Fannie Mae 2010 Annual Report Download - page 365

agreement prior to subsequent amendments. We did not receive any cash proceeds as a result of issuing these
shares or the warrant. We have assigned a value of $4.5 billion to Treasury’s commitment, which has been
recorded as a reduction to additional paid-in-capital and was partially offset by the aggregate fair value of the
warrant. There was no impact to the total balance of stockholders’ equity (deficit) as a result of the issuance
as reported in our consolidated statement of changes in stockholders’ equity (deficit).
Variable Liquidation Preference Senior Preferred Stock, Series 2008-2
Shares of the senior preferred stock have no par value and have a stated value and initial liquidation
preference equal to $1,000 per share. The liquidation preference of the senior preferred stock is subject to
adjustment. To the extent dividends are not paid in cash for any dividend period, the dividends will accrue and
be added to the liquidation preference of the senior preferred stock. In addition, any amounts paid by Treasury
to us pursuant to Treasury’s funding commitment provided in the senior preferred stock purchase agreement
and any quarterly commitment fee payable under the senior preferred stock purchase agreement that is not
paid in cash to or waived by Treasury will be added to the liquidation preference of the senior preferred stock.
As of February 24, 2011, we have received a total of $87.6 billion under Treasury’s funding commitment and
the Acting Director of FHFA has submitted a request for an additional $2.6 billion from Treasury to eliminate
our net worth deficit as of December 31, 2010.
Holders of the senior preferred stock are entitled to receive when, as and if declared by our Board of
Directors, out of legally available funds, cumulative quarterly cash dividends at an annual rate of 10% per year
based on the then-current liquidation preference of the senior preferred stock. As conservator and under our
Charter, FHFA also has authority to declare dividends on the senior preferred stock. If at any time we fail to
pay cash dividends in a timely manner, then immediately following such failure and for all dividend periods
thereafter until the dividend period following the date on which we have paid in cash full cumulative
dividends (including any unpaid dividends added to the liquidation preference), the dividend rate will be 12%
per year. Dividends declared and paid on our senior preferred stock were $7.7 billion, $2.5 billion and
$31 million for the years ended December 31, 2010, 2009 and 2008, respectively.
The senior preferred stock ranks prior to our common stock and all other outstanding series of our preferred
stock as to both dividends and rights upon liquidation. We may not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to,
any common stock or other securities ranking junior to the senior preferred stock without the prior written
consent of Treasury. Shares of the senior preferred stock are not convertible. Shares of the senior preferred
stock have no general or special voting rights, other than those set forth in the certificate of designation for the
senior preferred stock or otherwise required by law. The consent of holders of at least two-thirds of all
outstanding shares of senior preferred stock is generally required to amend the terms of the senior preferred
stock or to create any class or series of stock that ranks prior to or on parity with the senior preferred stock.
We are not permitted to redeem the senior preferred stock in full prior to the termination of Treasury’s funding
commitment under the senior preferred stock purchase agreement. However, we are permitted to pay down the
liquidation preference of the outstanding shares of senior preferred stock to the extent of (1) accrued and
unpaid dividends previously added to the liquidation preference and not previously paid down; and
(2) quarterly commitment fees previously added to the liquidation preference and not previously paid down. In
addition, to the extent we issue any shares of capital stock for cash at any time the senior preferred stock is
outstanding (which requires Treasury’s approval), we are required to use the net proceeds of the issuance to
pay down the liquidation preference of the senior preferred stock; however, the liquidation preference of each
share of senior preferred stock may not be paid down below $1,000 per share prior to the termination of
Treasury’s funding commitment. Following the termination of Treasury’s funding commitment, we may pay
down the liquidation preference of all outstanding shares of senior preferred stock at any time, in whole or in
F-107
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)