Fannie Mae 2009 Annual Report Download - page 33

of the senior preferred stock purchase agreement, senior preferred stock and warrant will continue to apply to
us even if we are released from the conservatorship. Please see “Risk Factors” for a description of the risks to
our business relating to the Treasury agreements.
We also entered into a lending agreement with Treasury in September 2008 under which we were allowed to
request loans from Treasury until December 31, 2009. In this report, we refer to this agreement as the
“Treasury credit facility.” On December 24, 2009, Treasury announced that the Treasury credit facility would
terminate on December 31, 2009, in accordance with its terms. We did not request any loans or borrow any
amounts under the Treasury credit facility prior to its termination on December 31, 2009.
Senior Preferred Stock Purchase Agreement and Related Issuance of Senior Preferred Stock and Common
Stock Warrant
Senior Preferred Stock Purchase Agreement
Under the senior preferred stock purchase agreement, we issued to Treasury (1) one million shares of Variable
Liquidation Preference Senior Preferred Stock, Series 2008-2, which we refer to as the “senior preferred
stock,” with an initial liquidation preference equal to $1,000 per share (for an aggregate liquidation preference
of $1.0 billion), and (2) a warrant to purchase, for a nominal price, shares of common stock equal to 79.9% of
the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is
exercised, which we refer to as the “warrant.” We did not receive any cash proceeds from Treasury at the time
the senior preferred stock or the warrant was issued.
The senior preferred stock and warrant were issued to Treasury as an initial commitment fee in consideration
of the commitment from Treasury to provide funds to us under the terms and conditions set forth in the senior
preferred stock purchase agreement. The senior preferred stock purchase agreement provides that, on a
quarterly basis, we generally may draw funds up to the amount, if any, by which our total liabilities exceed
our total assets, as reflected on our consolidated balance sheet, prepared in accordance with generally accepted
accounting principles (“GAAP”), for the applicable fiscal quarter (referred to as the “deficiency amount”).
More specifically, the agreement provides that if the Director of FHFA determines he will be mandated by law
to appoint a receiver for us, then FHFA, in its capacity as our conservator, may request that Treasury provide
funds to us in an amount up to the deficiency amount (subject to the maximum amount that may be funded
under the agreement). The senior preferred stock purchase agreement also provides that, if we have a
deficiency amount as of the date of completion of the liquidation of our assets, FHFA (or our Chief Financial
Officer if we are not under conservatorship), may request funds from Treasury in an amount up to the
deficiency amount (subject to the maximum amount that may be funded under the agreement).
On December 24, 2009, Treasury’s maximum funding commitment to us under the senior preferred stock
purchase agreement was increased pursuant to an amendment to the agreement. The amendment provides that
the cap on Treasury’s funding commitment to us under the senior preferred stock purchase agreement will
increase as necessary to accommodate any net worth deficits for calendar quarters in 2010 through 2012. For
any net worth deficits after December 31, 2012, Treasury’s remaining funding commitment will be
$124.8 billion, less any positive net worth as of December 31, 2012. In announcing the December 24, 2009
amendments to the senior preferred stock purchase agreement and to Treasury’s preferred stock purchase
agreement with Freddie Mac, Treasury noted that the amendments “should leave no uncertainty about the
Treasury’s commitment to support [Fannie Mae and Freddie Mac] as they continue to play a vital role in the
housing market during this current crisis.” The senior preferred stock purchase agreement provides that the
deficiency amount will be calculated differently if we become subject to receivership or other liquidation
process. We discuss our net worth deficits and FHFA’s requests on our behalf for funds from Treasury in
“Executive Summary—Summary of our Financial Performance for 2009.”
Under the senior preferred stock purchase agreement, beginning on March 31, 2011, we are required to pay a
quarterly commitment fee to Treasury. This quarterly commitment fee will accrue from January 1, 2011. The
fee, in an amount to be mutually agreed upon by us and Treasury and to be determined with reference to the
market value of Treasury’s funding commitment as then in effect, will be determined on or before
December 31, 2010, and will be reset every five years. Treasury may waive the quarterly commitment fee for
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