Document:

Exhibit 10.2

             

             

            

        

         

        DATED ...............

         

         

        EDWARD D. JONES & CO., L.P.

        and

        TOWRY LAW FINANCE COMPANY LIMITED

         

         

         

        _________________________

        DEED OF TAX COVENANT 

        _________________________

         

         

        Slaughter and May

        One Bunhill Row

        London EC1Y 8YY

        (RVC/SMQS/EJZM)

         

         

         

         

         

         

         

        
            

        

        CONTENTS

        
            	
                         

                    	
                         

                    	
                        Page

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        1.

                    	
                        INTERPRETATION

                    	
                        1

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        2.

                    	
                        COVENANT

                    	
                        6

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        3.

                    	
                        LIMITS ON CLAUSE 2

                    	
                        7

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        4.

                    	
                        EXCLUSIONS

                    	
                        9

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        5.

                    	
                        MITIGATION

                    	
                        9

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        6.

                    	
                        OVER PROVISIONS AND RELIEFS

                    	
                        10

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        7.

                    	
                        RECOVERY FROM OTHER PERSONS

                    	
                        11

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        8.

                    	
                        CLAIMS PROCEDURE

                    	
                        11

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        9.

                    	
                        TAX RETURNS

                    	
                        12

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        10.

                    	
                        DUE DATE OF PAYMENT

                    	
                        14

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        11.

                    	
                        DEDUCTIONS FROM PAYMENTS, ETC.

                    	
                        14

                    
	
                         

                    	
                         

                    	
                         

                    
	
                        12.

                    	
                        MISCELLANEOUS

                    	
                        15

                    

        

         

        
            

             

             

            

        

        
            

        

        Agreed Form 22/10/09

        THIS DEED OF TAX COVENANT is made on ...............

        BETWEEN:-

        
            	
                        1.

                    	
                        EDWARD D. JONES & CO., L.P. whose registered office is at 12555 Manchester Road, St. Louis, Missouri 63131, United States (a Missouri registered limited partnership) (the “Covenantor”); 

                    

        

        AND

        
            	
                        2.

                    	
                        TOWRY LAW FINANCE COMPANY LIMITED whose registered office is at Towry Law House, Western Road, Bracknell, RG12 1TL, United Kingdom (registered in England No. 05721344)(the “Purchaser”).

                    

        

        NOW THIS DEED WITNESSES as follows:-

        
            	
                        1.

                    	
                        INTERPRETATION

                    

        

        In this deed of covenant-

        
            	
                        1.1

                    	
                        unless otherwise defined herein, and except where the context requires otherwise, capitalised terms used in this deed shall have the meanings ascribed to them in the Agreement; and the following expressions shall have the following meanings:-

                    

        

        
            	
                        “Adjusted Net Assets”

                    	
                        has the meaning given in the Agreement;

                         

                    
	
                        “Agreement”

                    	
                        means the agreement between the Covenantor and the Purchaser for the sale and purchase of the Shares;

                         

                    
	
                        “Bond Transfers”

                    	
                        means the purchases of Crest depositary interests or bonds referred to in the specific disclosure against warranty 23.2 as set out in the Disclosure Letter;

                         

                    
	
                        “Claim” 

                    	
                        means the issue of any notice, letter or other document by or on behalf of any Tax Authority or the taking of any other action by or on behalf of any Tax Authority from which notice, letter, document or action it appears that a Tax Liability is to be, or may be, imposed on the Company and/or the Subsidiary;

                         

                    

        

        

        	
                    “Covenantor’s Extended Group”

                	
                    means the Covenantor and any company (other than the Company or the Subsidiary) that is, or has at any time been, treated for the purposes of any Tax as being a member of the same group as the 

                     

                

        

        

         

        
            

        

        
            

            2

             

        

        
            	
                         

                    	
                        Covenantor or as being otherwise associated or connected with the Covenantor;

                         

                    
	
                        “Covenantor’s Group”

                    	
                        has the meaning ascribed to “Retained Group” in the Agreement;

                         

                    
	
                        “Deemed Tax Liability”

                    	
                        has the meaning given in sub-clause 1.3;

                         

                    
	
                        “Disclosure Letter”

                    	
                        has the meaning given in the Agreement;

                         

                    
	
                        “Event” 

                    	
                        means any transaction, event, circumstance, action or omission, including, without limitation, any change in the residence of any person for the purposes of any Tax and shall also include Completion;

                         

                    
	
                        “GAAP”

                    	
                        means generally accepted accounting practice as defined in section 50 Finance Act 2004;

                         

                    
	
                        “HMRC”

                    	
                        means H.M. Revenue & Customs;

                         

                    
	
                        “ICTA” 

                    	
                        means the Income and Corporation Taxes Act 1988;

                         

                    
	
                        “Income, Profits or Gains”

                    	
                        has the meaning given in sub-clause 1.4(A);

                         

                    
	
                        “Pre-Sale Losses”

                    	
                        has the meaning ascribed to it in Schedule 6 (Pre-Sale Losses) to the Agreement;

                         

                    
	
                        “Purchaser’s Group”

                    	
                        has the meaning ascribed to it in the Agreement;

                         

                    

        

        

        	
                    “Purchaser’s Relief”

                	
                    means:

                    (a)  any Relief which is treated as an asset of the Company or the Subsidiary in the balance sheet comprised in the Accounts or is taken into account in computing (and so reducing or eliminating what would, but for the Relief, have been) a provision for deferred Tax in the balance sheet comprised in the Accounts; and

                    (b)  any Relief which: 

                    (i)    arises as a consequence of or by reference to an Event occurring (or deemed to occur) after Completion or in respect of a period commencing after Completion; and

                    (ii)   is not a Relief as referred to in sub-clause 6.2

                

        

         

        
            

        

        
            

            3

             

            

        

         

        
            	
                    	
                              (the benefit thereof being for the Covenantor in accordance with the provisions of clause 6); and

                        (iii)  is not a Relief as is comprised in the Pre-Sale Losses;

                         

                    
	
                        “Relevant Amount” 

                    	
                        has the meaning set out in sub-clause 6.3;

                         

                    
	
                        “Relief” 

                    	
                        means any loss, relief, allowance or credit in respect of any Tax and any deduction in computing Income, Profits or Gains for the purposes of any Tax;

                         

                    
	
                        “Shares” 

                    	
                        means all the issued shares in the capital of the Company;

                         

                    
	
                        “Straddle Period”

                    	
                        has the meaning set out in sub-clause 9.4;

                         

                    
	
                        “Tax” 

                    	
                        means:-

                         

                    

        

        

        	
                     

                	
                    (a)         within the United Kingdom:

                    (i) corporation tax, advance corporation tax, income tax (including income tax required to be deducted or withheld from or accounted for in respect of any payment), capital gains tax, any liability arising under section 601 ICTA, inheritance tax, national insurance contributions, stamp duty reserve tax (or amounts in respect thereof), stamp duty to the
                    extent that the same is recoverable as if it were an amount of stamp duty reserve tax, stamp duty land tax, value added tax, duties of customs and excise, and 

                    (ii) any taxes, levies, duties, charges, imposts or withholdings corresponding to, similar to, or replacing any of the taxes referred to in (i) above, 

                    together with all penalties, charges and interest relating to any of the above; and

                
	
                     

                	
                    (b)         outside the United Kingdom, all taxes and all levies, duties, imposts, charges and withholdings of a fiscal nature, including (without limitation) taxes on gross or net 

                

        

        

         

        
            

        

        
            

            4

             

        

        
             

            	
                         

                    	
                                    Income, Profits or Gains and taxes on receipts, sales, use, occupation, franchise, value added and personal property, together with all penalties, charges and interest relating to any of them,

                         

                    
	
                         

                    	
                        regardless (in either case) of whether any such taxes, levies, duties, imposts, charges, withholdings, penalties and interest are chargeable directly or primarily against or attributable directly or primarily to the Company, the Subsidiary or any other person and of whether any amount in respect of any of them is recoverable from any other person as
                        mentioned in clause 7 (RECOVERY FROM OTHER PERSONS);

                         

                    
	
                        “Tax Assessment” 

                    	
                        means any assessment, demand, determination or other similar formal notice of a Tax Liability issued by or on behalf of any Tax Authority by virtue of which the Company, the Subsidiary or any other person either is liable to make a payment of Tax or will, with the passing of time, become so liable (in the absence of any successful application to postpone
                        any such payment) and shall also mean any self-assessment made by the Company, the Subsidiary or any other person in respect of any amount of Tax which any of them either considers that it is liable to pay or considers that it will, with the passing of time, become liable to pay;

                         

                    
	
                        “Tax Authority” 

                    	
                        means any taxing or other authority (whether within or outside the United Kingdom) competent to impose any Tax Liability;

                         

                    
	
                        “Tax Liability”

                    	
                        has the meaning given in sub-clause 1.2; 

                         

                    

        

        

        	
                    “Transitional Services Agreement”

                	
                    has the meaning given in the Agreement;

                     

                

        

        

        
            	
                        1.2

                    	
                        references to any “Tax Liability” of the Company and/or the Subsidiary shall mean both liabilities or any increase in the liabilities of the Company and/or the relevant Subsidiary to make actual payments of or in respect of any Tax regardless of whether any such liability shall have been
                        discharged in whole or in part on or before Completion save to the extent that such discharge is taken into account in the Accounts and also:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        the loss of a right to repayment of Tax which has been treated as an asset of the Company or the Subsidiary in the balance sheet comprised in the Accounts or the setting off of any such right to repayment of Tax against any liability to make an actual 

                    

        

        
            

        

        
            

            5

             

            

        

         

        
            	
                         

                    	
                         

                    	
                        payment of Tax in respect of which the Purchaser would, but for that setting off, have been able to make a claim against the Covenantor under this deed; 

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        the setting off against Income, Profits or Gains which were earned, accrued or received on or before Completion or in respect of a period ended on or before Completion or against any Tax otherwise chargeable in respect of an Event occurring (or deemed to occur) on or before Completion or in respect of a period ended on or before Completion of any
                        Purchaser’s Relief in circumstances where, but for such setting off, the Company and/or the Subsidiary would have had a liability to make an actual payment of Tax in respect of which the Purchaser would have been able to make a claim against the Covenantor under this deed; and

                    

        

        
            	
                         

                    	
                        (C)

                    	
                        the loss or non-availability of, or a reduction in the amount of, any Relief falling within paragraph (a) of the definition of Purchaser’s Relief;

                    

        

        
            	
                        1.3

                    	
                        in any case falling within any of sub-clauses 1.2(A), 1.2(B), or 1.2(C) the amount that is to be treated for the purposes of this deed as a Tax Liability of the Company or the Subsidiary (the
                        “Deemed Tax Liability”) shall be determined as follows:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        in a case which falls within sub-clause 1.2(A), the Deemed Tax Liability shall be the amount of the repayment that would have been obtained but for the loss, reduction or setting off mentioned in that sub-clause;

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        in a case which falls within sub-clause 1.2(B) and where the Relief that was the subject of the setting off mentioned in that sub-clause was a deduction from or offset against Tax, the Deemed Tax Liability shall be the amount of that Relief; 

                    

        

        
            	
                         

                    	
                        (C)

                    	
                        in a case which falls within sub-clause 1.2(B) and where the Relief that was the subject of the setting off mentioned in that sub-clause was a deduction from or offset against Income, Profits or Gains, the Deemed Tax Liability shall be the amount of Tax which has been saved in consequence of the
                        setting off; and

                    

        

        

        	
                     

                	
                    (D)

                	
                    in a case which falls within sub-clause 1.2(C), the Deemed Tax Liability shall be the amount of any liability to make an actual payment of Tax which would not have arisen if the Relief had not been lost or reduced or, as the case may be, had been available;

                

        
            	
                        1.4

                    	
                        references to:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        “Income, Profits or Gains” shall include any income, profits or gains which are deemed to be earned, accrued or received for the purposes of any Tax; and

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        Income, Profits or Gains (as defined in sub-clause 1.4(A)) as being earned, accrued or received on or before a particular date or in respect of a particular period shall include Income, Profits or Gains which are deemed to have been, earned, accrued or received on or before that date or in respect of
                        that period for the purposes of any Tax; 

                    

        

        
            	
                        1.5

                    	
                        unless otherwise specified:-

                    

        

        
            

        

        
            

            6

             

            

        

        
            	
                         

                    	
                        (A)

                    	
                        references to clauses and sub-clauses, are to clauses and sub-clauses of this deed;

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

                    

        

        
            	
                         

                    	
                        (C)

                    	
                        references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state or any joint venture, association or partnership (whether or not having separate legal personality);

                    

        

        
            	
                         

                    	
                        (D)

                    	
                        references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

                    

        

        
            	
                         

                    	
                        (E)

                    	
                        the expression “body corporate” shall have the meaning given in section 1173 Companies Act 2006;

                    

        

        
            	
                         

                    	
                        (F)

                    	
                        references to writing shall include any modes of reproducing words in a legible and non-transitory form;

                    

        

        
            	
                         

                    	
                        (G)

                    	
                        references to times of the day are to London time;

                    

        

        
            	
                         

                    	
                        (H)

                    	
                        headings to clauses are for convenience only and do not affect the interpretation of this deed;

                    

        

        
            	
                         

                    	
                        (I)

                    	
                        references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term; and

                    

        

        

        	
                     

                	
                    (J)

                	
                    without limitation, references to the ordinary course of business or trade of the Company and/or the Subsidiary as carried on at Completion do not include any transaction carried out otherwise than on arm’s length terms except to the extent carried out pursuant to a legally binding commitment of the Company and/or the Subsidiary created on or before
                    Completion.

                

        

        	
                    2.

                	
                    COVENANT

                

        Subject to the provisions of clause 3 (LIMITS ON CLAUSE 2), clause 4 (EXCLUSIONS) and clause 5 (MITIGATION) the Covenantor hereby covenants with the Purchaser to pay to the Purchaser (so far as possible by way of repayment of the
        consideration payable under the Agreement for the Shares) an amount equal to any of the following:-

        
            	
                        2.1

                    	
                        any Tax Liability of the Company and/or the Subsidiary arising:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        as a consequence of or by reference to any Event (and “Event” shall, for the avoidance of doubt and without limitation, include Bond Transfers) which occurred on or before Completion or was deemed to occur on 

                    

        

         

        
            

        

        
            

            7

             

            

        

        
            	
                         

                    	
                         

                    	
                        or before Completion for the purposes of any Tax; or

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        in respect of or by reference to any Income, Profits or Gains which were earned, accrued or received on or before Completion or in respect of a period ending on or before Completion;

                    

        

        
            	
                        2.2

                    	
                        any Tax Liability of the Company and/or the Subsidiary arising as a consequence of or by reference to any of the following occurring or being deemed to occur at any time after Completion:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        the disposal by any member of the Covenantor’s Extended Group of any asset or of any interest in or right over any asset; 

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        the making by any member of the Covenantor’s Extended Group of any such payment or deemed payment as constitutes a chargeable payment for the purposes of section 214 ICTA; 

                    

        

        
            	
                         

                    	
                        (C)

                    	
                        any Event or the earning of any Income, Profits or Gains which results in the Company and/or the Subsidiary becoming liable to pay or bear a Tax Liability chargeable directly or primarily against or attributable directly or primarily to another person (not being the Company and/or the Subsidiary) and which liability to pay arises as a consequence of or by
                        reference to the relationship subsisting between the Company or the Subsidiary and that other person at any time prior to Completion; or

                    

        

        
            	
                         

                    	
                        (D)

                    	
                        any member of the Covenantor’s Extended Group ceasing to be resident in the United Kingdom for the purposes of any Tax; and

                    

        

        
            	
                        2.3

                    	
                        any reasonable out-of-pocket legal, accounting or other costs and expenses reasonably and properly incurred by the Company and/or the Subsidiary in connection either with any such Tax Liability as is mentioned in sub-clauses 2.1 or 2.2 or with any Claim therefor
                        which leads to such a Tax Liability (save to the extent that the Covenantor’s liability under this deed in respect of such Tax Liability is limited or excluded pursuant to clause 3 or clause 4).

                    

        

        
            	
                        3.

                    	
                        LIMITS ON CLAUSE 2

                    

        

        The covenant given in clause 2 (COVENANT) shall not cover any Tax Liability of the Company and/or the Subsidiary, and the Covenantor shall not be in breach of the Tax Warranties, to the extent that:-

        
            	
                        3.1

                    	
                        (in relation only to a breach of any of the Tax Warranties) provision or reserve in respect of that Tax Liability was made in the Accounts or otherwise expressly reflected therein; 

                    

        

        
            	
                        3.2

                    	
                        that Tax Liability was paid or discharged before Completion and such payment or discharge was reflected in the Adjusted Net Assets; 

                    

        

        
            

        

        
            

            8

             

            

        

        
            	
                        3.3

                    	
                        that Tax Liability was provided for or reserved in (or otherwise taken into account by way of a decrease in the amount of the assets or increase in the amount of the Total Liabilities comprised in) the Adjusted Net Assets; 

                    

        

        
            	
                        3.4

                    	
                        that Tax Liability (other than a Tax Liability arising as a consequence of or by reference to any Bond Transfers) arises or is increased as a result only of any increase in rates of Tax, or any change in law, or any change in the practice of, or any withdrawal of any extra-statutory concession by, any Tax Authority, or any change in accountancy practice or
                        principles, being an increase, withdrawal or change made, in any such case, after the date of the Agreement; 

                    

        

        
            	
                        3.5

                    	
                        that Tax Liability would not have arisen but for a voluntary transaction, action or omission carried out or effected by any member of the Purchaser’s Group at any time after Completion, other than any such transaction, action or omission:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        carried out or effected under a legally binding commitment created on or before Completion; or 

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        carried out or effected in the ordinary course of the trade carried on by the Company or Subsidiary as at Completion; or

                    

        

        
            	
                        3.6

                    	
                        that Tax Liability would not have arisen or would have been reduced but for:

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        a failure or omission on the part of the Purchaser and/or the Company and/or the Subsidiary after Completion to make any election or claim any Relief, the making or claiming of which was taken into account in computing the provision or reserve for Tax in the Accounts and the need for the making or claiming of which either has been notified to the Purchaser
                        in writing at least ten Business Days prior to the last date on which the election can be made or Relief claimed or was apparent on the face of the Accounts or, PROVIDED THAT the Covenantor notifies the Purchaser that such election or claim is required to be made, of the corporation tax return or associated tax computation prepared by the Covenantor pursuant to clause 9; or

                    

        

        

        	
                     

                	
                    (B)

                	
                    any election or claim for any Relief, made or claimed by the Company and/or the Subsidiary after Completion, the making or claiming of which was not taken into account in computing the provision or reserve for Tax in the Accounts;

                

        
            	
                        3.7

                    	
                        that Tax Liability arises by reason of a voluntary disclaimer by the Company and/or the Subsidiary after Completion of the whole or part of any allowance to which any of them is entitled under the Capital Allowances Act 2001 or by reason of the revocation by the Company and/or the Subsidiary after Completion of any claim for Relief made (whether
                        provisionally or otherwise) by any of them prior to Completion; 

                    

        

        
            	
                        3.8

                    	
                        that Tax Liability arises directly as a result of any changes after Completion of the date to which the Company and/or the Subsidiary makes up its accounts or in the bases, methods or policies of accounting of the Purchaser and/or the Company and/or the Subsidiary except where such change was necessary to comply with GAAP as, and to the extent that, it
                        applied to the relevant company at Completion; 

                    

        

        
            

        

        
            

            9

             

            

        

        
            	
                        3.9

                    	
                        that Tax Liability has been made good by insurers or otherwise compensated for without cost to the Purchaser, the Company and/or the Subsidiary; 

                    

        

        
            	
                        3.10

                    	
                        that Tax Liability arises or is increased as a consequence of any failure by the Purchaser to comply with any of its obligations under this deed or the Agreement; 

                    

        

        
            	
                        3.11

                    	
                        the Purchaser has made recovery in respect of that Tax Liability by means of a claim for breach of any of the Warranties or under any other provision of the Agreement (including, without limitation, any of the Indemnities); 

                    

        

        
            	
                        3.12

                    	
                        any of the Pre-Sale Losses are available to lawfully reduce or otherwise lawfully eliminate the Tax Liability in question; or

                    

        

        
            	
                        3.13

                    	
                        the Tax Liability arises as a result of any of the provisions of the Transitional Services Agreement or their proper implementation.

                    

        

        
            	
                        4.

                    	
                        EXCLUSIONS

                    

        

        Certain provisions of Schedule 3 to the Agreement contain further limitations which apply to this deed (including setting certain financial and time limits).

        
            	
                        5.

                    	
                        MITIGATION

                    

        

        The Purchaser shall, at the direction in writing of the Covenantor, procure that the Company and the Subsidiary take all such steps as the Covenantor may require to:-

        
            	
                        5.1

                    	
                        use in the manner hereinafter mentioned all such Reliefs (other than a Purchaser’s Relief or any other Relief to the extent it has already been taken into account in giving rise to a “Relevant Amount” under sub-clause 6.3) as are available to the Company or Subsidiary to reduce or
                        eliminate any Tax Liability in respect of which the Purchaser would have been able to make a claim against the Covenantor under this deed (such Reliefs including, without 

                    

        

         

        
            

        

        
            

            10

             

            

        

        
            	
                        5.2

                    	
                        make all such claims and elections specified by the Covenantor in respect of any accounting period of the Company and/or the Subsidiary commencing before Completion as have the effect of reducing or eliminating any such Tax Liability as is mentioned in sub-clause 5.1, provided that no such claim or election
                        shall require the Company or the Subsidiary to use any Purchaser’s Relief or any other Relief to the extent it has already been taken into account in giving rise to a “Relevant Amount” under sub-clause 6.3.

                    

        

        
            	
                        6.

                    	
                        OVER-PROVISIONS AND RELIEFS

                    

        

        
            	
                        6.1

                    	
                        If the auditors for the time being of the Company shall certify (at the request and expense of the Covenantor) that any provision for Tax in the Accounts (excluding any provision for deferred Tax) has proved to be an over-provision, then the amount of such over-provision shall be dealt with in accordance with sub-clause
                        6.3.

                    

        

        
            	
                        6.2

                    	
                        If any Tax Liability, or the matter or circumstances giving rise to such a Tax Liability, which has resulted in a payment having been made or becoming due from the Covenantor under this deed has given or will give rise to a Relief for the Company or the Subsidiary which would not otherwise have arisen (other than a Relief used pursuant to
                        clause 5 to limit the liability of the Covenantor to make a payment under this deed in respect of a Tax Liability), then, as and when the liability of the Company, the Subsidiary or any member of the Purchaser’s Group to make an actual payment of or in respect of Tax is reduced, by reason of that Relief and after taking account of the effect of all other Reliefs that are or become available to the Company, the
                        Subsidiary or any member of the Purchaser’s Group (including any Relief derived from a subsequent accounting period), from the amount that that liability would have been but for the availability of that Relief, the amount by which that liability is so reduced shall be dealt with in accordance with sub-clause 6.3.

                    

        

        
            	
                        6.3

                    	
                        Where it is provided under sub-clause 6.1 or 6.2 that any amount (the “Relevant Amount”) is to be dealt with in accordance with this sub-clause:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        the Relevant Amount shall first be set off against any payment then due from the Covenantor under this deed; and

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        to the extent there is an excess, a refund shall be made to the Covenantor of any previous payment or payments made by the Covenantor under this deed and not previously refunded under this clause up to the amount of such excess; and

                    

        

        
            	
                    	
                        (C)

                    	
                        to the extent that the excess referred to in paragraph 6.3(B) is not exhausted under that paragraph, the remainder of that excess shall be carried forward and set off against any future payment or payments which become due from the Covenantor under this deed.

                    
	6.4	Where any such certification as is mentioned in sub-clause 6.1 has been made, the Covenantor, the Purchaser or the Company may request the auditors for the time being of the Company to review such certification in the light of all relevant circumstances, including any facts which have become known only since such certification, and to
                    certify whether such certification remains correct or whether, in the light of those circumstances, the amount that was the subject of such certification should be amended.
	
                        6.5

                    	
                        If the auditors certify under sub-clause 6.4 that an amount previously certified should be amended, that amended amount shall be substituted for the purposes of sub-clause 6.3 as the Relevant Amount in respect of the certification in question in
                        place of the amount originally certified, and such adjusting payment (if any) as may be required by virtue of the 

                    

        

         

         

        
            

        

        
            

            11

             

            

        

        
            	
                         

                    	
                        above-mentioned substitution shall be made as soon as practicable by the Covenantor or (as the case may be) to the Covenantor.

                    

        

        
            	
                        6.6

                    	
                        For the purpose of giving full effect to this clause 6, the Purchaser shall, but only in accordance with and to the extent of the priority as to use of Reliefs specified in clause 6.2, procure that the Company, the Subsidiary and all members of the
                        Purchaser's Group use all such Reliefs as are mentioned in sub-clause 6.2 to lawfully reduce or eliminate any liability to Tax which the Company, the Subsidiary, or any member of the Purchaser’s Group would otherwise have incurred (such use including, without limitation, the surrender of the same, or of an amount equal to the same, by the Company to another member of the Purchaser’s Group), the said use being
                        to effect the reduction or elimination of any such liability to Tax to the extent permitted by law, and to provide to the Covenantor (if so required by the Covenantor), at the Covenantor’s expense, a certificate from the auditors (for the time being) of the Purchaser confirming that such Relief has been so used

                    

        

        
            	
                        7.

                    	
                        RECOVERY FROM OTHER PERSONS

                    

        

        If, in the event of any payment becoming due from the Covenantor under clause 2 (COVENANT) or in respect of the Tax Warranties, any member of the Purchaser’s Group either is immediately entitled at the due date for the making of that payment to recover from any person (not being any member of the Purchaser’s Group but
        including, without limitation, any Tax Authority) any sum in respect of the Tax Liability that has resulted in that payment becoming due from the Covenantor, or at some subsequent date becomes entitled to make such a recovery, then the Purchaser shall procure that the Company or, as the case may be, the Subsidiary shall promptly notify the Covenantor of its entitlement and shall, if so required by the Covenantor and at the Covenantor’s sole expense, take all appropriate steps to
        enforce that recovery (keeping the Covenantor fully and promptly informed of the progress of any action taken and providing the Covenantor with copies of all relevant correspondence and documentation); and if the Covenantor has made a payment under clause 2 (COVENANT) or under the Tax Warranties in respect of the Tax Liability in question, the Purchaser shall account to the Covenantor for whichever is the lesser of:-

        

        	
                     

                	
                    (A)

                	
                    any sum so recovered by the Company or Subsidiary, or member of the Purchaser’s Group, in respect of that Tax Liability (including any interest or repayment supplement paid by the Tax Authority or other person on or in respect thereof) less any Tax chargeable on the Company, the Subsidiary or member of the Purchaser’s Group; and

                

        
            	
                         

                    	
                        (B)

                    	
                        the amount paid by the Covenantor under clause 2 (COVENANT) or under the Tax Warranties in respect of that Tax Liability.

                    

        

        
            	8.	CLAIMS PROCEDURE
	
                        8.1

                    	
                        Upon the Purchaser or the Company and/or the Subsidiary becoming aware of a Claim relevant for the purposes of this deed or under the Tax Warranties, the Purchaser shall forthwith give written notice of that Claim to the Covenantor or, as the case may be, shall procure that the Company or Subsidiary forthwith give written notice of that Claim (including
                        reasonably sufficient details of such Claim, the due date for payment and the time limits for 

                    

        

        
            

        

        
            

            12

             

            

        

        
            	
                         

                    	
                        appeal, and so far as practicable, the amount of the Tax Liability involved) to the Covenantor, and the Purchaser shall further procure that, if the Covenantor shall indemnify the Purchaser and/or the Company or Subsidiary to their reasonable satisfaction against all losses, costs, damages and expenses, including interest on overdue Tax, which may be
                        incurred thereby, the Company or Subsidiary takes such action and gives such information and assistance in connection with the affairs of the Company or Subsidiary as the Covenantor may reasonably and promptly by written notice request to avoid, dispute, resist, appeal, compromise or defend the Claim; 

                    

        

        PROVIDED THAT the Purchaser shall not be obliged to procure that the Company and/or the Subsidiary appeals against any Tax Assessment if, the Covenantor having been given written notice of the receipt of that Tax Assessment in accordance with the preceding provisions of this sub-clause, the Company or Subsidiary has not within 30 days thereafter received instructions in writing from the
        Covenantor, in accordance with the preceding provisions of this sub-clause, to make that appeal. 

        
            	
                        8.2

                    	
                        The actions which the Covenantor may reasonably request under sub-clause 8.1 shall include (without limitation) the Company or Subsidiary applying to postpone (so far as legally possible) the payment of any Tax and/or allowing the Covenantor to take on or take over at its own expense the conduct of all or
                        any proceedings of whatsoever nature arising in connection with the Claim in question, and, if the Covenantor takes on or takes over the conduct of proceedings, the Purchaser shall provide and shall procure that the Company and/or the Subsidiary provides such information and assistance as the Covenantor may reasonably require in connection with the preparation for and conduct of those proceedings. 

                    

        

        
            	
                        9.

                    	
                        TAX RETURNS

                    

        

        
            	
                        9.1

                    	
                        The Covenantor or its duly authorised agent shall prepare the corporation Tax returns of the Company and the Subsidiary for all accounting periods ended on or prior to the Accounts Date to the extent that the same shall not have been prepared before Completion. 

                    

        

        
            	
                        9.2

                    	
                        The Purchaser shall procure that the Company and the Subsidiary shall cause the returns mentioned in sub-clause 9.1 to be authorised, signed and submitted to the appropriate authority without amendment or with such amendments as the Covenantor shall agree and shall give the Covenantor or its agent all such
                        assistance as may be required to complete those returns; 

                    

        

        PROVIDED THAT the Purchaser shall not be obliged to procure that either the Company or any Subsidiary take any such action as is mentioned in this sub-clause in relation to any Tax return that is not true and accurate in all material respects.

        
            	
                        9.3

                    	
                        The Purchaser or its duly authorised agent shall prepare the Tax returns of the Company and the Subsidiary for all accounting periods beginning on or before, but ending after, Completion (each such accounting period a “Straddle Period”). 

                    

        

        
            	
                        9.4

                    	
                        The Purchaser or its duly authorised agent shall submit each such Tax return referred to in sub-clause 9.3 in draft form to the Covenantor at least 20 Business Days before the last date 

                    

        

         

        
            

        

        
            

            13

             

            

        

        
            	
                         

                    	
                        on which such Tax returns may be filed with the applicable Tax Authority without incurring interest and penalties and the Covenantor shall be given an opportunity to make comments thereon. The Purchaser or its duly authorised agent shall reflect all reasonable comments of the Covenantor received prior to the submission of the relevant Tax return.

                    

        

        
            	
                        9.5

                    	
                        Save in relation to the preparation and submission of the corporation tax returns as provided in sub-clause 9.1, the Purchaser or its duly authorised agent shall prepare all documentation and deal with all matters (including correspondence) relating to the Tax returns of the Companies and the Subsidiary for
                        all periods on or prior to the Accounts Date and for all Straddle Periods provided that:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        where there is any correspondence with any Tax Authority in relation to such Tax returns; or

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        where any meeting or telephone call is to take place with a representative or representatives of any Tax Authority in relation to such Tax returns; 

                    

        

        and that correspondence, meeting or call may affect or otherwise be relevant to the liability or potential liability to Tax of the Covenantor, or any member of the Covenantor’s Group, or the Covenantor’s liability or potential liability under clause 2 (COVENANT):

        
            	
                         

                    	
                        (C)

                    	
                        the Purchaser shall as promptly as is reasonably practicable send copies of all such correspondence received and copies of all draft replies to the Covenantor and shall give the Covenantor an opportunity to make comments thereon a reasonable time in advance of such correspondence’s submission to the relevant Tax Authority to the extent that it relates
                        to the liability to Tax of the Covenantor, or any member of the Covenantor’s Group, or the Covenantor’s liability under clause 2 (COVENANT). The Purchaser or its duly authorised agent shall incorporate all reasonable comments of the Covenantor received prior to the submission of the relevant correspondence in such correspondence; and

                    

        

        
            	
                         

                    	
                        (D)

                    	
                        the Purchaser shall give reasonable advance notice of any such meeting to the Covenantor and the Covenantor shall be entitled to nominate a person or persons to attend and participate in such meeting or call to the extent that it relates to the liability to Tax of the Covenantor, or any member of the Covenantor’s Group, or the Covenantor’s
                        liability under clause 2 (COVENANT).

                    

        

        
            	
                        9.6

                    	
                        The Covenantor shall provide such access to their personnel, books, accounts and records and provide such assistance as is necessary and reasonable to enable the Purchaser or its duly authorised agent in complying with its obligations under sub-clauses 9.3 and 9.5.

                    

        

        
            	
                        9.7

                    	
                        Subject to sub-clause 3.10 of this deed, nothing done by the Company and/or the Subsidiary pursuant to this clause shall in any respect restrict or reduce any rights the Purchaser may have to make a claim against the Covenantor under this deed in respect of any such Tax Liability as is mentioned in
                        clause 2 (COVENANT).

                    

        

         

        
            

        

        
            

            14

             

            

        

        
            	
                        9.8

                    	
                        The Purchaser shall procure that the Company and the Subsidiary shall afford such access to their personnel, books, accounts and records and provide such assistance as is necessary and reasonable to enable the Covenantor or its duly authorised agent to conduct matters in accordance with the Covenantor’s rights and obligations under this
                        clause.

                    

        

        
            	
                        9.9

                    	
                        Where there is conflict between the provisions of this clause 9 (TAX RETURNS) and the provisions of clauses 8 (CLAIMS PROCEDURE), the provisions of clauses 8 (CLAIMS PROCEDURE) shall take precedence over
                        the provisions of this clause 9 (TAX RETURNS).

                    

        

        
            	
                        10.

                    	
                        DUE DATE OF PAYMENT

                    

        

        
            	
                        10.1

                    	
                        Where the Covenantor becomes liable to make any payment under clause 2 (COVENANT), the payment shall be made in cleared funds and the due date for the making of that payment shall be the later of:-

                    

        

        
            	
                         

                    	
                        (A)

                    	
                        three Business Days following the date on which notice demanding such payment is received by the Covenantor from the Purchaser; and

                    

        

        
            	
                         

                    	
                        (B)

                    	
                        in a case that involves an actual payment of Tax by the Company and/or any of the Subsidiary, the date that is the last date on which the Company or Subsidiary would have had to have paid to the appropriate Tax Authority the Tax that has given rise to the Covenantor’s liability under this deed in order to avoid incurring a liability to interest or a
                        charge or penalty in respect of that Tax Liability; or

                    

        

        
            	
                         

                    	
                        (C)

                    	
                        in a case falling within any of sub-clauses 1.2(A), 1.2(B) or 1.2(C), the date the repayment would have been obtained or when Tax would have been payable but for the setting off, as the case may
                        be.

                    

        

        
            	10.2	
                        If any payment required to be made by any party under this deed is not made by the due date for the making thereof, then, except to the extent that the Covenantor’s liability under clause 2 (COVENANT) compensates the Purchaser for the late payment by virtue of its extending to interest and penalties,
                        that payment shall carry interest from that due date until the date when the payment is actually made at the rate of 4 per cent. above the base rate from time to time of the Royal Bank of Scotland plc.

                    
	
                        11.

                    	
                        DEDUCTIONS FROM PAYMENTS, ETC.

                    
	
                        11.1

                    	
                        All sums payable by the Covenantor to the Purchaser under this deed shall be paid free and clear of all deductions or withholdings whatsoever, save only as may be required by law.

                    
	
                        11.2

                    	
                        If any deductions or withholdings are required by law to be made from any of the sums payable as mentioned in sub-clause 11.1 other than interest, the Covenantor shall be obliged to pay to the Purchaser such sum as will, after the deduction or withholding has been made, leave the Purchaser with the same
                        amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding.

                    

        

         

        
            

        

        
            

            15

             

            

        

        
            	
                        11.3

                    	
                        If any sum payable by the Covenantor to the Purchaser under this deed (other than interest or Tax collectable by deduction or withholding) shall be subject to Tax within the United Kingdom in the hands of the Purchaser, the Covenantor shall be under the same obligation to make an increased payment in relation to such Tax as if it were a deduction or
                        withholding required by law. No such increased payment shall be payable under sub-clause 11.3 if the relevant sum payable by the Covenantor under this deed cannot or does not fall to be treated for tax purposes as an adjustment to (and reduction in the amount of) the consideration paid by the Purchaser for the Shares for the reason that the payments under clause 8 (Adjusted Net Assets) of the Agreement do not fall to be
                        treated as such consideration.

                    

        

        
            	
                        12.

                    	
                        MISCELLANEOUS

                    

        

        
            	
                        12.1

                    	
                        Except as expressly set out herein, a person who is not a party to this Deed shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

                    

        

        
            	
                        12.2

                    	
                        The provisions of clauses 20 (Effect of Completion), 21 (Remedies and Waivers), 22 (Assignment), 25 (Notices), 27
                        (Confidentiality), 28 (Costs and Expenses), 29 (Counterparts), 30 (Invalidity), 32 (Choice of Governing
                        Law) and 33 (Jurisdiction) of the Agreement shall apply for the purposes of this Deed as if set out herein in full mutatis mutandis, with the proviso to clauses 22.1 being read replacing the words "under this Agreement" and "the operation of the "after-tax" provision in clause 1" with, respectively,
                        the words "under this deed" and "the operation of clause 11 of this deed".

                    

        

         

         

         

         

         

        
            

        

        
            

            16

             

            

        

        IN WITNESS WHEREOF this document has been executed and delivered as a deed the day and year first before written.

         

        
            	
                        Executed as a deed by 

                        EDWARD D. JONES & CO., L.P.

                        by its General Partner, EDJ Holding Company, Inc., by James D. Weddle (in his capacity as President) in the presence of:

                        Name of Witness:

                        .................................

                        Address of Witness:

                        .................................

                        .................................

                        Occupation of Witness:

                        .................................

                         

                    	
                        )

                        )

                        )

                        )

                        )

                        )

                    	
                         

                        .......................................

                        James D. Weddle

                         

                        .......................................

                        Witness Signature

                        _________________________

                    

        

         

        
            	
                        Executed as a deed

                    	
                        )

                    	
                         

                    	
                         

                    
	
                        by TOWRY LAW FINANCE COMPANY LIMITED 

                        acting by 

                        ...................................................

                        (Director / Secretary)

                         

                        ...................................................

                        (Director)

                    	
                        )

                        )

                        )

                        )

                        )

                        )

                        )

                        )

                        )

                        )

                        )

                        )

                    	
                        

                         

                        .................................

                         

                        

                        .................................exv10w1

Exhibit 10.1

MEMORANDUM OF UNDERSTANDING

AMONG

THE DEPARTMENT OF THE TREASURY,

THE FEDERAL HOUSING FINANCE AGENCY,

THE FEDERAL NATIONAL MORTGAGE ASSOCIATION, AND

THE FEDERAL HOME LOAN MORTGAGE CORPORATION

W I T N E S S E T H:

WHEREAS, the disruptions in housing markets, housing finance and capital markets have constricted
the general availability of credit to many different credit markets, particularly those related to
housing;

WHEREAS, the Federal Government has responded by establishing numerous special programs to fill the
gaps created by this temporary, but severe deterioration in credit availability;

WHEREAS, the United States Congress, in enacting the Housing and Economic Recovery Act of 2008, the
Emergency and Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act of
2009 and other legislation provided the United States Department of Treasury and other agencies of
government with the authority, funding, and direction to undertake such credit support programs,
with many of these program directed specifically at supporting housing markets and housing finance;

WHEREAS, state and local housing finance agencies (HFAs) have a core mission of providing financing
for (i) affordable mortgage financing for low and moderate income households, especially first-time
homebuyers, and (ii) affordable multifamily rental properties;

WHEREAS, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation
(collectively, the GSEs) have congressional charters with a statutory purpose of providing
stability, liquidity and affordability to housing finance, especially in support of affordable
housing;

WHEREAS, the Federal Housing Finance Agency, which was formed by a legislative merger of the Office
of Federal Housing Enterprise Oversight, the Federal Housing Finance Board and the United States
Department of Housing and Urban Development GSE mission team, regulates the GSEs and the twelve
(12) Federal Home Loan Banks;

WHEREAS, in this role, the Federal Housing Finance Agency promotes the safety and soundness of the
GSEs, supports housing finance and affordable housing, and supports a stable and liquid mortgage
market;

WHEREAS, the GSEs have been investors in Mortgage Revenue Bonds issued by housing finance agencies
(HFAs) and/or liquidity providers to HFAs, consistent with the

 

 

GSEs’ mission, and the GSEs’ and HFAs’ common purpose of supporting credit needs in affordable
housing;

WHEREAS, the National Council of State Housing Finance Agencies and the National Association of
Local Housing Finance Agencies requested assistance from the U.S. Department of the Treasury to
meet their funding needs to continue support of their affordable housing mission during this period
of disruption in housing finance and that request has been supported by market developments; and

WHEREAS, Treasury requested FHFA and the GSEs to help Treasury to design and implement the programs
set out in this Memorandum of Understanding to assist the HFAs. In helping in the design,
implementation and execution of these programs, the GSEs are not acting as intermediaries between
Treasury and the HFAs, made no introductions between those parties and are not expected to perform
the traditional functions of a securities dealer.

NOW THEREFORE, the parties to this Memorandum of Understanding do hereby agree to affirmatively
respond to this request for assistance in the manner set forth in this Memorandum of Understanding.
The parties further declare the following understandings regarding the form, purpose,
risk-sharing, and structure of this assistance:

THAT, the transaction structure set forth in this Memorandum of Understanding is consistent with
both law and congressional purpose, including that it provides meaningful furtherance of the GSEs’
and HFAs’ affordable housing missions;

THAT, the financing structure set forth in this Memorandum of Understanding responds to the unique
and exigent circumstances being addressed and is limited by time and scope to addressing such
circumstances. The goal of the financing structure is to establish a mechanism on commercially
reasonable terms for the GSEs at a time that current market conditions make exact prediction of
ultimate market response and market developments inherently uncertain;

THAT, the pricing of each liquidity facility provided to and Mortgage Revenue Bond purchased from
an HFA will reflect the risk of the bond indenture supported by the facility or under which bonds
are issued, with such assessment being based on the combined judgment of the parties hereto, based
upon input received from market indicators, third-party investment advisors, and internal credit
evaluation done by the GSEs;

THAT, the U.S. Department of the Treasury will take a first loss position with respect to the
aggregate of HFA Initiative losses, and the GSEs will take a second loss position intended to be
consistent with the highest investment grade credit exposure, based on the risk assessment
described above;

2

 

THAT, the financing set forth herein provides temporary financing to HFAs in order to provide them
time to seek more permanent, market-based financing structures while avoiding further near-term
disruption to their affordable housing missions;

THAT, the GSEs are completing a detailed execution plan intended to achieve the result of
implementing these programs with all eligible HFAs by December 31, 2009, which plan will be
submitted to FHFA for its review and consideration; and,

THAT, the participation of the GSEs in this endeavor affords the U.S. Department of Treasury access
to the GSEs’ operational capacity and financing expertise while creating an opportunity for the
HFAs to establish alternative secondary market funding sources including, but not limited to, the
GSEs’ mortgage securitization programs.

1.      Introduction.

A.      This Memorandum of Understanding (MOU) among the Department of the Treasury (Treasury), the
Federal Housing Finance Agency (FHFA), the Federal National Mortgage Association (Fannie Mae), and
the Federal Home Loan Mortgage Corporation (Freddie Mac) sets forth the mutual understandings and
intentions of the parties with respect to the proposal for Treasury to purchase certain GSE
Securities and GSE Obligations pursuant to Section 304(g) of the Federal National Mortgage
Association Charter Act (12 U.S.C. 1719(g)) and Section 306(l) of the Federal Home Loan Mortgage
Corporation Act (12 U.S.C. 1455(l)). The foregoing recitals are incorporated in this MOU as if
fully set forth herein.

B.      Consistent with this authority, Treasury intends to purchase GSE Securities and GSE Obligations
to facilitate financing for state and local housing finance agencies to serve homebuyers and low
income renters (the “HFA Initiative”).

C.      HFAs, the National Council of State Housing Agencies and the National Association of Local
Housing Finance Agencies requested assistance from Treasury to meet their missions to provide
affordable financing for single family and multifamily housing in light of the financial
difficulties facing the nation. Treasury requested that FHFA and the GSEs design and implement the
HFA Initiative. Each of the GSEs has briefed FHFA on its plans to conduct the HFA Initiative in a
manner that is consistent with the goals of being both commercially reasonable and safe and sound.
Therefore, FHFA, as conservator of Fannie Mae and Freddie Mac, directs the GSEs to participate in
the HFA Initiative on a basis that is consistent with the goals of being commercially reasonable
and safe and sound. This directive constitutes approval under the FHFA delegation of authorities
and related instructions to the GSEs’ Boards of Directors.

D.      The parties hereto recognize that the intentions expressed in Section 11 are a principal concern
taken into consideration with respect to whether the activities of the GSEs described in this MOU
are commercially reasonable.

3

 

E.      Fannie Mae and Freddie Mac each agrees with the tenets and statements of this MOU and will
undertake this HFA Initiative as set forth herein.

F.      The GSEs and Treasury acknowledge that:

     (1)      The GSEs will not act as an intermediary to bring the HFAs and Treasury together
pursuant to any program described in this MOU.

     (2)      The programs described in this MOU and any transactions executed pursuant to these
programs are isolated programs from the GSEs’ ordinary activities in tax-exempt securities.

     (3)      The GSEs are not registered as dealers in tax-exempt securities; the parties
further acknowledge that the GSEs will not provide price quotes to Treasury or otherwise
act in a manner with Treasury that would be akin to a dealer-customer relationship.

     (4)      Any amounts paid to the GSEs are intended to compensate them for (i) certain
credit risk that they will bear and (ii) administrative services that they will provide.

     (5)      Interest on any Bank Bond acquired pursuant to the Temporary Credit and Liquidity
Facility Program will be earned entirely by Treasury as a participant in that facility,
less administrative fees and other fees and expenses to which the GSEs are entitled.

2.      Definitions.

Unless otherwise defined herein, terms used in this MOU or in the Appendices to this MOU, which are
integral parts of this MOU, are used as defined in Appendix G, “Definitions.”

3.      Purchase of GSE Securities Backed by New Issue Bonds.

A.      It is the intention of the parties hereto that Treasury will purchase GSE Securities backed by
(a) new tax-exempt and certain taxable single family bonds and (b) certain multifamily bonds backed
by pools of Secured Multifamily Loans (collectively, the “New Issue Bonds”) issued by HFAs (the
“New Issue Bond Program”). Purchase by Treasury of any and all such GSE Securities must occur by
December 31, 2009 (see Section 6 below).

B.      It is the intention of the parties hereto that the GSEs shall jointly initiate, administer and
carry out the New Issue Bond Program during the Acquisition Period for the acquisition and
securitization of New Issue Bonds. The GSEs shall issue GSE Securities backed by New Issue Bonds
acquired during the Acquisition Period. Each GSE will acquire and securitize 50% of each HFA’s New
Issue Bond production, on a

4

 

pro rata basis, that qualifies under the terms and conditions of the New Issue Bond Program.

C.      The GSE Securities eligible for purchase by Treasury under this Program are described in
Appendix A, “GSE Securities Backed by New Issue Bonds.” The Program Limits under this Program are
set forth in Appendix E, “New Issue Bond Program, and Temporary Credit and Liquidity Facility
Program Limitations.”

4.      Purchase of GSE Obligations Backed by Multifamily Credit Enhanced Bonds.

A.      It is the intention of the parties hereto that Treasury will purchase GSE Obligations in the
form of new tax-exempt and certain taxable project-based multifamily bonds (“Multifamily Credit
Enhanced Bonds”) issued by HFAs that are credit enhanced by the GSEs (the “Multifamily Credit
Enhancement Program”). Purchase by Treasury of any and all such GSE Obligations must occur by
December 31, 2009 (see Section 6 below).

B.      It is the intention of the parties hereto that each GSE shall administer and carry out
separately, as each traditionally does in connection with multifamily bonds, this Program during
the Acquisition Period for the credit enhancement of Multifamily Credit Enhanced Bonds issued by
HFAs. In the ordinary course of their business and in accordance with their customary policies,
practices and procedures, the GSEs will compete with each other to provide direct-pay credit
enhancement for the multifamily bonds under this Program.

C.      The Multifamily Credit Enhanced Bonds which are eligible for purchase by Treasury under this
Program are described in Appendix B, “Multifamily Credit Enhanced Bonds.”

5.      Purchase of Participation Interests in Temporary Credit and Liquidity Facilities for Existing
Variable Rate Demand Obligations (VRDOs).

A.      It is the intention of the parties hereto that Treasury will purchase GSE Obligations evidenced
by participation interests in temporary credit and liquidity facilities issued by the GSEs in
support of existing HFA VRDOs originally issued to finance single family and/or certain multifamily
mortgage loans. GSEs shall issue temporary credit and liquidity facilities to support such VRDOs
(the “Temporary Credit and Liquidity Facility Program”). Purchase by Treasury of any and all such
participation interests shall be conclusively evidenced by the execution of Participation
Agreements on or before December 31, 2009 (see Section 6 below). The Participation Agreements will
set forth (i) the timing for the funding of the participation interests, (ii) the circumstances,
timing and mechanism for the GSEs to deliver Bank Bonds to Treasury in the form of GSE Securities
and (iii) the requisite fees to Treasury.

5

 

B.      It is the intention of the parties hereto that the GSEs shall jointly initiate, administer and
carry out the Temporary Credit and Liquidity Facility Program, under which the GSEs will enter into
agreements with HFAs to provide credit enhancement and liquidity support for certain existing and
currently outstanding VRDOs issued by HFAs. The Temporary Credit and Liquidity Facility (each, a
“Temporary Credit and Liquidity Facility” or “TCLF”) relating to each series of VRDOs participating
in this Program will be shared equally between the GSEs, with each GSE being severally liable to
existing bondholders for 50%, on a pro rata basis, of required credit support payments and required
liquidity support payments.

C.      The participation interests in Temporary Credit and Liquidity Facilities eligible for purchase
by Treasury under this Program are described in Appendix C, “GSE Obligations Backed by Bank Bonds
Acquired with Liquidity Advances under Temporary Credit and Liquidity Facilities.” The Program
Limits under this Program are set forth in Appendix E.

6.      Acquisition Period Deliverables.

A.      New Issue Bond Program. A transaction under the New Issue Bond Program will be
considered to have occurred on December 31, 2009 if each of the following requirements is
satisfied:

       (1)      On or before December 31, 2009, the following fully executed documents are delivered: (i)
the New Issue Bond Program Agreements between the GSEs and Treasury and (ii) Placement Agreements
between the GSEs and the HFAs, with set terms and pricing (collectively, the “Principal New Issue
Bond Closing Documents”);

       (2)      Each of the Principal New Issue Bond Closing Documents is an irrevocable, unconditional,
mutually binding contract which requires the settlement of that transactions on or before January
29, 2010; and

       (3)      Each of the transactions set out in the Principal New Issue Bond Closing Documents settles
in full on or before January 29, 2010.

B.      Multifamily Credit Enhancement Program. A transaction under the Multifamily Credit
Enhancement Program will be considered to have occurred on December 31, 2009 if each of the
following requirements is satisfied:

       (1)      On or before the December 31, 2009, the following fully executed documents are delivered:
(i) the Placement Agreements between the HFAs and Treasury, with set pricing and terms, with
settlement of the related Bonds to be a date on or prior to the end of the Acquisition Period and
(ii) the GSE credit enhancement in the GSEs’ standard forms (collectively, the “Principal Multifamily Bond Closing Documents”);

6

 

       (2)      Each of the Principal Multifamily Bond Closing Documents is an irrevocable, unconditional,
mutually binding contract which requires the settlement of that transactions on or before January
29, 2010; and

       (3)      Each of the transactions set out in the Principal Multifamily Closing Documents settles in
full on or before January 29, 2010.

C.      Temporary Credit and Liquidity Facility Program. A transaction under the Temporary
Credit and Liquidity Facility Program will be considered to have occurred on December 31, 2009 if
each of the following requirements is satisfied:

       (1)      On or before December 31, 2009, the bond trustee under the indenture for the VRDOs has
issued a notice of tender to the holders of the VRDOs in connection with the substitution of
liquidity and credit enhancement as contemplated under the Temporary Credit and Liquidity Facility
Program and the tender date is not later than January 29, 2010;

       (2)      On or before December 31, 2009, the following fully executed documents are delivered: (i)
the Participation Agreements between the GSEs and Treasury, (ii) the TCLFs (to be executed on at
the settlement date set forth in the applicable Escrow Agreement and to become effective on the
tender date set out in paragraph (1) above, (iii) the Reimbursement Agreements between the GSEs and
the HFAs and (iv) the Escrow Agreement for the foregoing documents (the “Escrow Agreement”), with
set pricing and terms, with no termination provisions including material market events and material
calamities (collectively, the “Principal TCLF Closing Documents”);

       (3)      Each of the Principal TCLF Closing Documents is an irrevocable, unconditional, mutually
binding contract which requires the settlement of that transaction on or before January 29, 2010;
and

       (4)      Each of the transactions set out in the Principal TCLF Closing Documents settles in full
on or before January 29, 2010.

7.      Loss Sharing.

A.      Loss Sharing under New Issue Bond Program and under the Temporary Credit and Liquidity
Facility Program. Each GSE, acting separately, will share Program Losses with Treasury
realized under the New Issue Bond Program and under the Temporary Credit and Liquidity Facility
Program as described in Appendix D, “Loss Sharing.” A GSE will only share in Program Losses
realized on the New Issue Bonds backing the GSE Securities issued by that GSE and in Program Losses
realized on that GSE’s portion of the Temporary Credit and Liquidity Facilities. Neither GSE will
share in Program Losses allocable to the other GSE.

B.      No Loss Sharing under Multifamily Credit Enhancement Program. Because a GSE will
provide separate credit enhancement for Multifamily Credit Enhanced Bonds as

7

 

described in Section 4 above and in Appendix B, no additional loss sharing under this Section will
apply with respect to the Multifamily Credit Enhancement Program.

8.      Decision Control.

With respect to (i) any Eligible Bond held by a Trust represented by a GSE Security held by or
behalf of Treasury and (ii) any Temporary Credit and Liquidity Facility, Treasury shall be entitled
to exercise Decision Control so long as the Crossover Date has not occurred and the GSEs shall be
entitled to exercise Decision Control on and after the Crossover Date. The identity of the party
having Decision Control shall not affect the obligations of Treasury under any Participation
Agreement or any New Issue Bond Program Agreement. Treasury agrees to consult with the GSEs, and
the GSEs agree to make recommendations to Treasury with respect to the issues for which Decision
Control by Treasury is to be exercised. Conversely, the GSEs agree to consult with Treasury, and
Treasury agrees to make recommendations to the GSEs with respect to the issues for which Decision
Control by the GSEs is to be exercised. Notwithstanding the foregoing, the party having Decision
Control shall have the unilateral right to make decisions regarding the exercise of bondholder
rights in respect of the Eligible Bonds.

9.      Information Sharing.

A.      FHFA understands and agrees that Fannie Mae and Freddie Mac shall share such information and
data as are necessary for the administration of the New Issue Bond Program and the Temporary Credit
and Liquidity Facility Program.

B.      Fannie Mae shall provide to Freddie Mac such information and data that is required in the
administration of the New Issue Bond Program and the Temporary Credit and Liquidity Facility
Program; provided, however, that Fannie Mae shall not be obligated to provide any
information that may be confidential or proprietary. Fannie Mae shall not be required to provide
to Freddie Mac any information in the administration of the Multifamily Credit Enhancement Program.

C.      Fannie Mae shall take appropriate steps to maintain the confidentiality of any information or
data provided by Freddie Mac. Fannie Mae shall not use any information or data received pursuant
to this MOU for any purpose other than the administration of the New Issue Bond Program and the
Temporary Credit and Liquidity Facility Program.

D.      Freddie Mac shall provide to Fannie Mae such information and data that is required in the
administration of the New Issue Bond Program and the Temporary Credit and Liquidity Facility
Program; provided however, that Freddie Mac shall not be obligated to provide any
information that may be confidential or proprietary. Freddie Mac shall not be required to provide
to Fannie Mae any information in the administration of the Multifamily Credit Enhancement Program.

E.      Freddie Mac shall take appropriate steps to maintain the confidentiality of any information or
data provided by Fannie Mae. Freddie Mac shall not use any information

8

 

or data received pursuant to this MOU for any purpose other than the administration of the New
Issue Bond Program and the Temporary Credit and Liquidity Facility Program.

F.      Each GSE shall provide or cause to be provided to Treasury the reports and other information
agreed to between Treasury and the GSEs. Treasury understands and agrees that the GSEs will be
dependent upon the receipt of information from HFAs, bond indenture trustees and other third
parties in order to carry out their reporting obligations under this provision. Accordingly,
neither GSE shall be responsible for lapses, gaps, inaccuracies and other failures to report
information to Treasury required by this provision for any reason beyond its control.

10.      GSE Securities Not to Trade.

Treasury agrees that it will not trade, sell, exchange, securitize, donate or give to any third
party or pledge, hypothecate or otherwise transfer any interests in or to any of the GSE Securities
acquired by it from time to time pursuant to or as contemplated by this MOU. Excluded from this
limitation is the use by Treasury of custodians to hold any GSE Security on behalf of Treasury. At
Treasury’s request, the issuing GSE will dissolve any GSE Security and simultaneously deliver the
underlying Bonds to Treasury’s designee in connection with the sale of such underlying Bonds. At
no time will Treasury have physical possession of the underlying Bonds. The GSEs will charge
commercially reasonable fees to unwind any GSE Security; such fees, as set forth in Appendix F,
“Pricing Schedule,” shall be netted from sales proceeds.

11.      Tax Considerations.

A.      It is the intent of each of the parties hereto that:

     (1)      For federal income tax purposes, the GSEs will not be treated as beneficial owners
of any tax-exempt obligations associated with their participation in any Program
contemplated by this MOU.

     (2)      For federal income tax purposes, a GSE’s participation in any Program (i) will not
cause the GSE to be considered a dealer in tax-exempt obligations and (ii) will not be
considered direct or indirect evidence of a purpose to incur or continue indebtedness to
purchase or carry tax-exempt obligations.

     (3)      For federal income tax purposes (i) any Trust created pursuant to this MOU shall
be treated as a disregarded entity or grantor trust, (ii) Treasury shall be treated as the
sole beneficial owner of the assets of such Trust and (iii) any amounts payable to the GSEs
from the income or assets of such Trust shall be treated as reasonable compensation for
services rendered and shall not be treated as a coupon-stripping transaction.

B.      The parties acknowledge that the statements in this Section concerning the intent of the parties
(as well as related statements in the Appendices), the statements of fact in

9

 

the WHEREAS clauses above, and the statements of fact in Section 1(F) above are not legal
determinations binding on the Internal Revenue Service or any party.

12.      Interpretation.

Each of the parties acknowledges that it and its counsel have participated in the drafting and
revision of this MOU. Accordingly, the parties agree that any rule of construction which disfavors
the drafting party shall not apply in the interpretation of this MOU.

13.      Governing Law.

This MOU shall be governed by, and interpreted in accordance with, Federal law, not the law of any
state or locality. To the extent that a court looks to the laws of any state to determine or
define the Federal law, it is the intention of the parties to this MOU that such court shall look
only to the laws of the State of New York without regard to the rules of conflicts of laws.

14.      Notices.

All notices, directions, certificates or other communications hereunder shall be sent by certified
or registered mail, return receipt requested, or by overnight courier addressed to the appropriate
notice address set forth below. Any such notice, certificate or communication shall be deemed to
have been given as of the date of actual delivery or the date of failure to deliver by reason of
refusal to accept delivery or changed address of which no notice was given pursuant to this
Section. Any of the parties hereto may, by such notice described above, designate any further or
different address to which subsequent notices, certificates or other communications shall be sent
without any requirement of execution of any amendment to this MOU. The notice addresses are as
follows:

 

	 	 	 	 	 
	

    To Treasury:

	
 
	
    Department of the Treasury

	
 
	
 
	
    1500 Pennsylvania Avenue, N.W.

	
 
	
 
	
    Washington, D.C. 20220

	
 
	
 
	
    Attention:
	
 
	
    Fiscal Assistant Secretary

	
 
	
 
	
 
	
 
	
    re: Housing Finance Agencies Initiative

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
    and

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
    Attention:
	
 
	
    Assistant General Counsel

	
 
	
 
	
 
	
 
	
    (Banking and Finance)

	
 
	
 
	
 
	
 
	
    re: Housing Finance Agencies Initiative

10

 

	 	 	 	 	 
	

    To FHFA:

	
 
	
    Federal Housing Finance Agency

	
 
	
 
	
    1700 G Street, N.W.

	
 
	
 
	
    Washington, D.C. 20552

	
 
	
 
	
    Attention:
	
 
	
    David J. Pearl

	
 
	
 
	
 
	
 
	
    Executive Advisor

	
 
	
 
	
 
	
 
	
    Division of Enterprise Regulation

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
    and

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
    Attention:
	
 
	
    Kevin Sheehan

	
 
	
 
	
 
	
 
	
    Attorney

	
 
	
 
	
 
	
 
	
    Office of General Counsel

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
     

	

    To Fannie Mae:

	
 
	
    Fannie Mae

	
 
	
 
	
    3900 Wisconsin Avenue, N.W.

	
 
	
 
	
    Washington, D.C. 20016

	
 
	
 
	
    Attention:
	
 
	
    Carl W. Riedy, Jr.

	
 
	
 
	
 
	
 
	
    Vice President for Public

	
 
	
 
	
 
	
 
	
    Entities Channel, Housing

	
 
	
 
	
 
	
 
	
    and Community Development

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
    and

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
    Attention:
	
 
	
    Barbara Ann Frouman

	
 
	
 
	
 
	
 
	
    Vice President and

	
 
	
 
	
 
	
 
	
    Deputy General Counsel, Housing and

    Community Development

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
     

	

    To Freddie Mac:

	
 
	
    Freddie Mac

	
 
	
 
	
    1551 Park Run Drive

	
 
	
 
	
    Mail Stop D4F

	
 
	
 
	
    McLean, Virginia 22102

	
 
	
 
	
    Attention:
	
 
	
    Mark D. Hanson

	
 
	
 
	
 
	
 
	
    Vice President Mortgage Funding

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
 
	
 
	
    and

	
 
	
 
	
 
	
 
	
     

	
 
	
 
	
    Freddie Mac
	
 
	
 

	
 
	
 
	
    8200 Jones Branch Drive

	
 
	
 
	
    Mail Stop 210

	
 
	
 
	
    McLean, Virginia 22102

	
 
	
 
	
    Attention:
	
 
	
    Joshua L. Schonfeld

	
 
	
 
	
 
	
 
	
    Associate General Counsel

11

 

or at such other address as the addressee may hereafter specify for the purpose in a notice to the
other party specifically captioned “Notice of Change of Address.”

15.      Severability.

Any provision of this MOU that is determined to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this MOU, and no such prohibition
or unenforceability in any jurisdiction shall invalidate such provision in any other jurisdiction.

16.      Expenses.

Each party to this MOU shall bear its own expenses in connection with the preparation, negotiation
and execution of this MOU and all costs associated with the sharing of information hereunder, and
neither party shall be liable to the other party for such expenses.

17.      Operation of MOU.

A.      This MOU is not a Federal procurement contract and is, therefore, not subject to the provisions
of the Federal Property and Administrative Services Act (41 U.S.C. §§ 251-60), the Federal
Acquisition Regulations (48 CFR Chapter 1) or any other Federal procurement law.

B.      This MOU expresses the intent of the parties to act cooperatively in carrying out this MOU and
is not intended to be a fiscal or funds obligation document and, accordingly, does not obligate
funds, personnel, services or other resources of any party.

C.      The parties hereto intend to negotiate in good faith, and execute mutually acceptable definitive
binding written agreements and documents for implementing the HFA Initiative including, but not
limited to, the Principal New Issue Bond Closing Documents, the Principal Multifamily Bond Closing
Documents and the Principal TCLF Closing Documents, all as set forth in Section 6 of this MOU
(collectively, the “Definitive Documentation”). The Definitive Documentation shall incorporate the
terms and conditions set forth in this MOU, and such other terms and conditions agreed to among the
parties hereto. The implementation by the parties hereto of the intentions articulated by this
MOU, so as to make it a binding agreement of the parties with respect to the HFA Initiative, is
wholly subject to the execution of the Definitive Documentation. The execution of the Definitive
Documentation is subject to (i) the provision by Treasury or the Internal Revenue Service of
guidance, including a closing agreement, in a form mutually agreeable to the parties hereto, on the
tax consequences of the HFA Initiative for the GSEs and (ii) revision of the terms and conditions
set forth herein, as needed, to avoid material adverse tax consequences for the GSEs.

12

 

D.      Each GSE shall be responsible only for the performance by it of its obligations under this MOU
and under any transaction, GSE Security or other undertaking made pursuant to this MOU, as
qualified by subsection (C) above. Nothing in this MOU shall make or be deemed to make a GSE
responsible for the obligations of the other GSE under this MOU or under any transaction, GSE
Security or other specific undertaking made pursuant to this MOU.

18.      Third Party Rights.

This MOU does not confer any rights, benefits, remedies or claims, either at law or in equity, on
any person not a party to this MOU including, but not limited to, the HFAs.

19.      Term of this Agreement.

The provisions of this MOU shall be effective from the date of execution and delivery of this MOU
by the parties hereto and any such provisions shall be superceded upon the execution and delivery
of the applicable Definitive Documentation for such transaction. Notwithstanding such
supercession, the recitations and Section 1 (“Introduction,” including the FHFA direction to the
GSEs) and Section 9 (“Information Sharing,” related to sharing and confidentiality of information),
as set forth in this MOU, shall remain unaffected.

20.      Counterparts.

This MOU may be executed in counterparts by the parties, each counterpart shall be considered an
original and all counterparts shall constitute one and the same instrument.

21.      Amendment and Termination.

A.      The parties to this MOU may from time to time amend this MOU in writing and such amendments,
when executed by all parties, shall then become a part of this MOU.

B.      The agreements contained herein governing the sharing and use of information and data shall
continue in effect following termination.

22.      Closings.

A.      Each of Treasury, FHFA, Freddie Mac and Fannie Mae will designate personnel to review, approve
and/or execute documents in connection with various closings contemplated under the HFA Initiative.

B.      Each of the parties hereto shall promptly notify the other parties of any further issues and
related clarifications necessary under this MOU; each of the parties hereto shall cooperate to
effectuate any related amendments pursuant to the provisions of Section 21 hereto.

13

 

C.      The parties hereto will not be obligated to close any transactions for which the other parties
hereto have not executed (i) with respect to the New Issue Bond Program and Multifamily Credit
Enhancement Program, the New Issue Bond Program Agreements and (ii) with respect to the Temporary
Credit and Liquidity Facility Program, the Participation Agreement and the Escrow Agreement, if
any.

23.      Effective Date.

This MOU shall become effective on its execution date.

[remainder of page intentionally left blank]

14

 

	 	 	 	 	 	 	 
	
    FOR DEPARTMENT OF THE TREASURY
	
 
	
    FOR FEDERAL HOUSING FINANCE AGENCY, as Conservator

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    By:
	
 
	
/s/ Michael S. Barr
	
 
	
    By:
	
 
	
/s/ Edward J. DeMarco

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Michael S. Barr
	
 
	
 
	
 
	
    Edward J. DeMarco

	
 
	
 
	
    Assistant Secretary of the Treasury
	
 
	
 
	
 
	
    Acting Director

	
 
	
 
	
    Department of the Treasury
	
 
	
 
	
 
	
    Federal Housing Finance Agency

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Date:
	
 
	
    October 19, 2009
	
 
	
    Date:
	
 
	
    October 19, 2009

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    FOR FANNIE MAE
	
 
	
    FOR FREDDIE MAC

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    By:
	
 
	
/s/ Michael J. Williams
	
 
	
    By:
	
 
	
/s/ Charles E. Haldeman, Jr.

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
    Michael J. Williams
	
 
	
 
	
 
	
    Charles E. Haldeman, Jr.

	
 
	
 
	
    President and
	
 
	
 
	
 
	
    Chief Executive Officer

	
 
	
 
	
    Chief Executive Officer
	
 
	
 
	
 
	
    Freddie Mac

	
 
	
 
	
    Fannie Mae
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
    Date:
	
 
	
    October 19, 2009
	
 
	
    Date:
	
 
	
    October 19, 2009

 

15

 

Appendix A

GSE Securities Backed by New Issue Bonds

1.      General Structure of New Issue Bond Program.

A.      New Issue Bonds. Under the New Issue Bond Program, the GSEs will swap GSE Securities
for Eligible Bonds and deliver such GSE Securities to Treasury pursuant to Placement Agreements
with the HFAs. Simultaneously, Treasury will purchase the related GSE Securities under the New
Issue Bond Program and remit the purchase prices to the HFAs pursuant to New Issue Bond Program
Agreements with the GSEs.

B.      GSE Securities. Each GSE will acquire 50% of the Eligible Bonds of a series of bonds
issued by an HFA (on a pro rata basis with respect to each series) and securitize the Eligible
Bonds so acquired into GSE Securities described in Section 6 below for purchase by Treasury. Each
GSE Security will be issued by the respective GSE. Each GSE Security may be issued as a single
class.

C.      Partial Guarantee. The GSE issuing the GSE Security will provide a Partial Guarantee as
a means of documenting its loss sharing obligations to Treasury regarding that GSE Security as
discussed in Appendix D, “Loss Sharing.”

D.      Ownership Vests with Treasury. Pursuant to the terms of a New Issue Bond Program
Agreement, Treasury or its nominee will immediately acquire ownership of the GSE Securities. It is
the intent of each of the parties to the MOU that the GSEs will not be treated as beneficial owners
of the related New Issue Bonds at any time for federal income tax or any other purposes (see
Section 11 of the MOU).

2.      Eligible Bonds.

New Issue Bonds eligible for acquisition under the New Issue Bond Program (“Eligible Bonds”) must
satisfy the following requirements:

A.      Tax-Exempt Status. The interest payable on the New Issue Bonds must be exempt from
inclusion in gross income for federal income tax purposes, except as set forth in this Paragraph.
New Issue Bonds bearing taxable interest and which otherwise meet the use of proceeds conditions of
Paragraph (B) below shall be Eligible Bonds only if such bonds are required to be issued on a
taxable basis due to volume cap allocation limitations of the HFAs. Notwithstanding the
foregoing, the HFAs must apply their current volume cap allocations to this Program or the
Multifamily Credit Enhancement Program unless already formally allocated and use their reasonable
best efforts to secure additional volume cap allocations as needed for the issuance of bonds under
such Programs. The maximum amount of Eligible Bonds that an HFA may issue under such Programs are
set forth in Appendix E, “New Issue Bond Program, and Temporary Credit and Liquidity Facility
Program Limitations.”

A-1

 

B.      Use of Proceeds. Proceeds of the New Issue Bonds must be used by the HFA to:

     (i)      acquire and finance the holding of single family loans and Secured Multifamily
Loans related to New Issue Bonds which loans are either newly originated or refinanced, so
long as all such loans are eligible to be financed on a tax-exempt basis under applicable
federal income tax law (“Eligible Loans”); or

     (ii)      refund, as fixed rate bonds, any of the HFA’s VRDOs or other variable rate debt
including, but not limited to, auction rate securities issued and outstanding prior to the
commencement of the Acquisition Period, so long as such bonds were, in turn, issued to
acquire and finance the holding of Eligible Loans; provided, however, that
not more than 30% of the net proceeds of the Eligible Bonds of an issue acquired under this
Program may be used for the purpose set out in this clause (ii).

Proceeds may also be spent to fund reasonably required reserves and pay costs of issuance of the
bonds in accordance with the requirements and limitations of applicable tax law.

C.      Requirements During Acquisition Period. In order to qualify under this Program, the
document delivery requirements set forth in Section 6 of the MOU with respect to Eligible Bonds
must be met on or prior to December 31, 2009.

D.      Minimum Rating. The Eligible Bonds must have a long-term credit rating of ‘Baa3’/’BBB-’
or better. To the extent that this minimum rating threshold is not maintained at any time any
proceeds of the Eligible Bonds are held in an Escrow, the New Issue Bonds will be redeemed to the
extent of any funds held in such Escrow.

E.      Term Bonds. Only bonds with stated maturity dates of not less than 10 years after the
date of issuance of the bonds (“Term Bonds”) are eligible under the New Issue Bond Program. HFAs
will be required to offer earlier maturities of the issue (“Serial Bonds”) for public or private
sale to investors in accordance with standard bond underwriting practices to settle within one (1)
year of the end of the Acquisition Period. The Term Bonds may not be more than 60% of the overall
issue measured by principal at the time of issuance of the Serial Bonds (the “Serial Bond Ratio
Requirement”). The exact delineation of the maturity dates of Eligible Bonds will be open to
adjustment as circumstances require; however, in all instances, the maturities must be structured
in a similar manner as other HFA issuances under the applicable indenture so as to assure prudent
fiscal management of the underlying trust estate held under the indenture. The Term Bond and
Serial Bonds of the same issue must be equal in rights to payment and security under the indenture
under which they are issued. The maturity of the Eligible Bonds shall be a maximum of 32 years.
If multifamily bonds are issued under a Permitted Indenture pursuant to Paragraph 9 below, HFAs
will not be required to offer Serial Bonds in such issuance.

A-2

 

F.      Issuance Limitation. The aggregate net proceeds of the Eligible Bonds and all related
Serial Bonds (whether issued simultaneously with the Term Bonds or on a delayed issuance basis as
provided below), sized in accordance with the Serial Bond Ratio Requirement, may not exceed the
reasonable expectations requirement applicable to tax-exempt mortgage revenue bonds.

G.      Serial Bond Issuances. The HFA may issue Serial Bonds using one or both of the
following options:

     (i)      Simultaneous Issuance. The HFA may issue Serial Bonds simultaneously with the
Eligible Bonds; and/or

     (ii)      Delayed Issuance. The HFA may issue Serial Bonds from time to time on or before
December 31, 2010; provided, however, that the HFA may not issue Serial
Bonds more than three times during this period. For purposes of the issuance limitation,
the issuance of Serial Bonds simultaneously with the Term Bonds does not count.

H.      Serial Bond Ratio Requirement Not Satisfied at Eligible Bond Issuance. The Serial Bond
Ratio Requirement need not be met at the time of issuance of the Eligible Bonds if a required
amount of the net proceeds of the Eligible Bonds is set aside with the trustee of the Eligible
Bonds in an escrow pending the delayed issuance of Serial Bonds (“Escrow”). Any issuance effected
pursuant to the preceding sentence must be completed by an HFA by the end of the Acquisition
Period. In addition, each HFA may effect only one such issuance. The amount of Term Bond proceeds
which must be escrowed will be the result of (i) multiplying the amount of the net proceeds of the
Serial Bonds (if any) issued simultaneously with the Eligible Bonds by 1.5, and (ii) subtracting
the amount calculated in (i) from the net proceeds of the Eligible Bonds. Such escrow limitation
shall be administered by the bond indenture trustee.

I.      Escrow Requirement. If Term Bond proceeds must be set aside in an Escrow (“Escrowed
Proceeds”), the Escrow must be established as a special, non-commingled fund within the trust
estate of the indenture under which the Eligible Bonds were issued to be administered by the bond
indenture trustee.

J.      Investment of Escrowed Proceeds. The Escrowed Proceeds must be invested in government
or agency securities rated in the highest short-term rating category (‘A-1’/’P-1’) (“Permitted
Escrow Investments”), with a maturity date of one (1) year or less, anticipated to match the
anticipated draw down of funds from escrow by the HFAs. The Permitted Escrow Investments must be
pledged exclusively to the repayment of the Eligible Bonds.

K.      Release of Escrowed Proceeds from Escrow. If and when an HFA issues Serial Bonds on a
delayed issuance basis (each, a “Reset Date”) and delivers to the bond indenture trustee and the
GSEs a related certificate of Serial Bond issuance and calculation of the release amount pursuant
to the Serial Bond Ratio Requirement,

A-3

 

Escrowed Proceeds will be released simultaneously from the Escrow to such HFA in an amount equal to
the net proceeds of the Serial Bonds then issued multiplied by 1.5.

L.      Unreleased Escrow Proceeds; Redemption of Eligible Bonds. If any Escrowed Proceeds
remain in the Escrow on January 1, 2011, such remaining Escrowed Proceeds must be used to redeem
outstanding Eligible Bonds at par on the next available redemption date under the indenture;
provided, however, that the redemption price must be adjusted for any unamortized
premium or discount prorated to the relative principal amount of the Eligible Bonds being redeemed
for that reason.

3.      HFA Covenants.

Each HFA participating under this Program shall covenant that it shall:

     (1)      Apply volume cap allocations as set forth in Paragraph 2(A) above;

     (2)      Not have any lock-out provisions or premium for the tender or redemption of the
Eligible Bonds, and adjust tender or redemption price for any unamortized premium or
discount;

     (3)      Not issue new bonds on a variable rate demand, adjustable rate or auction rate
basis under the same indenture pursuant to which the supported Eligible Bonds are issued
other than as permitted under Paragraph 4(D) below;

     (4)      Not allow any money, mortgage loans or other assets to be withdrawn from the
indenture (other than for scheduled debt service on Bonds issued under that indenture and
the costs of administering the mortgage loan program and the bond financing), or otherwise
pledged or hypothecated, unless such funds are used to redeem Eligible Bonds associated
with the related indenture; and

     (5)      With respect to the purchase, origination, enforcement and servicing of mortgage
loans and mortgage-backed securities (“MBS”):

          (a)      originate or cause to be originated, mortgage loans and purchase, or cause
to be purchased, MBS in a manner consistent with applicable state law, the
indenture and any supplements thereto, and such other related documents by which
the HFA is bound;

          (b)      cause all mortgage loans to be serviced pursuant to the servicing
requirements of the HFA, Fannie Mae and Freddie Mac, as applicable, or any other
party providing credit support in respect of the Secured Multifamily Loans;

A-4

 

          (c)      diligently take all steps necessary or desirable to enforce all terms of
the mortgage loans, MBS, loan program documents and all such other documents
evidencing obligations to the HFA; and

          (d)      diligently take all actions consistent with sound mortgage loan
origination, purchase and servicing practices and principles as may be necessary to
receive and collect sufficient revenues to pay debt service when due on the bonds.

4.      Interest on Eligible Bonds.

A.      Fixed Rates. Except as provided for Eligible Bonds with Escrowed Proceeds as set out in
Paragraph (D) below and as otherwise provided in this Paragraph, New Issue Bonds must bear fixed
rates of interest, with no stepped coupons.

B.      Interest Rates Set by Reference to an Index Plus Spread. The interest rate per annum on
an Eligible Bond and the Reset Rate for each tranche of Escrowed Proceeds of an Eligible Bond
released from Escrow will be the sum of (i) the 10-year Constant Maturity Treasury (“10-Year CMT”)
as reported by Treasury as of the close of business on the day immediately before the day the
interest rate is established and (ii) a Spread determined as set out in Paragraph (C) below for
such Eligible Bond or tranche thereof. The 10-Year CMT will be established by reference to the
Daily Treasury Yield Curve Rates published by Treasury, currently available on its website at:

http://www/ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml.

C.      Spread. The Spread for an Eligible Bond will be determined as set forth in Appendix F,
“Pricing Schedule.” The Spread for any tranche of Escrowed Proceeds of an Eligible Bond released
from Escrow will be determined at the time of release from Escrow as provided in Appendix F.

D.      Eligible Bonds with Escrowed Proceeds.

     (1)      Interest Rate — Generally. If any of the proceeds of an Eligible Bond must be
escrowed because the Serial Bond Ratio Requirement was not satisfied, then the Eligible
Bond will bear interest as follows:

          (a)      The portion of principal of the Eligible Bond, if any, that was not set
aside in Escrow on the date of issuance of the Eligible Bond will bear interest as
set out in Paragraphs (B) and (C) above. The remaining principal of the Eligible
Bond (that is, the amount that was set aside in Escrow) will bear interest at the
Variable Rate as set out in (2) below from the date of issue until released from
Escrow or used to redeem any portion of the Eligible Bond; and

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          (b)      For each tranche of the Escrowed Proceeds released from Escrow, the
principal of such tranche will bear interest beginning two (2) months after its
Reset Date to the date of Eligible Bond maturity, at the Reset Rate as set out in
(3) below.

     (2)      Variable Rate. A floating bond equivalent rate based on the 28-day Treasury Bill
discount rate.

     (3)      Reset Rate. At the time of issue of the Eligible Bond, the HFA will select the
Reset Rate method to apply to the Eligible Bond as follows:

          (a)      The Reset Rate may be a single fixed rate of interest which applies to all
tranches of the Eligible Bond determined in accordance with Paragraphs (B) and (C)
above before the issuance of the Eligible Bond; or

          (b)      The Reset Rate may be a fixed rate of interest determined in accordance
with Paragraphs (B) and (C) above for the tranche of the Eligible Bond immediately
prior to the Reset Date.

E.      Eligible Bonds Issued at a Premium. An HFA may elect to issue its Eligible Bonds at a
maximum premium of 103% in order to obtain extra proceeds to only be used to make supplemental
loans to borrowers for downpayment assistance so long as the internal rate of return on the
Eligible Bonds does not exceed the internal rate of return for the same Eligible Bonds issued
without a premium but at a rate of interest which would otherwise be applied to that bond under the
New Issue Bond Program. In addition, New Issue Bonds issued at a premium may not be issued in
connection with Escrowed Proceeds, and the aggregate principal amount of such premium bonds may not
exceed 20% of the aggregate principal amount of New Issue Bonds at the time of issuance of such
premium bonds.

F.      Control of Remedies. Control of the exercise of all rights and remedies on the
underlying Eligible Bonds shall be pursuant to the provisions of Section 8 of the MOU.

5.      Method of Acquiring New Issue Bonds and Issuing GSE Securities.

A GSE will acquire the Eligible Bonds directly from an HFA or the HFA’s underwriter (and
immediately thereafter transfer such Eligible Bonds to a Trust) by swapping the related GSE
Security which represents the beneficial ownership interests in the Trust for the Eligible Bond.
The HFA or other party will simultaneously transfer the GSE Security to Treasury’s acquisition
agent or another third-party dealer acting on behalf of Treasury.

6.      GSE Securities.

A.      Issuance in the Ordinary Course of Business. In the ordinary course of its business and
in accordance with its customary policies, procedures and programs, each GSE will place or arrange
for the placement of New Issue Bonds to be securitized or

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resecuritized under this MOU in a Trust or Trusts for securitization under appropriate policies and
procedures established by that GSE for that purpose. The structure and supporting details of a
Trust established by a GSE may vary from those adopted by the other GSE to conform to its
transactional and operational norms or from time to time within a single GSE as circumstances
warrant.

B.      Eligible Bonds of a Single Issue Placed Together. Eligible Bonds from a single issue of
HFA bonds may be placed together so as to back a single GSE Security.

C.      Allocation of Principal and Interest; Available Funds Only. All principal and interest
received on the Eligible Bonds backing a GSE Security, less administrative and other fees and
expenses to which the GSEs are entitled, will be allocated to that GSE Security without preference
or priority. All GSE Securities will be structured, and all distributions will be made, solely on
an available funds basis.

D.      Issuance Cycle. Each GSE will issue its GSE Securities not more than once each month in
accordance with a standardized schedule.

E.      Distribution Dates. The Trusts represented by GSE Securities will distribute funds
available from payments received from the underlying Eligible Bonds, less administrative fees and
other fees and expenses to which the GSEs are entitled, on the 25th calendar day of the
month. Depending on the mix of HFA bond payment dates represented in a GSE Security, distributions
may not be payable every calendar month.

GSE Securities will not be guaranteed by the United States and will not constitute a debt or
obligation of the United States or any agency or instrumentality thereof other than the GSE issuing
the GSE Security.

7.      GSE Fees.

A.      The GSE issuing a GSE Security will be entitled to an allocation of the interest payments
received on the related Eligible Bonds. The GSEs allocation will be an amount (“Allocation
Amount”) to compensate the GSEs for (i) their Loss Sharing obligations with Treasury plus (ii)
management of the New Issue Bond Program and to pay certain third-party expenses. The Allocation
Amount and the other fees chargeable by the GSEs under the Programs are set forth in Appendix F.

B.      Should the available amounts of interest received on an Eligible Bond at any time be less than
the Allocation Amount allocable to a GSE, the GSE may charge such shortfall to payments of interest
received on any of the other Eligible Bonds under the New Issue Bond Program and to Recoveries on
Eligible Bonds under the New Issue Bond Program.

C.      Each GSE shall be entitled to a structuring fee on the settlement of each GSE Security as set
forth in Appendix F and such other fees as set forth in Appendix F.

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8.      Loss Sharing.

The GSE issuing a GSE Security shall share principal losses with Treasury in accordance with
Appendix D, “Loss Sharing,” with respect to the Eligible Bonds backing the GSE Security. In order
to evidence the GSE’s loss sharing obligations, the GSE will provide a Partial Guarantee to the
related Trust for Program Losses allocable to such GSE Securities. The GSE will make a payment
under a Partial Guarantee only under the circumstances set out in Appendix D.

9.      Multifamily Bonds.

The GSEs will acquire newly issued Eligible Bonds that finance multifamily projects under the New
Issue Bond Program, subject to the Program Limits set forth in Appendix E. Such bonds may be
issued under: (i) existing or new multifamily only non-parity indentures and (ii) new multifamily
only parity indentures (collectively, “Permitted Indentures”). For multifamily loans originated
with proceeds of bonds issued under a Permitted Indenture under the New Issue Bond Program, GSEs
will underwrite such loans pursuant to a multifamily underwriting standard developed by and
acceptable to the GSEs, FHFA and Treasury for such Program or such loans will be subject to credit
enhancement provided by the GSEs, FHA or GNMA. The GSE Security backed by these Eligible Bonds
will have a Partial Guarantee and be subject to Loss Sharing with Treasury as described in Appendix
D. This Section does not apply to the underlying loans financed by VRDOs supported by the TCLF
Program.

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Appendix B

Multifamily Credit Enhanced Bonds

1.      General Structure of Multifamily Credit Enhancement Program.

A.      Acquisition of Multifamily Credit Enhanced Bonds. Each GSE shall, separately from the
other GSE, arrange for the pricing and acquisition by Treasury of Multifamily Credit Enhanced Bonds
for which the GSE has provided or will be providing credit enhancement.

B.      No GSE Securities. Each GSE shall credit enhance project-based Multifamily Credit
Enhanced Bonds directly.

C.      No Additional Risk Sharing. As the GSEs will compete with each other as stated above to
provide credit enhancement for Multifamily Credit Enhanced Bonds, there will be no risk sharing
obligation with respect to the Multifamily Credit Enhancement Program.

D.      Ownership Vests with Treasury. Pursuant to the terms of a placement agreement, Treasury
or its nominee will immediately acquire ownership of the GSE credit-enhanced Multifamily Credit
Enhanced Bonds. It is the intent of each of the parties to the MOU that the GSEs will not be
treated as beneficial owners of the Multifamily Credit Enhanced Bonds at any time for federal
income tax or any other purposes (see Section 11 of the MOU).

2.      Method of Acquiring Multifamily Credit Enhanced Bonds.

Because (i) the Multifamily Credit Enhanced Bonds include, at their core, an obligation of the GSE
as credit enhancer covering all principal and interest payable on the bond and (ii) all payments on
the Multifamily Credit Enhanced Bonds will be made from funds provided by the GSE, Treasury will
purchase the Multifamily Credit Enhanced Bonds directly from the HFAs. Simultaneous with closing
and the issuance of GSE credit enhancement, Treasury shall enter into a bond purchase agreement
with the HFAs and the GSE to purchase the credit enhanced Multifamily Credit Enhanced Bonds.

3.      Eligible Bonds.

Multifamily Credit Enhanced Bonds eligible for acquisition under the Multifamily Credit Enhancement
Program (“Eligible Bonds”) must satisfy the following requirements:

A.      Tax-Exempt Status. The Multifamily Credit Enhanced Bonds to be credit enhanced by the
GSE’s under the multifamily portion of the HFA Initiative shall be tax-exempt or taxable but only
if such taxable bonds otherwise meet the conditions of tax-exempt bonds but are issued on a taxable
basis due to volume cap allocation limitations

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of the HFAs. Notwithstanding the foregoing, the HFAs must apply their current volume cap
allocations to this Program or the New Issue Bond Program unless already formally allocated and use
their reasonable best efforts to secure volume cap allocations for the issuance of tax-exempt bonds
under such Programs.

B.      Requirements During Acquisition Period. In order to qualify under this Program, the
document delivery requirements set forth in Section 6 of the MOU with respect to Eligible Bonds
must be met on or prior to December 31, 2009.

C.      Escrow. Proceeds may be escrowed for a period of up to six (6) months using a similar
process to the process permitted under the New Issue Bond Program as described in Paragraphs 2(I)
through (L) of Appendix A, “GSE Securities Backed by New Issue Bonds.”

4.      Interest Rate Pricing of Multifamily Credit Enhanced Bonds.

A.      Construction Bond

A bond relating to a multifamily project in construction shall have the following parameters:

     (1)      Construction Phase. In accordance with the standard practices of the GSEs, Bonds
acquired under this Section will be required to enter into arrangements for a construction
lender and provide a construction letter of credit during the construction and lease-up
period that meets the requirements of the GSE providing credit enhancement for such Bond.

     (2)      Construction Period. For the first 48 months, the Index Bonds will bear interest
on a floating rate basis equal to SIFMA (weekly reset rate) plus a spread as set forth in
Appendix F, “Pricing Schedule.” The Bonds will be interest-only during this 48-month
period.

     (3)      Conversion to Fixed Rate. Commencing with the 49th month, the Index Bonds will
convert to a fixed rate based on the 10-Year CMT rate, on the date such Bond is originally
funded, plus a spread as set forth in Appendix F.

     (4)      Amortization and Term. Commencing with the 49th month, the converted Index Bonds
will amortize on a 30-year schedule (for an aggregate of a 34-year term) with mandatory
tender after 18 years from the date of issuance.

     (5)      Treasury Long Bond Purchase. The Fixed Rate Bonds can be split into serial bonds
with a term of less than 10 years that will be sold into the market. Treasury will only
purchase Bonds with terms in excess of 10 years.

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B.      Non-Construction Bond

A bond relating to a multifamily project that is not in construction shall have the following
parameters:

     (1)      Eligibility. For Eligible Bonds converting from construction to permanent
financing that have been outstanding for a period of no more than five (5) years.

     (2)      Rate. At a 10-Year CMT rate plus a spread as set forth in Appendix F.

     (3)      Amortization and Term. Amortization on a 30 year schedule with a 30 year term.

     (4)      Treasury Long Bond Purchase. The Fixed Rate Bonds can be split into serial bonds
with a term of less than 10 years that will be sold into the market. Treasury will only
purchase Bonds with terms in excess of 10 years.

C.      100% Treasury Purchase. Except for serial bonds, Treasury will purchase all of the
aforementioned GSE credit-enhanced Construction Bonds and Non-Construction Bonds.

5.      Credit Enhancement.

A.      In the ordinary course of their business and in accordance with their customary policies,
practices and programs, the GSEs will compete with each other to provide direct-pay credit
enhancement for the Multifamily Credit Enhanced Bonds. Accordingly, the GSEs shall bear all of the
credit risk related to the Multifamily Credit Enhanced Bonds and loss sharing shall not be a
separate feature of the Multifamily Credit Enhancement Program.

B.      All principal and interest on the Multifamily Credit Enhanced Bonds will be fully credit
enhanced by a GSE through a separate direct-pay obligation issued to the bond indenture trustee for
the benefit of all holders of the bonds. The terms of the credit enhancement will require the GSE
to provide, from its own resources, all payments made on the Multifamily Credit Enhanced Bonds.
Accordingly, Treasury as a holder of a Multifamily Bond under this Program will acquire a bond and
a GSE Obligation and all payments received on the Multifamily Credit Enhanced Bond will be paid by
the GSE and not the HFA or the borrower on the underlying multifamily mortgage loan.

C.      The GSEs shall control the exercise of all rights and remedies on the Multifamily Credit
Enhanced Bonds so long as the GSE credit enhancement remains in effect.

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Appendix C

GSE Obligations Backed by Bank Bonds Acquired with Liquidity Advances under Temporary Credit and Liquidity Facilities

1.      General Structure of Temporary Credit and Liquidity Facility Program.

A.      Overview.

     (1)      General. The GSEs will provide liquidity and credit support for certain existing
and currently outstanding single family bonds and certain existing and currently
outstanding multifamily bonds backed by pools of Secured Multifamily Loans, issued as
variable rate demand tax-exempt and taxable bonds issued by HFAs by the delivery of a
temporary credit and liquidity facility (each, a “Temporary Credit and Liquidity Facility”
or “TCLF”). Treasury will purchase a participation interest in each TCLF, which
participation interest obligates the GSEs, under certain circumstances, to deliver to
Treasury GSE Securities backed by Bank Bonds that have been purchased with Liquidity
Advances made under that TCLF.

     (2)      Program Limitations. The limitations to the HFAs for tax-exempt bonds under such
Programs are set forth in Appendix E, “New Issue Bond Program, and Temporary Credit and
Liquidity Facility Program Limitations.”

     (3)      Single Family Loans under the Temporary Credit and Facility Program. The GSEs
will provide TCLFs for indentures that are rated “BBB” or above for bonds that were issued
prior to the date of the announcement of this Program, subject to the Program Limits of the
Temporary Credit and Liquidity Facility Program set forth in Appendix E, “New Issue Bond
Program, and Temporary Credit and Liquidity Facility Program Limitations. .

     (4)      Multifamily Loans under the Temporary Credit and Liquidity Facility Program. The
GSEs will provide TCLFs for indentures that are rated “A” or above for bonds that were
issued prior to the date of the announcement of this Program, subject to the Program Limits
of the Temporary Credit and Liquidity Facility Program set forth in Appendix E, “New Issue
Bond Program, and Temporary Credit and Liquidity Facility Program Limitations.”

B.      Eligible Bonds. The bonds eligible for support under this Program must meet the
following requirement. The bonds must have been issued before announcement of this Program by
Treasury.

C.      Requirements During Acquisition Period. In order to qualify under this Program, the
document delivery requirements set forth in Section 6 of the MOU with respect to Eligible Bonds
must be met on or prior to December 31, 2009.

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D.      Transition to Other Funding Mechanisms. This Program will be designed to encourage HFAs
to transition to private providers or other funding mechanisms as the market stabilizes.

2.      Temporary Credit and Liquidity Facility Terms.

A.      Each TCLF will provide standby credit enhancement and standby liquidity bond purchase
commitments for VRDOs that are not Bank Bonds for a period of three (3) years from the closing date
of such TCLF, provided that each TCLF must expire by its terms on or before December 31, 2012.

B.      Temporary credit and liquidity support for the VRDOs shall be provided in equal shares by the
GSEs, with each GSE being liable to existing Bondholders for 50%, on a pro rata basis, of required
liquidity support payments and 50%, on a pro rata basis, of required credit support payments.

C.      Subject to 1.C above, no TCLF shall be executed and delivered or become effective after December
31, 2009.

D.      An HFA participating in the Temporary Credit and Liquidity Facility Program will pay a
continuing Temporary Credit and Liquidity Facility Fee to the GSEs based on the daily average of
the outstanding and undrawn commitment under the TCLF. A portion of the Temporary Credit and
Liquidity Facility Fee shall be remitted, as and when received, by the GSEs to Treasury to the
extent and as described below.

E.      The HFA benefiting from a TCLF shall have the right to terminate the facility at any time
generally on reasonable terms consistent with market practice, but no GSE may charge a termination
fee, fee maintenance charge or other similar fee (other than for actual out-of-pocket expenses
incurred to third parties in effecting the termination) to the HFA or any other party on account of
the termination.

F.      Concerning each TCLF, an HFA will enter into a related Reimbursement Agreement with the GSEs.
The Reimbursement Agreement will provide, among other things, that the HFAs will reimburse the GSEs
upon demand for (a) credit advances and (b) any other amount which the HFA is obligated to pay or
reimburse under the terms of the Reimbursement Agreement. The HFA will be required to pay interest
on any unreimbursed credit advance at an annual rate of interest equal to the Prime Rate plus 1%.
The promise of the HFA to repay credit advances will be secured by a pledge of the HFA’s ownership
interests in the mortgage loans and other assets backing the indenture pursuant to which the
supported VRDOs were issued, which pledge will be subject to the lien and claim of all other bonds
issued under the indenture.

G.      In the event the TCLF is not replaced prior to its expiration date, the GSEs will have the right
to cause a mandatory tender of the VRDOs.

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3.      HFA Covenants.

Each Reimbursement Agreement will provide that during the term of the TCLF the HFA covenants to:

     (1)      Not issue new bonds on a variable rate demand, adjustable rate or auction rate
basis under the same indenture pursuant to which the supported VRDOs are issued other than
as permitted under Paragraph 4(D) of Appendix A, “GSE Securities Backed by New Issue
Bonds;”

     (2)      Transition, as the market stabilizes, to private liquidity providers or other
funding mechanisms that will result in a reduction in the supported VRDOs outstanding;

     (3)      Continuously monitor the market with the objective of converting the VRDO issue to
a fixed rate financing without credit enhancement from the GSEs and effect such a
conversion if it can be accomplished at a break even cost to the HFA, including the cost of
terminating any related interest rate swap;

     (4)      Certify annually on the anniversary date of the TCLF execution that a conversion
to fixed rate was uneconomical during the prior year;

     (5)      Prepare documents within six (6) months of delivery of a TCLF that will allow the
HFA to expeditiously convert the VRDOs to fixed rate securities if economic conditions
permit;

     (6)      Except for scheduled or other required redemptions, redeem Bank Bonds ahead of any
other outstanding bonds issued pursuant to the related indenture;

     (7)      Apply available excess funds to redeem all Bank Bonds on or before the expiration
of the TCLF;

     (8)      To the extent the HFA does not have sufficient funds to redeem all Bank Bonds on
or before the expiration of the TCLF, “term-out” the outstanding Bank Bonds over a 10-year
period based upon amortization required in the related indenture as if no Bank Bonds were
outstanding with a balloon principal payment at the end of the 10-year period if required;

     (9)      Not allow any money, mortgage loans or other assets to be withdrawn from the
indenture (other than for scheduled debt service on Bonds issued under that indenture and
the costs of administering the mortgage loan program and the bond financing), or otherwise
pledged or hypothecated, unless such funds are used to redeem Bank Bonds or bank bonds
associated with the related indenture;

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     (10)      Agree to execute a commitment for the provision of a replacement liquidity
facility no later than 90 days prior to the stated expiration date of the TCLF and, if a
commitment is not obtained by such date, report in writing to Treasury and the GSEs on
efforts undertaken and reasons for the lack of success, and execute and deliver a
replacement liquidity facility by the date which is 30 days prior to the expiration date of
the TCLF; and

     (11)      With respect to the purchase, origination, enforcement and servicing of mortgage
loans and MBS:

          (a)      originate or cause to be originated, mortgage loans and purchase, or cause
to be purchased, MBS in a manner consistent with applicable state law, the
indenture and any supplements thereto, and such other related documents by which
the HFA is bound;

          (b)      cause all mortgage loans to be serviced pursuant to the servicing
requirements of the HFA, Fannie Mae and Freddie Mac, as applicable, or any other
party providing credit support is respect of the Secured Multifamily Loans;

          (c)      diligently take all steps necessary or desirable to enforce all terms of
the mortgage loans, MBS, loan program documents and all such other documents
evidencing obligations to the HFA; and

          (d)      diligently take all actions consistent with sound mortgage loan
origination, purchase and servicing practices and principles as may be necessary to
receive and collect sufficient revenues to pay debt service when due on the bonds.

4.      Temporary Credit and Liquidity Fees.

Temporary Credit and Liquidity Fees are set forth in Appendix F, “Pricing Schedule.”

5.      Treasury Purchase of Participation Interest.

Simultaneously with the closing of each TCLF, Treasury shall execute and deliver to the GSEs a
Participation Agreement which shall evidence Treasury’s purchase of an undivided participation
interest in that TCLF. Under the terms of the Participation Agreement, Treasury shall share the
repayment risks incurred by the GSEs for advances and payments made under the TCLF, and the GSEs
shall be obligated (i) to remit to Treasury a portion of the Temporary Credit and Liquidity Fee and
(ii) to deliver, under certain circumstances, to Treasury GSE Securities backed by Bank Bonds
acquired with Liquidity Advances made under the TCLF.

A.      Terms of Participation Agreement. The Participation Agreement will state (i) the terms
for funding Treasury’s participation interest, (ii) the custodial provisions relating to

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Bank Bonds and the terms of any GSE Security, (iii) the Partial Guarantee and (iv) the fees to be
paid to Treasury and to be retained by the GSEs. See the provisions relating to Loss Sharing in
Appendix D.

B.      Liquidity Advances and Related Provisions.

     (i)      The GSEs shall make required Liquidity Advances under a TCLF and obtain funds in
the amount of any such advance provided by Treasury on the date of such Liquidity Advance,
whether the VRDO purchase results from optional or mandatory tender, and the purchased
VRDOs (Bank Bonds) will be registered in the names of the GSEs and held pursuant to the
terms of the Participation Agreement. GSEs shall advise Treasury of the amount and the
payment date for each bond indenture trustee request for a Liquidity Advance under a TCLF
and Treasury shall provide immediately available funds on the same day as its participation
interest with respect to such Liquidity Advance by transferring to the GSEs an amount equal
to the principal and interest required to be advanced by the GSEs.

     The Principal TCLF Closing Documents for each Temporary Credit and Liquidity Facility
shall require the bond indenture trustee to send a copy to Treasury (or its agent) of each
notice it sends to the GSEs with respect to any bondholder tender of bonds, any remarketing
of such bonds and any drawing on the GSEs of a Liquidity Advance. Such notices will enable
Treasury to receive advance warning that it may have to make a payment under this
Paragraph.

     (ii)      Prior to the issuance of GSE Securities backed by particular Bank Bonds and
subject to the terms of the related Participation Agreement, such Bank Bonds shall be held
in a Trust pursuant to the provisions of the Participation Agreement while the remarketing
agent seeks to resell such VRDOs.

     (iii)      Bank Bonds held by each GSE are subject to immediate securitization in the form
of GSE Securities to be delivered to Treasury at the option of the GSEs or at the written
request of Treasury.

     (iv)      Bank Bonds held by each GSE as of the expiration of the TCLF, including those
purchased as a result of a mandatory tender due to the pending expiration of the TCLF, will
be securitized in the form of GSE Securities and delivered to Treasury at the written
request of Treasury or the GSEs.

C.      TCLF Shall Not Enhance Bank Bonds. Bank Bonds shall not be enhanced by or otherwise
have the benefit of the TCLF, including but not limited to the time during which such Bank Bonds
have been securitized in the form of GSE Securities.

D.      Credit Advances and Related Provisions. On a standby basis, GSEs will make credit
advances under their TCLFs to the bond indenture trustees as necessary to fund shortfalls in
indenture cashflow and reserves to pay debt service on the VRDOs. The

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Participation Agreement will require that, upon notice by the GSEs, Treasury will reimburse the
GSEs for all such credit advances in immediately available funds on the same day as the GSE credit
advance. The Principal TCLF Closing Documents for each Temporary Credit and Liquidity Facility
shall require the bond indenture trustee to send a copy to Treasury (or its agent) of each notice
it sends to the GSEs with respect to any drawing on the GSEs in respect of a Credit Advance. Such
notices will enable Treasury to receive advance warning that it may have to make a payment under
this Paragraph. The party with Decision Control shall have the right to cause a mandatory tender
of all supported VRDOs in the event that a credit advance is not reimbursed as required under the
terms of the Reimbursement Agreement. In the event that a VRDO shall become subject to mandatory
tender or is otherwise tendered, as a result of an unreimbursed credit advance, Bank Bonds so
acquired shall be subject to securitization in the form of GSE Securities which will be delivered
to Treasury at the written request of Treasury.

E.      Payments. Less administrative fees and other fees and expenses to which the GSE are
entitled as set forth in Appendix F, the GSEs will remit to Treasury principal of and interest on
Bank Bonds as and to the extent received.

6.      Remarketing of Bank Bonds.

The parties to the MOU understand and agree that all Bank Bonds will be subject to remarketing by
the related remarketing agent under the terms of the related indenture and remarketing agreement.
During the term of a TCLF, related Bank Bonds which have been securitized as GSE Securities may be
withdrawn from such securitization and remarketed as VRDOs having the benefit of the TCLF, so long
as such withdrawal is in compliance with the operational requirements of the GSEs. The TCLF shall
no longer be effective with respect to any Bank Bonds which have been withdrawn from such
securitization after the expiration or termination of the TCLF.

7.      GSE Securities.

A.      Placement of Bank Bonds into a Trust for Securitization. In the ordinary course of its
business and in accordance with its customary policies and procedures, and in accordance with the
applicable Participation Agreement, each GSE will place or arrange for the placement of the related
Bank Bonds in a Trust or Trusts for securitization under appropriate policies, practices and
procedures established by that GSE for that purpose in a manner similar to the GSE Securities
issued pursuant to Paragraph 6 of Appendix A. The GSE’s shall be paid a structuring fee on the
settlement of the GSE Security, as set forth in Appendix F.

GSE Securities will not be guaranteed by the United States and will not constitute a debt or
obligation of the United States or any agency or instrumentality thereof other than the GSE issuing
the GSE Security.

B.      Loss Sharing. The loss sharing arrangement between the GSEs and Treasury is set forth
in Appendix D.

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C.      Control of Remedies. Control of the exercise of all rights and remedies on the
underlying Eligible Bonds shall be pursuant to the provisions of Section 8 of the MOU.

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Appendix D

Loss Sharing

Certain losses realized under the New Issue Bond Program and certain losses realized under the
Temporary Credit and Liquidity Facility Program will be shared between the GSEs and Treasury as
described in this Appendix. There will be no loss sharing with respect to the Multifamily Credit
Enhancement Program.

1.      General Statement.

Treasury and the GSEs will share Program Losses, if any, realized on:

     (a)      the principal of the New Issue Bonds backing the GSE Securities issued from time to time
under the New Issue Bond Program; and

     (b)      the principal portion of all credit advances and liquidity advances made from time to time
under the Temporary Credit and Liquidity Facilities issued under the Temporary Credit and Liquidity
Facility Program.

Any losses incurred with respect to accrued but unpaid interest on any of the New Issue Bonds
backing the GSE Securities issued from time to time under the New Issue Bond Program and on any
credit advance or liquidity advance made from time to time under the Temporary Credit and Liquidity
Facilities issued under the Temporary Credit and Liquidity Facility Program are not subject to
sharing with the GSEs and will be entirely borne by Treasury. No loss sharing shall occur with
respect to the Multifamily Credit Enhancement Program as a GSE will have provided credit
enhancement for such Bonds separately.

2.      GSE Only Shares in Losses for its Activities in Programs.

The sharing of Program Losses will be structured between Treasury and each GSE separately. A GSE
will only share in Program Losses realized on the New Issue Bonds backing the GSE Securities issued
by that GSE and on losses realized on that GSE’s portion of the Temporary Credit and Liquidity
Facilities. Neither GSE will share in Program Losses allocable to the other GSE.

3.      Allocation of Losses between Treasury and GSE.

Treasury will bear all Program Losses realized on the New Issue Bond Program and the Temporary
Credit and Liquidity Facility Program up to the First Loss Limit (“First Position Losses”). Each
GSE will bear Program Losses, if any, realized on the New Issue Bond Program and the Temporary
Credit and Liquidity Facility Program once the Program Losses realized by Treasury equal the First
Loss Limit (“Second Position Losses”).

D-1

 

4.      First Loss Limit.

With respect to a GSE, the First Loss Limit will be 35% of the sum of:

       (a)      the aggregate original principal amount of all New Issue Bonds backing the GSE Securities
issued from time to time under the New Issue Bond Program by that GSE; and

       (b)      the aggregate original principal portion of the commitment amount made by the GSE in each
Temporary Credit and Liquidity Facility issued under the Temporary Credit and Liquidity Facility
Program.

Such First Loss Limit may be adjusted by the parties to the MOU if the aggregate amount under
either (a) or (b) above is less than $10 billion, or upon the obtaining or processing of
information impacting the applicable Risk Ratings, or such other material new information that
affects risk, commercial reasonableness, or safety and soundness under either the New Issue Bond
Program or the Temporary Credit and Liquidity Facility Program. Any such adjustment shall be made
in good faith by the parties to the MOU based upon objective thresholds factoring into, among other
things, the applicable Risk Ratings and the aggregate amounts set forth in (a) and (b) above.

5.      When Transaction Loss is Calculated.

       (a)      New Issue Bond Program. Under the New Issue Bond Program, Transaction Loss will
be calculated separately with respect to each Eligible Bond upon twelve (12) months after the first
to occur of:

     (1)      the stated maturity date of the Eligible Bond;

     (2)      the date the Eligible Bond is fully redeemed;

     (3)      the date of acceleration of the Eligible Bond; or

     (4)      the date of mandatory tender in lieu of redemption of the Eligible Bond.

       (b)      Temporary Credit and Liquidity Facility Program. Under the Temporary Credit and
Liquidity Facility Program, Transaction Loss will be calculated for each Temporary Credit and
Liquidity Facility upon the last to occur of:

     (1)      the date the GSE has no further obligation under the Temporary Credit and
Liquidity Facility;

     (2)      the date all Bank Bonds, if any, are paid in full, remarketed or redeemed; or

D-2

 

     (3)      twelve (12) months after the first to occur of:

     (A)      a Credit Advance remains unreimbursed;

     (B)      a Bank Bond is not paid or redeemed when due and payable at maturity; or

     (C)      the GSE causes the acceleration, redemption or mandatory tender of the
Bonds upon the occurrence of an Event of Default under any of the Transaction
Documents.

6.      How Losses are Determined.

Transaction Losses will be calculated for an Eligible Bond or a Temporary Credit and Liquidity
Facility as follows:

       (a)      New Issue Bond Program. Under the New Issue Bond Program, a Transaction Loss
under a Term Bond is the amount of principal of such Eligible Bond then due and unpaid as of the
date that Transaction Loss is calculated. Any accrued and unpaid interest and any interest on
interest or interest on other unpaid sums will not be included in Transaction Losses and will be
borne solely by Treasury.

       (b)      Temporary Credit and Liquidity Facility Program. Under the Temporary Credit and
Liquidity Facility Program, a Transaction Loss under a Temporary Credit and Liquidity Facility is:

     (1)      all amounts owing and unpaid by the HFA under the related Reimbursement Agreement
(whether constituting unreimbursed Credit Advances, unreimbursed Liquidity Advances,
accrued and unpaid fees or unpaid amounts owing on any Bank Bond), less

     (2)      the sum of all amounts reimbursed, received or recovered on account of the amounts
owing under Paragraph (1) above prior to the Loss Calculation Date.

The amount of any Transaction Loss will be allocated between unreimbursed Credit Advances and
unreimbursed Liquidity Advances (and the related Bank Bonds) on the basis of the ratio of aggregate
unreimbursed principal of the Credit Advances to the aggregate unreimbursed principal of the
Liquidity Advances.

       (c)      Calculation Rules. For purposes of determining Transaction Loss under the New
Issue Bond Program:

     (1)      Transaction Loss will be calculated only with respect to the Bonds actually held
by the related Trust. Any related Serial Bonds or other Bonds that

D-3

 

were not acquired by the Trust shall be excluded from the calculation of Transaction
Loss.

     (2)      For purposes of calculating Transaction Loss, all payments made by the trustee for
the Bonds shall be applied as principal or interest as characterized by the trustee for the
Bonds in making such payment. Should the trustee for the Bonds not characterize a payment
as either principal or interest, then that payment shall be characterized as required by
the indenture or bond resolution for the Bonds. If the trustee for the Bonds does not
characterize the payment as principal or interest and the related indenture or resolution
contains no relevant terms, then the payment shall be applied first to outstanding and
unpaid principal of the Bonds in the order of their stated maturity dates and then to
accrued and unpaid interest on the Bonds in the order of their stated maturity dates.

7.      Procedure for Reporting a Transaction Loss.

Pursuant to the timeframes set forth in Paragraph 5 above, the GSE will calculate, or cause to be
calculated, the amount of Transaction Loss, if any, realized on a Term Bond or Temporary Credit and
Liquidity Facility as provided in Paragraph 6 above.

8.      Reporting if No Transaction Loss Calculated.

If the calculation prepared in accordance with Paragraph 7 above shows that no Transaction Loss was
realized, the GSE will provide or cause to be provided a statement to that effect to Treasury
within 90 days of the Loss Calculation Date.

9.      Reporting if Transaction Loss Calculated; Payment of Second Position Loss.

A.      Reconciliation. If the calculation shows that a Transaction Loss was realized, the GSE
will send a written reconciliation calculation to Treasury within 90 days of the Loss Calculation
Date which specifies:

     (1)      Transaction Identification: The Eligible Bond or Temporary Credit and
Liquidity Facility for which the reconciliation is made.

     (2)      Transaction Loss: The Transaction Loss realized on the Eligible Bond or
Temporary Credit and Liquidity Facility as of the Loss Calculation Date.

     (3)      Program Losses:

          (A)      Aggregate Program Losses (excluding only the Transaction Loss then just
calculated for the Eligible Bond or Temporary Credit and Liquidity Facility for
which the reconciliation is made); and

D-4

 

          (B)      Aggregate Program Losses realized as of the Loss Calculation Date
(including the Transaction Loss then just calculated for the Eligible Bond or
Temporary Credit and Liquidity Facility for which the reconciliation is made).

     (4)      The First Loss Limit.

     (5)      The amount of the First Loss Limit still to be borne by Treasury.

B.      First Position Losses. If the amount calculated in (a)(3)(B) is not more than the First
Loss Limit, then the Transaction Loss for the Term Bond or Temporary Credit and Liquidity Facility
for such reconciliation calculation is fully First Position Losses.

C.      Partial First Position Losses; Partial Second Position Losses. If the amount appearing
in (a)(3)(A) is less than the First Loss Limit but the amount calculated in (a)(3)(B) exceeds the
First Loss Limit, then:

     (1)      the portion of the Transaction Loss equal to the difference between the amount
appearing in (a)(3)(A) and the First Loss Limit constitutes First Position Losses; and

     (2)      the remaining portion of the Transaction Loss not allocated to the First Position
Losses constitutes Second Position Losses.

D.      Second Position Losses. If the amount appearing in (a)(3)(A) is more than the First
Loss Limit, then the entire Transaction Loss constitutes Second Position Losses.

E.      Loss Sharing Payment. The GSE will pay the amount of any Second Position Losses (less
all amounts previously paid by the GSE to Treasury as Second Position Losses) to Treasury or its
order not later than 90 days after the Loss Calculation Date. Loss sharing payments made with
respect to GSE Securities will be made as a distribution under the GSE Security and all other loss
sharing payments will be paid to Treasury to such account as Treasury may require.

10.      Recoveries; Losses are Incurred But Not In Excess of the First Loss Limit.

This Paragraph applies if a GSE has calculated that a Transaction Loss has been realized with
respect to one or more Eligible Bonds or Temporary Credit and Liquidity Facilities but the amount
of the aggregate Program Losses has not exceeded the First Loss Limit. If one or more payments are
received or other amounts are received or recovered with respect to any Eligible Bond or Temporary
Credit and Liquidity Facility in respect of a Transaction Loss, then all such amounts will be paid
to Treasury and the related Transaction Loss and, consequently, the aggregate Program Losses will
be reduced by the amount of such Recovery.

D-5

 

11.      Recoveries; Losses are Incurred Which Exceed the First Loss Limit.

This Paragraph applies if a GSE has calculated that a Transaction Loss has been realized with
respect to one or more Eligible Bonds or Temporary Credit and Liquidity Facilities, aggregate
Program Losses exceed the First Loss Limit and the GSE has paid any Second Position Losses to
Treasury. If one or more payments are received or other amounts are received or recovered with
respect to any Eligible Bond or Temporary Credit and Liquidity Facility in respect of a Transaction
Loss, then:

       (a)      the related Transaction Losses and, consequently, the aggregate Program Losses will be
reduced by the amount of such Recovery;

       (b)      the GSE shall be entitled to such payments and other amounts, but not in excess of the
amount of the Second Position Losses previously paid to Treasury; and

       (c)      any excess available after the payment made in subparagraph (b) above shall be paid to
Treasury.

12.      Partial Guarantees of GSE Securities.

In order to evidence a GSE’s loss sharing obligations with respect to the GSE Securities it issues,
the GSE will issue a partial guarantee to the related Trust (“Partial Guarantee”) for Program
Losses allocable to such GSE Securities. The GSE will make a payment under a Partial Guarantee
only under the circumstances set out in this Appendix.

13.      Termination of Loss Sharing Upon Unwinding of GSE Security.

A GSE’s loss sharing obligations and any related Partial Guarantee will automatically terminate
with respect to any Term Bond and the related GSE Security if Treasury causes a GSE Security to be
unwound in exchange for the underlying Eligible Bonds.

D-6

 

Appendix E

New Issue Bond Program,

and Temporary Credit and Liquidity Facility Program Limitations

The size of each Program will be capped. To gauge demand, each HFA who desires to participate in
the New Issue Bond Program and the Temporary Credit and Liquidity Facility Program will develop a
program participation request in consultation with Treasury, Fannie Mae and Freddie Mac showing
their interest in each Program and the desired amount of participation. The amount requested for
the New Issue Bond Program must be generally within reasonable expectations and potential available
volume cap, including an amount for 2010. The amount requested for the Temporary Credit and
Liquidity Facility Program may not exceed the amount of outstanding bonds supported by facilities
to be replaced under the Program.

After all program requests are received, the Participants will determine final program sizes.

New Issue Bond Program volume will be made available to the HFAs requesting participation by
generally using the allocation formula established by the Housing and Economic Recovery Act of 2008
(“HERA”) for 2008 as a base line. Where the 2008 HERA amounts were not allocated among state and
local HFAs within a state, Treasury will determine a final allocation.

Temporary Credit and Liquidity Facility Program volume will be made available to the HFAs as
Treasury determines.

If demand for a Program is smaller than these guidelines determined, Program size will be set at a
lower amount.

E-1

 

Appendix F

Pricing Schedule
 
 

	
 

    HFA Initiative: GSE Fees

 

	
 

Program

 
	
 
	
 

    Description

 
	
 
	
 

    Fee/Charge (bps)

 

	
    Temporary Credit

    and Liquidity Facility

    (TCLF) Program
	
 
	
     Bank Bond

     Securitization Fee
	
 
	
    5 bps annually from

    time of Treasury

    purchase

	
 
	
     Bank Bond Security

     Unwrap Fee
	
 
	
    Greater of 3.125 bps

    of principal amount,

    or $50,000 per

    transaction, per GSE,

    at time of settlement

    (paid by underwriter

    to GSE)

	
     
	
 
	
 
	
 
	
 

	
    New Issue Bond

    (NIB) Program
	
 
	
     Initial Securitization

     Fee
	
 
	
    Greater of 10 bps of

    principal amount, or

    $50,000 per

    transaction, per GSE,

    at time of settlement

	
 
	
     Security Unwrap Fee
	
 
	
    Greater of 3.125 bps of principal amount, or $50,000
    per transaction, per GSE, at time of settlement (paid by
    underwriter to GSE)

F-1

 

 

    New Bond Fee
    Summary (bps per annum)
    

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Tsy Credit

	
 
	
 
	
 
	
    Additional

	
 
	
 

	
 
	
 
	
    Rating
	
 
	
    Premium
	
 
	
 
	
 
	
    GSE fee
	
 
	
    Total Fee

	 

	

    Single Family

	
 
	
    AAA / Aaa
	
 
	
 
	
    35
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    60
	
 

	
 
	
 
	
    AA / Aa
	
 
	
 
	
    50
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    75
	
 

	
 
	
 
	
    A / A
	
 
	
 
	
    85
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    110
	
 

	
 
	
 
	
    BBB / Baa
	
 
	
 
	
    200
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    225
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
    Tsy Credit

	
 
	
 
	
 
	
    Additional

	
 
	
 

	
 
	
 
	
    Rating
	
 
	
    Premium
	
 
	
 
	
 
	
    GSE fee
	
 
	
    Total Fee

	 

	

    Multi Family — Immediate Funding

	
 
	
    AAA / Aaa
	
 
	
 
	
    35
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    60
	
 

	
 
	
 
	
    AA / Aa
	
 
	
 
	
    50
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    75
	
 

	
 
	
 
	
    A / A
	
 
	
 
	
    85
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    110
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
    Tsy Credit

	
 
	
 
	
 
	
    Additional

	
 
	
 

	
 
	
 
	
    Rating
	
 
	
    Premium
	
 
	
    Rate Lock
	
 
	
    GSE fee
	
 
	
    Total Fee*

	 

	

    Multi Family — New Construction

	
 
	
    AAA / Aaa
	
 
	
 
	
    35
	
 
	
 
	
 
	
    80
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    140
	
 

	
 
	
 
	
    AA / Aa
	
 
	
 
	
    50
	
 
	
 
	
 
	
    80
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    155
	
 

	
 
	
 
	
    A / A
	
 
	
 
	
    85
	
 
	
 
	
 
	
    80
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    190
	
 

 

    Additional Conditions

 

    4yr Floating
    Rate — Premium will be set at SIFMA +50bps
    

    * Applies only to fixed rate bond
    period
    

 

 

    Liquidity
    Facility Fee Summary (bps per annum)
    

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
 
	
 
	
    Additional

	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    GSE fee
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
    Treasury Credit Premium
	
 
	
    applicable to

	
 
	
    Total Fee

	
 
	
 
	
    Rating
	
 
	
    Year 1
	
 
	
    Year 2
	
 
	
    Year 3
	
 
	
    each year
	
 
	
    Year 1
	
 
	
    Year 2
	
 
	
    Year 3

	 

	

    Single Family

	
 
	
    AAA / Aaa
	
 
	
 
	
    15
	
 
	
 
	
 
	
    40
	
 
	
 
	
 
	
    65
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    40
	
 
	
 
	
 
	
    65
	
 
	
 
	
 
	
    90
	
 

	
 
	
 
	
    AA / Aa
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    100
	
 

	
 
	
 
	
    A / A
	
 
	
 
	
    40
	
 
	
 
	
 
	
    65
	
 
	
 
	
 
	
    90
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    65
	
 
	
 
	
 
	
    90
	
 
	
 
	
 
	
    115
	
 

	
 
	
 
	
    BBB / Baa
	
 
	
 
	
    100
	
 
	
 
	
 
	
    125
	
 
	
 
	
 
	
    150
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    125
	
 
	
 
	
 
	
    150
	
 
	
 
	
 
	
    175
	
 

	

     

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Multifamily

	
 
	
    AAA / Aaa
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    100
	
 

	
 
	
 
	
    AA / Aa
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    50
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    100
	
 

	
 
	
 
	
    A / A
	
 
	
 
	
    45
	
 
	
 
	
 
	
    75
	
 
	
 
	
 
	
    95
	
 
	
 
	
 
	
    25
	
 
	
 
	
 
	
    70
	
 
	
 
	
 
	
    100
	
 
	
 
	
 
	
    120
	
 

 

F-2

 

Appendix G

Definitions

For purposes of the MOU and the Appendices thereto, the following definitions shall apply:

“Acquisition Period” means the period commencing on the date of public announcement of the Programs
by the federal government and ending on December 31, 2009.

“Allocation Amount” has the meaning given such term in Paragraph 7(A) of Appendix B.

“Bank Bonds” means any VRDOs that were tendered for purchase by a bondholder and were put to a GSE
under a TCLF and have not yet been remarketed to a new bondholder.

“Bonds” means, as the case may be, VRDOs, Bank Bonds, Multifamily Credit Enhanced Bonds and New
Issue Bonds.

“Credit Advance” means an advance under a TCLF to pay debt service due on VRDOs for which there are
insufficient funds available under the related indenture.

“Crossover Date” means the first date on which Program Losses equal or exceed 25/35ths of the First
Loss Limit.

“Decision Control” means:

     (a)      with respect to an Eligible Bond held by a Trust represented by a GSE Security held by or
on behalf of Treasury, any right available to a holder of that Eligible Bond to (i) instruct the
related bond indenture trustee to take or refrain from taking an action or decision including,
without limitation, any proposed amendment, restatement, waiver, forbearance of, or supplement to,
the bond indenture or resolution under which the Eligible Bond was issued or (ii) decide upon a
course of action in response to an Event of Default; and

     (b)      with respect to a Temporary Credit and Liquidity Facility, the right of a GSE to decide
upon a course of action with respect to a default that gives rise to an acceleration of the bonds
or the exercise by the GSEs of remedies available to them under the related reimbursement agreement
or any of the other related Transaction Documents.

“Definitive Documentation” has the meaning given to such term in Section 17(C) of the MOU.

“Eligible Bonds” (i) in the case of New Issue Bonds, has the meaning given to that term in
Paragraph 2 of Appendix A, (ii) in the case of Multifamily Credit Enhanced Bonds,

G-1

 

means bonds described in Paragraph 3 of Appendix B, and (iii) with respect to VRDOs, means bonds
described in Paragraph 1(B) of Appendix C.

“Eligible Loans” has the meaning given to such term in Paragraph 2(B) of Appendix A.

“Escrow” has the meaning given to such term in Paragraph 2 of Appendix A.

“Escrow Agreement” has the meaning given to such term in Section 6(C) of the MOU.

“Escrow Proceeds” has the meaning given to such term in Paragraph 2 of Appendix A.

“Event of Default” means an “event of default” as such term is defined in the related bond
indenture for the underlying bonds.

“Fannie Mae” means the Federal National Mortgage Association, a federally-chartered and
stockholder-owned corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. §1716 et seq.

“FHA” means the Federal Housing Administration.

“FHFA” means the Federal Housing Finance Agency.

“First Loss Limit” has the meaning given to that term in Section 4 of Appendix D, “Loss Sharing.”

“First Position Loss” means the amount of Program Loss to be borne by Treasury under the Program.
The First Position Loss is that portion of the Program Loss that does not exceed the First Loss
Limit.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation, a shareholder-owned
government-sponsored enterprise organized and existing under the laws of the United States.

“GNMA” means the Government National Mortgage Association, a government-sponsored enterprise
organized and existing under the laws of the United States.

“Government-sponsored enterprise” or “GSE” means either or both Fannie Mae and Freddie Mac.

“GSE Obligations” or “GSE Securities” are obligations and other securities issued or guaranteed, in
whole or in part, by Fannie Mae or Freddie Mac including, without limitation, Bank Bonds,
Multifamily Credit Enhanced Bonds and New Issue Bonds and with respect to Sections 1(A), 1(B) and 5
of the MOU, the Participation Agreement.

“HERA” has the meaning given to such term in Paragraph B(1) of Appendix.

G-2

 

“HFA” means a housing finance agency created by any of the States of the United States or any
possession, territory or commonwealth of the United States, or any political subdivision thereof.

“HFA Initiative” has the meaning given to such term in Section 1(B) of the MOU.

“Liquidity Advance” means an advance under a TCLF to pay for bond purchase tenders relating to
VRDOs.

“Loss Calculation Date” means the date as of which a Loss is calculated as provided in Paragraph 5
of Appendix D.

“MBS” means mortgage-backed securities held under an HFA indenture under the New Issue Bond Program
or the Temporary Credit and Liquidity Facility Program.

“MOU” means the Memorandum of Understanding among Treasury, FHFA, Fannie Mae and Freddie Mac.

“Multifamily Credit Enhanced Bonds” means project-based multifamily bonds eligible for purchase in
accordance with Section 4 of the MOU.

“Multifamily Credit Enhancement Program” means the program described in Section 4 of the MOU.

“New Issue Bond Program” means the program described in Section 3 of the MOU.

“New Issue Bond Program Agreement” means each New Issue Bond Program Agreement by and between
Treasury and the GSEs whereby the rights, duties and obligations of Treasury and the GSEs with
respect to the New Issue Bond Program (including the terms of the Partial Guarantee) are set forth,
as such agreements are amended and supplemented.

“New Issue Bonds” means, collectively, single family bonds and certain multifamily bonds backed by
pools of Secured Multifamily Loans eligible for purchase in accordance with the provisions of
Section 3 of the MOU for inclusion in the New Issue Bond Program.

“Partial Guarantee” means a partial guarantee provided by a GSE (a) pursuant to a Participation
Agreement with respect to the Temporary Credit and Liquidity Facility Program or (b) pursuant to a
GSE Security issued with respect to the New Issue Bond Program.

“Participant” means the Treasury, FHFA, Fannie Mae or Freddie Mac.

“Participation Agreement” means each Participation Agreement by and between Treasury and the GSEs
whereby the rights, duties and obligations of the Treasury and the GSEs

G-3

 

with respect to the Temporary Credit and Liquidity Facility Program (including the terms of the
Partial Guarantee) are set forth, as such agreements are amended and supplemented.

“Permitted Escrow Investments” has the meaning given to that term in Paragraph 2 of Appendix A.

“Permitted Indentures” has the meaning given to that term in Paragraph 9 of Appendix A.

“Placement Agreements” means Placement Agreements between the GSEs and the HFAs evidencing (i) an
unconditional obligation of the HFAs to issue the Eligible Bonds and deliver them to the GSEs, and
(ii) an unconditional obligation of the GSEs to deliver GSE Securities backed by the Eligible
Bonds.

“Prime Rate” means, for any day, a fluctuating rate of interest per annum equal to the base or
prime rate of a bank specified by the GSEs.

“Principal Multifamily Closing Documents” has the meaning given to such term in Section 6(B) of the
MOU.

“Principal New Issue Bond Closing Documents” has the meaning given to such term in Section 6(A) of
the MOU.

“Principal TCLF Closing Documents” has the meaning given to such term in Section 6(C) of the MOU.

“Program” means any of the New Issue Bond Program, the Multifamily Credit Enhancement Program, and
the Temporary Credit and Liquidity Facility Program.

“Program Limits” mean the respective Program limitations of the New Issue Bond Program, and the
Temporary Credit and Liquidity Facility Program, all as set forth in Appendix E.

“Program Losses” mean the aggregate of all Transaction Losses incurred under the Temporary Credit
and Liquidity Facility Program and the New Issue Bond Program.

“Recovery” means any payment or other amount received or recovered with respect to a Transaction
Loss. A Recovery excludes any amounts paid by a GSE to Treasury with respect to a Second Position
Loss or any amounts payable by Treasury to the GSEs under any purchase agreement or participation
agreement.

“Reimbursement Agreement” means each Reimbursement Agreement entered into between an HFA and the
GSEs relative to a TCLF, as such Reimbursement Agreements are amended and supplemented.

“Reset Date” has the meaning given to such term in Paragraph 2 of Appendix A.

G-4

 

“Risk Rating” means the risk rating of an indenture under a Program.

“Second Position Loss” means that portion of Program Losses, if any, that is not allocated to the
First Loss Position. Any Second Position Loss will be allocated to the Partial Guarantees in
accordance with the formula set out in the Partial Guarantees.

“Secured Multifamily Loans” means loans that are secured by multifamily properties.

“Serial Bond Ratio Requirement” has the meaning given to that term in Paragraph 2(E) of Appendix A.

“Serial Bonds” has the meaning given to that term in Paragraph 2 of Appendix A.

“Spread” means the spread based upon the on the related Risk Rating.

“Temporary Credit and Liquidity Facility” or “TCLF” has the meaning given to that term in Section
5(B) of the MOU.

“Temporary Credit and Liquidity Facility Fee” means the periodic fees payable by an HFA to the GSEs
for provision of a TCLF.

“Temporary Credit and Liquidity Facility Program” means the Program described in Section 5 of the
MOU.

“10-Year CMT” has the meaning given to that term in Paragraph 4(B) of Appendix A.

“Term Bonds” has the meaning given to that term in Paragraph 2 of Appendix A.

“Transaction Documents” means, collectively, the TCLF, the Reimbursement Agreement and related Bond
documents with respect to any series included in the Temporary Credit and Liquidity Facility
Program, as such documents are amended from time to time in accordance with their terms.

“Transaction Loss” means an amount calculated pursuant to Section 6 of Appendix D, “Loss Sharing”
as the loss realized on an Eligible Bond or a Temporary Credit and Liquidity Facility.

“Trust” means a trust established by a GSE as a pass-through entity which holds one or more issues
of Bonds and, where appropriate, a Partial Guarantee.

“Variable Rate” means the rate of interest described in Paragraph 4(D)(2) of Appendix A.

“VRDO” means a variable rate demand obligation bond issued by an HFA.

G-5

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