Freddie Mac 2012 Annual Report Download - page 40

In addition to the issuance of the senior preferred stock and warrant, we are required under the Purchase Agreement to
pay a quarterly commitment fee to Treasury. Under the Purchase Agreement, the fee is to be determined in an amount
mutually agreed to by us and Treasury with reference to the market value of Treasury’s funding commitment as then in
effect. However, pursuant to the August 2012 amendment to the Purchase Agreement, for each quarter commencing
January 1, 2013, and for as long as the net worth sweep dividend provisions remain in form and content substantially the
same, no periodic commitment fee under the Purchase Agreement will be set, accrue or be payable. Treasury had waived the
fee for all applicable quarters prior to that date.
The 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 GAAP balance sheet for the applicable fiscal quarter
(referred to as the deficiency amount), provided that the aggregate amount funded under the Purchase Agreement may not
exceed Treasury’s commitment. The 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 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 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 Purchase Agreement.
The Purchase Agreement provides that the Treasury’s funding commitment will terminate under any of the following
circumstances: (a) the completion of our liquidation and fulfillment of Treasury’s obligations under its funding commitment
at that time; (b) the payment in full of, or reasonable provision for, all of our liabilities (whether or not contingent, including
mortgage guarantee obligations); and (c) the funding by Treasury of the maximum amount of the commitment under the
Purchase Agreement. In addition, Treasury may terminate its funding commitment and declare the Purchase Agreement null
and void if a court vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of the
Conservator or otherwise curtails the Conservator’s powers. Treasury may not terminate its funding commitment under the
Purchase Agreement solely by reason of our being in conservatorship, receivership or other insolvency proceeding, or due to
our financial condition or any adverse change in our financial condition.
The Purchase Agreement provides that most provisions of the agreement may be waived or amended by mutual written
agreement of the parties; however, no waiver or amendment of the agreement is permitted that would decrease Treasury’s
aggregate funding commitment or add conditions to Treasury’s funding commitment if the waiver or amendment would
adversely affect in any material respect the holders of our debt securities or Freddie Mac mortgage guarantee obligations.
In the event of our default on payments with respect to our debt securities or Freddie Mac mortgage guarantee
obligations, if Treasury fails to perform its obligations under its funding commitment and if we and/or the Conservator are
not diligently pursuing remedies in respect of that failure, the holders of these debt securities or Freddie Mac mortgage
guarantee obligations may file a claim in the United States Court of Federal Claims for relief requiring Treasury to fund to us
the lesser of: (a) the amount necessary to cure the payment defaults on our debt and Freddie Mac mortgage guarantee
obligations; and (b) the lesser of: (i) the deficiency amount; and (ii) the maximum amount of the commitment less the
aggregate amount of funding previously provided under the commitment. Any payment that Treasury makes under those
circumstances will be treated for all purposes as a draw under the Purchase Agreement that will increase the liquidation
preference of the senior preferred stock.
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.
Senior Preferred Stock
Shares of the senior preferred stock have a par value of $1, 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. Dividends that are
not paid in cash for any dividend period will accrue and be added to the liquidation preference of the senior preferred stock.
In addition, any amounts Treasury pays to us pursuant to its funding commitment under the Purchase Agreement and any
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