Document:

exv10w18

 

Exhibit
10.18

FANNIE MAE

STOCK COMPENSATION PLAN OF 1993

Effective as of May 20, 1993

Amended October 18, 2005

12/05/2005

 

 

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.

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     (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

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Retirement Law.

     (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 the per share value of Common Stock as determined
by using the mean between the high and low selling prices of such Common Stock, on the date
of determination, as reported on the NYSE. If such prices are not available the Fair Market
Value shall be the mean of (1) the mean between the high and low selling prices of the
common stock, as reported on the NYSE, for the first trading day immediately preceding the
date of determination and (2) the mean between the high and low selling prices of the common
stock, as reported on the NYSE, for the first trading day immediately following the date of
determination. If the Common Stock is no longer traded on the NYSE, or if for any other
reason using the foregoing methods to determine Fair Market Value is not possible or logical
under the circumstances, the Committee may determine the Fair Market Value, in good faith,
using any reasonable method.

     (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 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

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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.

     (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

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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.

     (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.

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     (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 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

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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 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

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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 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

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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.

     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

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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
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.

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     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, 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.

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     (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 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.

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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.

     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

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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 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

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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 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

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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.

     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.

-17-

 

     (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 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

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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) 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

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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 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

-20-

 

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.

     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

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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 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

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	 	 	 	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 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

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	 	 	 	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
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

-24-

 

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 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

-25-

 

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.

     (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

-26-

 

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 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

-27-

 

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.

-28-exv10w23

 

Exhibit 10.23

FANNIE MAE

PROFESSIONAL SERVICES AGREEMENT

THIS PROFESSIONAL SERVICES AGREEMENT (“Agreement”), entered into on February 7, 2000, but effective
as of January 1, 2000 (“Effective Date ”), is entered into by and between:

	 	 	 
	FANNIE MAE

	 	JAMES A. JOHNSON
	3900 Wisconsin Avenue, N.W.

	 	3101 Woodland Drive, N.W.
	Washington, D.C. 20016-2899

	 	Washington, D.C. 20008
	(hereinafter, “Fannie Mae”)

	 	(hereinafter, “Contractor”)

     WHEREAS, Fannie Mae, recognizing Contractor’s unique skills, abilities and experience, desires
to retain Contractor’s professional services; and

     WHEREAS, Contractor desires to perform professional services for Fannie Mae, subject to the
terms and conditions of this Agreement.

     NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

1. SERVICES

     Contractor agrees to provide advisory services to the Chairman and Chief Executive Officer of
Fannie Mae on matters relating to Fannie Mae’s corporate strategy, corporate finance, industry
relations, public policy and international securities distribution. Contractor further agrees to
continue his participation in leading cultural, philanthropic, educational and research
institutions so as to maintain and enhance Fannie Mae’s visibility and leadership. Collectively,
the activities described in this Section 1 shall be deemed the “Services.”

2. COMPENSATION AND OTHER BENEFITS

     (a) Compensation. Fannie Mae shall pay Contractor no less than $375,000 per
year, payable on a monthly basis commencing on January 31, 2000. Contractor’s

 

 

annual compensation shall be increased (but in no case decreased) by any discretionary amounts
determined by Fannie Mae and, at the start of each calendar year after 2000, by the percentage
increase during the prior calendar year in the “Consumer Price Index for Urban Wage Earners and
Clerical Workers — All Items” compiled by the Bureau of Labor Statistics or any replacement index.

     (b) Support Services and Reimbursement Arrangements. Contractor shall be provided with
the services of two Fannie Mae employees as support staff, with the particular employees made
available being mutually agreed to by Fannie Mae and Contractor. On a monthly basis, Contractor
shall reimburse Fannie Mae for all costs, including salary and benefits, for any services performed
for Contractor by such support staff that is unrelated to the Services. For purposes of such
reimbursement, Contractor, in good faith, shall allocate the services performed for Contractor by
such support staff between those related to the Services and those unrelated to the Services
(“Support Staff Reimbursement”). Contractor shall have access to a car and driver provided by
Fannie Mae on up to a one-half time basis, determined on a monthly basis. On a monthly basis,
pursuant to invoice by Fannie Mae, Contractor will reimburse Fannie Mae, at Fannie Mae’s cost, for
Contractor’s use of such car and driver (“Transportation Reimbursement” and, together with Support
Staff Reimbursement, “Contractor Staff Reimbursement”).

     (c) Reimbursement of Expenses. On a monthly basis, pursuant to invoice by Contractor,
Fannie Mae will reimburse Contractor for out-of-pocket travel and entertainment expenses (other
than Contractor Staff Reimbursement expenses) incurred by him in his performance of the Services.
Contractor will incur and request reimbursement for such expenses in accordance with the Fannie Mae
standards and

2

 

procedures that applied to Contractor during his employment at Fannie Mae. Contractor will bear all
other costs of providing the Services, including but not limited to rent and other office expenses,
phone charges, cost of the purchase, maintenance and operation of computers, fax machines and other
office equipment and tax and financial planning expenses. To the extent Fannie Mae furnishes
Contractor with office equipment, Contractor will reimburse Fannie Mae at Fannie Mae’s adjusted
book cost for such equipment.

     (d) Office Furniture. Fannie Mae shall provide Contractor with such office furniture
previously used by him as Chairman of the Executive Committee during 1999 that is owned by Fannie
Mae as he chooses in exchange for a $2,000 contribution by Contractor to a charity of his choice.

     (e) In-Kind Items. To the extent that Fannie Mae is unable to provide Contractor with
any in-kind item required to be provided to him under this Agreement, Fannie Mae shall make a cash
payment to Contractor equal to the cost of obtaining such item from a third-party vendor.

     (f) General Policy for Former Senior Executives. If Fannie Mae adopts a general policy
of providing former senior executives with post-retirement office space, office support or like
items, Contractor, at his election, may elect to terminate this Agreement and receive such items
pursuant to such policy.

3

 

3. OWNERSHIP RIGHTS; RIGHTS TO INNOVATIONS

     (a) Innovations. The term “Innovation” shall mean computer software (including source
and object code), databases, documentation, reports, processes, procedures, improvements,
inventions, discoveries, concepts, know-how, ideas, designs, videos, methods, methodologies,
developments, drawings, notes and materials along with any modifications, improvements or
derivative works relating thereto, produced, created, conceived or worked on by Contractor, either
solely or jointly with others, which result from, relate to or are otherwise connected with the
Services rendered pursuant to this Agreement.

     (b) Intellectual Property Rights. The term “Intellectual Property Rights” shall mean
all copyrights, patents, patent rights, trademarks, service marks, trade secrets and other
proprietary, intellectual, industrial and moral rights of whatever nature, including all
applications therefore.

     (c) Exclusive Property Rights of Fannie Mae. All Innovations produced or created
pursuant to this Agreement, whether solely by Contractor, or jointly with others, shall belong
solely and exclusively to Fannie Mae, which will possess all ownership rights in and to such
Innovations and all Intellectual Property Rights (as defined above)
associated therewith. Fannie
Mae (including its successors and assigns) shall have the right to obtain and to hold in its own
name all such patents, copyrights, registrations or such other Intellectual Property Rights and
protection as may be appropriate.

     (d) Assignment. To effectuate the foregoing, it is expressly understood and
acknowledged that all Innovations shall be works made for hire under the U.S. copyright laws and
that all Intellectual Property Rights in and to each Innovation shall vest in Fannie Mae on the
date such Innovation is created. In the event that, under applicable

4

 

law, all Intellectual Property Rights do not vest in Fannie Mae, Contractor hereby irrevocably
transfers, conveys and assigns in perpetuity to Fannie Mae (including its successors and assigns)
any and all present and future Intellectual Property Rights which such persons may have in or to
any Innovations. Contractor irrevocably waives all moral rights in, and all other Intellectual
Property Rights to, all Innovations.

     (e) Assistance. Contractor agrees to execute applications, assignments and other
documents and to render all other reasonable assistance requested by Fannie Mae, at Fannie Mae’s
expense, to enable Fannie Mae to obtain, register and enforce domestic and foreign patents,
copyrights, trademarks and other Intellectual Property Rights for the Innovations. Notwithstanding
the foregoing, Contractor hereby irrevocably appoints Fannie Mae as attorney in fact (coupled with
an interest) to execute any such instruments. The foregoing powers of attorney and the obligations
to assist and execute shall survive termination of this Agreement for any reason.

     (f) No License. Except to the extent necessary for Contractor to perform the Services,
no license to Contractor under any Intellectual Property Rights which is now or may hereafter be
owned by Fannie Mae is either granted or implied by this Agreement.

4. PROPRIETARY INFORMATION

     (a) Proprietary Information. “Proprietary Information” shall mean, (i) information
disclosed by or on behalf of either party relating to product development strategy and activity,
corporate assessments and strategic plans, financial and statistical information, corporate
developments, accounting information, software, systems, processes, formulae, inventions,
discoveries, technical know-how, procedures, pricing, marketing strategies, policies, guidelines,
practices, suppliers, prospects, customers, disputes or litigation, (ii) other confidential,
proprietary or trade secret information

5

 

disclosed by or on behalf of such person or entity that is identified in writing as such at the
time of its disclosure, (iii) all other confidential, proprietary or trade secret information
disclosed by or on behalf of such person or entity, which a reasonable person employed in the
mortgage industry would recognize as such, (iv) information relating to such person’s or entity’s
employees, contractors or customers which, if released, would cause an unlawful or actionable
invasion of privacy, and (v) compilations or summaries of information or data that is itself
Proprietary Information. Without limiting the generality of the foregoing, Contractor acknowledges
and agrees that (x) any computer software and programs (including object and source codes),
computer software and data base technologies, systems, structures and architectures provided to
Contractor by or on behalf of Fannie Mae and (y) all Innovations (as defined above) are the
Proprietary Information of Fannie Mae. The terms of this Agreement (as well as all information
regarding the negotiation of this Agreement) shall be the Proprietary
Information of both parties.

     (b) Protection. All Proprietary Information disclosed by one party to the
other in the course of performing under this Agreement or to which the other gains access in
connection with this Agreement shall be deemed to be the property of the disclosing party, or
the appropriate third-party owner, as the case may be. The receiving party agrees to (i) receive
such Proprietary Information in confidence, (ii) use reasonable efforts to maintain the
confidentiality of such Proprietary Information and not disclose such Proprietary Information to
third parties (except for the receiving party’s employees, agents and subcontractors who have a
need to know, are under a duty of nondisclosure with respect to such information, and are acting
for the sole benefit of the receiving

6

 

party), which efforts shall accord such Proprietary Information at least the same level of
protection against unauthorized use and disclosure that the receiving party customarily accords to
the receiving party’s own information of a similar nature, but in no event less than a reasonable
standard of care, (iii) use or permit the use of such Proprietary Information solely in accordance
with the terms of this Agreement, and (iv) promptly notify the disclosing party in writing of any
loss or unauthorized use, disclosure or access of the disclosing party’s Proprietary Information of
which the receiving party becomes aware. Neither party shall take any physical or electronic forms
of Proprietary Information from the other’s offices (or make copies of such Proprietary
Information) without the other party’s written permission. Each party agrees to abide by and
reproduce and include any restrictive legend or proprietary rights notice that appears in or on any
Proprietary Information of the other party (or other third-party owner) that such party is
authorized to reproduce. Each party also agrees not to remove, alter, cover or distort any
trademark, trade name, copyright or other proprietary rights notices, legends, symbols or labels
appearing on or in any Proprietary Information of the other party (or other third-party owner).

     (c) Exclusions. The restrictions on use and disclosure set forth above shall not
apply when, and to the extent that, the receiving party can demonstrate that the Proprietary
Information: (i) is or becomes generally available to the public through no fault of the receiving
party (or anyone acting on such party’s behalf); (ii) was previously rightfully known to the
receiving party free of any obligation to keep it confidential, (iii) is subsequently disclosed to
the receiving party by a third party who may rightfully transfer and disclose such information
without restriction and free of any obligation to

7

 

keep it confidential; (iv) is independently developed by the receiving party or a third party
without reference to the disclosed Proprietary Information; or (v) is required to be disclosed by
the receiving party as a matter of law or compulsory process, provided that in the case of this
paragraph (v), the receiving party uses all reasonable efforts to provide the disclosing party with
at least 10 days’ prior notice of such disclosure and the receiving party discloses only that
portion of the Proprietary Information that is legally required to be furnished pursuant to the
opinion of legal counsel of the receiving party. Notwithstanding the foregoing, neither party shall
disclose, or permit the disclosure of, the terms or conditions of this Agreement without the prior
written consent of the other party, except (A) as provided in subparagraph (v) above, (B) to the
extent necessary to permit the exercise of rights or the performance of obligations under this
Agreement, or (C) to seek advice from attorneys, accountants or other professional advisors.

5. TERM AND TERMINATION

     (a) Term. This Agreement shall commence on the Effective Date and shall initially
continue and remain in force for three (3) years (the “Initial Term”). The Initial Term shall be
extended automatically for one additional day for each day that elapses during the Term (each an
“Extension,” and the Initial Term, as so extended, the “Term”). Fannie Mae, for any reason, may
eliminate any further Extension of the then-existing Term by providing a written notice of such
elimination to Contractor. Fannie Mae may terminate the Term immediately for Cause, as more fully
described in Section 5(b)(i). Contractor may terminate the Term on written notice to Fannie Mae at
any time.

     (b) Termination.

          (i) Fannie Mae may terminate this Agreement prior to the expiration of its Term for Cause,
which shall mean that Contractor has materially breached this

8

 

Agreement by engaging in dishonest or fraudulent actions or willful misconduct that is materially
injurious to the business of Fannie Mae. Notwithstanding the foregoing, this Agreement shall not be
deemed to have been terminated for Cause without (x) reasonable notice from Fannie Mae to
Contractor setting forth the reasons for Fannie Mae’s intention to terminate for Cause, (y) an
opportunity for Contractor, together with his counsel, to be heard before the Chairman and Chief
Executive Officer of Fannie Mae and (z) delivery to Contractor of a notice of termination from the
Chairman and Chief Executive Officer stating his good faith opinion that Contractor was guilty of
the conduct set forth in this Section 5(b)(i) and specifying the particulars thereof in detail. No
act or failure to act will be considered ‘willful’ unless it is done, or omitted to be done, by
Contractor in bad faith or without reasonable belief that his action of omission was in, or not
opposed to, the best interests of Fannie Mae.

          (ii) This Agreement will terminate on the death of Contractor In the event that, during the
Term of this Agreement, Contractor is prevented from performing his duties hereunder by reason of
serious illness or incapacity, Fannie Mae shall have the right, on 60 days’ prior written notice to
Contractor, to terminate this Agreement.

     (c) Return of Property Upon Termination. Contractor or his personal representative
shall deliver to Fannie Mae, within 10 days of termination of this Agreement or, in the case of
termination by death, within a reasonable time, all (i) work in progress under this Agreement, (ii)
Fannie Mae property and (iii) materials containing or embodying Proprietary Information and
Innovations. Contractor will make or retain no partial or entire copies of any of the foregoing and
will destroy all computer files containing such data and materials. Fannie Mae shall deliver all
Contractor property to

9

 

Contractor or his personal representative within 10 days of termination of this Agreement.

6. NON-COMPETITION

     Considering the highly confidential and proprietary nature of Fannie Mae’s information to
which Contractor is likely to have access hereunder and the highly competitive marketplace in which
Fannie Mae participates, Contractor agrees that until one year after the termination of this
Agreement, he will not knowingly provide services to the detriment of Fannie Mae that are directly
or indirectly for the benefit of any entity (or affiliate of an entity) engaged directly or
indirectly in competition with Fannie Mae, including without limitation the Federal Home Loan
Mortgage Corporation (“Freddie Mac”). In the event Contractor is uncertain as to whether an entity
engages in competition with Fannie Mae, he shall seek a determination by Chairman and Chief
Executive Office of Fannie Mae, whose decision shall be binding. The foregoing obligation is in
addition to, and not in substitution for, Contractor’s obligations (a) hereunder to maintain Fannie
Mae Proprietary Information in confidence and (b) under the Agreement on Ideas, Inventions and
Confidential Information executed by Fannie Mae and Contractor when he was an employee of Fannie
Mae.

7. LEGAL FEES AND INDEMNIFICATION

     (a) Legal Fees. Fannie Mae shall pay Contractor’s reasonable legal fees and
disbursements incurred in the negotiation of this Agreement or in defending (or participating in)
any challenge to (or investigation of) this Agreement by any third party.

     (b) Indemnification. Fannie Mae shall exonerate, indemnify, hold harmless and defend
Contractor (and make advances of expenses in connection therewith) for

10

 

actions taken or omitted pursuant to this Agreement to the same extent as for actions taken or
omitted when he was Chairman and Chief Executive Officer of Fannie Mae.

8. GENERAL TERMS AND CONDITIONS

     (a) Independent Contractor. During the term of this Agreement, Contractor shall at all
times be and act as an independent contractor, and not as an employee of Fannie Mae. Contractor
shall not represent otherwise to any third party. Except by reason of his prior employment by
Fannie Mae, Contractor will not participate in any employee benefit program offered now or in the
future by Fannie Mae to its employees. In making payments to Contractor of the compensation
described above, Contractor will not withhold taxes of any kind, including income taxes, FICA, FUTA
or other statutory withholding or employment taxes applicable to employees. To the extent required
by law, Fannie Mae will report to the Internal Revenue Service and other taxing authorities all
payments made to Contractor. In consultation with Fannie Mae, Contractor, as an independent
contractor, will be responsible for filing all lobbying disclosure or other forms, if any, required
to be filed by law as a result of the Services performed by Contractor.

     (b) Effect on Other Benefits. This Agreement shall not affect Contractor’s rights to
payments under Fannie Mae’s Executive Pension Plan or to any other benefits payable to Contractor
by reason of his prior employment by Fannie Mae.

     (c) Assignment. This Agreement may not be assigned by Contractor by operation of law
or otherwise.

     (d) Taxation. Fannie Mae is exempt from all state and local taxes, except
certain taxes on real property, pursuant to Section 309(c)(2) of the Federal National Mortgage
Association Charter Act, 12 U.S.C. § 1723a(c)(2). Fannie Mae will not be

11

 

responsible for any such taxes paid by Contractor on its behalf, and Contractor will not bill or
charge Fannie Mae for said taxes.

     (e) Force Majeure. Neither party shall be responsible for delays or failure of
performance resulting from acts beyond the reasonable control of such party (such as acts of God,
riots, acts of war and epidemics, power failures, earthquakes or other disasters) providing such
delay or failure of performance could not have been prevented by reasonable precautions and cannot
reasonably be circumvented by such party through the use of alternate sources, workaround plans or
other means.

     (f) No Implied Waiver. No term, provision or clause of this Agreement shall be deemed
waived and no breach excused unless such waiver or consent shall be in writing and executed by a
duly authorized representative of the party to be bound thereby. Any consent by any party to, or
waiver of, a breach by the other, expressed or implied, shall not constitute a consent to, waiver
of or excuse for any other different or subsequent breach.

     (g) Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the District of Columbia, without reference to or application of its,
or any otherwise applicable, conflicts of law principles. In the event that any provision of this
Agreement shall be invalid and legally unenforceable, the parties shall replace that provision with
one that most nearly reflects their original intentions and is valid and enforceable under
applicable law, and the same shall not affect in any respect whatsoever the validity and
enforceability of the remainder of this Agreement.

12

 

     (h) Jurisdiction and Venue. Any and all disputes between the parties that cannot
be settled by mutual agreement shall be resolved solely and exclusively in the courts located
within the District of Columbia, and Contractor hereby consents to the jurisdiction of such courts
and irrevocably waives any objections thereto, including without limitation, on the basis of
improper venue or forum non conveniens.

     (i) Injunctive Relief. Contractor understands and agrees that Fannie Mae will suffer
irreparable harm in the event that Contractor breaches any of the obligations imposed by Section 3
(Ownership Rights; Rights to Innovations), Section 4 (Proprietary Information) or Section 6
(Non-Competition), of this Agreement and that monetary damages will be inadequate to compensate
Fannie Mae for any such breach.

Accordingly, Contractor agrees that, in the event of a breach or
threatened breach of any of such provisions, Fannie Mae, in addition to and not in limitation of
any other rights, remedies or damages available to Fannie Mae at law or in equity, shall be
entitled to preliminary and permanent injunctive relief in order to prevent or restrain any such
breach without the necessity of proving damages or irreparable harm, or posting bond. In the event
of any violation of Section 6 (Non-Competition), the time period therein shall be extended for the
period of breach (but not more than an additional 12 months).

     (j) Notice. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been received by a party when
actually received in the case of hand delivery (against a signed receipt) or overnight delivery, or
five days after mailing by first-class mail, postage paid, to the other party at the address shown
on page one hereof, or to such other address as a party may designate by appropriate notice in
writing.

13

 

     (k) Examination of Books and Records. Fannie Mae shall have the right to examine
Contractor’s books, records and other documentation, in each case to the extent relating to the
Services (for billing or other reasonable purposes). Contractor shall make such information
available to Fannie Mae during normal business hours upon reasonable notice to Contractor.

     (1) Code of Business Conduct. Contractor shall comply with Fannie Mae’s Code of
Business Conduct (“Code”), as the same may be amended from time to time, for the duration of this
Agreement. A copy of the Code is attached hereto as Schedule A. Contractor shall execute the
compliance certification form attached hereto as Schedule B (Code of Business Contract Compliance
Certification), and such certification shall be incorporated herein and made a part of this
Agreement. If at any time Contractor believes that he has not complied with the Code or become
aware of an incident of non-compliance, Contractor shall promptly notify Fannie Mae, in writing,
directing its notice to the Office of Corporate Justice and
Employment Practices at 3900 Wisconsin
Avenue, N. W., Washington, D.C. 20016; or via facsimile at (202) 752-3311.

     (m) Survival. The terms of Section 3 (Ownership Rights; Rights to
Innovations), Section 4 (Proprietary Information), Section 6 (Non-Competition) and Section 7
(Legal Fees and Indemnification), as well as any other provisions which contemplates performance
or observance subsequent to any termination or expiration of this Agreement, shall survive
termination or expiration of this Agreement for any reason and shall continue in full force and
effect.

     (n) Amendment. This Agreement may be amended only by a writing executed by both
parties.

14

 

     (o) Construction. No provision of this Agreement shall be interpreted or
construed against any party because that party or its legal representative drafted that provision.
The captions and headings of the Sections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement. Unless the context of this Agreement
clearly requires otherwise: (i) references to the plural include the singular, the singular the
plural, and the part the whole, (ii) references to one gender include all genders, (iii) “or” has
the inclusive meaning frequently identified with the phrase “and/or,” (iv) “including” has the
inclusive meaning frequently identified with the phrase “including but not limited to” or
“including without limitation,” (v) references to “hereunder,” “herein” or “hereof relate to this
Agreement as a whole, and (vi) the terms “dollars” and
“$” refer to United States dollars. Any
accounting term used herein without specific definition shall have the meaning ascribed thereto by
U.S. generally accepted accounting practices. Section, subsection, paragraph, subparagraph, exhibit
and schedule references are to this Agreement as originally executed unless otherwise specified.
Any reference herein to any statute, rule, regulation or agreement, including this Agreement, shall
be deemed to include such statute, rule, regulation or agreement as it may be modified, varied,
amended or supplemented from time to time. Any reference herein to any person shall be deemed to
include the heirs, personal representatives, successors and permitted assigns of such person.

     (p) Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which taken together shall constitute a
single agreement.

15

 

     (q) Entire Agreement. This Agreement, together with any exhibits, addenda,
schedules and amendments relating hereto, sets forth the entire understanding between Fannie Mae
and Contractor with respect to the Services. There are no promises, commitments, representations or
warranties relied upon by either party which are not contained herein.

     (r) Facsimiles. The parties acknowledge and agree that copies of executed
documents received via facsimile shall be deemed to be originals for all purposes.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

     Agreed to and Accepted by:

	 	 	 	 	 	 	 
	     FANNIE MAE	 	 	 	 
	 

	 	 	 	/s/ James A. Johnson	 	 
	 

	 	 	 	 

JAMES A. JOHNSON
	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Thomas R. Nides
	 	Date : 2-8-00	 	 
	 

	 	 	 	 	 	 
	Thomas
R. Nides,
	 	 	 	 
	Senior
Vice President,
	 	 	 	 
	Human
Resources
	 	 	 	 
	 
	 	 	 	 	 	 
	Date:
February 7, 2000
	 	 	 	 

16

 

PERSEUS

2099 Pennsylvania Avenue, NW, Suite 900 Washington, DC 20006-1813

Telephone: 202 452 0101           Facsimile: 202 429 0588

April 18, 2005

Mr. Stephen B. Ashley

Chairman of the Board of Directors

Fannie Mae

3900 Wisconsin Avenue, NW

Washington, DC 20016

Dear Steve:

I have been very pleased to have been able to advise Fannie Mae on a wide range of issues since my
years as an employee came to an end in 1999. I believe this continued association has gone well
beyond what would be expected of a retired CEO.

I have watched closely the many tough decisions that the company has confronted recently involving
capital, real estate, expenses, and even the suspension of management bonuses. I also noted that
the press has reported that the company is reducing expenditures for lobbyists and consultants. I
have concluded that, in the context of my ongoing advisory assistance, I should do my part to
assist in Fannie Mae’s efforts to reduce expenditures at this difficult time.

Therefore, I am voluntarily taking the following steps with respect to my consulting agreement with
the company in order to reduce and streamline our relationship:

	 	§ 	 	A temporary reduction of my consulting payments to $300,000 per year, which is a 30.2%
reduction from what I am currently being paid, until the company files its restated
financial statements with the SEC.
	 
	 	§	 	A reduction in the notice period for termination under the consulting agreement from
three years to two years, to provide greater flexibility for the company.
	 
	 	§	 	Termination of all of the administrative support and automobile
transportation which the company provides to me, including support subject to my
reimbursement.

 

 

Transition arrangements for the Fannie Mae personnel will have to be worked out with the Fannie Mae
Human Resources Department. Whether the relevant employees decide to return to traditional Fannie
Mae positions, or to terminate Fannie Mae employment and work with me, my goal would be to complete
the transition in forty-five days and in any event by June 30, 2005.

Under my consulting agreement, I have no obligation to take any of the above-described actions. As
you know, the consulting agreement does not provide for Company amendments except by mutual
agreement, which this letter represents.

We both acknowledge that I may serve on the board of directors of enterprises that have business
with Fannie Mae. Consistent with my past approach, I agree that I will recuse myself from the
deliberations of any such board that relate to Fannie Mae business, and in the case of any such
enterprise I will not advise with respect to, or otherwise assist or participate in, any such
dealings. Fannie Mae agrees that the term “Services” as used in my consulting agreement does not
include any services that pertain to the business (i) of any enterprise as to which I am a member
of the board of directors or similar body, or (ii) for which I serve as an advisor.

I believe Fannie Mae’s role in the American housing financial system is absolutely vital, and I
look forward to continuing to be of assistance to the board and to management and to fulfilling
my obligations under the consulting agreement.

Sincerely,

	 	 	 
	/s/ James A. Johnson
	 	 
	 	 	 
	James A. Johnson
	 	 
	 
	 	 
	ACKNOWLEDGED AND AGREED:
	 	 
	 
	 	 
	/s/ Stephen B. Ashley
	 	 
	 	 	 
	Stephen B. Ashley
	 	 
	Chairman of the Board of Directors
	 	 
	Fannie Mae

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