Document:

deepdown_8k-ex1001.htm

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this "Agreement") is entered into as of April 29, 2010 (the "Effective Date"), by and among Deep Down, Inc., a Nevada corporation (the "Company") and Gay Stanley Mayeux (the "Executive”).

 

WITNESSETH:

 

WHEREAS, the Company has determined that it is in its best interests and those of its shareholders to retain the Executive;

 

WHEREAS, the Company desires to employ the Executive on the terms set forth below to provide services to the Company and its affiliated companies, and the Executive is willing to accept such employment and provide such services on the terms set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the parties hereto do hereby agree as follows:

 

1.  Certain Definitions.

 

(a)           "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

 

(b)           "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

 

(c)           "Board" shall mean the Board of Directors of the Company.

 

(d)           "Cause" shall mean:

 

(i)           the continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which such failure continues or remains uncorrected twenty (20) days after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Executive has not substantially performed the Executive's duties, or

 

(ii)           a judicial determination that Executive has engaged in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

 

Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or of a more senior officer of the Company or based upon the advice of counsel for the Company (which may be counsel employed by the Company or its subsidiaries) shall be conclusively presumed to not give rise to Cause.

 

(e)           "Change of Control" shall be deemed to have occurred if any event set forth in any one of the following paragraphs shall have occurred:

 

(i)           any Person is or becomes the Beneficial Owner, directly or indirectly, of more than thirty percent (30%) or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), excluding any Person who becomes such a Beneficial Owner in connection with the issuance of equity securities directly by Company to such Person in a Board approved equity financing or otherwise in connection with a transaction that complies with clauses (A) and (B)  of paragraph (iii) below;

  

 

  

 

(ii)           individuals, who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the Incumbent Board (including in connection with an equity financing by the Company or in connection with preparing for a listing of Company equity securities on a national stock exchange) shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or any other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(iii)           the consummation of a reorganization, merger, amalgamation, consolidation, scheme of arrangement, exchange offer or similar transaction of the Company or any of its subsidiaries or the sale, transfer or other disposition of all or substantially all of the Company's Assets (each, a "Business Combination"), unless, following such Business Transaction or series of related Business Transactions, as the case may be, (A) individuals and entities (which, for purposes of this Agreement, shall include, without limitation, any corporation, partnership, association, joint-stock company, limited liability company, trust, unincorporated organization or other business entity) who were the beneficial owners, respectively, of more than fifty percent (50%) of, respectively, the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Business Transaction beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding common shares and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or other governing body), as the case may be, of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's Assets either directly or through one (1) or more subsidiaries or entities), as the case may be, (B) no person (excluding any entity resulting from such Business Transaction or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, twenty-five percent (25%) or more of, respectively, then the outstanding shares of common stock of the entity resulting from such Business Transaction or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Transaction, and (C) at least a majority the members of the board of directors (or other governing body) of the entity resulting from such Business Transaction were members of the Incumbent Board at the time of the approval of such Business Transaction; or

 

(iv)           approval or adoption by the Board of Directors or the shareholders of the Company of a plan or proposal which would result directly or indirectly in the liquidation, transfer, sale or other disposal of all or substantially all of the Company's Assets or the dissolution of the Company; or

  

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(v)           the appointment or election of a new Chief Executive Officer.

 

(f)           "Company" shall mean Deep Down, Inc., a Nevada corporation, or any successor thereto, including (but not limited to) any Entity into which Deep Down, Inc. is merged, consolidated or amalgamated, or any Entity otherwise resulting from a Business Transaction.

 

(g)          "Company's Assets" shall mean the assets (of any kind) owned by the Company, including (but not limited to) the securities of the Company's Subsidiaries and any of the assets owned by the Company's Subsidiaries.

 

(h)          "Disability" shall mean the absence of the Executive from performance of the Executive's duties with the Company on a substantial basis for one hundred twenty (120) calendar days within any 12-month period as a result of incapacity due to mental or physical illness.

 

(i)           "Employment Period" shall mean the period commencing on the Effective Date and ending on the third anniversary of the Effective Date; provided, however, that commencing on the third anniversary of the Effective Date, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Employment Period shall be automatically extended for an additional annual period(s) (until the next annual anniversary of the Effective Date), unless, at least ninety (90) days prior to the applicable Renewal Date, the Company shall give notice to the Executive that the Employment Period shall not be so extended.

 

(j)           "Entity" shall mean any corporation, partnership, association, joint-stock company, limited-liability company, trust, unincorporated organization or other business entity.

 

(k)          "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

 

(l)           "Good Reason" shall mean the occurrence of any of the following:

 

(i)           except as provided herein regarding a Change of Control, the assignment to the Executive of any position, authority, duties or responsibilities that are not materially consistent with the Executive's position (including status, offices and titles), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company after receipt of notice thereof given by the Executive;

 

(ii)          any material failure by the Company to comply with any of the material provisions of this Agreement (including, without limitation, its obligations under Section 3(a)) or any other agreements between the Executive and the Company, other than any failure not occurring in bad faith and which is remedied by the Company after receipt of notice thereof given by the Executive;

 

(iii)         any material reduction to Executive's Annual Base Salary (as such term is defined in Section 3(b)) or Executive's bonus, retirement, pension, savings, life insurance, medical, health and accident, or disability plans;

 

(iv)         the Company's requiring the Executive to be based at any office or location other than as provided in Section 3(a)(i) hereof;

 

(v)         any failure by the Company to comply with and satisfy Section 9(b) of this Agreement;

  

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(vi)         the failure of Executive and Company to mutually agree to the criteria, terms and conditions for calculation of the Annual Bonus (as defined in Section 3(b)(ii) within thirty (30) days after the date such criteria are communicated to Executive.

 

In the event of a Change of Control or other Business Transaction, following the Change of Control or the consummation of such other Business Transaction, "Good Reason" shall be deemed to exist in the event Executive is assigned to any position, authority, duties or responsibilities that are (A) not at or with the ultimate parent company of the successor to the Company or the Entity surviving or resulting from such Business Transaction, or (b) materially inconsistent with the Executive's position (including status, offices, titles and excluding Executive's reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a).

 

(m)         "IRS" shall mean the Internal Revenue Service.

 

(n)           "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering by the Company of such securities, or (iv) a corporation or other Entity owned, directly or indirectly, by the shareholders of the Company in the same proportions as their ownership of Outstanding Company Common Shares.

 

(o)          "Section 409A" means Section 409A of the Internal Revenue Code of 1986, as amended.

 

(p)          "Section 409A Amounts" means those amounts that are deferred compensation subject to Section 409A.

 

(q)          "Separation From Service" shall have the meaning ascribed to such term in Section 409A.

 

(r)           "Subsidiary" shall mean any majority-owned subsidiary of the Company or any majority-owned subsidiary thereof, or any other Entity in which the Company owns, directly or indirectly, a majority of the economic interest therein.

 

2.  Employment Period. The Company and Executive hereby agree that unless this Agreement is earlier terminated as provided for herein, the Company will continue to employ throughout the Employment Period.

 

3.  Terms of Employment.

 

(a)          Position and Duties.

 

(i)           During the Employment Period, the Executive's position (including status, offices, titles, authority, duties and responsibilities) shall be Chief Financial Officer of the Company. The Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location.

  

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(ii)          During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours for a similarly situated executive to the reasonable business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities in clause (A), (B), and (C) together do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement.  It is expressly understood and agreed that to the extent that such activities have been conducted by the Executive prior to the date hereof, and are listed on Exhibit A, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

 

(b)          Compensation.

 

(i)           Base Salary.  During the Employment Period, the Executive shall receive an annualized base salary (the "Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve (12) times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately subsequent to  the month in which the Effective Date occurs.  During the Employment Period, the Annual Base Salary shall be reviewed no more than twelve (12) months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at lease annually.  Any increase in the Annual Base Salary may not serve to limit or reduce any other obligation to the Executive under this Agreement.  The Annual Base Salary shall not be reduced after any such increase and the Annual Base Salary as utilized in this Agreement shall refer to the Annual Base Salary as so increased.

 

(ii)          Annual Bonus.  In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (the "Annual Bonus") in cash.  Within the first three (3) months of each fiscal year, the Board shall propose the criteria, terms and conditions for meeting the targets (i) in the Company's Executive Officer Annual Incentive Program, provided that the Executive’s target shall be at least equal to the Executive’s target for the fiscal year prior to the Effective Date or equal to an increase in the target given to any other peer executive after the Effective Date, or if higher, (ii) under any annual incentive plan or discretionary award by the Company to other peer executives which is enacted or approved after the Effective Date.  The Annual Bonus will be paid no later than two and a half months after the end of the fiscal year following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement which meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.

 

(iii)         Incentive, Savings and Retirement Plans.  During the Employment Period, the Executive shall be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the whole, than the most favorable of those provided by the Company for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company, subject to the terms and conditions of the applicable plans, practices, policies and programs.

  

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(iv)         Welfare Benefit Plans.  During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible to participate in all welfare benefit and retirement plans, practices, policies and programs provided by the Company; including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs (the “Plans”) from time to time to the extent applicable generally to, and no less favorable than those provided to other peer executives at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company. The Company shall pay 100% of all premiums with respect to such Plans.

 

(v)         Fringe Benefits.  During the Employment Period, the Executive shall be entitled to such fringe benefits (including, without limitation, payment of cellular telephone, vehicle allowance, payment of club dues, payment of professional fees and taxes and related expenses, as appropriate) in accordance with the plans, practices, programs and policies of the Company for other peer executives at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company.  Notwithstanding the foregoing, no amounts shall be payable under this Section 3(b)(v) to the extent that such amounts are Section 409A Amounts.

 

(vi)        Expenses.  During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive subject to the terms of the Company's applicable expense reimbursement policies applicable to other peer executives at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company.  Notwithstanding the foregoing, no amounts shall be payable under this Section 3(b)(vi) to the extent that such amounts are Section 409A Amounts.

 

(vii)       Vacation.  During the Employment Period, the Executive shall be entitled to up to four (4) weeks paid vacation per calendar year or such greater amount of paid vacation as may be applicable generally to other peer executives at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company.  To the extent not used in any fiscal year, Executive may carry over up to eight (8) weeks of paid vacation to a subsequent calendar year.

 

(viii)      Legal Fees.  In the event of any dispute between Company and Executive as to the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance of this Agreement, Executive shall be entitled to reimbursement of all legal fees and expenses incurred by him, if Executive is the prevailing party in any such dispute, or any litigation, arbitration or other proceedings arising out of such dispute.

  

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(c)           Certain Additional Payments by the Company.

 

(i)           Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution by the Company or any of its affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any other plan, agreement or contract or otherwise, but determined without regard to any additional payments required under this Section 3(c)) (a “Payment”) would be subject to any additional tax or excise tax imposed by sections 409A, 457A or 4999 of the Code (and any successor provisions or sections to sections 409A, 457A and 4999) or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to promptly receive from the Company an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Any Gross Up Payment shall be made by the Company at least 10 days prior to the date that the Executive is required to remit to the relevant taxing authority any federal, state and local taxes imposed upon the Executive, including the amount of additional taxes imposed upon the Executive due to the Company’s payment of the initial taxes on such amounts.  Notwithstanding any provision of this Agreement to the contrary, any amounts to which the Executive would otherwise be entitled under this Section 3(c)(i) during the first six months following the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive on the date that is six months following the date of his Separation From Service.  All reimbursements by the Company under this Section 3(c)(i) shall be paid no later than the earlier of (i) the time periods described above and (ii) the last day of the Executive’s taxable year next following the taxable year in which the expense was incurred.

 

(ii)          Subject to the provisions of Section 3(c)(iii), all determinations required to be made under this Section 3(c), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination shall be made by PricewaterhouseCoopers or, as provided below, such other certified public accounting firm as may be designated by the Executive (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days after the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company.  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant to this Section 3(c), shall be paid by the Company to the Executive within five (5) days after the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm, absent manifest error, shall be binding upon the Company and the Executive, subject to the last sentence of Section 3(c)(i), and in no event later than the payment deadline specified in Section 3(c)(i).  As a result of the uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its remedies pursuant to Section 3(c)(iii) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive, subject to the last sentence of Section 3(c)(i), and in no event later than the payment deadline specified in Section 3(c)(i).

  

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(iii)         The Executive shall notify the Company in writing of any claim by the IRS that, if successful, would require the payment by the Company of the Gross-Up Payment (or an additional Gross-Up Payment) in the event the IRS seeks higher payment.  Such notification shall be given as soon as practicable, but no later than ten (10) business days after the Executive is informed in writing of such claim, and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

 

(A)     give the Company any information reasonably requested by the Company relating to such claim,

 

(B)      take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

 

(C)     cooperate with the Company in good faith in order to effectively contest such claim, and

 

(D)     permit the Company to participate in any proceedings relating to such claims; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred at any time during the period that ends ten (10) years following the lifetime of the Executive in connection with such proceedings and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section 3(c)(iii), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  The Company shall not direct the Executive to pay such a claim and sue for a refund if, due to the prohibitions of section 402 of the Sarbanes-Oxley Act of 2002, the Company may not advance to the Executive the amount necessary to pay such claim.  All such costs and expenses shall be made by the Company at least ten (10) days prior to the date that the Executive is required to pay or incur such costs and expenses.  The costs and expenses that are subject to be paid by the Company pursuant to this Section 3(c)(iii) shall not be limited as a result of when the costs or expenses are incurred.  The amounts of costs or expenses that are eligible for payment pursuant to this Section 3(c)(iii)(D) during a given taxable year of the Executive shall not affect the amount of costs or expenses eligible for payment in any other taxable year of the Executive.  The right to payment of costs and expenses pursuant to this Section 3(c)(iii)(D) is not subject to liquidation or exchange for another benefit.  Notwithstanding any provision of this Agreement to the contrary, any amounts to which the Executive would otherwise be entitled under this Section 3(c)(iii)(D) during the first six months following the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive on the date that is six months following the date of his Separation From Service.  All reimbursements by the Company under this Section 3(c)(iii)(D) shall be paid no later than the earlier of (i) the time periods described above and (ii) the last day of the Executive’s taxable year next following the taxable year in which the expense was incurred.

  

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(iv)           If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3(c)(iii), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 3(c)(iii)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 3(c)(iii), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall not be required to be repaid.

 

(v)           Any provision in this Agreement or any other plan or agreement to the contrary notwithstanding, if the Company is required to pay a Gross-Up Payment pursuant to the provisions of this Agreement and pursuant to the provisions of another plan or agreement, then the Company shall pay the total of the amounts determined pursuant to this Agreement and the provisions of such other plan or agreement.

 

4.  Termination of Employment.

 

(a)          Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period.  If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period, it may provide the Executive with written notice in accordance with this Agreement of its intention to terminate the Executive's employment.  In such event, the Executive's employment with the Company shall terminate effective thirty (30) days after receipt of such notice by the Executive (the "Disability Effective Date"), provided that within the thirty (30)-day period after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties.  In addition, if a physician selected by the Executive determines that the Disability of the Executive has occurred, the Executive (or his representative) may provide the Company with written notice in accordance with this Agreement of the Executive's intention to terminate his employment.  In such event, the Disability Effective Date shall be thirty (30) days after receipt of such notice by the Company.

  

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(b)          Cause.  The Company may terminate the Executive's employment during the Employment Period for Cause.

 

(c)           Good Reason.  The Executive's employment may be terminated by the Executive at any time during the Employment Period for Good Reason.

 

(d)          By the Company without Cause.  The Executive's employment may be terminated by the Company at any time during the Employment Period without Cause and not pursuant to the provisions of Section 4(a) above, at any time upon providing Executive a Notice of Termination pursuant to Section 4(f) below.

 

(e)          By the Executive without Good Reason.  The Executive's employment may be terminated by the Executive at any time during the Employment Period without good Reason at any time upon providing the Company a Notice of Termination pursuant to Section 4(f) below.

 

(f)           Notice of Termination.  Any termination by one party during the Employment Period for any reason other than Executive's death shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 10(d) of this Agreement.  For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date, in the case of a notice by the Company for termination pursuant to Section 4(d), or by the Executive for termination pursuant to Section 4(e), shall be at least thirty (30) days after the giving of such notice; provided, however that in the event of a termination by Executive pursuant to Section 4(e), the Company may accept Executive's resignation and terminate his employment prior to the termination date set forth in the Notice of Termination).  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.

 

(g)         Date of Termination.  "Date of Termination" shall mean:

 

(i)           if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be;

 

(ii)          if the Executive's employment is terminated by the Company other than for Cause or by the Executive without Good Reason, the Date of Termination shall be the termination date specified in the Notice of Termination, unless an earlier date is designated by the Company in the event of Executive's termination without Good Reason; and

  

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(iii)         if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

 

5.  Obligations of the Company Upon Termination.

 

(a)           Benefit Obligation and Accrued Obligation Defined.  For purposes of this Agreement, "Benefit Obligation" shall mean all benefits to which the Executive (or his designated beneficiary or legal representative, as applicable) is entitled or has become vested (or becomes entitled or vested as a result of termination) under the terms of all employee benefit and compensation plans, agreements and arrangements (collectively, "Benefit Plans") in which the Executive is a participant as of the Date of Termination.  "Accrued Obligation" means the sum of (x) the Executive's Annual Base Salary through the Date of Termination for periods through but not following his Separation From Service and (y) any accrued vacation pay earned by the Executive subject to any applicable Company policies on carryover of accrued vacation pay, and in each case, to the extent not theretofore paid.

 

(b)           Death, Disability.  If, during the Employment Period, the Executive's employment is terminated by reason of the Executive's death or Disability:

 

(i)           the Company shall pay to the Executive (or Executive's heirs, beneficiaries or representatives, as applicable) in a lump sum in cash, within thirty (30) days after the Date of Termination, the Accrued Obligation; and

 

(ii)          the Company shall pay or cause the Executive (or Executive's heirs, beneficiaries or representative, as applicable) to be paid the Benefit Obligation at the times specified in and in accordance with the terms of the applicable Benefit Plans.

 

(c)           Good Reason or Other Than for Cause.  If, during the Employment Period, the Executive is terminated by the Executive for Good Reason or by the Company for any reason other than for Cause, then:

 

(i)           The Company shall pay to the Executive, at the times specified in Section 5(c)(ii) below, the following amounts:

 

(A)     the Accrued Obligation,

 

(B)      the Benefit Obligation,

 

(C)      a lump sum in cash equal to one (1) times the Executive's Annual Base Salary (at the rate in effect as of the Date of Termination); provided, however, that if such termination occurs prior to the date that is twelve (12) months following a Change of Control, then the amount of such lump sum cash payment shall be equal to three (3) times the Executive's Annual Base Salary (at the rate in effect as of the Date of Termination),

 

(D)     a lump sum in cash equal to the average annual bonus paid to the Executive for the prior two (2) full fiscal years preceding the Date of Termination; provided, however, that if such termination occurs prior to the date that is twelve (12) months following a Change of Control, then the amount of such lump sum cash payment shall be equal to two (2) times the average Annual Bonus paid to the Executive for the prior two (2) full fiscal years preceding the Date of Termination unless the executive has been employed for less than two years than the average annual bonus paid to other peer executives for the prior two (2) full fiscal years preceding the Date of Termination if more favorable to the Executive,

  

11

  

 

(E)      a lump sum in cash equal to a pro rata portion of the Annual Bonus payable for the period in which the Date of Termination occurs based on actual performance under the Company's annual incentive bonus arrangement; provided, however, that such pro rata portion shall be calculated based on Executive's Annual Bonus for the previous fiscal year; provided, further that if no previous Annual Bonus has been paid to ex-Executive, then the lump sum cash payment shall be no less than fifty (50) percent of Executive’s Annual Base Salary unless the executive has been employed for less than one year than the annual bonus paid to other peer executives for the previous fiscal year preceding the Date of Termination, if more favorable to the Executive,

 

(F)      if such termination occurs prior to the date that is twelve (12) months following a Change of Control, then each and every share option, restricted share award and other equity-based award that is outstanding and held by the Executive shall immediately vest and become exercisable.

 

(ii)          The Company shall pay the Executive the Benefit Obligation at the times specified in and in accordance with the terms of the applicable Benefit Plans.  The Company shall pay the Executive the amounts described under Section 5(c)(i)(A) within thirty (30) days after the Date of Termination.  The Company shall pay to the Executive the amounts or benefits described in Sections 5(c)(i)(C) and 5(c)(i)(D) within ninety (90) days following the date of Executive's Separation From Service if he is not a Specified Employee or on the date that is six (6) months following the date of his Separation From Service if he is a Specified Employee.  The term "Specified Employee" means a person who is a "specified employee" within the meaning of Section 409A.  Amounts payable pursuant to Section 5(c)(i)(E) will be paid at time payment is made to employees generally pursuant to the terms of the Company's annual incentive bonus arrangement or, if Executive is a Specified Employee, on the date that is six (6) months following the date of his Separation From Service, if later.

 

(iii)         Payments to the Executive under this Section 5(c) (other than the Accrued Obligation and the Benefit Obligation) are contingent upon the Executive's execution (and non-revocation) of a release substantially in the form of Exhibit A hereto no later than sixty (60) days following Executive's Separation From Service.

 

(d)           Cause.  If the Executive's employment is terminated by the Company for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay to the Executive (x) the Accrued Obligation and (y) the Benefit Obligation in accordance with the terms of the applicable Benefit Plans.  In such case, the Accrued Obligation shall be paid to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination and the Benefit Obligation shall be paid in accordance with the terms of the applicable Benefit Plans.

 

(e)          Termination by Executive Other Than for Good Reason.  If the Executive voluntarily terminates his employment during the Employment Period for any reason other than for Good Reason, the Executive's employment shall terminate without further obligations to the Executive, other than for payment of the Accrued Obligation and the Benefit Obligation and the rights provided in Section 6.  In such case, the Accrued Obligation shall be paid to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination and the Benefit Obligation shall be paid in accordance with the terms of the applicable Benefit Plans.

 

(f)           General.  Notwithstanding anything herein to the contrary, if the Executive is a Specified Employee on the date of his Separation From Service, any payments or benefits hereunder that are deferred compensation subject to Section 409A, are payable upon his Separation From Service, and are not otherwise exempt from Section 409A, shall not be paid during the six-month period commencing on the date after the Executive's Separation From Service (the "Waiting Period"), and on the first business day following the expiration of the Waiting Period all payment and benefits that were payable during the Waiting Period will be paid to the Executive in a cash lump sum payment, without interest, and thereafter payments and benefits will be paid as provided herein.

  

12

  

 

6.  Other Rights.  Except as provided herein, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company.  Except as otherwise provided herein, amounts which are vested benefits, which vest according to the terms of this Agreement or which the Executive is otherwise entitled to receive under any of the Benefit Plans or any other plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement.

 

7.  Full Settlement.

 

(a)          No Rights of Offset.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.

 

(b)          No Mitigation Required.  The Company agrees that, if the Executive’s employment with the Company terminates, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to this Agreement.  Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

8.  Confidential Information; Non-Competition; Non-Solicitation.

 

(a)          Confidential Information.  As a condition of Executive's employment hereunder, the Company agrees to provide Executive with, and to give him access to, Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Company all trade secrets, confidential information, knowledge and data relating to the Company, its Subsidiaries and their respective businesses, affiliates employees, partners, managers, agents and representatives, which shall have been obtained by the Executive during the Executive's employment by the Company and/or its Subsidiaries which shall not have been or hereafter become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement) (hereinafter being collectively referred to as "Confidential Information").  After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate, use, disclose or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company.  Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8(a).  The Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment hereunder for any reason.  In no event shall an asserted violation of the provision of this Section 8(a) constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

  

13

  

 

(b)         Non-Competition.  [During the Employment Period and for one (1) year immediately following (such period following the Employment Period, the “Restricted Period”), the Executive shall not engage in Competition, as defined below, with the Company; provided, that it shall not be a violation of this Section 9(b) for the Executive to become the registered or beneficial owner of up to five percent (5%) of any class of the capital stock of a corporation registered under the Securities Exchange Act of 1934, as amended, provided that the Executive does not actively participate in the business of such corporation until such time as this covenant expires.

 

For purposes of this Agreement, “Competition” by the Executive means the Executive’s engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting his name to be used in connection with the activities of any other business or organization which competes, directly or indirectly, with the business of the Company as the same shall be constituted at any time during the Term.

 

(c)          Non-Solicitation; Non-Interference.  During the Employment Period and the one year immediately following the termination of the Executive's employment with the Company for any reason (the "Restricted Period"), the Executive agrees that he will not, directly or indirectly, for his benefit or for the benefit of any other person, firm or Entity, do any of the following:

 

(i)          solicit from any customer doing business with the Company or any of its Subsidiaries, as of the Date of Termination, business of the same or of a similar nature to the business of the Company or any of its Subsidiaries with such customer;

 

(ii)         solicit from any potential customer (that is known to the Executive) of the Company or any of its Subsidiaries business of the same or of a similar nature to that which has been the subject of a known written or oral bid, offer or proposal by the Company or any of its Subsidiaries, or of substantial preparation with a view to making such a bid, proposal or offer, within six (6) months prior to such Date of Termination;

 

(iii)        solicit the employment or services of any person employed by or a consultant to the Company upon the Date of Termination, or within six (6) months prior thereto (provided, however, that the provisions hereof shall be deemed not to prohibit the Executive, on the Executive's behalf or on behalf of other persons, firms or Entities, from placing advertisements in newspapers or other media of general circulation advertising employment opportunities and offering employment to individuals responding to those advertisements); or

 

(iv)        otherwise knowingly interfere with the business or accounts of the Company or any of its Subsidiaries.

  

14

  

 

(d)          General.  The Executive and the Company agree and acknowledge that the Company has a substantial and legitimate interest in protecting the Company's and its Subsidiaries' Confidential Information and goodwill.  The Executive and the Company further agree and acknowledge that the provisions of this Section 8 are necessary to protect the Company's legitimate business interests and are designed to protect the Company's and its Subsidiaries' Confidential Information and goodwill.  The Executive agrees that the scope of the restrictions as to time, geographic area, and scope of activity in this Section 8 are necessary for the protection of the Company's legitimate business interests and are not oppressive or injurious to the public interest.  The Executive agrees that in the event of a breach or threatened breach of any of the provisions of this Section 8 the Company shall be entitled to injunctive relief against the Executive's activities to the extent allowed by law, and the Executive waives any requirement for the posting of any bond by the Company in connection with such action.  The Executive further agrees that any breach or threatened breach of any of the provisions of Section 8 would cause injury to the Company for which monetary damages alone would not be a sufficient remedy.  The Executive hereby agrees that the period during which the agreements and covenants of the Executive made in Section 8(b) shall be effective shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of Section 8(b).

 

(e)           Inventions.  The Executive shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are (i) conceived or made by the Executive, solely or jointly with another, during the Employment Period, (ii) directly related to the business or activities of the Company or its Subsidiaries, and (iii) conceived by the Executive as a result of the Executive's employment by the Company (hereafter “Invention”).  The Executive hereby assigns and agrees to assign the Executive's interest in any such Invention, improvement or valuable discovery to the Company or its nominee.  Whenever requested to do so by the Company, the Executive shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to  protect the Company's or any Subsidiary's interest in any such Invention, improvement or valuable discovery.

 

9.  Successors.  This Agreement, and any rights and obligations hereunder, is personal to the Executive and shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

10.  Miscellaneous.

 

(a)          Waivers and Amendments.  This Agreement may be amended, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the Executive and the Company or, in the case of a waiver, by the party waiving compliance.  No delay on the party of any party in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any party of any such right, power or privilege hereunder, not any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.  Notwithstanding anything herein to the contrary, the Company may amend this Agreement in writing in any manner so that payments or benefits hereunder comply with or continue to be exempt from Section 409A, including, but not limited to, (i) adding a requirement that no payment or benefits due on account of the Executive's Separation From Service shall be paid during the six-month period commencing on the Executive's Date of Termination and (ii) making payment of any amounts due to the Executive hereunder such that any such payment is exempt from Section 409A (including making payment as soon as administratively practicable, within the meaning of Section 409A, for such purpose).

  

15

  

 

(b)         Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.

 

(c)         Headings.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

 

(d)         Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	  	  	
If to the Executive:

	  	
Gay Stanley Mayeux

at the address set forth in the personnel records at Deep Down, Inc.

 

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
If to the Company:

	  	  
	  	  	  	  	
Deep Down, Inc.

8827 W. Sam Houston Pkwy N., Suite 100

	  
	  	  	  	  	
Houston, Texas 77040

	  
	  	  	  	  	
Attention: General Counsel

 

	  

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be effective when actually received by the addressee.

 

(e)          Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

(f)           Withholding.  The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(g)          Entire Agreement.  This Agreement constitutes the entire agreement and understanding between the parties relating to the subject matter hereof and supersedes all prior agreements between the parties relating to the subject matter hereof.

 

(h)          Deferred Compensation and Specified Employee.  The Executive acknowledges and understands that none of the Company, its Affiliates, nor any of their officers, directors or employees are responsible or liable for and none of them guarantee the tax consequences of any payments or benefits under this Agreement, including, but not limited to, any excise taxes or interest that may be incurred under Section 409A.

  

16

  

 

11.  Indemnity.

 

 

(a)           Legal Fees.  To the extent permitted by applicable law, and the By-Laws of the Company, the Company agrees to defend, indemnify and hold harmless the Executive from any and all claims, demands or causes of action, including reasonable attorneys' fees and expenses, suffered or incurred by the Executive as a result of the assertion or filing of any claim, demand, litigation or other proceedings based, in whole or in part, upon statements, acts or omissions made by or on behalf of the Executive pursuant to this Agreement and/or in the course and scope of the Executive's employment by the Company.  Within ten (10) days after notice from the Executive of the filing or assertion of any claim for which indemnification is provided (or sooner if action is required sooner in order to properly defend the Executive), the Company shall designate competent, experienced counsel to represent the Executive, at the Company's expense, which counsel shall be subject to the Executive's approval, which shall not be unreasonably withheld.  Should the Company fail to so designate or pay, or make arrangements for payment of, such counsel, then Executive shall have the right to engage counsel of the Executive's choosing, and the Company shall be obligated to pay or reimburse any and all fees and expenses incurred by the Executive in defending himself in connection with any such claim.

 

 

(b)           Insurance.   During the entire employment period, and for a period of not less than five (5) years after termination of the Executive's employment, the Company shall maintain, and pay all applicable premiums for, directors' and officers' liability insurance, of which the Executive shall be an insured, which shall provide full coverage for the defense and indemnification of the Executive, to the fullest extent permitted by applicable law.

[SIGNATURE PAGE FOLLOWS]

  

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	  	
 EXECUTIVE

 

 

	  	
/s/ Gay Stanley Mayeux

	  	
Gay Stanley Mayeux

	  	  
	  	
DEEP DOWN, INC.

  

	  	
By:  

	
/s/ Eugene L. Butler

	  	  	
Name:  Eugene L. Butler

	  	  	
Title:    Chairman

	  

 

 

 

 

 

 

 

 

 

 

 

  

18

  

EXHIBIT A

RELEASE

The Executive hereby irrevocably and unconditionally releases, acquits and forever discharges the Company (as defined in the Executive's Employment Agreement) and its affiliated companies and their directors, officers, employees and representatives (collectively "Releasees"), from any and all claims, liabilities, obligations, damages, causes of action, demands, costs, losses and/or expenses (including attorneys' fees) of any nature whatsoever, whether known or unknown, including, but not limited to, rights arising out of alleged violations of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, or any tort, or any legal restrictions on the Company's right to terminate employees, or any federal, state or other governmental statute, regulation, or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, as amended, and the Age Discrimination in Employment Act of 1967, as amended, which the Executive claims to have against any of the Releasees (in each case, except as to indemnification provided by (a) the Executive's Employment Agreement with the Company (as amended or superseded from time to time) and/or (b) by the Company's bylaws and any indemnification agreement or arrangement permitted by applicable law and by directors, officers and other liability insurance coverages to the extent you would have enjoyed such coverages had you remained a director or officer of the Company).  In addition, the Executive waives all rights and benefits afforded by any state laws which provide in substance that a general release does not extend to claims which a person does not know or suspect to exist in his favor at the time of executing the release which, if known by him, must have materially affected the Executive's settlement with the other person.  The only exception to the foregoing are claims and rights that may arise after the date of execution of this Release, claims and rights arising under any employee benefit plan and claims and rights arising under Section 5 of the Executive's Employment Agreement.

 

The Executive understands and agrees that:

 

	
  

	
A.

	
He has a period of twenty-one (21) days within which to consider whether he desires to execute this Agreement, that no one hurried him into executing this Agreement during that twenty-one (21)-day period, and that no one coerced him into executing this Agreement..

 

	
  

	
B.

	
He has carefully read and fully understands all of the provisions of this Release, and declares that this Release is written in a manner that he fully understands.

 

	
  

	
C.

	
He is, through this Release, releasing the Releasees from any and all claims he may have against the Releasees, and that this Release constitutes a release and discharge of claims arising under the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621-634, including the Older Workers' Benefit Protection Act, 29 U.S.C. § 626(f).

 

	
  

	
D.

	
He declares that his agreement to all of the terms set forth in this Release is knowing and is voluntary.

 

	
  

	
E.

	
He knowingly and voluntarily intends to be legally bound by the terms of this Release.

  

19

  

 

	
  

	
F.

	
He was advised and hereby is advised in writing to consult with an attorney of his choice concerning the legal effect of this Release prior to executing this Release.

 

	
  

	
G.

	
He understands that rights or claims that may arise after the date this Release is executed are not waived.

 

	
  

	
H.

	
He understands that, in connection with the release of any claim of age discrimination, he has a period of seven (7) days to revoke his acceptance of this Release, and that he may deliver notification of revocation by letter or facsimile addressed to the President of the Company, at 8827 W. Sam Houston Pkwy N., Suite 100, Houston, TX 77040.  Executive understands that this Release will not become effective and binding with respect to a claim of age discrimination until after the expiration of the revocation period.  The revocation period commences when Executive executes this Release and ends at 11:59 p.m. on the seventh calendar day after execution, not counting the date on which Executive executes this Release.  Executive understands that if he does not deliver a notice of revocation before the end of the seven-day period described above, that this Release will become a final, binding and enforceable release of any claim of age discrimination.  This right of revocation shall not affect the release of any claim other than a claim of age discrimination arising under federal law.

 

	
  

	
I.

	
He understands that nothing in this Release shall be construed to prohibit Executive from filing a charge or complaint, including a challenge to the validity of this Release, with the Equal Employment Opportunity Commission or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission.

 

	
  

	
AGREED AND ACCEPTED, on this _____________ day of ___________________, _______.

 

 

	 	
 

[Name of Executive]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

20exv4w1

Exhibit 4.1

FEDERAL HOME LOAN MORTGAGE CORPORATION

GLOBAL DEBT FACILITY AGREEMENT

     AGREEMENT, dated as of February 24, 2010, among the Federal Home Loan Mortgage Corporation
(“Freddie Mac”) and Holders of Debt Securities (each as hereinafter defined).

     Whereas:

     (a) Freddie Mac is a corporation duly organized and existing under and by virtue of the laws
of the United States (Title III of the Emergency Home Finance Act of 1970, as amended (the “Freddie
Mac Act”)) and has full corporate power and authority to enter into this Agreement and to undertake
the obligations undertaken by it herein;

     (b) Pursuant to Section 306(a) of the Freddie Mac Act, Freddie Mac is authorized, upon such
terms and conditions as it may prescribe, to borrow, to pay interest or other return, and to issue
notes, bonds or other obligations or securities; and

     (c) To provide funds to permit Freddie Mac to engage in activities consistent with its
statutory purposes, Freddie Mac has established a Global Debt Facility (the “Facility”) and
authorized the issuance, from time to time, pursuant to this Agreement, of unsecured general
obligations of Freddie Mac or, if so provided in the applicable Supplemental Agreement (as
hereinafter defined), secured obligations of Freddie Mac (“Debt Securities”).

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is
hereby agreed that the following terms and conditions of this Agreement (including, as to each
issue of the Debt Securities, the applicable Supplemental Agreement) shall govern the Debt
Securities and the rights and obligations of Freddie Mac and Holders with respect to the Debt
Securities.

ARTICLE I

Definitions

     Whenever used in this Agreement, the following words and phrases shall have the following
meanings, unless the context otherwise requires.

     Additional Debt Securities: Debt Securities issued by Freddie Mac with the same terms (other
than Issue Date, interest commencement date and issue price) and conditions as Debt Securities for
which settlement has previously occurred so as to form a single series of Debt Securities as
specified in the applicable Supplemental Agreement.

     Agreement: This Global Debt Facility Agreement dated as of February 24, 2010, as it may be
amended or supplemented from time to time, and successors thereto pursuant to which Freddie Mac
issues the Debt Securities.

     Amortizing Debt Securities: Debt Securities on which Freddie Mac makes periodic payments of
principal during the terms of such Debt Securities as described in the related Supplemental
Agreement.

     Beneficial Owner: The entity or individual that beneficially owns a Debt Security.

 

 

     Bonds: Callable or non-callable Debt Securities with maturities of more than ten years.

     Book-Entry Rules: The Department of Housing and Urban Development regulations (24 C.F.R. Part
81, Subpart H) applicable to Freddie Mac’s book-entry securities and such procedures as to which
Freddie Mac and the FRBNY may agree.

     Business Day: (i) With respect to Fed Book-Entry Debt Securities, any day other than (a) a
Saturday, (b) a Sunday, (c) a day on which the FRBNY is closed, (d) as to any Holder of a Fed
Book-Entry Debt Security, a day on which the Federal Reserve Bank that maintains the Holder’s
account is closed, or (e) a day on which Freddie Mac’s offices are closed; and (ii) with respect to
Registered Debt Securities, any day other than (a) a Saturday, (b) a Sunday, (c) a day on which
banking institutions are closed in (1) the City of New York or (2) if the Specified Payment
Currency is other than U.S. dollars or euros, the Principal Financial Center of the country of such
Specified Payment Currency, (d) if the Specified Payment Currency is euros, a day on which the
TARGET system is not open for settlements, or a day on which payments in euros cannot be settled in
the international interbank market as determined by the Global Agent, (e) for any required payment,
a day on which banking institutions are closed in the place of payment, or (f) a day on which
Freddie Mac’s offices are closed.

     Calculation Agent: Freddie Mac or a bank or broker-dealer designated by Freddie Mac in the
applicable Supplemental Agreement as the entity responsible for determining the interest rate on a
Variable Rate Debt Security.

     Calculation Date: In each year, each of those days in the calendar year that are specified in
the applicable Supplemental Agreement as being the scheduled Interest Payment Dates regardless, for
this purpose, of whether any such date is in fact an Interest Payment Date and, for the avoidance
of doubt, a “Calculation Date” may occur prior to the Issue Date or after the last Principal
Payment Date.

     Callable Reference Notes: U.S. dollar denominated, callable Reference Securities with
maturities of more than one day.

     Cap: A maximum interest rate at which interest may accrue on a Variable Rate Debt Security
during any Interest Reset Period.

     Citibank — London: Citibank, N.A., London office, the Global Agent for Registered Debt
Securities.

     Citigroup — Frankfurt: Citigroup Global Markets Deutschland AG & Co. KGaA, the Registrar for
Registered Debt Securities.

     Clearstream, Luxembourg: Clearstream Banking, societe anonyme, which holds securities for its
participants and facilitates the clearance and settlement of securities transactions between its
participants through electronic book-entry changes in accounts of its participants.

     CMS Determination Date: The second New York Banking Day preceding the applicable Reset Date.

     CMS Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(N).

     CMT Determination Date: The second New York Banking Day preceding the applicable Reset Date.

2

 

     CMT Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(M).

     Code: The Internal Revenue Code of 1986, as amended.

     Common Depositary: The common depositary for Euroclear, Clearstream, Luxembourg and/or any
other applicable clearing system, which will hold Other Registered Debt Securities on behalf of
Euroclear, Clearstream, Luxembourg and/or any such other applicable clearing system.

     Currency Exchange Bank: The currency exchange bank specified in the applicable Supplemental
Agreement that will convert any amounts paid by Freddie Mac in a Specified Payment Currency on DTC
Registered Debt Securities to U.S. Holders into U.S. dollars.

     CUSIP Number: A unique nine-character designation assigned to each Debt Security by the CUSIP
Service Bureau and used to identify each issuance of Debt Securities on the records of the Federal
Reserve Banks or DTC, as applicable.

     Day Rate: The arithmetic mean for each day in a Seven-Day Period as determined by the
Calculation Agent in accordance with
Section 2.07(i)(P)(2).

     Dealers: Firms that engage in the business of dealing or trading in debt securities as
agents, brokers or principals.

     Debt Securities: Unsecured subordinated or unsubordinated notes, bonds and other debt
securities issued from time to time by Freddie Mac under the Facility, or if so provided in the
applicable Supplemental Agreement, secured obligation issued from time to time by Freddie Mac under
the facility.

     Deleverage Factor: A Multiplier of less than one by which an applicable Index is multiplied.

     Depository: DTC or any successor.

     Deposits: Deposits commencing on the applicable Reset Date.

     Designated EURIBOR Reuters Page: The display on Reuters Page 248 or any successor page or
such other page (or any successor page) on that service or any successor service specified in the
applicable Supplemental Agreement for the purpose of displaying rates for Deposits in euros.

     Designated EUR-LIBOR Reuters Page: The display on Reuters Page LIBOR01 or any successor page
or such other page (or any successor page) on that service or any successor service specified in
the applicable Supplemental Agreement for the purpose of displaying rates for Deposits in euros.

     Designated Reuters Page: The display on Reuters Page LIBOR01 (or where the Index Currency is
Australian dollars, Swiss francs or Yen, Page LIBOR02) or any successor page or such other page (or
any successor page) on that service or any successor service specified in the applicable
Supplemental Agreement for the purpose of displaying British Bankers’ Association interest
settlement rates for Deposits in the Index Currency.

     Determination Date: The date as of which the rate of interest applicable to an Interest Reset
Period is determined.

3

 

     Determination Period: The period from, and including, one Calculation Date to, but excluding,
the next Calculation Date.

     DTC: The Depository Trust Company, a limited-purpose trust company, which holds securities
for DTC participants and facilitates the clearance and settlement of transactions between DTC
participants through electronic book-entry changes in accounts of DTC participants.

     DTC Registered Debt Securities: Registered Debt Securities registered in the name of a
nominee of DTC, which will clear and settle through the system operated by DTC.

     EC: The European Community.

     EMU: European Monetary Union; the convergence of key features of the economies of certain
participating European countries, including the adoption of a common monetary unit called the euro.

     EMU Event: As defined in Section 7.01(b).

     EURIBOR: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(J.

     EURIBOR Determination Date: The second TARGET Business Day preceding the applicable Reset
Date, unless EURIBOR is determined in accordance with Section 2.07(i)(J)(3), in which case it means
the applicable Reset Date.

     EUR-LIBOR: The rate determined by the Calculation Agent in accordance with Section
2.07(i)(I).

     EUR-LIBOR Determination Date: The second TARGET Business Day preceding the applicable Reset
Date, unless EUR-LIBOR is determined in accordance with Section 2.07(i)(I)(3), in which case it
means the applicable Reset Date.

     Euroclear: Euroclear System, a depositary that holds securities for its participants and
clears and settles transactions between its participants through simultaneous electronic book-entry
delivery against payment.

     Euro Representative Amount: A principal amount of not less than the equivalent of U.S.
$1,000,000 in euros that, in the Calculation Agent’s sole judgment, is representative for a single
transaction in the relevant market at the relevant time.

     Euro-Zone: The region consisting of member states of the European Union that adopt the single
currency in accordance with the Treaty.

     Event of Default: As defined in Section 7.01(a).

     Extendible Variable Rate Securities: Variable Rate Debt Securities, the maturity of which may
be extended at a Benefical Owner’s option effective as of certain specified dates, subject to a
final maturity date, and that bear interest at variable rates subject to different Spreads for
different specified periods.

     Facility: The Global Debt Facility described in the Offering Circular dated February 24,
2010under which Freddie Mac issues the Debt Securities.

     Fed Book-Entry Debt Securities: U.S. dollar denominated Debt Securities issued and maintained
in book-entry form on the Fed Book-Entry System.

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     Fed Book-Entry System: The book-entry system of the Federal Reserve Banks which provides
book-entry holding and settlement for U.S. dollar denominated securities issued by the U.S.
Government, certain of its agencies, instrumentalities, government-sponsored enterprises and
international organizations of which the United States is a member.

     Federal Funds Rate (Daily): The rate determined by the Calculation Agent in accordance with
Section 2.07(i)(O).

     Federal Funds Rate (Daily) Determination Date: The applicable Reset Date; provided, however,
that if the Reset Date is not a Business Day, then the Federal Funds Rate (Daily) Determination
Date means the Business Day immediately following the applicable Reset Date.

     Federal Funds Rate (Weekly Average): The rate determined by the Calculation Agent in
accordance with Section 2.07(i)(P).

     Federal Reserve: The Board of Governors of the Federal Reserve System.

     Federal Reserve Bank: Each U.S. Federal Reserve Bank that maintains Debt Securities in
book-entry form.

     Federal Reserve Banks: Collectively, the Federal Reserve Banks.

     Fiscal Agency Agreement: The Uniform Fiscal Agency Agreement between Freddie Mac and the
FRBNY.

     Fiscal Agent: The FRBNY is fiscal agent for Fed Book-Entry Debt Securities.

     Fixed Principal Repayment Amount: An amount equal to 100% of the principal amount of a Debt
Security, payable on the applicable Maturity Date or earlier date of redemption or repayment or a
specified amount above or below such principal amount, as provided in the applicable Supplemental
Agreement.

     Fixed Rate Debt Securities: Debt Securities that bear interest at a single fixed rate.

     Fixed/Variable Rate Debt Securities: Debt Securities that bear interest at a single fixed
rate during one or more specified periods and at a variable rate determined by reference to one or
more Indices, or otherwise, during one or more other periods. As to any such fixed rate period,
the provisions of this Agreement relating to Fixed Rate Debt Securities shall apply, and, as to any
such variable rate period, the provisions of this Agreement relating to Variable Rate Debt
Securities shall apply.

     Floor: A minimum interest rate at which interest may accrue on a Debt Security during any
Interest Reset Period.

     Freddie Mac: Federal Home Loan Mortgage Corporation, a stockholder-owned company chartered by
Congress pursuant to the Freddie Mac Act.

     Freddie Mac Act: Title III of the Emergency Home Finance Act of 1970, as amended, 12 U.S.C.
§1451-1459.

     FRBNY: The Federal Reserve Bank of New York.

     Global Agency Agreement: The agreement between Freddie Mac, the Global Agent and the
Registrar.

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     Global Agent: The entity selected by Freddie Mac to act as its fiscal, transfer and paying
agent for Registered Debt Securities.

     H.15(519): The weekly statistical release entitled “Statistical Release H.15(519), Selected
Interest Rates” as published by the Federal Reserve, or any successor publication of the Federal
Reserve available on its website at http://www.federalreserve.gov/releases/h15/or any successor
site.

     H.15 Daily Update: The daily update of H.15(519), available on the website of the Federal
Reserve at http://www.federalreserve.gov/releases/h15/update, or any successor site or publication.

     Holder: In the case of Fed Book-Entry Debt Securities, the entity whose name appears on the
book-entry records of a Federal Reserve Bank as Holder; in the case of Registered Debt Securities
in global registered form, the depository, or its nominee, in whose name the Registered Debt
Securities are registered on behalf of a related clearing system; and, in the case of Registered
Debt Securities in definitive registered form, the person or entity in whose name such Debt
Securities are registered in the Register.

     Holding Institutions: Entities eligible to maintain
book-entry accounts with a Federal Reserve Bank.

     Index: LIBOR, EUR-LIBOR, EURIBOR, Prime Rate, Treasury Rate, CMT Rate, CMS Rate, Federal
Funds Rate (Daily), or Federal Funds (Weekly Average) or other specified interest rate, exchange
rate or other index, as the case may be.

     Index Currency: The currency or currency unit specified in the applicable Supplemental
Agreement with respect to which an Index will be calculated for a Variable Rate Debt Security;
provided, however, that if euros are substituted for such currency or currency unit, the Index
Currency will be euros and, with respect to LIBOR, the determination provisions for EUR-LIBOR will
apply to such Debt Securities upon such substitution. If no such currency or currency unit is
specified in the applicable Supplemental Agreement, the Index Currency will be U.S. dollars.

     Index Maturity: The period with respect to which an Index will be calculated for a Variable
Rate Debt Security that is specified in the applicable Supplemental Agreement.

     Interest Component: Each future interest payment, or portion thereof, due on or prior to the
Maturity Date, or if the Debt Security is subject to redemption or repayment prior to the Maturity
Date, the first date on which such Debt Security is subject to redemption or repayment.

     Interest Payment Date: The date or dates on which interest on Debt Securities will be payable
in arrears.

     Interest Payment Period: Unless otherwise provided in the applicable Supplemental Agreement,
the period beginning on (and including) the Issue Date or the most recent Interest Payment Date, as
the case may be, and ending on (but excluding) the earlier of the next Interest Payment Date or the
Principal Payment Date.

     Interest Reset Period: The period beginning on the applicable Reset Date and ending on the
calendar day preceding the next Reset Date.

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     Issue Date: The date on which Freddie Mac wires an issue of Debt Securities to Holders or
other date specified in the applicable Supplemental Agreement.

     Leverage Factor: A Multiplier of greater than one by which an applicable Index is multiplied.

     LIBOR: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(H).

     LIBOR Determination Date: The second London Banking Day preceding the applicable Reset Date
unless the Index Currency is Sterling, in which case it means the applicable Reset Date.

     London Banking Day: Any day on which commercial banks are open for business (including
dealings in foreign exchange and deposits in the Index Currency) in London.

     Maturity Date: The date, one day or longer from the Issue Date, on which a Debt Security will
mature unless extended, redeemed or repaid prior thereto.

     Multiplier: A constant or variable number (which may be greater than or less than one) to be
multiplied by the relevant Index for a Variable Rate Debt Security.

     Non-U.S. Currency: Specified Currency other than U.S. dollars.

     Notes: Callable or non-callable Debt Securities with maturities of more than one day.

     New York Banking Day: Any day other than (a) a Saturday, (b) a Sunday, (c) a day on which
banking institutions in the City of New York are required or permitted by law or executive order to
close, or (d) a day on which the FRBNY is closed.

     Offering Circular: The Freddie Mac Global Debt Facility Offering Circular dated February 24,
2010 (including any related Offering Circular Supplement) and successors thereto.

     OID Determination Date: The last day of the last accrual period ending prior to the date of
the meeting of Holders (or, for consents not at a meeting, prior to a date established by Freddie
Mac). The accrual period will be the same as the accrual period used by Freddie Mac to determine
its deduction for accrued original issue discount under section 163 (e) of the Code.

     Other Registered Debt Securities: Registered Debt Securities that are not DTC Registered Debt
Securities, that are deposited with a Common Depositary and that will clear and settle through the
systems operated by Euroclear, Clearstream, Luxembourg and/or any such other applicable clearing
system other than DTC.

     Pricing Supplement: A supplement to the Offering Circular that describes the specific terms,
of, and provides pricing information and other information for, an issue of Debt Securities or
which otherwise amends, modifies or supplements the terms of the Offering Circular.

     Prime Rate: The rate determined by the Calculation Agent in accordance with Section
2.07(i)(K).

     Prime Rate Determination Date: The New York Banking Day preceding the applicable Reset Date.

     Principal Component: The principal payment plus any interest payments that are either due
after the date specified in, or are specified as ineligible for stripping in, the applicable
Supplemental Agreement.

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     Principal Financial Center: The capital city of the country of the Specified Payment
Currency, or solely with respect to the calculation of LIBOR, the Index Currency, as the case may
be, as specified in the applicable Supplemental Agreement except that with respect to U.S. dollars,
Sterling, Yen, the euro and Swiss francs, the Principal Financial Center shall be the City of New
York, London, Tokyo, Brussels and Zurich, respectively.

     Principal Payment Date: The Maturity Date, or the earlier date of redemption or repayment, if
any (whether such redemption or repayment is in whole or in part).

     Range Accrual Debt Securities: Variable Rate Debt Securities on which no interest may accrue
during periods when the applicable Index is outside a specified range as described in the related
Supplemental Agreement.

     Record Date: As to Registered Debt Securities, the fifteenth calendar day preceding an
Interest Payment Date. Interest on a Registered Debt Security will be paid to the Holder of such
Registered Debt Security as of the close of business on the Record Date.

     Reference Bonds: U.S. dollar denominated, non-callable Reference Securities with maturities
of more than ten years.

     Reference Notes: U.S. dollar denominated, non-callable Reference Securities with maturities
of more than one day.

     Reference Securities: Scheduled U.S. dollar denominated issues of Debt Securities in large
principal amounts, which may be either Callable Reference Notes, Reference Bonds or Reference
Notes.

     Register: A register of the Holders of Registered Debt Securities maintained by the
Registrar.

     Registered Debt Securities: Debt Securities issued and maintained in global registered or
definitive registered form on the books and records of the Registrar.

     Registrar: The entity selected by Freddie Mac to maintain the Register.

     Representative Amount: A principal amount of not less than U.S. $1,000,000 (or, if the Index
Currency is other than U.S. dollars, a principal amount not less than the equivalent in the Index
Currency) that, in the Calculation Agent’s sole judgment, is representative for a single
transaction in the relevant market at the relevant time.

     Reset Date: The date on which a new rate of interest on a Debt Security becomes effective.

     Reuters: Reuters Group PLC or any successor service.

     Reuters USAUCTION10 Page: The display designated as “USAUCTION10” (or any successor page)
provided by Reuters.

     Reuters USAUCTION11 Page: The display designated as “USAUCTION11” (or any successor page)
provided by Reuters.

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     Reuters US PRIME1 Page: The display designated as page “USPRIME1’” (or any successor page)
provided by Reuters

     Seven-Day Period: As defined in Section 2.07(i)(P)(1).

     Specified Currency: The currency or currency unit in which a Debt Security may be denominated
and in which payments of principal of and interest on a Debt Security may be made.

     Specified Interest Currency: The Specified Currency provided for the payment of interest on
Debt Securities.

     Specified Payment Currency: The term to which the Specified Interest Currency and Specified
Principal Currency are referred collectively.

     Specified Principal Currency: The Specified Currency provided for the payment of principal on
Debt Securities.

     Spread: A constant or variable percentage or number to be added to or subtracted from the
relevant Index for a Variable Rate Debt Security.

     Step Debt Securities: Debt Securities that bear interest at different fixed rates during
different specified periods.

     Sterling: British pounds sterling.

     Supplemental Agreement: An agreement which, as to the related issuance of Debt Securities,
supplements the other provisions of this Agreement and identifies and establishes the particular
offering of Debt Securities issued in respect thereof. A Supplemental Agreement may be documented
by a supplement to this Agreement, a Pricing Supplement, a confirmation or a terms sheet. A
Supplemental Agreement may, as to any particular issuance of Debt Securities, modify, amend or
supplement the provisions of this Agreement in any respect whatsoever. A Supplemental Agreement
shall be effective and binding as of its publication, whether or not executed by Freddie Mac.

     TARGET: The Trans-European Automated Real-Time Gross Settlement Express Transfer system.

     TARGET Business Day: A day on which the TARGET system is operating.

     Targeted Registered Debt Securities: Debt Securities “targeted to foreign markets” under
Treasury Department regulations and offered or sold solely to persons outside the United States or
its territories or possessions.

     Treaty: The treaty establishing the EC, as amended by the treaty on European Union.

     Treasury Auction: The most recent auction of Treasury Bills prior to a given Reset Date.

     Treasury Bills: Direct obligations of the United States.

     Treasury Department: United States Department of the Treasury.

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     Treasury Rate: The rate determined by the Calculation Agent in accordance with Section
2.07(i)(L).

     Treasury Rate Determination Date: The day of the week in which the Reset Date falls on which
Treasury Bills would normally be auctioned or, if no auction is held for a particular week, the
first Business Day of that week. Treasury Bills are normally sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that the auction may be held on the preceding Friday; provided, however,
that if an auction is held on the Friday of the week preceding the Reset Date, the Treasury Rate
Determination Date will be that preceding Friday; and provided, further, that if the Treasury Rate
Determination Date would otherwise fall on the Reset Date, that Reset Date will be postponed to the
next succeeding Business Day.

     Variable Principal Repayment Amount: The principal amount determined by reference to one or
more Indices or otherwise, payable on the applicable Maturity Date or date of redemption or
repayment of a Debt Security, as specified in the applicable Supplemental Agreement.

     Variable Rate Debt Securities: Debt Securities that bear interest at a variable rate, and
reset periodically, determined by reference to one or more Indices or otherwise. The formula for a
variable rate may include a Spread.

     Yen: Japanese yen.

     Zero Coupon Debt Securities: Debt Securities that do not bear interest and are issued at a
discount to their principal amount.

ARTICLE II

Authorization; Certain Terms

     Section 2.01. Authorization.

     Debt Securities shall be issued by Freddie Mac in accordance with the authority vested in
Freddie Mac by Section 306(a) of the Freddie Mac Act. The indebtedness represented by the Debt
Securities shall be unsecured general obligations of Freddie Mac, or, if so provided in the
applicable Supplemental Agreement, secured obligations of Freddie Mac. Debt Securities shall be
offered from time to time by Freddie Mac in an unlimited amount and shall be known by the
designation given them, and have the Maturity Dates stated, in the applicable Supplemental
Agreement. Freddie Mac, in its discretion and at any time, may offer Additional Debt Securities
having the same terms and conditions as Debt Securities previously offered. The Debt Securities
may be issued as Reference Securities, which includes Callable Reference Notes, Reference Notes and
Reference Bonds, or may be issued as any other Debt Securities, denominated in U.S. dollars or
other currencies, with maturities of one day or longer and may be in the form of Notes or Bonds or
otherwise. Issuances may consist of new issues of Debt Securities or reopenings of an existing
issue of Debt Securities.

     Section 2.02. Other Debt Securities Issued Hereunder.

     Freddie Mac may from time to time create and issue Debt Securities hereunder which contain
terms and conditions not specified in this Agreement. Such Debt Securities shall be governed by
the applicable Supplemental Agreement and, to the extent that the terms of this Agreement are not
inconsistent with Freddie Mac’s intent in creating and issuing such Debt Securities, by the terms
of this Agreement. Such Debt Securities shall be secured or unsecured

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obligations of Freddie Mac. If the Debt Securities are secured obligations of Freddie Mac,
the provisions of Article V hereof shall apply to such Debt Securities.

     Section 2.03. Specified Currencies and Specified Payment Currencies.

     (a) Each Debt Security shall be denominated and payable in such Specified Currency as
determined by Freddie Mac. Fed Book-Entry Debt Securities will be denominated and payable in U.S.
dollars only.

     (b) Except under the circumstances provided in Section 2.03(c)(i) and (ii) and Article VI
hereof, Freddie Mac shall make payments of any interest on Debt Securities in the Specified
Interest Currency and shall make payments of the principal of Debt Securities in the Specified
Principal Currency. The Specified Currency for the payment of interest and principal with respect
to any Debt Security shall be set forth in the applicable Supplemental Agreement.

     (c) European Economic and Monetary Union and Unavailability

     (i) European Economic and Monetary Union. The Treaty contemplated that EMU would occur in
three stages. On January 1, 1999 the third and final stage of the EMU commenced with the
irrevocable fixing of the exchange rates of the currencies of the initial 11 participating member
states for interbank transfers in a single currency, the “euro”. Complete replacement of member
currencies was completed in 2002. As of the date of this Agreement, the participating member
states in the EMU are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia and Spain.

     (ii) Unavailability. Except as set forth below, if the principal of, premium, if any, or
interest on, any Debt Security is payable in a Specified Currency other than U.S. dollars and such
Specified Currency is not available to Freddie Mac for making required payments due to the
imposition of exchange controls, its replacement or disuse or other circumstances beyond the
control of Freddie Mac, then Freddie Mac shall be entitled to satisfy its obligations to Holders of
the Debt Securities by making such payments in U.S. dollars on the basis of the noon U.S. dollar
buying rate in New York City for cable transfers for such Specified Currency published by the FRBNY
on the date of such payment, or, if such currency exchange rate is not available on such date, as
of the most recent prior practicable date. Notwithstanding the provisions of the preceding
sentence, if euros have replaced such Specified Currency as described under Section 2.03(c)(i)
above, Freddie Mac may, at its option (or shall, if so required by applicable law) without the
consent of the Holders of such Debt Securities effect the payment of principal of, premium, if any,
or interest on, any Debt Security denominated in such Specified Currency in euros in lieu of such
Specified Currency, in conformity with legally applicable measures taken pursuant to, or by virtue
of the Treaty or other applicable legal or regulatory requirements.

     Section 2.04. Minimum Denominations.

     The Debt Securities shall be issued and maintained in the minimum denominations of U.S. $1,000
and additional increments of U.S. $1,000 for U.S. dollar denominated Debt Securities, unless
otherwise provided in the applicable Supplemental Agreement and as may be allowed or required from
time to time by the relevant regulatory authority or any laws or regulations applicable to the
relevant Specified Currency. In the case of Zero Coupon Debt Securities, denominations will be
expressed in terms of the principal amount payable on the Maturity Date.

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     Section 2.05. Maturity.

     (a) Each Debt Security shall mature on its Maturity Date, as provided in the applicable
Supplemental Agreement, unless redeemed at the option of Freddie Mac or repaid at the option of the
Holder prior thereto in accordance with the provisions described under Section 2.06. Debt
Securities may be issued with minimum or maximum maturities or variable maturities allowed or
required from time to time by the relevant regulatory or stock exchange authority or clearing
systems or any laws or regulations applicable to the Specified Currency.

     (b) If so provided in the applicable Supplemental Agreement, certain Debt Securities may have
provision permitting their Beneficial Owner to elect to extend the initial Maturity Date specified
in such Supplemental Agreement, or any later date to which the maturity of such Debt Securities has
been extended, on specified dates. However, the maturity of such Debt Securities may not be
extended beyond the final Maturity Date specified in the Supplemental Agreement.

     (b) The principal amount payable on the Maturity Date of a Debt Security shall be a Fixed
Principal Repayment Amount or a Variable Principal Repayment Amount, in each case as provided in
the applicable Supplemental Agreement.

     Section 2.06. Optional Redemption and Optional Repayment.

     (a) The Supplemental Agreement for any particular issue of Debt Securities shall provide
whether such Debt Securities may be redeemed at Freddie Mac’s option or repayable at the Holder’s
option, in whole or in part, prior to their Maturity Date. If so provided in the applicable
Supplemental Agreement, an issue of Debt Securities shall be subject to redemption at the option of
Freddie Mac, or repayable at the option of the Holders, in whole or in part, on one or more
specified dates, at any time on or after a specified date, or during one or more specified periods
of time. The redemption or repayment price for such Debt Securities (or such part of such Debt
Securities as is redeemed or repaid) shall be an amount provided in, or determined in a manner
provided in, the applicable Supplemental Agreement, together with accrued and unpaid interest to
the date fixed for redemption or repayment.

     (b) Unless otherwise provided in the applicable Supplemental Agreement, notice of optional
redemption shall be given to Holders of the related Debt Securities not less than 5 Business Days
nor more than 60 calendar days prior to the date of redemption in the manner provided in Section
8.07.

     (c) In the case of a partial redemption of an issue of Fed Book-Entry Debt Securities by
Freddie Mac, such Fed Book-Entry Debt Securities shall be redeemed pro rata. In the case of a
partial redemption of an issue of Registered Debt Securities by Freddie Mac, one or more of such
Registered Debt Securities shall be reduced by the Global Agent in the amount of such redemption,
subject to the principal amount of such Registered Debt Securities after redemption remaining in an
authorized denomination. The effect of any partial redemption of an issue of Registered Debt
Securities on the Beneficial Owners of such Registered Debt Securities will depend on the
procedures of the applicable clearing system and, if such Beneficial Owner is not a participant
therein, on the procedures of the participant through which such Beneficial Owner owns its
interest.

     (d) If so provided in the applicable Supplemental Agreement, certain Debt Securities shall be
repayable, in whole or in part, by Freddie Mac at the option of the relevant Holders

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thereof, on one or more specified dates, at any time on or after a specified date, or during
one or more specified periods of time, upon terms and procedures provided in the applicable
Supplemental Agreement. Unless otherwise provided in the applicable Supplemental Agreement, in the
case of a Registered Debt Security, to exercise such option, the Holder shall deposit with the
Global Agent (i) such Registered Debt Security; and (ii) a duly completed notice of optional
repayment in the form obtainable from the Global Agent, in each case not more than the number of
days nor less than the number of days specified in the applicable Supplemental Agreement prior to
the date fixed for repayment. Unless otherwise specified in the applicable Supplemental Agreement,
no such Registered Debt Security (or notice of repayment) so deposited may be withdrawn without the
prior consent of Freddie Mac or the Global Agent. Unless otherwise provided in the applicable
Supplemental Agreement, in the case of a Fed Book-Entry Debt Security, if the Beneficial Owner
wishes to exercise such option, then the Beneficial Owner shall give notice thereof to Freddie Mac
through the relevant Holding Institution as provided in the applicable Supplemental Agreement.

     (e) The principal amount payable upon redemption or repayment of a Debt Security shall be a
Fixed Principal Repayment Amount or a Variable Principal Repayment Amount, in each case as provided
in the applicable Supplemental Agreement.

     Section 2.07. Payment Terms of the Debt Securities.

     (a) Debt Securities shall bear interest at one or more fixed rates or variable rates or may
not bear interest. If so provided in the applicable Supplemental Agreement, Debt Securities may be
separated by a Holder into one or more Interest Components and Principal Components. The Offering
Circular or the applicable Supplemental Agreement for such Debt Securities shall specify the
procedure for stripping such Debt Securities into such Interest and Principal Components.

     (b) The applicable Supplemental Agreement shall specify the frequency with which interest, if
any, is payable on the related Debt Securities. Interest on Debt Securities shall be payable in
arrears on the Interest Payment Dates specified in the applicable Supplemental Agreement and on
each Principal Payment Date.

     (c) Each issue of interest-bearing Debt Securities shall bear interest during each Interest
Payment Period. No interest on the principal of any Debt Security will accrue on or after the
Principal Payment Date on which such principal is repaid.

     (d) The determination by the Calculation Agent of the interest rate on, or any Index in
relation to, a Variable Rate Debt Security and the determination of any payment on any Debt
Security (or any interim calculation in the determination of any such interest rate, index or
payment) shall, absent manifest error, be final and binding on all parties. If a principal or
interest payment error occurs, Freddie Mac may correct it by adjusting payments to be made on later
Interest Payment Dates or Principal Payment Dates (as appropriate) or in any other manner Freddie
Mac considers appropriate. If the source of an Index changes in format, but the Calculation Agent
determines that the Index source continues to disclose the information necessary to determine the
related interest rate substantially as required, the Calculation Agent will amend the procedure for
obtaining information from that source to reflect the changed format. All Index values used to
determine principal or interest payments are subject to correction within 30 days from the
applicable payment. The source of a corrected value must be

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the same source from which the original value was obtained. A correction might result in an
adjustment on a later date to the amount paid to the Holder.

     (e) Payments on Debt Securities shall be rounded, in the case of U.S. dollars, to the nearest
cent or, in the case of a Specified Payment Currency other than U.S. dollars, to the nearest
smallest transferable unit (with one-half cent or unit being rounded upwards).

     (f) In the event that any jurisdiction imposes any withholding or other tax on any payment
made by Freddie Mac (or our agent or any other person potentially required to withhold) with
respect to a Debt Security, Freddie Mac (or our agent or such other person) will deduct the amount
required to be withheld from such payment, and Freddie Mac (or our agent or such other person) will
not be required to pay additional interest or other amounts, or redeem or repay the Debt Securities
prior to the applicable Maturity Date, as a result.

     (g) Fixed Rate Debt Securities

     Fixed Rate Debt Securities shall bear interest at a single fixed interest rate. The
applicable Supplemental Agreement shall specify the fixed interest rate per annum on a Fixed Rate
Debt Security. Unless otherwise specified in the applicable Supplemental Agreement, interest on a
Fixed Rate Debt Security shall be computed on the basis of a 360-day year consisting of twelve
30-day months.

     (h) Step Debt Securities

     Step Debt Securities shall bear interest from their Issue Date to a specified date at their
initial fixed interest rate and from that date to their Maturity Date at one or more different
fixed interest rates that shall be prescribed as of the Issue Date. A Step Debt Security will have
one or more step periods. The applicable Supplemental Agreement shall specify the fixed interest
rate per annum payable on Step Debt Securities for each related period from issuance to maturity.
Unless otherwise specified in the applicable Supplemental Agreement, interest on a Step Debt
Security shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

     (i) Variable Rate Debt Securities

(A) Variable Rate Debt Securities shall bear interest at a variable rate determined on the
basis of a direct or an inverse relationship to one or more specified Indices or otherwise,
(x) plus or minus a Spread, if any, or (y) multiplied by one or more Leverage or Deleverage
Factors, if any, as specified in the applicable Supplemental Agreement. Variable Rate Debt
Securities also may bear interest in any other manner described in the applicable
Supplemental Agreement.

(B) Variable Rate Debt Securities may have a Cap and/or a Floor.

(C) The applicable Supplemental Agreement shall specify the accrual method (i.e., the day
count convention) for calculating interest or any relevant accrual factor on the related
Variable Rate Debt Securities. The accrual method may incorporate one or more of the
following defined terms:

     “Actual/360” shall mean that interest or any other relevant accrual factor shall be
calculated on the basis of the actual number of days elapsed in a year of 360 days.

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     “Actual/365 (fixed)” shall mean that interest or any other relevant accrual factor
shall be calculated on the basis of the actual number of days elapsed in a year of 365 days,
regardless of whether accrual or payment occurs during a calendar leap year.

     “Actual/Actual” shall mean, unless otherwise indicated in the applicable Supplemental
Agreement, that interest or any other relevant accrual factor shall be calculated on the
basis of (x) the actual number of days elapsed in the Interest Payment Period divided by
365, or (y) if any portion of the Interest Payment Period falls in a calendar leap year, (A)
the actual number of days in that portion divided by 366 plus (B) the actual number of days
in the remaining portion divided by 365. If so indicated in the applicable Supplemental
Agreement, “Actual/Actual” shall mean interest or any other relevant accrual factor shall be
calculated in accordance with the definition of “Actual/Actual” adopted by the International
Securities Market Association (“Actual/Actual (ISMA)”), which means a calculation on the
basis of the following:

(1) where the number of days in the relevant Interest Payment Period is equal to or
shorter than the Determination Period during which such Interest Payment Period
ends, the number of days in such Interest Payment Period divided by the product of
(A) the number of days in such Determination Period and (B) the number of Interest
Payment Dates that would occur in one calendar year; or

(2) where the Interest Payment Period is longer than the Determination Period during
which the Interest Payment Period ends, the sum of (A) the number of days in such
Interest Payment Period falling in the Determination Period in which the Interest
Payment Period begins divided by the product of (X) the number of days in such
Determination Period and (Y) the number of Interest Payment Dates that would occur
in one calendar year; and (B) the number of days in such Interest Payment Period
falling in the next Determination Period divided by the product of (X) the number of
days in such Determination Period and (Y) the number of Interest Payment Dates that
would occur in one calendar year.

(D) The applicable Supplemental Agreement shall specify the frequency with which the rate of
interest on the related Variable Rate Debt Securities shall reset. The applicable
Supplemental Agreement also shall specify the Reset Date. If the interest rate will reset
within an Interest Payment Period, then the interest rate in effect on the sixth Business
Day preceding an Interest Payment Date will be the interest rate for the remainder of that
Interest Payment Period and the first day of each Interest Payment Period also will be a
Reset Date. Variable Rate Debt Securities may bear interest prior to the initial Reset Date
at an initial interest rate, if any, specified in the applicable Supplemental Agreement. If
so, then the first day of the first Interest Payment Period will not be a Reset Date. The
rate of interest applicable to each Interest Reset Period shall be determined as provided
below or in the applicable Supplemental Agreement.

Except for a Variable Rate Debt Security as to which the rate of interest thereon is
determined by reference to LIBOR, EUR-LIBOR, EURIBOR, Prime Rate, Treasury Rate, CMT Rate,
CMS Rate, Federal Funds Rate (Daily), or Federal Funds Rate (Weekly Average) or as otherwise
set forth in the applicable Supplemental Agreement, the Determination Date for a Variable
Rate Debt Security means the second Business Day preceding the Reset Date applicable to an
Interest Reset Period.

15

 

(E) If the rate of interest on a Variable Rate Debt Security is subject to adjustment within
an Interest Payment Period, accrued interest shall be calculated by multiplying the
principal amount of such Variable Rate Debt Security by an accrued interest factor. Unless
otherwise specified in the applicable Supplemental Agreement, this accrued interest factor
shall be computed by adding the interest factor calculated for each Interest Reset Period in
such Interest Payment Period and rounding the sum to nine decimal places. The interest
factor for each such Interest Reset Period shall be computed by (1) multiplying the number
of days in the Interest Reset Period by the interest rate (expressed as a decimal)
applicable to such Interest Reset Period; and (2) dividing the product by the number of days
in the year referred to in the accrual method specified in the applicable Supplemental
Agreement.

(F) If and so long as an issue of Variable Rate Debt Securities is admitted for trading on
the Euro MTF Market and listed on the Official List of the Luxembourg Stock Exchange and
such stock exchange so requires, the Calculation Agent shall cause the interest rate for the
applicable Interest Reset Period and the amount of interest on the minimum denomination in
respect of such issue that would accrue through the last day of such Interest Reset Period,
as well as the last day of such Interest Reset Period, to be provided to such stock exchange
as soon as practicable, but in no event later than the applicable Reset Date.

(G) For each issue of Variable Rate Debt Securities, the Calculation Agent shall also cause
the interest rate for the applicable Interest Reset Period and the amount of interest
accrued on the minimum denomination specified for such issue to be made available to Holders
as soon as practicable after its determination but in no event later than two Business Days
thereafter. Such interest amounts so made available may subsequently be amended (or
appropriate alternative arrangements made by way of adjustment) without notice in the event
of an extension or shortening of the Interest Reset Period.

(H) If the applicable Supplemental Agreement specifies LIBOR as the applicable Index for
determining the rate of interest for the related Variable Rate Debt Security, the following
provisions shall apply (unless otherwise specified in the applicable Supplemental
Agreement):

     “LIBOR” shall mean, with respect to any Reset Date (in the following order of
priority):

(1) the rate (expressed as a percentage per annum) for Deposits in the Index
Currency having the Index Maturity that appears on the Designated Reuters Page at
11:00 a.m. (London time) on such LIBOR Determination Date;

(2) if such rate does not so appear pursuant to clause (1) above, the Calculation
Agent shall request the principal London offices of four leading banks in the London
interbank market selected by the Calculation Agent (after consultation with Freddie
Mac, if Freddie Mac is not then acting as Calculation Agent) to provide such banks’
offered quotations (expressed as a percentage per annum) to prime banks in the
London interbank market for Deposits in the Index Currency having the Index Maturity
at 11:00 a.m. (London time) on such LIBOR Determination Date and in a Representative
Amount. If at least two quotations

16

 

are provided, LIBOR shall be the arithmetic mean (if necessary rounded upwards) of
such quotations;

(3) if fewer than two such quotations are provided as requested in clause (2) above,
the Calculation Agent shall request four major banks in the applicable Principal
Financial Center selected by the Calculation Agent (after consultation with Freddie
Mac, if Freddie Mac is not then acting as Calculation Agent) to provide such banks’
offered quotations (expressed as a percentage per annum) to leading European banks
for a loan in the Index Currency for a period of time corresponding to the Index
Maturity, commencing on such Reset Date, at approximately 11:00 a.m. in the
Principal Financial Center on such LIBOR Determination Date and in a Representative
Amount. If at least two such quotations are provided, LIBOR shall be the arithmetic
mean (if necessary rounded upwards) of such quotations; and

(4) if fewer than two such quotations are provided as requested in clause (3) above,
LIBOR shall be LIBOR determined with respect to the Reset Date immediately preceding
such Reset Date or, in the case of the first Reset Date, shall be the rate for
Deposits in the Index Currency having the Index Maturity at 11:00 a.m. (London time)
on the most recent London Banking Day preceding the related LIBOR Determination Date
for which such rate shall have been displayed on the Designated Reuters Page with
respect to Deposits commencing on the second London Banking Day following such date
(or, if the Index Currency is Sterling, commencing on such date).

(I) If the applicable Supplemental Agreement specifies EUR-LIBOR as the applicable Index for
determining the rate of interest for the related Variable Rate Debt Security, the following
provisions shall apply (unless otherwise specified in the applicable Supplemental
Agreement):

     “EUR-LIBOR” shall mean, with respect to any Reset Date (in the following order of
priority):

(1) the rate (expressed as a percentage per annum) for Deposits in euros having the
Index Maturity that appears on the Designated EUR-LIBOR Reuters Page at 11:00 a.m.
(London time) on the related EUR-LIBOR Determination Date;

(2) if such rate does not so appear pursuant to clause (1) above, the Calculation
Agent shall request the principal London offices of four leading banks in the London
interbank market selected by the Calculation Agent (after consultation with Freddie
Mac, if Freddie Mac is not then acting as Calculation Agent) to provide such banks’
offered quotations (expressed as a percentage per annum) to prime banks in the
London interbank market for Deposits in euros having the Index Maturity at 11:00
a.m. (London time) on such EUR-LIBOR Determination Date and in a Euro Representative
Amount. If at least two quotations are provided, EUR-LIBOR shall be the arithmetic
mean (if necessary rounded upwards) of such quotations;

17

 

(3) if fewer than two such quotations are provided as requested in clause (2) above,
the Calculation Agent shall request four major banks in London selected by the
Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not then
acting as Calculation Agent) to provide such banks’ offered quotations (expressed as
a percentage per annum) to leading European banks for a loan in euros for a period
of time corresponding to the Index Maturity, commencing on such Reset Date, at
approximately 11:00 a.m. (London time) on such EUR-LIBOR Determination Date and in a
Euro Representative Amount. If at least two such quotations are provided, EUR-LIBOR
shall be the arithmetic mean (if necessary rounded upwards) of such quotations; and

(4) if fewer than two such quotations are provided as requested in clause (3) above,
EUR-LIBOR shall be EUR-LIBOR determined with respect to the Reset Date immediately
preceding such Reset Date. If the applicable Reset Date is the first Reset Date,
then the rate of interest payable for the new Interest Rate Period will be the
initial interest rate.

(J) If the applicable Supplemental Agreement specifies EURIBOR as the applicable Index for
determining the rate of interest for the related Variable Rate Debt Security, the following
provisions shall apply (unless otherwise specified in the applicable Supplemental
Statement):

     “EURIBOR” shall mean, with respect to a Reset Date (in the following order of
priority):

(1) the rate (expressed as a percentage per annum) for Deposits in euros having the
Index Maturity that appears on the Designated EURIBOR Reuters Page at 11:00 a.m.,
Brussels time, on the relevant EURIBOR Determination Date;

(2) if such rate does not so appear pursuant to clause (1) above, then the
Calculation Agent will request the principal offices of four major banks in the
Euro-Zone selected by the Calculation Agent (after consultation with Freddie Mac, if
Freddie Mac is not then acting as Calculation Agent) to provide such banks’ offered
quotations (expressed as a percentage per annum) to prime banks in the Euro-Zone
interbank market for Deposits in euros having the Index Maturity at 11:00 a.m.
Brussels time on such EURIBOR Determination Date and in a Euro Representative
Amount. If at least two quotations are provided, EURIBOR for that date will be the
arithmetic mean (if necessary, rounded upwards) of the quotations;

(3) if fewer than two such quotations are provided as requested in clause (2) above,
EURIBOR for that date will be the arithmetic mean (if necessary, rounded upwards) of
the rates quoted by major banks in the Euro-Zone, selected by the Calculation Agent
(after consultation with Freddie Mac, if Freddie Mac is not then acting as
Calculation Agent), at approximately 11:00 a.m., Brussels time, on the EURIBOR
Determination Date for loans in euros to leading European banks for a period of time
corresponding to the Index Maturity and in a Euro Representative Amount. If at
least two quotations are provided, EURIBOR for that date will be the arithmetic mean
(if necessary, rounded upwards) of the quotations; and

18

 

(4) if fewer than two quotations are provided as requested in clause (3) above,
EURIBOR will be EURIBOR as determined for the immediately preceding Reset Date or,
in the case of the first Reset Date, the interest rate payable for the new Interest
Reset Period will be the initial interest rate.

(K) If the applicable Supplemental Agreement specifies the Prime Rate as the applicable
Index for determining the rate of interest for the related Variable Rate Debt Securities,
the following provisions shall apply:

     The “Prime Rate” means, with respect to any Reset Date (in the following order of
priority):

(1) the rate for the Prime Rate Determination Date, as published in H.15(519) Daily
Update opposite the caption “Bank prime loan”;

(2) if the rate is not published by 5:00 p.m., New York City time, on the Reset Date
pursuant to clause (1), the rate for the Prime Rate Determination Date as published
in H.15(519) opposite the caption “Bank prime loan”;

(3) if the rate is not published in either H.15(519) or the H.15 Daily Update by
5:00 p.m., New York City time, on the Reset Date, then the Prime Rate will be the
arithmetic mean, determined by the Calculation Agent, of the rates (after
eliminating certain rates, as described below in this clause (3)) that appear, at
11:00 a.m., New York City time, on the Prime Rate Determination Date, on Reuters
USPRIME1 Page as the U.S. dollar prime rate or base lending rate of each bank
appearing on that page; provided, that at least three rates appear. In determining
the arithmetic mean:

(i) if 20 or more rates appear, the highest five rates (or in the event of
equality, five of the highest) and the lowest five rates (or in the event of
equality, five of the lowest) will be eliminated,

(ii) if fewer than 20 but 10 or more rates appear, the highest two rates (or
in the event of equality, two of the highest) and the lowest two rates (or
in the event of equality, two of the lowest) will be eliminated, or

(iii) if fewer than 10 but five or more rates appear, the highest rate (or
in the event of equality, one of the highest) and the lowest rate (or in the
event of equality, one of the lowest) will be eliminated;

(4) if fewer than three rates so appear on Reuters USPRIME1 Page pursuant to
clause (3) above, then the Calculation Agent will request five major banks in the
City of New York selected by the Calculation Agent (after consultation with Freddie
Mac, if Freddie Mac is not then acting as Calculation Agent) to provide a quotation
of such banks’ U.S. dollar prime rates or base lending rates on the basis of the
actual number of days in the year divided by 360 as of the close of business on the
Prime Rate Determination Date. If at least three quotations are provided, then the
Prime Rate will be the arithmetic mean determined by the Calculation Agent of the
quotations obtained (and, if five quotations are provided, eliminating

19

 

the highest quotation (or in the event of equality, one of the highest) and the
lowest quotation (or in the event of equality, one of the lowest));

(5) if fewer than three quotations are so provided pursuant to clause (4) above, the
Calculation Agent will request five banks or trust companies organized and doing
business under the laws of the United States or any state, each having total equity
capital of at least U.S. $500,000,000 and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent (after
consultation with Freddie Mac, if Freddie Mac is not then acting as Calculation
Agent), to provide a quotation of such banks’ or trust companies’ U.S. dollar prime
rates or base lending rates on the basis of the actual number of days in the year
divided by 360 as of the close of business on the Prime Rate Determination Date. In
making such selection of five banks or trust companies, the Calculation Agent will
include each bank, if any, that provided a quotation as requested in clause (4)
above and exclude each bank that failed to provide a quotation as requested in
clause (4). If at least three quotations are provided, then the Prime Rate will be
the arithmetic mean determined by the Calculation Agent of the quotations obtained;
and

(6) if fewer than three quotations are so provided pursuant to clause (5) above,
then the Prime Rate will be the Prime Rate determined for the immediately preceding
Reset Date. If the applicable Reset Date is the first Reset Date, then the Prime
Rate will be the rate calculated pursuant to clause (1) or (2) for the most recent
New York Banking Day preceding the Reset Date for which such rate was published in
H.15(519) or H.15 Daily Update.

(L) If the applicable Supplemental Agreement specifies the Treasury Rate as the applicable
Index for determining the rate of interest for the related Variable Rate, the following
provisions shall apply:

The “Treasury Rate” means, with respect to any Reset Date (in the following order of
priority):

(1) the rate for the Treasury Determination Date of Treasury Bills having the Index
Maturity, as published in H.15 Daily Update under the caption “U.S. government
securities/Treasury bills/(secondary market)”;

(2) if the rate described in clause (1) above does not appear in H.15 Daily Update
by 5:00 p.m., New York City time, on the Reset Date, then the rate for the Treasury
Rate Determination Date of Treasury Bills having the Index Maturity, as published in
the H.15 (519), or other recognized electronic source used for the purpose of
displaying that rate under the caption “U.S. government securities/Treasury
bills(secondary market)”;
(3) if the rate described in clause (2) above is not so published by 3.00 p.m., New
York City time, on the Reset Date, then the rate from Treasury Auction of Treasury
Bills having the Index Maturity, as that rate appears under the caption “INVEST
RATE” on the display on Reuters USAUCTION10 Page or Reuters USAUCTION11 Page;

20

 

(4) if the rate described in clause (3) above is not published by 5:00 p.m., New
York City time, on the Reset Date, then the auction average rate for Treasury Bills
having the Index Maturity obtained from the applicable Treasury Auction as
announced by the Treasury Department in the form of a press release under the
heading “Investment Rate” by 5:00 p.m. on such Reset Date;

(5) if the rate describe in clause (4) above is not so announced by the Treasury
Department by 5:00 p.m., New York City time, on the Reset Date, then auction average
rate obtained from the Treasury Auction of the applicable Treasury Bills, as
otherwise announced by the Treasury Department by 5:00 p.m., New York City time, on
the Reset Date as determined by the Calculation Agent;

(6) if such rate described in clause (5) is not so announced by the Treasury
Department by 5:00 p.m., New York City time, on the Reset Date, the Calculation
Agent will request five leading primary United States government securities dealers
in the City of New York selected by the Calculation Agent (after consultation with
Freddie Mac, if Freddie Mac is not then acting as Calculation Agent) to provide a
quotation of such dealers’ secondary market bid yields, as of 3:00 p.m. on the Reset
Date, for Treasury Bills with a remaining maturity closest to the Index Maturity
(or, in the event that the remaining maturities are equally close, the longer
remaining maturity). If at least three quotations are provided, then the Treasury
Rate will be the arithmetic mean determined by the Calculation Agent of the
quotations obtained; and

(7) if fewer than three quotations are so provided pursuant to clause (6) above,
then the Treasury Rate for the immediately preceding Reset Date. If the applicable
Reset Date is the first Reset Date, then the auction average rate for Treasury Bills
having the Index Maturity from the most recent auction of Treasury Bills prior to
the Reset Date for which such rate was announced by the Treasury Department in the
form of a press release under the heading “Investment Rate.”

     The rate (including the auction average rate) for Treasury Bills and the secondary market bid
yield for Treasury Bills will be obtained and expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable (or, if not so expressed, will be converted by the Calculation
Agent to such a bond equivalent yield).

     (M) If the applicable Supplemental Agreement specifies the CMT Rate as the applicable Index
for determining the rate of interest for the related Variable Rate, the following provisions shall
apply:

     The “CMT Rate” means, with respect to any Reset Date (in the following order of priority):

(1) for any CMT Determination Date, the daily rate for the Index Maturity that
appears on page “FRBCMT” on Reuters (or any other page that replaces the FRBCMT page
on that service or any successor service) under the heading “...Treasury Constant
Maturities. Federal Reserve Board Release H.15...Mondays Approximately 3:45
p.m.”;

21

 

(2) if the applicable rate described in clause (1) is not displayed on Reuters
page FRBCMT at 3:45 p.m., New York City time, on the CMT Determination Date, then
the CMT Rate will be the Treasury constant maturity rate for the Index Maturity
applicable for the CMT Determination Date as published in H.15 (519);

(3) if the CMT Rate is not determined pursuant to clause (1) and the applicable rate
described in clause (2) does not appear in H.15 (519) at 3:45 p.m., New York City
time, on the CMT Determination Date, then the CMT Rate will be the Treasury constant
maturity rate, or other U.S. Treasury rate, applicable to an Index Maturity with
reference to the CMT Determination Date, that:

(i) is published by the Federal Reserve or the Treasury Department; and

(ii) Freddie Mac has determined to be comparable to the applicable rate
formerly displayed on Reuters page 7051 and published in H.15 (519);

(4) if the CMT Rate is not determined pursuant to clause (1) or (2) and the rate
described in clause (3) above does not appear at 3:45 p.m., New York City time, on
the CMT Determination Date, then the CMT Rate will be the yield to maturity of the
arithmetic mean of the secondary market offered rates for U.S. Treasury securities
with an original maturity of approximately the Index Maturity and a remaining term
to maturity of no more than one year shorter than the Index Maturity, and in a
Representative Amount, as of approximately 3:45 p.m., New York City time, on the CMT
Determination Date, as quoted by three primary U.S. government securities dealers in
New York City that Freddie Mac selects. In selecting these offered rates, Freddie
Mac will request quotations from five primary dealers and will disregard the highest
quotation or, if there is equality, one of the highest and the lowest quotation or,
if there is equality, one of the lowest. If two U.S. Treasury securities with an
original maturity longer than the Index Maturity have remaining terms to maturity
that are equally close to the Index Maturity, Freddie Mac will obtain quotations for
the U.S. Treasury security with the shorter remaining term to maturity;

(5) if the CMT Rate is not determined pursuant to clause (1), (2) or (3) and fewer
than five but more than two primary dealers are quoting offered rates as described
in clause (4), then the CMT Rate for the CMT Determination Date will be based on the
arithmetic mean of the offered rates so obtained, and neither the highest nor the
lowest of those quotations will be disregarded;

(6) if the CMT Rate is not determined pursuant to clause (1), (2), (3) or (4) and
two or fewer primary dealers are quoting offered rates as described in clause (5),
then the CMT Rate will be the yield to maturity of the arithmetic mean of the
secondary market offered rates for U.S. Treasury securities having an original
maturity longer than the Index Maturity and a remaining term to maturity closest to
the Index Maturity, and in a Representative Amount, as of approximately 3:45 p.m.,
New York City time, on the CMT Determination Date, as quoted by three

22

 

primary U.S. government securities dealers in New York City that Freddie Mac
selects. In selecting these offered rates, Freddie Mac will request quotations from
five primary dealers and will disregard the highest quotation, or, if there is
equality, one of the highest and the lowest quotation or, if there is equality, one
of the lowest;

(7) if the CMT Rate is not determined pursuant to clauses (1) through (6) above and
fewer than five but more than two primary dealers are quoting offered rates as
described in clause (6), then the CMT Rate for the CMT Determination date will be
based on the arithmetic mean of the offered rates so obtained, and neither the
highest nor the lowest of those quotations will be disregarded; and

(8) if the Calculation Agent obtains fewer than three quotations of the kind
described in clause (6), the CMT Rate in effect for the new Interest Reset Period
will be the CMT Rate in effect for the prior Interest Rate Period, or if the
applicable Reset Date is the first Reset Date, the rate of interest payable for the
new Interest Reset Period will be the initial interest rate.

     (N) If the applicable Supplemental Agreement specifies the CMS Rate as the applicable Index
for determining the rate of interest for the related Variable Rate, the following provisions shall
apply:

     The “CMS Rate” means, with respect to any Reset Date:

(1) the most recent rate for U.S. dollar swap transactions for the applicable Index
Currency and applicable Index Maturity, as specified in the applicable Supplemental
Agreement for the Debt Securities, expressed as a percentage, which appears on the
Reuters page “ISDAFIX1” (or such other page that may replace that page on that
service or a successor service) at 11:00 a.m., New York City time, on the applicable
CMS Determination Date;

(2) if the most recent CMS Rate as described in clause (1) above was first available
prior to ten calendar days before the applicable CMS Determination Date, then the
CMS Rate will be determined by the Calculation Agent on the basis of the mid-market
semi-annual swap rate quotations provided by the five leading swaps dealers in the
New York City interbank market (which may include Dealers and their affiliates), and
for this purpose, “mid-market semi-annual swap rate” means the arithmetic mean of
the bid and offered rate quotations for the semi-annual fixed leg, calculated on a
30/360 day count basis, of a fixed-for-floating United States dollars denominated
interest rate swap transaction with the applicable Index Currency and Index
Maturity, as specified in the applicable Supplemental Agreement for the Debt
Securities, commencing on the Reset Date for the relevant Interest Period, and for a
relevant representative amount in the relevant market at the relevant time, with an
acknowledged dealer of good credit in the swap market, where the floating leg,
calculated on an Actual/360 day count basis, is equivalent to USD-LIBOR-BBA (as
defined in the 2006 ISDA Definitions published by the International Swaps and
Derivatives Association,

23

 

Inc.) with a designated maturity of three months. The Calculation Agent will
request the principal New York City office of each of the five leading swaps dealers
selected by the Calculation Agent to provide a quotation of its rate. If at least
five quotations are provided, the rate for that CMS Determination Date will be the
arithmetic mean of the quotations, eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest);

(3) if two, three or four (and not five) of such swaps dealers are quoting as
described in clause (2) above, then the CMS Rate will be based on the arithmetic
mean of the bid prices obtained and neither the highest nor lowest of such
quotations will be eliminated; and

(4) if fewer than two rate quotations are provided, then the CMS Rate for the Reset
Date will be the CMS Rate in effect on the preceding Reset Date, or if the
applicable Reset Date is the first Reset Date, the rate of interest payable for the
new Interest Reset Period will be the initial interest rate.

     (O) If the applicable Supplemental Agreement specifies the Federal Funds Rate (Daily) as the
applicable Index for determining the rate of interest for the related Variable Rate, the following
provisions shall apply:

     The “Federal Funds Rate (Daily)” means, with respect to any Reset Date:

(1) the rate for the Business Day preceding the Federal Funds Rate (Daily)
Determination Date for U.S. dollar federal funds, as published in the latest
H.15Daily Update opposite the caption “Federal funds (effective)”;

(2) if the rate specified in clause (1) is not published by 5:00 p.m., New York City
Time, on the Federal Funds Rate (Daily) Determination Date, the Federal Funds Rate
(Daily) will be the rate for that Fed Funds Rate (Daily) Determination Date as
published in the H.15 Daily Update, or other recognized electronic source used for
the purpose of displaying the applicable rate, opposite the caption “Federal funds
(effective)”;

(3) if the rate specified in clause (2) is not published by 5:00 p.m., New York City
time, on the Federal Funds Rate Determination Date, then the Calculation Agent will
request five leading brokers (which may include the related Dealers or their
affiliates) of federal funds transactions in the City of New York selected by the
Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not then
acting as Calculation Agent) each to provide a quotation of the broker’s effective
rate for transactions in overnight federal funds arranged by the broker settling on
the Business Day preceding the Federal Funds Rate (Daily) Determination Date. If at
least two quotations are provided, then the Federal Funds Rate (Daily) will be the
arithmetic mean determined by the Calculation Agent of the quotations obtained (and,
if five quotations are provided, eliminating the highest quotation (or, in the event
of equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest));

24

 

(4) if fewer than two quotations are so provided pursuant to clause (3) above, then
the Calculation Agent will request five leading brokers (which may include the
related Dealers or their affiliates) of federal funds transactions in the City of
New York selected by the Calculation Agent (after consultation with Freddie Mac, if
Freddie Mac is not then acting as Calculation Agent) each to provide a quotation of
the broker’s rates for the last transaction in overnight federal funds arranged by
the broker as of 11:00 a.m., New York City time, on the Business Day preceding the
Federal Funds Rate (Daily) Determination Date. If at least two quotations are
provided, then the Federal Funds Rate (Daily) will be the arithmetic mean determined
by the Calculation Agent of the quotations obtained (and, if five quotations are
provided, eliminating the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one of the
lowest)); and

(5) if fewer than two quotations are so provided pursuant to clause (4) above, then
the Federal Funds Rate (Daily) as of such Federal Funds Rate (Daily) Determination
Date will be the Federal Funds Rate (Daily) determined for the immediately preceding
Reset Date. If the applicable Reset Date is the first Reset Date, then the rate of
interest payable for the new Interest Rate Period will be the initial interest rate.

     (P) If the applicable Supplemental Agreement specifies the Federal Funds Rate (Weekly Average)
as the applicable Index for determining the rate of interest for the related Variable Rate, the
following provisions shall apply:

     The “Federal Funds Rate (Weekly Average)” means, with respect to any Reset Date:

(1) the most recent rate published in the latest H.15(519) available by 5:00 p.m.,
New York City time, on the Reset Date, opposite the caption “Federal funds
(effective)” and under the caption “Week Ending” for the Friday immediately
preceding the Reset Date. (As described in the footnotes to the H.15(519), the rate
shown for the week ending on a Friday preceding a Reset Date actually will be the
rate for the week ending on (and including) the Wednesday preceding the Reset Date
(the “Seven-Day Period”));

(2) if a rate is not so published pursuant to clause (1) above, then the Federal
Funds Rate (Weekly Average) will be the arithmetic mean determined by the
Calculation Agent of the rate, determined in the manner described in subclauses (y)
and (z) below (as applicable), for each day in the Seven-Day Period (each a “Day
Rate”); provided, that the Calculation Agent determines a Day Rate for each day in
the Seven-Day Period;

(y) The Day Rate for a Business Day will be the rate that is published, by
5:00 p.m., New York City time, on the Reset Date, in the H.15 Daily Update
or other recognized electronic source used for the purpose of displaying the
applicable rate, opposite the caption “Federal funds

25

 

(effective)” for that Business Day. If a rate for that Business Day does not
appear on H.15 Daily Update by 5:00 p.m., New York City time, on the Reset
Date, the Calculation Agent will request five leading brokers (which may
include the related Dealers or their affiliates) of federal funds
transactions in the City of New York selected by the Calculation Agent
(after consultation with Freddie Mac, if Freddie Mac is not then acting as
Calculation Agent) each to provide a quotation of the broker’s rate for the
last transaction in overnight federal funds arranged by the broker as of
11:00 a.m. on that Business Day. If at least two quotations are provided,
then the Day Rate will be the arithmetic mean determined by the Calculation
Agent of the quotations obtained (and, if five quotations are provided,
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)); and

(z) The Day Rate for a day other than a Business Day will be the rate for
the preceding Business Day, whether or not the Business Day falls within the
relevant Seven-Day Period, determined in accordance with the provisions of
subclause (y) above; and

(3) if the Day Rate for each day in the Seven-Day Period is not so determined
pursuant to either clause (1) or (2) above, then the Federal Funds Rate (Weekly
Average) as of such Reset Date will be the Federal Funds Rate (Weekly Average)
determined for the immediately preceding Reset Date. If the applicable Reset Date is
the first Reset Date, then the rate of interest payable for the new Interest Reset
Period will be the initial interest rate.

     (j) Fixed/Variable Rate Debt Securities

     Fixed/Variable Rate Debt Securities shall bear interest at a single fixed rate for one or more
specified periods and at a rate determined by reference to one or more Indices, or otherwise, for
one or more other specified periods. Fixed/Variable Rate Debt Securities also may bear interest at
a rate that Freddie Mac may elect to convert from a fixed rate to a variable rate or from a
variable rate to a fixed rate, if so provided in the applicable Supplemental Agreement.

     If Freddie Mac may convert the interest rate on a Fixed/Variable Rate Debt Security from a
fixed rate to a variable rate, or from a variable rate to a fixed rate, accrued interest for each
Interest Payment Period may be calculated using an accrued interest factor in the manner described
in Section 2.07(i)(E).

     (k) Zero Coupon Debt Securities

     Zero Coupon Debt Securities shall not bear interest.

     (l) Amortizing Debt Securities

     Amortizing Debt Securities are those on which Freddie Mac makes periodic payments of principal
during the terms of such Debt Securities as described in the related Supplemental Agreement.

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     (m) Debt Securities with Variable Principal Repayment Amounts

     Variable Principal Repayment Amount Debt Securities are those on which the amount of principal
payable is determined with reference to an Index specified in the related Supplemental Agreement.

     (n) Range Accrual Debt Securities

     Range Accrual Debt Securities are those on which no interest may accrue during periods when
the applicable index is outside a specified range as described in the related Supplemental
Agreement.

     (o) Extendible Variable Rate Debt Securities

     Extendible Variable Rate Debt Securities” are those, the maturity of which may be extended a
Beneficial Owner’s option effective as of specified dates, subject to a final maturity date, and
that bear interest at variable rates subject to different Spreads for different specified periods.

     Section 2.08. Business Day Convention.

     Unless otherwise specified in the applicable Supplemental Agreement, in any case in which an
Interest Payment Date or Principal Payment Date is not a Business Day, payment of any interest on
or the principal of the Debt Securities shall not be made on such date but shall be made on the
next Business Day with the same force and effect as if made on such Interest Payment Date or
Principal Payment Date, as the case may be. Unless otherwise provided in the applicable
Supplemental Agreement, no interest on such payment shall accrue for the period from and after such
Interest Payment Date or Principal Payment Date, as the case may be, to the actual date of such
payment.

     Section 2.09. Targeted Registered Issues.

     Any Debt Securities that are Targeted Registered Debt Securities shall be considered to be
“targeted to foreign markets” as provided under Treasury Department regulations.

     Section 2.10. Reopened Issues and Repurchases.

     Freddie Mac reserves the right, in its discretion and at any time, to offer additional Debt
Securities which have the same terms (other than Issue Date, interest commencement date and issue
price) and conditions as Debt Securities for which settlement has previously occurred or been
scheduled so as to form a single series of Debt Securities as specified in the applicable
Supplemental Agreement.

     Freddie Mac reserves the right, in its discretion and at any time, to purchase Debt Securities
or otherwise acquire (either for cash or in exchange for securities) some or all of an issue of
Debt Securities at any price or prices in the open market or otherwise. Such Debt Securities may
be held, resold or canceled by Freddie Mac.

ARTICLE III

Form; Clearance and Settlement Procedures

     Section 3.01. Form of Fed Book-Entry Debt Securities.

     (a) General

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     Fed Book-Entry Debt Securities shall be issued and maintained only on the Fed Book-Entry
System. Fed Book-Entry Debt Securities shall not be exchangeable for definitive Debt Securities.
The Book-Entry Rules are applicable to Fed Book-Entry Debt Securities.

     (b) Title

     Fed Book-Entry Debt Securities shall be held of record only by Holding Institutions. Such
entities whose names appear on the book-entry records of a Federal Reserve Bank as the entities to
whose accounts Fed Book-Entry Debt Securities have been deposited shall be the Holders of such Fed
Book-Entry Debt Securities. The rights of the Beneficial Owner of a Fed Book-Entry Debt Security
with respect to Freddie Mac and the Federal Reserve Banks may be exercised only through the Holder
of the Fed Book-Entry Debt Security. Freddie Mac and the Federal Reserve Banks shall have no
direct obligation to a Beneficial Owner of a Fed Book-Entry Debt Security that is not also the
Holder of the Fed Book-Entry Debt Security. The Federal Reserve Banks shall act only upon the
instructions of the Holder in recording transfers of a Debt Security maintained on the Fed
Book-Entry System. Freddie Mac and the Federal Reserve Banks may treat the Holders as the absolute
owners of Fed Book-Entry Debt Securities for the purpose of making payments in respect thereof and
for all other purposes, whether or not such Fed Book-Entry Debt Securities shall be overdue and
notwithstanding any notice to the contrary.

     The Holders and each other financial intermediary holding such Fed Book-Entry Debt Securities
directly or indirectly on behalf of the Beneficial Owners shall have the responsibility of
remitting payments for the accounts of their customers. All payments on Fed Book-Entry Debt
Securities shall be subject to any applicable law or regulation.

     (c) Fiscal Agent

     The FRBNY shall be the Fiscal Agent for Fed Book-Entry Debt Securities.

     In acting under the Fiscal Agency Agreement, the FRBNY shall act solely as Fiscal Agent of
Freddie Mac and does not assume any obligation or relationship of agency or trust for or with any
Holder of a Fed Book-Entry Debt Security.

     Section 3.02. Form of Registered Debt Securities.

     (a) General

     As specified in the applicable Supplemental Agreement, Registered Debt Securities shall be
deposited with (i) a custodian for, and registered in the name of a nominee of, DTC, or (ii) a
Common Depositary, and registered in the name of such Common Depositary or a nominee of such Common
Depositary.

     (b) Title

     The person in whose name a Registered Debt Security is registered in the Register shall be the
Holder of such Registered Debt Security. Beneficial interests in a Registered Debt Security shall
be represented, and transfers thereof shall be effected, only through book-entry accounts of
financial institutions acting on behalf of the Beneficial Owners of such Registered Debt Security,
as a direct or indirect participant in the applicable clearing system for such Registered Debt
Security.

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     Freddie Mac, the Global Agent and the Registrar may treat the Holders as the absolute owners
of Registered Debt Securities for the purpose of making payments and for all other purposes,
whether or not such Registered Debt Securities shall be overdue and notwithstanding any notice to
the contrary. Owners of beneficial interests in a Registered Debt Security shall not be considered
by Freddie Mac, the Global Agent or the Registrar as the owner or Holder of such Registered Debt
Security and, except as provided in Section 4.02(a), shall not be entitled to have Debt Securities
registered in their names and shall not receive or be entitled to receive definitive Debt
Securities. Any Beneficial Owner shall rely on the procedures of the applicable clearing system
and, if such Beneficial Owner is not a participant therein, on the procedures of the participant
through which such Beneficial Owner holds its interest, to exercise any rights of a Holder of such
Registered Debt Securities.

     Payments by DTC participants to Beneficial Owners of DTC Registered Debt Securities held
through DTC participants shall be the responsibility of such participants. Payments with respect
to Other Registered Debt Securities held through Euroclear, Clearstream, Luxembourg or any other
applicable clearing system shall be credited to Euroclear participants, Clearstream, Luxembourg
participants or participants of any other applicable clearing system in accordance with the
relevant system’s rules and procedures.

     (c) Global Agent

     In acting under the Global Agency Agreement, the Global Agent acts solely as a fiscal agent of
Freddie Mac and does not assume any obligation or relationship of agency or trust for or with any
Holder of a Registered Debt Security, except that any moneys held by the Global Agent for payment
on a Registered Debt Security shall be held in trust for the Holder as provided in the Global
Agency Agreement.

     (d) Registrar

     In acting under the Global Agency Agreement, the Registrar does not assume any obligation or
relationship of agency or trust for, or with, any Holder of a Registered Debt Security.

     Section 3.03. Clearance and Settlement Procedures.

     (a) General

     Unless otherwise provided in the applicable Supplemental Agreement:

(i) Most Debt Securities denominated and payable in U.S. dollars and distributed within the
United States shall clear and settle through the Fed Book-Entry System.

(ii) Most Debt Securities denominated and payable in U.S. dollars and distributed
simultaneously within and outside of the United States, including all Reference Securities,
shall clear and settle, within the United States, through the Fed Book-Entry System and,
outside of the United States, through the systems operated by Euroclear, Clearstream,
Luxembourg and/or any other designated clearing system.

(iii) Debt Securities denominated or payable in a Specified Currency other than U.S. dollars
(and Debt Securities denominated and payable in U.S. dollars that are not cleared and
settled in accordance with clauses (i) and (ii) above) and distributed solely within the
United States shall clear and settle through the system operated by DTC.

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(iv) Debt Securities denominated or payable in a Specified Currency other than U.S. dollars
(and Debt Securities denominated and payable in U.S. dollars that are not cleared and
settled in accordance with clauses (i) and (ii) above) and distributed simultaneously within
and outside of the United States shall clear and settle through the systems operated by DTC,
Euroclear, Clearstream, Luxembourg and/or any other designated clearing system.

(v) Debt Securities, irrespective of the Specified Currency in which such Debt Securities
are denominated or payable, distributed solely outside of the United States shall clear and
settle through the systems operated by Euroclear, Clearstream, Luxembourg and/or any other
designated clearing system or, in certain cases, DTC.

     (b) Primary Distribution

(i) General. On initial issue, Debt Securities shall be credited through one or more of the
systems specified below or any other system specified in the applicable Supplemental
Agreement.

(ii) Federal Reserve Banks. Fed Book-Entry Debt Securities shall be issued and settled
through the Fed-Book-Entry System in same-day funds and shall be held by designated Holding
Institutions. After initial issue, all Fed Book-Entry Debt Securities shall continue to be
held by such Holding Institutions in the Fed Book-Entry System unless arrangements are made
for the transfer thereof to another Holding Institution. Fed Book-Entry Debt Securities
shall not be exchangeable for definitive Debt Securities.

(iii) DTC. DTC participants acting on behalf of investors holding DTC Registered Debt
Securities through DTC shall follow the delivery practices applicable to securities eligible
for DTC’s Same-Day Funds Settlement System. DTC Registered Debt Securities shall be
credited to DTC participants’ securities accounts following confirmation of receipt of
payment to Freddie Mac on the relevant Issue Date.

(iv) Euroclear and Clearstream, Luxembourg. Investors holding Other Registered Debt
Securities through Euroclear, Clearstream, Luxembourg or such other clearing system shall
follow the settlement procedures applicable to conventional Eurobonds in registered form.
Such Other Registered Debt Securities shall be credited to Euroclear, Clearstream,
Luxembourg or such other clearing system participants’ securities accounts either on the
relevant Issue Date or on the settlement day following the relevant Issue Date against
payment in same-day funds (for value on the relevant Issue Date).

     (c) Secondary Market Transfers

(i) Fed Book-Entry Debt Securities. Transfers of Fed Book-Entry Debt Securities shall take
place only in book-entry form on the Fed Book-Entry System. Such transfers shall occur
between Holding Institutions in accordance with the rules of the Fed Book-Entry System.

(ii) Registered Debt Securities. Transfers of beneficial interests in Registered Debt
Securities within the various systems that may be clearing and settling interests therein
shall be made in accordance with the usual rules and operating procedures of the relevant
system applicable to the Specified Currency in which such Registered Debt Securities are
denominated or payable and the nature of the transfer.

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(iii) Freddie Mac shall not bear responsibility for the performance by any system or the
performance of the system’s respective direct or indirect participants or accountholders of
the respective obligations of such participants or account holders under the rules and
procedures governing such system’s operations.

ARTICLE IV

Payments, Exchange for Definitive Debt Securities

     Section 4.01. Payments.

     (a) Payments on Fed Book-Entry Debt Securities

     Payments of principal of and any interest on Fed Book-Entry Debt Securities shall be made in
U.S. dollars (except as otherwise provided in the applicable Supplemental Agreement) on the
applicable payment dates to Holders thereof as of the end of the Business Day preceding each such
payment date. Payments on Fed Book-Entry Debt Securities shall be made by credit of the payment
amount to the Holders’ accounts at the relevant Federal Reserve Bank. All payments to or upon the
order of a Holder shall be valid and effective to discharge the liability of Freddie Mac in respect
of the related Fed Book-Entry Debt Securities.

     (b) Payments on Registered Debt Securities

(i) Payments in respect of Registered Debt Securities shall be made to DTC, Euroclear,
Clearstream, Luxembourg or any other applicable clearing system, or their respective
nominees, as the case may be, as the Holders thereof. Except as provided in Section 2.03(c)
and Article VII hereof, such payments shall be made in the Specified Payment Currency. All
payments to or upon the order of the Holder of a Registered Debt Security shall be valid and
effective to discharge the liability of Freddie Mac in respect of such Registered Debt
Security. Ownership positions within each system shall be determined in accordance with the
normal conventions observed by such system. Freddie Mac, the Global Agent and the Registrar
shall not have any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Registered Debt Security or
for maintaining, supervising or reviewing any records relating to such beneficial ownership
interests.

(ii) Interest on a Registered Debt Security shall be paid on the applicable Interest Payment
Date. Such interest payment shall be made to the Holder of such Registered Debt Security as
of the close of business on the related Record Date. The first payment of interest on any
Registered Debt Security originally issued between a Record Date and the related Interest
Payment Date shall be made on the Interest Payment Date following the next Record Date to
the Holder on such next Record Date. The principal of each Registered Debt Security,
together with accrued and unpaid interest thereon, shall be paid to the Holder thereof
against presentation and surrender of such Registered Debt Security.

(iii) All payments on Registered Debt Securities are subject to any applicable law or
regulation. If a payment outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions, payments in respect of the related
Registered Debt Securities shall be made at the office of any paying agent in the United
States.

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     Section 4.02. Exchange for Definitive Debt Securities.

     In the event that Freddie Mac issues definitive Debt Securities in exchange for Registered
Debt Securities issued in global form, such definitive Debt Securities shall have terms identical
to the Registered Debt Securities for which they were exchanged except as described below.

     (a) Issuance of Definitive Debt Securities

     Unless otherwise provided in the applicable Supplemental Agreement, beneficial interests in
Registered Debt Securities issued in global form shall be subject to exchange for definitive Debt
Securities only if such exchange is permitted by applicable law and (i) in the case of a DTC
Registered Debt Security, DTC notifies Freddie Mac that it is no longer willing or able to
discharge properly its responsibilities as depositary with respect to such DTC Registered Debt
Security, or ceases to be a “clearing agency” registered under the Securities Exchange Act of 1934
(if so required), or is at any time no longer eligible to act as such, and in each case Freddie Mac
is unable to locate a successor within 90 calendar days of receiving notice of such ineligibility
on the part of DTC; (ii) in the case of any Other Registered Debt Security, if all of the systems
through which it is cleared or settled are closed for business for a continuous period of 14
calendar days (other than by reason of holidays, statutory or otherwise) or are permanently closed
for business or have announced an intention permanently to cease business and in any such
situations Freddie Mac is unable to locate a single successor within 90 calendar days of such
closure; (iii) a Holder has instituted a judicial proceeding in a court to enforce its rights under
such Registered Debt Security and such Holder has been advised by counsel that in connection with
such proceeding it is necessary for such Holder to obtain possession of definitive Debt Securities;
(iv) Freddie Mac (at its discretion), upon the request of a Holder and at such Holder’s expense,
elects to issue definitive Debt Securities; or (v) Freddie Mac (at its discretion) elects to issue
definitive Debt Securities. In such circumstances, Freddie Mac shall cause sufficient definitive
Debt Securities to be executed and delivered as soon as practicable (and in any event within 45
calendar days of Freddie Mac’s receiving notice of the occurrence of such circumstances) to the
Global Agent or its agent for completion, authentication and delivery to the relevant registered
holders of such definitive Debt Securities. A person having an interest in a DTC Registered Debt
Security or Other Registered Debt Security issued in global form shall provide Freddie Mac or the
Global Agent with a written order containing instructions and such other information as Freddie Mac
or the Global Agent may require to complete, execute and deliver such definitive Debt Securities in
authorized denominations.

     (b) Title

     The person in whose name a definitive Debt Security is registered in the Register shall be the
“Holder” of such definitive Debt Security. Freddie Mac, the Global Agent and the Registrar may
treat the Holders as the absolute owners of definitive Debt Securities for the purpose of making
payments and for all other purposes, whether or not such definitive Debt Securities shall be
overdue and notwithstanding any notice to the contrary.

     (c) Payments

     Interest on a definitive Debt Security shall be paid on the applicable Interest Payment Date.
Such interest payments shall be made by check mailed to the Holder thereof at the close of business
on the Record Date preceding such Interest Payment Date at such Holder’s address appearing in the
Register. The principal of each definitive Debt Security, together with accrued

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and unpaid interest thereon, shall be due on the Principal Payment Date (subject to the right
of the Holder thereof on the related Record Date to receive interest due on an Interest Payment
Date that is on or prior to such Principal Payment Date) and shall be paid against presentation and
surrender of such definitive Debt Security at the offices of the Global Agent or other paying
agent. Payments on the Principal Payment Date shall be made by check provided at the appropriate
office of the Global Agent or other paying agent or mailed by the Global Agent to the Holder of
such definitive Debt Security. U.S. dollar checks shall be drawn on a bank in the United States.
Checks in a Specified Payment Currency other than U.S. dollars shall be drawn on a bank office
located outside the United States.

     Notwithstanding the provisions described in the preceding paragraph relating to payments by
check, the Holder of an aggregate principal amount of at least $10,000,000 of an issue of Debt
Securities of which definitive Debt Securities form a part (or, in the case of a definitive Debt
Security denominated in a Specified Currency other than U.S. dollars, the Specified Currency
equivalent of at least $10,000,000) may elect to receive payments thereon by wire transfer of
immediately available funds in the Specified Payment Currency to an account in such Specified
Payment Currency with a bank designated by such Holder that is acceptable to Freddie Mac; provided,
that such bank has appropriate facilities therefor and accepts such transfer and such transfer is
permitted by any applicable law or regulation and will not subject Freddie Mac to any liability,
requirement or unacceptable charge. In order for such Holder to receive such payments, the
relevant paying agent (including the Global Agent) must receive at its office from such Holder (i)
in the case of payments on an Interest Payment Date, a written request therefor not later than the
close of business on the related Record Date; or (ii) in the case of payments on the Principal
Payment Date, a written request therefor not later than the close of business on the date 15 days
prior to such Principal Payment Date and the related definitive Debt Security not later than two
Business Days prior to such Principal Payment Date. Such written request must be delivered to the
relevant paying agent (including the Global Agent) by mail, by hand delivery or by tested or
authenticated telex. Any such request shall remain in effect until the relevant paying agent
receives written notice to the contrary.

     All payments on definitive Debt Securities shall be subject to any applicable law or
regulation. If a payment outside the United States is illegal or effectively precluded by exchange
controls or similar restrictions, payments in respect of the related definitive Debt Securities may
be made at the office of any paying agent in the United States.

     (d) Partial Redemption

     Definitive Debt Securities subject to redemption in part by Freddie Mac shall be selected by
the Global Agent by lot or in such other manner as the Global Agent deems fair and appropriate,
subject to the requirement that the principal amount of each outstanding definitive Debt Security
after such redemption is in an authorized denomination.

     (e) Transfer and Exchange

     Definitive Debt Securities shall be presented for registration of transfer or exchange (with
the form of transfer included thereon properly endorsed, or accompanied by a written instrument of
transfer, with such evidence of due authorization and guaranty of signature as may be required by
the Registrar, duly executed) at the office of the Registrar or any other transfer agent upon
payment of any taxes and other governmental charges and other amounts, but without payment

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of any service charge to the Registrar or such transfer agent for such transfer or exchange.
A transfer or exchange shall not be effective unless, and until, recorded in the Register.

     A transfer or exchange of a definitive Debt Security shall be effected upon satisfying the
Registrar with regard to the documents and identity of the person making the request and subject to
such reasonable regulations as Freddie Mac may from time to time agree with the Registrar. Such
documents may include forms prescribed by U.S. tax authorities to establish the applicability of,
or the exemption from, withholding or other taxes regarding the transferee Holder. Definitive Debt
Securities may be transferred or exchanged in whole or in part only in the authorized denominations
of the DTC Registered Debt Securities or Other Registered Debt Securities issued in global form for
which they were exchanged. In the case of a transfer of a definitive Debt Security in part, a new
definitive Debt Security in respect of the balance not transferred shall be issued to the
transferor. In addition, replacement of mutilated, destroyed, stolen or lost definitive Debt
Securities also is subject to the conditions discussed above with respect to transfers and
exchanges generally. Each new definitive Debt Security to be issued upon transfer of such a
definitive Debt Security, as well as the definitive Debt Security issued in respect of the balance
not transferred, shall be mailed to such address as may be specified in the form or instrument of
transfer at the risk of the Holder entitled thereto in accordance with the customary procedures of
the Registrar.

ARTICLE V

Secured Debt Securities

     If so provided in the applicable Supplemental Agreement, the indebtedness represented by
certain Debt Securities shall be secured obligations of Freddie Mac. In such event, the
description of the security interest and the terms of the grant of the security interest shall be
set forth in the applicable Supplemental Agreement.

ARTICLE VI

Currency Conversions

     Section 6.01. Currency Conversions for DTC Registered Debt Securities.

     (a) In the case of DTC Registered Debt Securities whose Specified Payment Currency is other
than U.S. dollars, the Currency Exchange Bank specified in the applicable Supplemental Agreement,
for Holders of such DTC Registered Debt Securities, shall convert any amounts paid by Freddie Mac
in such Specified Payment Currency into U.S. dollars, unless such Holders elect to receive payments
in such Specified Payment Currency as hereinafter described. Freddie Mac shall have no
responsibility for the conversion of the Specified Payment Currency for such DTC Registered Debt
Securities into U.S. dollars.

     (b) The U.S. dollar amount to be received by a Holder of a DTC Registered Debt Security in
respect of which payments are to be converted from the Specified Payment Currency into U.S. dollars
shall be determined by the Currency Exchange Bank in the morning of the day that would be
considered the date for “spot” settlement of the Specified Payment Currency on the applicable
payment date in accordance with market convention (generally two New York business days prior to
such payment date) at the market rate determined by the Currency Exchange Bank to accomplish the
conversion on such payment date of the aggregate amount of the Specified Payment Currency payable
in respect of DTC Registered Debt Securities scheduled to receive payments converted into U.S.
dollars. All currency exchange costs shall be borne by

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the Holders of such DTC Registered Debt Securities (and, accordingly, by the related
Beneficial Owners) by deductions from such payments. In the event all or any portion of a
Specified Payment Currency is not convertible into U.S. dollars, Holders of such DTC Registered
Debt Securities shall receive payment in the Specified Payment Currency.

     (c) A Holder of a DTC Registered Debt Security to be paid in a Specified Payment Currency
other than U.S. dollars shall have the option to receive payments of the principal of and any
interest on such DTC Registered Debt Security in the Specified Payment Currency by notifying DTC no
later than the third New York business day after the related Record Date, in the case of payments
on an Interest Payment Date, or the date 12 days prior to the Principal Payment Date, in the case
of payments on the Principal Payment Date.

ARTICLE VII

Events of Default and Remedies

     Section 7.01. Events of Default.

     (a) An “Event of Default” with respect to a specific issue of Debt Securities shall consist of
(i) any failure by Freddie Mac to pay to Holders of such Debt Securities any required payment that
continues unremedied for 30 days; (ii) any failure by Freddie Mac to perform in any material
respect any other covenant or agreement in this Agreement, which failure continues unremedied for
60 days after the giving of notice of such failure to Freddie Mac by the Holders of not less than
25% of the outstanding principal amount (or notional principal amount) of such Debt Securities;
(iii) a court having jurisdiction in the premises shall enter a decree or order for relief in
respect of Freddie Mac in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, or
sequestrator (or other similar official) of Freddie Mac or for all or substantially all of its
property, or order the winding up or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or (iv) Freddie Mac shall
commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, or sequestrator (or other similar official) of Freddie
Mac or any substantial part of its property, or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due.

     The appointment of a conservator (or other similar official) by a regulator having
jurisdiction over Freddie Mac, whether or not Freddie Mac consents to such appointment, will not
constitute an Event of Default. Any payment made in U.S. dollars or in euros as provided under
Section 2.03(c)(i) shall not constitute an Event of Default.

     (b) Any event associated with EMU (an “EMU Event”) shall not give rise to an Event of Default.
An EMU Event may include, without limitation, each (and any combination) of (i) the fixing of
exchange rates between the currency of a member state of the European Union and euros or between
the currencies of member states of the European Union; (ii) the introduction of euros as lawful
currency in a member state of the European Union; or (iii) the disappearance or replacement of a
relevant rate option or other price source for the national currency of any member state of the
European Union, or the failure of the agreed sponsor (or a successor sponsor) to publish or display
a relevant rate, index, price, page or screen.

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     Section 7.02. Rights Upon Event of Default.

     (a) As long as an Event of Default under this Agreement remains unremedied, Holders of not
less than 50% of the outstanding principal amount (or notional principal amount) of an issue of
Debt Securities to which such Event of Default relates may, by written notice to Freddie Mac,
declare such Debt Securities due and payable and accelerate the maturity of such Debt Securities.
Upon such acceleration, the principal amount of such Debt Securities and the interest accrued
thereon shall be due and payable.

     (b) No Holder has any right under this Agreement to institute any action or proceeding at law
or in equity or in bankruptcy or otherwise, or for the appointment of a receiver or trustee, or for
any other remedy, unless (i) such Holder previously has given to Freddie Mac written notice of an
Event of Default and of the continuance thereof; (ii) the Holders of not less than 50% of the
outstanding principal amount (or notional principal amount) of an issue of Debt Securities to which
such Event of Default relates have given written notice to Freddie Mac of such Event of Default;
and (iii) such Event of Default continues uncured for a period of 60 days following such notice.
No Holder of an issue of Debt Securities has any right in any manner whatsoever by virtue of or by
availing itself of any provision of this Agreement to affect, disturb or prejudice the rights of
any other such Holder, or to obtain or seek to obtain preference or priority over any other such
Holder or to enforce any right under this Agreement, except in the manner provided in this
Agreement and for the ratable and common benefit of all such Holders..

     (c) Prior to or after the institution of any action or proceeding relating to an issue of Debt
Securities, the Holders of not less than 50% of the outstanding principal amount (or notional
principal amount) of such Debt Securities may waive an Event of Default, whether or not it has
resulted in a declaration of an acceleration of the maturity of such Debt Securities, and may
rescind and annul any previously declared acceleration.

     (d) Whenever in this Agreement it is provided that the Holders of a specified percentage in
outstanding principal amount (or notional principal amount) of an issue of Debt Securities may take
any action (including the making of any demand or request, or the giving of any authorization,
notice, consent or waiver), the fact that at the time of taking any such action the Holders of such
specified percentage have joined therein may be evidenced by a writing, or any number of writings
of similar tenor, executed by Holders in person, or by an agent or proxy appointed in writing.

ARTICLE VIII

Miscellaneous Provisions

     Section 8.01. Limitations on Liability of Freddie Mac and Others.

     Neither Freddie Mac nor any of its directors, officers, employees or agents shall be under any
liability to the Holders or Beneficial Owners for any action taken, or not taken, by them in good
faith under this Agreement or for errors in judgment. This provision will not protect Freddie Mac
or any other related person against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence or by reason of reckless disregard of
obligations and duties under this Agreement. Freddie Mac and such related persons shall have no
liability of whatever nature for special, indirect or consequential damages, lost profits or
business, or any other liability or claim (other than for direct damages), even if reasonably

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foreseeable or Freddie Mac has been advised of the possibility of such loss, damage, liability
or claim.

     In performing its responsibilities under this Agreement, Freddie Mac may employ agents or
independent contractors. Except upon an Event of Default (as defined herein), Freddie Mac shall
not be subject to the control of Holders in any manner in the discharge of its responsibilities
pursuant to this Agreement.

     Freddie Mac shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its responsibilities under this Agreement and which in its opinion
may involve it in any expense or liability. However, Freddie Mac may in its discretion undertake
any such legal action which it may deem necessary or desirable in the interests of the Holders. In
such event, the legal expenses and costs of such action shall be expenses and costs of Freddie Mac.

     Section 8.02. Binding Effect of this Agreement.

     (a) By receiving and accepting a Debt Security, each Holder, financial intermediary and
Beneficial Owner of such Debt Security unconditionally agrees, without any signature or further
manifestation of assent, to be bound by the terms and conditions of this Agreement, as
supplemented, modified or amended pursuant to its terms.

     (b) This Agreement shall be binding upon and inure to the benefit of any successor to Freddie
Mac.

     Section 8.03. Replacement.

     Any Registered Debt Security in definitive form that becomes mutilated, destroyed, stolen or
lost shall be replaced by Freddie Mac at the expense of the Holder upon delivery to the Global
Agent of evidence of the destruction, theft or loss thereof, and an indemnity satisfactory to
Freddie Mac and the Global Agent. Upon the issuance of any substituted Registered Debt Security,
Freddie Mac or the Global Agent may require the payment by the Holder of a sum sufficient to cover
any taxes and expenses connected therewith.

     Section 8.04. Conditions to Payment, Transfer or Exchange.

     Freddie Mac, its agent or any other person potentially required to withhold with respect to
payments on a Debt Security shall have the right to require a Holder of a Debt Security, as a
condition to payment of principal of or interest on such Debt Security, or as a condition to
transfer or exchange of such Debt Security, to present at such place as Freddie Mac, its agent or
such other person shall designate a certificate in such form as Freddie Mac, its agent or such
other person may from time to time prescribe, to enable Freddie Mac, its agent or such other person
to determine its duties and liabilities with respect to (i) any taxes, assessments or governmental
charges which Freddie Mac, any Federal Reserve Bank, the Global Agent or such other person, as the
case may be, may be required to deduct or withhold from payments in respect of such Debt Security
under any present or future law of the United States or jurisdiction therein or any regulation or
interpretation of any taxing authority thereof; and (ii) any reporting or other requirements under
such laws, regulations or interpretations. Freddie Mac, its agent or such other person shall be
entitled to determine its duties and liabilities with respect to such deduction, withholding,
reporting or other requirements on the basis of information contained in such certificate or, if no
certificate shall be presented, on the basis of any presumption created by

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any such law, regulation or interpretation, and shall be entitled to act in accordance with
such determination.

     Section 8.05. Amendment.

     (a) Freddie Mac may modify, amend or supplement this Agreement and the terms of an issue of
Debt Securities, without the consent of the Holders or Beneficial Owners, (i) to cure any
ambiguity, or to correct or supplement any defective provision or to make any other provision with
respect to matters or questions arising under this Agreement or the terms of any Debt Security that
are not inconsistent with any other provision of this Agreement or the Debt Security; (ii) to add
to the covenants of Freddie Mac for the benefit of the Holders or surrender any right or power
conferred upon Freddie Mac; (iii) to evidence the succession of another entity to Freddie Mac and
its assumption of the covenants of Freddie Mac; (iv) to conform the terms of an issue of Debt
Securities or cure any ambiguity or discrepancy resulting from any changes in the Book-Entry Rules
or any regulation or document that are applicable to book-entry securities of Freddie Mac; (v) to
increase the amount of an issue of Debt Securities as contemplated under Section 2.07; or (vi) in
any other manner that Freddie Mac may determine and that will not adversely affect in any material
respect the interests of Holders or Beneficial Owners at the time of such modification, amendment
or supplement.

     (b) In addition, either (i) with the written consent of the Holders of at least a majority of
the aggregate then outstanding principal amount or notional principal amount of an issue of Debt
Securities affected thereby, excluding any such Debt Securities owned by Freddie Mac; or (ii) by
the adoption of a resolution at a meeting of Holders at which a quorum is present, by the Holders
of at least a majority of the aggregate then outstanding principal amount or notional principal
amount of an issue of Debt Securities represented at such meeting, excluding any such Debt
Securities owned by Freddie Mac, Freddie Mac may from time to time and at any time modify, amend or
supplement the terms of an issue of Debt Securities for the purpose of adding any provisions to or
changing in any manner or eliminating any provisions of such Debt Securities or modifying in any
manner the rights of the Holders; provided, however, that no such modification, amendment or
supplement may, without the written consent or affirmative vote of each Holder of a Debt Security;
(A) change the Maturity Date or any Interest Payment Date of such Debt Security; (B) materially
modify the redemption or repayment provisions, if any, relating to the redemption or repayment
price of, or any redemption or repayment date or period for, such Debt Security; (C) reduce the
principal amount of, delay the principal payment of, or materially modify the rate of interest or
the calculation of the rate of interest on, such Debt Security; (D) in the case of Registered Debt
Securities only, change the Specified Payment Currency of such Registered Debt Security; or (E)
reduce the percentage of Holders whose consent or affirmative vote is necessary to modify, amend or
supplement the terms of the relevant issue of Debt Securities. A quorum at any meeting of Holders
called to adopt a resolution shall be Holders entitled to vote a majority of the then aggregate
outstanding principal amount or notional principal amount of an issue of such Debt Securities
called to such meeting and, at any reconvened meeting adjourned for lack of a quorum, 25% of the
then aggregate outstanding principal amount or notional principal amount of such issue of Debt
Securities, in both cases excluding any such Debt Securities owned by Freddie Mac. It shall not be
necessary for the Holders to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent or resolution approves the substance of such change. If any
modification, amendment or supplement of the terms of an issue of Debt Securities that have

38

 

been separated into Interest and Principal Components requires the consent of Holders, only
the Holders of the Principal Components will be entitled to give or withhold that consent. Holders
of Interest Components will have no right to give or withhold such consent.

     (c) The “principal amount,” for purposes of the preceding paragraph, for a Debt Security that
is a Zero Coupon Debt Security or for a Debt Security issued at an “issue price” of 80% or less of
its principal amount will be equal to (i) the issue price of such Debt Security; plus (ii) the
original issue discount that has accrued from the Issue Date of such Debt Security to the OID
Determination Date; minus (iii) any amount considered as part of the “stated redemption price at
maturity” of such Debt Security that has been paid from the Issue Date of such Debt Security to the
OID Determination Date.

     The “principal amount,” for purposes of the second preceding paragraph, of a Debt Security
whose Specified Principal Currency is other than U.S. dollars will be the U.S. dollar equivalent,
determined on the Issue Date, of the principal amount (or, in the case of the Debt Securities
referred to in the preceding paragraph, the amount determined in accordance with the provisions
described in such preceding paragraph) of such Debt Security. The “principal amount” of a Debt
Security with principal determined by reference to an Index will be described in the applicable
Supplemental Agreement.

     (d) Freddie Mac may establish a record date for the determination of Holders entitled to vote
at any meeting of Holders of Debt Securities, to grant any consent in respect of Debt Securities
and to notice with respect to any such meeting or consent.

     (e) Any instrument given by or on behalf of any Holder of a Debt Security in connection with
any consent to any such modification, amendment or supplement shall be irrevocable once given and
shall be conclusive and binding on all subsequent Holders of such Debt Security or any Debt
Security issued, directly or indirectly, in exchange or substitution therefor, irrespective of
whether or not notation in regard thereto is made thereon. Any modification, amendment or
supplement of this Agreement or of the terms of Debt Securities shall be conclusive and binding on
all Holders of Debt Securities affected thereby, whether or not they have given such consent or
were present at any meeting (unless by the terms of this Agreement a written consent or an
affirmative vote of such Holders is required), and whether or not notation of such modification,
amendment or supplement is made upon the Debt Securities.

     Section 8.06. Securities Acquired by Freddie Mac.

     Freddie Mac may, from time to time, repurchase or otherwise acquire (either for cash or in
exchange for newly-issued Debt Securities) all or a portion of any issue of Debt Securities. Any
Debt Securities owned by Freddie Mac shall have an equal and proportionate benefit under the
provisions of this Agreement, without preference, priority or distinction as among such Debt
Securities, except that in determining whether the Holders of the required percentage of the
outstanding principal amount (or notional principal amount) of an issue of Debt Securities have
given any required demand, authorization, notice, consent or waiver under this Agreement, any Debt
Securities owned by Freddie Mac or any person directly or indirectly controlling or controlled by
or under direct or indirect common control with Freddie Mac shall be disregarded and deemed not to
be outstanding for the purpose of such determination.

     Section 8.07. Notice.

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     (a) Any notice, demand or other communication which by any provision of this Agreement is
required or permitted to be given to or served upon any Holder may be given or served in writing by
deposit thereof, postage prepaid, in the mail, addressed to such Holder as such Holder’s name and
address may appear in the records of Freddie Mac, a Federal Reserve Bank or the Registrar, as the
case may be, or, in the case of a Holder of a Fed Book-Entry Debt Security, by transmission to such
Holder through the communication system linking the Federal Reserve Banks. Such notice, demand or
other communication to or upon any Holder shall be deemed to have been sufficiently given or made,
for all purposes, upon mailing or transmission.

     (b) If and so long as an issue of Debt Securities is admitted for trading on the Euro MTF
Market and listed on the Official List of the Luxembourg Stock Exchange and the rules of the
Luxembourg Stock Exchange so require, notices with respect to such issue of Debt Securities also
shall be published in a newspaper of general circulation in Luxembourg or, if such publication is
not practical, elsewhere in Europe. Notice by publication shall be deemed to have been given on
the date of publication or, if published more than once, on the date of first publication.

     (c) Any notice, demand or other communication which by any provision of this Agreement is
required or permitted to be given to or served upon Freddie Mac shall be given in writing addressed
(until another address is published by Freddie Mac) as follows: Federal Home Loan Mortgage
Corporation, 8200 Jones Branch Drive, McLean, Virginia 22102 Attention: General Counsel and
Secretary. Such notice, demand or other communication to or upon Freddie Mac shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by Freddie Mac.

     Section 8.08. Governing Law.

     THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE HOLDERS AND FREDDIE MAC WITH RESPECT TO
THE DEBT SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED
STATES. INSOFAR AS THERE MAY BE NO APPLICABLE PRECEDENT, AND INSOFAR AS TO DO SO WOULD NOT
FRUSTRATE THE PURPOSES OF THE FREDDIE MAC ACT OR ANY PROVISION OF THIS AGREEMENT OR THE
TRANSACTIONS GOVERNED THEREBY, THE LAWS OF THE STATE OF NEW YORK SHALL BE DEEMED REFLECTIVE OF THE
LAWS OF THE UNITED STATES.

     Section 8.09. Headings.

     The Article, Section and Subsection headings are for convenience only and shall not affect the
construction of this Agreement.

FEDERAL HOME LOAN MORTGAGE CORPORATION

40

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