Freddie Mac 2015 Annual Report Download - page 222

Financial Statements Notes to the Consolidated Financial Statements | Note 2
Freddie Mac 2015 Form 10-K 220
Agreement, we also may not incur indebtedness that would result in the par value of our aggregate
indebtedness exceeding 120% of the amount of mortgage assets we are permitted to own on
December 31 of the immediately preceding calendar year. The mortgage asset and indebtedness
limitations are determined without giving effect to the changes to the accounting guidance for transfers of
financial assets and consolidation of VIEs, under which we consolidated our single-family PC trusts and
certain other VIEs in our financial statements as of January 1, 2010.
In addition, the Purchase Agreement provides that we may not enter into any new compensation
arrangements or increase amounts or benefits payable under existing compensation arrangements of any
named executive officer or other executive officer (as such terms are defined by SEC rules) without the
consent of the Director of FHFA, in consultation with the Secretary of the Treasury.
The Purchase Agreement also provides that, on an annual basis, we are required to deliver a risk
management plan to Treasury setting out our strategy for reducing our enterprise-wide risk profile and the
actions we will take to reduce the financial and operational risk associated with each of our reportable
business segments.
Warrant Covenants
The warrant we issued to Treasury includes, among others, the following covenants:
• Our SEC filings under the Exchange Act will comply in all material respects as to form with the
Exchange Act and the rules and regulations thereunder;
• Without the prior written consent of Treasury, we may not permit any of our significant subsidiaries to
issue capital stock or equity securities, or securities convertible into or exchangeable for such
securities, or any stock appreciation rights or other profit participation rights to any person other than
Freddie Mac or its wholly-owned subsidiaries;
• We may not take any action that will result in an increase in the par value of our common stock;
• Unless waived or consented to in writing by Treasury, we may not take any action to avoid the
observance or performance of the terms of the warrant and we must take all actions necessary or
appropriate to protect Treasury’s rights against impairment or dilution; and
• We must provide Treasury with prior notice of specified actions relating to our common stock, such as
setting a record date for a dividend payment, granting subscription or purchase rights, authorizing a
recapitalization, reclassification, merger or similar transaction, commencing a liquidation of the
company or any other action that would trigger an adjustment in the exercise price or number or
amount of shares subject to the warrant.
Termination Provisions
The Purchase Agreement provides that the Treasury’s funding commitment will terminate under any of the
following circumstances:
• The completion of our liquidation and fulfillment of Treasury’s obligations under its funding
commitment at that time;
• The payment in full of, or reasonable provision for, all of our liabilities (whether or not contingent,
including mortgage guarantee obligations); and
• The funding by Treasury of the maximum amount of the commitment under the Purchase Agreement.