Amendment to Employment Agreement between Fannie Mae and Franklin D. Raines (September 17, 2004)

Summary

This amendment updates the employment agreement between Fannie Mae and its Chairman and CEO, Franklin D. Raines. It clarifies that if regulations require the Chairman and CEO roles to be separated after January 1, 2007, this change alone will not be considered a breach of contract or grounds for resignation with "Good Reason." The amendment also revises the definition and process for termination for cause, and specifies that if the dual role must be eliminated, Mr. Raines can choose which position to keep, with future compensation determined by the Board's Compensation Committee.

EX-10.1 2 w02626exv10w1.htm EXHIBIT 10.1 exv10w1

Exhibit 10.1

September 17, 2004

Mr. Frank D. Raines
Chairman and Chief Executive Officer
Fannie Mae
3900 Wisconsin Avenue, NW
Washington, DC 20016

Dear Frank:

The Fannie Mae Board of Directors proposes that the following amendments be made to your Employment Agreement, executed by Fannie Mae in April 2004 and previously amended on June 30, 2004:

• Amend Section 1.14 by adding the following last sentence:

Notwithstanding the foregoing, if OFHEO shall by regulation require, effective on or after January 1, 2007, that the Chairman of the Corporation’s Board of Directors may not also serve as the Chief Executive Officer of the Corporation, elimination of Employee’s dual role to the extent necessary to comply with such regulation shall not, in and of itself, constitute Good Reason.

• Amend Section 2.1 by adding the following last sentence:

• Amend Section 2.2 by adding the following last sentence:

Franklin D. Raines
September 17, 2004
Page 2 of 3

• Amended Section 4.1(b) to read as follows:

(b) For Cause: Notwithstanding any other provision hereunder, the Corporation may terminate Employee’s employment for “Cause,” which shall mean that Employee has (A) materially harmed the Corporation by, in connection with his service under this Agreement, engaging in dishonest or fraudulent actions or willful misconduct, or performing his duties in a grossly negligent manner, or (B) been convicted of, or pleaded nolo contendere with respect to, a felony. The Corporation by written notice may terminate Employee’s employment for Cause at any time following the occurrence of an event described in (B). Employee shall not be deemed to have been terminated for Cause following the occurrence of an event described in (A) unless the Corporation shall have provided (i) reasonable notice to Employee setting forth the Corporation’s intention to terminate for Cause, (ii) where remedial action is feasible, a reasonable opportunity for such action, (iii) an opportunity for Employee, together with his counsel, to be heard before the Board and (iv) Employee with a notice of termination stating that Employee was guilty of the conduct set forth in this Section 4.1(b)(A) 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 Employee in bad faith or without reasonable belief that his action or omission was in the best interests of the Corporation.

• Amend Section 5.3 to read as follows:

Section 5.3. Termination for Cause. In the event of a Termination of Employment for Cause, except as provided in Section 5.1 Employee shall not be entitled to any payments or benefits except as follows: Employee shall be entitled to all of Employee’s Base Salary which has accrued to the date of termination and any benefits or awards (whether of options, stock or other property) which have vested prior to such date. The Corporation shall have no further obligations to Employee.

• Add a New Section 6.15 to read as follows:

Section 6.15. Change in Position. If OFHEO shall by regulation require, effective on or after January 1, 2007, that the Chairman of the Corporation’s Board of Directors may

Franklin D. Raines
September 17, 2004
Page 3 of 3

not also serve as the Chief Executive Officer of the Corporation and, in consequence thereof, Employee’s dual role is required to be eliminated, Employee shall be entitled to choose which of those positions to relinquish. Following any such adjustment in his positions and notwithstanding Section 1.14(b) and Section 3.1, Employee shall receive such future compensation, commensurate with his continuing position and consistent with the Act, as the Compensation Committee of the Board determines.

If you agree to the foregoing, please so indicate by signing the enclosed copy of this letter in the space indicated below and returning a fully executed copy of the letter to my attention, whereupon your Employment Agreement will be amended.

Sincerely,

/s/ Anne Mulcahy

Anne Mulcahy

Chairman, Compensation Committee

AGREED TO AND ACCEPTED:


/s/ Franklin D. Raines		September 17, 2004

Franklin D. Raines		Date