Freddie Mac 2015 Annual Report Download - page 221

Financial Statements Notes to the Consolidated Financial Statements | Note 2
Freddie Mac 2015 Form 10-K 219
The Purchase Agreement includes significant restrictions on our ability to manage our business, including
limiting the amount of indebtedness we can incur and capping the size of our mortgage-related
investments portfolio.
The Purchase Agreement has an indefinite term and can terminate only in limited circumstances, which
do not include the end of the conservatorship. The Purchase Agreement therefore could continue after the
conservatorship ends. However, Treasury's consent is required for a termination of conservatorship other
than in connection with receivership. Treasury has the right to exercise the warrant, in whole or in part, at
any time on or before September 7, 2028.
Purchase Agreement Covenants
The Purchase Agreement provides that, until the senior preferred stock is repaid or redeemed in full, we
may not, without the prior written consent of Treasury:
• Declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to
any Freddie Mac equity securities (other than with respect to the senior preferred stock or warrant);
• Redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the
senior preferred stock or warrant);
• Sell or issue any Freddie Mac equity securities (other than the senior preferred stock, the warrant and
the common stock issuable upon exercise of the warrant and other than as required by the terms of
any binding agreement in effect on the date of the Purchase Agreement);
• Terminate the conservatorship (other than in connection with a receivership);
• Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value:
To a limited life regulated entity (in the context of a receivership);
Of assets and properties in the ordinary course of business, consistent with past practice;
Of assets and properties having fair market value individually or in aggregate less than $250
million in one transaction or a series of related transactions;
In connection with our liquidation by a receiver;
Of cash or cash equivalents for cash or cash equivalents; or
To the extent necessary to comply with the covenant described below relating to the
reduction of our mortgage-related investments portfolio;
• Issue any subordinated debt;
• Enter into a corporate reorganization, recapitalization, merger, acquisition or similar event; or
• Engage in transactions with affiliates unless the transaction is: (a) pursuant to the Purchase
Agreement, the senior preferred stock or the warrant; (b) upon arm’s length terms; or (c) a transaction
undertaken in the ordinary course or pursuant to a contractual obligation or customary employment
arrangement in existence on the date of the Purchase Agreement.
The Purchase Agreement also requires us to reduce the amount of mortgage assets we own. The
Purchase Agreement, as revised in the August 2012 amendment, provides that we could not own
mortgage assets with UPB in excess of $650 billion on December 31, 2012, and on December 31 of each
year thereafter may not own mortgage assets with UPB in excess of 85% of the aggregate amount of
mortgage assets we are permitted to own as of December 31 of the immediately preceding calendar year,
provided that we are not required to own less than $250 billion in mortgage assets. Under the Purchase