |||||||||
Stephen B. Ashley(3) | 20,747 | 25,000 | 45,747 | |||||||||
Chairman of the Board of Directors | ||||||||||||
Dennis R. Beresford(4) | 719 | 0 | 719 | |||||||||
Director | ||||||||||||
Robert T. Blakely(5) | 12,421 | 0 | 12,421 | |||||||||
Executive Vice President | ||||||||||||
Louis J. Freeh | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Brenda J. Gaines(6) | 487 | 0 | 487 | |||||||||
Director | ||||||||||||
Karen N. Horn(7) | 487 | 0 | 487 | |||||||||
Director | ||||||||||||
Robert J. Levin(8) | 453,439 | 401,177 | 854,616 | |||||||||
Executive Vice President and Chief Business Officer | ||||||||||||
Bridget A. Macaskill(9) | 1,062 | 0 | 1,062 | |||||||||
Director | ||||||||||||
Daniel H. Mudd(10) | 411,157 | 590,136 | 1,001,293 | |||||||||
President and Chief Executive Officer | ||||||||||||
Peter S. Niculescu(11) | 146,949 | 188,209 | 335,158 | |||||||||
Executive Vice President—Capital Markets | ||||||||||||
Joe K. Pickett(12) | 12,882 | 27,000 | 39,882 | |||||||||
Director | ||||||||||||
Leslie Rahl(13) | 3,281 | 4,333 | 7,614 | |||||||||
Director | ||||||||||||
John C. Sites, Jr. | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Greg C. Smith(14) | 1,612 | 332 | 1,944 | |||||||||
Director | ||||||||||||
Julie St. John(15) | 45,033 | 269,964 | 314,997 | |||||||||
Former Executive Vice President and Chief Information Officer | ||||||||||||
H. Patrick Swygert(16) | 3,550 | 10,833 | 14,383 | |||||||||
Director | ||||||||||||
Beth A. Wilkinson(17) | 70,135 | 0 | 70,135 | |||||||||
Executive Vice President, General Counsel and Corporate Secretary |
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Amount and Nature of Beneficial Ownership (1) | |||||||||||
Name | Position | Common Stock Beneficially Owned Excluding Options | Stock Options Exercisable Within 60 Days of Record Date | Total Common Stock Beneficially Owned | |||||||
Victor H. Ashe | Director | 856 |
| 7,666 |
| 8,522 |
| ||||
Stephen B. Ashley | Director | 19,351 | (2) | 18,000 |
| 37,351 |
| ||||
Molly H. Bordonaro | Director | 858 |
| 7,666 |
| 8,524 |
| ||||
Kenneth M. Duberstein | Director | 3,011 |
| 20,000 |
| 23,011 |
| ||||
Thomas P. Gerrity | Director | 17,251 | (3) | 20,000 |
| 37,251 |
| ||||
Jamie S. Gorelick | Vice Chair of the Board | 71,977 |
| 296,110 |
| 368,087 |
| ||||
William R. Harvey | Director | 1,356 |
| 7,666 |
| 9,022 |
| ||||
Timothy Howard | Executive Vice President, Chief Financial Officer and Nominee | 185,783 | (4) | 408,624 | (5) | 594,407 |
| ||||
Manuel J. Justiz | Director | 1,813 |
| 6,666 |
| 8,479 |
| ||||
Ann McLaughlin Korologos | Director | 5,751 |
| 29,200 |
| 34,951 |
| ||||
Robert J. Levin | Executive Vice President—Housing and Community Development | 165,567 | (6) | 386,333 |
| 551,900 |
| ||||
Frederic V. Malek | Director | 1,697 |
| 4,000 |
| 5,697 |
| ||||
Donald B. Marron | Director | 1,871 |
| 8,000 |
| 9,871 |
| ||||
Daniel H. Mudd | Vice Chairman of the Board and Chief | 37,248 |
| 152,804 |
| 190,052 |
| ||||
Anne M. Mulcahy | Director | 1,714 |
| 12,667 |
| 14,381 |
| ||||
Joe K. Pickett | Director | 4,894 |
| 28,000 |
| 32,894 |
| ||||
Franklin D. Raines | Chairman of the Board and Chief Executive Officer | 134,471 |
| 1,049,380 |
| 1,183,851 |
| ||||
Taylor C. Segue, III | Director | 856 |
| 7,666 |
| 8,522 |
| ||||
H. Patrick Swygert | Director | 1,409 |
| 11,666 |
| 13,075 |
| ||||
All directors and executive officers | 788,672 |
| 2,944,220 |
| 3,732,892 |
| |||||
5% Holders | Common Stock Beneficially Owned | Percent of Class | |||||||||
FMR Corp. | 97,232,983 | (7) | 9.831 | % | |||||||
82 Devonshire Street | |||||||||||
Boston, Massachusetts 02109 |
4
Notes to Beneficial Ownership Table
Amount and Nature of Beneficial Ownership(1) | ||||||||||||
Stock Options | ||||||||||||
Exercisable and | ||||||||||||
Other Shares | ||||||||||||
Common Stock | Obtainable | Total | ||||||||||
Beneficially | Within 60 Days | Common Stock | ||||||||||
Owned Excluding | of October 22, | Beneficially | ||||||||||
Name and Position | Stock Options | 2007(2) | Owned | |||||||||
Michael J. Williams(18) | 230,287 | 272,074 | 502,361 | |||||||||
Executive Vice President and Chief Operating Officer | ||||||||||||
John K. Wulff(19) | 1,887 | 1,000 | 2,887 | |||||||||
Director | ||||||||||||
All directors and executive officers as a group (26 persons)(20) | 1,863,310 | 2,228,611 | 4,091,921 |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC for computing the number of shares of common stock beneficially owned by | |
(2) | The shares included in this column are not currently outstanding but are issuable within 60 days of the Record Date, and consist of shares issuable upon the exercise of outstanding stock options held by our executive officers and other shares issuable within 60 days. These other shares consist of 70,797 shares issuable upon the exercise of outstanding stock options held by the spouse of one of our executive officers; 1,308 shares of deferred stock held by Mr. Williams, which he could obtain within 60 days in certain circumstances; and shares expected to be paid out to certain of our executive officers within 60 days in connection with our PSP in the following amounts: Mr. Levin—17,586 shares, Mr. Mudd—19,418 shares, Mr. Niculescu—10,722 shares, Mr. Williams—14,381 shares, all directors and officers as | |
(3) | Mr. Ashley’s shares include 1,200 shares held by his spouse and 650 shares of restricted stock. | |
(4) | Mr. Beresford’s shares include 650 shares of restricted stock. | |
(5) | The reported amount does not include 111,111 restricted stock units held by Mr. Blakely. | |
(6) | Ms. Gaines’ shares consist of restricted stock. | |
(7) | Ms. Horn’s shares consist of restricted stock. | |
(8) | Mr. Levin’s shares consist of 258,287 shares held jointly with his spouse and 195,152 shares of restricted stock. | |
(9) | Ms. Macaskill’s shares include 650 shares of restricted stock. | |
(10) | Mr. Mudd’s shares include 297,026 shares of restricted stock. Mr. Mudd | |
(11) | Mr. Niculescu’s shares include 47,541 shares held jointly with his spouse, 234 shares held through our ESOP, and 86,354 shares of restricted stock. | |
(12) | Mr. Pickett’s shares include 650 shares of restricted stock. | |
(13) | Ms. Rahl’s shares include 200 shares held by her spouse and 650 shares of restricted stock. | |
(14) | Mr. Smith’s shares include 650 shares of restricted stock. | |
(15) | Ms. St. John left Fannie Mae in December 2006. Information about Ms. St. John’s holdings is based on an amended Form 4 filed by Ms. St. John on July 20, 2007 regarding her shares held as of December 15, 2006. Ms. St. John’s holdings include 869 shares held through our ESOP. | |
(16) | Mr. Swygert’s shares include 650 shares of restricted stock. | |
(17) | Ms. Wilkinson’s shares include 65,564 shares of restricted stock. |
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(18) | Mr. Williams’ shares include 77,061 shares held jointly with his spouse, 700 shares held by his daughter, 869 shares held through our ESOP and 151,501 shares of restricted stock. | |
(19) | Mr. Wulff’s shares include 650 shares of restricted stock. | |
(20) | The amount of shares held by all directors and executive officers as a group |
Common Stock | ||||||||
5% Holders | Beneficially Owned | Percent of Class | ||||||
Capital Research and Management Company(1) | 167,555,250 | 17.2 | % | |||||
333 South Hope Street Los Angeles, CA 90071 | ||||||||
Citigroup Inc.(2) | 62,341,565 | 6.3 | % | |||||
399 Park Avenue New York, NY 10043 | ||||||||
AXA(3) | 52,669,044 | 5.4 | % | |||||
25 Avenue Matignon 75008 Paris, France |
(1) | This information is based solely on information contained on a Schedule 13G/A filed with the SEC on February 12, 2007 by Capital Research and Management Company. According to the Schedule 13G/A, Capital Research and Management Company beneficially owned 167,555,250 shares of our common stock | |
(2) | This information is based solely on information contained in a Schedule 13G/A filed with the SEC on February 9, 2007 by Citigroup Inc. According to the Schedule 13G/A, Citigroup Inc. beneficially owns 62,341,565 shares of our common stock, with shared voting and dispositive power for all such shares. | |
(3) | This information |
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• | the highest personal values, judgment, and integrity; | |
• | an understanding of the regulatory and policy environment in which Fannie Mae does its business; and | |
• | diverse experience in the key business, financial, and other challenges that face a major American enterprise. |
• | a director’s previous contribution to the effective functioning of Fannie Mae; | |
• | any change during the past year in the director’s principal area of responsibility with his or her company or in his or her employment; | |
• | the director’s retirement during the past year from his or her principal area of responsibility with his or her company; | |
• | whether the director continues to bring relevant experience to the Board; | |
• | whether the director has the ability to attend meetings and fully participate in the activities of the Board; |
17
The
• | whether the director has developed any relationships with Fannie Mae or another organization, or other circumstances have arisen, that might make it inappropriate for the director to continue serving on the Board; and | |
• | the director’s age and length of service on the Board. |
All nominees have consented to being named in this proxy statement and to serve if elected.
Pursuant to the Fannie Mae Charter Act, the Presidentrecommendation of the United States has the authority to appoint five additional directors for terms ending on the dateNominating and Corporate Governance Committee of the 2004 annual meeting.
Board, the Board decides to accept the nominee’s resignation.
that shareholders voteforFOR each of the nominees.
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Name and Age | Position, Principal Occupation, Business Experience and Directorships |
Stephen B. Ashley, | Chairman and Chief Executive Officer The Ashley Group | |
• Chairman and Chief Executive Officer of The Ashley Group, a group of commercial and multifamily real estate, brokerage and investment | ||
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• Director of Fannie Mae since May 1995 and Chairman of Board since December 2004 | ||
• Other Directorships: Manning & Napier Fund, Inc. | ||
• Other Activities: Mortgage Bankers Association of America (past president) | ||
Dennis R. Beresford, 68 | Ernst & Young Executive Professor of Accounting J.M. Tull School of Accounting, Terry College of Business, University of Georgia | |
• Ernst & Young Executive Professor of Accounting, J.M. Tull School of Accounting, Terry College of Business, University of Georgia—1997 to present | ||
• Chairman of the Financial Accounting Standards Board, or FASB, the designated organization in the private sector for establishing standards of financial accounting and reporting in the U.S.—1987 to 1997 | ||
• Ernst & Young LLP (including ten years as a Senior Partner and National Director of Accounting)—1961 to 1986 | ||
• Director of Fannie Mae since May 2006 | ||
• Other Directorships: Kimberly-Clark Corporation (Chair, Audit Committee) and Legg Mason, Inc. (Chair, Audit Committee) | ||
• Other Activities: Member, SEC Advisory Committee on Improvements to Financial Reporting; certified public accountant | ||
Louis J. Freeh, 57 | President Freeh Group | |
• President of Freeh Group International, LLC, a practice of former federal judges and former senior FBI leaders who provide legal, governance, investigative, litigation, and risk management services—January 2006 to present | ||
• General Counsel, Corporate Secretary and Ethics Officer of MBNA Corporation, as well as Vice Chairman of MBNA America Bank N.A.—2001 to January 2006 | ||
• Director of the Federal Bureau of Investigation (FBI)—1993 to 2001 | ||
• U.S. District Judge—Southern District of New York—1991 to 1993 | ||
• Director of Fannie Mae since May 2007 | ||
• Other Directorships: Bristol-Myers Squibb Company (Member, Audit Committee, and Member, Directors and Corporate Governance Committee) |
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Brenda J. Gaines, | Retired | |
• Diners Club North America, a subsidiary of Citigroup (President and | ||
• Deputy Chief of Staff | ||
• Chicago Commissioner of | ||
• Director of |
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• Other Directorships: Office Depot (Chair, Audit Committee, and Member, Corporate Governance and Nominating Committee); NICOR, Inc. (Member, Corporate Governance Committee); and Tenet Healthcare Corporation (Member, Audit Committee, and Member, Compensation Committee) | ||
Senior Managing Director Brock Capital Group LLC | ||
• Senior Managing Director of | ||
• Managing Director, | ||
• Senior Managing Director and | ||
• Chairman and Chief Executive Officer of | ||
• President of Federal Reserve Bank of Cleveland—1982 to 1987 | ||
| ||
• Other Directorships: Eli Lilly and Company (Chair, Compensation Committee, and Member, Directors and Corporate Governance Committee); Simon Property Group, Inc. (Chair, Governance Committee, and Member, Compensation Committee); and all T. Rowe Price funds and trusts | ||
| ||
Bridget A. Macaskill, 59 | Principal BAM Consulting LLC | |
|
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• Oppenheimer Funds, Inc. (Chairman of the Board—2000 to 2001), (Chief Executive Officer—1995 to 2001), and (President—1991 to 2000) | ||
• Director of Fannie Mae since December 2005 | ||
• Other Directorships: Prudential plc (Chair, Remuneration Committee and Member, Nomination Committee) and Scottish & Newcastle plc. | ||
• Trusteeships: College Retirement Equities Fund (CREF) and the TIAA-CREF Funds |
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Daniel H. Mudd, | President and Chief Executive Officer Fannie Mae | |
• Fannie Mae (President and Chief Executive Officer—June 2005 to present), (Vice Chairman of Board of Directors and interim Chief Executive Officer—December 2004 to June 2005), (Vice Chairman and Chief Operating Officer—February 2000 to December 2004) | ||
• Fannie Mae Foundation (Chairman of the Board since June 2005), (Interim Chairman of the | ||
• President and Chief Executive Officer of GE Capital, Japan, a diversified financial services company and a | ||
• President of GE Capital, Asia | ||
• Director of Fannie Mae since February 2000 | ||
| ||
Leslie Rahl, 57 | President Capital Market Risk Advisors, Inc. | |
• President and Founder of Capital Market Risk Advisors, Inc., a financial advisory firm specializing in risk management, hedge funds and capital market strategy—1994 to present | ||
• Citibank (Various positions—1972 to 1991, including nine years as Vice President and Division Head, Derivatives Group—North America) | ||
• Director of Fannie Mae since February 2004 | ||
• Other Directorships: Canadian Imperial Bank of Commerce (CIBC) (Member, Risk Management Committee); the International Association of Financial Engineers; and the Fischer Black Memorial Foundation | ||
• Other Activities: International Swaps Dealers Association (former director) | ||
Consultant Wexford Capital, LLC General Partner Rock Creek Partners II, Ltd | ||
• Consultant to Wexford Capital, LLC, an SEC registered investment advisor—September 2006 to present. | ||
• General Partner of | ||
• General Partner of Daystar Special Situations Fund, a private equity fund—January 1996 to | ||
• Bear, Stearns and Co., Inc. (Various positions—1981 to 1995, including Executive Vice President & Member of the | ||
• Director of Fannie Mae since October 2007 |
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Greg C. Smith, | Retired | |
• Ford Motor Company (Vice Chairman—October 2005 until retirement in | ||
• Ford Motor Credit Company: Chairman and Chief Executive | ||
• Director of | ||
• Other Directorships: Penske Corp | ||
• Other Activities: American Financial Services Association (former Chairman) | ||
H. Patrick Swygert, 64 | President Howard University | |
• President of |
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| • Director of Fannie Mae since January | |
|
Directors Appointed by the President of the United States
Fannie Mae directors appointed by President George W. Bush have provided the following information about their principal occupation, business experience, and other matters. Each director’s term ends on the date of the annual meeting, May 20, 2003.
| ||
• Other Activities: Central Intelligence Agency External Advisory Board (member) | ||
|
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Hercules Incorporated | ||
• Hercules Incorporated, a manufacturer and supplier of specialty chemical products (Chairman of the Board—December 2003 to present), (Director—July 2003 to December 2003), and (Interim Chairman—October 2003 to December 2003) | ||
| ||
• Chief Financial Officer of Union Carbide Corporation, a chemicals and polymers company from 1996 until 2001 | ||
| ||
• Other Directorships: Hercules Incorporated (Chairman of the Board); Sunoco, Inc. (Member, Audit Committee, and Member, Public Affairs Committee); Celanese Corporation (Chair, Compensation Committee); and Moody’s Corporation (Chair, Audit Committee and Member, Governance and Compensation Committee) |
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eight22 times during 2002. Each director2006. During 2006, all of our current directors attended at least 75 percent75% of the total number of meetings of the Board of Directors and Board committees on which he or she served.
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• | Audit Committee; | |
• | Compensation Committee; | |
• | Compliance Committee; | |
• | Executive Committee; | |
• | Housing and Community Finance Committee; | |
• | Nominating and Corporate Governance Committee; | |
• | Risk Policy and Capital Committee; and | |
• | Technology and Operations Committee. |
• | our accounting, reporting, and financial practices, including the integrity of our financial statements and internal control over financial reporting; | |
• | our compliance with legal and regulatory requirements (in coordination with the Compliance Committee); | |
• | the qualifications and independence of the our outside auditors; and | |
• | the performance of our internal audit function and our outside auditor. |
• | oversees compensation policies and plans for officers and other management group employees and general compensation plans applicable to all employees, to maintain adherence to our philosophy, competitive position, and obligations under the Charter Act; | |
• | makes recommendations to the Board with respect to our incentive-compensation plans and stock-based plans that are subject to Board approval; | |
• | reviews and approves corporate goals and objectives relevant to CEO compensation, evaluates the CEO’s performance in light of those goals and objectives, and recommends to the independent members of the Board the CEO’s compensation level based on this evaluation, consistent with our compensation philosophy; | |
• | recommends to the Board corporate goals for measurement of performance and approving achievement against those goals; | |
• | recommends to the Board the compensation of executive vice presidents, consistent with the corporation’s compensation philosophy; and | |
• | approves the compensation of senior vice presidents, consistent with the corporation’s compensation philosophy, including senior vice presidents who may be “executive officers” as defined inRule 3b-7 under the Securities Exchange Act of 1934. With respect to the compensation of the Chief Audit Executive and Chief Compliance Officer, the Compensation Committee takes into account the recommendation of the Audit Committee and the Compliance Committee, respectively. |
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company’s contribution to affordable housing and community development. In addition, the Housing and Community Finance Committee monitors public policy surrounding housing issues. The AssetsHousing and Liabilities PolicyCommunity Finance Committee, which assists the Board met 15 times in its oversight of management’s interest rate risk, credit risk, and capital management activities by:
The Audit Committee, which oversees:
TheThe Compensation Committee, which discharges the responsibilities of the Board relating tocompensation of Fannie Mae’s executives and oversees and advises the Board on the adoption of policies that govern Fannie Mae’s annual compensation and stock ownership plans. The Compensation Committee, among other things:
The Nominating and Corporate Governance Committee:
governance. The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders. Shareholders may submitoversees the evaluation of the Board and its committees, including evaluating the adequacy and appropriateness of the content, format and distribution of the written recommendations for nomineesinformation, and evaluating reports and other material provided to the Office ofBoard. The Nominating and Corporate Governance Committee is also responsible for recommending compensation for non-management directors on the Secretary of Fannie Mae only in accordance with Section 4.19 of our bylaws.
The Technology Committee, which reviews and makes recommendationsBoard to the Board concerningof Directors and reviews non-management director compensation once a year. The Nominating and Corporate Governance Committee met 9 times in 2006.
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2006.
Board Committee | ||||||||||||||||||
Housing | Nominating | Risk | Technology | |||||||||||||||
and | and | Policy and | and | |||||||||||||||
Board | Independent | Community | Corporate | Capital | Operations | |||||||||||||
Member | Director | Audit | Compensation | Compliance | Executive | Finance | Governance | Committee | Committee | |||||||||
Stephen B. Ashley | X | X | X | X | Chair | X | X | X | X | |||||||||
Dennis R. Beresford* | X | Chair | X | X | ||||||||||||||
Louis J. Freeh | X | X | X | |||||||||||||||
Brenda J. Gaines | X | X | Chair | X | X | |||||||||||||
Karen N. Horn* | X | X | X | X | ||||||||||||||
Bridget A. Macaskill | X | Chair | X | X | ||||||||||||||
Daniel H. Mudd | X | |||||||||||||||||
Joe K. Pickett | X | X | X | X | X | |||||||||||||
Leslie Rahl | X | X | X | X | Chair | |||||||||||||
John C. Sites, Jr. | X | X | ||||||||||||||||
Greg C. Smith* | X | X | X | X | Chair | |||||||||||||
H. Patrick Swygert | X | X | Chair | X | X | |||||||||||||
John K. Wulff* | X | X | X | Chair | X |
* | The Board has determined that Mr. Beresford, Ms. Horn, Mr. Smith and Mr. Wulff have the requisite experience to qualify as “audit committee financial experts” under the rules and regulations of the SEC and has designated them as such, and they are independent as independence for audit committee members is defined under the NYSE listing standards. |
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Fees Earned or | Stock | Option | All Other | |||||||||||||||||
Name | Paid in Cash ($) | Awards ($)(1) | Awards ($)(2) | Compensation ($)(3) | Total ($) | |||||||||||||||
Stephen B. Ashley | $ | 500,000 | $ | 64,770 | $ | 17,516 | $ | 16,689 | $ | 598,975 | ||||||||||
Dennis R. Beresford | 99,950 | 22,053 | N/A | 35,691 | 157,694 | |||||||||||||||
Kenneth M. Duberstein(4) | 102,600 | 64,770 | 17,516 | 410,335 | 595,221 | |||||||||||||||
Brenda J. Gaines | 35,667 | 5,845 | N/A | 17,818 | 59,330 | |||||||||||||||
Thomas P. Gerrity | 110,533 | 64,770 | 17,516 | 15,821 | 208,640 | |||||||||||||||
Karen N. Horn | 38,667 | 5,845 | N/A | 24,553 | 69,065 | |||||||||||||||
Ann M. Korologos | 51,350 | — | 42,278 | 14,217 | 107,846 | |||||||||||||||
Bridget A. Macaskill | 139,733 | 37,347 | N/A | 18,797 | 195,877 | |||||||||||||||
Donald B. Marron | 45,917 | — | 42,278 | 53,396 | 141,591 | |||||||||||||||
Joe K. Pickett | 122,533 | 64,770 | 17,516 | 36,052 | 240,871 | |||||||||||||||
Leslie Rahl | 113,700 | 65,945 | 17,516 | 17,770 | 214,931 | |||||||||||||||
Greg C. Smith | 166,467 | 33,058 | 2,483 | 17,818 | 219,826 | |||||||||||||||
H. Patrick Swygert | 113,900 | 64,770 | 17,516 | 34,432 | 230,617 | |||||||||||||||
John K. Wulff | 170,600 | 53,364 | 9,038 | 22,005 | 255,006 |
(1) | These amounts represent the dollar amounts we recognized for financial statement reporting purposes with respect to 2006 for the fair value of restricted stock granted during 2006 and in prior years in accordance with SFAS 123R. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The value of the restricted stock awards is calculated as the average of the high and low trading price of our common stock on the date of grant. During 2006, three directors received restricted stock grants with the SFAS 123R grant date fair values shown upon joining our Board: Mr. Beresford, $36,033; Ms. Gaines, $26,162; and Ms. Horn, $26,162. | |
Ms. Korologos and Mr. Marron each retired from our Board during 2006 and, as a result, forfeited shares of unvested restricted common stock. The amounts shown do not reflect the reversal of previously recognized compensation cost for the forfeited shares. The amounts shown also do not reflect the impact of Mr. Gerrity’s forfeiture of 650 shares of restricted stock upon his resignation from our Board of Directors in December 2006. | ||
As of December 31, 2006, our directors held the following number of shares of restricted stock: Mr. Ashley, Mr. Beresford, Mr. Duberstein, Ms. Macaskill, Mr. Pickett, Ms. Rahl, Mr. Smith, Mr. Swygert, and Mr. Wulff, 650 shares each; Ms. Gaines and Ms. Horn, 487 shares each; and Mr. Gerrity, Ms. Korologos, and Mr. Marron, 0 shares. | ||
(2) | These amounts represent the dollar amounts we recognized for financial statement reporting purposes with respect to 2006 for the fair value of stock option awards granted during 2005 and in prior years in accordance with SFAS 123R. No director has received a stock option award since 2005. For the assumptions used in calculating the value of these awards, see “Notes to Consolidated Financial Statements—Note 1, Summary of Significant Accounting Policies—Stock-Based Compensation,” in our annual report onForm 10-K for the year ended December 31, 2006. Mr. Beresford, Ms. Gaines, Ms. Horn, and Ms. Macaskill have never been awarded Fannie Mae stock options. | |
As of December 31, 2006, each of our directors held options to purchase the following number of shares of common stock, with exercise prices ranging from $42.69 to $79.22 per share and expiration dates ranging from 2007 to 2015: Mr. Ashley, 26,000 shares; Mr. Beresford, Ms. Gaines, Ms. Horn, and Ms. Macaskill, 0 shares; Mr. Duberstein and Mr. Gerrity, 28,000 shares; Mr. Marron, 4,000 shares; Mr. Pickett and Ms. Korologos, 32,000 shares; Ms. Rahl, 5,333 shares; Mr. Smith, 666 shares; Mr. Swygert, 11,833 shares; and Mr. Wulff, 2,000 shares. | ||
(3) | “All Other Compensation” consists of our estimated incremental cost of providing Board members benefits under our Director’s Charitable Award Program, which is discussed in greater detail below. We estimate our incremental cost of providing this benefit for each director based on (1) the present value of our expected future payment of the benefit that became vested during 2006 and (2) the time value during 2006 of amounts vested for that director in prior years. |
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Director | Executive | Audit | Compensation | Nominating and Corporate Governance | Assets and Liabilities Policy | Technology | ||||||
Mr. Ashe | X | X | ||||||||||
Mr. Ashley | X | X | ||||||||||
Ms. Bordonaro | X | X | ||||||||||
Mr. Duberstein | X | Chair | X | |||||||||
Mr. Gerrity | X | Chair | X | |||||||||
Mr. Harvey | X | X | ||||||||||
Mr. Justiz | X | X | ||||||||||
Ms. McLaughlin Korologos | X | X | Chair | |||||||||
Mr. Malek | X | X | ||||||||||
Mr. Marron | X | X | ||||||||||
Ms. Mulcahy | X | X | Chair | |||||||||
Mr. Pickett | X | X | Chair | |||||||||
Mr. Raines | Chair | |||||||||||
Mr. Segue | X | X | ||||||||||
Mr. Swygert | X | |||||||||||
2002 Meetings | 0 | 7 | 4 | 7 | 5 | 2 |
Retainer Fees
During 2002,
We estimated the present values of our expected future payment based on the age and gender of our directors, the RP 2000 white collar mortality table projected to 2010, and a discount rate of approximately 5.5%. For Mr. Duberstein, our estimated cost for providing this benefit is $35,335, and we have also included in “All Other Compensation” $375,000 we paid to The Duberstein Group for consulting services. This amount was paid to The Duberstein Group, not to Mr. Duberstein. Our transactions with The Duberstein Group are discussed more in “Corporate Governance—Certain Transactions and Relationships—Transactions with the Duberstein Group.” Amounts shown under “All Other Compensation” do not include gifts made by the Fannie Mae Foundation under its matching gifts program, under which gifts made by our employees and directors to 501(c)(3) charities are matched, up to an aggregate total of $10,500 in any calendar year. No amounts are included for this program because the matching gifts are made by the Fannie Mae Foundation, not Fannie Mae. In addition, no amounts are included for a furnished apartment we lease near our corporate offices in Washington, DC for use by Mr. Ashley, the non-executive Chairman of our Board, when he is in town on company business. Provided that he reimburses us, Mr. Ashley is permitted to use the apartment up to twelve nights per year when he is in town but not on company business. | ||
(4) | Mr. Duberstein resigned from our Board in February 2007. Mr. Gerrity, Ms. Korologos and Mr. Marron each left our Board in 2006. |
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Directors who are employees of Fannie Mae receive no compensation for their service as directors.
Board. In 1992, we established OptionsOption Awards.Each nonmanagement Under the terms of the 2003 Plan, each non-management director is granted an annual nonqualified stock option to purchase 4,000 shares of common stock immediately following the annual meeting of shareholders at the fair market value on the date of grant. The date of grant is the date of theA non-management director elected between annual meeting of shareholders. A nonmanagement director appointed or elected as a mid-term replacement will receivemeetings receives a nonqualified stock option to purchase at the fair market value on the date of grant a pro rata number of shares equal to the fraction of the remainder of the term. In May 2002, each nonmanagement director received an option to purchase 4,000 shares of common stock, with a fair market valuebased on the date of grant of $78.885.time remaining until the next annual meeting. Each option granted in 2002 will expire ten years after the date of grant and was exercisable immediatelyvests in four equal annual installments beginning on the datefirst anniversary of grant.the grant, subject to accelerated vesting upon the director’s departure from the Board of Directors. Non-management directors generally have one year to exercise the options granted under the 2003 Plan when they leave the Board. Options granted on or prior to May 20, 2003 under the 1993 Plan must generally be exercised within three months after a director leaves the Board.options held by nonmanagement directors whowill have five years to increase the value of their common stock ownership from the current level of $175,000 to $500,000.at least ten years may be exercised for a period of one year following their retirement from the Board.12Restricted StockFannie Mae has a restricted stock award program for nonmanagement members of the Board of Directors. The shares currently are awarded under the Fannie Mae Stock Compensation Plan of 1993. The award program provides for consecutive five-year cycles of awards of restricted common stock. Restricted common stock is common stock that cannot be sold until it vests over an extended period of time, with vesting contingent on the director’s continued service on the Board. Restricted common stock is held in an escrow account for each participant until it vests. At vesting, the restricted period ends and the escrow agent delivers the shares to participants.Each participant has all of the rights and privileges of a shareholder as to the restricted common stock, other than the ability to transfer it, including the right to receive any cash or stock dividends declared with respect to the stock and the right to instruct the escrow agent in voting the stock. Awards vest over five years at the rate of20 percent per year, provided the participant is serving on the Board. If a director joins the Board during a five-year cycle,or until he or she receivesleaves the number of shares of restricted common stock that represents his or her pro rata portion of the grant for the cycle, based on the time remaining in the cycle. These grants vest in the same annual amounts as those of directors who participate in the full five-year cycle. Vesting accelerates upon departure from the Board due to death, disability, or the 70th birthday of an elected director.In May 2001, Fannie Mae granted 871 shares of restricted common stock for the 2001-2006 cycle to each nonmanagement director who was a member of the Board at that time. The full award for the 2001-2006 cycle had a fair market value on the grant date of $65,813. The current members of the Board who were not members in May 2001 received pro rata awards upon their appointment or election to the Board, as follows: 856 shares to Mr. Ashe, Ms. Bordonaro, Mr. Harvey, and Mr. Segue in July 2001; 813 shares to Mr. Justiz in October 2001; and 697 shares to Mr. Malek in May 2002.In May 2002, the following nonmanagement directors vested in shares of restricted common stock as follows: 174 shares to Mr. Ashley, Mr. Duberstein, Mr. Gerrity, Ms. McLaughlin Korologos, Mr. Marron, Ms. Mulcahy, Mr. Pickett, and Mr. Swygert; 159 shares to Mr. Ashe, Ms. Bordonaro, Mr. Harvey, and Mr. Segue; and 116 shares to Mr. Justiz. In addition, in May 2002, Mr. Vincent Mai, who left the Board in May 2002, and Mr. Stephen Friedman, who left the Board in December 2002, each vested in 174 shares of restricted common stock.ProgramProgram.the Federal National Mortgage Associationour Director’s Charitable Award Program. The purpose of the program is to acknowledge the service of Fannie Mae’sour directors, recognize theour own interest and that of Fannie Mae and itsour directors in supporting worthy institutions, and enhance Fannie Mae’sour director benefit program to enable Fannie Maeus to continue to attract and retain directors of the highest caliber. Under the program, whenwe make donations upon the death of a director dies, Fannie Mae will donate up to a maximum of $1,000,000 in $100,000 increments to up to five charitable organizations or educational institutions of the director’s choice. We donate $100,000 for every year of service by a director up to a maximum of $1,000,000. To be eligible to receive a donation, a recommended organization must be an educational institution or charitable organization and must qualify to receive tax-deductible donations under the Internal Revenue Code of 1986. The program is generally funded by life insurance contracts on the lives of participating directors; the funding is structured in a manner that will allow Fannie Mae to recover the entire program cost through the receipt of life insurance benefits.directors. The program has no direct compensation value to directors because they do not receive any direct cash or tax benefit.13The Audit Committee of Fannie Mae’s Board of Directors is composedmay elect to amend, suspend, or terminate the program at any time.five directors. In the business judgmentFannie Mae Foundation on the same terms as our employees.each Committee member meetsin any calendar year into the independence, qualification, and expertise requirements ofdeferred compensation plan. Plan participants receive an investment return on the New York Stock Exchange listing standards and Fannie Mae’s corporate governance guidelines.The Audit Committee operates underdeferred funds as if the funds were invested in a written charter that is reviewed annually and was last approvedhypothetical portfolio chosen by the Boardparticipant from among the available investment options, which are described in more detail below under “Nonqualified Deferred Compensation—Elective Deferred Compensation Plans.” Prior to the deferral, plan participants must elect to receive the deferred funds either (1) in a lump sum, (2) in approximately equal annual installments, or (3) in an initial payment followed by approximately equal annual installments, with a maximum of Directors15 installments. Deferral elections generally
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In accordance with this purpose, the outside auditors report directlyproposed amendment to the Audit Committee and the Committee has the sole authority2003 Plan described in Proposal 3 is approved, non-management directors also will be able to appoint and retain the outside auditors, subjectelect to shareholder ratification. The Audit Committee approvesdefer receipt of any awards of restricted stock units. In addition, non-management directors will be able to elect to convert their annual retainer to deferred shares. Additional information about these deferral rights is included in advance the fees for and terms“Proposal 3: Approval of all auditing and non-audit servicesAmendment to be provided by the outside auditors. The Committee meets periodically separately with management, the head of the internal audit department, and the outside auditors. The Committee has the authority to retain counsel, accountants, and other advisors to assist the members in carrying out their duties.
For the year ended December 31, 2002, the Audit Committee met seven times. During the year, the Committee met with members of senior management (including the Chairman and Chief Executive Officer, the Vice Chairman and Chief Operating Officer, the Vice Chair, the ChiefFinancial Officer, the Controller, the head of the internal audit department, the Chief Technology Officer, the Executive Vice President for Law & Policy, the General Counsel, and the Senior Vice President for Human Resources) and internal tax, finance, legal, technology, and internal audit personnel, as well as representatives from Fannie Mae’s outside auditors, to discuss and review the audit scope and plans, the results of internal and external audit examinations, evaluations by the auditors of Fannie Mae’s internal controls, the quality of Fannie Mae’s financial reporting, Fannie Mae’s compliance with legal and regulatory requirements, and Fannie Mae employees’ complianceStock Compensation Plan of 2003—Description of Plan—Deferred Compensation.”
In relianceservice on the reviews, reports,Board, including travel to and discussions referred to above, the Audit Committee recommendedfrom our meetings, accommodations, meals, and training.
28
14
that the audited financial statements be included in Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2002.
In addition, the Audit Committee approved and recommended to the Board of Directors the reappointment of Fannie Mae’s outside auditors, KPMG LLP, for 2003, subject to ratification by the shareholders at the 2003 annual meeting. The Committee pre-approved the fees for and terms of all audit and non-audit services to be provided by the outside auditors in 2003. The Audit Committee chairman must pre-approve any additional audit or non-audit services to be provided by the outside auditors and will report any pre-approvals to the Committee at the next scheduled meeting.
As part of its review of Fannie Mae’s internal controls and compliance with legal and regulatory requirements, the Committee also reviewedmodifications to Fannie Mae’s Code of Business Conduct for employees, including senior financial officers of Fannie Mae. The Board of Directors adopted the revised Code of Business Conduct in January 2003; the Codewhose background is available on Fannie Mae’s Web site at www.fanniemae.com.
Interested parties may contact the Audit Committee by electronic mail, to “auditcommittee@fanniemae.com”, or by U.S. mail, to Audit Committee, c/o Office of the Secretary, Fannie Mae, Mailstop: 1H-2S/05, 3900 Wisconsin Avenue NW, Washington DC 20016-2892.
The Audit Committee
Thomas P. Gerrity, Chairman
William R. Harvey
Frederic V. Malek
Anne M. Mulcahy
Taylor C. Segue
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Compensation Committee Report on Executive Compensation
This is the 2002 report of the Fannie Mae Compensation Committee. The Committee is composed entirely of independent directors. The Compensation Committee charter setting forth the Committee’s organization, purpose, and duties is available at www.fanniemae.com.
Fannie Mae’s Compensation Philosophy and Approach
Fannie Mae became a shareholder-owned corporation in 1968, and since that time has become one of the world’s largest financial institutions. In carrying out its mission, Fannie Mae has become the country’s largest source of financing for home mortgages and the largest issuer of private-sector corporate debt and mortgage-backed securities.
Because of the scope and complexity of Fannie Mae’s activities and the importance of its mission, it is imperative that the corporation always be in a position to attract and retain the best possible talent. To this end, Fannie Mae’s Board of Directors has adopted a compensation policy designed to help the corporation compete with other large, sophisticated financial services companies for the talent Fannie Mae needs.
In formulating and implementing Fannie Mae’s compensation philosophy, the Board of Directors, through its Compensation Committee, also has carefully considered its statutory obligations under the Fannie Mae Charter Act (the “Charter Act”). The Charter Act states that the Board of Directors shall pay its executive officers compensation which the Board determines to be “reasonable and comparable with compensation for employment in other similar businesses (including other publicly held financial institutions or major financial services corporations) involving similar duties and responsibilities.” Moreover, the Charter Act requires that “a significant portion of potential compensation of all executive officers…of [Fannie Mae] shall be based on the performance of [Fannie Mae].” The Compensation Committee has based its compensation philosophy on these statutory requirements and has established review processes to ensure that this philosophy is implemented rigorously and carefully.
Accordingly, the central tenets of Fannie Mae’s compensation philosophy are pay for performance and comparability. Pay for performance is reflected strongly in the structure of Fannie Mae’s compensation programs. It is the core principle underlying the programs. Other than base salary, all major elements of Fannie Mae’s compensation program for the most senior members of the executive officer group are tied to annual and long-term performance goals. Furthermore, through the use of stock vesting over multi-year terms, Fannie Mae tightly aligns the interests of executives with those of shareholders.
The Committee acts to ensure that Fannie Mae’s compensation is reasonable and comparable with the compensation of executives in other similar businesses that involve similar duties and responsibilities. Each year, the Compensation Committee reviews compensation survey data to analyze current compensation practices at companies comparable to Fannie Mae in terms of asset size, line of business, market capitalization, and other factors. Specific Fannie Mae officer positions are compared to positions involving similar duties and responsibilities. The market data reviewed by the Committee for specific officer positions comes from companies included in the S&P Financials Index shown in the stock performance graph, as well as other publicly held financial institutions and major financial services companies that compete for executives whose skills and experience are sought by Fannie Mae. The Committee utilizes as a third party resource a nationally recognized executive compensation consulting firm to assist in this comparability analysis.
In 2002, the Committee also asked its executive compensation consultant to provide a comprehensive assessment of Fannie Mae’s compensation philosophy to assist the Committee in its analysis of that pay philosophy, market comparability, and types of long-term incentives used. Based on that review, the Committee decided to continue to target cash compensation (i.e., salary and annual bonus) at approximately the 50th percentile of the market data and positions total compensation (cash plus stock-based awards) at approximately the 65th percentile. The market data is used to determine specific salary, bonus, and variable long-term incentive award targets by officer position. The proportion of the total compensation package tied
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to performance measures increases with the rank of the executive officer.
In implementing Fannie Mae’s compensation philosophy, the Committee each year conducts an assessment of corporate and individual performance. Each officer’s individual performance is assessed on both individual business results and the demonstration of specific leadership qualities throughout the year. Evaluation of leadership qualities are assessed through the collection of reviews from both the officer’s subordinates and superiors. In the final step of the performance review process, an overall performance rating is assigned reflecting a balance of business results and demonstration of leadership.
The performance rating is used to determine actual pay for salary, bonus, and variable long-term incentive awards relative to the targets. The Committee has final authority over compensation decisions for senior vice presidents, and the full non-management board determines compensation for executive vice presidents and the Office of the Chairman.
The company’s executive compensation program has three primary tools: base salary, an annual bonus award, and variable long-term incentive stock awards. The program ties a large portion of each officer’s total compensation to performance over different time periods. To achieve a balanced result, Fannie Mae’s pay for performance approach provides a cash payment for achieving annual financial goals and stock based awards for medium and long-term performance generating increases in shareholder returns. This program is expressly designed not to put too much reliance on any one form of compensation.
Base Salary. Base salary for executive officers is determined principally by the Committee’s judgment as to the market for comparable positions, informed by an annual market comparability review conducted by its third party consultant. Final salary determinations also reflect individual performance, leadership, and experience level. In general, the Committee seeks to target annual total cash (salary plus bonus) to the 50th percentile of the comparative market.
Annual Incentive Plan. The Annual Incentive Plan puts a portion of each executive officer’s annual compensation at risk. Financialgoals established by the Board at the beginning of the year and achievement against these goals determine the funding of the bonus pool from which the actual bonuses are paid. For 2002, the corporate financial goal was an aggressive earnings per share (“EPS”) growth measure that Fannie Mae exceeded.
Variable Long-Term Incentive Awards. Variable long-term incentive awards are delivered in the form of stock options, and performance shares or restricted stock. All variable long-term incentive compensation programs are paid solely in Fannie Mae common stock, thereby reinforcing the shared interests of officers and shareholders. Officers at the senior vice president level and above receive half of the value of their annual variable long-term incentive award in the form of performance shares and half in the form of stock options.
Performance Shares. Performance shares are pay for performance incentive awards that compensate senior management for meeting performance objectives over a three-year period. Each year, the Committee establishes designated award periods (“cycles”) of three years. At the beginning of each cycle, at the Committee’s request, the Board establishes program targets based on both financial and non-financial goals. The financial goals currently are tied to growth in EPS and the non-financial goals are tied to Fannie Mae’s strategic plan. The Committee has established a scorecard to measure Fannie Mae’s achievement of the strategic plan in the following areas:
The EPS goals and the strategic goals are given equal weighting (i.e., 50 percent each) in determining award payout. The Committee determines actual achievement against these goals at the conclusion of each cycle. An actual award payout can range from 40 percent of the performance shares granted for threshold
17
achievement to 150 percent for goal achievement at maximum levels. No payment is made if achievement is below the pre-determined threshold. Fannie Mae exceeded the EPS growth goals established for the three-year performance share cycle that concluded in 2002. The Committee also determined that Fannie Mae met or exceeded each of the 2000-2002 performance share cycle’s strategic non-financial goals set forth above.
Stock Options. Stock Options link the interests of executives and shareholders by providing value to the executive only when the stock price increases over a number of years. Stock options vest over a four-year period at the rate of 25% per year and generally have a ten-year term. The number of stock options received by Fannie Mae executive officers is targeted, when combined with performance shares, to bring total compensation to the 65th percentile of the comparative market.
Chief Executive Officer Compensation
All of the executive compensation processes and policies described above, are applied in setting the compensation and assessing the performance of Mr. Raines. In addition to the multi-rater feedback for all officers, all nonmanagement members of the Board participate in the review of Mr. Raines’ performance.
Without Mr. Raines present, the nonmanagement members of the Board discussed the Committee’s review of Mr. Raines’ performance for 2002. They assessed Mr. Raines’ performance against a broad range of leadership criteria including: strategic thinking, providing vision and direction, accelerating change, intellectual honesty, integrity, motivating and energizing people, teamwork and partnering, influencing ideas and initiatives, delivering results, valuing all people, and developing management. The Board considered feedback from subordinates and Board members obtained through the same survey instrument used to collect performance feedback for other officers. Mr. Raines’ performance also was measured against the financial and non-financial goals established for Fannie Mae’s strategic plan.
All of this information was used to make the performance-based compensation decisions for Mr. Raines. Overall, the Board concluded that the performance of Fannie Mae under Mr. Raines’leadership exceeded targets set in advance and met or exceeded that of comparable companies. The Committee specifically noted the following 2002 achievements in determining Mr. Raines’ compensation for 2002 and variable long-term incentive award grants:
The Committee’s specific 2002 compensation determinations with respect to Mr. Raines are as follows and are reflected in the Summary Compensation Table at page 24.
Base Salary. For 2002, the Board set Mr. Raines’ cash base salary at $992,250, unchanged since 2000, and slightly below the midpoint of the market. For the purposes of calculating his pension and life insurance benefits, however, the Board set a reference annual base salary for Mr. Raines at $1,093,956, reflecting a five percent increase over the prior year. Consistent with Fannie Mae’s pay for performance philosophy, the difference between Mr. Raines’ cash base salary and reference annual base salary is awarded as additional long-term, equity-based compensation.
Annual Bonus.For 2002, Mr. Raines’ annual bonus was determined against goals set at the
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beginning of the year based on corporate financial performance for the year, measured by growth in EPS. Fannie Mae significantly exceeded that goal and Mr. Raines’ bonus for the year reflects his contributions to that performance.
Variable Long-Term Incentive Compensation.The information provided in the proxy statement on variable long-term compensation reflects two actions taken by the Committee. First, the Committee awarded the long-term incentive payouts reported in the Summary Compensation Table at page 24. These stock payouts reflect the achievement of performance share programs’ financial and strategic goals for multi-year periods.
Second, in line with Fannie Mae’s pay for performance goals and to continue to align Mr. Raines directly with the long-term interests ofshareholders, the Committee granted Mr. Raines performance shares for the three-year period beginning in January 2003 and stock options, vesting over four years, based on his performance evaluation. The awards are set forth in the tables at pages 25 and 26.
Conclusion
The Committee believes both the design of Fannie Mae’s plans and the actual total compensation levels described in this proxy statement reflect adherence to the Board of Directors’ obligations under the Charter Act and careful thinking about what is appropriate from both competitive and shareholder perspectives, and clearly reflect Fannie Mae’s compensation philosophy.
The Compensation Committee
Anne M. Mulcahy, Chairman
Ann McLaughlin Korologos
Joe K. Pickett
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Nominating and Corporate Governance Committee Report
The Nominating and Corporate Governance Committee of the Fannie Mae Board of Directors is composed of four independent directors and operates under a written charter that was last approved by the Board in January 2003. At that time, Fannie Mae’s Board also approved a high standard of independence for directors, which is set forth in Fannie Mae’s Corporate Governance Guidelines, attached as Appendix B to this proxy statement. A substantial majority of the members of the Board meet the standard. Each member of the Nominating and Corporate Governance Committee currently meets not only that standard, but also the enhanced independence requirements for audit committee members, which are also set forth in our Corporate Governance Guidelines.
Duties and Responsibilities
Among its responsibilities, the Nominating and Corporate Governance Committee makes recommendations to the Board about individuals to be elected by the shareholders as Fannie Mae directors. The Committee also plays a leadership role in shaping Fannie Mae’s corporate governance.
The Nominating and Corporate Governance Committee met seven times in 2002. The Committee recommended 13 nominees for election as directors at the 2002 Annual Meeting of Shareholders. It also undertook a Corporate Governance Benchmarking Project, as discussed below.
Fannie Mae’s nonmanagement directors meet in executive session on a regular basis. In her role as the Chairman of the Nominating and Corporate Governance Committee, Ms. McLaughlin Korologos establishes the agenda and serves as the presiding director for all meetings of the non-management directors.
Corporate Governance Benchmarking Project
Fannie Mae has received high marks for the quality of its governance practices. For example, Standard & Poor’s issued Fannie Mae a corporate governance score of “9.0” on a scale of 1 to 10 (with 10 being the highest), after an extensive review of our corporate governance practices. Standard & Poor’s judged our corporate governance practices to be at “a very strong level on a global basis of comparison.” Fannie Mae also has strived consistently to enhance those practices in an effort to maintain the highest of standards.
To this end, in July 2002, the Nominating and Corporate Governance Committee undertook a Corporate Governance Benchmarking Project, consisting of a thorough review of Fannie Mae’s corporate governance practices. The Committee reviewed Fannie Mae’s practices in light of emerging requirements, including proposed corporate governance listing standards of the New York Stock Exchange and best practices followed by other companies. The goal of the benchmarking project was to maintain and enhance a corporate governance framework for Fannie Mae that is best in class.
Based upon its review, the Committee determined that Fannie Mae already was operating under many best corporate governance practices. In January 2003, the Committee recommended enhanced corporate governance standards to the Fannie Mae Board, and the Board voted to approve these standards, which are reflected in:
These documents implement and strengthen Fannie Mae’s corporate governance practices. They are available on Fannie Mae’s Web site at www.fanniemae.com.
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Interested parties wishing to communicate their concerns or questions about Fannie Mae to the Chairman of the Committee or to the non-management directors as a group may do so by electronic mail, to “board@fanniemae.com”, or by U.S. mail, to Non-Management Directors, c/o Office of the Secretary, Fannie Mae, Mailstop: 1H-2S/05, 3900 Wisconsin Avenue NW, Washington, DC 20016-2892.
In the coming months, additional provisions of the Sarbanes-Oxley Act of 2002, a new law addressing regulation of accounting and corporate governance, and the corporate governance listing standards proposed by the New York Stock Exchange are expected to become final. WithFannie Mae’s fundamental corporate governance practices already in place, the Nominating and Corporate Governance Committee is prepared to respond quickly upon approval of final rules and standards. The benchmarking project is ongoing, and its work is being updated periodically to enable Fannie Mae to maintain its position at the forefront of corporate governance best practices.
The Nominating and Corporate Governance Committee
Ann McLaughlin Korologos, Chairman
Stephen B. Ashley
Thomas P. Gerrity
Donald B. Marron
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Executive Officers Who Are Not Nominees
Our executive officers who are not nominees for election to the Board of Directors have provided the following information about their principal occupation, business experience, and other matters.
Executive Vice | ||
| • Fannie | |
| ||
| ||
• Interim Head of Housing and Community Development—January 2005 to July 2005 | ||
• Senior Vice President—Multifamily Lending and Investment—May 2000 to January 2005 | ||
• Senior Vice President—American Communities Fund—October 1999 to May 2000 | ||
• Senior Vice President of the Community Development Capital Corporation—August 1998 to October 1999 | ||
• Senior Vice President of Fannie Mae’s Northeastern Regional Office in Philadelphia—May 1993 to August 1998 | ||
• Directorships: Fannie Mae Foundation since January 1995 (Vice Chairman since January 2005), Comcast Corporation, Corporation for Supportive Housing, and Maret School | ||
• Other Activities: Member of the Executive Leadership Council and the Real Estate Round Table | ||
Executive Vice | ||
• Fannie Mae | ||
• Executive Vice President since | ||
• Executive Vice President and Chief | ||
• MCI, Inc. (Executive Vice President, Chief Financial Officer | ||
• President of Performance Enhancement Group, Inc., a business development services firm—July | ||
• Executive Vice President and Chief Financial Officer | ||
• Tenneco, Inc. (Executive Vice President from 1996 to November 1999) and (Chief Financial Officer from 1981 to November 1999) | ||
• Directorships: Financial Accounting Foundation (Trustee); Natural Resources Partners L.P.; and Westlake Chemicals Corporation |
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Enrico Dallavecchia, 45 | Executive Vice President and Chief Risk Officer | |
• Executive Vice President and Chief Risk Officer since June 2006 | ||
• JP Morgan Chase (Head of Market Risk for Retail Financial Services, Chief Investment Office and Asset Wealth Management—April 2005 to May 2006) and (Market Risk Officer for Global Treasury, Retail Financial Services, Credit Cards and Proprietary Positioning Division and Co-head of Market Risk Technology—December 1998 to March 2005) | ||
Linda K. Knight, 57 | Executive Vice President—Enterprise Operations | |
• Fannie Mae | ||
• Executive Vice President—Enterprise Operations since April 2007 | ||
• Executive Vice President—Capital Markets—March 2006 to April 2007 | ||
• Senior Vice President and Treasurer—February 1993 to March 2006 | ||
• Vice President and Assistant Treasurer—November 1986 to February 1993 | ||
• Director, Treasurer’s Office—November 1984 to November 1986 | ||
• Assistant Director, Treasurer’s Office—February 1984 to November 1984 | ||
• Senior Market Analyst—August 1982 to February 1984 | ||
Robert J. Levin,52 | Executive Vice President and Chief Business Officer | |
• Fannie Mae | ||
• Executive Vice President and Chief Business Officer since November 2005 | ||
• Interim Chief Financial Officer—December 2004 to January 2006 | ||
• Executive Vice President of Housing and Community Development—June 1998 to December 2004 | ||
• Executive Vice President—Marketing—June 1990 to June 1998 | ||
• Fannie Mae Foundation (previously served as director and treasurer). |
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Thomas A. Lund,48 | Executive Vice President—Single-Family Mortgage Business | |
• Fannie Mae | ||
• Executive Vice President—Single-Family Mortgage Business since July 2005 | ||
• Interim head of Single-Family Mortgage Business—January 2005 to July 2005 | ||
• Senior Vice President—Chief Acquisitions Office—January 2004 to January 2005 | ||
• Senior Vice President—Investor Channel—August 2000 to January 2004 | ||
• Senior Vice President—Southwestern Regional Office, Dallas, Texas—July 1996 to July 2000 | ||
• Vice President for Marketing—January 1995 to July 1996 | ||
Rahul N. Merchant, 51 | Executive Vice President and Chief Information Officer | |
• Executive Vice President and Chief Information Officer since November 2006 | ||
• Merrill Lynch & Co. (Head of Technology—2004 to 2006) and (Head of Global Business Technology, Global Markets and Investment Banking division—2000 to 2004) | ||
• Executive Vice President of Dresdner, Kleinwort and Benson—1998 to 2000 | ||
• Previously served as Senior Vice President of Sanwa Financial Products and First Vice President of Lehman Brothers, Inc. | ||
• Other Activities: Board of Advisors of the American India Foundation | ||
Peter S. Niculescu, | Executive Vice President—Capital Markets | |
• Fannie Mae | ||
• Executive Vice President—Capital Markets (previously Mortgage | ||
• Senior Vice President—Portfolio | ||
William B. Senhauser,44 | Senior Vice President and Chief Compliance Officer | |
• Fannie Mae | ||
• Senior Vice President and Chief Compliance Officer since December 2005 | ||
• Vice President for Regulatory Agreements and Restatement—October 2004 to December 2005 | ||
• Vice President for Operating Initiatives—January 2003 to September 2004 | ||
• Vice President, Deputy General Counsel—November 2000 to January 2003 |
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Julie St. John, age 51, has been Executive Vice President and Chief Technology Officer since July 2000. She served as Senior Vice President—Mortgage Business Technology from November 1999 to July 2000. She was Senior Vice President—Guaranty and Franchise Technologies from November 1993 to November 1999. Ms. St. John joined Fannie Mae in 1990.
Michael J. Williams, age 45, has been President—Fannie Mae eBusiness since July 2000. He served as Senior Vice President—e-Commerce from March 2000 to July 2000. He was Senior Vice President—Customer Applications and Technology Integration from November 1993 to March 2000. Mr. Williams joined Fannie Mae in 1991.
Stephen M. Swad, 46 | Executive Vice President and Chief Financial Officer | |
• Fannie Mae | ||
• Executive Vice President and Chief Financial Officer since August 18, 2007 | ||
• Executive Vice President and Chief Financial Officer Designate—May 2007 to August 17, 2007 | ||
• Executive Vice President and Chief Financial Officer of AOL, LLC—February 2003 to February 2007 | ||
• Executive Vice President of Finance and Administration of Turner Broadcasting System Inc.’s Turner Entertainment Group—April 2002 to February 2003 | ||
• Various corporate finance roles at Time Warner—1998 through 2002 | ||
• Previously served as a Partner of KPMG’s national office and Deputy Chief Accountant at the U.S. Securities and Exchange Commission | ||
Beth A. Wilkinson,45 | Executive Vice President—General Counsel and Corporate Secretary | |
• Executive Vice President—General Counsel and Corporate Secretary since February 2006 | ||
• Partner and Co-Chair, White Collar Practice Group at Latham & Watkins LLP—1998 to 2006 | ||
• Department of Justice (prosecutor and special counsel forU.S. v. McVeigh and Nichols—1996 to 1998), (principal deputy of the Terrorism & Violent Crime Section—1995), and (Special Counsel to the Deputy Attorney General—1995 to 1996) | ||
• Assistant U.S. Attorney in the Eastern District of New York—1991 to 1995 | ||
• Captain, U.S. Army (serving as an assistant to the general counsel of the Army for Intelligence & Special Operations)—1987 to 1991 | ||
• Other Activities: Board of Directors of Equal Justice Works | ||
Michael J. Williams, 50 | Executive Vice President and Chief Operating Officer | |
• Fannie Mae | ||
• Executive Vice President and Chief Operating Officer since November 2005 | ||
• Executive Vice President for Regulatory Agreements and Restatement—February 2005 to November 2005 | ||
• President—Fannie Mae eBusiness—July 2000 to February 2005 | ||
• Senior VicePresident—e-commerce—July 1999 to July 2000 | ||
• Various positions in Single-Family and Corporate Information Systems divisions—1991 to July 1999 |
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• | Daniel Mudd, President and Chief Executive Officer |
• | Robert Blakely, Executive Vice President (Chief Financial Officer—January 2006 to August 2007) |
• | Robert Levin, Executive Vice President and Chief Business Officer (Interim Chief Financial Officer—December 2004 to January 2006) |
• | Peter Niculescu, Executive Vice President—Capital Markets |
• | Beth Wilkinson, Executive Vice President, General Counsel and Corporate Secretary |
• | Michael Williams, Executive Vice President and Chief Operating Officer |
• | Julie St. John, former Executive Vice President and Chief Information Officer |
• | drive a “pay for performance” perspective that rewards company and individual performance, while supporting our mission to help more families achieve homeownership; |
• | promote a long-term focus and align management’s and shareholders’ interests by providing a greater portion of compensation that is stock-based for more senior members of management; |
• | foster compliance with legal and regulatory requirements; and |
• | provide compensation that is straightforward and easy to understand. |
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Allstate | Countrywide | SunTrust Banks | ||
American Express | Freddie Mac | U.S. Bancorp | ||
American International Group | JP Morgan Chase | Wachovia | ||
Bank of America | MetLife | Washington Mutual | ||
Capital One | National City | Wells Fargo | ||
Citigroup | Prudential |
• | Salary is the basic cash compensation for the executive’s performance of his or her job responsibilities. It is intended to reflect the executive’s level of responsibility and individual performance over time. |
• | Annual cash incentive bonuses reward executives based on a combination of corporate and individual performance during the year measured against pre-established corporate goals and individual goals designed to align with the corporate goals. We also use sign-on bonuses or guaranteed first-year bonus minimums from time to time to recruit executives with critical skills. |
• | Long-term incentive awards are stock-based awards that vest over a period of years. For 2006 performance, these awards were delivered in the form of restricted stock or restricted stock units with a four-year vesting schedule. We believe that providing a significant portion of senior management compensation through long-term incentive awards based on our common stock and with a multi-year vesting schedule aligns the long-term interests of our senior management with those of our other shareholders, reinforcing a shared interest in company performance. Long-term incentive awards may also be used as sign-on bonuses to recruit executives. |
• | Pension Benefits. Our named executives participate in our Executive Pension Plan. This plan is a nonqualified, defined benefit plan that supplements the pension benefits payable to the named executive |
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under our tax-qualified pension plan, which is the “Retirement Plan,” discussed below under “Compensation Tables—Pension Benefits—Fannie Mae Retirement Plan.” The annual pension benefit (when combined with our Retirement Plan) for our Executive Vice Presidents equals 40%, and for our Chief Executive Officer equals 50%, of the executive’s highest average covered compensation earned during any 36 consecutive months within the last 120 months of employment. Covered compensation under the plan is limited to 150% of base salary for our Executive Vice Presidents and 200% of base salary for our Chief Executive Officer. |
• | A named executive is not entitled to receive a pension benefit under the Executive Pension Plan until the executive has completed five years of service as a plan participant, at which point the pension benefit becomes 50% vested and continues vesting at the rate of 10% per year during the next five years. We consider the Executive Pension Plan an important component of our executives’ total compensation and believe requiring ten years of service as a participant before full vesting serves as a significant retention tool. Our Executive Pension Plan is discussed in more detail below under “Compensation Tables—Pension Benefits.” |
• | Other Employee Benefits and Plans. In general, named executives are eligible for the employee benefits available to our employee population as a whole, including our medical insurance plans, our 401(k) plan, and our matching gifts program. Named executives also are eligible to participate in programs we make available only to management employees at varying levels, including our elective deferred compensation plan. |
• | Severance benefits. Our Chief Executive Officer and our Chief Business Officer are entitled to receive severance benefits under agreements we entered into with them, dated November 15, 2005 and June 19, 1990, respectively. During 2006, our named executives other than Mr. Mudd were eligible to receive severance benefits under certain circumstances pursuant to a severance program no longer available to them. See “Compensation Tables-Potential Payments Upon Termination orChange-in-Control.” |
2006 Long-Term | Total of Base Salary, | |||||||||||||||
Base Salary as | 2006 Bonus | Incentive Award | Bonus, and Long-Term | |||||||||||||
Named executive(2) | of 12/31/06 | (Paid in 2007) | (Granted in 2007)(3) | Incentive Award | ||||||||||||
Daniel Mudd | $ | 950,000 | $ | 3,500,000 | $ | 9,999,947 | $ | 14,449,947 | ||||||||
Robert Blakely | 650,000 | 1,290,575 | 3,299,361 | 5,239,936 | ||||||||||||
Robert Levin | 750,000 | 2,087,250 | 6,667,104 | 9,504,354 | ||||||||||||
Peter Niculescu | 539,977 | 1,029,060 | 2,839,945 | 4,408,982 | ||||||||||||
Beth Wilkinson | 575,000 | 1,947,988 | (4) | 2,770,316 | 5,293,304 | |||||||||||
Michael Williams | 650,000 | 1,630,200 | 5,247,443 | 7,527,643 |
(1) | This table is not intended to replace the summary compensation table, required under applicable SEC rules, that is included below under “Compensation Tables—Summary Compensation Table for 2006.” | |
(2) | This table reflects compensation decisions made for our named executives who were still employed by Fannie Mae in January 2007. Ms. St. John entered into a separation agreement with us in July 2006, and she retired from Fannie Mae in December 2006. Information regarding Ms. St. John’s 2006 compensation appears below in the “Compensation Tables—Summary Compensation Table for 2006.” |
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(3) | These awards consist of restricted stock or restricted stock units. The dollar amounts are based on the average of the high and low trading prices of our common stock of $56.66 on January 25, 2007, the date of grant. Mr. Mudd is required to hold one-fifth of his grant (net of shares withheld to pay withholding taxes) until his employment with Fannie Mae is terminated. This is in addition to Mr. Mudd’s obligation to hold shares under Fannie Mae’s stock ownership guidelines. | |
(4) | Includes a sign-on bonus of $800,000 paid in 2006 to Ms. Wilkinson when she joined us. |
• | Salaries. The Board established salaries for Mr. Mudd, Mr. Williams, and Mr. Levin in November 2005 in connection with their appointments to their current positions. None of these three named executives received any increase in salary for 2006. Salaries for Mr. Blakely and Ms. Wilkinson were determined by the Board in connection with their hires. Mr. Niculescu’s and Ms. St. John’s salaries were increased in 2006 based on their performance, our company-wide budget for salary increases, and market-based information regarding compensation paid for executives with similar roles and responsibilities. |
• | Annual Incentive Plan Cash Bonuses. The amount of an annual incentive plan cash bonus paid to a named executive depends on the company’s and the named executive’s performance measured against pre-established corporate and individual performance goals. During 2006, we engaged in a significant restatement of prior period financial statements and made an extensive effort to comply with the terms of the OFHEO Consent Order and to address a number of operational, policy, and infrastructure issues. As a result of the need to restate prior period financial statements, we had no reliable GAAP-compliant financial statements for recent periods. In light of these circumstances, our Board established the following set of performance goals, which focused on successfully operating the business while undertaking significant initiatives to address our financial reporting and compliance issues: |
• | Regulation and Restatement. Stabilize the company by (a) building strong and productive relationships with regulators; (b) restating prior period financial statements; (c) managing capital surplus; and (d) building relationships with investors; |
• | Business Results. Optimize the company’s business model and generate shareholder value through key initiatives; |
• | Mission Results. Fulfill our affordable housing mission goals by increasing liquidity to make U.S. housing more affordable and making an impact in highly disadvantaged communities; |
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• | Operations and Controls. Instill operational discipline into all functions, resulting in stronger processes, reduced risk, and compliance with Sarbanes-Oxley requirements; and |
• | Customers and Employees. Renew the company’s culture to achieve the company’s objectives by (a) demonstrating service, engagement, accountability, and good management; (b) reenergizing diversity programs; and (c) renewing our people strategy. |
• | made progress toward our stability goal by resolving outstanding investigations by governmental agencies; |
• | achieved our restatement goal by filing our 2004Form 10-K and restating prior period financials; |
• | successfully launched several major strategic business initiatives; |
• | restructured several business functions, including technology and operations, to improve efficiency and generate cost savings; |
• | made progress on building out controls and instilling operational discipline; and |
• | met our housing goals in a difficult environment. |
• | Long-Term Incentive Awards. Our compensation philosophy generally results in a greater portion of our named executives’ compensation being stock-based than at companies in our comparator group. For 2006 performance, the Board and the Compensation Committee determined that, in light of Fannie Mae’s not being a current SEC filer, long-term incentive awards would be in the form of restricted shares of Fannie Mae common stock or restricted stock units. In January 2007, the Board and the Compensation Committee approved awards with the values shown above in the table titled “Compensation Paid or Granted for 2006.” These awards vest in four equal annual installments beginning in January 2008. |
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• | reimbursement for financial counseling—effective July 1, 2007; |
• | use of company transportation for any non-business purpose without reimbursement—effective January 1, 2007; |
• | personal use of company-owned memberships at country clubs—effective January 1, 2008; |
• | excess liability insurance—effective January 1, 2008 for all officers and March 1, 2007 for any person who became an officer on or after that date; and |
• | the tax“gross-up” to cover taxes due on any excess liability insurance or life insurance that we provided to officers—effective January 1, 2008. |
• | the first installment of shares that was paid in January 2004 exceeded the amount due for the 2001- 2003 performance cycle, |
• | the unpaid second installment of the award for the2001-2003 performance cycle should not be paid, and |
• | no payouts would be made under the2002-2004 performance cycle. |
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23
2003 to 2005 | 2004 to 2006 | |||||||||||||||
Performance Cycle | Performance Cycle | |||||||||||||||
Named Executive(1) | Shares (#) | Value ($)(2) | Shares (#) | Value ($)(2) | ||||||||||||
Daniel Mudd | 11,438 | $ | 786,363 | 15,960 | $ | 1,097,250 | ||||||||||
Robert Blakely(3) | — | — | — | — | ||||||||||||
Robert Levin | 9,994 | 687,088 | 15,184 | 1,043,900 | ||||||||||||
Peter Niculescu | 6,238 | 428,863 | 8,968 | 616,550 | ||||||||||||
Beth Wilkinson(3) | — | — | — | — | ||||||||||||
Michael Williams | 8,806 | 605,413 | 11,150 | 766,563 |
(1) | Information regarding PSP awards held by Ms. St. John is set forth in the “Outstanding Equity Awards at Fiscal Year-End” table under “Compensation Tables” below. | |
(2) | The value of the shares is based on the closing price of our common stock of $68.75 on June 15, 2007, the date of the Board’s determination. | |
(3) | Mr. Blakely and Ms. Wilkinson did not receive awards under the PSP because they joined Fannie Mae in 2006. |
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Long Term Compensation | ||||||||||||||||||||||
Annual Compensation (1) | Awards | Payouts | ||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Other | Restricted Stock Award(s) (2) ($) | Securities Underlying Options/ SARs (#) | LTIP Payouts ($) | All | ||||||||||||||
Franklin D. Raines | 2002 | $ | 992,250 | $ | 3,300,000 | $ | 78,692 |
| — | 311,731 | $ | 7,233,679 | $ | 24,248 | ||||||||
Chairman of the Board | 2001 |
| 992,250 |
| 3,125,650 |
| 3,085 |
| — | 277,335 |
| 6,803,068 |
| 25,215 | ||||||||
and Chief Executive | 2000 |
| 992,250 |
| 2,480,625 |
| 2,907 |
| — | 421,358 |
| 4,588,616 |
| 41,351 | ||||||||
Officer | ||||||||||||||||||||||
Daniel H. Mudd | 2002 |
| 689,124 |
| 911,250 |
| 1,358 |
| — | 82,918 |
| 2,339,702 |
| 9,569 | ||||||||
Vice Chairman of the | 2001 |
| 656,429 |
| 1,083,109 |
| 1,320 |
| — | 87,194 |
| 1,188,846 |
| 8,412 | ||||||||
Board and Chief Operating Officer | 2000 |
| 537,063 |
| 735,130 |
| 265,052 | $ | 1,319,533 | 321,295 |
| 414,090 |
| 342,796 | ||||||||
Jamie S. Gorelick (4) | 2002 |
| 689,124 |
| 911,250 |
| 1,583 |
| — | — |
| 3,049,012 |
| 15,589 | ||||||||
Vice Chair of the Board | 2001 |
| 656,429 |
| 1,083,109 |
| 1,837 |
| — | 87,194 |
| 2,791,087 |
| 15,420 | ||||||||
2000 |
| 625,170 |
| 859,609 |
| 1,819 |
| — | 186,517 |
| 2,458,528 |
| 22,015 | |||||||||
Timothy Howard | 2002 |
| 498,614 |
| 781,250 |
| 1,169 |
| — | 81,661 |
| 1,947,368 |
| 12,213 | ||||||||
Executive Vice | 2001 |
| 463,315 |
| 694,983 |
| 1,103 |
| — | 75,617 |
| 1,987,119 |
| 12,150 | ||||||||
President and Chief | 2000 |
| 435,540 |
| 544,425 |
| 1,126 |
| — | 129,142 |
| 2,088,542 |
| 18,543 | ||||||||
Financial Officer | ||||||||||||||||||||||
Robert J. Levin | 2002 |
| 480,092 |
| 575,000 |
| 950 |
| — | 72,445 |
| 1,947,368 |
| 9,811 | ||||||||
Executive Vice | 2001 |
| 457,317 |
| 686,028 |
| 994 |
| — | 44,735 |
| 1,987,119 |
| 9,373 | ||||||||
President—Housing & | 2000 |
| 435,540 |
| 544,425 |
| 1,043 |
| — | 100,002 |
| 2,088,542 |
| 12,877 | ||||||||
Community Development |
Notes to Summary Compensation Table
Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Deferred | All Other | ||||||||||||||||||||||||||||||||
Name and Principal | Salary | Bonus | Awards | Awards | Compensation | Compensation | Compensation | Total | ||||||||||||||||||||||||||||
Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(2) | Earnings ($)(5) | ($)(6) | ($) | |||||||||||||||||||||||||||
Daniel Mudd | 2006 | $ | 950,000 | — | $ | 4,799,057 | $ | 962,112 | $ | 3,500,000 | $ | 932,958 | $ | 136,072 | $ | 11,280,199 | ||||||||||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
Robert Blakely | 2006 | 587,500 | $ | 926,250 | 3,898,589 | — | 364,325 | 209,087 | 140,480 | 6,126,231 | ||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Robert Levin | 2006 | 750,000 | — | 2,477,097 | 883,442 | 2,087,250 | 307,078 | 70,710 | 6,575,577 | |||||||||||||||||||||||||||
Executive Vice President, Chief Business Officer and former Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Peter Niculescu | 2006 | 538,188 | — | 1,388,328 | 533,816 | 1,029,060 | 232,562 | 39,906 | 3,761,860 | |||||||||||||||||||||||||||
Executive Vice President—Capital Markets | ||||||||||||||||||||||||||||||||||||
Beth Wilkinson | 2006 | 490,961 | 1,748,750 | 396,712 | — | 199,238 | 198,413 | 35,578 | 3,069,652 | |||||||||||||||||||||||||||
Executive Vice President, General Counsel and Corporate Secretary | ||||||||||||||||||||||||||||||||||||
Michael Williams | 2006 | 650,000 | — | 1,808,182 | 701,446 | 1,630,200 | 371,753 | 69,482 | 5,231,063 | |||||||||||||||||||||||||||
Executive Vice President and Chief Operating Officer | ||||||||||||||||||||||||||||||||||||
Julie St. John(7) | 2006 | 536,618 | — | 1,514,019 | 744,008 | — | 936,773 | 1,841,777 | 5,573,195 | |||||||||||||||||||||||||||
Former Executive Vice President and Chief Information Officer |
(1) | Mr. Mudd is entitled to a minimum base salary of $950,000 under his employment agreement. “Salary” for Mr. Blakely includes $275,000 he elected to defer to later years. | |
Except as otherwise noted, amounts reported in the “Bonus” column do not include amounts earned under our annual | ||
(3) | These amounts | |
The SFAS 123R grant date fair value of restricted stock and restricted stock units is calculated as the average of the high and low trading price of our common stock on the date of grant. Because performance shares do not participate in dividends during the three-year performance cycle and include a cap on the market value to be paid equal to three times the grant date market value, the SFAS 123R grant date fair value of performance shares is calculated as the market value on date of grant, less the present value of expected dividends over the three-year performance period discounted at the risk-free rate, less the value of |
42
(4) | These amounts represent the dollar amounts we recognized for financial statement reporting purposes with respect to 2006 for the fair value of stock option awards granted during 2004 and in prior years in accordance with SFAS 123R. No named executive has received a stock option award since January 2004. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For the assumptions used in calculating the value of these awards, see “Notes to Consolidated Financial Statements—Note 1, Summary of Significant Accounting Policies—Stock-Based Compensation,” of our Annual Report on Form 10-K for the year ended December 31, 2006. | |
(5) | The reported amounts represent change in pension value. | |
(6) | The table below shows more information about the components of the “All Other Compensation” column. The Charitable Award Program amounts reflect a matching contribution program under which an employee who contributes at certain levels to the |
Universal | Universal | Excess | Excess | Payments in | ||||||||||||||||||||||||
401(k) | Life | Life | Liability | Liability | Connection | |||||||||||||||||||||||
Plan | Insurance | Insurance | Insurance | Insurance | Charitable | with | ||||||||||||||||||||||
Matching | Coverage | Tax | Coverage | Tax | Award | Termination | ||||||||||||||||||||||
Executive | Contributions | Premiums | Gross-up | Premiums | Gross-up | Programs | of Employment | |||||||||||||||||||||
Daniel Mudd | $ | 6,600 | $ | 58,650 | $ | 48,278 | $ | 1,150 | $ | 947 | $ | 20,447 | — | |||||||||||||||
Robert Blakely | — | 86,709 | 46,998 | 1,150 | 623 | 5,000 | — | |||||||||||||||||||||
Robert Levin | 6,600 | 31,715 | 25,326 | 1,150 | 918 | 5,000 | — | |||||||||||||||||||||
Peter Niculescu | 6,600 | 18,101 | 13,216 | 1,150 | 840 | — | — | |||||||||||||||||||||
Beth Wilkinson | 6,600 | 14,400 | 7,805 | 1,150 | 623 | 5,000 | — | |||||||||||||||||||||
Michael Williams | 6,600 | 23,304 | 18,610 | 1,150 | 918 | 5,000 | — | |||||||||||||||||||||
Julie St. John | 6,600 | 39,921 | 32,861 | 1,150 | 947 | 4,800 | 1,755,498 |
(7) | Ms. St. John entered into a separation agreement with us in July 2006, and she retired from Fannie Mae in December 2006. Her separation benefits were provided pursuant to the Board-approved management severance program and were approved by OFHEO. |
43
24
Estimated Possible Payouts | All Other Stock | |||||||||||||||||||
Under Non-Equity | Awards: | Grant Date Fair | ||||||||||||||||||
Incentive Plan | Number of | Value of Stock | ||||||||||||||||||
Award Approval | Awards(2) | Shares of Stock | and Option | |||||||||||||||||
Name | Grant Date(1) | Date(1) | Target ($) | or Units (#)(3) | Awards ($)(4) | |||||||||||||||
Daniel Mudd | 3/22/2006 | 2/8/2006 | 146,574 | $ | 7,905,469 | |||||||||||||||
$ | 2,612,500 | |||||||||||||||||||
Robert Blakely | 1/30/2006 | 11/8/2005 | 10,000 | 575,600 | ||||||||||||||||
3/22/2006 | 2/8/2006 | 61,611 | 3,322,989 | |||||||||||||||||
1,235,000 | ||||||||||||||||||||
Robert Levin | 3/22/2006 | 2/8/2006 | 78,257 | 4,220,791 | ||||||||||||||||
1,650,000 | ||||||||||||||||||||
Peter Niculescu | 3/22/2006 | 2/8/2006 | 32,948 | 1,777,050 | ||||||||||||||||
890,961 | ||||||||||||||||||||
Beth Wilkinson | 2/16/2006 | 12/19/2005 | 25,000 | 1,365,375 | ||||||||||||||||
948,750 | ||||||||||||||||||||
Michael Williams | 3/22/2006 | 2/8/2006 | 61,611 | 3,322,989 | ||||||||||||||||
1,235,000 | ||||||||||||||||||||
Julie St. John | 3/22/2006 | 2/8/2006 | 21,679 | 1,169,257 | ||||||||||||||||
873,909 |
(1) | The “Grant Date” column shows the grant date for equity awards determined for financial statement reporting purposes pursuant to SFAS 123R. The “Award Approval Date” column shows the date our Board approved the equity awards. On February 8, 2006, our Board approved restricted stock and restricted stock unit awards for which the final number of shares could not be determined until March 22, 2006, which is the grant date for these awards. These grants are discussed in more detail above in “Compensation Discussion and Analysis—What are our practices for determining when we grant equity awards?” The other equity awards listed in the table above reflect a grant date equal to the executive’s starting date with Fannie Mae. | |
(2) | The amounts shown are the target amounts established by our Board for 2006 performance under our Annual Incentive Plan. The amount paid to a named executive is based on Fannie Mae’s and the individual’s performance against corporate and individual pre-established goals. Our Board and Compensation Committee also retain discretion to pay bonuses in amounts below or above the amount derived from measuring performance against corporate and individual goals. It is expected that performance against corporate goals will normally be in the range of 75% to 125% of target. For 2006, the Board determined that corporate performance was 110% of the corporate target. Based on a combination of 2006 corporate and individual performance, Mr. Mudd received a bonus of 134% of his target, Mr. Blakely a bonus of 105% of his target, Mr. Levin a bonus of 127% of his target, Mr. Niculescu a bonus of 116% of his target, Ms. Wilkinson a bonus of 121% of her target, and Mr. Williams a bonus of 132% of his target. Ms. St. John received a prorated bonus based on 110% of her target under the terms of her separation agreement based solely on corporate performance. The amounts actually awarded are reported as “Bonus” and “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table, as explained in footnote 2 to that table. | |
(3) | Consists of restricted stock or restricted stock units awarded under the 2003 Plan. The amounts shown for Messrs. Mudd, Levin, Niculescu, and Williams represent stock that vests in four equal annual installments beginning in March 2007. Similarly, Ms. St. John received restricted stock that would have vested in the same manner. However, upon her retirement, Ms. St. John received accelerated vesting of the first installment of these shares, and forfeited the balance of these shares. The amount shown for Ms. Wilkinson represents stock that vests in three equal annual installments beginning in February 2007. As the holder of restricted stock the named executive has the rights and privileges of a shareholder as to the restricted common stock, other than the ability to sell or otherwise transfer it, including the right to receive any dividends declared with respect to the stock and the right to provide instructions on how to vote. | |
For Mr. Blakely, the amounts shown are restricted stock units, which represent the right to receive a share of unrestricted common stock for each unit upon vesting. The grant of 10,000 units vests in three equal annual installments beginning in January 2007 and the grant of 61,611 units vests in four equal annual installments beginning in March 2007. Because he is already 65, Mr. Blakely’s restricted stock units will vest fully upon his retirement from Fannie Mae. As the holder of restricted stock units, Mr. Blakely receives dividend equivalents on the units, but does not have the right to vote, sell or otherwise transfer the stock represented by the units until the restrictions lapse and shares are issued. |
44
(4) | The SFAS 123R grant date fair value of restricted stock and restricted stock unit awards is calculated as the average of the high and low trading price of our common stock on the date of grant. |
Stock Awards(2) | ||||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||||||
Incentive | Plan | |||||||||||||||||||||||||||||||||||||||
Plan | Awards: | |||||||||||||||||||||||||||||||||||||||
Awards: | Market or | |||||||||||||||||||||||||||||||||||||||
Number of | Payout | |||||||||||||||||||||||||||||||||||||||
Market | Unearned | Value of | ||||||||||||||||||||||||||||||||||||||
Option Awards(2) | Number of | Value of | Shares, | Unearned | ||||||||||||||||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | Units or | Shares, | |||||||||||||||||||||||||||||||||||
Securities | Securities | Units of | Units of | Other | Units or Other | |||||||||||||||||||||||||||||||||||
Underlying | Underlying | Option | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||||||||
Grant Date or | Unexercised | Unexercised | Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||||||
Award | Performance | Options (#) | Options (#) | Price | Expiration | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||||||||
Name | Type(1) | Period | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#)(3) | ($)(3) | ||||||||||||||||||||||||||||||
Daniel Mudd | O | 2/23/2000 | 114,855 | 52.78 | 2/23/2010 | |||||||||||||||||||||||||||||||||||
O | 2/23/2000 | 116,710 | (4) | 52.78 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/21/2000 | 89,730 | 77.10 | 11/21/2010 | ||||||||||||||||||||||||||||||||||||
O | 11/20/2001 | 87,194 | 80.95 | 11/20/2011 | ||||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 62,188 | 20,730 | 69.43 | 1/21/2013 | |||||||||||||||||||||||||||||||||||
O | 1/23/2004 | 52,874 | 52,875 | 78.32 | 1/23/2014 | |||||||||||||||||||||||||||||||||||
RSU | 3/10/2005 | 63,806(5) | 3,789,438 | |||||||||||||||||||||||||||||||||||||
RS | 11/15/2005 | 21,178(6) | 1,257,761 | |||||||||||||||||||||||||||||||||||||
RS | 3/22/2006 | 146,574(7) | 8,705,030 | |||||||||||||||||||||||||||||||||||||
PSP | 1/1/2001 to | 30,045(8) | $1,784,373(8) | |||||||||||||||||||||||||||||||||||||
12/31/2003 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2002 to | 15,149(9) | 899,699(9) | |||||||||||||||||||||||||||||||||||||
12/31/2004 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2003 to | 11,438(10) | 679,303(10) | |||||||||||||||||||||||||||||||||||||
12/31/2005 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2004 to | 33,599(11) | 1,995,445(11) | |||||||||||||||||||||||||||||||||||||
12/31/2006 | ||||||||||||||||||||||||||||||||||||||||
Robert Blakely | RSU | 1/30/2006 | 10,000(5) | 593,900 | ||||||||||||||||||||||||||||||||||||
RSU | 3/22/2006 | 61,611(7) | 3,659,077 | |||||||||||||||||||||||||||||||||||||
Robert Levin | O | 11/18/1997 | 46,110 | 51.72 | 11/16/2007 | |||||||||||||||||||||||||||||||||||
O | 11/17/1998 | 43,650 | 69.31 | 11/17/2008 | ||||||||||||||||||||||||||||||||||||
O | 11/16/1999 | 47,300 | 71.50 | 11/16/2009 | ||||||||||||||||||||||||||||||||||||
O | 1/18/2000 | 56,572 | (4) | 62.50 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/21/2000 | 43,430 | 77.10 | 11/21/2010 | ||||||||||||||||||||||||||||||||||||
O | 11/20/2001 | 44,735 | 80.95 | 11/20/2011 | ||||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 54,333 | 18,112 | 69.43 | 1/21/2013 | |||||||||||||||||||||||||||||||||||
O | 1/23/2004 | 50,306 | 50,307 | 78.32 | 1/23/2014 | |||||||||||||||||||||||||||||||||||
RS | 1/23/2004 | 1,460 | 86,709 | |||||||||||||||||||||||||||||||||||||
RS | 3/10/2005 | 36,099(5) | 2,143,920 | |||||||||||||||||||||||||||||||||||||
RS | 3/22/2006 | 78,257(7) | 4,647,683 | |||||||||||||||||||||||||||||||||||||
PSP | 1/1/2001 to | 14,543(8) | 863,709(8) | |||||||||||||||||||||||||||||||||||||
12/31/2003 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2002 to | 7,772(9) | 461,579(9) | |||||||||||||||||||||||||||||||||||||
12/31/2004 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2003 to | 9,994(10) | 593,544(10) | |||||||||||||||||||||||||||||||||||||
12/31/2005 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2004 to | 31,967(11) | 1,898,520(11) | |||||||||||||||||||||||||||||||||||||
12/31/2006 | ||||||||||||||||||||||||||||||||||||||||
45
Individual Grants | |||||||||||||
Name | Number of Securities Underlying Options Granted (1) | % of Total Options Granted to Employees for 2002 (1) | Exercise or Base Price ($/Sh) | Expiration Date | Grant Date Present Value (2) ($) | ||||||||
Franklin D. Raines | 311,731 | 8.27 | % | $ | 69.43 | 1/21/13 | $ | 6,680,395 | |||||
Daniel H. Mudd | 82,918 | 2.20 | % |
| 69.43 | 1/21/13 |
| 1,776,933 | |||||
Jamie S. Gorelick (3) | — | — |
|
| — | — |
| — | |||||
Timothy Howard | 81,661 | 2.17 | % |
| 69.43 | 1/21/13 |
| 1,749,995 | |||||
Robert J. Levin | 72,445 | 1.92 | % |
| 69.43 | 1/21/13 |
| 1,552,496 |
Notes to Option Grants Table
Stock Awards(2) | ||||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||||||
Incentive | Plan | |||||||||||||||||||||||||||||||||||||||
Plan | Awards: | |||||||||||||||||||||||||||||||||||||||
Awards: | Market or | |||||||||||||||||||||||||||||||||||||||
Number of | Payout | |||||||||||||||||||||||||||||||||||||||
Market | Unearned | Value of | ||||||||||||||||||||||||||||||||||||||
Option Awards(2) | Number of | Value of | Shares, | Unearned | ||||||||||||||||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | Units or | Shares, | |||||||||||||||||||||||||||||||||||
Securities | Securities | Units of | Units of | Other | Units or Other | |||||||||||||||||||||||||||||||||||
Underlying | Underlying | Option | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||||||||
Grant Date or | Unexercised | Unexercised | Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||||||
Award | Performance | Options (#) | Options (#) | Price | Expiration | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||||||||
Name | Type(1) | Period | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#)(3) | ($)(3) | ||||||||||||||||||||||||||||||
Peter Niculescu | O | 3/8/1999 | 16,000 | 70.72 | 3/6/2009 | |||||||||||||||||||||||||||||||||||
O | 11/16/1999 | 14,340 | 71.50 | 11/16/2009 | ||||||||||||||||||||||||||||||||||||
O | 1/18/2000 | 24,804 | (4) | 62.50 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/21/2000 | 12,120 | 77.10 | 11/21/2010 | ||||||||||||||||||||||||||||||||||||
O | 11/20/2001 | 13,150 | 80.95 | 11/20/2011 | ||||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 33,912 | 11,305 | 69.43 | 1/21/2013 | |||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 7,288 | (4) | 69.43 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 1/23/2004 | 29,712 | 29,713 | 78.32 | 1/23/2014 | |||||||||||||||||||||||||||||||||||
RS | 3/10/2005 | 23,032(5) | 1,367,870 | |||||||||||||||||||||||||||||||||||||
RS | 3/22/2006 | 32,948(7) | 1,956,782 | |||||||||||||||||||||||||||||||||||||
PSP | 1/1/2001 to | 4,298(8) | 255,258(8) | |||||||||||||||||||||||||||||||||||||
12/31/2003 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2002 to | 2,272(9) | 134,934(9) | |||||||||||||||||||||||||||||||||||||
12/31/2004 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2003 to | 6,238(10) | 370,475(10) | |||||||||||||||||||||||||||||||||||||
12/31/2005 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2004 to | 18,881(11) | 1,121,343(11) | |||||||||||||||||||||||||||||||||||||
12/31/2006 | ||||||||||||||||||||||||||||||||||||||||
Beth Wilkinson | RS | 2/16/2006 | 25,000(5) | 1,484,750 | ||||||||||||||||||||||||||||||||||||
Michael Williams | O | 11/18/1997 | 11,920 | 51.72 | 11/16/2007 | |||||||||||||||||||||||||||||||||||
O | 11/17/1998 | 11,390 | 69.31 | 11/17/2008 | ||||||||||||||||||||||||||||||||||||
O | 11/16/1999 | 12,290 | 71.50 | 11/16/2009 | ||||||||||||||||||||||||||||||||||||
O | 1/18/2000 | 20,027 | (4) | 62.50 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/21/2000 | 35,610 | 77.10 | 11/21/2010 | ||||||||||||||||||||||||||||||||||||
O | 1/16/2001 | 13,087 | (4) | 78.56 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/20/2001 | 44,735 | 80.95 | 11/20/2011 | ||||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 47,877 | 15,959 | 69.43 | 1/21/2013 | |||||||||||||||||||||||||||||||||||
O | 1/23/2004 | 36,940 | 36,940 | 78.32 | 1/23/2014 | |||||||||||||||||||||||||||||||||||
RS | 3/10/2005 | 25,342(5) | 1,505,061 | |||||||||||||||||||||||||||||||||||||
RS | 3/22/2006 | 61,611(7) | 3,659,077 | |||||||||||||||||||||||||||||||||||||
PSP | 1/1/2001 to | 11,925(8) | 708,226(8) | |||||||||||||||||||||||||||||||||||||
12/31/2003 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2002 to | 7,772(9) | 461,579(9) | |||||||||||||||||||||||||||||||||||||
12/31/2004 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2003 to | 8,806(10) | 522,988(10) | |||||||||||||||||||||||||||||||||||||
12/31/2005 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2004 to | 23,473(11) | 1,394,061(11) | |||||||||||||||||||||||||||||||||||||
12/31/2006 | ||||||||||||||||||||||||||||||||||||||||
46
Stock Awards(2) | ||||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||||||
Incentive | Plan | |||||||||||||||||||||||||||||||||||||||
Plan | Awards: | |||||||||||||||||||||||||||||||||||||||
Awards: | Market or | |||||||||||||||||||||||||||||||||||||||
Number of | Payout | |||||||||||||||||||||||||||||||||||||||
Market | Unearned | Value of | ||||||||||||||||||||||||||||||||||||||
Option Awards(2) | Number of | Value of | Shares, | Unearned | ||||||||||||||||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | Units or | Shares, | |||||||||||||||||||||||||||||||||||
Securities | Securities | Units of | Units of | Other | Units or Other | |||||||||||||||||||||||||||||||||||
Underlying | Underlying | Option | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||||||||
Grant Date or | Unexercised | Unexercised | Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||||||
Award | Performance | Options (#) | Options (#) | Price | Expiration | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||||||||
Name | Type(1) | Period | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#)(3) | ($)(3) | ||||||||||||||||||||||||||||||
Julie St. John | O | 11/18/1997 | 11,610 | 51.72 | 11/16/2007 | |||||||||||||||||||||||||||||||||||
O | 11/17/1998 | 11,390 | 69.31 | 11/17/2008 | ||||||||||||||||||||||||||||||||||||
O | 11/16/1999 | 11,680 | 71.50 | 11/16/2009 | ||||||||||||||||||||||||||||||||||||
O | 1/18/2000 | 18,373 | (4) | 62.50 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/21/2000 | 35,610 | 77.10 | 11/21/2010 | ||||||||||||||||||||||||||||||||||||
O | 1/16/2001 | 17,320 | (4) | 78.56 | 1/18/2010 | |||||||||||||||||||||||||||||||||||
O | 11/20/2001 | 44,735 | 80.95 | 11/20/2011 | ||||||||||||||||||||||||||||||||||||
O | 1/21/2003 | 63,836 | 69.43 | 1/21/2013 | ||||||||||||||||||||||||||||||||||||
O | 1/23/2004 | 55,410 | 78.32 | 1/23/2014 | ||||||||||||||||||||||||||||||||||||
PSP | 1/1/2001 to | 11,925(8) | 708,226(8) | |||||||||||||||||||||||||||||||||||||
12/31/2003 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2002 to | 7,772(9) | 461,579(9) | |||||||||||||||||||||||||||||||||||||
12/31/2004 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2003 to | 8,806(10) | 522,988(10) | |||||||||||||||||||||||||||||||||||||
12/31/2005 | ||||||||||||||||||||||||||||||||||||||||
PSP | 1/1/2004 to | 23,147(11) | 1,374,700(11) | |||||||||||||||||||||||||||||||||||||
12/31/2006 |
(1) | O indicates stock options; RS indicates restricted stock; RSU indicates restricted stock units; and PSP indicates performance share program awards. | |
Except as otherwise indicated, all awards of options, | ||
(3) | As described in “Compensation Discussion and Analysis,” beginning in early | |
(4) | The stock options vested 100% on January 23, 2004. | |
(5) | The initial award amount vests in | |
(6) | The | |
(7) | The initial award amount vests in four equal annual installments beginning on January 24, 2007. In connection with the stock awards with a grant date of March 22, 2006, each of our named executives other than Mr. Mudd also received a cash award payable in four equal annual installments beginning on January 24, 2007. As of December 31, 2006, the unpaid portion of our named executives’ cash awards were as follows: Mr. Blakely and Mr. Williams, $1,656,270; Mr. Levin, $2,103,750; and Mr. Niculescu, $885,720. | |
(8) | The amounts shown represent the maximum amount of common stock that the Board could have awarded as of the end of 2006 for the2001-2003 performance cycle, which equals the second installment of the awards the Compensation Committee determined performance for in January 2004. As described in “Compensation Discussion and Analysis,” the Board determined in February 2007 not to | |
(9) | The amounts shown represent the amount of common stock that would have been paid if the Compensation Committee had determined that we met threshold performance levels with respect to financial and | |
(10) | As described in “Compensation Discussion and Analysis,” the Board determined in June 2007 that our performance during this cycle did not meet the threshold performance level |
47
As |
25
Name | Shares Acquired on Exercise (#) | Value Realized (1) ($) | Number of Securities Underlying Unexercised Options December 31, 2002 Exercisable/ Unexercisable (#) | Value of Unexercised In-the-Money Options December 31, 2002 (2) Exercisable/ Unexercisable ($) | |||||||
Franklin D. Raines | — | $ | — | 1,000,630 / 618,843 | $ | 1,441,600 / $390,793 |
| ||||
Daniel H. Mudd | — |
| — | 124,090 / 284,399 |
| 663,207 / 2,011,068 |
| ||||
Jamie S. Gorelick | — |
| — | 296,110 / 227,281 |
| 1,661,516 / 177,120 |
| ||||
Timothy Howard | 20,000 |
| 1,246,362 | 408,624 / 161,395 |
| 9,899,535 / 103,527 |
| ||||
Robert J. Levin | 20,900 |
| 1,025,314 | 386,333 / 123,664 |
| 9,899,535 / 103,527 |
|
Notes to Option Exercises/Year End Values
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares Acquired on | Value Realized on | Shares Acquired on | Value Realized on | |||||||||||||
Name | Exercise (#) | Exercise ($)(1) | Vesting (#) | Vesting ($)(2) | ||||||||||||
Daniel Mudd | — | — | 31,904 | $ | 1,717,392 | |||||||||||
— | — | 10,588 | 569,952 | |||||||||||||
Robert Blakely | — | — | — | — | ||||||||||||
Robert Levin | — | — | 730 | 38,734 | ||||||||||||
— | — | 18,050 | 971,632 | |||||||||||||
30,680 | $ | 566,736 | — | — | ||||||||||||
Peter Niculescu | — | — | 11,516 | 619,906 | ||||||||||||
— | — | 1,000 | 57,900 | |||||||||||||
Beth Wilkinson | — | — | — | — | ||||||||||||
Michael Williams | — | — | 12,671 | 682,080 | ||||||||||||
13,310 | 245,869 | — | — | |||||||||||||
Julie St. John | 12,430 | 234,399 | — | — | ||||||||||||
— | — | 11,516 | 619,906 | |||||||||||||
— | — | 11,516 | 692,342 | |||||||||||||
— | — | 5,419 | 325,790 |
(1) | The value realized on exercise |
Long-Term Incentive Plan Awards Table
Performance or Other Period Until Maturation or Payout | Estimated Future Payouts Under Non-Stock Price Based Plans | |||||||||||
Name | Number of Performance Shares (1) (#) | Award Cycle | Payout Period (if any) | Threshold (#) | Target (#) | Maximum (#) | ||||||
Franklin D. Raines | 107,505 | 2003-2005 | 2006, 2007 | 43,002 | 107,505 | 161,258 | ||||||
Daniel H. Mudd | 28,596 | 2003-2005 | 2006, 2007 | 11,438 | 28,596 | 42,894 | ||||||
Jamie S. Gorelick (2) | — | — | — | — | — | — | ||||||
Timothy Howard | 28,162 | 2003-2005 | 2006, 2007 | 11,265 | 28,162 | 42,243 | ||||||
Robert J. Levin | 24,984 | 2003-2005 | 2006, 2007 | 9,994 | 24,984 | 37,476 |
Notes to Long-Term Incentive Plan Awards Table
(2) | The |
26
Fannie Mae Retirement PlanPlan.
The Federal National Mortgage Association Retirement Plan for Employees Not Covered Under Civil Service Retirement Law, (the “Fannie Maewhich we refer to as the Retirement Plan”)Plan, provides benefits for those eligible employees, including the named executives, who are not covered by the federal Civil Service retirement law. Normal retirement benefits are computed on a single life basis using a formula based on final average annual earnings and years of credited service. Participants are fully vested when they complete five years of credited service. In addition, the Fannie Mae Retirement Plan is coordinated with Social Security Covered Compensation as defined in Internal Revenue Service regulations. Since 1989, provisions of the Internal Revenue Code of 1986, as amended, have limited the amount of annual compensation that may be used for calculating pension benefits and the annual benefit that may be paid. For 2002,2006, the statutory compensation and benefit caps were $200,000$220,000 and $160,000, respectively, and they remain unchanged for 2003.$175,000, respectively. Before 1989, some employees accrued benefits based on higher income levels. For employees who retire before age 65, benefits are reduced by stated percentages for each year that they are younger than 65.
48
The covered executives have approximately the following years of credited service: Mr. Levin, 22 years; Mr. Howard, 21 years; Mr. Raines, 11 years; Ms. Gorelick, 6 years; and Mr. Mudd, 3 years.
The benefits under the Fannie Mae Retirement Plan are not subject to deductions for social security benefits or other offset amounts.
Supplemental Pension Plans
Fannie Mae adopted the Supplemental Pension Plan to provide supplemental retirement benefits to employees who do not participate in the Executive Pension Plan and whose salary exceeds the statutory compensation cap applicable to the Fannie Mae Retirement Plan or whose benefit under the Fannie Mae Retirement Plan is limited by the statutory benefit cap applicable to that Plan. Fannie Mae adopted the 2003 Supplemental Pension Plan to provide similar additional benefits to Fannie Mae officers based on the annual cash bonus received by an officer, but limited to 50 percent of the officer’s salary.
The benefits under the Fannie Mae supplemental pension plans are not subject to deductions for social security benefits or other offset amounts.
The following table shows the estimated annual benefits that are payable under the Fannie Mae Retirement Plan and, if applicable, the supplemental pension plans to an employee who does not participate in the Executive Pension Plan and who turned 65 and retired on January 1, 2003, using years of service accrued through January 1, 2003.
Fannie Mae Retirement Plan and Supplemental Pension Plans
Final Average Annual Earnings | Estimated Annual Pension for Representative Years of Service | ||||||||||||||||||
10 | 15 | 20 | 25 | 30 | 35 | ||||||||||||||
$ | 50,000 | $ | 7,802 | $ | 11,883 | $ | 16,688 | $ | 21,493 | $ | 26,298 | $ | 31,103 | ||||||
| 100,000 |
| 17,802 |
| 26,883 |
| 36,688 |
| 46,493 |
| 56,298 |
| 66,103 | ||||||
| 150,000 |
| 27,802 |
| 41,883 |
| 56,688 |
| 71,493 |
| 86,298 |
| 101,103 | ||||||
| 200,000 |
| 37,802 |
| 56,883 |
| 76,688 |
| 96,493 |
| 116,298 |
| 136,103 | ||||||
| 250,000 |
| 47,802 |
| 71,883 |
| 96,688 |
| 121,493 |
| 146,298 |
| 171,103 | ||||||
| 300,000 |
| 57,802 |
| 86,883 |
| 116,688 |
| 146,493 |
| 176,298 |
| 206,103 | ||||||
| 350,000 |
| 67,802 |
| 101,883 |
| 136,688 |
| 171,493 |
| 206,298 |
| 241,103 | ||||||
| 400,000 |
| 77,802 |
| 116,883 |
| 156,688 |
| 196,493 |
| 236,298 |
| 276,103 | ||||||
| 450,000 |
| 87,802 |
| 131,883 |
| 176,688 |
| 221,493 |
| 266,298 |
| 311,103 | ||||||
| 500,000 |
| 97,802 |
| 146,883 |
| 196,688 |
| 246,493 |
| 296,298 |
| 346,103 | ||||||
| 550,000 |
| 107,802 |
| 161,883 |
| 216,688 |
| 271,493 |
| 326,298 |
| 381,103 | ||||||
| 600,000 |
| 117,802 |
| 176,883 |
| 236,688 |
| 296,493 |
| 356,298 |
| 416,103 | ||||||
| 650,000 |
| 127,802 |
| 191,883 |
| 256,688 |
| 321,493 |
| 386,298 |
| 451,103 | ||||||
| 700,000 |
| 137,802 |
| 206,883 |
| 276,688 |
| 346,493 |
| 416,298 |
| 486,103 | ||||||
| 1,876,900 |
| 373,182 |
| 559,953 |
| 747,448 |
| 934,943 |
| 1,122,438 |
| 1,309,933 |
27
Fannie Mae We adopted the Executive Pension Plan to supplement the benefits payable to key officers under the Fannie Mae Retirement Plan. The Compensation Committee selectsapproves the participants and determinesin the pension benefits for each participant.Executive Pension Plan, who include the named executives. The Board of Directors approves each participant’s pension goal, which is part of the formula that determines pension benefits for participants who are atbenefits. Payments under the level of executive vice president and above. PaymentsExecutive Pension Plan are reduced by any amounts payable under the Fannie MaeRetirement Plan.
Participants are granted pension benefits ranging from 30 percent to 60 percentfor our other named executives equals 40% of the named executive’s highest average totalcovered compensation forearned during any 36 consecutive months within the three consecutive yearslast 120 months of the participant’s last ten years of employment when total compensation was the highest. Totalemployment. Covered compensation generally is a participant’s average annual base salary, including deferred compensation, plus the participant’s other taxable compensation paid by Fannie Mae(excluding income or gain in connection with the exercise of stock options) earned for the relevant year, in an amount up to 50 percent150% of annual base salary for that year. (Paymentsour Executive Vice Presidents and 200% of base salary for Mr. Mudd. As a result, Mr. Mudd’s maximum annual benefit under the Executive Pension Plan is 100% of his salary. The other named executives could receive a maximum annual benefit equal to 60% of salary. Effective for benefits earned over multiyear periods are allocated equally overon and after March 1, 2007, the years.)
only taxable compensation other than base salary considered for the purpose of calculating covered compensation is a participant’s annual incentive plan cash bonus.
49
Estimated annual
Fannie Mae’s employment agreementsBlakely, because no benefits would be paid under these plans if a named executive’s benefit under the Executive Pension Plan, together with Mr. Raines, Mr. Mudd, and Ms. Gorelick end on June 30, 2003, June 30, 2003, and April 30, 2003, respectively. Under the agreements,named executive’s benefit under the Retirement Plan, exceeded his or her current salary may not be reduced,combined benefits under the supplemental plans and the agreements mayRetirement Plan. At the time that most of our executives retire, the Executive Pension Plan will pay a greater benefit. As a result, we included only the values that would be extendedpayable under the Retirement Plan and the Executive Pension Plan. Because Mr. Blakely has advised us of his intention to retire from Fannie Mae before 2011, when he first becomes entitled to receive benefits under the Executive Pension Plan, his benefits will be greater under our supplemental plans and, as a result, we have included values for additional periods. The Board expects to enter into new agreements with Mr. RainesBlakely under those plans rather than under our Executive Pension Plan.
Number of Years Credited | Present Value of Accumulated | |||||||||
Service | Benefit | |||||||||
Name of Executive | Plan Name | (#)(1) | ($)(2) | |||||||
Daniel Mudd(3) | Fannie Mae Retirement Plan | 7 | $ | 101,102 | ||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 7 | 4,066,367 | ||||||||
Robert Blakely(4) | Fannie Mae Retirement Plan | 1 | 45,022 | |||||||
Supplemental Pension Plan | 1 | 93,441 | ||||||||
2003 Supplemental Pension Plan | 1 | 70,624 | ||||||||
Executive Pension Plan | ||||||||||
Robert Levin | Fannie Mae Retirement Plan | 26 | 461,776 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 17 | 2,758,908 | ||||||||
Peter Niculescu | Fannie Mae Retirement Plan | 8 | 108,689 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 4 | 631,129 | ||||||||
Beth Wilkinson | Fannie Mae Retirement Plan | 1 | 11,818 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 1 | 186,595 | ||||||||
Michael Williams | Fannie Mae Retirement Plan | 16 | 245,231 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 6 | 1,151,288 | ||||||||
Julie St. John(4) | Fannie Mae Retirement Plan | 16 | 379,149 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 7 | 2,259,133 |
(1) | Mr. Levin, Mr. Niculescu, Mr. Williams, and Ms. St. John each have fewer years of credited service under the Executive Pension Plan than under the Retirement Plan because they worked at Fannie Mae prior to becoming participants in the Executive Pension Plan. | |
(2) | The present value has been calculated for the Executive Pension Plan assuming the named executives will remain in service until age 60, the normal retirement age under the Executive Pension Plan, and assuming the named executives will remain in service until age 65, the normal retirement age under the Retirement Plan. The values also assume that benefits under the Executive Pension Plan will be paid in the form of a monthly annuity for the life of the named executive and the named executive’s surviving spouse and benefits under the Retirement Plan will be paid in the form of a single life monthly annuity for the life of the named executive. The post-retirement mortality assumption is based on the RP 2000 white collar mortality table projected to 2010. For additional information regarding the calculation of present value and the assumptions underlying these amounts, see “Notes to Consolidated Financial Statements—Note 14, Employee Retirement Benefits,” of our Annual Report on Form10-K for the year ended December 31, 2006. |
50
(3) | Mr. Mudd’s employment agreement provides that if Mr. Mudd’s benefit payments are in the form of a joint and 100% survivor annuity, the payments will be actuarially reduced to reflect the joint life expectancy of Mr. Mudd and his spouse. | |
(4) | Mr. Blakely is eligible for retirement under our supplemental pension plans and the Retirement Plan. Ms. St. John was eligible for early retirement under the Executive Pension Plan and the Retirement Plan. |
Among other things, the agreements provide that if the officer is terminated other than for cause, is not nominated for electionDecember 31, 2004. Similar to the BoardElective Deferred Compensation Plan II, the Elective Deferred Compensation Plan I provides that deferred amounts are deemed to be invested in mutual funds or in an investment option with earnings benchmarked to our long-term borrowing rate, as designated by the participants, and is an unfunded plan.
51
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||||||||
Contributions in | Contributions in | Earnings in Last | Withdrawals/ | Balance at Last | ||||||||||||||||
Last Fiscal Year | Last Fiscal Year | Fiscal Year | Distributions | Fiscal Year-End | ||||||||||||||||
Name of Executive | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Daniel Mudd | — | — | — | — | — | |||||||||||||||
Robert Blakely | ||||||||||||||||||||
Elective Deferred Compensation Plan II | $ | 275,000 | (1) | — | $ | 24,872 | — | $ | 299,872 | |||||||||||
Robert Levin | ||||||||||||||||||||
Deferred Performance Share Program Payments | — | — | 205,511 | — | 3,399,842 | |||||||||||||||
Peter Niculescu | — | — | — | — | — | |||||||||||||||
Beth Wilkinson | — | — | — | — | — | |||||||||||||||
Michael Williams | ||||||||||||||||||||
Career Deferred Compensation Plan | — | — | 23,499 | — | 506,905 | |||||||||||||||
2001 Special Stock award(2) | — | — | 14,878 | — | 75,979 | |||||||||||||||
Julie St. John | ||||||||||||||||||||
Deferred Performance Share Program Payments | — | — | 53,763 | — | 440,254 | |||||||||||||||
Career Deferred Compensation Plan | — | — | 187,620 | — | 1,374,791 | |||||||||||||||
Elective Deferred Compensation Plan | — | — | 360,416 | — | 2,640,958 |
(1) | Consists of salary reported in the “Summary Compensation Table.” This amount does not include Mr. Blakely’s bonus of $1,290,575 reported in the “Summary Compensation Table,” which was contributed to the Elective Deferred Compensation Plan II in 2007. | |
(2) | The Board approved a special stock award to officers for 2001 performance. On January 15, 2002, Mr. Williams deferred until retirement 1,142 shares he received in connection with this award. Aggregate earnings on these shares reflect dividends and stock price appreciation. Mr. Williams’ share balance has grown through the reinvestment of dividends to 1,279 shares as of December 31, 2006. |
52
Type of Termination | Payments | ||
Without “Cause,” By Mr. Mudd For “Good Reason,” Serious Illness or Disability, or “Failure to Extend” the Employment Agreement “Cause” means Mr. Mudd has: (a) materially harmed the company by, in connection with his service under his employment agreement, engaging in dishonest or fraudulent actions or willful misconduct, or performing his duties in a grossly negligent manner, or (b) been convicted of, or pleaded no lo contendere with respect to, a felony. “Good Reason” means (a) a material reduction by the company of Mr. Mudd’s authority or a material change in Mr. Mudd’s functions, duties or responsibilities that in any material way would cause Mr. Mudd’s position to become less important, (b) a reduction in Mr. Mudd’s base salary, (c) a requirement that Mr. Mudd report to anyone other than the Chairman of the Board of Directors, (d) a requirement by Fannie Mae that Mr. Mudd relocate his office outside of the Washington, DC area, or (e) a breach by the company of any material obligation under the employment agreement. “Failure to Extend” means notification by the company that it does not desire to extend the term of the employment agreement (which expires December 31, 2009) or that it desires to do so only on terms in the aggregate that are materially less favorable to Mr. Mudd than those currently applicable. | — Accrued, but unpaid base salary. — Base salary for two years (subject to offset for other employment or employer-provided disability payments in the event of termination due to serious illness or disability). — Prorated annual bonus for the year of termination and all amounts payable (but unpaid) under the annual bonus plan with respect to any year ended on or prior to the termination date. — Prorated PSP payment for any cycle in which at least 18 months have elapsed as of the date of termination and payment of all amounts payable (but unpaid) for completed cycles. — Vesting of all shares of restricted stock, to the extent not already vested. — Vesting of all options; options granted after the date of the employment agreement remain exercisable through the earlier of the remainder of the original exercise period and the third anniversary of the date of the termination. — Upon a termination by Fannie Mae without Cause or by Mr. Mudd for Good Reason, continued medical and dental coverage for Mr. Mudd and his spouse and dependents (but in the case of Mr. Mudd’s dependents only for so long as they remain dependents or until age 21 if later), without premium payments by Mr. Mudd, for two years or if earlier, the date Mr. Mudd obtains comparable coverage through another employer. | ||
Death or by Reason of Mr. Mudd’s Acceptance of an Appointment to a Senior Position in the U.S. Federal Government | — Same payments as above except (a) no salary severance, (b) no continued medical and dental coverage, and (c) in the case of termination due to acceptance of a governmental position, no accelerated vesting of options. | ||
53
Type of Termination | Payments | ||
“Retirement” or “Early Retirement” “Retirement” means termination at or after age 65, under conditions entitling an eligible employee to an immediate annuity under the Fannie Mae Retirement Plan. “Early Retirement” means termination at or after age 60, but before age 65, with five or more years of service, or at an earlier age only if permitted by the Compensation Committee in its sole discretion. | — Accrued, but unpaid base salary. — Prorated PSP payment for any cycle in which at least 18 months have elapsed as of the date of termination and payment of all amounts payable (but unpaid) for completed cycles. — In the case of Retirement, but not Early Retirement, vesting of all shares of restricted stock, to the extent not already vested. In the event of Early Retirement, Fannie Mae may in its discretion accelerate the vesting of shares of restricted stock. — Vesting of all options and options granted after the date of the employment agreement will remain exercisable through the earlier of the remainder of the original exercise period and the third anniversary of the date of the termination. | ||
For Cause or Voluntary Termination (other than for Good Reason or to Accept a Senior Position in the U.S. Federal Government) | — Accrued, but unpaid base salary. — If termination is for Cause, Mr. Mudd would not be entitled to any amounts payable (but unpaid) of any bonus or under any PSP award with respect to a performance cycle if the reason for such termination for Cause is substantially related to the earning of such bonus or to the performance over the performance cycle upon which the payment was based. | ||
If Mr. Raines dies during the termdiscussion of his employment agreement and to reimburse him for a complete physical examination annually.
28
will receive a cash sum equalis currently 48.
As announced by Fannie Mae on January 10, 2003, Ms. Gorelick will leave Fannie Mae later this year to devote substantial time to the bipartisan national commission investigating the attacks of September 11, 2001, and to pursue other interests. Ms. Gorelick will remain an employee of Fannie Mae through June 30, 2003. Until that date, Ms. Gorelick will continue to receive her current salary and benefits, including the vesting of stock-based compensation and pension benefits pursuant to her agreement. In addition, the Compensation Committee and the Board have approved that all options scheduled to vest in November 2003 and a pro rata portion of Ms. Gorelick’s EPS challenge options award will vestMr. Mudd as of June 30, 2003. Ms. GorelickDecember 29, 2006
Without Cause, | ||||||||||||||||||||
for Good Reason | Acceptance of | |||||||||||||||||||
or upon Non- | Senior Position in | |||||||||||||||||||
Extension of the | Serious Illness | U.S. Federal | ||||||||||||||||||
Payment Type | Agreement | or Disability | 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 |
54
(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 PSP 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 PSP, 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. |
Fannie Mae has agreementsa letter agreement with Mr. Howard and Mr. Levin, executive vice presidents of Fannie Mae. Eachdated June 19, 1990. The agreement provides that if the officerhe is terminated for reasons other than for cause,“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 Fannie Mae’sour life, medical, and long-term disability insurance plans for a12-month period, or until re- employmentre-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 the officerhe receives during the12-month period will reduce the amount otherwise payable byFannie Mae,by us, but only to the extent the benefits are attributable to payments made by Fannie Mae.us. If Mr. Levin had been terminated for reasons other than for “cause” as of December 29, 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 relatedgross-up payment we estimate would have cost us an aggregate of approximately $71,500.
• | 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 the 2003 Plan 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. |
55
Relationshipsalso containing a waiver of claims against us. Cash Payment(1) Equity Award(2)(3) Medical and Dental Outplacement(4) $ 2,058,500 — $ 15,158 $ 18,000 Robert Levin 3,465,937 $ 3,475,748 20,590 18,000 Peter Niculescu 2,011,452 1,890,994 20,590 18,000 Beth Wilkinson 1,662,856 494,956 20,968 18,000 Michael Williams 2,747,567 2,590,929 20,590 18,000 1,883,193 1,920,246 1,743 18,000 (1) Cash payments include severance payments, pro rata payments of annual cash incentive awards, and accelerated payments of the cash portion of the long-term incentive awards for 2005 that would have otherwise been payable within 12 months of an executive’s termination. (2) Reflects accelerated vesting of restricted stock and restricted stock units and performance shares under our PSP. No value is shown for 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 include payments under our PSP that normally would have been paid subsequent to December 29, 2006 and to which the named executives would not have been entitled if they had left in the absence of the severance program. For more information regarding our PSP, see “Compensation Discussion and Analysis—What decisions have we made with regard to our Performance Share Program?” (4) The amounts shown assume the executive will find new employment within 6 months. (5) If Mr. Blakely had left Fannie Mae on December 29, 2006 under the severance program, he would also have been eligible as a retiree to receive an additional cash payment of $1,656,270 under a long-term incentive award and accelerated vesting of restricted stock units worth $4,252,977. These amounts are not shown in this table, but are set forth in the “Potential Payments under our Stock Compensation Plans and 2005 Performance Year Cash Awards” table below. (6) Based on her age and years of service, upon her departure from Fannie Mae Ms. St. John received an extension of the exercise period of her options to the option expiration date under our stock compensation plans. She also was eligible for our retiree medical benefits. Because these benefits are available to all full-time, salaried employees, our costs for these benefits have not been included in the table above. The amount shown for Ms. St. John reflects our estimated cost of subsidizing her dental plan premiums for 18 months.
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During 2002,
• | Death, Disability, and Retirement. Under the 1993 Plan and the 2003 Plan, stock options, restricted stock, and restricted stock units held by our employees, including our named executives, fully vest upon the employee’s death, disability or retirement. On these terminations, or if an option holder leaves 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 means that the executive retires at or after age 60 with 5 years of service or age 65 (with no service requirement). |
• | In early 2006, our named executives, other than Mr. Mudd, received a portion of their long-term incentive awards for the 2005 performance year in the form of cash awards payable in four equal annual installments beginning in 2007. Under the terms of the awards, these cash awards are subject to accelerated payment at the same rate as restricted stock or restricted stock units and, accordingly, named executives would receive accelerated payment of the unpaid portions of this cash in the event of termination of employment by reason of death, disability, or retirement. |
• | Performance Share Program. As described above, performance shares are contingent grants of our common stock that are paid out based on performance over three-year performance periods. Actual payouts are generally made in two installments. Participants whose employment terminates at least 18 months after the beginning of the cycle but prior to the end of a performance cycle, due to death, disability, or, after age 55, at least five years of service, receive a pro rata payment of the performance shares at the end of the cycle, except in the case of death, in which case the payment is made as soon as practicable after the participant’s death. |
Restricted Stock and | Performance | |||||||||||
Name of Executive | Restricted Stock Units | Cash Award(2) | Shares(3) | |||||||||
Robert Blakely | $ | 4,252,977 | $ | 1,656,270 | N/A | |||||||
Robert Levin | 6,878,312 | 2,103,750 | 1,198,557 | |||||||||
Peter Niculescu | 3,324,652 | 885,720 | 717,863 | |||||||||
Beth Wilkinson | 1,484,750 | N/A | N/A | |||||||||
Michael Williams | 5,164,139 | 1,656,270 | 923,673 |
(1) | The values reported in this table, except for the cash, are based on the closing price of our common stock on December 29, 2006. No amounts are shown in the table for stock options because the exercise prices for options held by Mr. Levin, Mr. Niculescu and Mr. Williams that would have vested exceed the closing price of our common stock on December 29, 2006. Mr. Blakely and Ms. Wilkinson have never been awarded Fannie Mae stock options. | |
(2) | The reported amounts represent accelerated payment of cash awards made in early 2006 in connection with long-term incentive awards for the 2005 performance year. | |
(3) | The reported amounts in the “Performance Shares” column consist of payments under our PSP that normally would have been paid subsequent to December 29, 2006 and to which the named executives would not have been entitled if they left in the absence of the severance program. For more information regarding our PSP, see “Compensation Discussion and Analysis—What decisions have we made with regard to our Performance Share Program?” |
• | Life Insurance Benefits. We currently have a practice of arranging for our officers, including our named executives, to purchase universal life insurance coverage at our expense, with death benefits of $5,000,000 for Mr. Mudd and $2,000,000 for our other named executives. The death benefit is reduced by 50% at the |
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later of retirement, age 60, or 5 years from the date of enrollment. We provide the executives with an amount sufficient to pay the premiums for this coverage until but not beyond termination of employment, except in cases of retirement or disability, in which case we continue to make scheduled payments. Historically we also have paid our named executives a tax“gross-up” to cover any related taxes, but these payments will be eliminated as of January 1, 2008. |
• | Retiree Medical Benefits. We currently make certain retiree medical benefits available to our full-time salaried employees who retire and meet certain age and service requirements. We agreed that Mr. Blakely may participate in our retiree medical program as long as he remained employed until age 65. |
• | Pension and Deferred Compensation Benefits. Our named executives are also entitled to the benefits described above in “Pension Benefits” and “Nonqualified Deferred Compensation.” |
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Board of Directors is composed of five directors. In the business judgment of the Board of Directors, each Committee member meets the independence, qualification, and expertise requirements of the NYSE listing standards and Fannie Mae’s Corporate Governance Guidelines. The following directorsBoard has determined that Mr. Beresford, Ms. Horn, Mr. Smith, and executive officer had reportable relationshipsMr. Wulff have the requisite experience to qualify as “audit committee financial experts” under the rules and regulations of the SEC and has designated them as such.
Mr. DubersteinJanuary 2007. A copy of the charter is Chairmanavailable on our Web site at www.fanniemae.com. In addition to preparing this Audit Committee report, the purpose of the Audit Committee under its charter is to oversee:
• | the accounting, reporting, and financial practices of the Corporation and its subsidiaries, including the integrity of the Corporation’s financial statements and internal control over financial reporting; | |
• | the Corporation’s compliance with legal and regulatory requirements (in coordination with the Compliance Committee of the Board); | |
• | the independent auditor’s qualifications and independence; and | |
• | the performance of the Corporation’s internal audit function and the Corporation’s independent auditor. |
• | reviewed, and discussed with management, the audited financial statements included in Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2006; | |
• | discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, as amended; | |
• | received the written disclosures and the letter from the independent auditor, Deloitte & Touche LLP, required by Independence Standards Board Standard No. 1 (“Independence Discussions with Audit Committees”) and discussed with the independent auditor its independence from Fannie Mae; | |
• | conducted due diligence regarding the independent auditor’s independence from Fannie Mae and its management; |
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• | reviewed and discussed the scope and resources for the internal audit function; and | |
• | reviewed and oversaw the process by which Fannie Mae’s Chief Executive Officer and Chief Financial Officer certified Fannie Mae’s periodic disclosures. |
Mr. Swygert’s son is employed by Fannie Mae as a non-officer employeeDecember 31, 2006, in Fannie Mae’s eBusiness Marketing area. Mr. Swygert is an independent director under Fannie Mae’s Corporate Governance Guidelines and would continue to be independent underAnnual Report onForm 10-K for the director independence standards recently proposed byyear ended December 31, 2006.
Mr. Levin’s sister is employed by Fannie Mae as a non-officer employee in Fannie Mae’s Enterprise Systems Operations division.
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PROPOSAL 2: RATIFICATION OF AUDITORS
The Audit Committee has selected KPMG LLP asapproved the outside auditorsappointment of Fannie MaeMae’s independent auditor, Deloitte & Touche LLP, for 20032007, and the Board of Directors has approved that selection. KPMG LLP has served assubmitted the outside auditorsappointment to shareholders for ratification at the 2007 annual meeting.
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PROPOSAL 2: | RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Description of Fees | Fees for the Year Ended December 31, 2002 | Fees for the Year Ended December 31, 2001 | ||||
Audit Fees | $ | 1,978,955 | $ | 1,402,200 | ||
Audit Related Fees (1) |
| 3,651,493 |
| 2,674,596 | ||
Tax Fees (2) |
| 3,638,820 |
| 3,862,275 | ||
All Other Fees (3)(4) |
| 221,165 |
| 237,165 | ||
Total Fees | $ | 9,490,433 | $ | 8,176,236 | ||
Notes to Auditor Fees Table
Fees For The Year Ended | Fees For The Year Ended | |||||||
Description of Fees | December 31, 2006 | December 31, 2005 | ||||||
Audit Fees | $ | 42,000,000 | $ | 59,966,000 | ||||
Audit-Related Fees(1) | 192,000 | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 42,192,000 | $ | 59,966,000 |
(1) | For |
voteforFOR the ratification of the selection of KPMG LLP.Deloitte & Touche LLP as Fannie Mae’s independent
registered public accounting firm for 2007.
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30
PROPOSAL 3: APPROVAL OF FANNIE MAE STOCK COMPENSATION PLAN OF 2003
Background
PROPOSAL 3: | APPROVAL OF AMENDMENT TO FANNIE MAE STOCK COMPENSATION PLAN OF 2003 |
• | discontinue automatic stock option grants to non-management directors at each annual meeting; | |
• | eliminate the current Plan provision requiring automatic awards to non-management directors of restricted stock in 2006 (with the 2006 award to have a fair market value of $75,000) and in 2010 (with the 2010 award to have a fair market value of $90,000), as described in more detail below under “Non-Management Director Restricted Stock Awards”; | |
• | provide for automatic awards of restricted stock or restricted stock units (collectively referred to as “restricted stock”) to non-management directors, after each annual meeting, with a fair market value to be determined annually by the Board (which, for the annual meeting in 2008, will be $135,000), and that will vest in full no later than one year after the date of grant, as described in more detail below under “Non-Management Director Restricted Stock Awards”; and | |
• | permit non-management directors to elect to defer awards of restricted stock and convert their annual cash retainer into deferred shares, as described below under “Deferred Compensation.” |
• | simplify our current program, | |
• | curtail the use of options for directors, | |
• | eliminate meeting fees for our non-management directors, and | |
• | rely, in the future, on cash retainers and an annual restricted stock grant. |
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this annual award in future years.
its entirety by reference to Appendix A.
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2,000,000 share limit.
31
will however, are not be available for additional awards under the Plan.
the termination of the Plan.
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Generally speaking, restricted
32
control or termination of employment in some circumstances.
Beginning
This provision will continue to apply following the Plan Amendment.
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Each nonmanagement
Generally speaking,
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33
Mae willis not be entitled to a federal income tax deduction as a result of the disposition.
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Payments Upon Change in Control. Where payments
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Name and Principal Position | Dollar Value ($) | Number of Units | ||||||
Non-Executive Director Group | $ | 9,720,000 | Not determinable |
Name and Principal Position | Stock Options Granted | |||||||
• | Daniel Mudd, President and Chief Executive Officer and Director Nominee | 105,749 | ||||||
• | Robert Blakely, Executive Vice President | 0 | ||||||
• | Robert Levin, Executive Vice President and Chief Business Officer and a former Chief Financial Officer | 100,613 | ||||||
• | Peter Niculescu, Executive Vice President— Capital Markets | 59,425 | ||||||
• | Beth Wilkinson, Executive Vice President, General Counsel and Corporate Secretary | 0 | ||||||
• | Michael Williams, Executive Vice President and Chief Operating Officer | 73,880 | ||||||
• | Julie St. John, Former Executive Vice President and Chief Information Officer | 73,880 | ||||||
• | Stephen B. Ashley, Director Nominee | 4,000 | ||||||
• | Dennis R. Beresford, Director Nominee | 0 | ||||||
• | Louis J. Freeh, Director Nominee | 0 | ||||||
• | Brenda J. Gaines, Director Nominee | 0 | ||||||
• | Karen N. Horn, Director Nominee | 0 | ||||||
• | Bridget A. Macaskill, Director Nominee | 0 | ||||||
• | Leslie Rahl, Director Nominee | 5,333 | ||||||
• | John C. Sites, Jr., Director Nominee | 0 | ||||||
• | Greg C. Smith, Director Nominee | 666 | ||||||
• | H. Patrick Swygert, Director Nominee | 4,000 | ||||||
• | John K. Wulff, Director Nominee | 2,000 | ||||||
• | Rebecca Senhauser (former employee) | 19,080 | ||||||
• | Barbara Spector (employee) | 0 | ||||||
• | Recipients of 5% of options | 0 | ||||||
• | Executive Group (all current executive officers) | 426,846 | ||||||
• | Non-Executive Director Group (all current non-management directors) | 19,999 | ||||||
• | Non-Executive Officer Employee Group | 876,692 |
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34
Equity Compensation Plan Information
(as of December 31, 2002)
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | Weighted-average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) (#) | ||||
Equity compensation plans approved by shareholders | 25,131,000 | $ | 59.16 | 16,297,084 (1) | |||
Equity compensation plans not approved by shareholders | N/A |
| N/A | N/A (2) | |||
Total | 25,131,000 | $ | 59.16 | 16,297,084 | |||
Notes to Equity Compensation Plan Information
As of December 31, 2006 | ||||||||||||
Number of | ||||||||||||
Securities | ||||||||||||
Remaining | ||||||||||||
Number of | Available | |||||||||||
Securities to | for Future Issuance | |||||||||||
be Issued upon | Weighted-Average | under Equity | ||||||||||
Exercise | Exercise Price of | Compensation | ||||||||||
of Outstanding | Outstanding | Plans (Excluding | ||||||||||
Options, | Options, | Securities | ||||||||||
Warrants and | Warrants and | Reflected in First | ||||||||||
Plan Category | Rights (#) | Rights ($) | Column) (#) | |||||||||
Equity compensation plans approved by stockholders | 22,234,887 | (1) | $ | 70.44 | (2) | 44,075,454 | (3) | |||||
Equity compensation plans not approved by stockholders | N/A | N/A | N/A | |||||||||
Total | 22,234,887 | $ | 70.44 | 44,075,454 | ||||||||
(1) | This amount includes outstanding stock options; restricted stock units; the maximum number of shares issuable to eligible employees pursuant to our stock-based performance award; shares issuable upon the payout of deferred stock balances; the maximum number of shares that may be issued pursuant to performance share program awards made to members of senior management for which no determination had yet been made regarding the final number of shares payable; and the maximum number of shares that may be issued pursuant to performance share program awards that have been made to members of senior management for which a payout determination has been made but for which the shares were not paid out as of December 31, 2006. Outstanding awards, options, and rights include grants under the 1993 Plan, the 2003 Plan, and the payout of shares deferred upon the settlement of awards made under the 1993 Plan and a prior plan. | |
The weighted average exercise price is calculated for the outstanding options and does not take into account restricted stock units, stock-based performance awards, deferred shares or the performance shares described in footnote (1). | ||
(3) | This number of shares consists of 11,960,258 shares available under the 1985 Employee Stock Purchase Plan and |
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Mrs.
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Proposal 5: | Proposal to Authorize Cumulative Voting |
meeting:
“That “That the stockholders of Fannie Mae,FNMA, assembled in Annual Meeting in person and by proxy, hereby request the Board of Directors to take the necessary steps to provide for cumulative voting in the election of directors, which means each stockholder shall be entitled to as many votes as shall equal the number of shares he or she owns multiplied by the number of directors to be elected, and he or she may cast all of such votes for a single candidate, or any two or more of them as he or she may see fit.”
“The many problems FNMA has been having make cumulative voting of the UTMOST importance!!!
“Many states have mandatory cumulative voting, so do National Banks.”
“
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Management Comment
The Board of Directors believes that the “one share, one vote” or straight voting method of electing directors results in a more efficient and unified board, a board where each director represents the interests of all shareholders.
Under the cumulative voting method for election of Fannie Mae’s directors, a shareholder would be entitled to cast votes equal to the number of shares that the shareholder owns multiplied by the number of directors to be elected. Thus, all of a shareholder’s votes could be cast for a single candidate or distributed among several nominees. If a shareholder wished, he or she could cast all 13 votes for each owned share for one candidate. This method could permit a well-organized minority shareholder bloc to concentrate votes and elect one or more candidates to the Fannie Mae Board. If this occurs, the operation of the Board could become fractionalized, resulting in inefficient functioning and serious harm to corporate operations. It is for this reason that the Board recommended eliminating cumulative voting in 1988 and now, as it did in 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, and 2002 recommends against the reimposition of cumulative voting.
Unless shareholders specify otherwise in the proxy, proxies solicited by the Board of Directors will be voted by the proxy holders at the annual meeting against this proposal. A majority of the votes cast at the annual meeting is required to approve this proposal.
vote
VoteagainstAGAINSTthis proposal.
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meeting, the Board intends that the proxy holders will vote proxies in the accompanying form on such matters according to the judgment of the proxy holders (exceptholders.
36
Escrow Agreements executed in accordance with restricted stock awards under the Fannie Mae Stock Compensation Plan of 1993).
Shareholder Proposals and Nominations for 2004
Any shareholder proposal intended to be presentedconsideration at the 20042008 annual meeting must submit the proposal so that we receive it by no later than November 30, 2007, in order for the proposal to be received by Fannie Maeconsidered for inclusion in the proxy statement no later than December 19, 2003. and form of proxy that the Board of Directors will distribute in connection with that meeting. The shareholder proposal must be delivered to, or mailed and received by, Fannie Mae Shareholder Proposal,c/o Office of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin Avenue, NW, Washington, DC20016-2892.
Shareholder nominations of candidates for electionserve as directorsa director must be madereceived by the same deadlines described above.Office of the Secretary not earlier than the close of business on January 21, 2008 and not later than the close of business on March 21, 2008. The written notice must include (1) should be directed to Fannie Mae Director Nominees,c/o Office of the Secretary, Fannie Mae, Mail Stop 1H-2S/05, 3900 Wisconsin Avenue NW, Washington, DC20016-2892.
• | the name, age, business address and residence address of each nominee proposed in the notice, | |
• | the principal occupation or employment of each nominee, | |
• | the class of securities and the number of shares of Fannie Mae capital stock which are beneficially owned by each nominee, | |
• | any other information concerning each nominee that would be required under SEC rules in a proxy statement soliciting proxies for the election of that nominee as a director, and | |
• | a statement whether the nominee, if elected, intends to tender, promptly following the nominee’s election or re-election, an irrevocable resignation effective upon the nominee’s failure to receive the required vote |
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for re-election at the next meeting of shareholders at which the nominee faces re-election and upon acceptance of such resignation by the Board of Directors. |
our website atwww.fanniemae.com.
Fannie Mae pays
This amount excludes costs normally expended for a solicitation for an uncontested election of directors, and salaries and wages of regular employees and officers.
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Section 16(a) Beneficial Ownership Reporting
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires directors and certain officers of reporting companies, and persons who own more than ten percent of a registered class of such company’s equity securities, to file reports of ownership and changes in ownership with the SEC and any exchange on which such company’s securities trade, and to furnish the company with copies of the forms. As a federally chartered corporation, Fannie Mae’s directors and officers were exempt from these requirements during 2002. On March 31, 2003, however, upon the effectiveness of Fannie Mae’s registration of its common stock with the SEC under the Exchange Act, Fannie Mae’s directors and applicable officers began filing Section 16(a) reports. These reports are accessible through our Web site at www.fanniemae.com.
By Order of the Board of Directors
Thomas E. Donilon
Secretary
Dated: April 14, 2003
Washington, DC
37
2. Purpose, duties and responsibilities.
The purpose of the Committee shall be to:
Among its duties and responsibilities, the Committee shall:
Oversight of External Auditor Relationship
|
A-1
|
Financial Statement and Disclosure Matters
A-2
Oversight of Internal Audit Function
Compliance Oversight Responsibilities
Other Duties
3. Outside advisors. The Committee shall have the authority to retain such outside counsel, accountants, experts and other advisors as it deems appropriate to assist the Committee in the performance of its functions. The corporation shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any advisor retained by the Committee.
4. Meetings. The Committee shall meet as often as may be deemed necessary or appropriate in its judgment, but not less than quarterly, either in person or telephonically, and at such times and places as the Committee shall determine. The Committee shall meet separately in executive session, periodically, with each of management, the head of the internal audit department, and the outside auditor.
5. Subcommittees. In its discretion, the Committee may establish subcommittees consisting of one or more members, who shall report on their activities at the next meeting of the Committee.
A-3
APPENDIX B: CORPORATE GOVERNANCE GUIDELINES
The Role of the Board and Management
The Board of Directors oversees the management of the corporation and its business. The Fannie Mae Board of Directors represents the interests of the company’s stockholders, the owners of the corporation, in optimizing long-term value by providing the company guidance and strategic oversight on the stockholders’ behalf. The paramount duty of the Board of Directors is to select a well-qualified and ethical Chief Executive Officer (CEO) and to diligently oversee the CEO and other senior management in the operation of the corporation. In addition, the Board performs the following specific functions, among others:
It is the responsibility of management, in the exercise of their fiduciary duty to the company and its stockholders, to run the corporation’s business in an effective and ethical manner. The CEO is the leader of management and vested with the authority to make final decisions on behalf of management.
The Corporate Governance Guidelines
These Corporate Governance Guidelines have been developed by Fannie Mae’s Nominating and Corporate Governance Committee and formally adopted by the Board of Directors. These guidelines (along with the charters of the Board Committees as well as the company’s Bylaws, its Employee Code of Business Conduct and Directors’ Code of Conduct and Ethics and Conflict of Interests Policy) are published on Fannie Mae’s corporate website, www.fanniemae.com and are available in print to any stockholder who requests them.
Board Composition, Size and Membership Criteria
The Fannie Mae Board consists of eighteen persons, five of whom are appointed annually by the President of the United States, and the remainder of whom are elected annually by the stockholders at the company’s Annual Meeting of Stockholders. It is the policy of the Board that a substantial majority of the Fannie Mae directors will be independent, in accordance with the standards adopted by the Board. Currently, more than two-thirds of the Board consists of independent directors.
It is the responsibility of the Nominating and Corporate Governance Committee to identify and evaluate prospective stockholder-elected candidates for the Board. The Committee will seek out Board members who possess the highest personal values, judgment and integrity; an understanding of the regulatory and policy environment in which the corporation does its business; and diverse experience in the key business, financial and other challenges that face a major American enterprise. Stockholders may submit written recommendations for nominees directly to the Chairman of the Nominating and Corporate Governance Committee of the Board in care of the Office of the Secretary of the corporation.
B-1
The Chairman of the Nominating and Corporate Governance Committee formally invites new director candidates to stand for election to the Board.
In considering stockholder-elected members of the Board for renomination, the Nominating and Corporate Governance Committee takes into consideration: (i) a director’s contribution to the effective functioning of the corporation; (ii) any change in the director’s principal area of responsibility with his or her company or in his or her employment; (iii) the director’s retirement from his or her principal area of responsibility with his or her company; (iv) whether the director continues to bring relevant experience to the Board; (v) whether the director has the ability to attend meetings and fully participate in the activities of the Board; and (vi) whether the director has developed any relationships with Fannie Mae or another organization, or other circumstances have arisen, that might make it inappropriate for the director to continue serving on the Board; and (vii) the director’s age and length of service on the Board.
Directors are required to inform the Nominating and Corporate Governance Committee of any changes in employment responsibilities in order for the committee to determine whether it is appropriate to renominate the Board member for continuing Board service.
Generally, a director will not be renominated after having served for ten years, although the Nominating and Corporate Governance Committee may for good reason propose the renomination of such a director. No director will be proposed for renomination after 15 years of Board service. This policy is applied on a gradual basis so that turnover of a significant number of seats on the Board in any one year is limited.
A Board member generally must retire at the Annual Meeting of Shareholders following his or her 70th birthday, except that a director first nominated after age 67 may be renominated at up to the next five Annual Meetings.
Unless otherwise requested by the Board, the Chairman and CEO will cease to be a member of the Board of Directors at the termination of his or her employment as CEO.
Management directors must obtain approval from the Nominating and Corporate Governance Committee before accepting a seat on the Board of another for-profit organization. Non-management directors must notify the Nominating and Corporate Governance Committee before accepting a seat on the Board of another for-profit organization, and the Committee will determine, in its judgment, whether such service will interfere with the director’s service on the Fannie Mae Board. Audit Committee members may not serve on the audit committees of more than three public companies.
Director Independence
The Board, through its Nominating and Corporate Governance Committee, on an annual basis, reviews the independence of all directors, affirmatively makes a determination as to the independence of each director, and discloses those determinations. Under the definition of “independence” adopted by the Board, an “independent director” must be determined to have no material relationship with Fannie Mae, either directly or through an organization that has a material relationship with Fannie Mae. A relationship is “material” if, in the judgment of the Board, it would interfere with the director’s independent judgment. In addition, an Audit Committee member also must be “independent” within the meaning of the New York Stock Exchange’s listing requirements for audit committees. To assist it in determining whether a director is independent, the Board has adopted the guidelines set forth below:
B-2
The Board may determine that, in its judgment, a director that does not meet these guidelines nonetheless, under all the facts and circumstances, does not have a relationship with Fannie Mae that would interfere with the director’s independent judgment. The Board will disclose the basis for any such determination in the company’s next proxy statement.
Board Meetings
The Fannie Mae Board meets at least seven times per year. In addition to regularly scheduled meetings, unscheduled Board meetings may be called with adequate notice, if needed. Directors are expected to attend in person all regularly scheduled Board meetings. The presence of a majority of the incumbent directors at the time of any meeting constitutes a quorum for the transaction of business, and the act of a majority of such directors present at a meeting at which a quorum is present constitutes the act of the Board. Directors may not vote or participate by proxy. The Board may act by unanimous written consent of all incumbent directors. The Chairman and CEO, in consultation with the Chairs of the Board’s committees, determines the agenda for Board meetings. Directors will be asked regularly by the Chairman of the Nominating and Corporate Governance Committee to evaluate the information being provided to the Board and to submit suggestions for Board agenda items.
Fannie Mae’s non-management directors meet in executive session on a regular basis. Time for an executive session will be placed on the agenda for every regular Board meeting. The Chairman of the Nominating and Corporate Governance Committee will serve as the presiding director of these sessions.
B-3
Board dinners are scheduled quarterly each year to give Board members an opportunity to informally discuss Fannie Mae issues.
Board Materials
Directors are expected to review and devote appropriate time to studying Board materials. Materials for meetings are generally delivered five to seven days in advance of each Board and committee meeting. In certain cases, due to the sensitive nature of a matter, presentations are provided only at the Board or committee meeting.
Committees
The current standing Board committees are the Executive, Assets and Liabilities Policy, Audit, Compensation, Nominating and Corporate Governance, and Technology Committees. The bylaws give the Board authority to create additional committees. Each Committee has a written charter setting forth the responsibilities, duties and authorities of the Committee. The full Board reviews and approves Committee charters.
The Audit, Compensation, and Nominating and Corporate Governance Committees consist solely of independent directors. Committee assignments, including the designation of Committee Chairs, are made annually by Board resolution, based on recommendations from the Nominating and Corporate Governance Committee. Assignments are made based on a combination of factors including each individual Board member’s expertise and the needs of the corporation.
Each committee meets periodically for an appropriate length of time based on the specific meeting agenda. Generally, the regular annual committee schedule is as follows: Executive, as needed; Assets and Liabilities Policy, four times a year; Audit, at least four times a year; Compensation, at least three times a year; Nominating and Corporate Governance, at least four times a year; and Technology, twice a year. Additional committee meetings are scheduled as needed. Committee agendas are developed by the Committee Chair in consultation with the appropriate members of management and with the input of other directors. Directors are expected to attend in person all regularly scheduled committee meetings. Participation by telephone is permitted in exigent circumstances. Each Committee Chair makes a report on committee matters to the Board of Directors at the next scheduled Board meeting.
The Audit Committee periodically meets separately in executive session with each of management, the corporation’s internal auditor, and the outside auditor. In addition, the Audit Committee, or a designated representative of the Committee, will meet prior to the release and filing of the corporation’s quarterly financial reports, to review such materials. The Chairman of the Audit Committee will also meet twice a year with the company’s internal corporate disclosure committee. The corporation’s Senior Vice President for Operations Risk, who is responsible for Fannie Mae’s internal audit function, reports directly to the Audit Committee.
Director Access to Management and Outside Advisors
The corporation’s senior management team attends Board meetings on a regular basis, both to make special presentations and as a discussion resource, and is available directly to Board members outside of meetings.
The Board and its committees (consistent with the provisions of their respective charters) have the authority to retain such outside counsel, experts, and other advisors as they determine necessary to assist them in the performance of their functions.
Communications with the Board
The Chairman of the Nominating and Corporate Governance Committee is responsible for convening and presiding over regular executive sessions of the non-management directors. To facilitate the ability
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of interested parties to communicate their concerns or questions, Fannie Mae will publish on its website and in its proxy statement a mailing address and an e-mail address for communications directly with the Chairman of the Nominating and Corporate Governance Committee or the non-management directors as a group. In addition, Fannie Mae will publish on its website and in its proxy statement a procedure for communicating with the Audit Committee regarding accounting, internal accounting controls or auditing matters.
Director Compensation
Director compensation is a mix of cash, options, and restricted stock. Vesting over a period of years, director equity compensation is designed to align director interests with stockholders’ long-term value. Non-management directors’ total compensation is targeted to be consistent with the compensation philosophy applicable to senior management. The Nominating and Corporate Governance Committee is responsible for recommending compensation for non-management directors on the Board and reviews non-management director compensation once a year. Management directors do not receive additional compensation for Board service.
Director Orientation and Continuing Education
New directors participate in an orientation program to assist in familiarizing them with Fannie Mae’s business and their responsibilities as directors. The Secretary of the corporation is responsible for providing the orientation program to new directors. The orientation program addresses at a minimum Fannie Mae’s corporate powers and limitations; an overview of Fannie Mae’s business; the housing finance industry; key corporate performance indicators; strategic goals, risks, and the Fannie Mae workforce; and technological change in the industry. Orientation sessions are also provided to new members of Board committees. Fannie Mae supports directors’ periodic participation in continuing education programs to assist them in performing their Board responsibilities. In addition, the corporation conducts in-house director education programs on relevant topics.
Board Performance Evaluation
The Board’s performance can have an important effect on the overall, long-term business performance of the corporation. The Board conducts an annual self-evaluation to assess its effectiveness, on the basis of criteria developed by the Nominating and Corporate Governance Committee and approved by the Board. Each of the Board’s committees conducts an annual self-evaluation. The ability of individual directors to contribute to the Board is assessed in connection with the renomination process.
Management Evaluation and Succession
The Compensation Committee conducts an annual review of the performance of the corporation and the Chairman of the Board and CEO and senior management. The Chairman of the Board and CEO and other management directors are not present when the Committee meets to evaluate their performance. The Committee Chair reports on that evaluation to the non-management directors of the Board. The annual performance review is based, in large part, upon ratings and commentary provided on an annual CEO Evaluation Form distributed to the entire Board. The CEO rating factors include: strategic thinking; providing vision and direction; accelerating change; intellectual honesty; integrity; motivating and energizing people; teamwork and partnering; influencing delivering results; valuing all people; and developing management. The review includes the Compensation Committee’s own assessment and reflects discussions with other Board members.
On an annual basis, the Compensation Committee and the non-management members of the Board review management succession planning with the Chairman of the Board and CEO. The Chairman and CEO meets in executive session with the nonmanagement Board on at least an annual basis to discuss
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succession planning for the CEO and the company’s key executives. During the Chairman of the Board’s absence or inability to act, or during the vacancy of the office, the Vice Chairman and Chief Operating Officer shall perform the duties and exercise the authority of the Chairman, until a temporary or permanent successor to the Chairman and CEO is appointed by the Board.
Codes of Conduct
Fannie Mae’s Board has adopted a Code of Business Conduct applicable to all Fannie Mae employees, which is posted on the company’s website. Each employee must annually certify compliance with the Code. The Audit Committee oversees implementation and compliance of the Code.
The Board has adopted a Code of Business Conduct and Ethics and Conflict of Interests Policy for Members of the Board of Directors, which is posted on the company’s website. Each director must annually certify compliance with the Directors’ Code. The Nominating and Corporate Governance Committee oversees implementation and compliance with the Directors’ Code.
Implementation of the Guidelines
If the Board ascertains at any time that any of the Guidelines set forth herein are not in full force and effect, the Board shall take such action as it deems necessary to assure full compliance.
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APPENDIX C: FANNIE MAE
STOCK COMPENSATION PLAN OF 2003
as proposed to be amended
I. The Plan
I. | The Plan |
1.1 | Purpose. The purpose of the Fannie Mae Stock Compensation Plan of 2003 is to promote the success of Fannie Mae by providing stock compensation to employees and directors that is comparable to that provided by similar companies; to attract, motivate, retain and reward employees of Fannie Mae; to provide incentives for high levels of individual performance and improved financial performance of Fannie Mae; to attract, motivate and retain experienced and knowledgeable independent directors; and to promote a close identity of interests between directors, officers, employees and shareholders. |
1.2 | Definitions. The following terms shall have the meanings set forth below: |
The following terms shall have the meanings set forth below:
(1) | “Award”shall mean an award of any Option, Stock Appreciation Right, Restricted Stock, Performance Share Award, Stock Bonus or any other award authorized under Section 1.6, or any combination thereof, whether alternative or cumulative, or an award of any Options or Restricted Stock authorized under Articles VI and VII. |
(2) | “Award Date”shall mean the date upon which the Committee takes the action granting an Award or a later date designated by the Committee as the Award Date at the time it grants the Award, or, in the case of Awards under Sections 6.2 or 7.2, the applicable dates set forth therein. |
(3) | “Award Document”shall mean any writing (including in electronic or other form approved by the Committee), which may be an agreement, setting forth the terms of an Award that has been granted by the Committee. |
(4) | “Award Period”shall mean the period beginning on an Award Date and ending on the expiration date of such Award. |
(5) | “Beneficiary”shall mean the person or persons designated by a Participant or Permitted Transferee in writing to the senior-ranking officer in the Human Resources department of Fannie Mae to receive the benefits specified in an Award Document and under the Plan in the event of the death of the Participant or Permitted Transferee. |
(6) | “Benefit Plans Committee”shall mean the Benefit Plans Committee established by the Board, consisting of employees of Fannie Mae. |
(7) | “Board”shall mean the Board of Directors of Fannie Mae. |
(8) | “Cause”shall mean significant harm to Fannie Mae in connection with a Participant’s employment by Fannie Mae, by the Participant’s engaging in dishonest or fraudulent actions or willful misconduct or performing the Participant’s duties in a negligent manner, as determined by the Committee for a member of the Board who is an officer or employee of Fannie Mae and for the General Counsel of Fannie Mae, and by the General Counsel of Fannie Mae for all other employees; provided that no act or failure to act will be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the act or failure to act was in the interest of Fannie Mae. |
(9) | “Change in Control Event”shall mean a change in the composition of a majority of the Board elected by shareholders within 12 months after any “person” (as such term is used in Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of Fannie Mae representing more than |
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25 percent of the combined voting power of the then-outstanding securities of Fannie Mae entitled to then vote generally in the election of directors of Fannie Mae. |
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(10) | “Code”shall mean the Internal Revenue Code of 1986, as amended from time to time. |
(11) | “Committee”shall mean the Compensation Committee of the Board. |
(12) | “Common Stock”shall mean the common stock of Fannie Mae and, in the event such common stock is converted to another security or property pursuant to Section 8.2, such other security or property. |
(13) | “Director Term”shall mean the period starting immediately following the annual meeting of the shareholders at which directors are elected to serve on the Board and ending at the close of the next annual meeting at which directors are elected. |
(14) | “Early Retirement”means separation from service with Fannie Mae at or after the attainment of age 60 (but before attainment of age 65) with five years of service with Fannie Mae, or at an earlier age only if permitted by the Committee in its sole discretion. For purposes of this Section 1.2(14), a year of service shall be determined in accordance with the Federal National Mortgage Association Retirement Plan for Employees Not Covered Under Civil Service Retirement Law. |
(15) | “Eligible Employee”shall mean any employee of Fannie Mae. |
(16) | “ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended. |
(17) | “Fair Market Value”shall mean the per share value of Common Stock as determined by using the mean between the high and low selling prices of such Common Stock, on the date of determination, as reported on the NYSE. If such prices are not available |
(18) | “Fannie Mae”shall mean Fannie Mae and its successors and, where the context requires, its Subsidiaries. |
(19) | “Immediate Family Member”shall mean, with respect to a Participant, (i) the Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, half-sibling, stepsibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law orsister-in-law (including adoptive relations where the adopted individual shall not have attained the age of 18 years prior to such adoption); (ii) the Participant’s Domestic Partner (as defined in Section 2.18 of the Federal National Mortgage Association Retirement Plan for Employees Not Covered Under Civil Service Retirement Law and determined pursuant to the guidelines and procedures established thereunder); (iii) any lineal ascendant or descendant of any individual described in (i) or (ii) above; (iv) any partnership, limited liability company, association, corporation or other entity all of whose beneficial interests (including without limitation all pecuniary interests, voting rights and investment power) are held by and for the benefit of the Participantand/or one or more individuals described in (i), (ii) or (iii) above; or (v) any trust for the sole benefit of the Participantand/or one or more individuals described in (i), (ii) or (iii) above. |
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(20) | “Incentive Stock Option”shall mean an Option that is designated as an incentive stock option within the meaning of Section 422 of the Code, or any successor provision, and that otherwise satisfies the requirements of that section. |
(21) | “NMD Participant”shall mean a Nonmanagement Director who has been granted an Award under Article VI or Article VII. |
(22) | “Nonmanagement Director”shall mean a member of the Board who is not an officer or employee of Fannie Mae. |
(23) | “Nonqualified Stock Option”shall mean an Option that is not an Incentive Stock |
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(24) | “NYSE”shall mean the New York Stock Exchange. |
(25) | “Option”shall mean an option to purchase shares of Common Stock pursuant to an Award. |
(26) | “Participant”shall mean a Nonmanagement Director who has been granted an Award under the Plan or an Eligible Employee who has been granted an Award under the Plan. |
(27) | “Performance Share Award”shall mean an Award granted under Section 5.1. |
(28) | “Permitted Transferee” shall mean (i) any Immediate Family Member with respect to the Participant, and (ii) in the case of an Eligible Employee, any organization described in Section 170(c) of the Code that is eligible to receive tax-deductible, charitable contributions or any intermediary designated to exercise an Option for the benefit of such organization. |
(29) | “Personal Representative”shall mean the person or persons who, upon the incompetence of a Participant or Permitted Transferee, shall have acquired, by legal proceeding or power of attorney, the power to exercise the rights under the Plan, and who shall have become the legal representative of the Participant or Permitted Transferee, or, in the event of the death of the Participant or the Permitted Transferee, the executor or administrator of the estate of the Participant or Permitted Transferee. |
(30) | “Plan”shall mean this Fannie Mae Stock Compensation Plan of 2003. |
(31) | “Plan Termination Date”shall mean the tenth anniversary of the date of the meeting at which shareholders of Fannie Mae approve the Plan. |
(32) | “QDRO”shall mean a qualified domestic relations order as defined in Section 414(p) of the Code or Section 206(d)(3) of ERISA (to the same extent as if this Plan were subject thereto) and the applicable rules thereunder. |
(33) | “Restricted Stock”shall mean shares or bookkeeping units of Common Stock awarded to a Participant subject to payment of the consideration, if any, and the conditions on vesting and transfer and other restrictions as are established under the Plan, for so long as such shares or units remain nonvested under the terms of the applicable Award Document. |
(34) | “Retirement”shall mean, in the case of an Eligible Employee, separation from service with Fannie Mae under conditions entitling such Eligible Employee to an immediate annuity under the Federal National Mortgage Association Retirement Plan for Employees Not Covered Under Civil Service Retirement Law or under the Civil Service retirement law, whichever is applicable to such Eligible Employee, at or after the attainment of age 65. |
(35) | “Stand-Alone SAR”shall mean a Stock Appreciation Right granted independently of any other Award. |
(36) | “Stock Appreciation Right”shall mean a right pursuant to an Award to receive a number of shares of Common Stock or an amount of cash, or a combination of shares of Common Stock and cash, the aggregate amount or value of which is determined by reference to a change in the Fair Market Value of the Common Stock. |
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(37) | “Stock Bonus”shall mean an Award of shares of Common Stock under Section 5.2. |
(38) | “STSP”shall mean the Fannie Mae Securities Transactions Supervision Program and the guidelines thereunder. |
(39) | “Subsidiary”shall mean an organization whose employees are identified by the Board as eligible to participate in benefit plans of Fannie Mae. |
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(40) | “Total Disability”shall mean complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Participant was employed when the illness commenced or accident occurred, as determined by Fannie Mae’s independent medical consultant. |
(41) | “Without Consideration”shall mean, with respect to a transfer of an Option, that the transfer is being made purely as a gift or donation, with no promise or receipt of payment, goods, services or other thing of value in exchange for the Option; provided, however, if the terms of a transfer of Options to an otherwise Permitted Transferee require that, upon proper notice of exercise of such Options, (i) Fannie Mae may reduce the number of shares of Common Stock or sell such number of shares of Common Stock otherwise deliverable thereunder to the extent required to fund any additional withholding tax on behalf of the Eligible Employee necessitated by the exercise, delivering only the balance of the shares of Common Stock due upon exercise of the Option to the Permitted Transferee,and/or (ii) the Permitted Transferee sell the shares of Common Stock so received upon exercise of the Option, apply a portion of the net proceeds of the exercise to the payment of any additional taxes, fees or other costs or expenses incurred by the donor Eligible Employee in connection with or as a result of such transfer and then deliver (if an intermediary) or retain (if an organization described in Section 170(c) of the Code) the remaining net proceeds from such sales of shares of Common Stock, the transfer shall nevertheless continue to be Without Consideration for the purposes hereof. A distribution of an Option by an entity or trust described in Section 1.2(19)(iv) or (v) to an owner or beneficiary thereof shall be treated as a transfer Without Consideration. |
1.3 | Administration and Authorization; Power and |
(a) | The Committee. The Plan shall be administered by, and all Awards to Eligible Employees shall be authorized by, the Committee, unless otherwise required by law or regulation. Action of the Committee with respect to the administration of the Plan shall be taken by majority vote or unanimous written consent of the respective members. |
(b) | Plan Awards; Interpretation; Powers. Subject to the express provisions of the Plan, the Committee shall have the authority: |
(i) | to determine the Eligible Employees who will receive an Award; |
(ii) | to grant an Award to such Eligible Employees, to determine the amount of and the price at which shares of Common Stock will be offered or awarded, to determine the other specific terms and conditions of such Award consistent with the express limits of the Plan, to establish the installments (if any) in which such Award shall become exercisable or shall vest, and to establish the expiration date and the events of termination of such Award; |
(iii) | to construe and interpret the Plan and any Award Documents, to further define the terms used in the Plan, and to prescribe, amend and rescind rules and regulations relating to the administration of the Plan; |
(iv) | to cancel, modify or waive Fannie Mae’s rights with respect to, or modify, discontinue, suspend or terminate, an Award being granted or an outstanding Award granted to or held by an Eligible Employee, subject to any required consents under Section 8.5; |
(v) | as part of any Eligible Employee’s employment agreement approved by the Committee, to modify or change an Award; |
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(vi) | to accelerate the vesting of, extend the ability to exercise, or extend the term of an Award being granted or an outstanding Award; and |
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(vii) | to make all other determinations and take such other actions as contemplated by the Plan or as may be necessary or advisable for the administration of the Plan and the effectuation of its purposes. |
(c) | Binding Determinations. Any action taken by, and any inaction of, Fannie Mae, any Subsidiary, the Board, the Committee or the Benefit Plans Committee relating or pursuant to the Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Subject only to compliance with the express provisions of the Plan, the Board, the Committee and the Benefit Plans Committee may act in their absolute discretion in matters within their authority related to this Plan. |
(d) | Reliance on Experts. In making any determination or in taking or not taking any action under the Plan, the Board, the Committee and the Benefit Plans Committee may obtain and may rely upon the advice of experts, including professional advisors to Fannie Mae. |
(e) | Delegation. The Committee may delegate, subject to such terms and conditions as it may impose, some or all of its authority under the Plan to one or more members of the Board or, for Awards to Eligible Employees below the rank of Senior Vice President, to the senior-ranking officer in the Human Resources department. In addition, the Committee may delegate ministerial, non-discretionary functions to individuals who are officers, employees, contractors or vendors of Fannie Mae. |
(f) | No Liability. No member of the Board, the Committee or the Benefit Plans Committee, or director, officer or employee of Fannie Mae or any Subsidiary shall be liable, responsible or accountable in damages or otherwise for any determination made or other action taken or any failure to act by such person in connection with the administration of the Plan, so long as such person is not determined by a final adjudication to be guilty of willful misconduct with respect to such determination, action or failure to act. |
(g) | Indemnification. To the extent permitted by law, each of the members of the Board, the Committee and the Benefit Plans Committee and each of the directors, officers and employees of Fannie Mae and any Subsidiary shall be held harmless and be indemnified by Fannie Mae for any liability, loss (including amounts paid in settlement), damages or expenses (including reasonable attorneys’ fees) suffered by virtue of any determinations, acts or failures to act, or alleged acts or failures to act, in connection with the administration of the Plan so long as such person is not determined by a final adjudication to be guilty of willful misconduct with respect to such determination, action or failure to act. |
1.4 | Participation. Awards may be granted by the Committee to Eligible Employees. An Eligible Employee who has been granted an Award may be granted, if otherwise eligible, additional Awards if the Committee shall so determine. Nonmanagement Directors shall be eligible to receive Awards granted automatically under Sections 6.2 and 7.2 and Awards granted under Sections 6.7 and 7.5. |
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1.5 | Shares Available for Awards. |
(a) | Common Stock. Subject to the provisions of Section 8.2, the shares of Common Stock that may be delivered under this Plan shall be shares of Fannie Mae’s authorized but unissued Common Stock, shares of Common Stock held by Fannie Mae as treasury shares or shares of Common Stock purchased by Fannie Mae on the open market. |
(b) | Number of Shares. |
(i) | a Specified Stock Award is (A) an Award granted pursuant to Article IV (“Restricted Stock Awards”) that is scheduled to vest in full before the third anniversary of the date of grant, or (B) an Award granted pursuant to Section 5.1 (“Grants of Performance Share Awards”) with a performance cycle that ends less than one year from the date of grant, or (C) an Award granted pursuant to Section 5.2 (“Grants of Stock Bonuses”) that is fully and immediately vested or that has vesting or performance features described in (A) or (B) above; | |
(ii) | an Award that is described in both Article IV and Section 5.1 shall be considered a Specified Stock Award only if it is described in both of clauses (A) and (B) of Section 1.5(b)(i) above; | |
(iii) | in applying Sections 1.5(b)(i), there shall be disregarded any Award or Plan provision that could result in accelerated vesting of or delivery of Common Stock under an Award; and | |
(iv) | the 40,000,000 and 2,000,000 limitations shall be subject to adjustment in accordance with Section 8.2.” |
(c) | Calculation of Available Shares and Replenishment. A good faith estimate of the number of shares of Common Stock subject to outstanding Awards that will be satisfied by delivery of shares of Common Stock, plus the number of shares of Common Stock referenced in calculating an Award paid in cash, shall be reserved from the number of shares of Common Stock available for Awards under the Plan. The aggregate number of shares of Common Stock delivered under the Plan plus the number of shares of Common Stock referenced with respect to Awards paid in cash shall reduce the number of shares of Common Stock remaining available for Awards under the Plan. If any Award shall expire or be canceled or terminated without having been exercised in full, or any Common Stock subject to a Restricted Stock Award or other Award shall not vest or be delivered, the unpurchased, nonvested or undelivered shares of Common Stock subject thereto or the shares of Common Stock referenced with respect thereto shall again be available under the Plan. In the case of Awards granted in combination such that the exercise of one results in a proportionate cancellation of the other, the number of shares of Common Stock reserved for issuance shall be the greater of the number that would be reserved if one or the other alone were outstanding. If Fannie Mae withholds shares of Common Stock pursuant to Section 8.4, the number of shares of Common Stock that would have been deliverable with respect to an Award but that are withheld pursuant to the provisions of Section 8.4 shall be treated as delivered, and the aggregate number of shares of Common Stock deliverable with respect to the applicable Award and under the Plan shall be reduced by the number of shares of Common Stock so withheld, and such withheld shares shall not be available for additional Awards. |
1.6 | Grant of Awards. Subject to the express provisions of the Plan, the Committee shall determine the number of shares of Common Stock subject to each Award, the price (if any) to be paid for such shares or Award and other terms and conditions of the Award. Each Award to an Eligible Employee |
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shall be evidenced by an Award Document, which, if required by the Committee, shall be signed by the Eligible Employee. Awards are not restricted to any specified form or structure and may include, without limitation, the types of Awards set forth in Articles II, III, IV and V or, without limitation, any other transfers of Common Stock or any options or warrants to acquire shares of Common Stock, or any similar right with value related to or derived from the value of Common Stock, as may be determined by the Committee. An Award may consist of one such benefit, or two or more of them in any combination or alternative. |
1.7 | Award Period. Each Award and all executory rights or obligations under the related Award Document shall expire on such date (if any) as shall be determined by the Committee. |
1.8 | Limitations on Exercise and Vesting of Awards. |
(a) | Provisions for Exercise. An Award shall be exercisable or shall vest as determined by the Committee. |
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(b) | Procedure. Any exercisable Award shall be exercised when the person appointed by the Committee or the Committee’s designee receives written notice of exercise from the Participant or by any other method, including in electronic form, approved by the Committee, together with satisfactory arrangements for any required payment to be made in accordance with Sections 2.2 or 8.4 or the terms of the Award Document, as the case may be. |
(c) | Fractional Shares. Fractional share interests shall be disregarded, but may be accumulated, or the Committee may determine that cash will be paid or transferred in lieu of any fractional share interests. |
1.9 | Transferability. |
(a) | General |
(b) | Tax |
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senior-ranking officer in the Human Resources department of Fannie Mae, as the case may be, may specify other steps that the Eligible Employee must take to provide for the collection by Fannie Mae of all federal, state, local and other taxes required by law to be withheld upon the exercise of such Transferred Options. |
(c) | Notice of Transfer. A transfer of an Option to a Permitted Transferee shall not be effective unless, prior to making the transfer, the transferor (i) provides written notice of the transfer to (A) the Chairman of the Committee in the case of a transfer by a Participant who is either a member of the Board, the senior-ranking officer in the Human Resources department of Fannie Mae or the General Counsel of Fannie Mae (or a transfer by a Permitted Transferee of an Option originally granted to a member of the Board or to |
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the senior-ranking officer in the Human Resources department of Fannie Mae), or (B) the senior-ranking officer in the Human Resources department of Fannie Mae in the case of any other transfer, and (ii) certifies in writing to the Chairman of the Committee or the senior-ranking officer in the Human Resources department of Fannie Mae, as the case may be, that the transfer will be Without Consideration. |
(d) | Approval of |
(e) | Transfer of Nonvested |
1.10 | Section 83(b) Elections. If a Participant shall file an election with the Internal Revenue Service under Section 83(b) of the Code to include the value of any Award in the Participant’s gross income while the Award remains subject to restrictions, the Participant shall promptly furnish Fannie Mae with a copy of such election. |
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II. Options
II. | Options |
2.1 | Grants. One or more Options may be granted under this Article II to any Eligible Employee. Each Option granted may be either an Incentive Stock Option or a Nonqualified Stock Option. |
2.2 | Option Price. |
(a) | Pricing Limits. The exercise price for shares of Common Stock covered by an Option shall be determined by the Committee at the time of the Award, but shall not be less than 100 percent of the Fair Market Value of the Common Stock on the Award Date. Notwithstanding any provision of the Plan, an Option may not be modified so as to reduce the exercise price of the Option. |
(b) | Payment Provisions. The exercise price for any shares of Common Stock purchased on exercise of an Option granted under this Article II shall be paid in full at the time of each exercise in one or a combination of the following methods: (i) by electronic funds transfer; (ii) by check payable to the order of Fannie Mae; (iii) by notice and third party payment; (iv) by the delivery of shares of Common Stock already owned by the Participant; or (v) by cashless exercise, or any other method, if permitted by law and authorized by the Committee, in its discretion, or specified in the applicable Award Document; provided, however, that the Committee, in its discretion, may limit the |
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Participant’s ability to exercise an Option by delivering shares of Common Stock, including by imposing a requirement that the Participant satisfy a minimum holding period with respect to the shares so delivered. Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at their Fair Market Value on the date of exercise. |
2.3 | Limitations on Incentive Stock Options. There shall be imposed in any Award Document relating to Incentive Stock Options such terms and conditions as from time to time are required in order that the Option be an “incentive stock option” as that term is defined in Section 422 of the Code, or any successor provision. |
2.4 | Option Period. |
(a) | Award Period. Each Option shall specify the Award Period for which the Option is granted and shall provide that the Option shall expire at the end of such Award Period. The Committee may extend the Award Period by amendment of an Option or in an Eligible Employee’s employment agreement approved by the Committee. Notwithstanding the foregoing, the Award Period with respect to an Incentive Stock Option, including all extensions, shall not exceed ten years. |
(b) | Effect of Termination of Employment. Notwithstanding the provisions of Section 2.4(a), unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, (i) for a Participant whose employment is terminated for any reason other than for Cause, Retirement, Early Retirement, Total Disability, death or having attained at least age 55 with at least five years of service and is not covered by Section 2.5(d), an Option shall expire on the earlier to occur of (A) the end of the Award Period or (B) the date three months following the Participant’s termination of employment, (ii) for a Participant whose employment is terminated and is covered by Section 2.5(d), an Option shall expire on the earlier to occur of (A) the end of the Award Period or (B) the date 12 months following the Participant’s termination of employment, (iii) for a Participant whose employment is terminated by reason of Retirement, Early Retirement, Total Disability, death or having attained at least age 55 with at least five years of service, an Option shall expire on the end of the Award Period and (iv) for a Participant whose employment is terminated by Fannie Mae for Cause, an Option shall expire upon the Participant’s termination. |
(c) | Death of Permitted Transferee. Unless otherwise provided by the Committee, an Option held by a Permitted Transferee shall expire on the earlier of the date on which it would expire pursuant to Section 2.4(a) or (b) or the date 12 months following the Permitted Transferee’s death. |
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2.5 | Vesting; Forfeiture. |
(a) | Vesting |
(b) | Change in |
(c) | Retirement, Early Retirement, Total Disability or |
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(d) | Vesting Upon Termination with Separation |
(e) | “EPS Challenge Grants.” Section 2.5(d) shall not apply to Options granted under the “EPS Challenge Grant” program established by the Board on January 18, 2000 or, if so provided by the Committee, to Options granted under other special incentive Option programs. |
2.6 | Option Amendments or Waiver of Restrictions.Subject to Sections 1.5 and 8.5 and the specific limitations on Awards contained in the Plan, the Committee from time to time may authorize, generally or in specific cases only, for the benefit of any Participant who is an Eligible Employee, any adjustment in the vesting schedule, the restrictions upon or the term of an Award granted under this Article II by amendment, waiver or other legally valid means. The amendment or other action may provide, among other changes, for a longer or shorter vesting or exercise period. |
2.7 | Gain Deferral. Any Participant who is eligible to participate in the Fannie Mae Stock Option Gain Deferral Plan may elect to exercise a Nonqualified Stock Option under the provisions of such plan. |
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3.1 | Grants. In its discretion, the Committee may grant to any Eligible Employee Stock Appreciation Rights either concurrently with the grant of another Award or in respect of an outstanding Award, in whole or in part, or may grant to any Eligible Employee Stand-Alone SARs. Any Stock Appreciation Right granted in connection with an Incentive Stock Option shall contain such terms as may be required to comply with the provisions of Section 422 of the Code (or any successor provision). Each Stand-Alone SAR shall specify the Award Period for which the Stand-Alone SAR is granted and shall provide that the Stand-Alone SAR shall expire at the end of such Award Period. The Committee may extend the Award Period by amendment of a Stand-Alone SAR. |
3.2 | Exercise of Stock Appreciation Rights. |
(a) | Related Awards. Unless the Award Document or the Committee otherwise provides, a Stock Appreciation Right related to another Award shall be exercisable at such time or times, and to the extent, that the related Award shall be exercisable. |
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(b) | Stand-Alone |
3.3 | Payment. |
(a) | Amount. Unless the Committee otherwise provides, upon exercise of a Stock Appreciation Right and surrender of the appropriate exercisable portion of any related Award, the Participant shall be entitled to receive payment of an amount determined by multiplying |
(i) | the difference obtained by subtracting the exercise price per share of Common Stock under the related Award (if applicable) or the initial share value specified in the Award from the Fair Market Value on the date of exercise, by |
(ii) | the number of shares of Common Stock with respect to which the Participant is exercising the Stock Appreciation Right. |
(b) | Form of Payment. The Committee, in its discretion, shall determine the form in which payment shall be made of the amount determined under paragraph (a) above, which may be solely in cash, solely in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right), or partly in shares and partly in cash. If the Committee permits the Participant to elect to receive cash or shares of Common Stock (or a combination thereof) on such exercise, any such election shall be subject to such conditions as the Committee may impose. |
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IV. Restricted Stock Awards
IV. | Restricted Stock Awards |
4.1 | Grants. The Committee, in its discretion, may grant one or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock Award Document shall specify the number of shares or units of Common Stock to be issued to the Participant, the date of such issuance, the consideration for the Restricted Stock, if any, to be paid by the Participant, the restrictions imposed on the Restricted Stock, and the conditions of release or lapse of such restrictions. Promptly after the lapse of restrictions on Restricted Stock, shares of Common Stock equal to the number of shares or units as to which the restrictions have lapsed (or such lesser number as may be permitted pursuant to Section 8.4) shall be delivered or credited to the Participant or other person entitled under the Plan to receive the shares. The Participant or such other person shall deliver to Fannie Mae such further assurance and documents as the Committee may require. |
4.2 | Restrictions. |
(a) | Pre-Vesting Restraints. Except as provided in Section 1.9, shares or units of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered, either voluntarily or involuntarily, until the restrictions have lapsed. |
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(b) | Dividend and Voting Rights. Unless otherwise provided in the applicable Award Document, a Participant receiving shares (but not units) of Restricted Stock shall be entitled to cash dividend and voting rights for all shares of Common Stock issued even though they are not vested, provided that such rights shall terminate immediately as to any shares of Restricted Stock that cease to be eligible for vesting. If provided in the applicable Award Document, a Participant receiving units of Restricted Stock shall be entitled to cash dividend and voting rights for such units even though they are not vested, provided that such rights shall terminate immediately as to any units of Restricted Stock that cease to be eligible for vesting. |
(c) | Accelerated Vesting. Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, the restrictions on Restricted Stock shall lapse upon the Participant’s Total Disability or termination of employment by reason of Retirement, Early Retirement, or death, and, if provided in the applicable Award Document, restrictions on Restricted Stock held for more than one year from the Award Date by Participants shall lapse upon a Change in Control Event. |
(d) | Vesting Upon Termination with Separation |
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Awards shall vest in accordance with the terms of such Eligible Employee’s employment agreement. |
(e) | Forfeiture. Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, Restricted Stock as to which the restrictions have not lapsed in accordance with the provisions of the Award or pursuant to Section 4.2(c) shall be forfeited upon a Participant’s termination of employment. Upon the occurrence of any forfeiture of Restricted Stock, the forfeited Restricted Stock shall be automatically transferred to Fannie Mae without payment of any consideration by Fannie Mae and without any action by the Participant. |
V. Performance Share Awards and Stock Bonuses
V. | Performance Share Awards and Stock Bonuses |
5.1 | Grants of Performance Share Awards. |
(a) | The Committee, in its discretion, may grant Performance Share Awards to Eligible Employees. An Award shall specify the maximum number of shares of Common Stock (if any) subject to the Performance Share Award and its terms and conditions. The Committee shall establish the specified period (a “performance cycle”) for the |
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Performance Share Award and the measure(s) of the performance of Fannie Mae (or any part thereof) or the Eligible Employee. The Committee, during the performance cycle, may make such adjustments to the measure(s) of performance as it may deem appropriate to compensate for, or reflect, any significant changes that may occur in accounting practices, tax laws and other laws or regulations that alter or affect the computation of the measure(s). The Award Document shall specify how the degree of attainment of the measure(s) over the performance cycle is to be determined. |
(b) | In its discretion, the Committee may grant Performance Share Awards which, by their terms, provide that, upon a Change in Control Event, payments shall be made with respect to a Performance Share Award held for more than one year from the Award Date by an Eligible Employee, based on the assumption that the performance achievement specified in the Award would have been attained by the end of the performance cycle. If the Committee approves an employment agreement with an Eligible Employee that provides for payments with respect to a Performance Share Award upon the employee’s termination, payments shall be made with respect to such Performance Share Awards in accordance with the terms of such Eligible Employee’s employment agreement. |
(c) | Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, if an Eligible Employee’s employment is terminated because of Retirement, Total Disability or Early Retirement prior to the end of the performance cycle, but at least 18 months after the first day of the performance cycle, such Eligible Employee shall receive a pro rata Performance Share Award, calculated as if the Eligible Employee were employed by Fannie Mae at the end of the performance cycle but adjusted to reflect the portion of the performance cycle in which the Participant actually was employed by Fannie Mae, payable in full as soon as practicable after the end of the performance cycle. |
(d) | Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, if an Eligible Employee’s employment is terminated because of the Eligible Employee’s death prior to the end of the performance cycle, but at least 18 months after the first day of the performance cycle, the Eligible Employee shall receive a pro rata Performance Share Award, payable in full as soon as practicable after the Eligible Employee’s death, in an amount that is based upon the Committee’s assessment of the likelihood of Fannie Mae’s success in attaining the performance measures by the end of the performance cycle and the portion of the performance cycle during which the Eligible Employee was employed by Fannie Mae, and calculated using the date of the Eligible Employee’s death as the date for establishing the Fair Market Value of such Award. |
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(e) | Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, if, after the end of the performance cycle, an Eligible Employee’s employment is terminated because of the Eligible Employee’s Retirement, Total Disability, death or Early Retirement, all portions of the Eligible Employee’s Performance Share Award not yet paid shall be paid in full as soon as practicable thereafter, except to the extent subject to a deferral election under Section 5.3. |
(f) | Unless otherwise provided by the Committee or in an Eligible Employee’s employment agreement approved by the Committee, any Eligible Employee who is not employed by Fannie Mae on the last day of a performance cycle or on the date of a scheduled payment of any portion of a Performance Share Award (determined without regard to any deferral election under Section 5.3), other than by reason of the Eligible Employee’s Retirement, Total Disability, death or Early Retirement, shall forfeit such payment and all future payments with respect to such performance cycle. |
5.2 | Grants of Stock Bonuses.The Committee may grant a Stock Bonus to any Eligible Employee in such amounts of shares of Common Stock and on such terms and conditions as determined from time to time by the Committee. |
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5.3 | Deferred |
VI. Nonmanagement Director Options
VI. | Nonmanagement Director Options |
6.1 |
6.2 | Annual Option |
(a) | Annual Awards. On the first day of the Director Term in 2004 and in each subsequent year prior to the Plan Termination Date (each of which shall be the Award Date), there shall be granted automatically (without any action by the Board or the Committee) to each Nonmanagement Director then in office a Nonqualified Stock Option to purchase 4,000 shares of Common Stock. Any Nonmanagement Director appointed or elected to office during a Director Term shall be granted automatically (without any action by the Board or the Committee) a Nonqualified Stock Option (the Award Date of which shall be the date such person takes office) to purchase the nearest whole number of shares of Common Stock equal to 4,000 multiplied by the number of partial or full calendar months remaining in the Director Term in which the Award is granted divided by 12. |
(b) | Maximum Number of Shares. Annual grants that would otherwise cause the total Awards under this Plan to exceed the maximum number of shares of Common Stock under Section 1.5(b) shall be prorated to come within such limitation. |
(c) | Discontinuance of Annual Option Grants. Notwithstanding Section 6.2(a), no additional annual grants of Nonqualified Stock Options pursuant to Section 6.2(a) shall be made to Nonmanagement Directors after the grants made with respect to the annual meeting of the shareholders held in 2004. |
6.3 | Option |
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6.4 | Option Period and Ability to |
6.5 | Termination of Directorship. If an NMD Participant’s services as a member of the Board terminate for any reason, any Option granted under Sections 6.2 or 6.7 held by the NMD Participant shall immediately vest and may be exercised until the earlier of one year after the date of such termination or the expiration of the stated term of the Option. |
6.6 | Adjustments. Options granted under Sections 6.2 or 6.7 shall be subject to adjustment as provided in Section 8.2, but only to the extent that such adjustment is based on objective criteria and is consistent with adjustments to Options or other Awards held by persons other than Nonmanagement Directors. |
6.7 | Additional Option Awards. Under this Article VI, the Committee may grant additional Option Awards to Nonmanagement Directors as appropriate, based on market compensation data or other information or circumstances. |
7.1 Participation. Awards under this Article VII shall be made only to Nonmanagement Directors. Neither the Plan nor any action taken under the Plan shall give any NMD Participant the right to be reappointed or renominated to serve as a member of the Board. C-14
7.2 |
(a) | Commencing with the annual meeting of the Company’s shareholders held in 2008, each Nonmanagement Director who is a member of the Board immediately following each annual meeting of the shareholders of the Company, shall be granted, immediately following such annual meeting, a Restricted Stock Award in the form of units (rounded down to the nearest full unit) representing shares of Common Stock. In 2008, this grant shall have an aggregate Fair Market Value on the date of grant equal to $135,000. In future years, the amount of the grant shall be equal to $135,000 or such other amount to be determined by the Board prior to the annual meeting. The Committee may determine, prior to the scheduled grant date, to substitute Restricted Stock in the form of restricted shares of Common Stock for the Restricted Stock units granted under Section 7.2. |
(b) | A Nonmanagement Director who is newly appointed or elected after the annual meeting of the Company’s shareholders held in 2008 and between annual meetings of the Company’s shareholders shall be granted upon such appointment or election a pro rata portion of the Award of Restricted Stock that would have been granted to such newly appointed or elected Nonmanagement Director under Section 7.2(a) had he or she been a member of the Board on the date of the annual meeting of the shareholders of |
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number of units or shares of Restricted Stock that would have been awarded had the newly appointed or elected Nonmanagement Director been a member of the Board immediately following the annual meeting of shareholders occurring immediately prior to his or her election or appointment by a fraction, the numerator of which is twelve minus the number of |
An NMD Participant receiving Restricted Stock units shall be entitled to receive dividend equivalents with respect to the Restricted Stock units. Dividend equivalents shall be paid in the same amount and |
(f) | The awards of Restricted Stock |
Deferrals. An NMD Participant may elect to defer the shares that the NMD Participant would otherwise receive pursuant to Section 7.2(d) by submitting an irrevocable deferral election (in a form provided by the |
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7.4 | Adjustments. Restricted Stock granted under this Article VII shall be subject to adjustment as provided in Section |
7.5 | Additional Restricted Stock and Other Stock Awards. |
(a) | Under this Article VII, the Committee may grant additional Restricted Stock Awards to Nonmanagement Directors as appropriate, based on market compensation data or other information or circumstances. The Committee may also grant Awards consisting of deferred Common Stock to Nonmanagement Directors who elect to convert their Nonmanagement Director retainer payments into deferred Common Stock, in each case consistent with the requirements of Section 409A of the Code. | |
(b) | An NMD Participant who elects to convert his or her Nonmanagement Director retainer payments into deferred Common Stock pursuant to Section 7.5(a) shall submit an irrevocable deferral election (in a form provided by the Company) no later than December 31 of the year prior to the year in which the retainer payments are earned and paid. Notwithstanding the forgoing, a newly appointed or elected NMD Participant may make an election to convert the NMD Participant’s retainer payments for the current calendar year into deferred Common Stock; provided, that, such election is made no later than thirty days following the Participant’s appointment or election to the Board and applies only to payments that are earned and paid after the date of the election. Dividend equivalents shall be credited with respect to the deferred shares at the same time dividends are paid with respect to the Common Stock, and shall be deemed to be reinvested in additional deferred shares of Common Stock based on the Fair Market Value of the Common Stock on the date credited. Distributions of shares deferred pursuant to this Section 7.5(b) shall be paid in a single lump-sum distribution (with cash paid for fractional shares) on the first business day of the month that is six months following the month in which the NMD Participant separates from service within the meaning of Section 409A of the Code. Deferrals made pursuant to this Section 7.5(b) shall be subject to such other terms and |
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conditions, consistent with Section 409A of the Code, as may be established by the Company and set forth in a deferral election form and related documents. |
8.1 | Rights of Eligible Employees, Participants and Beneficiaries. |
(a) | Employment Status. Status as an Eligible Employee shall not be construed as a commitment that any Award will be made under this Plan to an Eligible Employee or to Eligible Employees generally. |
(b) | No Employment |
(c) | Plan Not Funded. Awards payable under the Plan shall be payable in shares of Common Stock or from the general assets of Fannie Mae, and (except as provided in Section 1.5(c)) no special or separate reserve, fund or deposit shall be made to assure payment of Awards. No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of Fannie Mae by reason of any Award hereunder. Neither the provisions of the Plan (or of any related documents), nor the creation or adoption of the Plan, nor any action taken pursuant to the provisions of the Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between Fannie Mae and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the right of any unsecured general creditor of Fannie Mae. |
8.2 | Adjustments. |
(a) | Events Requiring Adjustments. If any of the following events occur, the Committee shall make the adjustments described in Section 8.2(b): (i) any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation,split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities of Fannie Mae, (ii) any issuance of warrants or other rights to purchase shares of Common Stock or other securities of Fannie Mae (other than to employees) at less than 80 percent of Fair Market Value on the date of such issuance, (iii) a sale of substantially all the assets of Fannie Mae, or (iv) any other similar corporate transaction or event with respect to the Common Stock. |
(b) | Adjustments to Awards. If any of the events described in Section 8.2(a) occurs, then the Committee shall, in the manner and to the extent (if any) as it deems appropriate and equitable, (i) proportionately adjust any or all of (1) the number and type of shares of Common Stock that thereafter may be made the subject of Awards (including the specific maximum set forth in Section 1.5), (2) the number, amount and type of shares of Common Stock subject to any or all outstanding Awards, (3) the grant, purchase or exercise price of any or all outstanding Awards, (4) the shares of Common Stock or cash deliverable upon exercise of any outstanding Awards, or (5) the performance standards appropriate to any outstanding Awards; or (ii) make provision for a cash payment or for the substitution or exchange of any or all outstanding Awards based upon the distribution or consideration payable to holders of Common Stock upon or in respect of the event; provided, however, in each case, that with respect to Awards of Incentive Stock Options, |
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no adjustment shall be made that would cause the Plan to violate Section 422 or 424(a) of the Code or any successor provisions thereto. |
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8.3 | Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of shares of Common Stock and the payment of money under the Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for Fannie Mae, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring the securities shall, if requested by Fannie Mae, provide such assurances and representations to Fannie Mae, as Fannie Mae may deem necessary or desirable to assure compliance with all applicable legal requirements. |
8.4 | Tax Withholding. Upon any exercise, vesting or payment of any Award or upon the disposition of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code (or any successor provision), the Committee may make such provisions and take such steps as it may deem necessary or appropriate for the withholding by Fannie Mae of all federal, state, local and other taxes required by law to be withheld, including without limitation, the right, at its option, to the extent permitted by law (i) to require the Participant (or Personal Representative or Beneficiary, as the case may be) to pay or provide for payment of the amount of any taxes that Fannie Mae may be required to withhold with respect to the transaction as a condition to the release of the shares of Common Stock or the making of any payment or distribution, or (ii)(a) to deduct from any amount payable in cash, or (b) to reduce the number of shares of Common Stock otherwise deliverable (or otherwise reacquire such shares), based upon their Fair Market Value on the date of delivery, or (c) to grant the Participant the right to elect reduction in the number of shares upon such terms and conditions as it may establish for the amount of any taxes that Fannie Mae may be required to withhold. |
8.5 | Plan Amendment, Termination and Suspension. |
(a) | Board Authorization. Subject to this Section 8.5, the Board may, at any time, terminate or amend, modify or suspend the Plan, in whole or in part. No Awards may be granted during any suspension of the Plan or after termination of the Plan, but the Committee shall retain jurisdiction as to Awards then outstanding in accordance with the terms of the Plan. |
(b) | Shareholder Approval. If any amendment would (i) materially increase the benefits accruing under the Plan, or (ii) materially increase the aggregate number of shares of Common Stock that may be issued under the Plan (except as provided in Section 8.2), then to the extent deemed necessary or advisable by the Board or as required by law or the rules of the NYSE, such amendment shall be subject to shareholder approval. |
(c) | Amendments to Awards. Without limiting any other express authority granted under the Plan, but subject to its express limits, the Committee may waive conditions of or limitations on Awards, without the consent of the Participant, and may make other changes to the terms and conditions of Awards that do not affect the Participant’s rights and benefits under an Award in any materially adverse manner. |
(d) | Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of the Plan or any change affecting any outstanding Award shall, without the written consent of the Participant, Beneficiary or Personal Representative, as applicable, affect in any manner materially adverse to such person any rights or benefits of any such person or any obligations of Fannie Mae under any Award granted under the Plan prior to the effective date of such change; however, any changes made pursuant to Section 8.2 shall not be deemed to constitute changes or amendments for purposes of this Section 8.5. |
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8.6 | Privileges of Stock Ownership.Except as otherwise expressly authorized by the Committee or the Plan and expressly stated in an Award Document, a Participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. No adjustment shall be made for dividends or other shareholder rights for which a record date is prior to the date of delivery of such shares. |
8.7 | Effective Date of the Plan.The Plan shall be effective as of the date of the meeting at which the shareholders of Fannie Mae approve it. |
8.8 | Term of the Plan. |
8.9 | Governing Law/Construction/Severability. |
(a) | Choice of Law. The Plan, the Awards, all documents evidencing Awards, and all other related documents shall be governed by, and construed in accordance with the laws of the District of Columbia, without reference to its principles of conflicts of law. |
(b) | Severability. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of the Plan shall continue in effect. |
8.10 | Captions.Captions and headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. The headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or of its provisions. |
8.11 | Effect of Change of Subsidiary Status.For purposes of the Plan and any Award, if an entity ceases to be a Subsidiary, the employment of all Participants who are employed by such entity shall be deemed to have terminated, except any Participant who continues as an employee of another entity within Fannie Mae. |
8.12 | Nonexclusivity of Plan.Nothing in the Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority. |
8.13 | Plan Binding on Successors.The obligations of Fannie Mae under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of Fannie Mae, or upon any successor corporation or organization succeeding to substantially all of the assets and business of Fannie Mae. Fannie Mae agrees that it will make appropriate provisions for the preservation of all Participants’ rights under the Plan in any agreement or plan that it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets. |
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VOTE BY INTERNET — www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on December 13, 2007. Have your proxy card in hand when you access the web site and follow the instructions to obtain yourFANNIE MAErecords and to create an electronic voting instruction form.3900 WISCONSIN AVENUE NWWASHINGTON, DC 20016ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONSIf you would like to reduce the costs Fannie Mae incurs in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above about how to vote by Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.VOTE BY TELEPHONE — 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on December 13, 2007. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Fannie Mae, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 so that it is received by close of business on December 13, 2007.Your voting instructions are confidential. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:FANMA1KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLYFANNIE MAE The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.COMPANY PROPOSALSFor Against For AllTo vote against any individual nominee(s), 1. Proposal to elect 12 directorsAllAll Exceptmark “For All Except” and write the name(s) of the nominee(s) on the line below.01) Stephen B. Ashley 07) Daniel H. Mudd 02) Dennis R. Beresford 08) LeslieRahl 03) Louis J. Freeh 09) John C. Sites, Jr.0 0 004) Brenda J.Gaines 10) Greg C. Smith05) Karen N. Horn, Ph.D. 11) H. Patrick SwygertFor Against Abstain06) Bridget A.Macaskill 12) John K. Wulff2. Proposal to ratify the selection of Deloitte & Touche LLP as independent registered public accounting firm for 2007.0 0 03.Proposal to approvean amendment to the Fannie Mae Stock Compensation Plan of 2003.0 0 0 The Board of Directors recommends a vote AGAINST Proposals 4 and 5. For Against Abstain SHAREHOLDER PROPOSALS4. Proposal to require shareholder advisory vote on executive compensation.0 0 05. Proposal to authorize cumulative voting.0 0 0Please date and sign below exactly as your name or names appear on this Please indicate if you plan to attend this meeting.0 0proxy card. Joint owners should each sign personally. Corporate proxies should be signed in full corporate name by an authorized officer andYes Noattested. Any person signing in a fiduciary capacity should indicate his or her full title in the fidiciary capacity. Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date |
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[LOGO] FannieMae 3900 Wisconsin Avenue, NW Washington, DC 20016 PROXY FOR ANNUAL MEETING OF SHAREHOLDERS--May 20, 2003 I/we, by signing this proxy card, hereby appoint STEPHEN B. ASHLEY, THOMAS P. GERRITY, and JOE K. PICKETT, and each of them, proxies, with full power of substitution, to vote my/our stock at the Annual Meeting of Shareholders of Fannie Mae on May 20, 2003 at 10 A.M. (local time) at the Hotel Monaco Salt Lake City, 15 West 200 South, Salt Lake City, Utah, and at any adjournments, as fully as I/we could if personally present, on the matters of election of directors, ratification of the selection of auditors, approval of the Stock Compensation Plan of 2003, and one stockholder proposal, as more fully described in the Proxy Statement, and upon any other matter that may come before such meeting. Nominees for the Election of Directors are: (01) S.B. Ashley, (02) K.M. Duberstein, (03) T.P. Gerrity, (04) T. Howard (05) A. McLaughlin Korologos, (06) F.V. Malek, (07) D.B. Marron, (08) D.H. Mudd, (09) A.M. Mulcahy, (10) J.K. Pickett, (11) F.D. Raines, and (12) H.P. Swygert (Continued and to be signed on the reverse side) PLEASE FOLD AND DETACH HERE P R O X Y
| | 2335 X Please mark your |______ votes as in this example. - ---------------------------------------------------------------------------------------------------------------------------------- The Directors Recommend a Vote FOR All Nominees in Item 1, FOR Item 2 and FOR The Directors Recommend a Vote AGAINST Item 4 Item 3 - ---------------------------------------------------------------------------------------------------------------------------------- FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 1. Election of 2. Ratification of the 4. Stockholder Proposal to Nominees as [ ] [ ] Selection of [ ] [ ] [ ] Reinstate Cumulative [ ] [ ] [ ] Directors: Auditors Voting Withheld for: (Write name of nominee(s) in the space provided 3. Approval of the [ ] [ ] [ ] below. Stock Compensation - --------------------------------- Plan of 2003 - ----------------------------------------------------------------------------------------------------------------------------------- This Proxy is Solicited on Behalf of the Board of Directors This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. Unless the stockholder specifies otherwise, the shares represented here will be voted in accordance with the recommendations of the Directors set forth above. Signature(s)________________________________________ Date _________________ Please mark, date, and sign your name exactly as it appears on this card and return in the enclosed envelope. When signing as attorney, executor, administrator, trustee, guardian, or officer of a corporation, please give your full title as such. For joint accounts each joint owner should sign. (triangle up) PLEASE FOLD AND DETACH HERE (triangle up) [LOGO] FannieMae Your vote is important. You may vote the shares held in this account in any one of the following three ways: . Vote by mail. Complete, date, sign and mail your proxy card (above) in the enclosed postage-paid envelope. . Vote by phone. Call toll-free, 1-877-PRX-VOTE (1-877-779-8683) 24 hours a day, 7 days a week from the U.S. and Canada to vote your proxy. . Vote by Internet. Access the Web site at http://www.eproxyvote.com/fnm 24 hours a day, 7 days a week. If you vote by phone or via the Internet, please have your social security number and proxy card available. The sequence of numbers appearing in the box above, just below the perforation, and your social security number are necessary to verify your vote. A phone or Internet vote authorizes the named proxies in the same manner as if you marked, signed and returned this proxy card. If you vote by phone or vote using the Internet, there is no need for you to mail back your proxy card. THANK YOU FOR VOTING
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSFOR THE 2007 ANNUAL MEETING OF SHAREHOLDERS DECEMBER 14, 2007You, the undersigned shareholder, appoint each of Joe K. Pickett, Karen N. Horn and Brenda J. Gaines, your attorney-in-fact and proxy, with full power of substitution, to vote on your behalf shares of Fannie Mae common stock that you would be entitled to vote at the 2007 Annual Meeting of Shareholders, and any adjournment of the meeting, with all powers that you would have if you were personally present at the meeting.The shares represented by this proxy will be voted as instructed by you and in the discretion of the proxies on all other matters. If not otherwise specified, shares will be voted FOR Proposals 1, 2 and 3, and AGAINST Proposals 4 and 5. Voting Methods:If you wish to vote by mail, please sign your name exactly as it appears on this proxy and mark, date and return it in the enclosed envelope. If you wish to vote by Internet or telephone, please follow the instructions on the reverse side. If you submit your proxy by Internet or telephone, please do not return your proxy card. |