Fannie Mae 2014 Annual Report Download - page 272

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-57
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 part.
Common Stock Warrant
The warrant gives Treasury the right to purchase shares of our common stock equal to 79.9% of the total number of shares of
our common stock outstanding on a fully diluted basis on the date of exercise. The warrant may be exercised in whole or in
part at any time on or before September 7, 2028, by delivery to Fannie Mae of: (a) a notice of exercise; (b) payment of the
exercise price of $0.00001 per share; and (c) the warrant. If the market price of one share of common stock is greater than the
exercise price, in lieu of exercising the warrant by payment of the exercise price, Treasury may elect to receive shares equal
to the value of the warrant (or portion thereof being canceled) pursuant to the formula specified in the warrant. Upon exercise
of the warrant, Treasury may assign the right to receive the shares of common stock issuable upon exercise to any other
person. If the warrant is exercised, the stated value of the common stock issued will be reclassified as “Common stock” in
our consolidated balance sheets. Treasury has not exercised the warrant.
Senior Preferred Stock Purchase Agreement with Treasury
Funding Commitment
Under the senior preferred stock purchase agreement, Treasury made a commitment to provide funding, under certain
conditions, to eliminate deficits in our net worth. We have received a total of $116.1 billion from Treasury pursuant to the
senior preferred stock purchase agreement as of December 31, 2014. The aggregate liquidation preference of the senior
preferred stock, including the initial aggregate liquidation preference of $1.0 billion, remained at $117.1 billion as of
December 31, 2014.
While we had a positive net worth as of December 31, 2014, in some future periods we could have a net worth deficit and, if
so, will be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement. As
of December 31, 2014, the remaining amount of funding available to us under the agreement was $117.6 billion.
If we were to draw additional funds from Treasury under the agreement in a future period, the amount of remaining funding
under the agreement would be reduced by the amount of our draw. Dividend payments we make to Treasury do not restore or
increase the amount of funding available to us under the agreement.
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. The deficiency amount may be increased above the otherwise
applicable amount upon our mutual written agreement with Treasury. In addition, if the Director of FHFA determines that the
Director will be mandated by law to appoint a receiver for us unless our capital is increased by receiving funds under the
commitment in an amount up to the deficiency amount (subject to the maximum amount that may be funded under the
agreement), then FHFA, in its capacity as our conservator, may request that Treasury provide funds to us in such amount. 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, we 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). Any amounts that we draw under the senior preferred stock
purchase agreement will be added to the liquidation preference of the senior preferred stock. No additional shares of senior
preferred stock are required to be issued under the senior preferred stock purchase agreement.
Commitment Fee
Pursuant to the August 2012 amendment to the senior preferred stock purchase agreement described in “Note 1, Summary of
Significant Accounting Policies,” effective January 1, 2013, the periodic commitment fee under the agreement will not be set,
accrue or be payable, as long as the dividend payment provisions described above remain in effect. Treasury waived the
quarterly commitment fee under the senior preferred stock purchase agreement for each quarter of 2012.
Covenants
The senior preferred stock 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 Fannie Mae
equity securities (other than with respect to the senior preferred stock or warrant);