Document:

exv10w14

 

EXHIBIT 10.14

PROCEDURES FOR DEFERRAL AND DIVERSIFICATION OF AWARDS

     The following guidelines for deferral and diversification of awards
(“Awards”) under the PSP have been adopted by the Benefit Plans Committee
pursuant to Section 5.3 of the Fannie Mae Stock Option Plan of 1993 (the
“Plan”), and pursuant to authority granted by the Fannie Mae Board of Directors
(the “Board”) on November 18, 1997:

     1.     An individual who has received an Award and who has been designated as
eligible by the Board or by the Chairman of the Board to request deferral of
such an Award (a “Participant”) may make an election (“Election”) to defer
receipt of an Award.

     2.     The Election must specify (a) the date on which amounts in the
Participant’s Account (as defined in paragraph 5 below) attributable to the
Award deferred by such Election shall be paid or begin to be paid to the
Participant pursuant to paragraph 16 below, and (b) the method of such payment.
The payment date must be at least one year from the date that an Award would
have been paid to a Participant, but for the Participant’s Election to defer
receipt of such Award. The Participant may not change the payment date or
method specified in his or her Election. In place of a specific date on which
distributions under these guidelines will be paid or begin, a Participant may
elect to have distributions paid or begin upon his or her Retirement1 or death.

     3.     Once made, an Election may not be modified or revoked by the
Participant.

	1 Unless otherwise defined herein, all capitalized terms are as defined in
the Fannie Mae Stock Compensation Plan of 1993 (the “Plan”).

AMENDED 1/15/99

 

 

     4.     An Election to defer receipt of an Award must be approved (a) by the
Chairman of the Board, in the case of a Participant other than the Chairman of
the Board, or (b) by the Chairman of the Compensation Committee, in the case of
the Chairman of the Board.

     5.     Fannie Mae (the “Company”) shall establish for each Participant a
bookkeeping account (“Account”) to record deferrals and subsequent adjustments
under these guidelines. Each Participant shall have a separate Account. Within
a Participant’s Account, each Award deferred under these guidelines shall be
accounted for separately. Each Account shall be credited and debited as
described below.

     6.     On the date that an Award would have been paid to a Participant, but
for the Participant’s Election to defer receipt of such Award, the
Participant’s Account shall be credited with the number of shares of the
Company’s common stock (“Deemed Shares”) that would have been payable under
such Award.

     7.     Within 30 days of the end of each quarter, a Participant’s Account
shall be credited with an amount equal to the dividends that would have been
paid with respect to any Deemed Shares credited at the end of such quarter to
his or her Account if such Deemed Shares had they been issued and outstanding
(“Deemed Dividends”). Upon crediting to a Participant’s Account, such Deemed
Dividend shall be converted to shares (or a partial share) of Common Stock
using the Fair Market Value on the last day of the most recently ended quarter
as the date of valuation to calculate the number of shares (or the partial
share) to be so credited.

     8.     For purposes of these guidelines, “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 Common Stock on the day preceding date of
valuation (or, if the New York Stock Exchange (“NYSE”) is not open or the
Common Stock is not trading that day, the most recent prior date that the NYSE
was open for trading and the Common Stock was traded) as reported for such date
on the table entitled “NYSE -- Composite Transactions” contained in the Wall
Street Journal.

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     9.     If any of the following events occurs, appropriate adjustments will be
made with respect to any Deemed Shares and shares attributable to Deemed
Dividends in a Participant’s Account: (a) any extraordinary dividend or other
extraordinary distribution in respect of Common Stock (whether in the form of
cash, Common Stock, other securities or other property), (b) 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 Company, (c) any issuance of warrants
or other rights to purchase shares of Common Stock or other securities of the
Company (other than to employees) at less than 80 percent of fair value on the
date of such issuance, or (d) any other like corporate transaction or event in
respect of the Common Stock or a sale of substantially all the assets of the
Company.

     10.     A Participant may elect to have Deemed Shares and Deemed Dividends
previously credited to his or her Account converted into a cash credit,
provided that such election must be approved (a) by the Chairman of the Board,
in the case of a Participant other than the Chairman of the Board, or (b) by
the Chairman of the Compensation Committee, in the case of the Chairman of the
Board. Such cash credit shall be equal to the Fair Market Value, on the date of
conversion, of such Deemed Shares and, upon crediting, will be deemed to be
invested in a hypothetical portfolio chosen by the Participant from among such
investment options as the Benefit Plans Committee (“Committee”) may designate
as available under these guidelines (the “Deemed Investment Portfolio”).”

     11.     Amounts credited to a Participant’s Account pursuant to paragraph 10
above shall be adjusted for the deemed gain or loss with respect to the Deemed
Investment Portfolio (the “Deemed Earnings”). The Deemed Earnings with respect
to each investment option in a Deemed Investment Portfolio shall be determined
by reference to the total actual return on such investment option for the
period in question.

     12.     A Participant’s Account shall be reduced by any payments made to the
Participant, his or her beneficiary, estate or representative.

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     13.     If a Participant elects, pursuant to paragraph 10 above, to have cash
credited to his or her Account, he or she shall also designate a Deemed
Investment Portfolio, and shall allocate the amount credited to his or her
Account as a result of such Election among the investment options offered in
the Deemed Investment Portfolio in integral multiples of five percent. A
Participant shall so designate a Deemed Investment Portfolio by directly
contacting the investment advisor with responsibility for administering the
Deemed Investment Portfolio (the “Investment Administrator”). A Participant may
change such allocation at any time by notice to the Investment Administrator,
in accordance with such procedures as may be established by the Investment
Administrator. By allocating amounts to a Deemed Investment Portfolio, a
Participant directs the Investment Administrator to notify the Company of such
allocation and any changes thereto.

     14.     The Company shall have no responsibility for the performance of any
hypothetical investment options selected by a Participant.

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

     16.     Except as otherwise provided in paragraphs 23 and 27 below, all
payments from an Account will be made or will commence as soon as practicable
after the payment date selected by the Participant pursuant to paragraph 2
above.

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     17.     Except as provided in paragraph 19 below, payment from a Participant’s
Account with respect to Deemed Shares or Deemed Dividends credited thereto
shall be made in shares of Common Stock. Payments from a Participant’s Account
with respect to cash credited to such Account pursuant to paragraph 10 above,
and as adjusted by Deemed Earnings thereon, shall be made in cash.

     18.     A Participant may elect to receive payments hereunder in one of the
following methods:

	 	a.	 	a single payment,
	 
	 	b.	 	annual installments over a period of years (selected by the
Participant) not to exceed 15, with the amount of each annual
installment calculated by dividing the balance of the Account at the
end of the prior year by the number of installments remaining to be
paid, or
	 
	 	c.	 	an initial installment of an amount specified by the
Participant followed by annual installments over a period of years
not to exceed 15 and commencing in a year selected by the
Participant, with each annual installment calculated by dividing the
balance of the Account at the end of the prior year by the number of
installments remaining to be paid.

     19.     If any annual installment (other than the last installment),
calculated as set forth in paragraph 18 above, would result in the payment of a
fractional share of Common Stock, such annual installment shall be reduced to
the next lowest whole number of shares of Common Stock. If, as part of the
final installment payment, a fractional share of Common Stock would be paid,
then in lieu thereof the Fair Market Value of such fractional share on the date
the payment is calculated shall be paid in cash.

     20.     Notwithstanding any other provision of these guidelines to the
contrary, a Participant or beneficiary may receive a payment with respect to
his or her Account upon a finding by the Committee in its sole discretion (a)
that an unanticipated emergency caused by

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an event beyond the control of such Participant or beneficiary has
occurred and that such emergency would result in financial hardship to such
Participant or beneficiary if early payment were not permitted, or (b) that the
continued participation of a Participant who is employed by the federal
government or that of a state or municipality creates a serious hardship for
the Participant because of the conflict of interest or ethics rules of such
government. The amount that may be paid pursuant to clause (a) above shall not
exceed the amount necessary to meet such financial hardship as determined by
the Committee in its sole discretion. The entire balance in the Participant’s
Account may be paid pursuant to clause (b) above. The Committee shall have the
right to require such Participant or beneficiary to submit such documentation
as it deems appropriate for the purpose of determining the existence, cause and
extent of such hardship.

     21.     Notwithstanding any other provision in these guidelines to the
contrary, the Company may apply, at a Participant’s request, such Participant’s
Account or a portion thereof in accordance with the provisions of the Fannie
Mae Estate Enhancement Plan.

     22.     The Company shall have the right to deduct from any payment to be made
pursuant to these guidelines any federal, state or local taxes required by law
to be withheld.

     23.     In the event of the death of a Participant, an amount equal to the
balance of the Participant’s Account shall be paid to the Participant’s
beneficiary in a single payment within 30 days after the date of such death.

     24.     Each Participant shall designate a beneficiary to whom an amount equal
to any balance in the Participant’s Account shall be payable on the
Participant’s death. A Participant may also designate an alternate beneficiary
to receive such payment in the event that the designated beneficiary cannot
receive payment for any reason. In the event no designated or alternate
beneficiary can receive such payment for any reason, payment will be made to
the Participant’s surviving spouse, if any, or if the Participant has no
surviving spouse, then to the following beneficiaries if then living in the
following order of priority: (a) to the Participant’s children (including
adopted children and stepchildren) in equal shares, (b) to the Participant’s
parents in equal shares, (c) to the Participant’s brothers and sisters in

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equal shares and (d) to the Participant’s estate. Each Participant may at
any time change his or her beneficiary designation. A change of beneficiary
designation must be made in writing and delivered to the Committee for such
purposes. The interest of any beneficiary who predeceases the Participant will
terminate unless otherwise specified by the Participant.

     25.     Upon a Participant’s Retirement, payments from the Participant’s
Account will be made as the Participant specified in his or her Election.

     26.     Upon Termination of Service of a Participant, the balance of such
Participant’s Account shall be paid to the Participant in a single payment as
soon as practicable after such Termination of Service, unless the Participant
elected, in his or her Election, not to have such a single payment provision
apply.

     27.     If a Participant’s employment with the Company is terminated other
than by reason of Retirement or death and the Participant, in his or her
Election, elected to have the balance of his or her Account paid, or begin to
be paid, after Retirement, and not in a single payment under paragraph 26, the
Participant’s date of “Retirement” shall be deemed to be the earliest date on
which the Participant could have retired and become entitled to an immediate
annuity under the Federal National Mortgage Association Retirement Plan For
Employees Not Covered Under Civil Service Retirement Law or under the Civil
Service Retirement Law, whichever is applicable, had the Participant continued
in the employ of the Company until such date.

     28.     Claims for benefits under these guidelines shall be filed with the
Committee. If any Participant or other person claims to be entitled to a
benefit under these guidelines and the Committee determines that such claim
should be denied in whole or in part, the Committee shall notify such person of
its decision in writing. Such notification will be written in a manner
calculated to be understood by such person and will contain (a) specific
reasons for the denial, (b) specific reference to pertinent provisions of these
guidelines, (c) a description of any additional material or information
necessary for such person to perfect such claim and an explanation of why such
material or information is necessary and (d) information as to the steps to be
taken if the person wishes to submit a request for review.

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Such notification will be given within 90 days after the claim is received
by the Committee. If such notification is not given within such period, the
claim will be considered denied as of the last day of such period, and such
person may request a review of his claim.

     29.     Within 60 days after the date on which a person receives a written
notice of a denied claim (or, if applicable, within 60 days after the date on
which such denial is considered to have occurred) such person (or his duly
authorized representative) may (a) file a written request with the Committee
for a review of his denied claim and of pertinent documents and (b) submit
written issues and comments to the Committee. The Committee will notify such
person of its decision in writing. Such notification will be written in a
manner calculated to be understood by such person and will contain specific
reasons for the decision as well as specific references to pertinent provisions
of these guidelines. The decision on review will be made within 60 days after
the request for review is received by the Committee. If the decision on review
is not made within such period, the claim will be considered denied.

     30.     These guidelines shall be administered by the Committee. The Committee
shall have all powers necessary to carry out the provisions of these
guidelines, including, without reservation, the power to delegate
administrative matters to other persons and to interpret these guidelines in a
manner consistent with its express provisions.

     31.     The Company may at any time by action of the Board of Directors
terminate these guidelines. Upon termination of these guidelines, no further
Elections shall be permitted, but Awards subject to prior Elections will be
granted under the terms of these guidelines, and each Participant’s Account as
it then exists will be maintained, credited and paid pursuant to the provisions
of these guidelines and the Participant’s prior Elections.

     32.     The Company may at any time amend these guidelines in any respect, (a)
in the case of amendments which have a material effect on the cost to the
Company of maintaining these guidelines, by action of the Board of Directors,
or (b) with respect to any other amendments, by action of the Committee;
provided, however, that no such amendment shall adversely affect the rights of
Participants or their beneficiaries to any amounts

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previously credited to the Participants’ Accounts prior to the adoption of
any such amendment.

     33.     To the extent permitted by law, Participants and beneficiaries shall
not have the right to alienate, anticipate, commute, sell, assign, transfer,
pledge, encumber or otherwise convey the right to receive any payments under
these guidelines, and any payments under these guidelines or rights thereto
shall not be subject to the debts, liabilities, contracts, engagements or torts
of Participants or beneficiaries nor to attachment, garnishment or execution,
nor shall they be transferable by operation of law in the event of bankruptcy
or insolvency. Any attempt, whether voluntary or involuntary, to effect any
such action shall be null, void, and of no effect.

     34.     Nothing contained in these guidelines shall be construed as conferring
upon a Participant the right to continue in the employ of the Company as an
officer or in any other capacity.

     35.     These guidelines shall be construed and administered under the laws of
the District of Columbia.

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EXHIBIT 10.15

FANNIE MAE

STOCK OPTION GAIN DEFERRAL PLAN

 

 

TABLE OF CONTENTS

	 
	 	Page

	 	

	 	 	 	 	 	 	 
	ARTICLE 1
	Establishment and Purpose
	1.1.	 	
Establishment
	 	 	1	 
	1.2.	 	
Purpose
	 	 	1	 
	ARTICLE 2
	Definitions
	2.1.	 	
Account
	 	 	1	 
	2.2.	 	
Attestation
	 	 	1	 
	2.3.	 	
Award
	 	 	2	 
	2.4.	 	
Award Document
	 	 	2	 
	2.5.	 	
Board of Directors
	 	 	2	 
	2.6.	 	
Code
	 	 	2	 
	2.7.	 	
Committee
	 	 	2	 
	2.8.	 	
Common Stock
	 	 	2	 
	2.9.	 	
Company
	 	 	2	 
	2.10.	 	
Deemed Dividends
	 	 	2	 
	2.11.	 	
Deferral Exercise Date
	 	 	2	 
	2.12.	 	
Director
	 	 	2	 
	2.13.	 	
Election
	 	 	3	 
	2.14.	 	
ERISA
	 	 	3	 
	2.15.	 	
Executive
	 	 	3	 
	2.16.	 	
Exercise Date
	 	 	3	 
	2.17.	 	
Fair Market Value
	 	 	3	 
	2.18.	 	
Gain Shares
	 	 	4	 
	2.19.	 	
Option
	 	 	4	 
	2.20.	 	
Participant
	 	 	4	 
	2.21.	 	
Plan
	 	 	4	 
	2.22.	 	
Retirement
	 	 	4	 
	2.23.	 	
Stock Compensation Plan
	 	 	4	 
	2.24.	 	
Termination of Service
	 	 	6	 

 

 

	 	 	 	 	 	 	 
	ARTICLE 3
	Eligibility, Election and Exercise
	3.1.	 	

Eligibility
	 	 	5	 
	3.2.	 	
Election
	 	 	5	 
	3.3.	 	
Exercise of Options
	 	 	6	 
	ARTICLE 4
	Accounts
	4.1.	 	
Maintenance of Accounts
	 	 	8	 
	4.2.	 	
Funding Prohibitions
	 	 	9	 
	ARTICLE 5
	Payment
	5.1.	 	
Payment of Account
	 	 	9	 
	5.2.	 	
Commencement of Payment
	 	 	10	 
	5.3.	 	
Method of Payment
	 	 	10	 
	5.4.	 	
Withholding
	 	 	11	 
	5.5.	 	
Payment on Death
	 	 	11	 
	5.6.	 	
Payment on Retirement or Termination
of Service
	 	 	12	 
	5.7.	 	
Claims Procedure
	 	 	13	 
	5.8.	 	
Review Procedure
	 	 	13	 
	ARTICLE 6
	Administration
	6.1.	 	
Administration
	 	 	14	 
	ARTICLE 7
	Miscellaneous
	7.1.	 	
Termination of Plan
	 	 	14	 
	7.2.	 	
Controlling Provisions
	 	 	14	 
	7.3.	 	
Amendment
	 	 	14	 
	7.4.	 	
No Alienation of Benefits
	 	 	15	 

 

 

	 	 	 	 	 	 	 
	7.5.	 	
No Rights to Continued Employment
or Board Membership
	 	 	15	 
	7.6.	 	
Separate Plans
	 	 	15	 
	7.7.	 	
Headings
	 	 	15	 
	7.8.	 	
Applicable Law
	 	 	16	 

 

 

FANNIE MAE

STOCK OPTION GAIN DEFERRAL PLAN

ARTICLE 1

Establishment and Purpose

     1.1.     Establishment. The Company has established, effective as of November
18, 1997, this Fannie Mae Stock Option Gain Deferral Plan.

     1.2.     Purpose.

          (a) The purpose of this Plan is to attract and retain certain individuals
of outstanding competence as employees or as members of the Board of Directors
or both by permitting such individuals to elect to defer to a later date
receipt of amounts attributable to the exercise of stock options granted by the
Company under a Stock Compensation Plan.

          (b) This Plan, as it relates to Executives, is intended to qualify as a
“top-hat” plan for purposes of ERISA and is an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees.

ARTICLE 2

Definitions

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

     2.1.     “Account” shall mean the account maintained for a Participant
pursuant to Article 4 hereof.

     2.2.     “Attestation” shall mean the payment of an Option’s exercise price by
the designation of shares of Common Stock that, unless otherwise approved by
the Committee, have been owned by the Participant for at least six months as of
the Exercise Date. To designate shares of Common Stock for this purpose, on
exercise of an Option pursuant to this Plan, the Participant must attach to the
Nonqualified Stock Option Exercise Notification Form a properly completed

 

 

attestation form (as prescribed by the Committee).

     2.3.     “Award” shall mean an award of any Option authorized by and granted
under a
Stock Compensation Plan.

     2.4.     “Award Document” shall mean any writing, which may be an agreement,
setting forth the terms of an Award.

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

     2.6.     “Code” shall mean the Internal Revenue Code of 1986, as amended.

     2.7.     “Committee” shall mean the Benefit Plans Committee designated by the
Board of Directors.

     2.8.     “Common Stock” shall mean the common stock of the Company and, in the
event such common stock is converted to another security or property, such
other security or property.

     2.9.     “Company” shall mean Fannie Mae.

     2.10.     “Deemed Dividends” shall mean, with respect to Gain Shares, an
amount equal to the dividends that would have been paid with respect to such
Gain Shares had they been issued and outstanding.

     2.11.     “Deferral Exercise Date” shall mean the date on or after which an
Option may be exercised pursuant to an Election or pursuant to Section 3.2(c)
hereof.

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

     2.13.     “Election” shall mean an irrevocable election by a Participant, made
on a form prescribed by the Committee and delivered to the Company’s Senior
Vice-President of Human

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Resources or his designee (or, in the case of a
Director, to the Corporate Secretary or Assistant Secretary of the Company), to
defer receipt of amounts upon the exercise of an Option under this Plan. Such
Election shall be effective when such form is countersigned on behalf of the
Company.

     2.14.     “ERISA” shall mean the Employment Retirement Income Security Act of
1974, as
amended.

     2.15.     “Executive” shall mean any member of the management group of the
Company who is among the top 10% of the most highly compensated Company
employees, whose base annual compensation is equal to or in excess of the
minimum base salary set each year, for such purpose, by the Senior
Vice-President of Human Resources, and who has been designated by the Company’s
Chairman of the Board as eligible to participate in this Plan.

     2.16.     “Exercise Date” shall mean the date of exercise of an Option as to
which an Election has been made.

     2.17.     “Fair Market Value” shall mean the per share value of Common Stock
as determined by using the mean between the high and low selling prices of
Common Stock on the day preceding the date of valuation (or, if the New York
Stock Exchange (“NYSE”) is not open or the Common Stock is not trading that
day, the most recent prior date that the NYSE was open for trading and the
Common Stock was traded) as reported for such date on the table entitled “NYSE
 -- Composite Transactions” contained in the Wall Street Journal.

     2.18.     “Gain Shares” shall mean, with respect to the exercise of an Option
under this Plan, the excess of (a) the number of shares of Common Stock as to
which such Option was exercised, over (b) the number of shares of Common Stock
utilized to pay the exercise price of the Option.

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     2.19.     “Option” shall mean a stock option that is granted under a Stock
Compensation Plan and that is not an incentive stock option within the meaning
of Section 422 of the Code.

     2.20.     “Participant” shall mean any Executive or Director who becomes a
Participant in this Plan by making an Election pursuant to Section 3.2 hereof.

     2.21.     “Plan” shall mean this Fannie Mae Stock Option Gain Deferral Plan.

     2.22.     “Retirement” shall mean (i) in the case of an Executive, separation
from the employ
of the Company either under conditions entitling him or her to an immediate
annuity under the Federal National Mortgage Association Retirement Plan for
Employees Not Covered Under Civil Service Retirement Law or under the Civil
Service Retirement Law, whichever is applicable to such Executive, or under
conditions entitling the Executive to long-term disability benefits under any
disability payment plan paid for by the Company, including disability
insurance, on account of the inability to perform service for the Company due
to a physical or mental ailment and (ii) in the case of a Director, any
termination from the membership of the Board of Directors.

     2.23.     “Stock Compensation Plan” shall mean the Fannie Mae Stock
Compensation Plan of 1986, as amended, or the Fannie Mae Stock Compensation
Plan of 1993, as amended.

     2.24.     “Termination of Service” shall mean termination of an Executive’s
employment with the Company other than by reason of Retirement or death.

ARTICLE 3

Eligibility, Election and Exercise

     3.1.     Eligibility. All Directors and Executives who have been granted an
Option under a Stock Compensation Plan shall be eligible to participate in this
Plan.

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     3.2.      Election.

          (a) Method of Election. An individual eligible to participate in this
Plan under Section 3.1 hereof may make an Election as described in Section 2.13
hereof. An Election must be with respect to an Option (or portion thereof)
covering shares of Common Stock with a Fair Market Value, at the time of the
Election, that is at least $25,000 in excess of the exercise price of such
Option (or such portion thereof). Unless otherwise determined under Section
3.2(c) or approved by the Committee, the Deferral Exercise Date indicated in
the Election shall be at least six months subsequent
to the date of such Election.

          (b) Date and Method of Payment. An Election must specify the date on
which amounts in the Participant’s Account attributable to the Option exercise
covered by such Election shall be paid or begin to be paid to the Participant
pursuant to Section 5.2 hereof, and the method of such payment. The payment
date specified in the Participant’s Election must be at least one year from the
Deferral Exercise Date. The Participant may not change the payment date or
method specified in the Participant’s Election. In place of a specific date on
which distributions under the Plan will be paid or begin, a Participant may
elect to have distributions paid or begin upon his or her Retirement or death.

          (c) Irrevocability and Modification. Once made, an Election may not be
modified or revoked by the Participant. If, however, before the Deferral
Exercise Date specified in the Election, the Participant’s employment with the
Company is terminated, the Deferral Exercise Date shall be deemed to be the
earlier of six months prior to the date an Option covered by the Election
would expire or the Deferral Exercise Date specified in the Election.

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          (d) Deferral of Partial Option. If a Participant files an Election under
this Plan with respect to only a portion of an Option, the Participant must
further elect at the time of such Election whether the Election applies to:

               (i) the first portion of such Option, so that the Participant may not
exercise any other portion of the Option until he or she has exercised under
this Plan that portion of the Option covered by the Election; or

               (ii) the last portion of such Option, so the Participant must exercise
all other portions of the Option before he or she may exercise any portion of
the Option pursuant to the Election.

     3.3.     Exercise of Options.

          (a) Exercise Price. Except as provided in the next sentence, the
exercise price of an Option (or portion thereof) exercised pursuant to this
Plan must be paid in full at the time of exercise by Attestation, and, once an
Election is made with respect to an Option, no method of paying the exercise
price for such Option, other than Attestation, may be used. If, however,
payment of the full exercise price by Attestation would otherwise require the
delivery or issuance of a fractional share of Common Stock, the number of
shares of Common Stock required to pay the exercise price by Attestation shall
be reduced to the next lowest whole number of shares of Common Stock, and the
Participant shall pay the balance of the exercise price in cash.

          (b) Exercise Notification Form. In order to exercise an Option (or
portion thereof) under this Plan, a Participant shall file a Nonqualified Stock
Option Exercise Notification Form specifying the date of exercise and shall
provide the Company with sufficient funds to satisfy any federal, state, local
or other taxes required by law to be withheld upon the exercise of the Options
covered by the Notification Form.

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          (c) Minimum Exercise Amount. Unless otherwise permitted by the
Committee, an exercise of an Option (or portion thereof) as to which an
Election has been made must be with respect to (i) shares of Common Stock with
a Fair Market Value, at the time of exercise, that is at least $25,000 in
excess of the exercise price of the Option (or portion thereof) being
exercised, or (ii) if less, all the shares of Common Stock covered by the
entire remaining Option (or entire remaining portion thereof) that is subject
to the Election.

          (d) Exercise After Death. If a Participant dies after making an Election
under this Plan but before all Options covered by such Election have been
exercised, the outstanding Options covered by such Election may be exercised as
permitted in Section 1.10(a) of the Fannie Mae Stock Compensation Plan of 1993,
as amended, or Section 2.1(e) of the Fannie Mae Stock Compensation
Plan of 1986, as amended, whichever is applicable to the Option being
exercised.

          (e) Effect of Award Documents and Stock Compensation Plans. Any Option
exercised pursuant to this Plan must be exercisable on the Exercise Date under
the applicable Award Document and Stock Compensation Plan and in accordance
with the Federal National Mortgage Association Securities Transactions
Supervision Program and the guidelines thereunder, if applicable.

ARTICLE 4

Accounts

     4.1.     Maintenance of Accounts.

          (a) Establishment. The Company shall establish for the Participants
bookkeeping accounts to record the deferrals and adjustments under this Plan.
Each Participant shall have a separate Account. Within a Participant’s
Account, Option exercises shall be accounted

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for separately with respect to
each Election. Each Account shall be credited and debited as provided in this
Article 4.

          (b) Gain Shares. Upon a Participant’s exercise of an Option under this
Plan, the Participant’s Account shall be credited with the Gain Shares with
respect to such exercise.

          (c) Deemed Dividends. Within 30 days of the end of each quarter, a
Participant’s Account shall be credited with Deemed Dividends on the Gain
Shares in his or her Account. Upon crediting to a Participant’s Account, such
Deemed Dividend shall be converted to shares (or a partial share) of Common
Stock using the Fair Market Value on the last day of the most recently ended
quarter as the date of valuation to calculate the number of shares (or the
partial share) to be so credited.

          (d) Payments. A Participant’s Account shall be reduced by any payments
made to the Participant, his or her beneficiary, estate or representative.

          (e) Adjustments. If any of the following events occurs, the Committee
shall make
appropriate adjustments with respect to Gain Shares and shares attributable to
Deemed Dividends in a Participant’s Account: (i) any extraordinary dividend or
other extraordinary distribution in respect of 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 Company, (iii) any issuance of warrants
or other rights to purchase shares of Common Stock or other securities of the
Company (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
Company.

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

ARTICLE 5

Payment

     5.1.     Payment of Account. Payment of amounts credited to a Participant’s
Account shall be made as specified in this Article 5.

     5.2.     Commencement of Payment. Except as otherwise provided in Sections
5.5 and 5.6 hereof, all payments from an Account will be made or will commence
as soon as practicable after the payment date selected by the Participant
pursuant to Section 3.2(b) hereof. 5.3.

     Method of Payment.

                (a) Form. Except as provided in Section 5.3(c) hereof, payment from a
Participant’s Account shall be made in shares of Common Stock.

                (b) Payment Methods. A Participant may elect to receive such payments in
one of the following methods:

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               (i) a single payment,

               (ii) annual installments over a period of years (selected by the
Participant) not to exceed 15, with the amount of each annual installment
calculated by dividing the balance of the Account at the end of the prior year
by the number of installments remaining to be paid, or

               (iii) an initial installment of an amount specified by the Participant
followed by annual installments over a period of years not to exceed 15 and
commencing in a year selected by the Participant, with each annual installment
calculated by dividing the balance of the Account at the end of the prior year
by the number of installments remaining to be paid.

          (c) Fractional Shares. If any annual installment (other than the last
installment), calculated as set forth in Section 5.3(b)(ii) or (iii) hereof,
would result in the payment of a fractional share of Common Stock, such annual
installment shall be reduced to the next lowest whole number of shares of
Common Stock. If, as part of the final installment payment, a fractional share
of Common Stock would be paid, then in lieu thereof the Fair Market Value of
such fractional share on the date the payment is calculated shall be paid in
cash.

          (d) Hardship Payment. Notwithstanding any other provision of this Plan
to the contrary, a Participant or beneficiary may receive a payment with
respect to his or her Account upon a
finding by the Committee (or, in the case of a Director, by the General Counsel
of the Company) in its (or his or her) sole discretion (i) that an
unanticipated emergency caused by an event beyond the control of such
Participant or beneficiary has occurred and that such emergency would result in
financial hardship to such Participant or beneficiary if early payment were not
permitted, or (ii) that the continued participation of a Participant who is
employed by the federal government or that of a state or municipality creates a
serious hardship for the Participant because

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of the conflict of interest or
ethics rules of such government. The amount that may be paid pursuant to
clause (i) above shall not exceed the amount necessary to meet such financial
hardship as determined by the Committee (or the General Counsel) in its (or his
or her) sole discretion. The entire balance in the Participant’s Account may
be paid pursuant to clause (ii) above. The Committee (or the General Counsel)
shall have the right to require such Participant or beneficiary to submit such
documentation as it (or he or she) deems appropriate for the purpose of
determining the existence, cause and extent of such hardship.

     5.4.     Withholding. The Company shall have the right to deduct from any
payment to be made pursuant to this Plan any federal, state or local taxes
required by law to be withheld.

     5.5.     Payment on Death.

          (a) Single Payment. In the event of the death of a Participant, an
amount equal to the balance of the Participant’s Account shall be paid to the
Participant’s beneficiary in a single payment within 30 days after the date of
such death.

          (b) Beneficiary Designation. Each Participant shall designate a
beneficiary to whom an amount equal to any balance in the Participant’s Account
shall be payable on the Participant’s death. A Participant may also designate
an alternate beneficiary to receive such payment in the event that the
designated beneficiary cannot receive payment for any reason. In the event no
designated or alternate beneficiary can receive such payment for any reason,
payment will be made to the Participant’s surviving spouse, if any, or if the
Participant has no surviving spouse, then to the following beneficiaries if
then living in the following order of priority: (i) to the Participant’s
children (including adopted children and stepchildren) in equal shares, (ii)
to the Participant’s parents in equal shares, (iii) to the Participant’s
brothers and sisters in equal shares and (iv) to the Participant’s estate.
Each Participant may at any time change his or her beneficiary

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designation. A
change of beneficiary designation must be made in writing and delivered to the
Committee or its designee for such purposes. The interest of any beneficiary
who predeceases the Participant will terminate unless otherwise specified by
the Participant.

     5.6.     Payment on Retirement or Termination of Service.

          (a) Retirement. Upon a Participant’s Retirement, payments from the
Participant’s Account will be made as the Participant specified in his or her
Election.

          (b) Termination of Service. Upon Termination of Service of a Participant,
the balance of such Participant’s Account shall be paid to the Participant in a
single payment as soon as practicable after such Termination of Service, unless
the Participant elected, in his or her Election, not to have such a single
payment provision apply.

          (c) Deemed Date of Retirement. If a Participant’s employment with the
Company is terminated other than by reason of Retirement or death and the
Participant, in his or her Election, elected to have the balance of his or her
Account paid, or begin to be paid, as soon as practicable after Retirement, and
not in a single payment under Section 5.6(b), the Participant’s date of
“Retirement” shall be deemed to be the earliest date on which the Participant
could have retired and become entitled to an immediate annuity under the
Federal National Mortgage Association Retirement Plan For Employees Not Covered
Under Civil Service Retirement Law or under the Civil Service Retirement Law,
whichever is applicable, had the Participant continued in the employ of the
Company until such date.

     5.7.     Claims Procedure. Claims for benefits under this Plan shall be filed
with the Committee. If any Participant or other person claims to be entitled
to a benefit under this Plan and the Committee determines that such claim
should be denied in whole or in part, the Committee shall notify
such person of its decision in writing. Such notification will be written in a
manner

- 12 -

 

calculated to be understood by such person and will contain (a) specific
reasons for the denial, (b) specific reference to pertinent provisions of this
Plan, (c) a description of any additional material or information necessary for
such person to perfect such claim and an explanation of why such material or
information is necessary and (d) information as to the steps to be taken if
the person wishes to submit a request for review. Such notification will be
given within 90 days after the claim is received by the Committee. If such
notification is not given within such period, the claim will be considered
denied as of the last day of such period, and such person may request a review
of his claim.

     5.8.     Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60 days
after the date on which such denial is considered to have occurred) such person
(or his or her duly authorized representative) may (a) file a written request
with the Committee for a review of his or her denied claim and of pertinent
documents and (b) submit written issues and comments to the Committee. The
Committee will notify such person of its decision in writing. Such
notification will be written in a manner calculated to be understood by such
person and will contain specific reasons for the decision as well as specific
references to pertinent provisions of this Plan. The decision on review will
be made within 60 days after the request for review is received by the
Committee. If the decision on review is not made within such period, the claim
will be considered denied.

ARTICLE 6

Administration

     6.1.     Administration. This Plan shall be administered by the Committee;
provided however, that determinations under Section 5.3(d) shall be made by the
Committee and the General Counsel as provided therein. The Committee shall
have all powers necessary to carry out the

- 13 -

 

provisions of this Plan, including,
without reservation, the power to delegate administrative matters to
other persons and to interpret this Plan in a manner consistent with its
express provisions.

ARTICLE 7

Miscellaneous

     7.1.     Termination of Plan. The Company may at any time by action of the
Board of Directors terminate this Plan. Upon termination of this Plan, no
further Elections shall be permitted, but Options subject to prior Elections
may continue to be exercised under the terms of this Plan, and each
Participant’s Account as it then exists will be maintained, credited and paid
pursuant to the provisions of this Plan and the Participant’s prior Elections.

     7.2.     Controlling Provisions. Unless otherwise provided in this Plan, the
Stock Compensation Plans will continue to control all aspects of Awards
granted under each such Stock Compensation Plan.

     7.3.     Amendment. The Company may at any time amend this Plan in any
respect, (a) in the case of amendments which have a material effect on the cost
to the Company of maintaining this Plan, by action of the Board of Directors,
or (b) with respect to any other amendments, by action of the Committee;
provided, however, that no such amendment shall adversely affect the rights of
Participants or their beneficiaries to any amounts previously credited to the
Participants’ Accounts prior to the adoption of any such amendment.

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

- 14 -

 

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

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

     7.6. Separate Plans. For purposes of ERISA, this Plan shall be treated as
consisting of two separate plans, one for the benefit of Executives and one for
the benefit of Directors.

     7.7. Headings. The headings of the Sections hereof are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Plan.

     7.8. Applicable Law. This Plan shall be construed and administered under
the laws of the District of Columbia.

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