Fannie Mae Warrant to Purchase Common Stock

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EX-4.3 4 w67133exv4w3.htm EX-4.3

Exhibit 4.3

EXECUTION VERSION

FEDERAL NATIONAL MORTGAGE ASSOCIATION

WARRANT TO PURCHASE COMMON STOCK

NO. 2008-1 September 7, 2008

VOID AFTER SEPTEMBER 7, 2028

THIS CERTIFIES THAT, for value received, the United States Department of the Treasury, with its principal office at 1500

Pennsylvania Avenue, NW, Washington, DC 20220 (the “Holder”), is entitled to purchase at the Exercise Price (defined below) from

Federal National Mortgage Association, a government-sponsored enterprise of the United States of America, with its principal office at

3900 Wisconsin Avenue, NW, Washington, DC 20016 (the “

Company”), shares of common stock, no par value, of the Company, as

provided herein.

1. Definitions. As used herein, the following terms shall have the following respective meanings:

“Affiliate” shall mean, as to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct

or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any

Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of

voting securities, by contract or otherwise and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the

foregoing.

“Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions

in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” shall mean the common stock, no par value, of the Company, and all other stock of any class or classes (however

designated) of the Company from time to time outstanding, the holders of which have the right, without limitation as to amount, either

to all or to a share of the balance of current dividends or liquidating distributions after the payment of dividends and distributions on

any shares entitled to preference.

“Exercise Period” shall mean the time period commencing with the date hereof and ending at 5:00 p.m. New York time on the 20

anniversary of the date hereof.

“Exercise Price” shall mean one one-thousandth of a cent ($0.00001) per share.

“Exercise Shares” shall mean the shares of the Common Stock issuable upon exercise of this Warrant, subject to adjustment

pursuant to the terms herein, and shall also mean any other shares, securities, assets or property otherwise issuable upon exercise of this

Warrant.

“Fair Market Value” shall mean, with respect to a share of Common Stock, or any other security of the Company or any other

issuer:

(a) the volume weighted average daily Market Price during the period of the most recent twenty (20) Trading Days, ending on the

last Trading Day before the date of determination of Fair Market Value, if such class of Common Stock or other security is (i) traded

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on the New York Stock Exchange or any other U.S. national or regional securities exchange, or admitted to unlisted trading privileges

on such an exchange, or (ii) is quoted or reported on the Over-the-Counter Bulletin Board (“OTCBB”) or by Pink OTC Markets Inc. or

a similar organization or agency succeeding to its functions of reporting prices; or

(b) if such class of Common Stock or other security is not then so listed, admitted to trading or quoted, the Fair Market Value shall

be the Market Price on the last Business Day before the date of determination of Fair Market Value.

“

Fully Diluted” shall mean, as of immediately prior to the exercise of this Warrant (or a portion of this Warrant), the sum of, without

duplication, (i) the total number of shares of Common Stock outstanding and (ii) all shares of Common Stock issuable in respect of

securities convertible into or exercisable or exchangeable for Common Stock, stock appreciation rights or options, warrants (including

this Warrant) and other rights to purchase or subscribe for Common Stock or securities convertible into or exercisable or exchangeable

for Common Stock (in each case, assuming that no restrictions apply with respect to conversion, exercise, exchange, subscription or

purchase).

“Market Price” shall be, as of any specified date with respect to any share of any class of Common Stock or any other security of

the Company or any other issuer:

(i) the closing price on that date or, if no closing price is reported, the last reported sale price, of shares of the Common Stock or

such other security on the New York Stock Exchange on that date; or

(ii) if the Common Stock or such other security is not traded on the New York Stock Exchange, the closing price on that date as

reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such

other security is so traded or, if no closing price is reported, the last reported sale price of shares of the Common Stock or such other

security on the principal U.S. national or regional securities exchange on which the Common Stock or such other security is so traded

on that date; or

(iii) if the Common Stock or such other security is not traded on a U.S. national or regional securities exchange, the last quoted bid

price on that date for the Common Stock or such other security in the over-the-counter market as reported (x) by the OTCBB or (y) if

reports are unavailable under clause (x) above by Pink OTC Markets Inc. or a similar organization or agency succeeding to its

functions of reporting prices;

(iv) if the Common Stock or such other security is not so quoted by OTCBB or Pink OTC Markets Inc. or a similar organization, the

Market Price shall be determined in accordance with the Valuation Procedure.

“Participating Securities” shall mean, (i) any equity security (other than Common Stock) that entitles the holders thereof to

participate in liquidations or other distributions with the holders of Common Stock or otherwise participate in the capital of the

Company other than through a fixed or floating rate of return on capital loaned or invested, and (ii) any stock appreciation rights,

phantom stock rights, or any other profit participation rights with respect to

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any of the Company’s capital stock or other equity ownership interest, or any rights or options to acquire any such rights.

“Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock

company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof, or any other entity

whatsoever.

“

Trading Day” shall mean, with respect to any class of Common Stock or any other security of the Company or any other issuer a

day (i) on which the securities exchange or other trading platform applicable for purposes of determining the Market Price of a share or

unit of such class of Common Stock or other security shall be open for business or (ii) for which quotations from such securities

exchange or other trading platform of the character specified for purposes of determining such Market Price shall be reported.

“Valuation Procedure” shall mean a determination made in good faith by the Board of Directors of the Company (the “Board”) that

is set forth in resolutions of the Board that are certified by the Secretary of the Company, which certified resolutions (i) set forth the

basis of the Board’s determination, which, in the case of a valuation in excess of $100 million, shall include the Board’s reliance on the

valuation of a nationally recognized investment banking or appraisal firm, and (ii) are delivered to the Holder within ten (10) Business

Days following such determination. A Valuation Procedure with respect to the value of any capital stock shall be based on the price

that would be paid for all of the capital stock of the issuer in an arm’s-length transaction between a willing buyer and a willing seller

(neither acting under compulsion).

2. Exercise of Warrant; Number of Shares.

2.1 Exercise. This Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the

following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

(a) an executed Notice of Exercise in the form attached hereto;

(b) payment of the Exercise Price (i) in cash or by check, (ii) by cancellation of indebtedness or (iii) pursuant to Section 2.2

hereof; and

This Warrant will be exercisable for a number of shares of Common Stock that, together with the shares of Common Stock

previously issued pursuant to this Warrant, is equal to 79.9% of the total number of shares of Common Stock outstanding on a Fully

Diluted basis on the date of exercise. Whenever the Holder exercises this Warrant in whole or in part, it may assign its right to receive

the Exercise Shares issuable upon such exercise to any other Person.

As soon as practicable (and in any event within five Business Days) after this Warrant shall have been exercised, a certificate or

certificates for the Exercise Shares so purchased, registered in the name of the Holder or such other Person as may be designated by the

Holder (to the extent such transfer is not validly restricted and upon payment of any transfer taxes that are

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required to be paid by the Holder in connection with any such transfer), shall be issued and delivered by the Company to the Holder or

such other Person .

The Person in whose name any certificate or certificates for the Exercise Shares are to be issued upon exercise of this Warrant shall

be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the

Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender

and payment is a date when the stock transfer books of the Company are closed, such Person shall be deemed to have become the

holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open (whether before or

after the end of the Exercise Period).

2.2 Net Exercise. Notwithstanding any provision herein to the contrary, if the Market Price of one share of the Common Stock is

greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash,

check or cancellation of indebtedness, the Holder may elect (the “

Conversion Right”) to receive shares equal to the value (as

determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the

Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of

shares of Common Stock computed using the following formula:

Where X = the number of shares of Common Stock to be issued

Y = the number of shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised,

the portion of this Warrant being exercised (at the date of such calculation)

A = the Market Price of one share of the Common Stock (at the date of such calculation)

B = Exercise Price (as adjusted pursuant to the terms herein to the date of such calculation)

The Company shall pay all reasonable administrative costs incurred by the Holder in connection with the exercise of the Conversion

Right by the Holder pursuant to this Section 2.2.

3. Covenants and Representations of the Company

3.1 Covenants as to Exercise Shares.

(a) The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of this Warrant will,

upon issuance, be validly authorized, issued and outstanding, fully paid and nonassessable, free of preemptive rights and free from all

taxes, liens and charges with respect to the issuance thereof. If the Common Stock or the class of securities of any other Exercise

Shares is then listed or quoted on a national securities exchange

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or a regional securities exchange, all such Exercise Shares shall, upon issuance, also be so listed or quoted. The Company further

covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved solely for purposes

of the exercise of this Warrant, free from preemptive rights, a sufficient number of shares of its Common Stock or the class of securities

of any other Exercise Shares to provide for the exercise in full of this Warrant (without taking into account any possible exercise

pursuant to Section 2.2 hereof). If at any time during the Exercise Period the number of authorized but unissued shares of Common

Stock or the class of securities of any other Exercise Shares shall not be sufficient to permit exercise in full of this Warrant (without

taking into account any possible exercise pursuant to Section 2.2 hereof), the Company will take such corporate action as shall be

necessary to increase its authorized but unissued shares of Common Stock or the class of securities of any other Exercise Shares to

such number of shares as shall be sufficient for such purposes.

(b) If at any time the Exercise Shares shall include any shares or other securities other than shares of Common Stock, or any

other property or assets, the terms of this Warrant shall be modified or supplemented (and in the absence of express written

documentation thereof, shall be deemed to be so modified or supplemented), and the Company shall take all actions as may be

necessary to preserve, in a manner and on terms as nearly equivalent as practicable to the provisions of this Warrant as they apply to

the Common Stock, the rights of the Holder hereunder, including any equitable replacements of the term “Common Stock” with the

term “Exercise Shares” and adjustments of any formula included herein.

Exchange Act”), will comply in all

material respects as to form with the Exchange Act and the rules and regulations thereunder.

(d) Without prior written consent of the Holder, the Company shall not permit any Significant Subsidiary (as defined by

Rule 1-02(w) of Regulation S-X under the Securities Act or any successor rule) to (i) issue or grant any capital stock or equity

ownership interest, including any Participating Security; (ii) any rights, options, warrants or convertible security that is exercisable for

or convertible into any capital stock or other equity ownership interest, including any Participating Security; or (iii) any stock

appreciation rights, phantom stock rights, or any other profit participation rights, or any rights or options to acquire any such rights, in

each case of clauses (i), (ii) and (iii) above, to any Person other than the Company or its wholly owned subsidiaries.

(e) The Company shall not take any action that will result in an increase in the par value of the Common Stock.

3.2 No Impairment. Except and to the extent as waived or consented to in writing by the Holder, the Company will not, by

amendment of its charter, bylaws or other governing documents or through any reorganization, transfer of assets, consolidation, merger,

dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to

be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of

this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder

against impairment or dilution consistent with the intent and principles

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expressed herein. If any event or occurrence shall occur (including without limitation, stock dividends and stock splits) as to which the

failure to make any adjustment to the Exercise Price and/or the number of shares or other assets or property subject to this Warrant

would adversely affect the purchase rights or value represented by this Warrant, including any issuance of Common Stock or

Participating Securities, then, in each such case, the Company shall determine the adjustment, if any, on a basis consistent with the

essential intent and principles herein, necessary to preserve, without dilution, the purchase rights represented by this Warrant. If such

determination involves or is based on a determination of the Fair Market Value of any securities or other assets or property, such

determination shall be made in accordance with the Valuation Procedure. Without limiting the foregoing, in the event of any dividend

or distribution by the Company of assets or property (including shares of any other Person) on or with respect to the Common Stock, or

any exchange of the shares of Common Stock into any other assets, property or securities, this Warrant will be equitably adjusted to

permit the Holder to receive upon exercise the assets, property or securities that would have been received if the Warrant had been

exercised immediately prior to such dividend, distribution or exchange.

3.3 Notice of Record Date. In the event (i) the Company takes a record of the holders of any class of securities for the purpose of

determining the holders thereof who are entitled to receive any dividend or other distribution, (ii) the Company authorizes the granting

to the holders of Common Stock (or holders of the class of securities of any other Exercise Shares) of rights to subscribe to or purchase

any shares of capital stock of any class or securities convertible into any shares of capital stock or of any other right, (iii) the Company

authorizes any reclassification of, or any recapitalization involving, any class of Common Stock or any consolidation or merger to

which the Company is a party and for which approval of the stockholders of the Company is required, or of the sale or transfer of all or

substantially all of the assets of the Company, (iv) the Company authorizes or consents to or otherwise commences the voluntary or

involuntary dissolution, liquidation or winding up of the Company or (v) the Company authorizes or takes any other action that would

trigger an adjustment in the Exercise Price or the number or amount of shares of Common Stock or other Exercise Shares subject to

this Warrant, the Company shall mail to the Holder, at least ten (10) days prior to the earlier of the record date for any such action or

stockholder vote and the date of such action, a notice specifying (a) which action is to be taken and the date on which any such record

is to be taken for the purpose of any such action, (b) the date that any such action is to take place and (c) the amount and character of

any stock, other securities or property and amounts, or rights or options with respect thereto, proposed to be issued, granted or

delivered to each holder of Common Stock (or holders of the class of securities of any other Exercise Shares).

4. Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant. All Exercise Shares (including fractions)

issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance

of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu

of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from

multiplying such fractional amount by the Fair Market Value of one share of Common Stock.

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Listing Rights. The Company shall use its best efforts, upon the request of the Holder, to cause the Exercise Shares to be listed or

quoted on a national securities exchange or a regional securities exchange.

6. No Stockholder Rights or Liabilities. Without limiting the consent rights of the Holder contained in Section 3, this Warrant in and

of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant,

in the absence of affirmative action by the Holder to exercise this Warrant in exchange for shares of Common Stock, and no mere

enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price or as a

stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

7. Transfer of Warrant. This Warrant is not transferable; provided, however, that the Holder may assign its rights to receive shares

upon exercise of this Warrant pursuant to Section 2.1.

8. Payment of Taxes on Stock Certificate Issues Upon Exercise. The initial issuance of certificates of Common Stock upon any

exercise of this Warrant shall be made without charge to the exercising Holder for any transfer, stamp or similar tax or for any other

governmental charges that may be imposed in respect of the issuance of such stock certificates, and such stock certificates shall be

issued in the respective names of, or in such names as may be directed by, the Holder; provided, however, that the Company shall not

be required to pay any tax or such other charges that may be payable in respect of any transfer involved in the issuance and delivery of

any such stock certificate, any new warrants or other securities in a name other than that of the Holder upon exercise of this Warrant

(other than to an Affiliate), and the Company shall not be required to issue or deliver such certificates or other securities unless and

until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have

established to the satisfaction of the Company that such tax has been paid or is not payable.

Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such

terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender

thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Any such new

Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or

destroyed Warrant shall be at any time enforceable by anyone.

10. Closing of Books. The Company will at no time close its transfer books against the transfer of any shares of Common Stock

issued or issuable upon the exercise or conversion of any Warrant in any manner which interferes with the timely exercise or

conversion of this Warrant.

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11.

Notices, Etc. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon

personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the

recipient or if not, then on the next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt

requested, postage prepaid, or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next

Business Day delivery, with written verification of receipt. All notices and other communications shall be sent to the Company at the

address listed on the signature page and to Holder at the address set forth below or at such other address as the Company or Holder

may designate by ten (10) days advance written notice to the other parties hereto:

United States Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, DC 20220

Attn: Under Secretary for Domestic Finance

with a copy to:

United States Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, DC 20220

Attn: General Counsel

12.

Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and

conditions contained herein.

13. Binding Effect on Successors. This Warrant shall be binding upon any Person succeeding the Company by merger, consolidation

or acquisition of all or substantially all of the Company’s assets, and all of the obligations of the Company relating to the Common

Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant

and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.

14. Governing Law. This Warrant and all rights, obligations and liabilities hereunder shall be governed and construed in accordance

with Federal law, if and to the extent such Federal law is applicable, and otherwise in accordance with the law of the State of New

York.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of September 7,

2008.

FEDERAL NATIONAL MORTGAGE ASSOCIATION, by

The Federal Housing Finance Agency, its Conservator

/s/ James B. Lockhart III

James B. Lockhart III

Director

Address: 3900 Wisconsin Avenue, NW

Washington, DC 20016

Signature Page to Warrant