Document:

exv4w2

 

EXHIBIT 4.2

CERTIFICATE OF DESIGNATION OF TERMS OF

5.10% NON-CUMULATIVE PREFERRED STOCK, SERIES E

	1.	 	Designation, Par Value and Number of Shares.

     The designation of the series of preferred stock of the Federal National
Mortgage Association (the “Corporation”) created by this resolution shall be
“5.10% Non-Cumulative Preferred Stock, Series E” (the “Series E Preferred
Stock”), and the number of shares constituting the Series E Preferred Stock is
Three Million (3,000,000). Shares of Series E Preferred Stock will have no par
value and a stated value and liquidation preference of $50 per share. The Board
of Directors of the Corporation, or a duly authorized committee thereof, in its
sole discretion, may increase the number of shares of Series E Preferred Stock
and may reduce the number of shares of Series E Preferred Stock, provided such
reduction is not below the number of shares of Series E Preferred Stock then
outstanding.

	2.	 	Dividends.

     (a)   Holders of record of Series E Preferred Stock (each individually a
“Holder”, or collectively the “Holders”) will be entitled to receive, when, as
and if declared by the Board of Directors of the Corporation, or a duly
authorized committee thereof, in its sole discretion out of funds legally
available therefor, non-cumulative, quarterly cash dividends which will accrue
from and including April 15, 1999, and will be payable on March 31, June 30,
September 30 and December 31 of each year (each, a “Dividend Payment Date”),
commencing June 30, 1999, at the annual rate of $2.55 per share or 5.10% of the
stated value and liquidation preference of $50 per share (without taking into
account any adjustments referred to in paragraphs (b)and (c) of this Section
2). Dividends on the Series E Preferred Stock will be payable to the Holders as
they appear on the books and records of the Corporation on the relevant record
date fixed by the Board of Directors, or a duly authorized committee thereof,
which may not be earlier than 45 days or later than 10 days prior to the
applicable Dividend Payment Date. If declared, the initial dividend, which will
be for the period from and including April 15, 1999 to but excluding June 30,
1999, will be $.53125 per share. Thereafter, the dividend period relating to a
Dividend Payment Date will be the period from and including the preceding
Dividend Payment Date to but excluding such Dividend Payment Date. If a
Dividend Payment Date is not a Business Day, dividends (if declared) on the
Series E Preferred Stock will be paid on the succeeding Business Day, without
interest. A “Business Day” shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in New York, New York are authorized or
required by law to close. Dividends payable on the Series E Preferred Stock for
any period greater or less than a full dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months and the actual
number of days elapsed in any period of less than one month. Dividends payable
on the Series E Preferred Stock for each full dividend period will be computed
by dividing the per annum dividend rate by four.

     (b)(i)   If, prior to 18 months after the date of original issuance of the
Series E Preferred Stock, one or more amendments to the Internal Revenue Code
of 1986, as amended (the “Code”), are enacted that reduce the percentage of the
dividends-received deduction applicable to the Series E Preferred Stock (a
“Dividends-Received Reduction Amendment”) as specified in section 243(a)(1) of
the Code or any successor provision thereto (the “Dividends-Received
Percentage”), the adjustments set forth in this paragraph (b) shall be made in
respect of the dividends payable by the Corporation.

     (ii)   Subject to subclauses (v) and (vi) of this paragraph (b), the amount
of each dividend payable (if declared) per share of Series E Preferred Stock
for dividend payments made on or after the effective date of a
Dividends-Received Reduction Amendment will be adjusted by multiplying the
amount of the dividend payable pursuant to paragraph (a) of this Section 2
(before adjustment) by a factor, which will be the number determined in
accordance with the following formula (the “DRD Formula”), and rounding the
result to the nearest cent (with one-half cent rounded up):

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1–.35(1–.70)

1–.35(1–DRP)

For the purposes of the DRD Formula, “DRP” means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend in question;
provided, however, that if the Dividends-Received Percentage applicable to the
dividend in question shall be less than 50%, then the DRP shall equal .50. No
amendment to the Code, other than a change in the percentage of the
dividends-received deduction applicable to the Series E Preferred Stock as set
forth in section 243(a)(1) of the Code or any successor provision thereto, will
give rise to an adjustment.

     (iii)   Notwithstanding the foregoing and subject to subclauses (v) and
(vi) of this paragraph (b), if any Dividends-Received Reduction Amendment is
enacted after the dividend payable on a Dividend Payment Date has been
declared, the amount of the dividend payable on such Dividend Payment Date will
not be increased; instead, additional dividends (the “Post Declaration Date
Dividends”), equal to the excess, if any, of (x) the product of the dividend
paid by the Corporation on such Divided Payment Date and the DRD Formula (where
the DRP used in the DRD Formula would be equal to the greater of the
Dividends-Received Percentage applicable to the dividend in question and .50)
over (y) the dividend paid by the Corporation on such Dividend Payment Date,
will be payable (if declared) to Holders on the record date applicable to the
next succeeding Dividend Payment Date or, if the Series E Preferred Stock is
called for redemption prior to such record date, to Holders on the applicable
redemption date, as the case may be, in addition to any other amounts payable
on such date.

     (iv)   Subject to subclauses (v) and (vi) of this paragraph (b), if any
Dividends-Received Reduction Amendment is enacted and the reduction in the
Dividends-Received Percentage retroactively applies to a Dividend Payment Date
as to which the Corporation previously paid dividends on the Series E Preferred
Stock (each, an “Affected Dividend Payment Date”), the Corporation will pay (if
declared) additional dividends (the “Retroactive Dividends”) to Holders on the
record date applicable to the next succeeding Dividend Payment Date (or, if
such amendment is enacted after the dividend payable on such Dividend Payment
Date has been declared, to Holders on the record date applicable to the second
succeeding Dividend Payment Date following the date of enactment) or, if the
Series E Preferred Stock is called for redemption prior to such record date, to
Holders on the applicable redemption date, as the case may be, in an amount
equal to the excess of (x) the product of the dividend paid by the Corporation
on each Affected Dividend Payment Date and the DRD Formula (where the DRP used
in the DRD Formula would be equal to the greater of the Dividends-Received
Percentage and .50 applied to each Affected Dividend Payment Date) over (y) the
sum of the dividend paid by the Corporation on each Affected Dividend Payment
Date. The Corporation will only make one payment of Retroactive Dividends for
any such amendment. Notwithstanding the foregoing provisions, if, with respect
to any such amendment, the Corporation receives either an unqualified opinion
of nationally recognized independent tax counsel selected by the Corporation or
a private letter ruling or similar form of authorization from the IRS to the
effect that such amendment does not apply to a dividend payable on an Affected
Dividend Payment Date for the Series E Preferred Stock, then such amendment
will not result in the payment of Retroactive Dividends with respect to such
Affected Dividend Payment Date. The opinion referenced in the previous sentence
shall be based upon legislation amending or establishing the DRP or upon a
published pronouncement of the IRS addressing such legislation.

     (v)   Notwithstanding the foregoing provisions, if, with respect to any
Dividends-Received Reduction Amendment, the Corporation receives either an
unqualified opinion (which opinion shall be based on the Dividends-Received
Reduction Amendment or upon a published pronouncement of the IRS addressing
such legislation) of nationally recognized independent tax counsel selected by
the Corporation or a private letter ruling or similar form of authorization
from the Internal Revenue Service (the “IRS”) to the effect that such an
amendment does not apply to a dividend payable on the Series E Preferred Stock,
then such amendment will not result in the adjustment provided for pursuant to
the DRD Formula with respect to such dividend. Unless the context otherwise
requires, references to dividends herein will mean dividends as

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adjusted by the DRD Formula. The Corporation’s calculation of the
dividends payable as so adjusted shall be final and not subject to review.

     (vi)   Notwithstanding the foregoing, no adjustment in the dividends
payable by the Corporation shall be made, and no Post Declaration Date
Dividends or Retroactive Dividends shall be payable by the Corporation, in
respect of the enactment of any Dividends-Received Reduction Amendment
occurring 18 months or more after the date of original issuance of the Series E
Preferred Stock.

     (vii)   In the event that the amount of dividends payable per share of
Series E Preferred Stock is adjusted pursuant to the DRD Formula and/or Post
Declaration Date Dividends or Retroactive Dividends are to be paid, the
Corporation will cause notice of each such adjustment and, if applicable, Post
Declaration Date Dividends and Retroactive Dividends to be given as soon as
practicable to the Holders of Series E Preferred Stock.

     (c)(i)   If one or more amendments to the Code (the “Debt Financed Purchase
Amendments”) are enacted in substantially the form that was proposed by the
President of the United States in a budget plan released on February 1, 1999
(the determination of which shall be in the Corporation’s sole discretion) and
that (1) would deny a percentage of a corporation’s dividends-received
deduction attributable to the percentage of Series E Preferred Stock that is
indirectly financed by indebtedness (including using a pro-rata allocation of
interest expense similar to the one used in section 264(f) of the Code) and (2)
would be effective for Series E Preferred Stock acquired on or after the
effective date of such changes to the Code, the adjustments set forth in this
paragraph (c) (the “Debt Financed Purchase Adjustments”) shall be made in
respect of dividends payable by the Corporation; provided, however, that no
Debt Financed Purchase Adjustments shall be made unless the Corporation has
been offered the right to purchase the affected shares of Series E Preferred
Stock pursuant to subclause (vi) of this paragraph (c).

     (ii)   Subject to subclauses (iv) through (vi) of this paragraph (c), upon
any transfer of shares of Series E Preferred Stock that closes on or after the
effective date of the Debt Financed Purchase Amendments, the dividends payable
on the transferred shares of Series E Preferred Stock for the period beginning
on the date of transfer shall be equal to (1) the amount of the dividend that
would be payable for such period on such shares if the shares were not entitled
to adjustment multiplied by (2) 1.08485 (the “Sale Factor”), rounded to the
nearest cent (with one-half cent rounded upwards).

     (iii)   Notwithstanding the foregoing, if a Debt Financed Purchase
Adjustment is required after the dividend payable on a Dividend Payment Date
has been declared, the amount of the dividend payable on such Dividend Payment
Date will not be increased; instead, additional dividends (the “Second Post
Declaration Date Dividends”), equal to the excess, if any, of (x) the amount of
the dividend that would have been payable if the adjustment described in
subclause (ii) of this paragraph (c) had been made over (y) the dividend paid
by the Corporation on such Dividend Payment Date, will be payable (if declared)
to the Holders of the affected shares of Series E Preferred Stock on the record
date applicable to the next succeeding Dividend Payment Date or, if the Series
E Preferred Stock is called for redemption prior to such record date, to
Holders of the affected shares of Series E Preferred Stock on the applicable
redemption date, as the case may be, in addition to any other amounts payable
on such date.

     (iv)   Notwithstanding the foregoing provisions, if, with respect to the
Debt Financed Purchase Amendments, the Corporation receives either an
unqualified opinion (which shall be based upon the Debt Financed Purchase
Amendments or upon a published pronouncement of the IRS addressing such
amendments) of a nationally recognized independent tax counsel selected by the
Corporation or a private letter ruling or similar form of authorization from
the IRS to the effect that such amendments do not apply to a dividend payable
on the Series E Preferred Stock, then such amendments will not result in a Debt
Financed Purchase Adjustment.

     (v)   Notwithstanding the foregoing, no adjustment in the dividends payable
by the Corporation shall be made, and no Second Post Declaration Date Dividends
shall be payable by the Corporation, in respect of the enactment of any Debt
Financed Purchase Amendment occurring 18 months or more after the date of
original issuance of the Series E Preferred Stock.

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     (vi)   No Debt Financed Purchase Adjustment shall be made, or Second Post
Declaration Date Dividends paid, to any Holder of shares of Series E Preferred
Stock unless, after the date of enactment of the Debt Financed Purchase
Amendment and prior to any transfer to the Holder that gives rise to the rights
to such adjustment, the Corporation is offered the right to purchase such
shares upon reasonable terms and at a fair market price (which determination
shall be in the sole discretion of the Corporation). If the Corporation has not
notified the Holder of its intent to exercise such right in writing within
three trading days of receipt of written notice from the Holder, the
Corporation will be deemed to have declined to exercise such right.

     (vii)   If a Debt Financed Purchase Adjustment is made, or Second Post
Declaration Date Dividends are to be paid, with respect to certain shares of
Series E Preferred Stock, the Corporation will give notice of each such
occurrence to the applicable Holders of such shares of Series E Preferred
Stock.

     (d)   No dividend (other than dividends or distributions paid in shares of,
or options, warrants or rights to subscribe for or purchase shares of, the
common stock of the Corporation or any other stock of the Corporation ranking,
as to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, junior to the Series E Preferred
Stock) may be declared or paid or set apart for payment on the Corporation’s
common stock (or on any other stock of the Corporation ranking, as to the
payment of dividends, junior to the Series E Preferred Stock) unless dividends
have been declared and paid or set apart (or ordered to be set apart) on the
Series E Preferred Stock for the then-current quarterly dividend period;
provided, however, that the foregoing dividend preference shall not be
cumulative and shall not in any way create any claim or right in favor of the
Holders of Series E Preferred Stock in the event that dividends have not been
declared or paid or set apart (or ordered to be set apart) on the Series E
Preferred Stock in respect of any prior dividend period. If the full dividend
on the Series E Preferred Stock is not paid for any quarterly dividend period,
the Holders of Series E Preferred Stock will have no claim in respect of the
unpaid amount so long as no dividend (other than those referred to above) is
paid on the Corporation’s common stock (or any other stock of the Corporation
ranking, as to the payment of dividends, junior to the Series E Preferred
Stock) for such dividend period.

     (e)   The Board of Directors of the Corporation, or a duly authorized
committee thereof, may, in its discretion, choose to pay dividends on the
Series E Preferred Stock without the payment of any dividends on the
Corporation’s common stock (or any other stock of the Corporation ranking, as
to the payment of dividends, junior to the Series E Preferred Stock).

     (f)   No full dividends shall be declared or paid or set apart for payment
on any stock of the Corporation ranking, as to the payment of dividends, on a
parity with the Series E Preferred Stock for any period unless full dividends
have been declared and paid or set apart for payment on the Series E Preferred
Stock for the then-current quarterly dividend period. When dividends are not
paid in full upon the Series E Preferred Stock and all other classes or series
of stock of the Corporation, if any, ranking, as to the payment of dividends,
on a parity with the Series E Preferred Stock, all dividends declared upon
shares of Series E Preferred Stock and all such other stock of the Corporation
will be declared pro rata so that the amount of dividends declared per share of
Series E Preferred Stock and all such other stock will in all cases bear to
each other the same ratio that accrued dividends per share of Series E
Preferred Stock (including any adjustments in dividends payable pursuant to
Sections 2(b) and 2(c) but without accumulation of unpaid dividends on the
Series E Preferred Stock for prior dividend periods) and such other stock bear
to each other.

     (g)   No dividends may be declared or paid or set apart for payment on any
shares of Series E Preferred Stock if at the same time any arrears exist or
default exists in the payment of dividends on any outstanding class or series
of stock of the Corporation ranking, as to the payment of dividends, prior to
the Series E Preferred Stock.

     (h)   Holders of Series E Preferred Stock will not be entitled to any
dividends, whether payable in cash or property, other than as herein provided
and will not be entitled to interest, or any sum in lieu of interest, in
respect of any dividend payment.

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	3.	 	Optional Redemption.

     (a)   On or after April 15, 2004, the Corporation, at its option, may
redeem the Series E Preferred Stock, in whole or in part, at any time or from
time to time, out of funds legally available therefor, at the redemption price
of $50.00 per share plus an amount equal to the dividend (whether or not
declared) for the then-current quarterly dividend period accrued to but
excluding the date of such redemption, including any adjustments in dividends
payable pursuant to Sections 2(b) and 2(c) but without accumulation of unpaid
dividends on the Series E Preferred Stock for prior dividend periods. If less
than all of the outstanding shares of Series E Preferred Stock are to be
redeemed, the Corporation will select the shares to be redeemed from the
outstanding shares not previously called for redemption by lot or pro rata (as
nearly as possible) or by any other method that the Board of Directors of the
Corporation, or a duly authorized committee thereof, in its sole discretion
deems equitable.

     (b)   In the event the Corporation shall redeem any or all of the Series E
Preferred Stock as aforesaid, the Corporation will give notice of any such
redemption to Holders of Series E Preferred Stock not less than 30 days prior
to the date fixed by the Board of Directors of the Corporation, or duly
authorized committee thereof, for such redemption. Each such notice will state:
(1) the number of shares of Series E Preferred Stock to be redeemed and, if
fewer than all of the shares of Series E Preferred Stock held by a Holder are
to be redeemed, the number of shares to be redeemed from such Holder; (2) the
redemption price; (3) the redemption date; and (4) the place at which a
Holder’s certificate(s) representing shares of Series E Preferred Stock must be
presented upon such redemption. Failure to give notice, or any defect in the
notice, to any Holder of Series E Preferred Stock shall not affect the validity
of the proceedings for the redemption of shares of any other Holder of Series E
Preferred Stock being redeemed.

     (c)   Notice having been given as herein provided, from and after the
redemption date, dividends on the Series E Preferred Stock called for
redemption shall cease to accrue and such Series E Preferred Stock called for
redemption will no longer be deemed outstanding, and all rights of the Holders
thereof as registered holders of such shares of Series E Preferred Stock will
cease. Upon surrender in accordance with said notice of the certificate(s)
representing shares of Series E Preferred Stock so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the Corporation, or a
duly authorized committee thereof, shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption
price aforesaid. Any shares of Series E Preferred Stock that shall at any time
have been redeemed shall, after such redemption, be cancelled and not reissued.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the Holder thereof.

     (d)   The Series E Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. In addition, Holders of
Series E Preferred Stock will have no right to require redemption of any shares
of Series E Preferred Stock.

	4.	 	Liquidation Rights.

     (a)   Upon any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, after payment or provision for the liabilities of the
Corporation and the expenses of such dissolution, liquidation or winding up,
the Holders of outstanding shares of the Series E Preferred Stock will be
entitled to receive out of the assets of the Corporation or proceeds thereof
available for distribution to stockholders, before any payment or distribution
of assets is made to holders of the Corporation’s common stock (or any other
stock of the Corporation ranking, as to the distribution of assets upon
dissolution, liquidation or winding up of the Corporation, junior to the Series
E Preferred Stock), the amount of $50.00 per share plus an amount equal to the
dividend (whether or not declared) for the then-current quarterly dividend
period accrued to but excluding the date of such liquidation payment, including
any adjustments in dividends payable pursuant to Sections 2(b) and 2(c) but
without accumulation of unpaid dividends on the Series E Preferred Stock for
prior dividend periods.

     (b)   If the assets of the Corporation available for distribution in such
event are insufficient to pay in full the aggregate amount payable to Holders
of Series E Preferred Stock and holders of all other classes or

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series of stock of the Corporation, if any, ranking, as to the
distribution of assets upon dissolution, liquidation or winding up of the
Corporation, on a parity with the Series E Preferred Stock, the assets will be
distributed to the Holders of Series E Preferred Stock and holders of all such
other stock pro rata, based on the full respective preferential amounts to
which they are entitled, including any adjustments in dividends payable
pursuant to Sections 2(b) and 2(c) but without accumulation of unpaid dividends
on the Series E Preferred Stock for prior dividend periods.

     (c)   Notwithstanding the foregoing, Holders of Series E Preferred Stock
will not be entitled to be paid any amount in respect of a dissolution,
liquidation or winding up of the Corporation until holders of any classes or
series of stock of the Corporation ranking, as to the distribution of assets
upon dissolution, liquidation or winding up of the Corporation, prior to the
Series E Preferred Stock have been paid all amounts to which such classes or
series are entitled.

     (d)   Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of the Corporation, nor the merger, consolidation or combination of
the Corporation into or with any other corporation or the merger, consolidation
or combination of any other corporation into or with the Corporation, shall be
deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 4.

     (e)   After payment of the full amount of the distribution of assets upon
dissolution, liquidation or winding up of the Corporation to which they are
entitled pursuant to paragraphs (a), (b) and (c) of this Section 4, the Holders
of Series E Preferred Stock will not be entitled to any further participation
in any distribution of assets by the Corporation.

	5.	 	No Conversion or Exchange Rights.

     The Holders of shares of Series E Preferred Stock will not have any rights
to convert such shares into or exchange such shares for shares of any other
class or classes, or of any other series of any class or classes, of stock or
obligations of the Corporation.

	6.	 	No Pre-emptive Rights.

     No Holder of Series E Preferred Stock shall be entitled as a matter of
right to subscribe for or purchase, or have any pre-emptive right with respect
to, any part of any new or additional issue of stock of any class whatsoever,
or of securities convertible into any stock of any class whatsoever, whether
now or hereafter authorized and whether issued for cash or other consideration
or by way of dividend.

	7.	 	Voting Rights; Amendments.

     (a)   Except as provided below, the Holders of Series E Preferred Stock
will not be entitled to any voting rights, either general or special.

     (b)   Without the consent of the Holders of Series E Preferred Stock, the
Corporation will have the right to amend, alter, supplement or repeal any terms
of the Series E Preferred Stock (i) to cure any ambiguity, or to cure, correct
or supplement any defective provision contained in this Certificate of
Designation or (ii) to make any other provision with respect to matters or
questions arising with respect to the Series E Preferred Stock that is not
inconsistent with the provisions of this Certificate of Designation so long as
such action does not materially and adversely affect the interests of the
Holders of Series E Preferred Stock; provided, however, that any increase in
the amount of authorized or issued Series E Preferred Stock or the creation and
issuance, or an increase in the authorized or issued amount, of any other class
or series of stock of the Corporation, whether ranking prior to, on a parity
with or junior to the Series E Preferred Stock, as to the payment of dividends
or the distribution of assets upon dissolution, liquidation or winding up of
the Corporation, or otherwise, will not be deemed to materially and adversely
affect the interests of the Holders of Series E Preferred Stock.

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     (c)   Except as set forth in paragraph (b) of this Section 7, the terms of
the Series E Preferred Stock may be amended, altered, supplemented or repealed
only with the consent of the Holders of at least two-thirds of the shares of
Series E Preferred Stock then outstanding, given in person or by proxy, either
in writing or at a meeting of stockholders at which the Holders of Series E
Preferred Stock shall vote separately as a class. On matters requiring their
consent, Holders of Series E Preferred Stock will be entitled to one vote per
share.

     (d)   The rules and procedures for calling and conducting any meeting of
Holders (including, without limitation, the fixing of a record date in
connection therewith), the solicitation and use of proxies at such a meeting,
the obtaining of written consents, and any other aspect or matter with regard
to such a meeting or such consents shall be governed by any rules that the
Board of Directors of the Corporation, or a duly authorized committee thereof,
in its discretion, may adopt from time to time, which rules and procedures
shall conform to the requirements of any national securities exchange on which
the shares of the Series E Preferred Stock are listed at the time.

	8.	 	Additional Classes or Series of Stock.

     The Board of Directors of the Corporation, or a duly authorized committee
thereof, shall have the right at any time in the future to authorize, create
and issue, by resolution or resolutions, one or more additional classes or
series of stock of the Corporation, and to determine and fix the distinguishing
characteristics and the relative rights, preferences, privileges and other
terms of the shares thereof. Any such class or series of stock may rank prior
to, on a parity with or junior to the Series E Preferred Stock as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, or otherwise.

	9.	 	Priority.

     For purposes of this Certificate of Designation, any stock of any class or
series of the Corporation shall be deemed to rank:

     (a)   Prior to the shares of Series E Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, if the holders of such class or
series shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation,
as the case may be, in preference or priority to the Holders of shares of
Series E Preferred Stock.

     (b)   On a parity with shares of Series E Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, whether or not the dividend rates
or amounts, dividend payment dates or redemption or liquidation prices per
share, if any, be different from those of the Series E Preferred Stock, if the
holders of such class or series shall be entitled to the receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in proportion to their respective dividend
rates or amounts or liquidation prices, without preference or priority, one
over the other, as between the holders of such class or series and the Holders
of shares of Series E Preferred Stock.

     (c)   Junior to shares of Series E Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, if such class shall be common
stock of the Corporation or if the Holders of shares of Series E Preferred
Stock shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as the case may
be, in preference or priority over the holders of such class or series.

     (d)   The shares of Preferred Stock of the Corporation designated “6.41%
Non-Cumulative Preferred Stock, Series A” (the “Series A Preferred Stock”),
“6.50% Non-Cumulative Preferred Stock, Series B” (the “Series B Preferred
Stock”), “6.45% Non-Cumulative Preferred Stock, Series C” (“the Series C
Preferred Stock”) and “5.25% Non-Cumulative Preferred Stock, Series D” (the
“Series D Preferred Stock”) shall be

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deemed to rank on a parity with shares of Series E Preferred Stock as to
the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the Corporation. Accordingly, the holders of
record of Series A Preferred Stock, the holders of record of Series B Preferred
Stock, the holders of record of Series C Preferred Stock, the holders of record
of Series D Preferred Stock and the Holders of Series E Preferred Stock shall
be entitled to the receipt of dividends and of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or amounts or liquidation
prices, without preference or priority, one over the other.

	10.	 	Transfer Agent, Dividend Disbursing Agent and Registrar.

     The Corporation hereby appoints First Chicago Trust Company of New York, a
division of EquiServe, as its initial transfer agent, dividend disbursing agent
and registrar for the Series E Preferred Stock. The Corporation may at any time
designate an additional or substitute transfer agent, dividend disbursing agent
and registrar for the Series E Preferred Stock.

	11.	 	Notices.

     Any notice provided or permitted by this Certificate of Designation to be
made upon, or given or furnished to, the Holders of Series E Preferred Stock by
the Corporation shall be made by first-class mail, postage prepaid, to the
addresses of such Holders as they appear on the books and records of the
Corporation. Such notice shall be deemed to have been sufficiently made upon
deposit thereof in the United States mail. Notwithstanding anything to the
contrary contained herein, in the case of the suspension of regular mail
service or by reason of any other cause it shall be impracticable, in the
Corporation’s judgment, to give notice by mail, then such notification may be
made, in the Corporation’s discretion, by publication in a newspaper of general
circulation in The City of New York or by hand delivery to the addresses of
Holders as they appear on the books and records of the Corporation.

     With respect to any right to purchase shares of the Series E Preferred
Stock afforded the Corporation under Section 2(c)(vi) hereof, a Holder must
submit notice via facsimile transmission of the terms and price of the offer to
each of the following persons at the Corporation:

		
	 	Facsimile number: (202) 752-5980

Attention: Executive Vice President and Chief Financial Officer

		
	 	Facsimile number: (202) 752-4948

Attention: General Counsel

		
	 	Facsimile number: (202) 752-0410

Attention: Vice President – Corporate Finance

     The notice also must contain the name, title, address, telephone number
and facsimile transmission number of an authorized representative of the Holder
to whom the Corporation should respond.

     RECEIPT AND ACCEPTANCE OF A SHARE OR SHARES OF THE SERIES E PREFERRED
STOCK BY OR ON BEHALF OF A HOLDER SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY SUCH HOLDER (AND ALL OTHERS HAVING BENEFICIAL OWNERSHIP OF SUCH SHARE OR
SHARES) OF ALL OF THE TERMS AND PROVISIONS OF THIS CERTIFICATE OF DESIGNATION.
NO SIGNATURE OR OTHER FURTHER MANIFESTATION OF ASSENT TO THE TERMS AND
PROVISIONS OF THIS CERTIFICATE OF DESIGNATION SHALL BE NECESSARY FOR ITS
OPERATION OR EFFECT AS BETWEEN THE CORPORATION AND THE HOLDER (AND ALL SUCH
OTHERS).

8exv4w3

 

EXHIBIT 4.3

CERTIFICATE OF DESIGNATION OF TERMS OF

VARIABLE RATE NON-CUMULATIVE PREFERRED STOCK, SERIES F

	1.	 	Designation, Par Value and Number of Shares.

     The designation of the series of preferred stock of the Federal National
Mortgage Association (“Fannie Mae”) created by this resolution shall be
“Variable Rate Non-Cumulative Preferred Stock, Series F” (the “Series F
Preferred Stock”), and the number of shares initially constituting the Series F
Preferred Stock is Twelve Million (12,000,000)1. Shares of Series F Preferred
Stock will have no par value and a stated value and liquidation preference of
$50.00 per share. The Board of Directors of Fannie Mae, or a duly authorized
committee thereof, in its sole discretion, may reduce the number of shares of
Series F Preferred Stock, provided such reduction is not below the number of
shares of Series F Preferred Stock then outstanding.

	2.	 	Dividends.

     (a)   Holders of record of Series F Preferred Stock (each individually a
“Holder”, or collectively the “Holders”) will be entitled to receive, when, as
and if declared by the Board of Directors of Fannie Mae, or a duly authorized
committee thereof, in its sole discretion out of funds legally available
therefor, non-cumulative quarterly cash dividends which will accrue from and
including March 20, 2000 and will be payable on March 31, June 30, September 30
and December 31 of each year (each, a “Dividend Payment Date”), commencing June
30, 2000. If a Dividend Payment Date is not a Business Day, the related
dividend (if declared) will be paid on the next succeeding Business Day with
the same force and effect as though paid on the Dividend Payment Date, without
any increase to account for the period from such Dividend Payment Date through
the date of actual payment. A “Business Day” shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in New York, New York
are authorized by law to close. Dividends will be paid to Holders on the record
date fixed by the Board of Directors or a duly authorized committee thereof,
which may not be earlier than 45 days or later than 10 days prior to the
applicable Dividend Payment Date.

     If declared, the dividend rate for the period from and including March 20,
2000 to but excluding March 31, 2002 will be 6.295% per annum. Thereafter,
dividends will accrue at a variable per annum rate (not greater than 11%) equal
to the “CMT Rate” (as defined below) minus 0.16%, without taking into account
any adjustments pursuant to clause (c) of this Section 2. On March 31, 2002,
and on March 31 every two years thereafter, the previous dividend rate will be
replaced by the then current CMT Rate minus 0.16%. The CMT Rate for each
two-year period will be determined by Fannie Mae on the second Business Day
immediately preceding the first day of such period (each, a “CMT Determination
Date”). If declared, the initial dividend, which will be for the “Dividend
Period” from and including March 20, 2000 to but excluding June 30, 2000, will
be $0.8830 per share and will be payable on June 30, 2000. Thereafter, the
Dividend Period relating to a Dividend Payment Date will be the period from and
including the preceding Dividend Payment Date to but excluding the related
Dividend Payment Date. If Fannie Mae redeems the Series F Preferred Stock, the
dividend that would otherwise be payable for the Dividend Period ending on the
date of redemption will be included in the redemption price of the shares
redeemed and will not be separately payable.

     Dividends payable on the Series F Preferred Stock for any period greater
or less than a full Dividend Period will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Dividends payable on the Series F
Preferred Stock for each full Dividend Period will be computed by dividing the
per annum dividend rate by four. The amount of quarterly dividends per share
will be rounded to the fourth digit after the decimal point. (If the fifth
digit to the right of the decimal point is five or greater, the fourth digit
will be rounded up by one.)

	1 Plus up to 1,800,000 additional shares pursuant to the Underwriters’
overallotment option.

1

 

     (b)   The “CMT Rate” for any CMT Determination Date with respect to any
Dividend Period will be the rate equal to (in the following order of priority):

		
	 	     (1)   the one-week average yield on 2-year United States Treasury
securities at “constant maturity” as estimated from the United States
Department of the Treasury’s weekly yield curve, as published in the latest
H.15(519) (as defined below) available on the applicable CMT Determination
Date with respect to such Dividend Period, provided that such H.15(519) was
first available not earlier than ten calendar days before such CMT
Determination Date, under the column “Week Ending” for the week most
recently ended opposite the heading “U.S. government securities-Treasury
Constant Maturities, 2-year.”

		
	 	     (2)   if the latest H.15(519) available on the applicable CMT
Determination Date with respect to such Dividend Period was first available
prior to ten calendar days before such CMT Determination Date, the CMT Rate
will be such 2-year United States Treasury constant maturity rate (or other
2-year United States Treasury rate) for such CMT Determination Date as may
then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that Fannie Mae
determines to be comparable to the rate formerly published in H.15(519).

		
	 	     (3)   if the CMT Rate as described in clause (2) is not published by
10:00 a.m. (New York City time) on the applicable CMT Determination Date,
the CMT Rate will be calculated by Fannie Mae and will be a yield to
maturity (expressed as a bond equivalent as a decimal on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) based on
the arithmetic mean of the secondary market bid prices as of approximately
3:30 p.m. (New York City time) on such CMT Determination Date of three
leading primary United States government securities dealers in The City of
New York selected by Fannie Mae (from five such dealers and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)) for
direct noncallable fixed rate obligations of the United States (“Treasury
Notes”) most recently issued with an original maturity of approximately two
years and a remaining term to maturity of not less than one year. If three
or four (and not five) of such dealers are quoting as described in this
clause (iii), then the CMT Rate will be based on the arithmetic mean of the
bid prices obtained and neither the highest nor lowest of such quotations
will be eliminated.

		
	 	     (4)   if fewer than three dealers selected by Fannie Mae are quoting as
described in clause (3), the CMT Rate will be calculated by Fannie Mae and
will be a yield to maturity (expressed as a bond equivalent and as a decimal
on the basis of a year of 365 or 366 days, as applicable, and applied on a
daily basis) based on the arithmetic mean of the secondary market bid prices
as of approximately 3:30 p.m. (New York City time) on the applicable CMT
Determination Date of three leading primary United States government
securities dealers in The City of New York selected by Fannie Mae (from five
such dealers and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)) for Treasury Notes with an original maturity
of approximately ten years and a remaining term to maturity closest to two
years. If three or four (and not five) of such dealers are quoting as
described in this clause (4), then the CMT Rate will be based on the
arithmetic mean of the bid prices obtained and neither the highest nor
lowest of such quotations will be eliminated.

		
	 	     (5)   if fewer than three dealers selected by Fannie Mae are quoting as
described in clause (4), the CMT Rate will be the CMT Rate in effect for the
prior Dividend Period.

     In the case of clause (4), if two Treasury Notes with an original maturity
of approximately ten years have remaining terms to maturity equally close to
two years, the quotes for the Treasury Note with the shorter remaining term to
maturity will be used.

     “H.15(519)” means the weekly statistical release designated as the
H.15(519), as officially published by the Board of Governors of the Federal
Reserve System.

     Fannie Mae’s determination of the CMT Rate and the dividend rate will be
final and binding.

2

 

     (c)   If, prior to September 20, 2001, one or more amendments to the
Internal Revenue Code of 1986, as amended (the “Code”), are enacted that
eliminate or reduce the percentage of the dividends-received deduction
applicable to the Series F Preferred Stock as specified in section 243(a)(1) of
the Code or any successor provision thereto (the “Dividends-Received
Percentage”), certain adjustments may be made in respect of the dividends
payable by Fannie Mae, and Post Declaration Date Dividends and Retroactive
Dividends (as such terms are defined below) may become payable, as described
below.

     The amount of each dividend payable (if declared) per share of Series F
Preferred Stock for dividend payments made on or after the effective date of
such change in the Code will be adjusted by multiplying the amount of the
dividend payable pursuant to clause (a) of this Section 2 (before adjustment)
by a factor, which will be the number determined in accordance with the
following formula (the “DRD Formula”), and rounding the result to the nearest
cent (with one-half cent rounded up):

1–.35(1–.70)

1–.35(1–DRP)

     For the purposes of the DRD Formula, “DRP” means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend in question;
provided, however, that if the Dividends- Received Percentage applicable to the
dividend in question shall be less than 50%, then the DRP shall equal .50. No
amendment to the Code, other than a change in the percentage of the
dividends-received deduction applicable to the Series F Preferred Stock as set
forth in section 243(a)(1) of the Code or any successor provision thereto, will
give rise to an adjustment. Notwithstanding the foregoing provisions, if, with
respect to any such amendment, Fannie Mae receives either an unqualified
opinion of nationally recognized independent tax counsel selected by Fannie Mae
or a private letter ruling or similar form of assurance from the Internal
Revenue Service (the “IRS”) to the effect that such an amendment does not apply
to a dividend payable on the Series F Preferred Stock, then such amendment will
not result in the adjustment provided for pursuant to the DRD Formula with
respect to such dividend. The opinion referenced in the previous sentence shall
be based upon the legislation amending or establishing the DRP or upon a
published pronouncement of the IRS addressing such legislation. Unless the
context otherwise requires, references to dividends herein will mean dividends
as adjusted by the DRD Formula. Fannie Mae’s calculation of the dividends
payable as so adjusted shall be final and not subject to review.

     Notwithstanding the foregoing, if any such amendment to the Code is
enacted after the dividend payable on a Dividend Payment Date has been declared
but before such dividend is paid, the amount of the dividend payable on such
Dividend Payment Date will not be increased; instead, additional dividends (the
“Post Declaration Date Dividends”), equal to the excess, if any, of (1) the
product of the dividend paid by Fannie Mae on such Dividend Payment Date and
the DRD Formula (where the DRP used in the DRD Formula would be equal to the
greater of the Dividends-Received Percentage applicable to the dividend in
question and .50) over (2) the dividend paid by Fannie Mae on such Dividend
Payment Date, will be payable (if declared) to Holders on the record date
applicable to the next succeeding Dividend Payment Date.

     If any such amendment to the Code is enacted and the reduction in the
Dividends-Received Percentage retroactively applies to a Dividend Payment Date
as to which Fannie Mae previously paid dividends on the Series F Preferred
Stock (each, an “Affected Dividend Payment Date”), Fannie Mae will pay (if
declared) additional dividends (the “Retroactive Dividends”) to Holders on the
record date applicable to the next succeeding Dividend Payment Date (or, if
such amendment is enacted after the dividend payable on such Dividend Payment
Date has been declared, to Holders on the record date applicable to the second
succeeding Dividend Payment Date following the date of enactment) or, if the
Series F Preferred Stock is called for redemption prior to such record date, to
Holders on the applicable redemption date, as the case may be, in an amount
equal to the excess of (1) the product of the dividend paid by Fannie Mae on
each Affected Dividend Payment Date and the DRD Formula (where the DRP used in
the DRD Formula would be equal to the greater of the Dividends-Received
Percentage and .50 applied to each Affected Dividend Payment Date) over (2) the
sum of the dividend paid by Fannie Mae on each Affected Dividend Payment Date.
Fannie Mae will only make one payment of Retroactive Dividends for any such
amendment.

3

 

Notwithstanding the foregoing provisions, if, with respect to any such
amendment, Fannie Mae receives either an unqualified opinion of nationally
recognized independent tax counsel selected by Fannie Mae or a private letter
ruling or similar form of assurance from the IRS to the effect that such
amendment does not apply to a dividend payable on an Affected Dividend Payment
Date for the Series F Preferred Stock, then such amendment will not result in
the payment of Retroactive Dividends with respect to such Affected Dividend
Payment Date. The opinion referenced in the previous sentence shall be based
upon legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation.

     Notwithstanding the foregoing, no adjustment in the dividends payable by
Fannie Mae shall be made, and no Post Declaration Date Dividends or Retroactive
Dividends shall be payable by Fannie Mae, in respect of the enactment of any
amendment to the Code after September 20, 2001 that eliminates or reduces the
Dividends-Received Percentage.

     In the event that the amount of dividends payable per share of Series F
Preferred Stock is adjusted pursuant to the DRD Formula and/or Post Declaration
Date Dividends or Retroactive Dividends are to be paid, Fannie Mae will cause
notice of each such adjustment and, if applicable, Post Declaration Date
Dividends and Retroactive Dividends to be given as soon as practicable to the
Holders of Series F Preferred Stock.

     (d)   No dividend (other than dividends or distributions paid in shares of,
or options, warrants or rights to subscribe for or purchase shares of, the
common stock of Fannie Mae or any other stock of Fannie Mae ranking, as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, junior to the Series F Preferred
Stock) may be declared or paid or set apart for payment on Fannie Mae’s common
stock (or on any other stock of Fannie Mae ranking, as to the payment of
dividends, junior to the Series F Preferred Stock) unless dividends have been
declared and paid or set apart (or ordered to be set apart) on the Series F
Preferred Stock for the then current quarterly Dividend Period; provided,
however, that the foregoing dividend preference shall not be cumulative and
shall not in any way create any claim or right in favor of the Holders of
Series F Preferred Stock in the event that dividends have not been declared or
paid or set apart (or ordered to be set apart) on the Series F Preferred Stock
in respect of any prior dividend period. If the full dividend on the Series F
Preferred Stock is not paid for any quarterly dividend period, the Holders of
Series F Preferred Stock will have no claim in respect of the unpaid amount so
long as no dividend (other than those referred to above) is paid on Fannie
Mae’s common stock (or any other stock of Fannie Mae ranking, as to the payment
of dividends, junior to the Series F Preferred Stock) for such Dividend Period.

     (e)   The Board of Directors of Fannie Mae, or a duly authorized committee
thereof, may, in its discretion, choose to pay dividends on the Series F
Preferred Stock without the payment of any dividends on Fannie Mae’s common
stock (or any other stock of Fannie Mae ranking, as to the payment of
dividends, junior to the Series F Preferred Stock).

     (f)   No full dividends shall be declared or paid or set apart for payment
on any stock of Fannie Mae ranking, as to the payment of dividends, on a parity
with the Series F Preferred Stock for any period unless full dividends have
been declared and paid or set apart for payment on the Series F Preferred Stock
for the then-current quarterly dividend period. When dividends are not paid in
full upon the Series F Preferred Stock and all other classes or series of stock
of Fannie Mae, if any, ranking, as to the payment of dividends, on a parity
with the Series F Preferred Stock, all dividends declared upon shares of Series
F Preferred Stock and all such other stock of Fannie Mae will be declared pro
rata so that the amount of dividends declared per share of Series F Preferred
Stock and all such other stock will in all cases bear to each other the same
ratio that accrued dividends per share of Series F Preferred Stock (including
any adjustments in dividends payable due to changes in the Dividends-Received
Percentage but without accumulation of unpaid dividends on the Series F
Preferred Stock for prior Dividend Periods) and such other stock bear to each
other.

     (g)   No dividends may be declared or paid or set apart for payment on any
shares of Series F Preferred Stock if at the same time any arrears exist or
default exists in the payment of dividends on any outstanding

4

 

class or series of stock of Fannie Mae ranking, as to the payment of
dividends, prior to the Series F Preferred Stock.

     (h)   Holders of Series F Preferred Stock will not be entitled to any
dividends, whether payable in cash or property, other than as herein provided
and will not be entitled to interest, or any sum in lieu of interest, in
respect of any dividend payment.

	3.	 	Optional Redemption.

     (a)   The Series F Preferred Stock shall not be redeemable prior to March
31, 2002. On that date and on March 31 every two years thereafter, subject to
the notice provisions set forth in Section 3(b) below and subject to any
further limitations which may be imposed by law, Fannie Mae may redeem the
Series F Preferred Stock, in whole or in part, out of funds legally available
therefor, at the redemption price of $50.00 per share plus an amount,
determined in accordance with Section 2 above, equal to the amount of the
dividend (whether or not declared) for the then-current quarterly Dividend
Period accrued to but excluding the date of such redemption, including any
adjustments in dividends payable due to changes in the Dividends-Received
Percentage but without accumulation of unpaid dividends on the Series F
Preferred Stock for prior Dividend Periods. If less than all of the outstanding
shares of Series F Preferred Stock are to be redeemed, Fannie Mae will select
the shares to be redeemed from the outstanding shares not previously called for
redemption by lot or pro rata (as nearly as possible) or by any other method
that the Board of Directors of Fannie Mae, or a duly authorized committee
thereof, in its sole discretion deems equitable.

     (b)   In the event Fannie Mae shall redeem any or all of the Series F
Preferred Stock as aforesaid, Fannie Mae will give notice of any such
redemption to Holders of Series F Preferred Stock not less than 30 days prior
to the date fixed by the Board of Directors of Fannie Mae, or duly authorized
committee thereof, for such redemption. Each such notice will state: (1) the
number of shares of Series F Preferred Stock to be redeemed and, if fewer than
all of the shares of Series F Preferred Stock held by a Holder are to be
redeemed, the number of shares to be redeemed from such Holder; (2) the
redemption price; (3) the redemption date; and (4) the place at which a
Holder’s certificate(s) representing shares of Series F Preferred Stock must be
presented upon such redemption. Failure to give notice, or any defect in the
notice, to any Holder of Series F Preferred Stock shall not affect the validity
of the proceedings for the redemption of shares of any other Holder of Series F
Preferred Stock being redeemed.

     (c)   Notice having been given as herein provided, from and after the
redemption date, dividends on the Series F Preferred Stock called for
redemption shall cease to accrue and such Series F Preferred Stock called for
redemption will no longer be deemed outstanding, and all rights of the Holders
thereof as registered holders of such shares of Series F Preferred Stock will
cease. Upon surrender in accordance with said notice of the certificate(s)
representing shares of Series F Preferred Stock so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of Fannie Mae, or a duly
authorized committee thereof, shall so require and the notice shall so state),
such shares shall be redeemed by Fannie Mae at the redemption price aforesaid.
Any shares of Series F Preferred Stock that shall at any time have been
redeemed shall, after such redemption, be cancelled and not reissued. In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares without cost
to the Holder thereof.

     (d)   The Series F Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. In addition, Holders of
Series F Preferred Stock will have no right to require redemption of any shares
of Series F Preferred Stock.

	4.	 	Liquidation Rights.

     (a)   Upon any voluntary or involuntary dissolution, liquidation or winding
up of Fannie Mae, after payment or provision for the liabilities of Fannie Mae
and the expenses of such dissolution, liquidation or winding up, the Holders of
outstanding shares of the Series F Preferred Stock will be entitled to receive
out of the assets of Fannie Mae or proceeds thereof available for distribution
to stockholders, before any payment or distribution of assets is made to
holders of Fannie Mae’s common stock (or any other stock of

5

 

Fannie Mae ranking, as to the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, junior to the Series F Preferred
Stock), the amount of $50.00 per share plus an amount, determined in accordance
with Section 2 above, equal to the dividend (whether or not declared) for the
then-current quarterly dividend period accrued to but excluding the date of
such liquidation payment, including any adjustments in dividends payable due to
changes in the Dividends-Received Percentage but without accumulation of unpaid
dividends on the Series F Preferred Stock for prior Dividend Periods.

     (b)   If the assets of Fannie Mae available for distribution in such event
are insufficient to pay in full the aggregate amount payable to Holders of
Series F Preferred Stock and holders of all other classes or series of stock of
Fannie Mae, if any, ranking, as to the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, on a parity with the Series F
Preferred Stock, the assets will be distributed to the Holders of Series F
Preferred Stock and holders of all such other stock pro rata, based on the full
respective preferential amounts to which they are entitled (including any
adjustments in dividends payable due to changes in the Dividends-Received
Percentage but without accumulation of unpaid dividends on the Series F
Preferred Stock for prior Dividend Periods).

     (c)   Notwithstanding the foregoing, Holders of Series F Preferred Stock
will not be entitled to be paid any amount in respect of a dissolution,
liquidation or winding up of Fannie Mae until holders of any classes or series
of stock of Fannie Mae ranking, as to the distribution of assets upon
dissolution, liquidation or winding up of Fannie Mae, prior to the Series F
Preferred Stock have been paid all amounts to which such classes or series are
entitled.

     (d)   Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of Fannie Mae, nor the merger, consolidation or combination of
Fannie Mae into or with any other corporation or the merger, consolidation or
combination of any other corporation or entity into or with Fannie Mae, shall
be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 4.

     (e)   After payment of the full amount of the distribution of assets upon
dissolution, liquidation or winding up of Fannie Mae to which they are entitled
pursuant to paragraphs (a), (b) and (c) of this Section 4, the Holders of
Series F Preferred Stock will not be entitled to any further participation in
any distribution of assets by Fannie Mae.

	5.	 	No Conversion Or Exchange Rights.

     The Holders of shares of Series F Preferred Stock will not have any rights
to convert such shares into or exchange such shares for shares of any other
class or classes, or of any other series of any class or classes, of stock or
obligations of Fannie Mae.

	6.	 	No Pre-Emptive Rights.

     No Holder of Series F Preferred Stock shall be entitled as a matter of
right to subscribe for or purchase, or have any pre-emptive right with respect
to, any part of any new or additional issue of stock of any class whatsoever,
or of securities convertible into any stock of any class whatsoever, or any
other shares, rights, options or other securities of any class whatsoever,
whether now or hereafter authorized and whether issued for cash or other
consideration or by way of dividend.

	7.	 	Voting Rights; Amendments.

     (a)   Except as provided below, the Holders of Series F Preferred Stock
will not be entitled to any voting rights, either general or special.

     (b)   Without the consent of the Holders of Series F Preferred Stock,
Fannie Mae will have the right to amend, alter, supplement or repeal any terms
of this Certificate or the Series F Preferred Stock (1) to cure any ambiguity,
or to cure, correct or supplement any provision contained in this Certificate
of Designation

6

 

that may be defective or inconsistent with any other provision herein or
(2) to make any other provision with respect to matters or questions arising
with respect to the Series F Preferred Stock that is not inconsistent with the
provisions of this Certificate of Designation so long as such action does not
materially and adversely affect the interests of the Holders of Series F
Preferred Stock; provided, however, that any increase in the amount of
authorized or issued Series F Preferred Stock or the creation and issuance, or
an increase in the authorized or issued amount, of any other class or series of
stock of Fannie Mae, whether ranking prior to, on a parity with or junior to
the Series F Preferred Stock, as to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of Fannie
Mae, or otherwise, will not be deemed to materially and adversely affect the
interests of the Holders of Series F Preferred Stock.

     (c)   Except as set forth in paragraph (b) of this Section 7, the terms of
this Certificate or the Series F Preferred Stock may be amended, altered,
supplemented or repealed only with the consent of the Holders of at least
two-thirds of the shares of Series F Preferred Stock then outstanding, given in
person or by proxy, either in writing or at a meeting of stockholders at which
the Holders of Series F Preferred Stock shall vote separately as a class. On
matters requiring their consent, Holders of Series F Preferred Stock will be
entitled to one vote per share.

     (d)   The rules and procedures for calling and conducting any meeting of
Holders (including, without limitation, the fixing of a record date in
connection therewith), the solicitation and use of proxies at such a meeting,
the obtaining of written consents, and any other aspect or matter with regard
to such a meeting or such consents shall be governed by any rules that the
Board of Directors of Fannie Mae, or a duly authorized committee thereof, in
its discretion, may adopt from time to time, which rules and procedures shall
conform to the requirements of any national securities exchange on which the
Series F Preferred Stock are listed at the time.

	8.	 	Additional Classes or Series of Stock.

     The Board of Directors of Fannie Mae, or a duly authorized committee
thereof, shall have the right at any time in the future to authorize, create
and issue, by resolution or resolutions, one or more additional classes or
series of stock of Fannie Mae, and to determine and fix the distinguishing
characteristics and the relative rights, preferences, privileges and other
terms of the shares thereof. Any such class or series of stock may rank prior
to, on a parity with or junior to the Series F Preferred Stock as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, or otherwise.

	9.	 	Priority.

     For purposes of this Certificate of Designation, any stock of any class or
series of Fannie Mae shall be deemed to rank:

     (a)   Prior to the shares of Series F Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, if the holders of such class or series
shall be entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of Fannie Mae, as the case may be, in
preference or priority to the Holders of shares of Series F Preferred Stock.

     (b)   On a parity with shares of Series F Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, whether or not the dividend rates or
amounts, dividend payment dates or redemption or liquidation prices per share,
if any, be different from those of the Series F Preferred Stock, if the holders
of such class or series shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of Fannie
Mae, as the case may be, in proportion to their respective dividend rates or
amounts or liquidation prices, without preference or priority, one over the
other, as between the holders of such class or series and the Holders of shares
of Series F Preferred Stock.

7

 

     (c)   Junior to shares of Series F Preferred Stock, either as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of Fannie Mae, if such class shall be common stock of
Fannie Mae or if the Holders of shares of Series F Preferred Stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of Fannie Mae, as the case may be, in
preference or priority over the holders of such class or series.

     (d)   The shares of Preferred Stock of Fannie Mae designated “6.41%
Non-Cumulative Preferred Stock, Series A” (the “Series A Preferred Stock”),
“6.50% Non-Cumulative Preferred Stock, Series B” (the “Series B Preferred
Stock”), “6.45% Non-Cumulative Preferred Stock, Series C” (“the Series C
Preferred Stock”), “5.25% Non-Cumulative Preferred Stock, Series D” (“the
Series D Preferred Stock”) and “5.10% Non-Cumulative Preferred Stock, Series E”
(“the Series E Preferred Stock”) shall be deemed to rank on a parity with
shares of Series F Preferred Stock as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of Fannie
Mae. Accordingly, the holders of record of Series A Preferred Stock, the
holders of record of Series B Preferred Stock, the holders of record of Series
C Preferred Stock, the holders of record of Series D Preferred Stock, the
holders of record of Series E Preferred Stock and the Holders of Series F
Preferred Stock shall be entitled to the receipt of dividends and of amounts
distributable upon dissolution, liquidation or winding up of Fannie Mae, as the
case may be, in proportion to their respective dividend rates or amounts or
liquidation prices, without preference or priority, one over the other.

	10.	 	Transfer Agent, Dividend Disbursing Agent and Registrar.

     Fannie Mae hereby appoints First Chicago Trust Company a division of
EquiServe as its initial transfer agent, dividend disbursing agent and
registrar for the Series F Preferred Stock. Fannie Mae may at any time
designate an additional or substitute transfer agent, dividend disbursing agent
and registrar for the Series F Preferred Stock.

	11.	 	Notices.

     Any notice provided or permitted by this Certificate of Designation to be
made upon, or given or furnished to, the Holders of Series F Preferred Stock by
Fannie Mae shall be made by first-class mail, postage prepaid, to the addresses
of such Holders as they appear on the books and records of Fannie Mae. Such
notice shall be deemed to have been sufficiently made upon deposit thereof in
the United States mail. Notwithstanding anything to the contrary contained
herein, in the case of the suspension of regular mail service or by reason of
any other cause it shall be impracticable, in Fannie Mae’s judgment, to give
notice by mail, then such notification may be made, in Fannie Mae’s discretion,
by publication in a newspaper of general circulation in The City of New York or
by hand delivery to the addresses of Holders as they appear on the books and
records of Fannie Mae.

     Receipt and acceptance of a share or shares of the Series F Preferred
Stock by or on behalf of a Holder shall constitute the unconditional acceptance
by such Holder (and all others having beneficial ownership of such share or
shares) of all of the terms and provisions of this Certificate of Designation.
No signature or other further manifestation of assent to the terms and
provisions of this Certificate of Designation shall be necessary for its
operation or effect as between Fannie Mae and the Holder (and all such others).

8

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