Document:

exv10w12

 

EXHIBIT 10.12

FANNIE MAE

STOCK COMPENSATION PLAN OF 1993

	I.	 	The Plan

     1.1 Purpose. The purpose of the Fannie Mae Stock Compensation Plan of
1993 is to promote the success of the Federal National Mortgage Association by
providing an additional means through the grant of Awards to provide officers
and employees with stock compensation that is comparable with compensation for
employment with other similar companies in order to attract, motivate, retain
and reward officers and employees; to provide incentives for high levels of
individual performance and improved financial performance; to attract, motivate
and retain experienced and knowledgeable independent directors; and to promote
a close identity of interests between directors, officers, employees and
stockholders.

     1.2 Definitions.

     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, authorized by and granted under this
Plan.
	 
	 	     (2) “Award Date” shall mean the date upon which the Nonmanagement
Board or the Committee, as applicable as determined pursuant to Section
1.3, takes the action granting an Award or such later date as the
Nonmanagement Board or the Committee designates as the Award Date at the
time of granting the Award or, in the case of Awards under Articles VI or
VII, the applicable dates set forth therein.
	 
	 	     (3) “Award Document” shall mean any writing, which may be an
agreement, setting forth the terms of an Award that has been granted by
the Nonmanagement Board or 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 Benefit Plans
Committee to receive the benefits specified in an Award Document and
under this Plan in the event of the death of such Participant or
Permitted Transferee, or, if the Participant or Permitted Transferee has
not designated such person or persons, or such person or persons shall
all have pre-deceased the Participant or Permitted Transferee, the
executor or administrator of the estate of such Participant or Permitted
Transferee.

 

 

		
	 	     (6) “Benefit Plans Committee” shall mean the Benefit Plans Committee
established by the Board, consisting of employees of the Corporation.
	 
	 	     (7) “Board” shall mean the Board of Directors of the Corporation.
	 
	 	     (8) “Change in Control Event” shall mean any of the following:

		
	 	     (a) A change in the composition of a majority of the Board
elected by stockholders within 12 months after any “person” (as
such term is used in Sections 3(a)(9), 13(d) and 14(d) of the
Securities Exchange Act of 1934) is or becomes the beneficial
owner, directly or indirectly, of securities of the Corporation
representing more than 25 percent of the combined voting power of
the then outstanding securities of the Corporation entitled to then
vote generally in the election of directors of the Corporation.
	 
	 	     (b) A change in the authority of the Corporation to carry on
its business that would materially restrict the general scope of
its authorized business activities.
	 
	 	     (c) A change in the current legal or regulatory structure,
other than one sought by management, that would materially impair
the Corporation’s ability to borrow as a “federal agency” borrower.

		
	 	     (9) “Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time.
	 
	 	     (10) “Committee” shall mean the Compensation Committee of the Board.
	 
	 	     (11) “Common Stock” shall mean the common stock of the Corporation
and, in the event such common stock is converted to another security or
property pursuant to Section 8.2, such other security or property.
	 
	 	     (12) “Corporation” shall mean Federal National Mortgage Association
and its successors, and, where the context requires, its Subsidiaries.
	 
	 	     (13) “Director Term” shall mean the period starting with the annual
meeting of the stockholders at which directors are elected to serve on
the Board and ending with the next annual meeting at which directors are
elected.
	 
	 	     (14) “Early Retirement” means separation from service with the
Corporation at or after the attainment of age 60 (but before attainment
of age 65) with five years of service with the Corporation, or at an
earlier age only if permitted by the Nonmanagement Board or the Committee
(as the case may be) 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.

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	 	     (15) “Eligible Employee” shall mean any employee of the Corporation.
	 
	 	     (16) “ERISA” shall mean the Employee Retirement Income Security Act
of 1974, as amended.
	 
	 	     (17) “Escrow Agent” shall mean Chemical Bank or any additional or
successor escrow agent designated by the Benefit Plans Committee.
	 
	 	     (18) “Escrow Agreement” shall mean the document approved by the
Benefit Plans Committee that sets forth the agreement among the
Corporation, the Participant and the Escrow Agent pursuant to which an
Award of Restricted Stock, including an Award of Restricted Stock to a
Nonmanagement Director pursuant to Article VII, is held in escrow
pursuant to its terms.
	 
	 	     (19) “Fair Market Value” shall mean

		
	 	     (i) for the purpose of determining the exercise price of an
Option or the number of shares of Restricted Stock to be granted
under Article VII, 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 Award Date (or, if the NYSE is
not open that day, the next subsequent day that the NYSE is open
for trading and the Common Stock is traded) as reported for such
date in the table entitled “NYSE—Composite Transactions,”
contained in The Wall Street Journal; and
	 
	 	     (ii) for the purpose of valuing Common Stock used in payment
upon the exercise of an Option or other Award or to satisfy a tax
withholding obligation or of calculating the gain upon the exercise
of a Stock Appreciation Right, the per share value of Common Stock
as determined by using the closing price of such Common Stock on
the day preceding the date of exercise or payment (or, if the NYSE
is not open that day, the closest preceding day that the NYSE is
open for trading and the Common Stock is traded) as reported for
such date in the table entitled “NYSE—Composite Transactions,”
contained in The Wall Street Journal, or for the purpose of
computing the value of a Limited SAR, the average of such closing
prices of such Common Stock on each day during the period or on the
date specified in the Award Document.

		
	 	     (20) “Immediate Family Member” shall mean, with respect to a
Participant, (i) such Participant’s child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, half-sibling, stepsibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law (including adoptive relations where the
adopted individual shall not have attained the age of 18 years prior to
such adoption); (ii) such 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

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	 	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 Participant and/or one or
more individuals described in (i), (ii) or (iii) above; or (v) any trust
for the sole benefit of the Participant and/or one or more individuals
described in (i), (ii) or (iii) above.
	 
	 	     (21) “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.
	 
	 	     (22) “Limited SAR” shall mean a Stock Appreciation Right granted
pursuant to Section 3.4.
	 
	 	     (23) “NMD Participant” shall mean a Nonmanagement Director who
holds an Award granted pursuant to Article VI or Article VII.
	 
	 	     (24) “Nonmanagement Board” shall mean the Nonmanagement
Directors, as a group.
	 
	 	     (25) “Nonmanagement Director” shall mean a member of the Board who
is not an officer or employee of the Corporation.
	 
	 	     (26) “Nonqualified Stock Option” shall mean an Option that is not
an Incentive Stock Option.
	 
	 	     (27) “NYSE” shall mean the New York Stock Exchange.
	 
	 	     (28) “Option” shall mean an option to purchase Common Stock
pursuant to an Award.
	 
	 	     (29) “Participant” shall mean a Nonmanagement Director or an
Eligible Employee who has been granted an Award under this Plan.
	 
	 	     (30) “Performance Share Award” shall mean an Award granted under
Section 5.1.
	 
	 	     (31) “Permitted Transferee” shall mean (i) any Immediate Family
Member with respect to the Participant, (ii) (A) an extended family
member or any person who has provided or is providing long-term
assistance or care to the Participant or to an individual who is an
Immediate Family Member with respect to the Participant or (B) an
Immediate Family Member of a person described in (A), and (iii) in the
case of an Eligible Employee, any organization that is described in
Section 170(c) of the Code or any intermediary designated to exercise an
Option for the benefit of such organization.

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	 	     (32) “Personal Representative” shall mean the person or persons who,
upon the incompetence of a Participant, shall have acquired on behalf of
the Participant, by legal proceeding or otherwise, the power to exercise
the rights or receive benefits under this Plan and who shall have become
the legal representative of the Participant.

	 
	 	     (33) “Plan” shall mean this Fannie Mae Stock Compensation Plan of
1993.
	 
	 	     (34) “Plan Termination Date” shall mean the tenth anniversary of
the date of the meeting at which stockholders of the Corporation approve
the Plan.
	 
	 	     (35) “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), or the applicable
rules thereunder.
	 
	 	     (36) “Restricted Stock” shall mean shares of Common Stock awarded
to a Participant subject to payment of such consideration, if any, and
such conditions on vesting and such transfer and other restrictions as
are established in or pursuant to this Plan, for so long as such shares
remain nonvested under the terms of the applicable Award Document.
	 
	 	     (37) “Retirement” shall mean, in the case of an Eligible Employee,
separation from service with the Corporation 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.
	 
	 	     (38) “Rule 16a-1” shall mean Rule 16a-1 as promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended from time to time, and any successor provision.
	 
	 	     (39) “Rule 16b-3” shall mean Rule 16b-3 as promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended from time to time, and any successor provision.
	 
	 	     (40) Stand-Alone SAR” shall mean a Stock Appreciation Right granted
independently of any other Award.
	 
	 	     (41) “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 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.
	 
	 	     (42) “Stock Bonus” shall mean an Award of shares of Common Stock
under Section 5.2.

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	 	     (43) “STSP” shall mean the Federal National Mortgage Association
Securities Transactions Supervision Program and the guidelines
thereunder.
	 
	 	     (44) “Subsidiary” shall mean an organization whose employees are
identified by the Board as eligible to participate in benefit plans of
the Corporation.
	 
	 	     (45) “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 the Corporation’s independent medical
consultant, and, in the case of Eligible Employees at or above the rank
of Executive Vice President, ratified by the Nonmanagement Board.
	 
	 	     (46) “Without Consideration” shall mean that a transfer of an Option
is being made for a purely donative purpose, with no other promise or
receipt of payment, goods, services or other thing of value in exchange
therefor, provided, however, if the terms of a transfer of Options to an
otherwise Permitted Transferee requires that, upon proper notice of
exercise of such Options by or on behalf of such Permitted Transferee,
(i) the Corporation 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 such exercise,
delivering only the balance of the shares of Common Stock due upon the
exercise of such Option to the Permitted Transferee, and/or (ii) the
Permitted Transferee is required to sell the shares of Common Stock so
received upon exercise of the Option, apply a portion of the net proceeds
thereof 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, such
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(20)(iv) or (v) to an owner or beneficiary
thereof shall be treated as a transfer Without Consideration

     1.3 Administration and Authorization; Power and Procedure.

		
	 	     (a) The Nonmanagement Board and the Committee. This Plan shall be
administered by, and all Awards to Eligible Employees shall be authorized
by, the Nonmanagement Board in the case of Eligible Employees at or above
the rank of Executive Vice President and the Committee in the case of
Eligible Employees below the rank of Executive Vice President. Action of
the Nonmanagement Board or the Committee with respect to the
administration of this Plan shall be taken pursuant to a majority vote or
by unanimous written consent of the respective members. All references in
this Plan to actions or determinations in respect of Awards by the
Nonmanagement Board shall be references to Awards granted to Eligible
Employees at or above the rank of Executive Vice President. All
references in this Plan to actions or determinations in respect of Awards
by the Committee shall be references to Awards granted to Eligible
Employees below the rank of Executive

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	 	Vice President. The Nonmanagement
Board shall administer this Plan with respect to all
Awards held by Eligible Employees at or above the rank of Executive
Vice President, including Awards granted prior to the time that any such
Eligible Employee is elevated to that rank.
	 
	 	     (b) Plan Awards; Interpretation; Powers. Subject to the express
provisions of this Plan, the Nonmanagement Board or the Committee shall
have the authority:

		
	 	(i) to determine the Eligible Employees who will receive Awards;
	 
	 	(ii) to grant Awards to such Eligible Employees, to determine
the amount of and the price at which Common Stock will be
offered or awarded thereto, to determine the other specific
terms and conditions of such Awards consistent with the express
limits of this Plan, to establish the installments (if any) in
which such Awards shall become exercisable or shall vest, and
to establish the expiration date and the events of termination
of such Awards;
	 
	 	(iii) to construe and interpret this Plan and any Award
Documents, to further define the terms used in this Plan, and
to prescribe, amend and rescind rules and regulations relating
to the administration of this Plan;
	 
	 	(iv) to cancel, to modify, or waive the Corporation’s rights
with respect to, or modify, discontinue, suspend, or terminate
any or all outstanding Awards held by Eligible Employees,
subject to any required consents under Section 8.5;
	 
	 	(v) to accelerate or extend the ability to exercise or extend
the term of any or all outstanding Awards (subject to the
maximum term of Awards under Section 1.7); and
	 
	 	(vi) to make all other determinations and take such other
actions as contemplated by this Plan or as may be necessary or
advisable for the administration of this Plan and the
effectuation of its purposes.

		
	 	Notwithstanding the foregoing, the provisions of Articles VI and VII
relating to Nonmanagement Director Awards shall be automatic and, to the
maximum extent possible, self-effectuating, and the discretion of the
Nonmanagement Board or the Committee shall not extend to such Awards in
any manner that would be impermissible under Rule 16b-3(c)(2).
Ministerial, non-discretionary actions with respect to implementation of
the provisions of Articles VI and VII shall be performed by individuals
who are officers or employees of the Corporation at the direction of the
Benefit Plans Committee.
	 
	 	     (c) Binding Determinations. Any action taken by, or inaction of,
the Corporation, any Subsidiary, the Board, the Nonmanagement Board, the
Committee or the Benefit Plans Committee relating or pursuant to this
Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. Subject only to

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	 	compliance with the express provisions hereof, the Board, the
Nonmanagement Board and
the 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 this Plan, the Board, the Nonmanagement
Board or the Committee may obtain and may rely upon the advice of
experts, including professional advisors to the Corporation.
	 
	 	     (e) Delegation. The Committee may delegate some or all of its
authority under the Plan to one or more members of the Board. The
Nonmanagement Board and the Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees
of the Corporation.
	 
	 	     (f) No Liability. No member of the Board, the Committee or the
Benefit Plans Committee, or director, officer or employee of the
Corporation 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 so long as such person is not
determined to be guilty by a final adjudication 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 the Corporation and any
Subsidiary shall be held harmless and be indemnified by the Corporation
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 this 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 Nonmanagement Board or
the Committee only to Eligible Employees. An Eligible Employee who has been
granted an Award may, if otherwise eligible, be granted additional Awards if
the Nonmanagement Board or the Committee shall so determine. Nonmanagement
Directors shall not be eligible to receive any Awards except for Awards granted
automatically pursuant to Articles VI and VII.

     1.5 Shares Available for Awards.

		
	 	     (a) Common Stock. Subject to the provisions of Section 8.2, the
Common Stock that may be delivered under this Plan shall be shares of the
Corporation’s authorized but unissued Common Stock, any shares of Common
Stock held as treasury shares, and shares of Common Stock purchased by
the Corporation on the open market.
	 
	 	     (b) Number of Shares. Subject to adjustments in accordance with
Section 8.2, the maximum number of shares of Common Stock that may be
delivered pursuant to Awards

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	 	granted to Eligible Employees and
Nonmanagement Directors under this Plan shall not
exceed 13,500,000 shares plus shares previously approved by the
stockholders for awards under the Fannie Mae Stock Compensation Plan, the
Federal National Mortgage Association Restricted Stock Plan for
Directors, the Federal National Mortgage Association 1984 Stock Option
Plan and the Federal National Mortgage Association Performance Share Plan
that have never been subject to awards under such plans or that have
become available as of March 29, 1993 under such plans through the
expiration, cancellation or termination of outstanding awards.
	 
	 	     (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 for purposes of
determining other Awards, shall be reserved from the number of shares of
Common Stock available for Awards under this Plan. The aggregate number
of shares of Common Stock delivered under this Plan plus the number of
shares referenced with respect to Awards paid in cash shall reduce the
number of shares of Common Stock remaining available. 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 this Plan; provided, however, that no such unpurchased, nonvested
or undelivered shares shall again be available if the holder received
dividends with respect to such shares or any other benefits of ownership
of such shares, other than voting rights or the accumulation of dividends
that are never paid to the holder. 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 was outstanding. If the Corporation withholds
shares of Common Stock pursuant to Section 8.4, the number of shares 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
issued and the aggregate number of shares issuable with respect to the
applicable Award and under this Plan shall be reduced by the number of
shares so withheld and such shares shall not be available for additional
Awards.

     1.6 Grant of Awards. Subject to the express provisions of this Plan, the
Nonmanagement Board or the Committee shall determine the number of shares of
Common Stock subject to each Award, the price (if any) to be paid for the
shares or the Award and other terms and conditions of the Award. Each Award to
an Eligible Employee shall be evidenced by an Award Document signed by the
Corporation and, if required by the Nonmanagement Board or the Committee, 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 hereof or, without limitation, any other transfers
of Common Stock or any options or warrants to acquire Common Stock, or any
similar right with a value related to or derived from the value of Common
Stock, as may be determined by the Nonmanagement Board or the Committee. An
Award may consist of one such benefit, or two or more of them in any
combination or alternative.

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     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 Nonmanagement Board or the Committee, but in the case of
Options or other rights to acquire Common Stock, not later than ten (10) years
and one day after the Award Date.

     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 Nonmanagement Board or the Committee.
	 
	 	     (b) Procedure. Any exercisable Award shall be exercised when the
person appointed by the Nonmanagement Board or the Committee receives
written notice of such exercise from the Participant, 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/Minimum Issue. Fractional share interests
shall be disregarded, but may be accumulated. However, the Nonmanagement
Board or the Committee may determine that cash will be paid or
transferred in lieu of any fractional share interests.

     1.9 Acceptance of Notes to Finance Exercise. Where the Nonmanagement
Board or the Committee deems it appropriate under the circumstances as
indicated by its written approval, the Corporation may accept one or more notes
from any Eligible Employee Participant in connection with the exercise or
receipt of any outstanding Award or the payment of the amount of any taxes that
the Corporation may be required to withhold with respect to such exercise or
receipt; provided that any such note shall be subject to the following terms
and conditions:

		
	 	     (1) The principal of the note shall not exceed the amount required
to be paid to the Corporation upon the exercise or receipt of one or more
Awards under the Plan, including the amount of any taxes required to be
withheld, and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
	 
	 	     (2) The initial term of the note shall be determined by the
Nonmanagement Board or the Committee; provided that the term of the note,
including extensions, shall not exceed ten years.
	 
	 	     (3) The note shall provide for full recourse to the Participant,
including a right of set-off against amounts otherwise payable by the
Corporation to the Participant, and shall bear interest at a rate
determined by the Nonmanagement Board or the Committee, but not less than
the applicable federal rate determined under Section 1274, or any
successor provision of the Code.
	 
	 	     (4) If the employment of the Participant terminates, the unpaid
principal balance of 

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	 	the note shall become due and payable on the 10th
business day after such termination;
provided, however, that if a sale of shares of Common Stock would cause
such Participant to incur liability under the STSP, the unpaid balance
shall become due and payable on the 10th business day after the first day
on which a sale of such shares can be made without incurring such
liability, assuming for these purposes that, subsequent to such
termination, the Participant has entered into no other transactions
involving shares of Common Stock.
	 
	 	     (5) If required by the Nonmanagement Board or the Committee or by
applicable law, the note shall be secured by a pledge of any shares or
rights financed thereby in compliance with applicable law.
	 
	 	     (6) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform
with applicable rules and regulations of the Federal Reserve Board as
then in effect.

     1.10 Transferability.

		
	 	     (a) General Restrictions. Awards may be exercised only by the
Participant; the Participant’s Personal Representative, if any; the
Participant’s Beneficiary, if the Participant has died; in the case of
any Option (other than an Incentive Stock Option), a person who was a
Permitted Transferee at the time the Option was transferred to such
person; or a Permitted Transferee’s Beneficiary, if the Permitted
Transferee has died. Amounts payable or shares of Common Stock issuable
pursuant to an Award shall be paid to (or registered in the name of) such
person or persons as specified by the person exercising the Award. Other
than by will or the laws of descent and distribution or pursuant to a
QDRO (except to the extent not permitted in the case of an Incentive
Stock Option) or (subject to (b), (c), (d), (e), and (f) below) to a
Permitted Transferee in the case of any Option (other than an Incentive
Stock Option), no right or benefit under this Plan or any Award,
including without limitation any Option, Performance Share Award or
share of Restricted Stock that has not vested, shall be transferable by a
Participant or Permitted Transferee or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance
or charge (other than to the Corporation), and any such attempted action
shall be void. The Corporation shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding sentences and
only shall pay or deliver such cash or shares of Common Stock in
accordance with the provisions of this Plan. The designation of a
Beneficiary hereunder shall not constitute a transfer for these purposes.
	 
	 	     (b) Tax Withholding. An Eligible Employee may not transfer Options
(“Transferred Options”) to a Permitted Transferee, other than a Permitted
Transferee described in Section 1.2(31)(iii), unless the Eligible
Employee agrees to retain, and not to exercise, until the exercise of the
Transferred Options, at least 50 percent of the exercisable Options held
by the Eligible Employee with the same exercise price and expiration date
as the Transferred Options. The condition set forth in the preceding
sentence, however, may be waived at any time by (A) the Chairman of the
Committee in the case of an Eligible Employee who is either a member of
the Board or the General Counsel of the Corporation,

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	 	or (B) the General
Counsel of the Corporation in the case of any other Eligible Employee,
and, as a condition
of such waiver, the Chairman of the Committee or the General Counsel of
the Corporation, as the case may be, may specify other steps that the
Eligible Employee must take to provide for the collection by the
Corporation 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 or the General Counsel of the Corporation
(or a transfer by a Permitted Transferee of an Option originally granted
to a member of the Board or to the General Counsel of the Corporation),
or (B) the General Counsel of the Corporation in the case of any other
transfer, and (ii) certifies in writing to the Chairman of the Committee
or the General Counsel of the Corporation, as the case may be, that the
transfer will be Without Consideration.
	 
	 	     (d) Approval of Transfer. A transfer of an Option to a Permitted
Transferee described in section 1.2(31)(ii) or (iii) shall not be
effective unless, after receiving the notice described in (c) above, the
Chairman of the Committee or the General Counsel of the Corporation, as
the case may be, either approves the proposed transfer in writing or does
not disapprove the proposed transfer in writing within ten business days
after receipt of such notice. The Chairman of the Committee or the
General Counsel of the Corporation, as the case may be, may disapprove
such a proposed transfer if he or she determines, in his or her good
faith judgment, that (i) the proposed Permitted Transferee has
philosophies, purposes, policies, objectives, goals or practices
inconsistent with those of the Corporation or (ii) the Participant has
not taken such steps as may be necessary or appropriate to provide for
the collection by the Corporation of all federal, state, local and other
taxes required by law to be withheld upon exercise of the Option.
	 
	 	     (e) Time of Transfer. A transfer to a Permitted Transferee other
than a Permitted Transferee described in Section 1.2(31)(iii) may be made
not earlier than March 14, 1997 and not later than March 21, 1997 or,
thereafter, only on the first business day of a subsequent calendar
quarter.
	 
	 	     (f) Transfer of Nonvested Options. A nonvested Option may be
transferred to a Permitted Transferee other than a Permitted Transferee
described in section 1.2(31)(iii) only with the prior consent of (A) the
Chairman of the Committee in the case of a Participant who is either a
member of the Board or the General Counsel of the Corporation, or (B) the
General Counsel of the Corporation in the case of any other Participant.

     1.11 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 pursuant to the provisions of such plan.

     1.12 Section 83(b) Elections. If a Participant shall file an election
with the Internal

-12-

 

 Revenue Service to include the value of any Award in the
Participant’s gross income while such Award
remains subject to restrictions, the Participant shall promptly furnish the
Corporation with a copy of such election.

     1.13 Payments to Persons Other Than Participants or Beneficiaries. If the
Nonmanagement Board or the Committee determines that any Participant or
Beneficiary to whom any amount is payable under the Plan is unable to care for
such person’s affairs because of illness or accident, or is a minor, then any
payment due to such person (unless a prior claim therefor has been made by a
duly appointed legal representative) may, in the discretion of the
Nonmanagement Board or the Committee, be paid to such person’s spouse, child,
other relative, an institution maintaining or having custody of such person, or
any other person deemed by the Nonmanagement Board or the Committee to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of any liability under this Plan.

	II.	 	Options

     2.1 Grants. One or more Options may be granted under this Article 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 Options shall be determined by the Nonmanagement Board or the
Committee at the time of the Award, but shall not be less than 100% of
the Fair Market Value of the Common Stock on the Award Date.
	 
	 	     (b) Payment Provisions. The exercise price for any shares of Common
Stock purchased on exercise of an Option granted under this Article shall
be paid in full at the time of each exercise in one or a combination of
the following methods: (i) in cash or by electronic funds transfer; (ii)
by check payable to the order of the Corporation; (iii) by notice and
third party payment; (iv) by the delivery of shares of Common Stock
already owned by the Participant; (v) if authorized by the Nonmanagement
Board or the Committee or specified in the applicable Award Document, by
a promissory note of the Participant consistent with the requirements of
Section 1.9; or (vi) through simultaneous sale through a broker of shares
of Common Stock acquired on exercise, as permitted under Regulation T of
the Board of Governors of the Federal Reserve System; provided, however,
that the Nonmanagement Board or the Committee may, in its absolute
discretion, limit the 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.

-13-

 

     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 Nonmanagement Board or the
Committee may extend the Award Period by amendment of an Option.
Notwithstanding the foregoing, the Award Period with respect to an
Option, including all extensions, shall not exceed: (i) in the case of
an Incentive Stock Option, 10 years, and (ii) in the case of any other
Option, 10 years and one day.
	 
	 	     b) Effect of Termination of Employment. Notwithstanding the
provisions of Section 2.4(a), unless otherwise provided by the
Nonmanagement Board or the Committee, (i) for a Participant who
terminates employment with the Company for any reason other than
Retirement, Early Retirement, Total Disability or, death or having
attained age 55 with 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 who terminates
employment with the Company 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, or
(iii) for a Participant who terminates employment by reason of
Retirement, Early Retirement, Total Disability, death or having attained
age 55 with five years of service, an Option shall expire on the end of
the Award Period.
	 
	 	     c) Death of Permitted Transferee. Unless otherwise provided by the
Nonmanagement Board or the Committee, an Option held by a Permitted
Transferee shall expire on the earlier of its expiration pursuant to
Section 2.4(a) or (b) or the date 12 months following the Permitted
Transferee’s death.

     2.5 Vesting; Forfeiture.

		
	 	     (a) Vesting Generally. An Option shall be exercisable and vested
upon such terms and conditions or pursuant to such schedule as the
Nonmanagement Board or the Committee shall determine at the time of the
Award. Except as otherwise provided in this Section 2.5 or unless
otherwise specified by the Nonmanagement Board or the Committee, an
Option that is not vested upon a Participant’s termination of employment
shall be forfeited.
	 
	 	     (b) Change in Control. Unless otherwise specified by the
Nonmanagement Board, Options held for more than one year from the Award
Date by Participants at or above the rank of Executive Vice President
shall become immediately exercisable and

-14-

 

		
	 	fully vested upon a Change in
Control Event.
	 
	 	     (c) Retirement, Early Retirement, Total Disability or Death.
Unless otherwise specified by the Nonmanagement Board or the Committee,
an Option shall become immediately exercisable and fully vested upon the
Participant’s termination of employment with the Corporation by reason of
Retirement, Early Retirement, Total Disability or death.
	 
	 	     (d) Vesting Upon Termination with Separation Agreements.
Notwithstanding the foregoing, (i) for a Participant who executes, prior
to the termination of his or her employment, a separation agreement with
the Corporation pursuant to the Corporation’s Voluntary Separation
Agreement program (“VSA”), one-half of the portion of each Award that
would have vested within 12 months of the date of such Participant’s
termination of employment with the Corporation shall become immediately
exercisable and fully vested upon such Participant’s termination; (ii)
(A) for a Participant who accepts the Corporation’s offer to terminate
employment voluntarily and executes, prior to the termination of such
Participant’s employment, a separation agreement with the Corporation
pursuant to an Elective Severance Window under the Federal National
Mortgage Association Discretionary Severance Benefit Plan, the portion of
each Award that would have vested within 12 months of the date of such
Participant’s termination of employment with the Corporation, and
one-half of the portion of each Award that would have vested within 13-24
months of the date of such Participant’s termination, shall become
immediately exercisable and fully vested upon such Participant’s
termination, and (B) for a Participant who is not given the opportunity
to terminate employment under an Elective Severance Window but
voluntarily executes, prior to the termination of his or her employment,
a separation agreement with the Corporation pursuant to a Displacement
Program under the Federal National Mortgage Association Discretionary
Severance Benefit Plan, the portion of each Award that would have vested
within 12 months of the date of such Participant’s termination of
employment with the Corporation shall become immediately exercisable and
fully vested upon such Participant’s termination, and (iii) for a
Participant who executes, prior to the termination of his or her
employment, a separation agreement with the Corporation pursuant to the
Fannie Mae Individual Severance Plan, the portion of each Award that
would have vested within 12 months of the date of such Participant’s
termination of employment with the Corporation shall become immediately
exercisable and fully vested upon such Participant’s termination.
	 
	 	     (e) “EPS Challenge Grants.” Section 2.5(d) shall not apply to
Options granted pursuant to “EPS Challenge Grants,” initially granted on
January 18, 2000.

     2.6 Option Repricing, Cancellation, Substitution or Waiver of
Restrictions. Subject to Sections 1.5 and 8.5 and the specific limitations on
Awards contained in this Plan, the Nonmanagement Board or 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
exercise or purchase price, the vesting schedule, the number of shares subject
to, the restrictions upon or the term of, an Award granted under this Article
by cancellation of an outstanding Award and a subsequent granting of an Award,
by amendment, by substitution of an outstanding Award, by waiver or by other
legally valid means. Such amendment or other action may result, among

-15-

 

 other
changes, in an exercise or purchase price that is higher or lower than the
exercise or purchase price
of the original or prior Award, provide for a greater or lesser number of
shares subject to the Award, or provide for a longer or shorter vesting or
exercise period.

	III.	 	Stock Appreciation Rights

     3.1 Grants. In its discretion, the Nonmanagement Board or 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) and the
regulations promulgated thereunder. 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
Nonmanagement Board or the Committee may extend the Award Period by amendment
of a Stand-Alone SAR; provided, however, that the Award Period, including all
extensions, shall not exceed 10 years and one day.

     3.2 Exercise of Stock Appreciation Rights.

		
	 	     (a) Related Awards. Unless the Award Document or the Nonmanagement
Board 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.
	 
	 	     (b) Stand-Alone SARs. Stand-Alone SARs shall be exercisable and
vest upon such terms and conditions or pursuant to such schedule as the
Nonmanagement Board or the Committee shall determine at the time of the
Award. Unless otherwise provided by the Nonmanagement Board or the
Committee, (i) in the case of a Participant’s termination of employment
with the Corporation by reason of Retirement, Early Retirement, Total
Disability or death, Stand-Alone SARs shall become immediately
exercisable and fully vested upon the Participant’s termination of
employment, and Stand-Alone SARs shall expire and no longer be
exercisable at the end of the Award Period; and (ii) in the case of a
Participant’s termination of employment with the Corporation for any
reason other than Retirement, Early Retirement, Total Disability or
death, Stand-Alone SARs shall expire and no longer be exercisable 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. Unless
otherwise provided by the Nonmanagement Board, Stand-Alone SARs held for
more than one year from the Award Date by Participants at or above the
rank of Executive Vice President shall become immediately exercisable and
fully vested upon a Change in Control Event.

-16-

 

     3.3 Payment.

		
	 	     (a) Amount. Unless the Nonmanagement Board or 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 upon 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 Nonmanagement Board or the
Committee, in its sole 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 such shares
and partly in cash. If the Nonmanagement Board or the Committee
permits the Participant to elect to receive cash or shares (or a
combination thereof) on such exercise, any such election shall be
subject to such conditions as the Nonmanagement Board or the
Committee may impose.

     3.4 Limited Stock Appreciation Rights. The Committee may grant to any
Eligible Employee Limited SARs exercisable only upon or in respect of a Change
in Control Event or any other specified event and such Limited SARs may relate
to or operate in combination with or in substitution for Options, other Stock
Appreciation Rights or other Awards (or any combination thereof), and may be
payable in cash or shares of Common Stock based on the spread between the
exercise price of the Limited SAR and a price based upon the Fair Market Value
of the shares during a specified period or on a specified date within a range
of six months before or after such event.

	IV.	 	Restricted Stock Awards

     4.1 Grants. The Nonmanagement Board or the Committee may, in its
discretion, grant one or more Restricted Stock Awards to any Eligible Employee.
Each Restricted Stock Award Document shall specify the number of shares of
Common Stock to be issued to the Participant, the date of such issuance, the
consideration for such shares, if any, by the Participant, the restrictions
imposed on such shares, and the conditions of release or lapse of such
restrictions. Stock certificates evidencing shares of Restricted Stock pending
the lapse of the restrictions shall be held by the Corporation or by a third
party designated by the Nonmanagement Board or the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award. Promptly after the lapse of
restrictions, a certificate or certificates

-17-

 

 evidencing the number of shares of
Common Stock as to which the restrictions have lapsed (or such
lesser number as may be permitted pursuant to Section 8.4) shall be delivered
to the Participant or other person entitled under the Plan to receive the
shares. The Participant or such other person shall deliver to the Corporation
such further assurance and documents as the Nonmanagement Board or the
Committee may require.

     4.2 Restrictions.

		
	 	     (a) Pre-Vesting Restraints. Except as provided in Section 1.10,
shares of Common Stock comprising any Restricted Stock Award may not be
sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until the restrictions
have lapsed.
	 
	 	     (b) Dividend and Voting Rights. Unless otherwise provided in the
applicable Award Document, a Participant receiving a Restricted Stock
Award 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 Restricted Stock that
ceases to be eligible for vesting.
	 
	 	     (c) Accelerated Vesting. Unless otherwise provided by the
Nonmanagement Board or the Committee, the restrictions on Restricted
Stock shall lapse upon the Participant’s termination of employment with
the Corporation by reason of Retirement, Early Retirement, Total
Disability or death, and restrictions on Restricted Stock held for more
than one year from the Award Date by Participants at or above the rank of
Executive Vice President shall lapse upon a Change in Control Event.
	 
	 	     (d) Forfeiture. Unless otherwise specified by the Nonmanagement
Board or 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
shares of Restricted Stock, such forfeited shares shall be automatically
transferred to the Corporation without payment of any consideration by
the Corporation and without any action by the Participant.

	V.	 	Performance Share Awards and Stock Bonuses

     5.1 Grants of Performance Share Awards. The Nonmanagement Board or the
Committee may, in its discretion, 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 Nonmanagement Board shall establish the specified period (a “performance
cycle”) for the Performance Share Award and the measure(s) of the performance
of the Corporation (or any part thereof) or the Participant. The Nonmanagement
Board may, during the performance cycle, 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, 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)

-18-

 

 over the performance cycle is to be determined. The
Nonmanagement Board or the Committee may
provide for full or partial credit, prior to completion of such performance
cycle or the attainment of the performance achievement specified in the Award,
in the event of the Participant’s death or other termination of employment.
Unless otherwise provided by the Nonmanagement Board, 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 a Participant at or above the rank of
Executive Vice President, based on the assumption that the performance
achievement specified in the Award would have been attained by the end of the
performance cycle.

     5.2 Grants of Stock Bonuses. The Nonmanagement Board or the Committee may
grant a Stock Bonus to any Eligible Employee to reward exceptional or special
services, contributions or achievements, in such amounts of Common Stock and on
such terms and conditions as determined from time to time by the Nonmanagement
Board or the Committee.

     5.3 Deferred Payments. The Nonmanagement Board or the Committee may
authorize for the benefit of any Eligible Employee the deferral of any payment
of cash or shares of Common Stock that may become due or of cash otherwise
payable under this Plan, and provide for accredit benefits thereon based upon
such deferment, at the election or at the request of such Participant, subject
to the other terms of this Plan. Such deferral shall be subject to such further
conditions, restrictions or requirements as the Nonmanagement Board or the
Committee may impose, subject to any then-vested rights of the Participant.

	VI.	 	Nonmanagement Director Options

     6.1 Participation. Awards under this Article VI shall be made only to
Nonmanagement Directors.

     6.2 Annual Option Grants.

		
	 	     (a) Time of Initial Award. After approval of this Plan by the
stockholders of the Corporation, each Nonmanagement Director shall be
granted automatically (without any action by the Board, the Nonmanagement
Board or the Committee) a Nonqualified Stock Option (the Award Date of
which shall be the date of stockholder approval of the Plan) to purchase
4000 shares of Common Stock.
	 
	 	     (b) Subsequent Annual Awards. Following the initial award described
in Section 6.2(a), on the first day of each Director Term for each
Nonmanagement Director (which shall be the Award Date) each year prior to
the Plan Termination Date, there shall be granted automatically (without
any action by the Board, the Nonmanagement Board or the Committee) to
each such Nonmanagement Director then in office a Nonqualified Stock
Option to purchase 4000 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, the Nonmanagement
Board or the Committee) a Nonqualified Stock Option (the Award Date of
which shall be the date such person takes

-19-

 

		
	 	office) to purchase the nearest
whole number of shares of Common Stock equal to 4000
multiplied by the number of partial or full calendar months (not to
exceed 12) remaining in such Director Term divided by 12.
	 
	 	     (c) 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.

     6.3 Option Price. The exercise price per share of Common Stock covered by
each Option granted pursuant to Section 6.2 shall be 100 percent of the Fair
Market Value. The exercise price of any Option granted under this Article shall
be paid in full at the time of each purchase, in cash or by check or in shares
of Common Stock valued at their Fair Market Value on the date of exercise of
the Option, or partly in such shares and partly in cash.

     6.4 Option Period and Ability to Exercise. Each Option granted under this
Article VI and all rights or obligations thereunder shall commence on the Award
Date and expire ten years and one day thereafter and shall be subject to
earlier termination as provided below. Each Option granted under Section 6.2
shall be immediately exercisable.

     6.5 Termination of Directorship. If an NMD Participant’s services as a
member of the Board terminate for any reason after at least ten years of
service as a NMD, or by reason of such NMD Participant’s death, Total
Disability or not having been renominated for election by the stockholders of
the Corporation after reaching age 70, any Option granted pursuant to this
Article VI held by such NMD Participant shall remain exercisable until the
earlier of one year after the date of such termination and the expiration of
the stated term of such Option. If an NMD Participant’s services as a member of
the Board terminate for any other reason, any then-outstanding Option may be
exercised until the earlier of three months after the date of such termination
and the expiration of the stated term of such Option.

     6.6 Adjustments. Options granted under this Article VI 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 Limitation on Amendments. The provisions of this Article VI shall not
be amended more than once every six months (other than as may be necessary to
conform to any applicable changes in the Code or the rules thereunder), unless
any such amendment would be consistent with the provisions of Rule
16b-3(c)(2)(ii) (or any successor provision).

	VII.	 	Nonmanagement Director Restricted Stock

     7.1 Participation. Awards under this Article VII shall be made only to
Nonmanagement Directors.

-20-

 

     7.2 Amount of Awards. There shall be a five-year cycle of Awards under
this Article VII commencing on the date of the annual meeting of the
stockholders of the Corporation during the year 2001 and ending on the fifth
anniversary of such date in the year 2006. Awards shall be made to each
Nonmanagement Director according to the appropriate provision set forth below.
No Awards shall be granted later than the end of the five-year cycle. Neither
the Plan nor any action taken thereunder shall be construed as giving any NMD
Participant the right to be reappointed or renominated to serve as a member of
the Board.

		
	 	     (i) Each Nonmanagement Director who is a member of the Board
immediately following the annual meeting of the stockholders of the
Corporation in the year 2001 shall receive an Award (rounded to the
nearest full share) of shares of Restricted Stock having an aggregate
Fair Market Value on the date of the first meeting of the Board following
such annual meeting equal to the amount computed by adjusting $60,000 for
inflation between 1996 and 2001. The computation shall be done by
multiplying $60,000 by 100 percent plus the percentage increase in the
12-month Consumer Price Index for All Urban Consumers (“CPI-U”), as
published by the U.S. Bureau of Labor Statistics, for the year 2000 over
the 12-month CPI-U for 1996. If the CPI-U is not published or otherwise
available at the time of the 2001 annual meeting of stockholders of the
Corporation, the Benefit Plans Committee is authorized to choose another
measure of the inflation between 1996 and 2001 for purposes of this
computation.
	 
	 	     (ii) A Nonmanagement Director who is newly appointed or elected
thereafter shall receive an Award equal to the number of shares (rounded
to the nearest full share) that would have been granted had such person
been a member of the Board on the date of the first meeting of the Board
following the annual meeting of the stockholders of the Corporation in
the year 2001 multiplied by the number of partial or full calendar months
(not to exceed 60) remaining in the cycle from the date of the
Nonmanagement Director’s appointment or election divided by 60.

     7.3 Terms and Conditions. Each NMD Participant who receives an Award
pursuant to Section 7.2 shall execute an Escrow Agreement and appropriate blank
stock powers with respect to his or her Restricted Stock. Stock certificates
for such Restricted Stock registered in the name of each such NMD Participant
shall be issued and deposited, together with the Escrow Agreement and stock
powers, with the Escrow Agent. An NMD Participant shall be entitled to the
delivery of such stock certificates out of escrow only in accordance with the
provisions of Sections 7.6 and 7.7. Except as provided in Section 7.4, all
Common Stock, all cash, or other property received by the Escrow Agent on
account of the Restricted Stock shall be treated in the same manner as
Restricted Stock, shall be subject to all of the terms and conditions of the
Escrow Agreement and shall be delivered out of escrow to the NMD Participant or
to the Corporation at the same time as the Restricted Stock with respect to
which it was issued.

     7.4 Rights of NMD Participants. Except for the restrictions under Section
7.5, each NMD Participant who receives an Award pursuant to Section 7.2 shall
have all of the rights and privileges of a stockholder of the Corporation as to
the Restricted Stock subject to such Award, including the

-21-

 

 right to receive any
cash and stock dividends declared with respect to such Restricted Stock and to
direct the Escrow Agent as to the exercise of voting rights; provided, however,
that in the case of a stock split in the form of a stock dividend, such
dividend shares shall be subject to the same restrictions as the Restricted
Stock and held under the Escrow Agreement.

     7.5 Restrictions. Restricted Stock covered by an Award under this Article
VII shall be subject to the following restrictions, which shall apply from the
date the Award is granted and shall continue until such Restricted Stock
becomes vested under Section 7.6 or 7.7:

	 	(i)	 	The Restricted Stock shall not be transferable
other than to the NMD Participant’s Beneficiary upon the NMD
Participant’s death.
	 
	 	(ii)	 	Each NMD Participant’s right to the Restricted
Stock shall be forfeited if and when such NMD Participant
ceases to be a Nonmanagement Director, except to the extent
that the NMD Participant’s right to receive the Restricted
Stock without restrictions shall have vested under Section 7.6
or 7.7. If forfeited, all such stock shall become the
property of the Corporation and all of the rights of such NMD
Participant to such Restricted Stock and as a stockholder
(including the right to any accrued but unpaid dividends)
shall terminate without further obligation on the part of the
Corporation.

     7.6 Vesting. The right of each NMD Participant to removal of the
restrictions from Restricted Stock held for the account of such NMD Participant
shall vest in accordance with the provisions of this Section 7.6 and the
restrictions for those shares shall lapse, whereupon the Escrow Agent shall
deliver to the NMD Participant or the NMD Participant’s Beneficiary or Personal
Representative a stock certificate evidencing such Restricted Stock, free of
the restrictions set forth in the Award and Section 7.5. Except for NMD
Participants described in Section 7.7, upon termination of a Nonmanagement
Director’s service on the Board, all shares awarded under this Article VII that
remain subject to restrictions, after the provisions of subsections (i) through
(iii) below are applied, shall be forfeited by the NMD Participant and become
the property of the Corporation and all of the rights of such NMD Participant
to such Restricted Stock and as a stockholder (including the right to accrued
but unpaid dividends) shall terminate without further obligation on the part of
the Corporation.

	 	(i)	 	Each NMD Participant who is a member of the Board
at the first meeting following the annual meeting of the
stockholders of the Corporation in the year 2001 shall vest on
the day before each subsequent annual meeting of the
stockholders during the remainder of the cycle (if he or she
is a member of the Board on such date) in the number of full
shares closest to and not exceeding 20 percent of the
Restricted Stock awarded at the beginning of the full cycle.
If an NMD Participant is not reelected or reappointed to
membership on the Board, upon such NMD Participant’s ceasing
to be a Nonmanagement Director all Restricted Stock awarded
under this Article VII that then remains subject to
restrictions, shall be forfeited.
	 
	 	(ii)	 	An NMD Participant who is elected or appointed to
the Board for a complete

-22-

 

	 	 	 	Director Term after the first year of
the cycle shall vest on the day before each
subsequent annual meeting of the stockholders during the
remainder of the cycle (if he or she is a member of the Board
on such date) as to the number of shares of Restricted Stock in
which such NMD Participant would have vested on such date if
such NMD Participant had been granted an Award at the beginning
of the cycle.
	 
	 	(iii)	 	The rights of an NMD Participant who is elected
or appointed to the Board during a Director Term shall vest on
the day before each subsequent annual meeting during the
remainder of the cycle (if he or she is a member of the Board
on such date) as to the number of shares of Restricted Stock
in which the replaced predecessor would have vested had the
predecessor remained a Nonmanagement Director, except that for
the initial partial Director Term, the NMD Participant shall
vest in only a fraction of the shares (rounded to the nearest
full share) in which an NMD Participant serving for the full
Director Term would have vested for that Director Term, such
fraction being the number of such shares multiplied by the
number of partial or full calendar months (not to exceed 12)
of the Director Term served by the NMD Participant, divided by
12.

     7.7 Disability, Death or Termination After Age 70. If any NMD
Participant’s membership on the Board terminates because of (i) Total
Disability, (ii) such NMD Participant’s death, or (iii) as to a Nonmanagement
Director who is elected to the Board by the stockholders, not being renominated
after reaching age 70, the restrictions on all of the Restricted Stock held in
the account of such NMD Participant shall lapse on the date of such termination
of membership on the Board and the full balance of Restricted Stock in such
account shall be delivered out of escrow as provided in Section 7.6.

     7.8 Adjustments. Restricted Stock granted under this Article VII 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 Restricted Stock or other Awards held by persons other than
Nonmanagement Directors.

     7.9 Limitation on Amendments. The provisions of this Article VII shall
not be amended more than once every six months (other than as may be necessary
to conform to any applicable changes in the Code or the rules thereunder),
unless any such amendment would be consistent with the provisions of Rule
16b-3(c)(2)(ii) (or any successor provision).

	VIII.	 	Other Provisions

     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

-23-

 

		
	 	Eligible Employees generally.
	 
	 	     (b) No Employment Contract. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) shall confer
upon any Participant any right to continue in the employ or other service
of the Corporation or constitute any contract or agreement of employment
or other service, nor shall this Plan interfere in any way with the right
of the Corporation to change such person’s compensation or other benefits
or to terminate the employment of such person, with or without cause;
provided, however, that nothing contained in this Plan or any document
related hereto shall adversely affect any independent contractual right
of any Participant without his or her consent.
	 
	 	     (c) Plan Not Funded. Awards payable under this Plan shall be
payable in shares of Common Stock or from the general assets of the
Corporation, and (except as provided in Section 1.5(c)) no special or
separate reserve, fund or deposit shall be made to assure payment of such
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 the
Corporation by reason of any Award hereunder. Neither the provisions of
this Plan (or of any related documents), nor the creation or adoption of
this Plan, nor any action taken pursuant to the provisions of this Plan
shall create, or be construed to create, a trust of any kind or a
fiduciary relationship between the Corporation 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 the Corporation.

     8.2 Adjustments.

		
	 	     (a) Events Requiring Adjustments. If any of the following events
occur, the Nonmanagement Board or the Committee shall make the
adjustments described in Section 8.2(b): (i) any extraordinary dividend
or other extraordinary distribution in respect of the Common Stock
(whether in the form of cash, Common Stock, other securities, or other
property), (ii) 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 the Corporation, (iii) any issuance of warrants or other rights to
purchase shares of Common Stock or other securities of the Corporation
(other than to employees) at less than 80 percent of fair value on the
date of such issuance, or (iv) any other like corporate transaction or
event in respect of the Common Stock or a sale of substantially all the
assets of the Corporation.
	 
	 	     (b) Adjustments to Awards. If any of the events described in
Section 8.2(a) occurs, then the Nonmanagement Board or the Committee
shall, in such manner and to such 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

-24-

 

		
	 	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
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, no such adjustment shall be made that would
cause the Plan to violate Section 422 or Section 424(a) of the Code or
any successor provisions thereto.

     8.3 Compliance with Laws. This Plan, the granting and vesting of Awards
under this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this 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 such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation,
be necessary or advisable in connection therewith. Any securities delivered
under this Plan shall be subject to such restrictions, and the person acquiring
such securities shall, if requested by the Corporation, provide such assurances
and representations to the Corporation as the Corporation 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 Nonmanagement Board or the Committee may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding by the
Corporation of all federal, state, local and other taxes required by law to be
withheld, including without limitation, the right, at its option, (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 the
Corporation may be required to withhold with respect to such transaction as a
condition to the release of Common Stock or the making of any payment or
distribution, (ii) to deduct from any amount payable in cash, (iii) 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 to grant the Participant the right to elect such reduction in the
number of shares upon such terms and conditions as it may establish, or (iv) to
permit the Corporation to accept a note for the amount of any taxes that the
Corporation may be required to withhold with respect to such transaction in
accordance with Section 1.9.

     8.5 Plan Amendment, Termination and Suspension.

		
	 	     (a) Board Authorization. Subject to this Section 8.5, the Board
may, at any time, terminate or, from time to time, amend, modify or
suspend this Plan, in whole or in part. No Awards may be granted during
any suspension of this Plan or after termination of this Plan, but the
Nonmanagement Board or the Committee shall retain jurisdiction as to
Awards then outstanding in accordance with the terms of this Plan.

-25-

 

		
	 	     (b) Stockholder Approval. If any amendment would (i) materially
increase the benefits accruing under this Plan, or (ii) materially
increase the aggregate number of shares of Common Stock that may be
issued under this Plan (except as provided in Section 8.2), then to the
extent deemed necessary or advisable by the Board, such amendment shall
be subject to stockholder approval.
	 
	 	     (c) Amendments to Awards. Without limiting any other express
authority granted under this Plan, but subject to its express limits, the
Nonmanagement Board or the Committee by agreement or resolution may waive
conditions of or limitations on Awards to Eligible Employees that the
Nonmanagement Board or the Committee in the prior exercise of its
discretion has imposed, 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 the Corporation under any Award granted
under this 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.

     8.6 Privileges of Stock Ownership. Except as otherwise expressly
authorized by the Nonmanagement Board or the Committee or this 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 stockholder rights for which a record date is prior to
the date of delivery of such shares.

     8.7 Effective Date of the Plan. This Plan shall be effective as of the
date of the meeting at which the stockholders of the Corporation approve it.

     8.8 Term of the Plan. Except for any Award pursuant to Section 7.2
granted to a Nonmanagement Director who is newly appointed or elected to the
Board during the 2001-2006 cycle, no Award shall be granted after the Plan
Termination Date. Unless otherwise expressly provided in this Plan or in an
applicable Award Document, any Award may extend beyond such date, and all
authority of the Nonmanagement Board or the Committee with respect to Awards
hereunder shall continue during any suspension of this Plan and in respect of
Awards outstanding on the Plan Termination Date.

     8.9 Governing Law/Construction/Severability.

		
	 	     (a) Choice of Law. This Plan, the Awards, all documents evidencing
Awards, and all other related documents shall be governed by, and
construed in accordance with the laws

-26-

 

		
	 	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 this Plan shall continue in effect.

	 
	 	     (c) Plan Construction. It is the intent of the Corporation that
this Plan and the Awards satisfy and be interpreted so that Participants
who are or may be subject to the applicable requirements of the STSP will
not be subjected to avoidable liability under the STSP. If any provision
of this Plan or of any Award would otherwise frustrate or conflict with
this intent, to the extent possible that provision shall be interpreted
and deemed amended so as to avoid such conflict; if there is any
remaining irreconcilable conflict with such intent, such provision shall
be deemed void.

     8.10 Captions. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.

     8.11 Effect of Change of Subsidiary Status. For purposes of this Plan and
any Award hereunder, 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 such Participant who continues as an employee of another
entity within the Corporation.

     8.12 Nonexclusivity of Plan. Nothing in this 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 the Corporation under
the Plan shall be binding upon any successor corporation or organization
resulting from the merger, consolidation or other reorganization of the
Corporation, or upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Corporation. The
Corporation 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.

-27-exv10w13

 

EXHIBIT 10.13

FEDERAL NATIONAL MORTGAGE ASSOCIATION

ELECTIVE DEFERRED COMPENSATION PLAN

ARTICLE I

Establishment and Purpose

     1.1 Establishment. The Federal National Mortgage Association (the
“Company”) established, effective as of December 20, 1978, a deferred
compensation plan known as the Federal National Mortgage Association Executive
Optional Deferred Compensation Plan (hereinafter referred to as the “Executive
Plan”), and amended the Executive Plan as of November 1982. The Company
amended and restated the Executive Plan, effective as of November 15, 1983.
The amended and restated plan was designated the “Federal National Mortgage
Association Optional Deferred Compensation Plan” (hereinafter referred to as
the “Optional Plan”), which plan was further amended and restated, effective as
of January 1, 1985. The Optional Plan was amended and restated in its
entirety, effective for all purposes and in all respects as of September 16,
1986, as two plans. The amended and restated plans are designated the “Federal
National Mortgage Association Career Deferred Compensation Plan” and the
“Federal National Mortgage Association Elective Deferred Compensation Plan.”
With respect to amounts elected to be deferred under the Optional Plan, as in
effect prior to September 16, 1986, to a date prior to the “Retirement” of the
“Participant” (as such terms were defined in such plan) making such election,
the rights and obligations of the Company, such Participants and their
beneficiaries shall be determined under the Federal National Mortgage
Association Elective Deferred Compensation Plan. For all deferrals for Deferral
Years after 1999, the rate of return for accounts relating to such deferrals
will be based on the Participant’s choice among several hypothetical investment
funds. If a Participant (other than an Inactive Participant) so elects on or
after August 1, 2000, the rate of return on accounts relating to deferrals for
Deferral Years prior to 2000, calculated beginning on the business day
following the election, will be based on the Participant’s choice among several
hypothetical investment funds and not on the Company’s cost of funds. For all
deferral elections made for Deferral Years beginning in 2000 and thereafter
and, if a

 

 

Participant has elected during the period
established by the Committee for accounts relating to deferrals made before
2000, the rate of return on deferrals, calculated beginning as of January 1,
2000 will be based on the Participant’s choice among several hypothetical
investment funds and not on the Company’s cost of funds. The terms and
conditions of the Federal National Mortgage Association Elective Deferred
Compensation Plan are set forth herein.

     1.2 Purpose. The purpose of the Federal National Mortgage Association
Elective Deferred Compensation Plan is to attract and retain certain
individuals of outstanding competence as employees or as members of the Board
of Directors of the Company or both by permitting such individuals to elect to
defer a portion of their compensation from the Company to a later date or
event.

ARTICLE II

Definitions

     When used herein the following terms shall have the following meanings:

     2.1 “Award” shall mean the amount of money, if any, earned in accordance
with the provisions of the Federal National Mortgage Association Annual
Incentive Plan, the Portfolio Bonus Plan, the Multifamily Bonus Plan, the REO
Bonus Plan and such other incentive and bonus plans designated by the
Committee.

     2.2 “Board of Directors” shall mean the Board of Directors of the Company.

     2.3 “Committee” shall mean the Benefit Plans Committee provided for in
Section 6.1.

     2.4 “Company” shall mean Federal National Mortgage Association.

     2.5 “Compensation” shall mean (i) in the case of an Executive, his or her
regular basic salary, excluding any Awards or other forms of additional
compensation and (ii) in the case of a Director, the annual retainer and all
fees (excluding any reimbursed expenses) payable to such individual in his or
her capacity as a member of the Board of Directors in any calendar year;
provided, however, that in the case of an individual who becomes a Participant
in accordance with Section 3.2(b), “Compensation” for the year in which such
individual first becomes eligible to participate in the Plan shall mean only
that Compensation of such individual payable with respect to the portion of the
calendar year during which he or she was eligible to participate in the Plan.

- 2 -

 

     2.6 “Deferral Year” shall mean each calendar year as to which an election
is made to defer Compensation or an Award, or both, in accordance with the
provisions of Section 3.3 of the Plan.

     2.7 “Deemed Earnings” shall mean the deemed gain or loss with respect to
the Deemed Investment Portfolio. The Deemed Earnings with respect to each
investment option in a Deemed Investment Portfolio shall be determined by
reference to the total actual return, net of applicable fees and expenses, on
such investment option for the period in question.

     2.8 “Deemed Investment Portfolio” shall mean a hypothetical portfolio
chosen by the Participant from among such investment options as the Executive
Vice President and Chief Financial Officer, or his designee, may designate as
available under the Plan.

     2.9 “Director” shall mean any member of the Board of Directors who
receives Compensation in his or her capacity as a member of such Board of
Directors.

     2.10 “Executive” shall mean any officer or other member of the management
group of the Company who is among the top 15% of the most highly compensated
Company employees and whose regular basic salary is at least equal to the
minimum qualifying salary established each year by the Senior Vice President of
Human Resources or his designee.

     2.11 “Inactive Participant” shall mean a Participant who, on August 1,
2000, is neither an employee nor a Director of the Company, and who has not
deferred any Compensation or Award in any Deferral Year beginning after 1999.

     2.12 “Incentive Plan” shall mean the Federal National Mortgage Association
Annual Incentive Plan, the Portfolio Bonus Plan, the Multifamily Bonus Plan,
the REO Bonus Plan and such other incentive and bonus plans designated by the
Committee.

     2.13 “Investment Administrator” shall mean the investment advisor with
responsibility for administering the Deemed Investment Portfolio.

     2.14 “Participant” shall mean any Executive or Director who becomes a
Participant in the Plan as provided in Section 3.2 of the Plan.

     2.15 “Plan” shall mean the Federal National Mortgage Association Elective
Deferred Compensation Plan.

     2.16 “Retirement” shall mean (i) in the case of an Executive, separation
from the employ of the Company either under conditions entitling him or her to
an immediate annuity under the Federal National Mortgage Association Retirement
Plan for Employees Not Covered Under Civil

- 3 -

 

Service Retirement Law or under the Civil Service Retirement Law, which ever is
applicable to such Executive, or under conditions entitling him or her to
long-term disability benefits under any disability payment plan paid for by the
Company, including disability insurance, on account of the inability to perform
service for the Company due to a physical or mental ailment and (ii) in the
case a Director, any termination from the membership of the Board of Directors.

     2.17 “Termination of Service” shall mean, in the case of an Executive,
termination of employment with the Company other than by reason of Retirement
or death.

ARTICLE III

Eligibility and Participation

     3.1 Eligibility. All Executives and Directors shall be eligible to
participate under the Plan.

     3.2 Participation.

          (a) An individual eligible to participate in the Plan under Section 3.1
may become a Participant for any calendar year by executing an irrevocable
deferral election (on a form prescribed by the Committee) with respect to his
or her Compensation for such calendar year or with respect to his or her Award
to be paid during the next succeeding calendar year, or both. Except as
provided in Sections 3.2(b) and 3.2(c), such election shall be executed on or
before the fifth business day in December of the preceding calendar.

          (b) With respect to an individual who first becomes eligible to
participate in the Plan under Section 3.1 after the beginning of a calendar
year by reason of (i) the commencement of employment by the Company as an
Executive, (ii) the promotion from a non-executive position to a position as an
Executive or (iii) an election or appointment to the Board of Directors, such
individual may become a Participant for the remainder of such year by executing
an irrevocable deferral election (on a form prescribed by the Committee) with
respect to his or her Compensation within thirty (30) days of the date such
individual receives notice from the Company that he or she is eligible to
participate after becoming an Executive or Director, as applicable.

          (c) An individual eligible to participate in the Plan under Section 3.1
who becomes a participant in an Incentive Plan after the beginning of a
calendar year may, within thirty

- 4 -

 

(30)  days of becoming a participant in such plan, execute an irrevocable
deferral election (on a form prescribed by the Committee) with respect to his
or her Award to be paid in the next succeeding calendar year. Such individual
shall thereby become a Participant for the remainder of such year, if such
individual is not already a Participant by virtue of having executed an
irrevocable deferral election with respect to his Compensation for such year
pursuant to Section 3.2(a) or 3.2(b).

     3.3 Deferral Election.

          (a) As a condition of participation under the Plan:

		
	 	     (i) An Executive must agree to defer at least one thousand
dollars ($1,000) of Compensation for each calendar year as to which
such Executive elects to defer Compensation. The amount of
Compensation deferred must be in increments of one thousand dollars
($1,000). The maximum amount that may be deferred for any calendar
year under this Plan alone or in combination with the Federal
National Mortgage Association Career Deferred Compensation Plan by
a Participant who is an Executive is fifty percent (50%) of the
Compensation (including any amount deferred under this Plan or the
Federal National Mortgage Association Career Deferred Compensation
Plan and any amount which, pursuant to the election of the
Executive, the Company has contributed to any cash deferred
arrangement qualified under Section 401(k) of the Internal Revenue
Code) of such Participant for such calendar year.
	 
	 	     (ii) An Executive must agree to defer a specified percentage
or dollar amount of his or her Award for each calendar year as to
which such Executive elects to defer his or her Award. Such
deferred amount may be determined as a fixed percentage of the
Award, a percentage of the excess over a specified dollar amount, a
specified maximum dollar amount or in such other manner as may be
provided by the Committee from time to time. A Participant who is
an Executive may elect to defer for any calendar year up to one
hundred percent (100%) of the Award (including any amount deferred
under this Plan) of such Participant for such calendar year.
	 
	 	     (iii) A Director must agree to defer at least an amount equal
to twenty-five percent (25%) of Compensation for each calendar year
as to which such Director

- 5 -

 

		
	 	elects to defer Compensation. The amount of Compensation deferred
must be in increments of twenty-five (25%) of Compensation for such
calendar year. A Participant who is a Director may elect to defer
for any calendar year up to one hundred percent (100%) of the
Compensation (including any amount deferred under this Plan) of
such Participant for such calendar year.

          (b) An election made under this Plan with respect to Compensation shall
relate only to Compensation for the succeeding calendar year, or to
Compensation for the remainder of a calendar year if Section 3.2(b) applies,
and a separate election must be made in order to defer Compensation during any
subsequent year. In the event of a failure to make a timely election to defer
as to Compensation for any year, no portion of the Participant’s Compensation
for such year may be deferred under this Plan.

          (c) An election made under this Plan with respect to an Award shall relate
only to an Award to be paid during the second succeeding calendar year, or to
an Award to be paid during the first succeeding calendar year if Section 3.2(c)
applies, and a separate election must be made in order to defer compensation
during any subsequent year. In the event of a failure to make a timely
election to defer as to an Award for any year, no portion of the Executive’s
Award for such year may be deferred under this Plan.

          (d) Each deferral election under Section 3.2 shall (in accordance with
Sections 5.2, 5.3, and 5.4) also designate:

		
	 	     (i) the date or event after which payment is to commence,
which shall be stated as the January of a given year or the January
commensurate with or next following the event;
	 
	 	     (ii) the method of payment;
	 
	 	     (iii) for all deferral elections made for Deferral Years
beginning in or after 2000, a Deemed Investment Portfolio; and
	 
	 	     (iv) the beneficiary to receive any payments if the
Participant dies before receiving all amounts to which he or she is
entitled under the Plan.

If the Participant fails to designate a Deemed Investment Portfolio as required
under Sections 3.3(d)(iii) and 4.1(c), Participant’s deferral shall be
allocated among the hypothetical investment options in accordance with the
Participant’s most recent Deemed Investment Portfolio designation. If the
Participant has not previously made a Deemed Investment Portfolio

- 6 -

 

designation, the Participant’s deferral shall be allocated to the Advantus
Money Market Portfolio (or the successor fund designated by the Chief Financial
Officer of the Company or his or her designee), and the deferral shall remain
allocated to such Portfolio until such time as the Participant changes the
allocation under the procedures set forth in Section 4.1(c)(i).

ARTICLE IV

Participant’s Account

     4.1 Accounts.

          (a) The Company shall establish bookkeeping accounts to record the
deferrals under this Plan. Each Participant shall have a separate account for
each Deferral Year, and each account shall be increased and decreased as
provided in this section.

          (b) During the Deferral Year, the Company shall credit each Participant’s
account for that year as follows:

		
	 	     (i) The amount of Compensation deferred under Section 3.2(a)
by each Participant who is an Executive shall be credited to such
Participant’s account on a biweekly basis, by crediting, at the end
of each such biweekly period, one-twenty-sixth of the total annual
deferral, or on such other basis as may be determined by the Chief
Financial Officer of the Company. The amount of Compensation
deferred under Section 3.2(b) by each Participant who is an
Executive shall be credited to such Participant’s account on a
biweekly basis, by crediting at the end of each such biweekly
period of participation, an amount determined by dividing the total
amount the Participant has elected to defer under Section 3.1 by
the number of biweekly periods remaining in the calendar year at
the time the Executive first became eligible to participate, or on
such other basis as may be determined by the Chief Financial
Officer of the Company. If as a result of participation in this
plan, an Executive is prevented from electing the maximum deferral
under the Federal National Mortgage Association Retirement Savings
Plan for Employees (“RSP”) then an additional amount shall be
credited to the account of such Participant who is an Executive as
of December 31 of the Deferral Year, equal to the amount the

- 7 -

 

		
	 	Company would have
contributed as a match to the RSP for such Deferral Year with
respect to Compensation deferred under Section 3.2 of this Plan had
such Participant elected to make the maximum permissible
Participant Contributions (as such term is used in the RSP) to such
Retirement Savings Plan during the Deferral Year with respect to
his or her Compensation deferred under Section 3.2 of this Plan.
	 
	 	     (ii) The amount of the Award deferred under Section 3.2(a) or
3.2(c) by each Participant who is an Executive shall be credited to
such Participant’s account on the date such Award would have been
paid to such Executive had its receipt not been deferred under the
Plan.
	 
	 	     (iii) The amount of Compensation deferred under Section 3.2 by
each Participant who is a Director shall be credited to such
Participant’s account by a monthly crediting at the end of each
month of an amount obtained by multiplying the amount of
Compensation which would have been payable to such Participant in
such amount (determined without regard to such Participant’s
deferral election under Section 3.2) by the percentage of
Compensation (25%, 50%, 75% or 100%) such Participant has elected
to defer in the Deferral Year.

     (c)  With respect to all accounts relating to deferrals for Deferral
Years after 1999 and, if the Participant has elected during the period
established by the Committee to have this Section 4.1(c) apply, for
accounts relating to deferrals for Deferral Years prior to 2000:

		
	 	     (i) A Participant shall designate a Deemed Investment
Portfolio, and shall allocate, the amount credited to his or
her account As a result of deferral elections among the
hypothetical investment options offered for inclusion in a
Deemed Investment Portfolio. A Participant shall so
designate a Deemed Investment Portfolio by directly
contacting the Investment Administrator. A Participant may
change such allocation at any time by notice to the
Investment Administrator, in accordance with such procedures
as may be established by the Investment Administrator.

- 8 -

 

		
	 	     (ii) The Participant’s accounts to which this Section
4.1(c) applies shall be adjusted periodically for Deemed
Earnings, beginning January 1, 2000.
	 
	 	     (iii) A Participant’s account (reduced in accordance
with Section 4.1(e)) shall continue to be adjusted in
accordance with this Section 4.1(c) during (A) any
installment payment period which may have been elected by
the Participant under Section 5.3(a), (B) any installment
payment period in connection with a financial hardship
withdrawal approved by the Committee pursuant to Section
5.3(b) or 5.5(c), and (C) the period following the
Participant’s death but prior to the payment of the balance
of the Participant’s accounts pursuant to Section 5.4.
	 
	 	     (iv) If a Participant elects to have this Section
4.1(c) apply to an account relating to a deferral for any
Deferral Year prior to 2000, such election must apply to the
Participant’s accounts for all such Deferral Years in this
Plan and in the Federal National Mortgage Association Career
Deferred Compensation Plan. Notwithstanding the foregoing,
such election shall not apply to the Participant’s account
for Deferral Year 1981 or 1982 if such account is subject to
a fixed, permanent rate of return, unless the Participant
signs a special agreement specified by the Committee
applying the election to such account.

     (d)  For any deferrals for Deferral Years prior to 2000 for which a
Participant has not elected during the period established by the Committee to
have Section 4.1(c) apply:

		
	 	     (i) The amount determined in Sections 4.1(b)(i) and 4.1(b)(ii)
(for each Participant who is an Executive) or Section 4.1(b)(iii)
(for each Participant who is a Director), as the case may be, shall
be increased as of the last day of any month during the Deferral
Year by the amount obtained by multiplying the account balance as
of the first day of such month by one-twelfth of the rate
equivalent to the average annual percent cost of money borrowed by
the Company through issuance of debentures (having a maturity of
one year or longer) in the first three quarters of the year
preceding the Deferral Year.
	 
	 	     (ii) The rate established in Section 4.1(d)(i) above shall
remain in effect

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	 	for the Deferral Year. For all years subsequent
to the Deferral Year, the rate will be readjusted annually and will
be determined by calculating the average annual percent cost of
money borrowed by the Company through the issuance of debentures
(having a maturity of one year or longer) for the twelve-month
period immediately preceding the year with respect to which the
interest rate will be effective.
	 
	 	     (iii) In all years following the Deferral Year, the
Participant’s account will be increased as of the last day of each
month by an amount equal to the account balance as of the first day
of such month multiplied by one-twelfth of the rate as established
under Section 4.1(d)(ii) for that year. A Participant’s account
(reduced in accordance with Section 4.1(e)) shall continue to be
increased in accordance with this Section 4.1(d) during any
installment payment period which may have been elected by the
Participant under Section 5.3(a) or approved by the Committee under
Sections 5.3(b) or 5.4.

          (e) The Participant’s account shall be reduced by any payments made to the
Participant, his or her beneficiary, estate or representative. If Section
4.1(c) applies to such account, each payment shall be made from the
Participant’s account on a pro rata basis from among the hypothetical
investments designated for such account by the Participant under Section
4.1(c)(i). If Section 4.1(c) does not apply to such account, each payment
shall be made from the account maintained as set forth above in Section 4.1(d).

          (f) In the event that, as a result of participation in this Plan by any
Participant who is an Executive, the benefits payable to him or her under the
Federal National Mortgage Association Retirement Plan for Employees Not Covered
Under Civil Service Retirement Law (the “Retirement Plan”) or any other
qualified plan sponsored by the Company under which benefits are determined by
reference to the rate of salary paid to such Participant during a specified
period of time preceding such Participant’s retirement are lower than the
benefits which would have been payable to such Participant had he or she not
been a Participant in the Plan, then the Company shall make monthly payments to
the Participant, or, if applicable, to his or her beneficiary entitled to
receive benefits under such Retirement Plan or other qualified plan, of an
amount equal to such reduction. With respect to any non-qualified employee
benefit or welfare plans sponsored by the Company under which the amount of any
benefit is based on the rate of salary paid to an employee,

- 10 -

 

a Participant’s
rate of salary for the purposes of such non-qualified employee benefit or
welfare plan shall include any amount of Compensation deferred under this Plan
but not any Award, unless otherwise specifically provided in such plan.

     4.2 Funding Prohibitions. All entries in a Participant’s account shall be
bookkeeping entries only and shall not represent a special reserve or otherwise
constitute a funding of the Company’s unsecured promise to pay any amounts
hereunder. All payments to be made under the Plan shall be paid from the
general funds of the Company. Participants and their beneficiaries shall have
no right, title or interest in or to any investments which the Company may make
to aid it in meeting its obligations under the Plan. All such assets shall be
the property solely of the Company and shall be subject to the claims of the
Company’s unsecured general creditors. To the extent a Participant or any
other person acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of any unsecured general
creditor of the Company and such person shall have only the unsecured promise
of the Company that such payments shall be made.

ARTICLE V

Payment

     5.1 Payment of Account. Payment of amounts credited to a Participant’s
account shall be made in the manner and at the time or times specified herein.
All payments shall be made by Company check. The normal payment schedule will
consist of one payment in January of each year.

     5.2 Commencement of Payment. When the Participant makes the deferral
election under Section 3.2 for a Deferral Year, he or she shall also elect the
time at which payment of the amounts credited to the account established for
such Deferral Year shall commence. The earliest time a Participant may elect
to have payment commence shall be the January following the Deferral Year.
Such election of the time of commencement of payment of an amount credited to
the account established for a Deferral Year may be changed by the Participant,
provided that such change is made at least twelve months before the
commencement of any payment from such account and that the commencement of any
payment specified in such change is at least twelve months from the date of
such change. Any such change of the time of commencement of

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payment shall be
made in the manner specified by the Committee. Payment of amounts credited to
such account shall commence in the January coincident with or next following
the date or event specified by the Participant in such election, or, if
changed, in the most recent change pursuant to this Section 5.2.

     5.3 Method of Payment.

          (a) The Participant shall elect to have the balance of each of his or her
accounts paid out in one of the following methods: (1) a single lump sum; (2)
annual installments over a period of years (selected by the Participant) not to
exceed 15; or (3) an initial installment of an amount specified by the
Participant followed by annual installments over a period of years not to
exceed 15 and commencing in a year selected by the Participant. Annual
installments will be calculated by dividing the balance of the account at the
end of the prior year by the number of installments remaining to be paid.

          (b) When the Participant makes the deferral election under Section 3.2
for a Deferral Year, he or she shall also elect the method of payment for the
account established for such Deferral Year. Such election of payment method for
a Deferral Year may be changed by the Participant, provided that such change is
made at least twelve months before the commencement of any payment from such
account. Any such change of the payment method shall be made in the manner
specified by the Committee. Payment of amounts credited to such account shall
commence in the January coincident with or next following the date or event
specified by the Participant in such election, or, if changed, in the most
recent change pursuant to this Section 5.2. Notwithstanding any other
provision of the Plan to the contrary, a Participant or beneficiary may
withdraw an amount from one or more of his or her accounts upon a finding by
the Benefit Plans Committee (or, as provided in Section 6.1, the Compensation
Committee of the Board of Directors) in its sole discretion (i) that an
unanticipated emergency that is caused by an event beyond the control of such
Participant or beneficiary has occurred and that such emergency would result in
severe financial hardship to such Participant or beneficiary if early
withdrawal were not permitted, or (ii) that the continued participation of a
Participant who is employed by the federal government or that of a state or
municipality creates a serious hardship for the Participant because of the
conflict of interest or ethics rules of such government. The amount that may
be withdrawn pursuant to clause (i) above shall not exceed the amount necessary
to meet such financial hardship as determined by the Benefit Plans Committee
(or the Compensation Committee) in its sole

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discretion. The entire balance in
the Participant’s accounts may be withdrawn pursuant to clause (ii) above. The
Benefit Plans Committee (or the Compensation Committee) shall have the right to
require such Participant or beneficiary to submit such documentation as it
deems appropriate for the purpose of determining the existence, cause and
extent of such hardship.

     5.4 Payment on Death

          (a) Notwithstanding any provisions of the Plan to the contrary, in the
event of the death of any Participant, the balance in each of the Participant’s
accounts shall be paid to the Participant’s beneficiary in a single lump sum
payment within thirty (30) days after the date of such death.

          (b) Each Participant shall designate a beneficiary to whom any balance in
each account under this Plan shall be payable on his or her death. A
Participant may also designate an alternate beneficiary to receive such payment
in the event that the designated beneficiary cannot receive payment for any
reason. In the event no designated or alternate beneficiary can receive such
payment for any reason, payment will be made to the Participant’s surviving
spouse, if any, or if the Participant has not surviving spouse, then to the
following beneficiaries if then living in the following order of priority: (i)
to the Participant’s children (including adopted children and stepchildren) in
equal shares, (ii) to the Participant’s parents in equal shares, (iii) to the
Participant’s brothers and sisters in equal shares, and (iv) to the
Participant’s estate. Each Participant may at any time change any beneficiary
designation. A change of beneficiary designation must be made in writing and
delivered to the Committee or its delegate for such purposes. The interest of
any beneficiary who dies before the Participant will terminate unless otherwise
specified by the Participant.

     5.5 Payment on Retirement or Termination of Service.

          (a) Upon a Participant’s Retirement, payments from the Participant’s
accounts will be made as the Participant specified in the deferral election,
pursuant to Section 3.3(d), or if changed, in the most recent change pursuant
to Section 5.2 or 5.3.

          (b) Upon the Termination of Service of a Participant who is an Executive,
the balance in each of such Participant’s account(s) shall be paid to the
Participant in a single lump sum payment in the January following Termination
of Service, unless, in the case of a Participant’s accounts for Deferral Years
after 1996, the Participant has elected not to have the foregoing lump sum
payment provision apply in his or her deferral election(s), or, in the case of
a Participant’s

- 13 -

 

accounts for Deferral Years prior to 1997, the Participant has
elected in writing, on or before August 16, 1996, not to have the foregoing
lump sum payment provision apply, but to have payments from his or her accounts
made as he or she specified in his or her deferral elections pursuant to
Section 3.3(d). In the event of such an election by a Participant with respect
to accounts
for Deferral Years prior to 1997, any reference to “retirement” in the
Participant’s deferral elections with respect to such Deferral Years shall be
deemed to refer to the earliest date on which the Participant could have
retired and become entitled 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, had such Participant continued in the employ of the Company until
such date. An election made pursuant to this Section 5.5(b) may be changed by
the Participant, provided that such change is made at least twelve months prior
to any payment from the account or accounts in question. Any change of
election shall be made in the manner specified by the Committee.

          (c) Notwithstanding Sections 5.5(a) and (b) above, a Participant may
withdraw an amount from one or more of his or her accounts prior to the January
following his or her Termination of Service upon a finding by the Benefit Plans
Committee (or, as provided in Section 6.1, the Compensation Committee of the
Board of Directors) in its sole discretion that (i) an unanticipated emergency
that is caused by an event beyond the control of such Participant has occurred
and that such emergency would result in severe financial hardship to such
Participant or beneficiary if early withdrawal were not permitted or (ii) the
continued participation of a Participant who is employed by the federal
government or that of a state or municipality creates a serious hardship for
the Participant because of the conflict of interest or ethics rules of such
government. The amount that may be withdrawn pursuant to clause (i) above
shall not exceed the amount necessary to meet such financial hardship as
determined by the Benefit Plans Committee (or the Compensation Committee) in
its sole discretion. The entire balance in the Participant’s accounts may be
withdrawn pursuant to clause (ii) above. The Benefit Plans Committee (or the
Compensation Committee) shall have the right to require such Participant to
submit such documentation as it seems appropriate for the purpose of
determining the existence, cause, and extent of such hardship.

- 14 -

 

ARTICLE VI

Administration

     6.1 Administration. The Plan shall be administered by the Benefit Plans
Committee; provided, however, that all decisions affecting officers having the
title of Executive
Vice President or a higher ranking title shall be made by the Compensation
Committee of the Board of Directors. The Benefit Plans Committee shall consist
of not less than three and not more than seven persons, each of whom shall be
appointed by, shall remain in office at the will of, and may be removed (with
or without cause) by the Board of Directors of the Company. The Benefit Plans
Committee shall have all powers necessary to carry out the provisions of the
Plan, including, without reservation, the power to delegate administrative
matters to other persons and to interpret the Plan in a manner consistent with
its express provisions.

ARTICLE VII

Miscellaneous

     7.1 Termination of Plan. The Company may at any time by action of its
Board of Directors terminate this Plan. Upon termination of the Plan, no
further deferrals will be permitted, and the Participant’s Compensation will be
restored on a non-deferred basis. Each Participant’s accounts as they then
exist will be maintained, credited and paid pursuant to the provisions of this
Plan and the Participant’s elections.

     7.2 Amendment. The Company may at any time amend this Plan in any
respect, (i) in the case of amendments which have a material effect on the cost
to the Company of maintaining the Plan, by action of its Board of Directors or,
(ii) with respect to any other amendments, by action of the Committee;
provided, however, that no such amendment shall adversely affect the rights of
Participants or their beneficiaries to any amounts credited to the
Participant’s accounts with respect to any Deferral Year which has commenced
prior to the adoption of any such amendment.

     7.3 No Alienation of Benefits. To the extent permitted by law,
Participants and beneficiaries shall not have the right to alienate,
anticipate, commute, sell, assign, transfer, pledge, encumber otherwise convey
the right to receive any payments under this Plan, and any payments under this
Plan or rights thereto shall not be subject to the debts, liabilities,
contracts, engagements

- 15 -

 

or torts of Participants or beneficiaries nor to
attachment, garnishment or execution, nor shall they be transferable by
operation of law in the event of bankruptcy or insolvency. Any attempt,
whether voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.

     7.4 No Rights to Continued Employment. Nothing contained herein shall be
construed as conferring upon an Executive the right to continue in the employ
of the Company as an Executive or in any other capacity, or as conferring upon
a Director the right to continue as a member of the Board of Directors.

     7.5 Headings. The headings of paragraphs are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of the Plan.

     7.6 Applicable Law. The Plan shall be construed and administered under
the laws of the District of Columbia.

- 16 -

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