Document:

exv10w1

    Exhibit 10.1
    

 

    EXECUTION
    VERSION
    

 

    SENIOR
    PREFERRED STOCK PURCHASE AGREEMENT

 

    SENIOR PREFERRED STOCK PURCHASE AGREEMENT (this
    “Agreement”) dated as of September 7,
    2008, between the UNITED STATES DEPARTMENT OF THE TREASURY
    (“Purchaser”) and FEDERAL HOME LOAN MORTGAGE
    CORPORATION (“Seller”), acting through the
    Federal Housing Finance Agency (the “Agency”)
    as its duly appointed conservator (the Agency in such capacity,
    “Conservator”). Reference is made to
    Article 1 below for the meaning of capitalized terms used
    herein without definition.

 

    Background

 

    A. The Agency has been duly appointed as Conservator for
    Seller pursuant to Section 1367(a) of the Federal Housing
    Enterprises Financial Safety and Soundness Act of 1992 (as
    amended, the “FHE Act”). Conservator has
    determined that entry into this Agreement is (i) necessary
    to put Seller in a sound and solvent condition;
    (ii) appropriate to carry on the business of Seller and
    preserve and conserve the assets and property of Seller; and
    (iii) otherwise consistent with its powers, authorities and
    responsibilities.

 

    B. Purchaser is authorized to purchase obligations and
    other securities issued by Seller pursuant to
    Section 306(l) of the Federal Home Loan Mortgage
    Corporation Act, as amended (the “Charter
    Act”). The Secretary of the Treasury has determined,
    after taking into consideration the matters set forth in
    Section 306(l)(1)(C) of the Charter Act, that the purchases
    contemplated herein are necessary to (i) provide stability
    to the financial markets; (ii) prevent disruptions in the
    availability of mortgage finance; and (iii) protect the
    taxpayer.

 

    THEREFORE, the parties hereto agree as follows:

 

    Terms and
    Conditions

 

    1.  DEFINITIONS

 

    As used in this Agreement, the following terms shall have the
    meanings set forth below:

 

    “Affiliate” means, when used with respect to a
    specified Person (i) any direct or indirect holder or group
    (as defined in Sections 13(d) and 14(d) of the Exchange
    Act) of holders of 10.0% or more of any class of capital stock
    of such Person and (ii) any current or former director or
    officer of such Person, or any other current or former employee
    of such Person that currently exercises or formerly exercised a
    material degree of Control over such Person, including without
    limitation each current or former Named Executive Officer of
    such Person.

 

    “Available Amount” means, as of any date of
    determination, the lesser of (a) the Deficiency Amount as
    of such date and (b) the Maximum Amount as of such date.

 

    “Business Day” means any day other than a
    Saturday, Sunday or other day on which commercial banks are
    authorized to close under United States federal law and the law
    of the State of New York.

 

    “Capital Lease Obligations” of any Person shall
    mean the obligations of such Person to pay rent or other amounts
    under any lease of (or other similar arrangement conveying the
    right to use) real or personal property, or a combination
    thereof, which obligations are required to be classified and
    accounted for as capital leases on a balance sheet of such
    Person under GAAP and, for purposes hereof, the amount of such
    obligations at any time shall be the capitalized amount thereof
    at such time determined in accordance with GAAP.

 

    “Control” shall mean the possession, directly
    or indirectly, of the power to direct or cause the direction of
    the management or policies of a Person, whether through the
    ownership of voting securities, by contract or otherwise.

 

    “Deficiency Amount” means, as of any date of
    determination, the amount, if any, by which (a) the total
    liabilities of Seller exceed (b) the total assets of Seller
    (such assets excluding the Commitment and any unfunded amounts
    thereof), in each case as reflected on the balance sheet of
    Seller as of the applicable date set forth in this Agreement,
    prepared in accordance with GAAP; provided,
    however, that:

 

    (i) for the avoidance of doubt, in measuring the Deficiency
    Amount liabilities shall exclude any obligation in respect of
    any capital stock of Seller, including the Senior Preferred
    Stock contemplated herein;

 

    (ii) in the event that Seller becomes subject to
    receivership or other liquidation process or proceeding,
    “Deficiency Amount” shall mean, as of any date of
    determination, the amount, if any, by which (a) the total
    allowed claims against the receivership or other applicable
    estate (excluding any liabilities of or transferred to any LLRE
    (as defined in Section 5.4(a)) created by a receiver)
    exceed (b) the total assets of such receivership or other
    estate (excluding the Commitment, any unfunded amounts thereof
    and any assets of or transferred to any LLRE, but including the
    value of the receiver’s interest in any LLRE);

 

    (iii) to the extent Conservator or a receiver of Seller. or
    any statute, rule, regulation or court of competent
    jurisdiction, specifies or determines that a liability of Seller
    (including without limitation a claim against Seller arising
    from rescission of a purchase or sale of a security issued by
    Seller (or guaranteed by Seller or with respect to which Seller
    is otherwise liable) or for damages arising from the purchase,
    sale or retention of such a security) shall be subordinated
    (other than pursuant to a contract providing for such
    subordination) to all other liabilities of Seller or shall be
    treated on par with any class of equity of Seller, then such
    liability shall be excluded in the calculation of Deficiency
    Amount; and

 

    (iv) the Deficiency Amount may be increased above the
    otherwise applicable amount by the mutual written agreement of
    Purchaser and Seller, each acting in its sole discretion.

 

    “Designated Representative” means Conservator
    or (a) if Conservator has been superseded by a receiver
    pursuant to Section 1367(a) of the FHE Act, such receiver,
    or (b) if Seller is not in con-

    

    - 2 -

 

    servatorship or receivership pursuant to Section 1367(a) of
    the FHE Act, Seller’s chief financial officer.

 

    “Director” shall mean the Director of the
    Agency.

 

    “Effective Date” means the date on which this
    Agreement shall have been executed and delivered by both of the
    parties hereto.

 

    “Equity Interests” of any Person shall mean any
    and all shares, interests, rights to purchase or otherwise
    acquire, warrants, options, participations or other equivalents
    of or interests in (however designated) equity, ownership or
    profits of such Person, including any preferred stock, any
    limited or general partnership interest and any limited
    liability company membership interest, and any securities or
    other rights or interests convertible into or exchangeable for
    any of the foregoing,

 

    “Exchange Act” means the Securities Exchange
    Act of 1934, as amended, and the rules and regulations of the
    SEC promulgated thereunder.

 

    “GAAP” means generally accepted accounting
    principles in effect in the United States as set forth in the
    opinions and pronouncements of the Accounting Principles Board
    and the American Institute of Certified Public Accountants and
    statements and pronouncements of the Financial Accounting
    Standards Board from time to time.

 

    “Indebtedness” of any Person means, for
    purposes of Section 5.5 only, without duplication,
    (a) all obligations of such Person for money borrowed by
    such Person, (b) all obligations of such Person evidenced
    by bonds, debentures, notes or similar instruments, (c) all
    obligations of such Person under conditional sale or other title
    retention agreements relating to property or assets purchased by
    such Person, (d) all obligations of such Person issued or
    assumed as the deferred purchase price of property or services,
    other than trade accounts payable, (e) all Capital Lease
    Obligations of such Person, (f) obligations, whether
    contingent or liquidated, in respect of letters of credit
    (including standby and commercial), bankers’ acceptances
    and similar instruments and (g) any obligation of such
    Person, contingent or otherwise, guaranteeing or having the
    economic effect of guaranteeing any Indebtedness of the types
    set forth in clauses (a) through (f) payable by
    another Person other than Mortgage Guarantee Obligations.

 

    “Liquidation End Date” means the date of
    completion of the liquidation of Seller’s assets.

 

    “Maximum Amount” means, as of any date of
    determination, $100,000,000,000 (one hundred billion dollars),
    less the aggregate amount of funding under the Commitment prior
    to such date.

 

    “Mortgage Assets” of any Person means assets of
    such Person consisting of mortgages, mortgage loans,
    mortgage-related securities, participation certificates,
    mortgage-backed commercial paper, obligations of real estate
    mortgage investment conduits and similar assets, in each case to
    the extent such assets would appear on the balance sheet of such
    Person in accordance with GAAP as in effect as of the date
    hereof (and, for the avoidance of doubt, without giving effect
    to any

    

    - 3 -

 

    change that may be made hereafter in respect of Statement of
    Financial Accounting Standards No. 140 or any similar
    accounting standard).

 

    “Mortgage Guarantee Obligations” means
    guarantees, standby commitments, credit enhancements and other
    similar obligations of Seller, in each case in respect of
    Mortgage Assets.

 

    “Named Executive Officer” has the meaning given
    to such term in Item 402(a)(3) of
    Regulation S-K
    under the Exchange Act, as in effect on the date hereof.

 

    “Person” shall mean any individual,
    corporation, limited liability company, partnership, joint
    venture, association, joint-stock company, trust, estate,
    unincorporated organization or government or any agency or
    political subdivision thereof, or any other entity whatsoever.

 

    “SEC” means the Securities and Exchange
    Commission.

 

    “Senior Preferred Stock” means the Variable
    Liquidation Preference Senior Preferred Stock of Seller,
    substantially in the form of Exhibit A hereto.

 

    “Warrant” means a warrant for the purchase of
    common stock of Seller representing 79.9% of the common stock of
    Seller on a fully-diluted basis, substantially in the form of
    Exhibit B hereto.

 

    2.  COMMITMENT

 

    2.1. Commitment.  Purchaser hereby commits to
    provide to Seller, on the terms and conditions set forth herein,
    immediately available funds in an amount up to but not in excess
    of the Available Amount, as determined from time to time (the
    “Commitment”); provided, that in no
    event shall the aggregate amount funded under the Commitment
    exceed $100,000,000,000 (one hundred billion dollars). The
    liquidation preference of the Senior Preferred Stock shall
    increase in connection with draws on the Commitment, as set
    forth in Section 3.3 below.

 

    2.2. Quarterly Draws on Commitment.  Within
    fifteen (15) Business Days following the determination of
    the Deficiency Amount, if any, as of the end of each fiscal
    quarter of Seller which ends on or before the Liquidation End
    Date, the Designated Representative may, on behalf of Seller,
    request that Purchaser provide immediately available funds to
    Seller in an amount up to but not in excess of the Available
    Amount as of the end of such quarter. Any such request shall be
    valid only if it is in writing, is timely made, specifies the
    account of Seller to which such funds are to be transferred, and
    contains a certification of the Designated Representative that
    the requested amount does not exceed the Available Amount as of
    the end of the applicable quarter. Purchaser shall provide such
    funds within sixty (60) days of its receipt of such request
    or, following any determination by the Director that the
    Director will be mandated by law to appoint a receiver for
    Seller if such funds are not received sooner, such shorter
    period as may be necessary to avoid such mandatory appointment
    of a receiver if reasonably practicable taking into
    consideration Purchaser’s access to funds.

 

    2.3. Accelerated Draws on
    Commitment.  Immediately following any
    determination by the Director that the Director will be mandated
    by law to appoint a receiver for Seller prior to the Liquidation
    End Date unless Seller’s capital is increased by an amount
    (the “Special Amount”)

    

    - 4 -

 

    up to but not in excess of the then current Available Amount
    (computed based on a balance sheet of Seller prepared in
    accordance with GAAP that differs from the most recent balance
    sheet of Seller delivered in accordance with Section 5.9(a)
    or (b)) on a date that is prior to the date that funds will be
    available to Seller pursuant to Section 2.2, Conservator
    may, on behalf of Seller, request that Purchaser provide to
    Seller the Special Amount in immediately available funds. Any
    such request shall be valid only if it is in writing, is timely
    made, specifies the account of Seller to which such funds are to
    be transferred, and contains certifications of Conservator that
    (i) the requested amount does not exceed the Available
    Amount (including computations in reasonable detail and
    satisfactory to Purchaser of the then existing Deficiency
    Amount) and (ii) the requested amount is required to avoid
    the imminent mandatory appointment of a receiver for Seller.
    Purchaser shall provide such funds within thirty (30) days
    of its receipt of such request or, if reasonably practicable
    taking into consideration Purchaser’s access to funds, any
    shorter period as may be necessary to avoid mandatory
    appointment of a receiver.

 

    2.4. Final Draw on Commitment.  Within fifteen
    (15) Business Days following the determination of the
    Deficiency Amount, if any, as of the Liquidation End Date
    (computed based on a balance sheet of Seller as of the
    Liquidation End Date prepared in accordance with GAAP), the
    Designated Representative may, on behalf of Seller, request that
    Purchaser provide immediately available funds to Seller in an
    amount up to but not in excess of the Available Amount as of the
    Liquidation End Date. Any such request shall be valid only if it
    is in writing, is timely made, specifies the account of Seller
    to which such funds are to be transferred, and contains a
    certification of the Designated Representative that the
    requested amount does not exceed the Available Amount (including
    computations in reasonable detail and satisfactory to Purchaser
    of the Deficiency Amount as of the Liquidation End Date).
    Purchaser shall provide such funds within sixty (60) days
    of its receipt of such request.

 

    2.5. Termination of Purchaser’s
    Obligations.  Subject to earlier termination
    pursuant to Section 6.7, all of Purchaser’s
    obligations under and in respect of the Commitment shall
    terminate upon the earliest of: (a) if the Liquidation End
    Date shall have occurred, (i) the payment in full of
    Purchaser’s obligations with respect to any valid request
    for funds pursuant to Section 2.4 or (ii) if there is
    no Deficiency Amount on the Liquidation End Date or if no such
    request pursuant to Section 2.4 has been made, the close of
    business on the 15th Business Day following the
    determination of the Deficiency Amount, if any, as of the
    Liquidation End Date; (b) the payment in full of,
    defeasance of or other reasonable provision for all liabilities
    of Seller, whether or not contingent, including payment of any
    amounts that may become payable on, or expiry of or other
    provision for, all Mortgage Guarantee Obligations and provision
    for unmatured debts; and (c) the funding by Purchaser under
    the Commitment of an aggregate of $100,000,000,000 (one hundred
    billion dollars). For the avoidance of doubt, the Commitment
    shall not be terminable by Purchaser solely by reason of
    (i) the conservatorship, receivership or other insolvency
    proceeding of Seller or (ii) the Seller’s financial
    condition or any adverse change in Seller’s financial
    condition.

 

    3.  PURCHASE
    OF SENIOR PREFERRED STOCK AND WARRANT; FEES

 

    3.1. Initial Commitment Fee.  In consideration
    of the Commitment, and for no additional consideration, on the
    Effective Date (or as soon thereafter as is practicable) Seller
    shall sell and issue to Purchaser, and Purchaser shall purchase
    from Seller, (a) one million (1,000,000) shares of Senior
    Preferred Stock, with an initial liquidation preference equal to
    $1,000 per share

    

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    ($1,000,000,000 (one billion dollars) liquidation
    preference in the aggregate), and (b) the Warrant.

 

    3.2. Periodic Commitment
    Fee.  (a) Commencing March 31, 2010,
    Seller shall pay to Purchaser quarterly, on the last day of
    March, June, September and December of each calendar year (each
    a “Periodic Fee Date”), a periodic commitment
    fee (the “Periodic Commitment Fee”). The
    Periodic Commitment Fee shall accrue from January 1, 2010.

 

    (b) The Periodic Commitment Fee is intended to fully
    compensate Purchaser for the support provided by the ongoing
    Commitment following December 31, 2009. The amount of the
    Periodic Commitment Fee shall be set not later than
    December 31, 2009 with respect to the ensuing five-year
    period, shall be reset every five years thereafter and shall be
    determined with reference to the market value of the Commitment
    as then in effect. The amount of the Periodic Commitment Fee
    shall be mutually agreed by Purchaser and Seller, subject to
    their reasonable discretion and in consultation with the
    Chairman of the Federal Reserve; provided, that Purchaser
    may waive the Periodic Commitment Fee for up to one year at a
    time, in its sole discretion, based on adverse conditions in the
    United States mortgage market.

 

    (c) At the election of Seller, the Periodic Commitment Fee
    may be paid in cash or by adding the amount thereof ratably to
    the liquidation preference of each outstanding share of Senior
    Preferred Stock so that the aggregate liquidation preference of
    all such outstanding shares of Senior Preferred Stock is
    increased by an amount equal to the Periodic Commitment Fee.
    Seller shall deliver notice of such election not later than
    three (3) Business Days prior to each Periodic Fee Date. If
    the Periodic Commitment Fee is not paid in cash by 12:00 pm
    (New York time) on the applicable Periodic Fee Date
    (irrespective of Seller’s election pursuant to this
    subsection), Seller shall be deemed to have elected to pay the
    Periodic Commitment Fee by adding the amount thereof to the
    liquidation preference of the Senior Preferred Stock, and the
    aggregate liquidation preference of the outstanding shares of
    Senior Preferred Stock shall thereupon be automatically
    increased, in the manner contemplated by the first sentence of
    this section, by an aggregate amount equal to the Periodic
    Commitment Fee then due.

 

    3.3. Increases of Senior Preferred Stock Liquidation
    Preference as a Result of Funding under the
    Commitment.  The aggregate liquidation preference
    of the outstanding shares or Senior Preferred Stock shall be
    automatically increased by an amount equal to the amount of each
    draw on the Commitment pursuant to Article 2 that is funded
    by Purchaser to Seller, such increase to occur simultaneously
    with such funding and ratably with respect to each share of
    Senior Preferred Stock.

 

    3.4. Notation of Increase in Liquidation
    Preference.  Seller shall duly mark its records to
    reflect each increase in the liquidation preference of the
    Senior Preferred Stock contemplated herein (but, for the
    avoidance of doubt, such increase shall be effective regardless
    of whether Seller has properly marked its records).

    

    - 6 -

 

    4.  REPRESENTATIONS

 

    Seller represents and warrants as of the Effective Date, and
    shall be deemed to have represented and warranted as of the date
    of each request for and funding of an advance under the
    Commitment pursuant to Article 2, as follows:

 

    4.1. Organization and Good Standing.  Seller is
    a corporation, chartered by the Congress of the United States,
    duly organized, validly existing and in good standing under the
    laws of the United States and has all corporate power and
    authority to carry on its business as now conducted and as
    proposed to be conducted.

 

    4.2. Organizational Documents.  Seller has made
    available to Purchaser a complete and correct copy of its
    charter and bylaws, each as amended to date (the
    “Organizational Documents”). The Organizational
    Documents are in full force and effect. Seller is not in
    violation of any provision of its Organizational Documents.

 

    4.3. Authorization and Enforceability.  All
    corporate or other action on the part of Seller or Conservator
    necessary for the authorization, execution, delivery and
    performance of this Agreement by Seller and for the
    authorization, issuance and delivery of the Senior Preferred
    Stock and the Warrant being purchased under this Agreement, has
    been taken. This Agreement has been duly and validly executed
    and delivered by Seller and (assuming due authorization,
    execution and delivery by the Purchaser) shall constitute the
    valid and legally binding obligation of seller, enforceable
    against Seller in accordance with its terms, except to the
    extent the enforceability thereof may be limited by bankruptcy
    laws, insolvency laws, reorganization laws, moratorium laws or
    other laws of general applicability affecting creditors’
    rights generally or by general equitable principles (regardless
    of whether enforcement is sought in a proceeding in equity or at
    law). The Agency is acting as conservator for Seller under
    Section 1367 of the FHE Act. The Board of Directors of
    Seller, by valid action at a duly called meeting of the Board of
    Directors on September 6, 2008, consented to the
    appointment of the Agency as conservator for purposes of
    Section 1367(a)(3)(I) of the FHE Act, and the Director of
    the Agency has appointed the Agency as Conservator for Seller
    pursuant to Section 1367(a)(I) of the FHE Act, and each
    such action has not been rescinded, revoked or modified in any
    respect.

 

    4.4. Valid Issuance.  When issued in accordance
    with the terms of this Agreement, the Senior Preferred Stock and
    the Warrant will be duly authorized, validly issued, fully paid
    and nonassessable, free and clear of all liens and preemptive
    rights. The shares of common stock to which the holder of the
    Warrant is entitled have been duly and validly reserved for
    issuance. When issued and delivered in accordance with the terms
    of this Agreement and the Warrant, such shares will be duly
    authorized, validly issued, fully paid and nonassessable, free
    and clear of all liens and preemptive rights.

 

    4.5. Non-Contravention.

 

    (a) The execution, delivery or performance by Seller of
    this Agreement and the consummation by Seller of the
    transactions contemplated hereby do not and will not
    (i) conflict with

    

    - 7 -

 

    or violate any provision of the Organizational Documents of
    Seller; (ii) conflict with or violate any law, decree or
    regulation applicable to Seller or by which any property or
    asset of Seller is bound or affected, or (iii) result in
    any breach of, or constitute a default (with or without notice
    or lapse of time, or both) under, or give to others any right of
    termination, amendment, acceleration or cancellation of, or
    result in the creation of a lien upon any of the properties or
    assets of Seller, pursuant to any note, bond, mortgage,
    indenture or credit agreement, or any other contract, agreement,
    lease, license, permit, franchise or other instrument or
    obligation to which Seller is a party or by which Seller is
    bound or affected, other than, in the case of clause (iii), any
    such breach, default, termination, amendment, acceleration,
    cancellation or lien that would not have and would not
    reasonably be expected to have, individually or in the
    aggregate, a material adverse effect on the business, property,
    operations or condition of the Seller, the authority of the
    Conservator or the validity or enforceability of this Agreement
    (a “Material Adverse Effect”).

 

    (b) The execution and delivery of this Agreement by Seller
    does not, and the consummation by Seller of the transactions
    contemplated by this Agreement will not, require any consent,
    approval, authorization, waiver or permit of, or filing with or
    notification to, any governmental authority or any other person,
    except for such as have already been obtained.

 

    5.  COVENANTS

 

    From the Effective Date until such time as the Senior Preferred
    Stock shall have been repaid or redeemed in full in accordance
    with its terms:

 

    5.1. Restricted Payments.  Seller shall not,
    and shall not permit any of its subsidiaries to, in each case
    without the prior written consent of Purchaser, declare or pay
    any dividend (preferred or otherwise) or make any other
    distribution (by reduction of capital or otherwise), whether in
    cash, property, securities or a combination thereof, with
    respect to any of Seller’s Equity Interests (other than
    with respect to the Senior Preferred Stock or the Warrant) or
    directly or indirectly redeem, purchase, retire or otherwise
    acquire for value any of Seller’s Equity Interests (other
    than the Senior Preferred Stock or the Warrant), or set aside
    any amount for any such purpose.

 

    5.2. Issuance of Capital Stock.  Seller shall
    not, and shall not permit any of its subsidiaries to, in each
    case without the prior written consent of Purchaser, sell or
    issue Equity Interests of Seller or any of its subsidiaries of
    any kind or nature, in any amount, other than the sale and
    issuance of the Senior Preferred Stock and Warrant on the
    Effective Date and the common stock subject to the Warrant upon
    exercise thereof, and other than as required by (and pursuant
    to) the terms of any binding agreement as in effect on the date
    hereof.

 

    5.3. Conservatorship.  Seller shall not (and
    Conservator, by its signature below, agrees that it shall not),
    without the prior written consent of Purchaser, terminate, seek
    termination of or permit to be terminated the conservatorship of
    Seller pursuant to Section 1367 of the FHE Act, other than
    in connection with a receivership pursuant to Section 1367 of
    the FHE Act.

 

    5.4. Transfer of Assets.  Seller shall not, and
    shall not permit any of its subsidiaries to, in each case
    without the prior written consent of Purchaser, sell, transfer,
    lease or otherwise dispose

    

    - 8 -

 

    of (in one transaction or a series of related transactions) all
    or any portion of its assets (including Equity Interests in
    other persons, including subsidiaries), whether now owned or
    hereafter acquired (any such sale, transfer, lease or
    disposition, a “Disposition”), other than
    Dispositions for fair market value:

 

    (a) to a limited life regulated entity
    (“LLRE”) pursuant to Section 1367(i) of
    the FHE Act;

 

    (b) of assets and properties in the ordinary course of
    business, consistent with past practice;

 

    (c) in connection with a liquidation of Seller by a
    receiver appointed pursuant to Section 1367(a) of the FHE
    Act;

 

    (d) of cash or cash equivalents for cash or cash
    equivalents; or

 

    (e) to the extent necessary to comply with the covenant set
    forth in Section 5.7 below.

 

    5.5. Indebtedness.  Seller shall not, and shall
    not permit any of its subsidiaries to, in each case without the
    prior written consent of Purchaser, incur, assume or otherwise
    become liable for (a) any Indebtedness if, after giving
    effect to the incurrence thereof, the aggregate Indebtedness of
    Seller and its subsidiaries on a consolidated basis would exceed
    110.0% of the aggregate Indebtedness of Seller and its
    subsidiaries on a consolidated basis as of June 30, 2008 or
    (b) any Indebtedness if such Indebtedness is subordinated
    by its terms to any other Indebtedness of Seller or the
    applicable subsidiary. For purposes of this covenant the
    acquisition of a subsidiary with Indebtedness will be deemed to
    be the incurrence of such Indebtedness at the time of such
    acquisition.

 

    5.6. Fundamental Changes.  Seller shall not,
    and shall not permit any or its subsidiaries to, in each case
    without the prior written consent of Purchaser, (i) merge
    into or consolidate or amalgamate with any other Person, or
    permit any other Person to merge into or consolidate or
    amalgamate with it, (ii) effect a reorganization or
    recapitalization involving the common stock of Seller, a
    reclassification of the common stock of Seller or similar
    corporate transaction or event or (iii) purchase, lease or
    otherwise acquire (in one transaction or a series of
    transactions) all or substantially all of the assets of any
    other Person or any division, unit or business of any Person.

 

    5.7. Mortgage Assets.  Seller shall not own, as
    of any applicable date, Mortgage Assets in excess of (i) on
    December 31, 2009, $850 billion, or (ii) on
    December 31 of each year thereafter, 90.0% of the aggregate
    amount of Mortgage Assets of Seller as of December 31 of the
    immediately preceding calendar year; provided, that in no
    event shall Seller be required under this Section 5.7 to
    own less than $250 billion in Mortgage Assets.

 

    5.8. Transactions with Affiliates.  Seller
    shall not, and shall not permit any of its subsidiaries to,
    without the prior written consent of Purchaser, engage in any
    transaction of any kind or nature with an Affiliate of Seller
    unless such transaction is (i) pursuant to this Agreement,
    the Senior Preferred Stock or the Warrant, (ii) upon terms
    no less favorable to Seller than would be ob-

    

    - 9 -

 

    tained in a comparable arm’s-length transaction with a
    Person that is not an Affiliate of Seller or (iii) a
    transaction undertaken in the ordinary course or pursuant to a
    contractual obligation or customary employment arrangement in
    existence as of the date hereof.

 

    5.9. Reporting.  Seller shall provide to
    Purchaser:

 

    (a) not later than the time period specified in the
    SEC’s rules and regulations with respect to issuers as to
    which Section 13 and 15(d) of the Exchange Act apply,
    annual reports on
    Form 10-K
    (or any successor or comparable form) containing the information
    required to be contained therein (or required in such successor
    or comparable form);

 

    (b) not later than the time period specified in the
    SEC’s rules and regulations with respect to issuers as to
    which Section 13 and 15(d) of the Exchange Act apply,
    reports on
    Form 10-Q
    (or any successor or comparable form) containing the information
    required to be contained therein (or required in such successor
    or comparable form);

 

    (c) promptly from time to time after the occurrence of an
    event required to be therein reported (and in any event within
    the time period specified in the SEC’s rules and
    regulations), such other reports on
    Form 8-K
    (or any successor or comparable form);

 

    (d) concurrently with any delivery of financial statements
    under paragraphs (a) or (b) above, a certificate of
    the Designated Representative, (i) certifying that Seller
    is (and since the last such certificate has at all times been)
    in compliance with each of the covenants contained herein and
    that no representation made by Seller herein or in any document
    delivered pursuant hereto or in connection herewith was false or
    misleading in any material respect when made, or, if the
    foregoing is not true, specifying the nature and extent of the
    breach of covenant
    and/or
    representation and any corrective action taken or proposed to be
    taken with respect thereto, and (ii) setting forth
    computations in reasonable detail and satisfactory to the
    Purchaser of the Deficiency Amount, if any;

 

    (e) promptly, from time to time, such other information
    regarding the operations, business affairs, plans, projections
    and financial condition of Seller, or compliance with the terms
    of this Agreement, as Purchaser may reasonably request; and

 

    (f) as promptly as reasonably practicable, written note of
    the following:

 

    (i) the occurrence of the Liquidation End Date;

 

    (ii) the filing or commencement of, or any written threat
    or notice of intention of any Person to file or commence, any
    action, suit or proceeding, whether at law or in equity or by or
    before any governmental authority or in arbitration, against
    Conservator, Seller or any other Person which, if adversely
    determined, would reasonably be expected to have a Material
    Adverse Effect;

 

    (iii) any other development that is not a matter of general
    public knowledge and that has had, or would reasonably be
    expected to have, a Material Adverse Effect.

    

    - 10 -

 

    5.10. Executive Compensation.  Seller shall
    not, without the consent of the Director, in consultation with
    the Secretary of the Treasury, enter into any new compensation
    arrangements with, or increase amounts or benefits payable under
    existing compensation arrangements of, any Named Executive
    Officer of Seller.

 

    6.  MISCELLANEOUS

 

    6.1. No Third-Party Beneficiaries.  Until the
    termination of the Commitment, at any time during the existence
    and continuance of a payment default with respect to debt
    securities issued by Seller
    and/or a
    default by Seller with respect to any Mortgage Guarantee
    Obligations, any holder of such defaulted debt securities or
    beneficiary of such Mortgage Guarantee Obligations
    (collectively, the “Holders”) may
    (a) deliver notice to the Seller and the Designated
    Representative requesting exercise of all rights available to
    them under this Agreement to draw on the Commitment up to the
    lesser of the amount necessary to cure the outstanding payment
    defaults and the Available Amount as of the last day of the
    immediately preceding fiscal quarter, and (b) if Seller and
    the Designated Representative fail to act as requested within
    thirty (30) days of such notice, or if Purchaser shall fail
    to perform its obligations in respect of any draw on the
    Commitment and Seller
    and/or the
    Designated Representative shall not be diligently pursuing
    remedies in respect of such failure, seek judicial relief
    requiring Seller to draw on the Commitment or Purchaser to fund
    the Commitment, as applicable. The Holders shall have no other
    rights under or in respect of this Agreement, and the Commitment
    shall not otherwise be enforceable by any creditor of Seller or
    by any other Person other than the parties hereto, and no such
    creditor or other Person is intended to be, or shall be, a third
    party beneficiary of any provision of this Agreement.

 

    6.2. Non-Transferable; Successors.  The
    Commitment is solely for the benefit of Seller and shall not
    inure to the benefit of any other Person (other than the Holders
    to the extent set forth in Section 6.1), including any
    entity to which the charter of Seller may be transferred, to any
    LLRE or to any other successor to the assets, liabilities or
    operations of Seller. The Commitment may not be assigned or
    otherwise transferred, in whole or in part, to any Person
    (including, for the avoidance of doubt, any LLRE to which a
    receiver has assigned all or a portion of Seller’s assets)
    without the prior written consent of Purchaser (which may be
    withheld in its sole discretion). In no event shall any
    successor to Seller (including such an LLRE) be entitled to the
    benefit of the Commitment without the prior written consent of
    Purchaser. Seller and Conservator, for themselves and on behalf
    of their permitted successors, covenant and agree not to
    transfer or purport to transfer the Commitment in contravention
    of the terms hereof, and any such attempted transfer shall be
    null and void ab initio. It is the expectation of the
    parties that, in the event Seller were placed into receivership
    and an LLRE formed to purchase certain of its assets and assume
    certain of its liabilities, the Commitment would remain with
    Seller for the benefit of the holders of the debt of Seller not
    assumed by the LLRE.

 

    6.3. Amendments; Waivers.  This Agreement may
    be waived or amended solely by a writing executed by both of the
    parties hereto, and, with respect to amendments to or waivers of
    the provisions of Sections 5.3, 6.2 and 6.11, the
    Conservator; provided, however, that no such
    waiver or amendment shall decrease the aggregate Commitment or
    add conditions to funding the amounts required to be funded by
    Purchaser under the Commitment if such waiver or amendment
    would,

    

    - 11 -

 

    in the reasonable opinion of Seller, adversely affect in any
    material respect the holders of debt securities of Seller
    and/or the
    beneficiaries of Mortgage Guarantee Obligations, in each case in
    their capacities as such, after taking into account any
    alternative arrangements that may be implemented concurrently
    with such waiver or amendment. In no event shall any rights
    granted hereunder prevent the parties hereto from waiving or
    amending in any manner whatsoever the covenants of Seller
    hereunder.

 

    6.4. Governing Law; Jurisdiction; Venue.  This
    Agreement and the Warrant shall be governed by, and construed in
    accordance with, the federal law of the United States of America
    if and to the extent such federal law is applicable, and
    otherwise in accordance with the laws of the State of New York.
    The Senior Preferred Stock shall be governed as set forth in the
    terms thereof. The United States District Court for the District
    of Columbia shall have exclusive jurisdiction over all civil
    actions arising out of this Agreement, the Commitment, the
    Senior Preferred Stock and the Warrant, and venue for any such
    civil action shall lie exclusively in the United States District
    Court for the District of Columbia.

 

    6.5. Notices.  Any notices delivered pursuant
    to or in connection with this Agreement shall be delivered to
    the applicable parties at the addresses set forth below:

     

    If to Seller:

     

    Federal Home Loan Mortgage Corporation

    c/o Federal
    Housing Finance Authority

    1700 G Street, NW

    4th Floor

    Washington, DC 20552

    Attention: General Counsel

     

    If to Purchaser:

     

    United States Department of the Treasury

    1500 Pennsylvania Avenue, NW

    Washington DC 20220

    Attention: Under Secretary for Domestic Finance

     

    with a copy to:

     

    United States Department of the Treasury

    1500 Pennsylvania Avenue, NW

    Washington DC 20220

    Attention: General Counsel

     

    If to Conservator:

     

    Federal Housing Finance Authority

    1700 G Street, NW

    

    - 12 -

 

    4th Floor

    Washington, DC 20552

    Attention: General Counsel

 

    All notices and other communications provided for herein shall
    be in writing and shall be delivered by hand or overnight
    courier service, mailed by certified or registered mail. All
    notices hereunder shall be effective upon receipt.

 

    6.6. Disclaimer of Guarantee.  This Agreement
    and the Commitment are not intended to and shall not be deemed
    to constitute a guarantee by Purchaser or any other agency or
    instrumentality of the United States of the payment or
    performance of any debt security or any other obligation,
    indebtedness or liability of Seller of any kind or character
    whatsoever.

 

    6.7. Effect of Order; Injunction; Decree.  If
    any order, injunction or decree is issued by any court of
    competent jurisdiction that vacates, modifies, amends,
    conditions, enjoins, stays or otherwise affects the appointment
    of Conservator as conservator of Seller or otherwise curtails
    Conservator’s powers as such conservator (except in each
    case any order converting the conservatorship to a receivership
    under Section 1367(a) of the FHE Act), Purchaser may by
    written notice to Conservator and Seller declare this Agreement
    null and void, whereupon all transfers hereunder (including the
    issuance of the Senior Preferred Stock and the Warrant and any
    funding of the Commitment) shall be rescinded and unwound and
    all obligations of the parties (other than to effectuate such
    rescission and unwind) shall immediately and automatically
    terminate.

 

    6.8. Business Day.  To the extent that any
    deadline or date of performance of any right or obligation set
    forth herein shall fall on a day other than a Business Day, then
    such deadline or date of performance shall automatically be
    extended to the next succeeding Business Day.

 

    6.9. Entire Agreement.  This Agreement,
    together with the Senior Preferred Stock and Warrant, contains
    the entire agreement between the parties hereto with respect to
    the transactions contemplated hereby and supersedes and cancels
    all prior agreements, including, but not limited to, all
    proposals, term sheets, statements, letters of intent or
    representations, written or oral, with respect thereto.

 

    6.10. Remedies.  In the event of a breach by
    Seller of any covenant or representation of Seller set forth
    herein, Purchaser shall be entitled to specific performance (in
    the case of a breach of covenant), damages and such other
    remedies as may be available at law or in equity;
    provided, that Purchaser shall not have the right to
    terminate the Commitment solely as a result of any such breach,
    and compliance with the covenants and the accuracy of the
    representations set forth in this Agreement shall not be
    conditions to funding the Commitment.

 

    6.11. Tax Reporting.  Neither Seller nor
    Conservator shall take, or shall permit any of their respective
    successors or assigns to take, a position for any tax,
    accounting or other purpose that is inconsistent with Internal
    Revenue Service Notice
    2008-76 (or
    the regulations to be issued pursuant to such Notice) regarding
    the application of Section 382 of the Internal Revenue Code
    of 1986, as amended, a copy of which Notice has been provided to
    Seller in connection with the execution of this Agreement.

    

    - 13 -

 

    6.12. Non-Severability.  Each of the provisions
    of this Agreement is integrated with and integral to the whole
    and shall not be severable from the remainder of the Agreement.
    In the event that any provision of this Agreement, the Senior
    Preferred Stock or the Warrant is determined to be illegal or
    unenforceable, then Purchaser may, in its sole discretion, by
    written notice to Conservator and Seller, declare this Agreement
    null and void, whereupon all transfers hereunder (including the
    issuance of the Senior Preferred Stock and the Warrant and any
    funding of the Commitment) shall be rescinded and unwound and
    all obligations of the parties (other than to effectuate such
    rescission and unwind) shall immediately and automatically
    terminate.

 

    [Signature
    Page Follows]
    

    

    - 14 -

 

    FEDERAL HOME LOAN MORTGAGE

    CORPORATION, by

              

    Federal Housing Finance Agency,

    its Conservator

              

    /s/  James
    B. Lockhart III

    James B. Lockhart III

    Director

              

              

              

    UNITED STATES DEPARTMENT

    OF THE TREASURY

              

    /s/  Henry
    M. Paulson, Jr.

    Henry M. Paulson, Jr.

    Secretary of the Treasury

     

              

              

    Acknowledged and, solely as

    to Sections 5.3, 6.2 and 6.11,

    agreed:

              

    FEDERAL HOUSING

    FINANCE AGENCY

    as Conservator

              

    /s/  James
    B. Lockhart III

    James B. Lockhart III

    Director

 

 

 

    Signature
    Page to Senior Preferred Stock Purchase Agreementexv10w2

    Exhibit 10.2
    

 

    EXECUTION
    VERSION
    

 

    FEDERAL HOME
    LOAN MORTGAGE CORPORATION
    

    WARRANT TO PURCHASE COMMON STOCK

 

		
	    NO. 2008-1
    	     September
    7, 2008
    

 

    VOID AFTER
    SEPTEMBER 7, 2028
    

 

    THIS CERTIFIES THAT, for value received, the United States
    Department of the Treasury, with its principal office at 1500
    Pennsylvania Avenue, NW, Washington, DC 20220 (the
    “Holder”), is entitled to purchase at the
    Exercise Price (defined below) from Federal Home Loan Mortgage
    Corporation, a government-sponsored enterprise of the United
    States of America, with its principal office at 8200 Jones
    Branch Drive, McLean, Virginia 22102 (the
    “Company”), shares of common stock, no par
    value, of the Company, as provided herein.

 

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

 

    “Affiliate” shall mean, as to any specified
    Person, any other Person directly or indirectly controlling or
    controlled by or under direct or indirect common control with
    such specified Person. For the purposes of this definition,
    “control,” when used with respect to any Person, means
    the power to direct the management and policies of such Person,
    directly or indirectly, whether through the ownership of voting
    securities, by contract or otherwise and the terms
    “affiliated,” “controlling” and
    “controlled” have meanings correlative to the
    foregoing.

 

    “Business Day” shall mean each Monday, Tuesday,
    Wednesday, Thursday and Friday that is not a day on which
    banking institutions in New York, New York are authorized or
    obligated by law or executive order to close.

 

    “Common Stock” shall mean the common stock, no
    par value, of the Company, and all other stock of any class or
    classes (however designated) of the Company from time to time
    outstanding, the holders of which have the right, without
    limitation as to amount, either to all or to a share of the
    balance of current dividends or liquidating distributions after
    the payment of dividends and distributions on any shares
    entitled to preference.

 

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

 

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

 

    “Exercise Shares” shall mean the shares of the
    Common Stock issuable upon exercise of this Warrant, subject to
    adjustment pursuant to the terms herein, and shall also mean any
    other shares, securities, assets or property otherwise issuable
    upon exercise of this Warrant.

 

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

 

    (a)  the volume weighted average daily Market Price
    during the period of the most recent twenty (20) Trading
    Days, ending on the last Trading Day before the date of
    determination of Fair Market Value, if such class of Common
    Stock or other security is (i) traded

 

    on the New York Stock Exchange or any other U.S. national or
    regional securities exchange, or admitted to unlisted trading
    privileges on such an exchange, or (ii) is quoted or
    reported on the
    Over-the-Counter
    Bulletin Board (“OTCBB”) or by Pink OTC Markets
    Inc. or a similar organization or agency succeeding to its
    functions of reporting prices; or

 

    (b)  if such class of Common Stock or other security
    is not then so listed, admitted to trading or quoted, the Fair
    Market Value shall be the Market Price on the last Business Day
    before the date of determination at Fair Market Value.

 

    “Fully Diluted” shall mean, as of immediately
    prior to the exercise of this Warrant (or a portion of this
    Warrant), the sum of, without duplication, (i) the total
    number of shares of Common Stock outstanding and (ii) all
    shares of Common Stock issuable in respect of securities
    convertible into or exercisable or exchangeable for Common
    Stock, stock appreciation rights or options, warrants (including
    this Warrant) and other rights to purchase or subscribe for
    Common Stock or securities convertible into or exercisable or
    exchangeable for Common Stock (in each case, assuming that no
    restrictions apply with respect to conversion, exercise,
    exchange, subscription or purchase).

 

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

 

    (i)  the closing price on that date or, if no closing
    price is reported, the last reported sale price, of shares of
    the Common Stock or such other security on the New York Stock
    Exchange on that date; or

 

    (ii)  if the Common Stock or such other security is
    not traded on the New York Stock Exchange, the closing price on
    that date as reported in composite transactions for the
    principal U.S. national or regional securities exchange on
    which the Common Stock or such other security is so traded or,
    if no closing price is reported, the last reported sale price of
    shares of the Common Stock or such other security on the
    principal U.S. national or regional securities exchange on
    which the Common Stock or such other security is so traded on
    that date; or

 

    (iii)  if the Common Stock or such other security is
    not traded on a U.S. national or regional securities
    exchange, the last quoted bid price on that date for the Common
    Stock or such other security in the over-the-counter market as
    reported (x) by the OTCBB or (y) if reports are
    unavailable under clause (x) above by Pink OTC Markets Inc.
    or a similar organization or agency succeeding to its functions
    of reporting prices;

 

    (iv)  if the Common Stock or such other security is
    not so quoted by OTCBB or Pink OTC Markets Inc. or a similar
    organization, the Market Price shall be determined in accordance
    with the Valuation Procedure.

 

    “Participating Securities” shall mean,
    (i) any equity security (other than Common Stock) that
    entitles the holders thereof to participate in liquidations or
    other distributions with the holders of Common Stock or
    otherwise participate in the capital of the Company other than
    through a fixed or floating rate of return on capital loaned or
    invested, and (ii) any stock appreciation rights, phantom
    stock rights, or any other profit participation rights with
    respect to

    

    - 2 -

 

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

 

    “Person” shall mean any individual,
    corporation, limited liability company, partnership, joint
    venture, association, joint-stock company, trust, estate,
    unincorporated organization or government or any agency or
    political subdivision thereof, or any other entity whatsoever.

 

    “Trading Day” shall mean, with respect to any
    class of Common Stock or any other security of the Company or
    any other issuer a day (i) on which the securities exchange
    or other trading platform applicable for purposes of determining
    the Market Price of a share or unit of such class of Common
    Stock or other security shall be open for business or
    (ii) for which quotations from such securities exchange or
    other trading platform of the character specified for purposes
    of determining such Market Price shall be reported.

 

    “Valuation Procedure” shall mean a
    determination made in good faith by the Board of Directors of
    the Company (the “Board”) that is set forth in
    resolutions of the Board that are certified by the Secretary of
    the Company, which certified resolutions (i) set forth the
    basis of the Board’s determination, which, in the case of a
    valuation in excess of $100 million, shall include the
    Board’s reliance on the valuation of a nationally
    recognized investment banking or appraisal firm, and (ii) are
    delivered to the Holder within ten (10) Business Days
    following such determination. A Valuation Procedure with respect
    to the value of any capital stock shall be based on the price
    that would be paid for all of the capital stock of the issuer in
    an arm’s-length transaction between a willing buyer and a
    willing seller (neither acting under compulsion).

 

    2.  Exercise of Warrant; Number of Shares.

 

    2.1  Exercise. This Warrant may be exercised in
    whole or in part at any time during the Exercise Period, by
    delivery of the following to the Company at its address set
    forth above (or at such other address as it may designate by
    notice in writing to the Holder):

 

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

 

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

 

    (c)  this Warrant.

 

    This Warrant will be exercisable for a number of shares of
    Common Stock that, together with the shares of Common Stock
    previously issued pursuant to this Warrant, is equal to 79.9% of
    the total number of shares of Common Stock outstanding on a
    Fully Diluted basis on the date of exercise. Whenever the Holder
    exercises this Warrant in whole or in part, it may assign its
    right to receive the Exercise Shares issuable upon such exercise
    to any other Person.

 

    As soon as practicable (and in any event within five Business
    Days) after this Warrant shall have been exercised, a
    certificate or certificates for the Exercise Shares so
    purchased, registered in the name of the Holder or such other
    Person as may be designated by the Holder (to the extent such
    transfer is not validly restricted and upon payment of any
    transfer taxes that are

    

    - 3 -

 

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

 

    The Person in whose name any certificate or certificates for the
    Exercise Shares are to be issued upon exercise of this Warrant
    shall be deemed to have become the holder of record of such
    shares on the date on which this Warrant was surrendered and
    payment of the Exercise Price was made, irrespective of the date
    of delivery of such certificate or certificates, except that, if
    the date of such surrender and payment is a date when the stock
    transfer books of the Company are closed, such Person shall be
    deemed to have become the holder of such shares at the close of
    business on the next succeeding date on which the stock transfer
    books are open (whether before or after the end of the Exercise
    Period).

 

    2.2  Net Exercise. Notwithstanding any
    provision herein to the contrary, if the Market Price of one
    share of the Common Stock is greater than the Exercise Price (at
    the date of calculation as set forth below), in lieu of
    exercising this Warrant by payment of cash, check or
    cancellation of indebtedness, the Holder may elect (the
    “Conversion Right”) to receive shares equal to
    the value (as determined below) of this Warrant (or the portion
    thereof being canceled) by surrender of this Warrant at the
    principal office of the Company together with the properly
    endorsed Notice of Exercise in which event the Company shall
    issue to the Holder a number of shares of Common Stock computed
    using the following formula:

 

    X = Y (A − B)

        A

 

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

 

    Y = the number of shares of Common Stock purchasable under this
    Warrant or, if only a portion of this Warrant is being
    exercised, the portion of this Warrant being exercised (at the
    date of such calculation)

 

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

 

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

 

    The Company shall pay all reasonable administrative costs
    incurred by the Holder in connection with the exercise of the
    Conversion Right by the Holder pursuant to this Section 2.2.

 

    3.  Covenants and Representations of the Company

 

    3.1  Covenants as to Exercise Shares.

 

    (a)  The Company covenants and agrees that all
    Exercise Shares that may be issued upon the exercise of this
    Warrant will, upon issuance, be validly authorized, issued and
    outstanding, fully paid and nonassessable, free of preemptive
    rights and free from all taxes, liens and charges with respect
    to the issuance thereof. If the Common Stock or the class of
    securities of any other Exercise Shares is then listed or quoted
    on a national securities exchange

    

    - 4 -

 

    or a regional securities exchange, all such Exercise Shares
    shall, upon issuance, also be so listed or quoted. The Company
    further covenants and agrees that the Company will at all times
    during the Exercise Period, have authorized and reserved solely
    for purposes of the exercise of this Warrant, free from
    preemptive rights, a sufficient number of shares of its Common
    Stock or the class of securities of any other Exercise Shares to
    provide for the exercise in full of this Warrant (without taking
    into account any possible exercise pursuant to Section 2.2
    hereof). If at any time during the Exercise Period the number of
    authorized but unissued shares of Common Stock or the class of
    securities of any other Exercise Shares shall not be sufficient
    to permit exercise in full of this Warrant (without taking into
    account any possible exercise pursuant to Section 2.2
    hereof), the Company will take such corporate action as shall be
    necessary to increase its authorized but unissued shares of
    Common Stock or the class of securities of any other Exercise
    Shares to such number of shares as shall be sufficient for such
    purposes.

 

    (b)  If at any time the Exercise Shares shall include
    any shares or other securities other than shares of Common
    Stock, or any other property or assets, the terms of this
    Warrant shall be modified or supplemented (and in the absence of
    express written documentation thereof, shall be deemed to be so
    modified or supplemented), and the Company shall take all
    actions as may be necessary to preserve, in a manner and on
    terms as nearly equivalent as practicable to the provisions of
    this Warrant as they apply to the Common Stock, the rights of
    the Holder hereunder, including any equitable replacements of
    the term “Common Stock” with the term “Exercise
    Shares” and adjustments of any formula included herein.

 

    (c)  The Company’s filings under the Securities
    Exchange Act of 1934, as amended (the “Exchange
    Act”), will comply in all material respects as to form
    with the Exchange Act and the rules and regulations thereunder.

 

    (d)  Without prior written consent of the Holder, the
    Company shall not permit any Significant Subsidiary (as defined
    by
    Rule 1-02(w)
    of
    Regulation S-X
    under the Securities Act or any successor rule) to
    (i) issue or grant any capital stock or equity ownership
    interest, including any Participating Security; (ii) any
    rights, options, warrants or convertible security that is
    exercisable for or convertible into any capital stock or other
    equity ownership interest, including any Participating Security;
    or (iii) any stock appreciation rights, phantom stock
    rights, or any other profit participation rights, or any rights
    or options to acquire any such rights, in each case of clauses
    (i), (ii) and (iii) above, to any Person other than
    the Company or its wholly owned subsidiaries.

 

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

 

    3.2  No Impairment. Except and to the extent as
    waived or consented to in writing by the Holder, the Company
    will not, by amendment of its charter, bylaws or other governing
    documents or through any reorganization, transfer of assets,
    consolidation, merger, dissolution, issue or sale of securities
    or any other action, avoid or seek to avoid the observance or
    performance of any of the terms to be observed or performed
    hereunder by the Company, but will at all times in good faith
    assist in the carrying out of all the provisions of this Warrant
    and in the taking of all such action as may be necessary or
    appropriate in order to protect the exercise rights of the
    Holder against impairment or dilution consistent with the intent
    and principles

    

    - 5 -

 

    expressed herein. If any event or occurrence shall occur
    (including without limitation, stock dividends and stock splits)
    as to which the failure to make any adjustment to the Exercise
    Price and/or
    the number of shares or other assets or property subject to this
    Warrant would adversely affect the purchase rights or value
    represented by this Warrant, including any issuance of Common
    Stock or Participating Securities, then, in each such case, the
    Company shall determine the adjustment, if any, on a basis
    consistent with the essential intent and principles herein,
    necessary to preserve, without dilution, the purchase rights
    represented by this Warrant. If such determination involves or
    is based on a determination of the Fair Market Value of any
    securities or other assets or property, such determination shall
    be made in accordance with the Valuation Procedure. Without
    limiting the foregoing, in the event of any dividend or
    distribution by the Company of assets or property (including
    shares of any other Person) on or with respect to the Common
    Stock, or any exchange of the shares of Common Stock into any
    other assets, property or securities, this Warrant will be
    equitably adjusted to permit the Holder to receive upon exercise
    the assets, property or securities that would have been received
    if the Warrant had been exercised immediately prior to such
    dividend, distribution or exchange.

 

    3.3  Notice of Record Date. In the event
    (i) the Company takes a record of the holders of any class
    of securities for the purpose of determining the holders thereof
    who are entitled to receive any dividend or other distribution,
    (ii) the Company authorizes the granting to the holders of
    Common Stock (or holders of the class of securities of any other
    Exercise Shares) of rights to subscribe to or purchase any
    shares of capital stock of any class or securities convertible
    into any shares of capital stock or of any other right,
    (iii) the Company authorizes any reclassification of, or
    any recapitalization involving, any class of Common Stock or any
    consolidation or merger to which the Company is a party and for
    which approval of the stockholders of the Company is required,
    or of the sale or transfer of all or substantially all of the
    assets of the Company, (iv) the Company authorizes or
    consents to or otherwise commences the voluntary or involuntary
    dissolution, liquidation or winding up of the Company or
    (v) the Company authorizes or takes any other action that
    would trigger an adjustment in the Exercise Price or the number
    or amount of shares of Common Stock or other Exercise Shares
    subject to this Warrant, the Company shall mail to the Holder,
    at least ten (10) days prior to the earlier of the record
    date for any such action or stockholder vote and the date of
    such action, a notice specifying (a) which action is to be
    taken and the date on which any such record is to be taken for
    the purpose of any such action, (b) the date that any such
    action is to take place and (c) the amount and character of
    any stock, other securities or property and amounts, or rights
    or options with respect thereto, proposed to be issued, granted
    or delivered to each holder of Common Stock (or holders of the
    class of securities of any other Exercise Shares).

 

    4.  Fractional Shares. No fractional shares
    shall be issued upon the exercise of this Warrant. All Exercise
    Shares (including fractions) issuable upon exercise of this
    Warrant may be aggregated for purposes of determining whether
    the exercise would result in the issuance of any fractional
    share. If, after aggregation, the exercise would result in the
    issuance of a fractional share, the Company shall, in lieu of
    issuance of any fractional share, pay the Holder otherwise
    entitled to such fraction a sum in cash equal to the product
    resulting from multiplying such fractional amount by the Fair
    Market Value of one share of Common Stock.

    

    - 6 -

 

    5.  Listing Rights. The Company shall use its
    best efforts, upon the request of the Holder, to cause the
    Exercise Shares to be listed or quoted on a national securities
    exchange or a regional securities exchange.

 

    6.  No Stockholder Rights or Liabilities.
    Without limiting the consent rights of the Holder contained in
    Section 3, this Warrant in and of itself shall not entitle
    the Holder to any voting rights or other rights as a stockholder
    of the Company. No provision of this Warrant, in the absence of
    affirmative action by the Holder to exercise this Warrant in
    exchange for shares of Common Stock, and no mere enumeration
    herein of the rights or privileges of the Holder, shall give
    rise to any liability of the Holder for the Exercise Price or as
    a stockholder of the Company, whether such liability is asserted
    by the Company or by creditors of the Company.

 

    7.  Transfer of Warrant. This Warrant is not
    transferable; provided, however, that the Holder may assign its
    rights to receive shares upon exercise of this Warrant pursuant
    to Section 2.1.

 

    8.  Payment of Taxes on Stock Certificate Issues
    Upon Exercise. The initial issuance of certificates of
    Common Stock upon any exercise of this Warrant shall be made
    without charge to the exercising Holder for any transfer, stamp
    or similar tax or for any other governmental charges that may be
    imposed in respect of the issuance of such stock certificates,
    and such stock certificates shall be issued in the respective
    names of, or in such names as may be directed by, the Holder;
    provided, however, that the Company shall not be required to pay
    any tax or such other charges that may be payable in respect of
    any transfer involved in the issuance and delivery of any such
    stock certificate, any new warrants or other securities in a
    name other than that of the Holder upon exercise of this Warrant
    (other than to an Affiliate), and the Company shall not be
    required to issue or deliver such certificates or other
    securities unless and until the Person or Persons requesting the
    issuance thereof shall have paid to the Company the amount of
    such tax or shall have established to the satisfaction of the
    Company that such tax has been paid or is not payable.

 

    9.  Lost, Stolen, Mutilated or Destroyed
    Warrant. If this Warrant is lost, stolen, mutilated or
    destroyed, the Company may, on such terms as to indemnity or
    otherwise as it may reasonably impose (which shall, in the case
    of a mutilated Warrant, include the surrender thereof), issue a
    new Warrant of like denomination and tenor as this Warrant so
    lost, stolen, mutilated or destroyed. Any such new Warrant shall
    constitute an original contractual obligation of the Company,
    whether or not the allegedly lost, stolen, mutilated or
    destroyed Warrant shall be at any time enforceable by anyone.

 

    10.  Closing of Books. The Company will at no
    time close its transfer books against the transfer of any shares
    of Common Stock issued or issuable upon the exercise or
    conversion of any Warrant in any manner which interferes with
    the timely exercise or conversion of this Warrant.

    

    - 7 -

 

    11.  Notices, Etc. All notices required or
    permitted hereunder shall be in writing and shall be deemed
    effectively given: (a) upon personal delivery to the party
    to be notified, (b) when sent by confirmed telex or
    facsimile if sent during normal business hours of the recipient
    or if not, then on the next Business Day, (c) five
    (5) days after having been sent by registered or certified
    mail, return receipt requested, postage prepaid, or (d) one
    (1) Business Day after deposit with a nationally recognized
    overnight courier, specifying next Business Day delivery, with
    written verification of receipt. All notices and other
    communications shall be sent to the Company at the address
    listed on the signature page and to Holder at the address set
    forth below or at such other address as the Company or Holder
    may designate by ten (10) days advance written notice to
    the other parties hereto:

 

    United States Department of the Treasury

    1500 Pennsylvania Avenue, NW

    Washington, DC 20220

    Attn: Under Secretary for Domestic Finance

 

    with a copy to:

 

    United States Department of the Treasury

    1500 Pennsylvania Avenue, NW

    Washington, DC 20220

    Attn: General Counsel

 

 

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

 

    13.  Binding Effect on Successors. This Warrant
    shall be binding upon any Person succeeding the Company by
    merger, consolidation or acquisition of all or substantially all
    of the Company’s assets, and all of the obligations of the
    Company relating to the Common Stock issuable upon the exercise
    or conversion of this Warrant shall survive the exercise,
    conversion and termination of this Warrant and all of the
    covenants and agreements of the Company shall inure to the
    benefit of the successors and assigns of the Holder.

 

    14.  Governing Law. This Warrant and all
    rights, obligations and liabilities hereunder shall be governed
    and construed in accordance with Federal law, if and to the
    extent such Federal law is applicable, and otherwise in
    accordance with the law of the State of New York.

    

    - 8 -

 

    IN WITNESS WHEREOF, the Company has caused this Warrant to be
    executed by its duly authorized officer as of September 7,
    2008.

 

    FEDERAL HOME LOAN MORTGAGE

    CORPORATION, by

 

    The Federal Housing Finance Agency, its Conservator

 

    /s/  James
    B. Lockhart III

    James B. Lockhart III

    Director

 

			
	 	    Address:
	
    8200 Jones Branch Drive

    McLean, Virginia 22102

 

 

    Signature Page to Warrant

 

    NOTICE
    OF EXERCISE 

 

		
	
    TO:  
    
	
    FEDERAL HOME
    LOAN MORTGAGE CORPORATION
    

 

    (1)    o The
    undersigned hereby elects to purchase
                        
    shares of the Common Stock of Federal Home Loan Mortgage
    Corporation (the “Company”) pursuant to the
    terms of the attached Warrant, and tenders herewith or is
    delivering by wire transfer to account number
                        
    at
                        
    (bank) payment of the exercise price in full.

 

         o The
    undersigned hereby elects to purchase
                        
    shares of the Common Stock of the Company pursuant to the terms
    of the net exercise provisions set forth in Section 2.2 of
    the attached Warrant.

 

    (2)    Please issue a certificate or
    certificates representing said shares of Common Stock in the
    name of the undersigned or in such other name as is specified
    below:

 

    (Name)

 

 

    (Address)

 

	 	 	 
	
    

	
 
	
    

	

    (Date)

	
 
	
    (Signature)

	
 
	
 
	
 

	
 
	
 
	
    

	
 
	
 
	
    (Print name)

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