EX-10.1






Exhibit 10.1




EXECUTION VERSION




MASTER INVESTMENT AND CREDIT AGREEMENT




among




MAIDEN LANE III LLC,

as Company




FEDERAL RESERVE BANK OF NEW YORK,

as Controlling Party




FEDERAL RESERVE BANK OF NEW YORK,

as Senior Lender




AMERICAN INTERNATIONAL GROUP, INC.,

as Equity Investor




and




THE BANK OF NEW YORK MELLON

as Collateral Agent




Dated as of November 25, 2008





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	ARTICLE 1
	 	 	 	 
	Definitions
	 	 	 	 
	 
	 	 	 	 
	Section 1.01. Defined Terms
	 	 	4	 
	Section 1.02. Other Definitional Provisions
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 2
	 	 	 	 
	Funding Of Equity Interest
	 	 	 	 
	 
	 	 	 	 
	Section 2.01. Issuance and Purchase of Equity Interest
	 	 	16	 
	Section 2.02. Distributions with Respect to Equity Interest
	 	 	17	 
	Section 2.03. Accrual of Preferred Distributions
	 	 	17	 
	Section 2.04. Computation Of Preferred Distributions
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 3
	 	 	 	 
	Funding of Senior Loans
	 	 	 	 
	 
	 	 	 	 
	Section 3.01. Senior Loan Facility
	 	 	17	 
	Section 3.02. Repayment of Senior Loan
	 	 	18	 
	Section 3.03. Accrual of Interest
	 	 	19	 
	Section 3.04. Computation of Interest
	 	 	19	 
	Section 3.05. Contingent Interest
	 	 	19	 
	Section 3.06. Records of Indebtedness
	 	 	19	 
	 
	 	 	 	 
	ARTICLE 4
	 	 	 	 
	Reports And Calculations
	 	 	 	 
	 
	 	 	 	 
	Section 4.01. Weekly Reports
	 	 	20	 
	Section 4.02. Reset Date Notices
	 	 	20	 
	Section 4.03. Binding Effect of Weekly Reports and Reset Date Notices
	 	 	20	 
	Section 4.04. Collateral Agent Notices
	 	 	20	 
	Section 4.05. Access to Collateral Agent Records
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 5
	 	 	 	 
	payments
	 	 	 	 
	 
	 	 	 	 
	Section 5.01. Payments Generally
	 	 	21	 
	Section 5.02. Application of Proceeds
	 	 	21	 
	Section 5.03. Distribution of Amounts to Equity Investor
	 	 	23	 
	Section 5.04. Termination
	 	 	23	 






1









 






	 	 	 	 	 
	 	 	Page
	ARTICLE 6
	 	 	 	 
	Representations and Warranties
	 	 	 	 
	 
	 	 	 	 
	Section 6.01. Company’s Representations and Warranties
	 	 	24	 
	Section 6.02. Equity Investor’s Representations and Warranties
	 	 	26	 
	 
	 	 	 	 
	ARTICLE 7
	 	 	 	 
	Conditions Precedent
	 	 	 	 
	 
	 	 	 	 
	Section 7.01. Conditions to Effectiveness
	 	 	28	 
	Section 7.02. Conditions to Senior Loans and Equity Interest
	 	 	29	 
	 
	 	 	 	 
	ARTICLE 8
	 	 	 	 
	Affirmative Covenants
	 	 	 	 
	 
	 	 	 	 
	Section 8.01. GAAP Financial Statements
	 	 	30	 
	Section 8.02. Other Information
	 	 	30	 
	Section 8.03. Payment of Obligations
	 	 	31	 
	Section 8.04. Maintenance of Existence; Compliance
	 	 	31	 
	Section 8.05. Inspection of Property; Books and Records; Discussions
	 	 	31	 
	Section 8.06. Notices
	 	 	32	 
	Section 8.07. Proceeds
	 	 	32	 
	Section 8.08. Third Party Contracts
	 	 	32	 
	 
	 	 	 	 
	ARTICLE 9
	 	 	 	 
	Negative Covenants
	 	 	 	 
	 
	 	 	 	 
	Section 9.01. Indebtedness
	 	 	33	 
	Section 9.02. Liens
	 	 	33	 
	Section 9.03. Fundamental Changes
	 	 	33	 
	Section 9.04. Disposition of Property
	 	 	33	 
	Section 9.05. Restricted Payments
	 	 	33	 
	Section 9.06. Investments
	 	 	33	 
	Section 9.07. Limitations on Payments and Expenditures
	 	 	34	 
	Section 9.08. Amendments to Transaction Documents
	 	 	34	 
	Section 9.09. Limitations on Activities
	 	 	34	 
	Section 9.10. ERISA
	 	 	34	 
	Section 9.11. Accounts
	 	 	34	 
	Section 9.12. Formation of Subsidiaries
	 	 	34	 
	 
	 	 	 	 
	ARTICLE 10
	 	 	 	 
	Events of Default
	 	 	 	 
	 
	 	 	 	 
	Section 10.01. Events of Default
	 	 	34	 
	Section 10.02. Consequences Of Events Of Default
	 	 	35	 






2









 






	 	 	 	 	 
	 	 	Page
	ARTICLE 11
	 	 	 	 
	Miscellaneous
	 	 	 	 
	 
	 	 	 	 
	Section 11.01. Waivers; Amendments
	 	 	36	 
	Section 11.02. Notices; Electronic Communications
	 	 	37	 
	Section 11.03. Binding Effect
	 	 	37	 
	Section 11.04. Survival of Agreement
	 	 	37	 
	Section 11.05. Expenses; Indemnity
	 	 	38	 
	Section 11.06. Successors and Assigns; Participations and Assignments
	 	 	39	 
	Section 11.07. Equity Investor’s Last Look Rights
	 	 	41	 
	Section 11.08. Priority
	 	 	42	 
	Section 11.09. Counterparts
	 	 	44	 
	Section 11.10. Severability
	 	 	45	 
	Section 11.11. Integration
	 	 	45	 
	Section 11.12. Applicable Law
	 	 	45	 
	Section 11.13. Jurisdiction; Consent to Service of Process
	 	 	45	 
	Section 11.14. Confidentiality
	 	 	46	 
	Section 11.15. WAIVER OF JURY TRIAL
	 	 	46	 
	Section 11.16. Limited Recourse
	 	 	47	 
	Section 11.17. Certain Tax Matters 
	 	 	47	 
	Section 11.18. Headings
	 	 	47	 
	Section 11.19. Investment Company Act
	 	 	47	 
	Section 11.20. Right of Setoff
	 	 	48	 
	Section 11.21. Role Of Investment Manager And Controlling Party
	 	 	48	 






	 	 	 
	EXHIBITS:
	 
	 	 
	A

	 	Form of Security Agreement
	B

	 	Form of Administration Agreement
	C

	 	Form of Shortfall Agreement
	D

	 	Form of Reset Date Notice
	E

	 	Form of Drawdown Certificate
	F

	 	Form of Weekly Report
	G

	 	Form of Closing Certificate
	H

	 	Form of Opinion(s) of Counsel to the Company
	I

	 	Form of Opinion(s) of Delaware Counsel to the Company
	J

	 	Form of Opinion(s) of Counsel to the Equity Investor
	K

	 	Form of Opinion(s) of Counsel to the Collateral Agent, the Escrow Agent and the
Administrator
	L

	 	Form of Opinion(s) of Counsel to AIG-FP






3









 





     MASTER INVESTMENT AND CREDIT AGREEMENT (this “Agreement”) dated as of November 25, 2008 among
MAIDEN LANE III LLC, a Delaware limited liability company (the “Company”), FEDERAL RESERVE BANK OF
NEW YORK in its capacity as Controlling Party (the “Controlling Party”), FEDERAL RESERVE BANK OF
NEW YORK as Senior Lender (the “Senior Lender”), AMERICAN INTERNATIONAL GROUP, INC. as Equity
Investor (the “Equity Investor”) and THE BANK OF NEW YORK MELLON as Collateral Agent (the
“Collateral Agent”).



     The Parties hereto hereby agree as follows:



ARTICLE 1

Definitions




     Section 1.01. Defined Terms. As used in this Agreement, the terms listed in this Section
1.01 shall have the respective meanings set forth in this Section 1.01.



     “Administration Agreement” means the Administration Agreement dated as of the date hereof
among the Company, the Managing Member, the Escrow Agent and the Administrator, substantially in
the form of Exhibit B hereto.



     “Administrator” means The Bank of New York Mellon, in its capacity as Administrator under the
Administration Agreement, or any successor in such capacity.



     “Affiliate” means, when used with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified. For the avoidance of doubt, neither the Equity Investor nor
AIG-FP shall be considered for any purpose under this Agreement or any of the Transaction Documents
an Affiliate of the Federal Reserve Bank of New York.



     “Agreement” has the meaning set forth in the preamble hereto.



     “AIG-FP” means AIG Financial Products Corp., a Delaware corporation.



     “Assignor” has the meaning set forth in Section 11.07(a).



     “Assigned Amount” has the meaning set forth in Section 11.07(a).



     “Availability Period” means the period from and including the Closing Date to but excluding
March 25, 2009, unless extended by the Senior Lender in its sole discretion.



4









 





     “Available Senior Commitment” means, as of any date with respect to the Senior Facility, an
amount equal to (i) the Senior Commitment, minus (ii) the aggregate initial principal amount of all
Senior Loans (excluding, for the avoidance of doubt, any capitalized interest on such Senior Loans)
made before such date.



     “Board” means the Board of Governors of the Federal Reserve System.



     “Business Day” means a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close.



     “Calculation Period” means (i) for the Equity Interest, initially the period from and
including the Closing Date to but excluding the first Reset Date after the Closing Date, and
thereafter each subsequent period from and including a Reset Date to but excluding the next Reset
Date, and (ii) for any Senior Loan, initially the period from and including the Drawdown Date for
such Senior Loan to but excluding the first Reset Date after such Drawdown Date, and thereafter
each subsequent period from and including a Reset Date to but excluding the next Reset Date.



     “Capital Stock” means any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all equivalent ownership interests
in a Person (other than a corporation) and any and all warrants, rights or options to purchase any
of the foregoing, but excluding any CDO Issue and any Underlying Instrument.



     “CDO Issue” means each “CDO Issue” as defined in each Forward Purchase Agreement.



     “CDO Pool” means each “CDO Pool” as defined in each Forward Purchase Agreement.



     “Closing Date” means November 25, 2008.



     “Code” means the Internal Revenue Code of 1986, as amended from time to time.



     “Collateral” has the meaning set forth in the Security Agreement.



     “Collateral Accounts” has the meaning set forth in the Security Agreement.



     “Collateral Account Control Agreement” has the meaning set forth in the Security Agreement.



5









 





     “Collateral Agent” means The Bank of New York Mellon, or any successor Collateral Agent
appointed pursuant to the Security Agreement or any assignee thereof permitted pursuant to Section
11.06.



     “Collateral Agent Records” means “Records” as defined in the Security Agreement.



     “Company” means Maiden Lane III LLC, a Delaware limited liability company.



     “Contingent Interest” means the amounts payable under Section 3.05 to the Senior Lender.



     “Contractual Obligation” means, as to any Person, any provision of any security issued by such
Person or of any agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.



     “Control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have
meanings correlative thereto.



     “Controlling Party” means (i) for so long as the Federal Reserve Bank of New York has a
beneficial interest in any Senior Loan (including in any Contingent Interest) and any principal,
interest or Contingent Interest remains unpaid on any such Senior Loan, the Federal Reserve Bank of
New York, and otherwise (ii) for so long as any principal or interest (other than Contingent
Interest) remains unpaid on any Senior Loan, Senior Lenders of at least a majority in principal
amount of the Senior Loans then outstanding, and otherwise (iii) holders of Membership Interests
entitled to at least a majority of any remainder to be paid or released for distribution pursuant
to clause tenth of Section 5.02.



     “Costs and Expenses” means each of the following to the extent owing by the Company: (i) all
reasonable costs, disbursements (including any advances or overdrafts) and expenses incurred or
paid by, or owing to the Administrator, the Escrow Agent, the Securities Intermediary, the
Investment Manager, the Senior Lender, the Collateral Agent and the Controlling Party and their
respective advisors, agents and counsel in connection with (A) the administration of the Collateral
(including the CDO Pools and the Collateral Accounts), the Transactions, the Transaction Documents,
the Investment Management Agreement and such other instruments and documents related thereto, and
any amendment, supplement or modification to the Transaction Documents or the Investment Management
Agreement and such other instruments and documents, (B) the administration and preservation of the
Company, including all audit, accounting, legal and other professional fees and expenses and other
administrative costs of the Company and (C) the enforcement, exercise or



6









 







preservation of any rights or remedies under the Transaction Documents or the Investment
Management Agreement and such other instruments and documents related thereto, including, in the
case of clauses (A), (B) and (C), reasonable legal, audit, accounting and other professional fees
and expenses of any service providers; and (ii) all taxes that are determined to be owing by the
Company from time to time.



     “Disposition” means, with respect to any property, any sale, lease, sale and leaseback,
assignment, conveyance, transfer or other disposition thereof. The terms “Dispose” and “Disposed
of” shall have correlative meanings.



     “Distribution Compounding Date” means each Reset Date occurring after the Closing Date.



     “Dollars” and “$” mean dollars in lawful currency of the United States.



     “Drawdown Certificate” means a notice requesting a drawdown under the Senior Facility in the
form of Exhibit E hereto, prepared by the Company and delivered to the Senior Lender setting forth
(i) the proposed Drawdown Date (which date shall be a Business Day during the Availability Period),
(ii) details of the CDO Issues to which such notice relates and (iii) the aggregate principal
amount of the drawdown requested (which amount shall be equal to the Purchase Payment for the CDO
Issues and/or to the Shortfall Payment, if any, to which such notice relates).



     “Drawdown Date” means, for any Senior Loan, the date on which such Senior Loan is made or is
to be made to the Company pursuant to Section 3.01(b) or (c).



     “Equity Contribution Amount” has the meaning set forth in Section 2.01.



     “Equity Interest” means the equity interest in the Company issued pursuant to Section 2.01.



     “Equity Investor” means American International Group, Inc., and any assignee thereof permitted
pursuant to Section 11.06.



     “Equity Investor Entitlements” has the meaning set forth in Section 11.08.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together
with the Company, is treated as a single employer under Section 414 of the Internal Revenue Code of
1986, as amended.



7









 





     “Escrow Account” has the meaning set forth in the Administration Agreement.



     “Escrow Account Control Agreement” has the meaning set forth in the Security Agreement.



     “Escrow Agent” has the meaning set forth in the Administration Agreement.



     “Event of Default” has the meaning set forth in Section 10.01.



     “Excess Amounts” means any amounts payable under clause tenth of Section 5.02 to the Equity
Investor.



     “Expense Reimbursement Sub-Account” has the meaning set forth in the Security Agreement.



     “Fees” has the meaning set forth in the Security Agreement.



     “Fee Letter” means the letter agreement, dated as of November 25, 2008, among the Company, the
Collateral Agent, the Escrow Agent and the Administrator, in respect of the fee arrangement for the
Collateral Agent, the Escrow Agent and the Administrator.



     “Forward Closing Date” has the meaning set forth in the Administration Agreement.



     “Forward Purchase Agreement” means each of the Forward Purchase Agreements specified on
Schedule 1.01.



     “GAAP” means generally accepted accounting principles in the United States as in effect from
time to time.



     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory
organization.



     “Guarantee Obligation” means as to any Person (the “guaranteeing person”), any obligation,
including a reimbursement, counterindemnity or similar obligation, of the guaranteeing Person that
guarantees or in effect guarantees, or which is given to induce the creation of a separate
obligation by another Person (including any bank under any letter of credit) that guarantees or in
effect guarantees, any Indebtedness, leases, dividends or other obligations (the “primary
obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or
indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary



8









 







obligation or any property constituting direct or indirect security therefor, (ii) to advance
or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof; provided that the term
Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying
such Guarantee Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability
in respect thereof as determined by the Company in good faith.



     “Indebtedness” of any Person at any date means, without duplication, (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such Person for the deferred purchase price
of property or services (other than current trade payables incurred in the ordinary course of such
Person’s business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (iv) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (v) all capital lease obligations of such
Person, (vi) all obligations of such Person, contingent or otherwise, as an account party or
applicant under or in respect of acceptances, letters of credit, surety bonds or similar
arrangements, (vii) the liquidation value of all redeemable preferred Capital Stock of such Person,
(viii) all Guarantee Obligations of such Person in respect of obligations of the kind referred to
in clauses (i) through (vii) above and (ix) all obligations of the kind referred to in clauses (i)
through (viii) above secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including accounts and contract
rights) owned by such Person, whether or not such Person has assumed or become liable for the
payment of such obligation. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general partner) to the extent
such Person is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such Indebtedness expressly
provide that such Person is not liable therefor.



9









 





     “Interest Capitalization Date” means, for a Senior Loan, each Reset Date occurring after the
Drawdown Date for such Senior Loan.



     “Investment Manager” means BlackRock Financial Management, Inc., in its capacity as investment
manager under the Investment Management Agreement, together with its Affiliates, or any successor
in such capacity.



     “Investment Management Agreement” means the Investment Management Agreement dated as of the
date hereof between the Investment Manager and the Controlling Party.



     “Investment Reserve Sub-Account” has the meaning set forth in the Security Agreement.



     “Investments” means, for any Person, (i) Capital Stock, bonds, notes, debentures or other
securities of any other Person or any agreement to acquire any Capital Stock, bonds, notes,
debentures or other securities of any other Person (including any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering into such sale), or
(ii) deposits, advances, loans, capital contributions or other extensions of credit (by way of
guaranty or otherwise) made to any other Person (including purchases of property from another
Person subject to an understanding or agreement, contingent or otherwise, to resell such property
to such Person).



     “Last Look Notice” has the meaning set forth in Section 11.07(b).



     “Last Look Purchase Price” has the meaning set forth in Section 11.07(b).



     “LIBOR” means, for any Calculation Period, the rate per annum determined by the Administrator
for one-month deposits in Dollars which appears on the Bloomberg Screen BTMM Page under the heading
“LIBOR FIX BBAM” as of 11:00 a.m., London time, on the day that is three London Business Days prior
to the first day of such Calculation Period; provided that if such rate does not appear on the
Bloomberg Screen BTMM Page, “LIBOR” shall be the interest rate per annum determined by the
Administrator to be representative of the rates per annum at which one-month deposits in Dollars
are offered by major banks to other major banks, each in the London interbank market, on such day;
provided, further, that if an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition on such day, “LIBOR” shall be the rate per annum determined by the
Administrator for one-month deposits in Dollars which appears on Bloomberg pursuant to the command
“NYFR1M <GO>” as of 11:00 a.m., New York City time, on such day.



     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or any preference,
priority or other security agreement or preferential



10









 







arrangement of any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any capital lease having substantially the same economic effect as any of
the foregoing).



     “LLC Operating Agreement” means the limited liability company agreement of Maiden Lane III LLC
dated as of October 14, 2008, as amended and restated on November 24, 2008.



     “London Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in London are authorized or required by law to close.



     “Managing Member” has the meaning set forth in the LLC Operating Agreement. The Managing
Member as of the date hereof is the Federal Reserve Bank of New York.



     “Material Adverse Effect” means (i) a material impairment of the totality of the rights and
remedies of, or benefits available to the Senior Lender, the Equity Investor and the Collateral
Agent under the Transaction Documents taken as a whole or (ii) a material adverse effect on the
value of the Collateral.



     “Membership Interest” means a limited liability company membership interest in the Company.



     “Notes” means, collectively, the promissory notes, if any, evidencing the Senior Loans.



     “Notice Date” has the meaning set forth in the Administration Agreement.



     “Obligations” means (i) the unpaid principal of and interest (including Contingent Interest,
interest accruing after the maturity of the Senior Loans and Post-Petition Amounts) on the Senior
Loans, (ii) any claim in respect of any unpaid Equity Contribution Amount and any unpaid amounts
(including Excess Amounts and Post-Petition Amounts) in respect of the Equity Interest, and (iii)
all other obligations and liabilities of the Company to the Senior Lender, the Equity Investor, the
Controlling Party, the Collateral Agent, the Administrator, the Escrow Agent or the Investment
Manager, whether direct or indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any
other Transaction Document or any other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, fees, indemnities, costs, expenses (including
all fees, charges and disbursements of counsel to the Senior Lender, the Controlling Party, the
Collateral Agent, the Administrator, the Escrow Agent or the Investment Manager and the accountants
(including Ernst & Young) and advisors (including BlackRock Financial Management, Inc. and Morgan
Stanley & Co. Incorporated) but not the fees, charges and disbursements of any counsel to, or any
other costs and expenses of,



11









 







the Equity Investor) that are required to be paid by the Company pursuant hereto or pursuant
to the other Transaction Documents or otherwise.



     “Party” means a party to this Agreement.



     “Payment Calculation Report” has the meaning set forth in the Administration Agreement.



     “Payment Cut-Off Date” means, initially, December 27, 2008 and thereafter the 27th
day of each calendar month.



     “Payment Date” means the 4th Business Day of each calendar month occurring after
the Closing Date, or such other day as may be specified by the Controlling Party or its designee
pursuant to a Proper Instruction; provided that a Payment Date shall not occur less frequently than
semi-annually.



     “PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA (or any successor).



     “Permitted CDO Liquidation Purchase” has the meaning set forth in the Security Agreement.



     “Permitted Hedging Transactions” means any transaction entered into by the Company to hedge
currency risk with respect to any CDO Issue or other asset of the Company denominated in any
currency other than Dollars that is consented to by the Controlling Party (or its designee).



     “Permitted Investments” has the meaning set forth in the Security Agreement.



     “Person” means an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.



     “Plan” means any employee benefit plan as defined in Section 3(3) of ERISA, including any
employee welfare benefit plan (as defined in Section 3(1) of ERISA), any employee pension benefit
plan (as defined in Section 3(2) of ERISA), and any plan which is both an employee welfare benefit
plan and an employee pension benefit plan.



     “Post-Petition Amount” means any interest or amount that accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the
Company (or would accrue but for the operation of applicable bankruptcy or insolvency laws),
whether or not such interest or amount is allowed or allowable as a claim in any such proceeding.



     “Proceeds” has the meaning set forth in the Security Agreement.



12









 





     “Proper Instruction” has the meaning set forth in the Security Agreement



     “Proposed Transfer” has the meaning set forth in Section 11.07(a).



     “Proposed Purchase Price” has the meaning set forth in Section 11.07(a).



     “Purchase Payment” means, for any CDO Issue, the total cash amount the Company is required to
pay in order to fulfill its obligations in respect of the purchase of such CDO Issue, including its
obligations pursuant to Section 1.01(a) of the applicable Forward Purchase Agreement.



     “Regulation T” means Regulation T of the Board as from time to time in effect and all official
rulings and interpretations thereunder or there of.



     “Regulation U” means Regulation U of the Board as from time to time in effect and all official
rulings and interpretations thereunder or there of.



     “Regulation X” means Regulation X of the Board as from time to time in effect and all official
rulings and interpretations thereunder or there of.



     “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and
the respective directors, officers, employees, agents, attorneys, accountants, and other advisors,
and controlling persons of such Person and such Person’s Affiliates. For the avoidance of doubt,
neither the Equity Investor nor AIG-FP shall be considered for any purpose under this Agreement or
any of the Transaction Documents a Related Party with respect to the Federal Reserve Bank of New
York.



     “Requirement of Law” means, as to any Person, the organizational or governing documents of
such Person (including, with respect to the Company, the LLC Operating Agreement) and any law,
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.



     “Reset Date” means initially the Closing Date and thereafter the last Business Day of each
calendar month.



     “Reset Date Notice” means a report prepared by the Administrator as provided in Section 4.02,
substantially in the form of Exhibit D hereto.



     “Responsible Officer” means (i) with respect to the Company, (A) any officer in the corporate
trust office of the Administrator or any other officer customarily performing functions similar to
those performed by officers in such corporate trust office or to whom any corporate trust matter is
referred because of such Person’s knowledge of and familiarity with a particular subject and (B)
the Managing Member, (ii) with respect to the Collateral Agent, any officer in the corporate trust
office of the Collateral Agent or any other officer customarily



13









 







performing functions similar to those performed by officers in such corporate trust office or
to whom any corporate trust matter is referred because of such Person’s knowledge of and
familiarity with a particular subject, (iii) with respect to the Escrow Agent, any officer of the
Escrow Agent with direct responsibility for the administration of the transactions and agreements
contemplated by this Agreement and the other Transaction Documents and the Escrow Account, (iv)
with respect to the Investment Manager, any Managing Director or Director of the Investment Manager
with direct responsibility for the administration of the transactions and agreements contemplated
by this Agreement, the Investment Management Agreement and the other Transaction Documents and the
Collateral, (v) with respect to the Administrator, any officer of the Administrator with direct
responsibility for the administration of the transactions and agreements contemplated by this
Agreement and the other Transaction Documents and the Collateral, and (vi) with respect to any
other Person, its Chairman of the Board, its Chief Executive Officer, its President, any Senior
Vice President, the Chief Financial Officer, any Vice President, the Treasurer or any other
employee (A) that has the power to take or delegate the taking of the action in question and has
been so authorized, directly or indirectly, by the board of directors or other governing body of
such Person, (B) working under the direct supervision or the delegated authority of any such
Chairman of the Board, Chief Executive Officer, President, Senior Vice President, Chief Financial
Officer, Vice President or Treasurer or (C) whose responsibilities include the administration of
the transactions and agreements contemplated by this Agreement and the Transaction Documents and
the Collateral.



     “Revolving Credit Agreement” means the Credit Agreement dated as of September 22, 2008 between
American International Group, Inc., as Borrower, and Federal Reserve Bank of New York, as Lender.



     “Secured Obligations” has the meaning set forth in the Security Agreement.



     “Secured Party” has the meaning set forth in the Security Agreement.



     “Security Agreement” means the Security Agreement dated as of the date hereof among the
Company, the Senior Lender, the Controlling Party and the Collateral Agent substantially in the
form of Exhibit A hereto.



     “Security Documents” means, collectively, the Security Agreement, the Collateral Account
Control Agreement, the Escrow Account Control Agreement and all other security documents hereafter
delivered to the Collateral Agent granting a Lien on any property of the Company to secure the
Secured Obligations.



     “Securities Intermediary” means The Bank of New York Mellon, in its capacity as securities
intermediary.



14









 





     “Senior Commitment” means $30.0 billion.



     “Senior Debt” has the meaning set forth in Section 11.08.



     “Senior Facility” means the term loan facility made available to the Company pursuant to
Section 3.01(a).



     “Senior Lender” means the Federal Reserve Bank of New York, and any assignee thereof permitted
pursuant to Section 11.06.



     “Senior Loan” means each loan made under the Senior Facility.



     “Shortfall Agreement” means the Shortfall Agreement dated as of the date hereof between the
Company and AIG-FP, substantially in the form of Exhibit C hereto.



     “Shortfall Payment” means the amount, if any, payable by the Company pursuant to Section 2(a)
of the Shortfall Agreement.



     “Subsidiary” means, with respect to any person (herein referred to as the “parent”), any
corporation, partnership, limited liability company, association or other business entity of which
securities or other ownership interests representing more than 50% of the ordinary voting power or
more than 50% of the general partnership or managing limited liability company interests (as
applicable) are, at the time any determination is being made, owned, Controlled or held directly or
indirectly by such parent.



     “Termination Agreement” means each of the Termination Agreements specified on Schedule 1.01.



     “Transaction Documents” means this Agreement, the Notes, if any, the Security Documents, each
Forward Purchase Agreement, each Termination Agreement, the Fee Letter, the Administration
Agreement, the Shortfall Agreement, the LLC Operating Agreement and each other servicing and
custodial agreement and each agreement relating to Permitted Hedging Transactions, in each case in
effect from time to time with the Company or the Collateral Agent as a party thereto in respect of
the transactions contemplated by the foregoing documents, all schedules, exhibits and annexes
thereto, all side letters and agreements affecting the terms thereof or entered into in connection
therewith, all assignments and other instruments or documents entered into in connection with the
foregoing and any amendment, waiver, supplement or other modification to any of the foregoing.



     “Transactions” means the transactions contemplated by the Transaction Documents.



     “Treasury Regulations” means the regulations promulgated under the Code.



15









 





     “United States” means the United States of America.



     “Weekly Report” means the report of the Administrator as provided in Section 4.01,
substantially in the form of Exhibit F hereto.



     “Weekly Reporting Date” means each Monday commencing with the first Monday after the Closing
Date. If any Monday is not a Business Day, the “Weekly Reporting Date” shall be deemed to be the
next succeeding Business Day.



     Section 1.02. Other Definitional Provisions. (a) As used herein and in any certificate or
other document made or delivered pursuant hereto or thereto, (i) accounting terms shall have the
respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be
construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and
the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues,
accounts, leasehold interests and contract rights, and (v) references to agreements or other
Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or
Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time,
or any successor or replacement agreement which may be entered into from time to time.



     (b) The words “hereof”, “herein” and “hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.



     (c) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.



ARTICLE 2

Funding Of Equity Interest




     Section 2.01. Issuance and Purchase of Equity Interest. On the Closing Date, subject to
satisfaction of the conditions precedent in Section 7.01 and Section 7.02, the Company shall issue,
sell and deliver to the Equity Investor, and the Equity Investor shall purchase from the Company,
an Equity Interest, with the terms as set forth herein, for an aggregate purchase price of $5
billion (as adjusted pursuant to Section 2.02 and Section 2.03, the “Equity Contribution Amount”).
The Equity Investor agrees to pay the aggregate purchase price for the Equity Interest by wire
transfer of immediately available funds by 12:00 noon, New York



16









 







City time, directly to the Escrow Account to be applied in accordance with the Administration
Agreement.



     Section 2.02. Distributions with Respect to Equity Interest. The Company shall make
distributions in respect of the Equity Interest as cash is released to it for such purpose by the
Collateral Agent on the dates and in the amounts that such cash is released for such purpose
pursuant to Section 5.02. The balance of the Equity Contribution Amount shall be decreased by
amounts released to the Company, for distribution to the Equity Investor, pursuant to clause
seventh of Section 5.02.



     Section 2.03. Accrual of Preferred Distributions. (a) The Equity Interest shall accrue
preferred distributions from and including the Closing Date to but excluding the date the
undistributed balance of the Equity Contribution Amount has been reduced to zero and all accrued
and unpaid preferred distributions have been paid in full.



     (b) Preferred distributions shall accrue during each Calculation Period for the Equity
Interest on a daily basis on the balance of the Equity Contribution Amount remaining undistributed
as of each day and at a rate per annum equal to LIBOR in effect for such Calculation Period plus
3.00%. Preferred distributions on the Equity Interest shall be calculated during any Calculation
Period on the basis of the actual days elapsed and the actual number of days in the calendar year
during which such Calculation Period occurs.



     (c) Preferred distributions shall be compounded as of the start of each Distribution
Compounding Date by increasing the balance of the Equity Contribution Amount by the amount of
preferred distributions accrued but unpaid as at such date and thereafter deeming such accrued
preferred distributions paid in full on such date.



     Section 2.04. Computation Of Preferred Distributions. The Company shall cause the
Administrator to calculate preferred distributions in accordance with Section 2.03. Each
determination of the rate of accrual of preferred distributions and each calculation of the amount
of accrued preferred distributions, in each case by the Administrator pursuant to any provision of
this Agreement, shall be conclusive and binding on the Company, the Senior Lender and the Equity
Investor in the absence of manifest error.



ARTICLE 3

Funding of Senior Loans




     Section 3.01. Senior Loan Facility. (a) Subject to the terms hereof, including satisfaction
of the conditions precedent in Section 7.01 and Section 7.02, the Senior Lender agrees to make
available to the Company a term loan facility in an aggregate amount equal to the Senior Commitment
for the purpose of funding



17









 




(i) the Purchase Payment for the CDO Issues and (ii) the Shortfall Payment, if any. Each
Senior Loan made under the Senior Facility shall rank pari passu with all other Senior Loans. The
terms of the Senior Loans shall differ only in respect of the term of the first Calculation Period
for each Senior Loan and the interest rate during such first Calculation Period.




     (b) On the Closing Date, subject to satisfaction of the conditions precedent set forth in
Section 7.02 hereof, the Senior Lender agrees to make a Senior Loan to the Company in an aggregate
principal amount equal to $15,133,566,656.



     (c) The Company may request additional drawdowns under the Senior Facility at any time during
the Availability Period by giving an irrevocable Drawdown Certificate to the Senior Lender at least
three Business Days prior to the proposed Drawdown Date. Upon receipt of a Drawdown Certificate
from the Company in accordance with this clause (c), subject to satisfaction of the conditions
precedent in Section 7.02 hereof, the Senior Lender agrees to make a Senior Loan to the Company in
an aggregate principal amount equal to the amount specified in such Drawdown Certificate; provided
that the aggregate principal amount of such Senior Loan may not exceed the Available Senior
Commitment.



     (d) Each Senior Loan shall be made on the applicable Drawdown Date specified in the relevant
Drawdown Certificate or the Closing Date, as the case may be, by wire transfer of immediately
available funds equal to the aggregate principal amount of such Senior Loan by 12:00 noon, New York
City time, directly to the Escrow Account to be applied in accordance with the Administration
Agreement.



     Section 3.02. Repayment of Senior Loan. (a) The Company shall make payments on account of
the principal of the Senior Loans and accrued and unpaid interest and other amounts due thereon on
the dates and in the amounts provided in Section 5.02. Amounts paid on account of the principal of
the Senior Loans may not be reborrowed.



     (b) The Company, so long as funds are available in accordance with Section 5.02, shall repay
the remaining outstanding principal amount of each Senior Loan, together with all accrued and
unpaid interest (other than Contingent Interest) and other amounts due thereon, on the sixth
anniversary of the Closing Date, and pursuant to the requirements of Section 5.02, the Company may
prepay the outstanding principal amount of each Senior Loan from time to time prior to such sixth
anniversary of the Closing Date; provided that the Controlling Party may, in its sole discretion,
at any time and from time to time, extend the date of final repayment of the Senior Loans to any
later date. For the avoidance of doubt, passing the foregoing maturity date for a Senior Loan
while any principal or interest remains outstanding in respect of such Senior Loan shall not
require the Controlling Party to automatically liquidate any CDO Pool or other Collateral.



18









 





     Section 3.03. Accrual of Interest. (a) Each Senior Loan shall bear interest from and
including the Drawdown Date for such Senior Loan to but excluding the date such Senior Loan,
together with all accrued and unpaid interest (other than Contingent Interest), is paid in full.



     (b) Interest on a Senior Loan shall accrue during each Calculation Period for such Senior Loan
on a daily basis on the principal amount of such Senior Loan outstanding as of each day and at a
rate per annum equal to LIBOR in effect for such Calculation Period plus 1.00%. Interest shall be
calculated during any Calculation Period on the basis of the actual days elapsed and the actual
number of days in the calendar year during which such Calculation Period occurs.



     (c) Interest on any Senior Loan shall be capitalized as of the start of each Interest
Capitalization Date by increasing the outstanding principal amount of such Senior Loan by the
amount of accrued but unpaid interest on such Senior Loan as of such date and thereafter deeming
such accrued interest paid in full on such date.



     Section 3.04. Computation of Interest. The Company shall cause the Administrator to
calculate interest on the Senior Loans in accordance with Section 3.03. Each determination of the
interest rate and each calculation of the amount of accrued interest, in each case by the
Administrator pursuant to any provision of this Agreement, shall be conclusive and binding on the
Company, the Senior Lender and the Equity Investor in the absence of manifest error.



     Section 3.05. Contingent Interest. The Company agrees to pay to the Senior Lender as
Contingent Interest the amounts referred to in clause tenth of Section 5.02 at the time and to the
extent provided therein. No reference to “interest” herein shall be a reference to the Contingent
Interest. For the avoidance of doubt, Contingent Interest shall be payable even if the Senior
Loans, together with all accrued and unpaid interest (other than Contingent Interest), have
otherwise been paid in full.



     Section 3.06. Records of Indebtedness. The Senior Lender may maintain in accordance with its
usual practice an account or accounts evidencing the Indebtedness of the Company to the Senior
Lender resulting from the Senior Loans, including the amounts of principal and interest payable and
paid to the Senior Lender or capitalized from time to time hereunder; provided that the failure of
the Senior Lender to maintain such accounts or any error therein shall not in any manner affect the
obligation of the Company to repay the Senior Loans in accordance with the terms of this Agreement
and the Security Agreement.



19









 





ARTICLE 4

Reports And Calculations




     Section 4.01. Weekly Reports. The Company shall cause the Administrator to deliver a Weekly
Report to the Company, the Senior Lender, the Equity Investor, the Collateral Agent, the
Controlling Party and the Investment Manager on each Weekly Reporting Date setting forth in respect
of the preceding week:




     (i) in the case of the first such report (A) the amounts of principal outstanding on
each Senior Loan, if any, as of the Closing Date and (B) the Equity Contribution Amount,
as of the Closing Date; and




     (ii) in the case of each subsequent such report, as of the preceding Weekly Reporting
Date, (A) payments of principal of and accrued interest, if any, on each Senior Loan since
the Closing Date or the last Weekly Reporting Date, as the case may be, and the amounts of
principal and accrued interest outstanding on each Senior Loan as of the last Business Day
preceding such report and (B) release of cash to the Company for distribution in respect
of the Equity Interest since the Closing Date or the last Weekly Reporting Date, as the
case may be, and the Equity Contribution Amount and accrued preferred distributions
outstanding on the Equity Interest as of the last Business Day preceding such report.



     Section 4.02. Reset Date Notices. The Company shall cause the Administrator to deliver a
Reset Date Notice to the Company, the Senior Lender, the Equity Investor, the Collateral Agent, the
Controlling Party and the Investment Manager initially on the Closing Date and thereafter on the
second Business Day before each subsequent Reset Date setting forth (i) the amount of interest
accrued on each Senior Loan and to be capitalized on such Reset Date, (ii) the amount of preferred
distributions accrued on the Equity Interest and to be added to the unpaid balance of the Equity
Contribution Amount, (iii) LIBOR for the Calculation Period commencing on such Reset Date and (iv)
the interest rate and the preferred distribution rate for such Calculation Period.



     Section 4.03. Binding Effect of Weekly Reports and Reset Date Notices. Each Weekly Report
and Reset Date Notice shall be binding on the Company, the Senior Lender, the Equity Investor, the
Collateral Agent, the Controlling Party and the Investment Manager absent manifest error.



     Section 4.04. Collateral Agent Notices. The Collateral Agent hereby agrees to promptly give
to the Equity Investor a copy of any notice or information the Collateral Agent provides to the
Company pursuant to the Security Agreement.



     Section 4.05. Access to Collateral Agent Records. The Collateral Agent hereby agrees to
provide the Equity Investor with reasonable access during



20









 







normal business hours to the Collateral Agent Records on the same terms as it provides such
access to the Company in accordance with Section 29(b) of the Security Agreement.



ARTICLE 5

payments




     Section 5.01. Payments Generally. (a) Notwithstanding anything to the contrary contained in
this Agreement or in any other Transaction Document, the Company shall not (i) make any payments on
account of principal, interest, Contingent Interest, fees or otherwise in respect of any Senior
Loan, or (ii) distribute in respect of the Equity Interest any cash released to it for such
distribution, including for distribution in respect of the Equity Contribution Amount, Excess
Amounts or otherwise in respect of the Equity Interest, in each case other than in accordance with
Section 5.02 but subject to Section 11.20.



     (b) All payments under the Senior Loans and the Equity Interest shall be made by the Company
without any deduction or withholding for or on account of any tax unless such deduction or
withholding is required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, then in effect.



     Section 5.02. Application of Proceeds. All amounts available in the Collateral Accounts as
of each Payment Cut-Off Date shall be distributed by the Collateral Agent on the first following
Payment Date in accordance with a Payment Calculation Report delivered to, and approved by, the
Controlling Party in accordance with the Administration Agreement prior to such Payment Date, in
the following order of priority:




     first, to pay any Costs and Expenses then due and payable, any Fees then due and
payable and any indemnity amounts and any other amounts (except as otherwise provided for
in this Section 5.02 and in accordance with Proper Instructions) then owing under any of
the Transaction Documents or the Investment Management Agreement to any Person, in each
case, to the extent such Costs and Expenses, Fees and indemnity and other amounts, as
applicable, have been incurred no later than the two Business Days prior to the Notice
Date immediately preceding such Payment Date and have been invoiced no later than such
Notice Date, which payments shall be distributed to the Persons to whom such amounts are
owing; provided that, to the extent that amounts on deposit in the Collateral Accounts are
insufficient to pay all amounts that are owing pursuant to this clause first on any
Payment Date, amounts will be distributed ratably to the Persons to whom such amounts are
owed pursuant to this clause first;



21









 






     second, to pay any amounts due and payable to any counterparty to any Permitted
Hedging Transaction as of the Payment Cut-Off Date under any Permitted Hedging
Transaction, other than any such amounts due and payable in connection with any default,
event of default, termination event or other similar event or condition in respect of
which the counterparty to such Permitted Hedging Transaction is the sole defaulting or
affected party;




     third, to fund the Expense Reimbursement Sub-Account until the balance thereof is
equal to $500,000, or such other amount as may be specified by the Controlling Party
pursuant to a Proper Instruction;




     fourth, to fund the Investment Reserve Sub-Account until the balance thereof is equal
to $1,500,000,000, or such other amount as may be specified by the Controlling Party
pursuant to a Proper Instruction;




     fifth, to pay all or any portion of the outstanding principal amount of the Senior
Loans, which payment shall be distributed ratably to the Senior Lenders;




     sixth, so long as the entire outstanding principal amount of the Senior Loans shall
have been paid in full in cash, to pay all or any portion of the accrued but unpaid
interest (including Post-Petition Amounts, to the fullest extent permitted by applicable
law, but excluding Contingent Interest) outstanding on the Senior Loans, which payment
shall be distributed ratably to the Senior Lenders;




     seventh, so long as the entire outstanding principal amount of, and all accrued and
unpaid interest (including Post-Petition Amounts, to the fullest extent permitted by
applicable law, but excluding Contingent Interest) outstanding on, the Senior Loans shall
have been paid in full in cash, to release to the Company, for distribution to the Equity
Investor, the lesser of (A) all remaining amounts and (B) the undistributed balance of the
Equity Contribution Amount;




     eighth, so long as (i) the entire outstanding principal amount of, and all accrued
and unpaid interest (including Post-Petition Amounts, to the fullest extent permitted by
applicable law, but excluding Contingent Interest) outstanding on, the Senior Loans shall
have been paid in full in cash, (ii) all other remaining Secured Obligations outstanding
(and all fees and expenses or other amounts to the extent not constituting Fees or Costs
and Expenses) shall have been paid in full in cash and (iii) the Equity Contribution
Amount shall have been decreased to zero because cash has been released to the Company for
distribution to the Equity Investor, to release to the Company, for distribution to the
Equity Investor, the lesser of (A) all remaining amounts and (B) the accrued but unpaid
preferred distributions (including Post-Petition Amounts, to the fullest extent



22









 







permitted by applicable law, but excluding Excess Amounts) in respect of the Equity
Interest;




     ninth, so long as (i) the entire outstanding principal amount of, and all accrued and
unpaid interest (including Post-Petition Interest, to the fullest extent permitted by
applicable law, but excluding Contingent Interest) outstanding on, the Senior Loans been
paid in full in cash, (ii) all other remaining Secured Obligations outstanding (and all
fees and expenses or other amounts to the extent not constituting Fees or Costs and
Expenses) shall have been paid in full in cash and (iii) the Equity Contribution Amount
shall have been decreased to zero and there are no outstanding accrued but unpaid
preferred distributions (including Post-Petition Amounts, to the fullest extent permitted
by applicable law, but excluding Excess Amounts), to pay any amounts due and payable to
any counterparty to any Permitted Hedging Transaction as of the Payment Cut-Off Date under
any Permitted Hedging Transaction to the extent not paid under clause second above;




     tenth, so long as (i) the entire outstanding principal amount of, and all accrued and
unpaid interest (including Post-Petition Interest, to the fullest extent permitted by
applicable law, but excluding Contingent Interest) outstanding on, the Senior Loans been
paid in full in cash, (ii) all other remaining Secured Obligations outstanding (and all
fees and expenses or other amounts to the extent not constituting Fees or Costs and
Expenses) shall have been paid in full in cash and (iii) the Equity Contribution Amount
shall have been decreased to zero and there are no outstanding accrued but unpaid
preferred distributions (including Post-Petition Amounts, to the fullest extent permitted
by applicable law, but excluding Excess Amounts), to pay 67% of all remaining amounts to
the Senior Lender and to release to the Company, for distribution to the Equity Investor,
33% of all remaining amounts.



     Section 5.03. Distribution of Amounts to Equity Investor. The Managing Member of the Company
hereby acknowledges that upon release to the Company of any amounts for distribution to the Equity
Investor pursuant to Section 5.02, the Company shall immediately make, to the maximum extent
permissible by applicable law, a distribution equal to such amounts to the Equity Investor pursuant
to the terms of the LLC Operating Agreement. The Managing Member agrees, for so long as any Equity
Interest remains outstanding (including in the form of a right to Excess Amounts), not to amend the
LLC Operating Agreement in a manner that would result in any such distribution not being
immediately made pursuant to this Section 5.03 to the maximum extent permitted by applicable law.



     Section 5.04. Termination. Regardless of whether or not any Obligations remain outstanding
but subject to Section 11.04, all Obligations then due and owing shall be terminated and
extinguished on the date on which all of the



23









 







Collateral has been fully liquidated and Disposed of and all proceeds thereof have been
distributed in accordance with Section 5.02.



ARTICLE 6

Representations and Warranties




     Section 6.01. Company’s Representations and Warranties. The Company hereby represents and
warrants that:



     (a) Organization; Powers. The Company (i) is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Delaware, (ii) has all
requisite power and authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required and (iv) has the power and
authority to execute, deliver and perform its obligations under each of the Transaction Documents
and each other agreement or instrument contemplated thereby to which it is or will be a Party and
to borrow hereunder.



     (b) Authorization. The execution, delivery and performance by the Company of the Transaction
Documents to which it is a party and the consummation of the Transactions (i) have been duly
authorized by all requisite limited liability company action and, if required, member action of the
Company and (c) will not (i) result in the violation by the Company of (A) any provision of law,
statute, rule or regulation, or of the certificate of formation, LLC Operating Agreement or other
constitutive documents or bylaws of the Company, (B) any order of any Governmental Authority or (C)
any provision of any indenture, agreement or other instrument to which the Company is a party or by
which any of them or any of their property is or may be bound, (ii) be in conflict with, result in
a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give
rise to any right to accelerate or to require the prepayment, repurchase or redemption of any
obligation of the Company under any such indenture, agreement or other instrument or (iii) result
in the creation or imposition of any Lien upon or with respect to any property or assets now owned
or hereafter acquired by the Company (other than any Lien created under the Security Documents).



     (d) Enforceability. This Agreement and each other Transaction Document to which the Company
is a party has been duly executed and delivered by the Company and constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.




24












 





     (e) Governmental Approvals. No action, consent or approval of, registration or filing
with or any other action by any Governmental Authority is required to be taken, obtained or made by
the Company in connection with the Transactions, except (i) the filing of Uniform Commercial Code
financing statements by the Collateral Agent and (ii) such as have been made or obtained and are in
full force and effect.



     (f) Litigation; Compliance with Laws. There are no actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the knowledge of the Company,
threatened against or affecting the Company that involve any Transaction Document or the
Transactions.



     (g) Compliance with Laws. The Company is not in violation of any law, rule or regulation and
is not in default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority.



     (h) No Default; No Event of Default. The Company is not in default under or with respect to
any of its Contractual Obligations. No Event of Default has occurred and is continuing.



     (i) Margin Regulations. No part of the proceeds of any Senior Loan or the Equity Interest
will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately,
by the Company for any purpose that entails a violation of, or that is inconsistent with, the
provisions of the regulations of the Board, including Regulation T, Regulation U or Regulation X.



     (j) ERISA. The Company neither maintains, participates in, or is otherwise deemed an
“employer” (as defined in Section 3(5) of ERISA) with respect to, any Plans, and neither the
Company nor any ERISA Affiliate has any liability to the PBGC under ERISA.



     (k) Investment Company Act. The Company is not, and after application of the proceeds of the
Senior Loans and the Equity Interest the Company will not be, required to register as an
“investment company” as such term is defined in the Investment Company Act of 1940, as amended.



     (l) Subsidiaries. The Company has no Subsidiaries and does not own the Capital Stock of any
Person.



     (m) Use of Proceeds. The proceeds of the Senior Loans and the Equity Interest shall be used
by the Company solely to fund the Purchase Payment for CDO Issues and the Shortfall Amount, if any,
in accordance with the terms of the Administration Agreement, the Forward Purchase Agreements and
the Shortfall Agreement.



     (n) No Material Misstatements. No information, report, financial statement, exhibit or
schedule furnished by or on behalf of the Company to the



25









 







Senior Lender, the Equity Investor or the Controlling Party in connection with the negotiation
of any Transaction Document or included therein or delivered pursuant thereto contained, when taken
as a whole, contains or will contain any material misstatement of fact or omitted, omits or will
omit to state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading; provided that to the
extent any such information, report, financial statement, exhibit or schedule was based upon or
constitutes a forecast or projection, the Company represents only that it acted in good faith and
utilized assumptions reasonable at the time made (based upon accounting principles consistent with
the historical audited financial statements of the Company) and exercised due care in the
preparation of such information, report, financial statement, exhibit or schedule.



     (o) Activities. The Company has not engaged in activities since its formation other than
those incidental to its formation and other appropriate actions incidental to the Transaction
Documents.



     (p) Other Representations. All representations and warranties of the Company in each
Transaction Document to which it is, or will become, a party are true and correct and repeated
herein as though fully set forth herein.



     (q) Inadequate Credit Accommodations. The Company is unable to secure adequate credit
accommodations from other banking institutions and such credit is not available from other sources.



     Section 6.02. Equity Investor’s Representations and Warranties. The Equity Investor hereby
represents and warrants that:



     (a) Organization; Powers. The Equity Investor (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and (ii) has all requisite
power and authority to (A) fund the Equity Interest hereunder and (B) execute, deliver and perform
its obligations under each Transaction Document and each other agreement or instrument contemplated
thereby to which it is or will be a party.



     (b) Authorization; No Conflict. The execution, delivery and performance of each Transaction
Document by the Equity Investor (i) have been duly authorized by all requisite corporate and, if
required, stockholder action and (ii) will not (A) result in the violation by the Equity Investor
of (1) any provision of law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or bylaws of the Equity Investor, (2) any order of
any Governmental Authority or (3) any provision of any indenture, agreement or other instrument to
which the Equity Investor is a party or by which it or any of its property is or may be bound, (B)
be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement or other



26









 







instrument or (C) result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by the Equity Investor.



     (c) Enforceability. This Agreement has been duly executed and delivered by the Equity
Investor and constitutes, and each other Transaction Document to which it is a party, when executed
and delivered by the Equity Investor, will constitute, a legal, valid and binding agreement of the
Equity Investor enforceable against the Equity Investor in accordance with its terms, except that
such enforceability may be limited by bankruptcy, insolvency, or other similar laws of general
applicability affecting the enforcement of creditors’ rights generally and by the court’s
discretion in relation to equitable remedies.



     (d) Governmental Approvals. No action, consent or approval of, registration or filing with or
any other action by any Governmental Authority is or will be required to be taken, obtained or made
by the Equity Investor in connection with the Transactions except such as (i) have been made or
obtained and are in full force and effect and (ii) with respect to any Governmental Authority of
the United States or any state thereof, if the failure to take such action, obtain such consent or
approval or register or file with such Governmental Authority could not reasonably be expected to
have a Material Adverse Effect.



     (e) Litigation; Compliance with Laws. Except as set forth in the financial statements
attached to the Equity Investor’s most recent Form 10-Q filed with the Securities and Exchange
Commission:




     (i) there are no actions, suits or proceedings at law or in equity or by or before
any Governmental Authority now pending or, to the knowledge of the Equity Investor,
threatened against or affecting the Equity Investor or any business, property or rights of
the Equity Investor (A) that involve any Transaction Document, the Transactions or its
Equity Interest or (B) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect; and




     (ii) the Equity Investor is not in violation of any law, rule or regulation
(including any zoning, building, ordinance, code or approval or any building permits) or
any restrictions of record or is in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.



     (f) Investment Company Act. The Equity Investor is, and after making the Equity Interest will
be, a “qualified purchaser” as such term is defined in Section 2(a)(51)(A) of the Investment
Company Act of 1940, as amended.



27









 





ARTICLE 7

Conditions Precedent




     Section 7.01. Conditions to Effectiveness. The effectiveness of this Agreement shall be
subject to the following conditions precedent:



     (a) Transaction Documents. The Senior Lender, the Equity Investor, the Controlling Party and
the Collateral Agent shall have received counterparts of the following agreements duly executed by
each other party thereto: (i) this Agreement, (ii) the Security Agreement, (iii) the Collateral
Account Control Agreement, (iv) the Escrow Account Control Agreement, (v) each Forward Purchase
Agreement, (vi) each Termination Agreement, (vii) the Administration Agreement and (viii) the
Shortfall Agreement.



     (b) Closing Certificate; Certified Certificate of Formation; Good Standing Certificates. The
Senior Lender, the Equity Investor, the Controlling Party and the Collateral Agent shall have
received (i) a certificate of the Company, dated the Closing Date, substantially in the form of
Exhibit G, with appropriate insertions and attachments, including the certificate of formation
certified by the Secretary of State of the State of Delaware and the LLC Operating Agreement, and
(ii) a long form good standing certificate for the Company from the Secretary of State of the State
of Delaware. The Senior Lender, the Controlling Party and the Collateral Agent shall have received
a secretary’s certificate of the Equity Investor, dated the Closing Date, with appropriate
insertions and attachments, evidencing good standing of the Equity Investor, due authorization of
the Transaction Documents to which it is a party and the Transactions and confirming that each of
the representations made by the Equity Investor in the Transaction Documents on the Closing Date
are true and correct.



     (c) Legal Opinions. (i) The Senior Lender, the Equity Investor and the Controlling Party
shall have received executed legal opinions dated the Closing Date and addressed to, and in form
satisfactory to, the Senior Lender, the Equity Investor and the Controlling Party and covering such
other matters incidental to the transactions contemplated by this Agreement as the Senior Lender,
the Equity Investor or the Controlling Party shall have reasonably requested from:




     (A) Davis Polk & Wardwell, counsel to the Company, in substantially the
form of Exhibit H hereto;




     (B) Weil, Gotshal & Manges LLP, counsel to the Equity Investor, in
substantially the form of Exhibit J hereto;




     (C) Cadwalader, Wickersham & Taft LLP, counsel to the Collateral Agent, the
Escrow Agent and the Administrator, in substantially the form of Exhibit K
hereto; and



28









 






     (D) Weil, Gotshal & Manges LLP, counsel to AIG-FP, in substantially the
form of Exhibit L hereto.




     (ii) The Senior Lender shall have received an executed legal opinion dated the
Closing Date from Morris, Nichols, Arsht & Tunnell, Delaware counsel to the Company,
addressed to, and in form satisfactory to, the Senior Lender and covering maters relating
to perfection of certain security interests created pursuant to the Security Agreement, in
substantially the form of Exhibit I hereto.



     (d) Representations and Warranties of Equity Investor. Each of the representations and
warranties made by the Equity Investor herein and pursuant to each other Transaction Document shall
be true and correct on and as of the Closing Date as if made on and as of the Closing Date.



     Section 7.02. Conditions to Senior Loans and Equity Interest. The agreement of the Senior
Lender to make the Senior Loans and the agreement of the Equity Investor to purchase the Equity
Interest hereunder is subject to the satisfaction, prior to or concurrently with the making of such
Senior Loans and the purchase of such Equity Interest, on the applicable Drawdown Date or the
Closing Date, as the case may be, of the following conditions precedent:



     (a) Approvals. All governmental and third-party approvals necessary in connection with the
Transactions shall have been obtained and be in full force and effect.



     (b) Filings, Registrations and Recordings. Each document (including any Uniform Commercial
Code financing statement) required by the Security Documents or under law or reasonably requested
by the Senior Lender or the Controlling Party to be filed, registered or recorded in order to
create in favor of the Collateral Agent, for the benefit of the Secured Parties, a perfected Lien
on the Collateral, prior and superior in right to any interest therein of any other Person, shall
be in proper form for filing, registration or recordation.



     (c) Representations and Warranties. Each of the representations and warranties made by the
Company herein and pursuant to each other Transaction Document shall be true and correct on and as
of the applicable Drawdown Date or Closing Date, as the case may be, as if made on and as of such
Drawdown Date or Closing Date, as the case may be.



     (d) No Default or Event of Default. No Default (as defined in the Revolving Credit Agreement)
or Event of Default shall have occurred and be continuing on the applicable Drawdown Date or the
Closing Date after giving effect to the Transactions to occur on the applicable Drawdown Date or
Closing Date.



29









 





     (e) Conditions Precedent in Forward Purchase Agreement. In the case of a Senior Loan made for
the purpose of funding the Purchase Payment for a CDO Issue, each of the conditions precedent set
forth in Section 3.03 of the applicable Forward Purchase Agreement shall have been satisfied on the
applicable Drawdown Date.



     Each of the Senior Lender and the Equity Investor may, in its sole discretion, waive or
otherwise modify any of the conditions set forth in this Section 7.02 in respect of any Senior Loan
or the Equity Interest, respectively.



ARTICLE 8

Affirmative Covenants




     The Company hereby agrees to:



     Section 8.01. GAAP Financial Statements. Furnish to the Senior Lender, the Equity Investor,
the Investment Manager and the Controlling Party:



     (a) as soon as available, but in any event within 120 days after the end of each fiscal year
of the Company, a copy of the audited balance sheet of the Company as at the end of such year and
the related audited statements of income and of cash flows for such year, in each case prepared in
accordance with GAAP and reported on by an independent certified public accounting firm of
nationally recognized standing; and



     (b) as soon as available, but in any event within 35 days after the end of each of the first
three fiscal quarters of the Company, a copy of the unaudited balance sheet of the Company as at
the end of such quarter and the related unaudited statements of income for such quarter, in each
case excluding footnotes but otherwise prepared in accordance with GAAP.



     Section 8.02. Other Information. Furnish to the Senior Lender, the Controlling Party and the
Investment Manager (and, in the case of clauses (a), (c) and (d), to the Equity Investor):



     (a) promptly upon receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments and similar writings furnished to
the Company under each Transaction Document;



     (b) promptly upon request, all reports, notices, requests, demands, certificates, policies and
other instruments required by the Federal Reserve Bank of New York or the Board in connection with
Section 13(3) of the Federal Reserve Act from time to time;



     (c) within 10 Business Days after the end of each March, June, September and December and, in
respect of clause (i) only, on each Forward



30









 







Closing Date: (i) estimated cash flows for each CDO Issue and assets acquired in connection
with Permitted CDO Liquidation Purchases; and (ii) the estimated net asset value of the Equity
Interest (computed as the estimated market value of all of the CDO Issues and assets acquired in
connection with Permitted CDO Liquidation Purchases minus the aggregate outstanding balance of the
Senior Loans); and



     (d) promptly, such additional financial and other information as the Senior Lender, the
Controlling Party or the Equity Investor, as the case may be, may from time to time reasonably
request.



     Section 8.03. Payment of Obligations. Subject to the limitations set forth in Article 5,
pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the Company.



     Section 8.04. Maintenance of Existence; Compliance. (a)(i)  Preserve, renew and keep in
full force and effect its organizational existence and (ii) take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal conduct of its business;
(b) comply with all material Requirements of Law and (c) punctually perform and observe all of its
obligations and agreements contained in the Transaction Documents to which it is a party (it being
understood that such performance or observance may be undertaken by the Administrator on the
Company’s behalf). The Company may contract with other Persons to assist it in performing its
duties under the Transaction Documents and its other Contractual Obligations, and any performance
of such duties by a Person identified to the Senior Lender, the Equity Investor and the Controlling
Party shall be deemed to be action taken by the Company. Initially, the Company has contracted
with the Administrator to assist the Company in performing its duties under the Transaction
Documents.



     Section 8.05. Inspection of Property; Books and Records; Discussions.
Cause the Administrator to (a) keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b) to permit
representatives of the Controlling Person (or its designees), the Equity Investor and the Senior
Lender to visit and examine and make abstracts from any of such books and records kept by the
Administrator at any reasonable time and as often as may reasonably be desired and to discuss the
business, assets and financial and other condition of the Company with officers and employees of
the Administrator and with the Company’s independent certified public accountants.



31









 





     Section 8.06. Notices. Promptly give notice to the Senior Lender, the Equity Investor, the
Controlling Party and the Investment Manager of:




     (a) the occurrence of any Event of Default;




     (b) any (i) default or event of default under any Contractual Obligation of the
Company or (ii) material litigation, investigation or proceeding affecting the Company,
including any litigation, investigation or proceeding (A) in which injunctive or similar
relief is sought or (B) which relates to any Transaction Document; and




     (c) any development or event that has had or could reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise), operations,
assets (including the Collateral) of the Company or the ability of the Company to perform
its obligations under this Agreement or any other Transaction Document to which it is a
party.



     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer
of the Company setting forth details of the occurrence referred to therein and stating what action
the Company proposes to take with respect thereto.



     Section 8.07. Proceeds. Cause all amounts due and to become due to the Company under or in
connection with the Collateral or otherwise constituting Proceeds to be paid directly to the
Collateral Agent to be credited to the Collateral Accounts.



     Section 8.08. Third Party Contracts. Cause each party to any Transaction Document with the
Company (other than ordinary course trading contracts or agreements) to covenant and agree in such
contract that such party will not at any time during which any of the Obligations are outstanding
and not before one year and one day has elapsed since the Obligations are no longer outstanding or,
if longer, the applicable preference period then in effect in any relevant jurisdiction, (a)
commence or institute against the Company or join with or facilitate any other Person in commencing
or instituting against the Company, any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, receivership, insolvency or liquidation proceedings, or other similar
proceedings under any United States Federal or state, or other jurisdiction, bankruptcy or similar
law or statute now or hereafter in effect in connection with any obligations relating to this
Agreement or any of the other Transaction Documents or (b) participate in any assignment for
benefit of creditors, compositions, or arrangements with respect to the Company’s debts.



32









 





ARTICLE 9

Negative Covenants




     The Company hereby agrees not to, unless it shall have received the prior written consent of,
or otherwise been directed to do so in writing by, the Controlling Party:



     Section 9.01. Indebtedness. Create, issue, incur, assume, become liable in respect of or
suffer to exist any Indebtedness, except (a) Indebtedness pursuant to any Transaction Document, (b)
Indebtedness in respect of Permitted Hedging Transactions or Permitted Investments and (c) any
other liabilities contemplated by this Agreement or any other Transaction Document.



     Section 9.02. Liens. Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, or assign or otherwise
convey or encumber any existing or future right to receive any income or payments, except for Liens
created pursuant to the Security Documents or in connection with Permitted Hedging Transactions or
Permitted Investments.



     Section 9.03. Fundamental Changes. Enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all
or substantially all of its property or business; provided that the Company may be liquidated,
wound up, dissolved or all or substantially all of its property or business Disposed of, so long as
the proceeds of such Disposition, liquidation, winding-up or dissolution are distributed in
accordance with Section 5.02.



     Section 9.04. Disposition of Property. Dispose of any of its property, whether now owned or
hereafter acquired, unless (a) directed to do so in writing by the Controlling Party or its
designee or (b) in connection with a Permitted Investment.



     Section 9.05. Restricted Payments. Declare or pay any dividend (whether in cash or in
additional Capital Stock) on, or make any payment on account of, or set apart assets for a sinking
fund or other analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any of its Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company, except in accordance with Section 5.02.



     Section 9.06. Investments. Make any Investment except (a) the purchase of the CDO Pools in
accordance with the applicable Forward Purchase Agreements, (b) Permitted Investments of the funds
in the Collateral Accounts, the Expense Reimbursement Sub-Account and the Investment Reserve
Sub-Account in accordance with the Security Agreement, (c) investments of the funds received from
the CDO Pools and other Collateral during the period from and



33









 







including the Closing Date or a Payment Date to but excluding the next Payment Date in
Permitted Investments, (d) investments in Permitted Hedging Transactions and (e) investments in
Permitted CDO Liquidation Purchases.



     Section 9.07. Limitations on Payments and Expenditures. Make any payment to any Person
(including pursuant to any Transaction Document) or any expenditure for any assets, in each case
except (a) in accordance with Section 5.02, (b) out of the Investment Reserve Account or the
Expense Reimbursement Sub-Account in accordance with Section 5 of the Security Agreement, (c) out
of the Escrow Account (or any sub-account thereof) in accordance with the Article 3 of the
Administration Agreement and (d) any other Investments permitted under this Agreement.



     Section 9.08. Amendments to Transaction Documents. Amend or modify any of the Transaction
Documents to which it is a party or any other agreement or instrument pursuant to which any of the
assets in any CDO Pool or other Investments have been created, unless directed to do so in writing
by the Controlling Party.



     Section 9.09. Limitations on Activities. Engage in any activity of any kind or enter into a
transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking
which is not directly or indirectly related to the Transactions.



     Section 9.10. ERISA. Establish, maintain, sponsor or contribute to or assume any liability
under, or become obligated to establish, maintain, sponsor or contribute to or assume any liability
under, any Plans.



     Section 9.11. Accounts. Except for the Collateral Accounts (and any sub-accounts thereof,
including the Expense Reimbursement Sub-Account and the Investment Reserve Sub-Account) and the
Escrow Account (and any sub-accounts thereof), open or maintain any deposit account or securities
account.



     Section 9.12. Formation of Subsidiaries. Form any new Subsidiary or invest in or acquire any
new Subsidiary.



ARTICLE 10

Events of Default




     Section 10.01. Events of Default. The occurrence of any of the following events shall
constitute an event of default (an “Event of Default”):




     (a) any representation or warranty made or deemed made the Company herein or in any
other Transaction Document or that is contained in any certificate, document or financial
or other statement furnished by it at any time under or in connection with this Agreement
or



34









 







any such other Transaction Document shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made; or




     (b) the Company shall default in the observance or performance of any other covenant,
agreement or undertaking contained in this Agreement or any other Transaction Document and
such default is not cured for a period of five Business Days after the Controlling Party
gives written notice thereof to the Company; or




     (c) (i) the Company shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets; or (ii) there shall be commenced against the Company
any case, proceeding or other action of a nature referred to in clause (i) above that
(A) results in the entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed or undischarged for a period of 60 days; or (iii) there shall be
commenced against the Company any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or any
substantial part of its assets that results in the entry of an order for any such relief
that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Company shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Company shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they become due;
or (vi) the Company shall make a general assignment for the benefit of its creditors; or




     (d) (i) any of the Transaction Documents shall cease, for any reason, to be in full
force and effect, or the Company shall so assert, or (ii) any Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect and priority
purported to be created thereby, or (iii) the Company shall repudiate any of its
obligations under this Agreement or any Security Document.



     Section 10.02. Consequences Of Events Of Default. If an Event of Default occurs and is
continuing, the Controlling Party may (i) declare the Senior Loans (with accrued interest thereon)
and all other amounts owing under this Agreement and the other Transaction Documents to be due and
payable forthwith, whereupon the same shall immediately become due and payable; provided that



35









 







upon the occurrence of any Event of Default described in Section 10.01(c)(i), (ii), (iii) or
(iv), the Senior Loans (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Transaction Documents shall automatically become and be due and payable,
(ii) instruct the Company to liquidate all of the CDO Pools and all other Collateral, distribute
its assets as provided in Section 5.02 and dissolve its legal existence and (iii) instruct the
Collateral Agent to exercise all or any of its rights, powers and remedies with respect to the
Collateral as Collateral Agent for the Secured Parties. Except as expressly provided above in this
Section 10.02, presentment, demand, protest and all other notices of any kind are hereby expressly
waived by the Company.



ARTICLE 11

Miscellaneous




     Section 11.01. Waivers; Amendments. (a) No failure or delay of the Senior Lender, the
Equity Investor, the Controlling Party or the Collateral Agent in exercising any power or right
hereunder or under any other Transaction Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Senior Lender, the Equity
Investor, the Controlling Party and the Collateral Agent hereunder and under the other Transaction
Documents are cumulative and are not exclusive of any rights or remedies that it would otherwise
have. No waiver of any provision of this Agreement or any other Transaction Document or consent of
the Senior Lender, the Equity Investor, the Controlling Person or the Collateral Agent to any
departure by the Company shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other circumstances.



     (b) The Company may, with the consent of the Controlling Party (and shall, if directed by the
Controlling Party), and the Senior Lender may, from time to time, (i) enter into written
amendments, supplements or modifications hereto and to the other Transaction Documents for the
purpose of adding any provisions to this Agreement or the other Transaction Documents or changing
in any manner the rights of the Senior Lender, the Equity Investor, the Controlling Party or the
Company hereunder or thereunder or (ii) waive any of the requirements of this Agreement or the
other Transaction Documents or any Event of Default and its consequences; provided that no such
waiver and no such amendment, supplement or modification shall, without the written consent of the
Equity Investor, (A) reduce the Equity Contribution Amount, (B) reduce the rate at which preferred
distributions accrue hereunder on the Equity Interest or (C) amend Section 5.02 in a way that is
material and adverse to the Equity Investor. Any such waiver and



36









 







any such amendment, supplement or modification shall be binding upon the Company, the Senior
Lender, the Equity Investor, the Controlling Party and the Collateral Agent. No waiver of any
Event of Default shall extend to any subsequent or other Event of Default or impair any right
consequent thereon. Neither this Agreement nor any provision hereof may be waived, amended or
modified except in accordance with the provisions of this Section, and any purported amendment,
supplement or modification not complying with the terms of this Section 11.01 shall be null and
void.



     Section 11.02. Notices; Electronic Communications. (a) Except in the case of notices and
other communications expressly permitted to be given by telephone, notices and other communications
provided for herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by fax or e-mail, and all notices and other
communications expressly permitted hereunder to be given by telephone shall be made, to the
applicable address, fax number, e-mail address or telephone number specified for the applicable
Party in Schedule 11.02.



     (b) All notices and other communications given to any Party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered
by hand or overnight courier service or sent by fax or email or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such Party as provided in this Section or in accordance with the latest
unrevoked direction from such Party given in accordance with this Section. As agreed to among the
Parties from time to time, notices and other communications may also be delivered by e-mail to the
e-mail address of a representative of the applicable Party provided from time to time by such
Party.



     Section 11.03. Binding Effect. This Agreement shall become effective when a counterpart
hereof shall have been executed by each of the Parties and delivered to the Controlling Party.



     Section 11.04. Survival of Agreement. All covenants, agreements, representations and
warranties made by the Company herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Transaction Document shall
be considered to have been relied upon by the Senior Lender, the Equity Investor, the Controlling
Party and the Collateral Agent, regardless of any investigation made by the Senior Lender, the
Equity Investor, the Company, the Managing Member, the Controlling Party or the Collateral Agent or
on their behalf, and shall continue in full force and effect until the Company is liquidated in
accordance with the LLC Operating Agreement. Notwithstanding anything to the contrary herein, the
provisions of Section 11.05 shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Senior Loans or the Equity Interest, the invalidity or unenforceability
of any term or provision



37









 







of this Agreement or any other Transaction Document or any investigation made by or on behalf
of any of the Senior Lender, the Equity Investor, the Company, the Managing Member, the Controlling
Party or the Collateral Agent.



     Section 11.05. Expenses; Indemnity. (a) The Company agrees to pay in accordance with
Section 5.02 all reasonable out-of-pocket expenses incurred by the Senior Lender and the
Controlling Party in connection with its due diligence and the financial analysis of the Company,
the preparation and administration of this Agreement and the other Transaction Documents, any
amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions hereby or thereby contemplated shall be consummated) or incurred by the Senior Lender
or the Controlling Party in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Transaction Documents or in connection with the Senior
Loans made hereunder, including in each case the fees, charges and disbursements of counsel,
accountants, financial advisers and other experts engaged by the Senior Lender or the Controlling
Party.



     (b) Subject to clause (c) of this Section 11.05, the Company agrees to indemnify each of the
Senior Lender, the Equity Investor, the Controlling Party and their respective Related Parties
(each such Person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel
fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with or as a result of (i) the execution or delivery of this Agreement or any
other Transaction Document or any agreement or instrument contemplated thereby, the performance by
the parties thereto of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the
Senior Loans and the Equity Interest or (iii) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless
of whether such matter is initiated by a third party or by the Company or any of its Affiliates).



     (c) The indemnities in clause (b) of this Section 11.05 shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted primarily from the bad faith, gross negligence, fraudulent actions or willful misconduct
of such Indemnitee; provided that the Company shall not be obligated to pay, indemnify or hold
harmless any Indemnitee if such Indemnitee (i) does not provide reasonably prompt notice to the
Company (with a copy to the Controlling Party) of any claim for which indemnification is sought or
(ii) admits any liability or incurs any significant expenses after receiving actual written notice
of the claim (which is sufficiently specific to give reasonable notice of the existence of the
claims and the expenses of such legal proceedings), or agrees to any settlement without the prior
written consent of the Company. The Company may, in its sole discretion



38









 







and at its expense, control the defense of the claim including designating counsel for the
Indemnitees and controlling all negotiations, litigation, arbitration, settlements, compromises and
appeals of any claim.



     (d) To the extent permitted by applicable law, no party, and no Person benefiting from the
indemnity provided herein, shall assert, and each hereby waives and the Company shall have no
indemnity obligation with respect to, any claim against any other party, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, the Senior Loan, the Equity Interest or the use
of the proceeds thereof.



     (e) The provisions of this Section shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Senior Loans or the Equity Interest, the
invalidity or unenforceability of any term or provision of this Agreement or any other Transaction
Document or any investigation made by or on behalf of the Senior Lender or the Equity Investor.



     (f) All amounts due under this Section 11.05 shall be payable in accordance with Section 5.02,
subject to Section 11.20. In order to be paid such amounts on any particular Payment Date in
respect of any losses, claims, damages, liabilities or related expenses, in each case incurred no
later than two Business Days prior to the Notice Date immediately preceding such Payment Date, the
request for payment under this Section 11.05 must be received by the Company, the Collateral Agent
and the Administrator no later than such Notice Date.



     Section 11.06. Successors and Assigns; Participations and Assignments. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns permitted by this Section 11.06. Any assignment or transfer by a
Party of rights or obligations under this Agreement that does not comply with this Section 11.06
shall be null and void.



     (b) The Company may not assign or otherwise transfer (including through participation) any of
its rights or obligations hereunder without the prior written consent of each of the Senior Lender,
the Equity Investor and the Controlling Party (and any attempted assignment or transfer by the
Company without such consent shall be null and void).



     (c) The Equity Investor may not assign or otherwise transfer (including through participation)
its rights or obligations hereunder; provided that the Equity Investor may sell, assign or
otherwise transfer (including through participation) all or any portion of the Equity Interest with
the consent of the Controlling Party; provided, further, that (i) any assignment or transfer
(including through participation) by the Equity Investor of all or any portion of the Equity
Interest



39









 







will be accompanied by a simultaneous transfer of an equivalent portion of the Membership
Interest under this Agreement (including any rights to receive Excess Amounts associated with such
portion) to the same assignee (or participant) and (ii) the Equity Investor shall deliver to the
Controlling Party an opinion of counsel, which is reasonably satisfactory to the Controlling Party,
that such action will not cause the Company to be treated as an association or other entity taxable
as a corporation, and (iii) each assignee or participant shall be a “qualified purchaser” (as
defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended). Any assigning
Equity Investor shall promptly notify the Controlling Party, any other Equity Investor, the Senior
Lender, the Investment Manager, the Collateral Agent, the Administrator and the Company of the name
of any such assignee and the date of effectiveness of such assignment. From and after the date of
such notice of assignment, the assignee thereunder shall be a party hereto and have the rights and
obligations of the assigning Equity Investor under this Agreement (to the extent of the interest so
assigned) and the other Transaction Documents, and the assigning Equity Investor shall be released
from its obligations under this Agreement (to the extent of the interest so assigned) and, to the
extent the entire amount of its Equity Interest has been assigned or transferred, such Equity
Investor shall cease to be a Party hereto but shall continue to be entitled to the benefits of
Section 11.05.



     (d) The Senior Lender may not assign or otherwise transfer (including through participation)
its rights or obligations hereunder; provided that the Senior Lender, may sell, assign or otherwise
transfer (including through participation) all or any portion of the principal amount of any Senior
Loan with the consent of the Controlling Party; provided, further, that (i) any assignment or
transfer (including through participation) by the Senior Lender of all or any portion of the
principal amount of any Senior Loan will be accompanied by a simultaneous transfer of an equivalent
portion of the Membership Interest under this Agreement (including and any rights to receive the
Contingent Interest associated with such portion) to the same assignee (or participant), (ii) the
Senior Lender shall deliver to the Controlling Party an opinion of counsel, which is reasonably
satisfactory to the Controlling Party, that such action will not cause the Company to be treated as
an association or other entity taxable as a corporation and (iii) each assignee or participant
shall be a “qualified purchaser” (as defined in Section 2(a)(51)(A) of the Investment Company Act
of 1940, as amended). Any assigning Senior Lender shall promptly notify the Controlling Party, the
Equity Investor, any other Senior Lender, the Investment Manager, the Collateral Agent, the
Administrator and the Company of the name of any such assignee and the date of effectiveness of
such assignment. From and after the date of such notice of assignment, the assignee thereunder
shall be a party hereto and have the rights and obligations of the assigning Senior Lender under
this Agreement (to the extent of the interest so assigned) and the other Transaction Documents, and
the assigning Senior Lender shall be released from its obligations under this Agreement (to the
extent of the interest so assigned) and, to the extent the entire amount of its Senior Loans have



40









 







been assigned or transferred, such Senior Lender shall cease to be a Party hereto but shall
continue to be entitled to the benefits of Section 11.05.



     (e) At least five Business Days prior to any proposed transfer by the Senior Lender that would
result in a transfer of its rights as the Controlling Party, the Senior Lender will notify the
holder of the Equity Interest of the proposed transfer, and offer an opportunity for such holder of
the Equity Interest to suggest any amendments, supplements or other modifications that such holder
of the Equity Interest reasonably believes are necessary to protect the economic interests of such
holder of the Equity Interest; provided that the Controlling Party shall be under no obligation to
effect or consent to any such amendment, supplement or other modification, and following such
notice, the Senior Lender may effect any such transfer in its sole and absolute discretion.



     (f) The Collateral Agent may not assign or otherwise transfer (including through
participation) its rights or obligations hereunder; provided that if the Collateral Agent (i)
assigns its rights pursuant to the terms of the Security Agreement, it shall assign such rights
only together with all of its rights under this Agreement, or (ii) resigns and appoints a successor
Collateral Agent pursuant to the terms of the Security Agreement, such successor shall be the
successor to the Collateral Agent under this Agreement without the execution or filing of any paper
or any further act on the part of the parties to this Agreement, notwithstanding anything in this
Agreement to the contrary.



     Section 11.07. Equity Investor’s Last Look Rights. (a) If the Federal Reserve Bank of New
York, in its capacity as Senior Lender (in such capacity, the “Assignor”), proposes to assign or
otherwise transfer (including through participation) all or any portion of the principal amount of
any Senior Loan (in one or a series of transactions) such that, after giving effect to such
assignment or transfer, the Assignor will hold less than 50% of the outstanding aggregate principal
amount of all Senior Loans (a “Proposed Transfer”), the Assignor shall provide written notice to
the Equity Investor of the Proposed Transfer, which notice shall identify the principal amount of
the Senior Loans to be assigned or transferred (the “Assigned Amount”), the proposed purchase price
thereof (the “Proposed Purchase Price”) and the other terms and conditions of the Proposed
Transfer.



     (b) At any time within three Business Days after the date the Equity Investor receives notice
of a Proposed Transfer, the Equity Investor shall have the right and option to purchase all (but
not less than all) of the Assigned Amount by delivering written notice (the “Last Look Notice”) to
the Assignor of its intent to purchase the Assigned Amount at a premium to the proposed purchase
price equal to 100.50% of the Proposed Purchase Price (such amount, the “Last Look Purchase
Price”).



     (c) If, prior to the end of the three Business Day period referred to in clause (b) of this
Section 11.07, the Equity Investor has delivered a Last Look



41









 







Notice, the Equity Investor shall be obligated to purchase the Assigned Amount by paying to
the Assignor the Last Look Purchase Price in immediately available funds on or before the later of
(i) ten Business Days after the date upon which the Last Look Notice was delivered by the Equity
Investor and (ii) the same date as was proposed for the closing of the Proposed Transfer and, in
either case, must otherwise consummate such purchase on the same terms and conditions of the
Proposed Transfer. If at the end of such three Business Day period, the Equity Investor has not
delivered a Last Look Notice to the Assignor, the Assignor shall be free to consummate the Proposed
Transfer pursuant to the terms thereof and all rights and options of the Equity Investor to
purchase any Senior Loans pursuant this Section 11.07 shall terminate.



     Section 11.08. Priority. (a) All rights to payment on the Equity Interest hereunder and any
amounts owed to the Equity Investor under the other Transaction Documents (collectively, the
“Equity Investor Entitlements”) are subordinate and junior in right of payment to all the
Obligations owing to the Senior Lender hereunder and under the other Transaction Documents
(including in respect of principal and interest on the Senior Loans, but excluding the Contingent
Interest payable on the Senior Loans) (collectively, the “Senior Debt”) to the extent and in the
manner provided herein and in the Security Agreement.



     (b) Unless and until all Senior Debt and all items above the Equity Interest in the priority
of payments set forth in Section 5.02 shall have been paid in full in cash in accordance with its
terms, the Company shall not, directly or indirectly, make or agree to make:




     (i) any distribution or payment (in cash or property, by set-off or otherwise),
direct or indirect, of or on account of the Equity Investor Entitlements, and no such
payment shall be accepted by the Equity Investor;




     (ii) any payment (in cash or property, by set-off or otherwise), direct or indirect,
of or on account of the Equity Contribution Amount, and no such payment shall be accepted
by the Equity Investor;




     (iii) any payment (in cash or property, by set-off or otherwise), direct or indirect,
of or on account of any other Obligations due to the Equity Investor; or




     (iv) any redemption, purchase, prepayment or other acquisition, direct or indirect,
or in respect of, the Equity Investor Entitlements, and no such payment shall be accepted
by the Equity Investor.



     (c) Upon any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or winding up or total
or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency,



42









 







receivership or other statutory or common law proceedings or arrangements, then and in any
such event all principal and interest and all other amounts due or to become due upon the Senior
Debt and all items above the Equity Interest in the priority of payments set forth in Section 5.02
shall first be paid in full in cash before the Equity Investor shall be entitled to retain any
assets so paid or distributed in respect of the Equity Investor Entitlements; and, upon any such
dissolution or winding up or liquidation or reorganization, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or securities, to which the
Equity Investor would be entitled, except as otherwise provided herein, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Equity Investor if received by them, to the
Collateral Agent for distribution to the Senior Lender, to the extent necessary to pay all Senior
Debt in full in cash, after giving effect to any concurrent payment or distribution to or for the
Senior Lender, before any payment or distribution is made to the Equity Investor.



     (d) Until the Senior Debt shall have been paid in full in cash, should any payment or
distribution be collected or received by the Equity Investor or should the Equity Investor acquire
custody, control or possession of any Collateral or the proceeds therefrom other than pursuant to
or in accordance with the terms of this Agreement, the Equity Investor shall promptly (but in any
event within five Business Days) turn over the same to the Collateral Agent in the form received
(except for the endorsement or the assignment of the Equity Investor when necessary) and, until so
turned over, the same shall be held in trust by the Equity Investor as the property of the Senior
Lender.



     (e) The Equity Investor shall not have any right to demand payment of, or return of, or
institute any proceedings in respect of, the Equity Investor Entitlements, or exercise any remedies
under this Agreement or any of the Transaction Documents or request or instruct the Controlling
Party or the Collateral Agent to exercise any such remedies until the Senior Debt is paid in full
in cash.



     (f) The Equity Investor, by acceptance of the benefits of this Agreement and the other
Transaction Documents, agrees that it will not hold, take, accept or obtain any Lien upon any of
the Collateral to secure the payment and performance of any of the Obligations.



     (g) Until the Senior Debt and the Contingent Interest shall have been paid in full in cash and
not before one year and one day has elapsed since such payment or, if longer, the applicable
preference period then in effect in any relevant jurisdiction, the Equity Investor agrees that it
will not at any time, without the prior written consent of the Controlling Party, (i) commence or
institute against the Company or join with or facilitate any other Person in commencing or
instituting against the Company, any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, receivership, insolvency or



43









 







liquidation proceedings, or other proceedings under any United States Federal or state, or
other jurisdiction, bankruptcy or similar law or statute now or hereafter in effect in connection
with any obligations relating to this Agreement or any of the other Transaction Documents or (ii)
participate in any assignment for benefit of creditors, compositions, or arrangements with respect
to the Company’s debts. The agreements in this Section 11.08(g) shall survive termination of this
Agreement and payment in full of the Senior Debt (including the Contingent Interest).



     (h) Application of the foregoing provisions to the Equity Investor Entitlements, the
subordination effected thereby and the rights of the Senior Lender shall not be affected by (i) any
amendment of or addition or supplement to any Transaction Document or any Senior Debt or any
instrument or agreement relating thereto or providing collateral security for any Senior Debt, (ii)
any exercise or non-exercise of any right, power or remedy under or in respect of any Transaction
Document or any Senior Debt or any instrument or agreement relating thereto, or any release of any
collateral securing any Senior Debt, or (iii) any waiver, consent, release, indulgence, extension,
renewal, modification, delay or any other action, inaction or omission in respect of any
Transaction Document or any Senior Debt or any instrument or agreement relating thereto or
providing collateral security for any Senior Debt; in each case whether or not the Equity Investor
shall have had notice or knowledge of any of the foregoing.



     (i) The Equity Investor hereby waives notice of or proof of reliance by the Senior Lender upon
the provisions hereof, and the Senior Debt shall conclusively be deemed to have been created,
contracted, incurred or maintained in reliance upon the provisions hereof.



     (j) The Company hereby waives diligence, presentment, demand, protest and notice of any kind
whatsoever. The non-exercise by the Controlling Party or the Collateral Agent of any of its rights
hereunder or under any other Transaction Document in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.



     (k) The subordination provisions contained herein are for the benefit of the Senior Lender and
its successors and assigns and may not be rescinded or cancelled or modified in any way without the
prior written consent of the Controlling Party.



     (l) Notwithstanding anything herein to the contrary, neither the Controlling Party nor the
Senior Lender shall have any obligation to take the interests of the Equity Investor into
consideration when making decisions concerning the exercise of any rights or remedies as against
the Company or in respect of the Collateral.



     Section 11.09. Counterparts. This Agreement may be executed in counterparts (and by
different Parties on different counterparts), each of which



44









 







shall constitute an original but all of which when taken together shall constitute a single
contract, and shall become effective as provided in Section 8.03. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.



     Section 11.10. Severability. If any one or more of the provisions contained in this
Agreement or in any other Transaction Document should be held invalid, illegal or unenforceable in
any respect to the extent permitted by applicable law, the validity, legality and enforceability of
the remaining provisions contained herein and therein shall not in any way be affected or impaired
thereby (it being understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in any other
jurisdiction). The Parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.



     Section 11.11. Integration. This Agreement and the other Transaction Documents represent the
entire agreement of the Parties with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the Senior Lender, the Equity
Investor or the Controlling Party relative to the subject matter hereof not expressly set forth or
referred to herein or in the other Transaction Documents.



     Section 11.12. Applicable Law. THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.



     Section 11.13. Jurisdiction; Consent to Service of Process. (a) Each Party hereby
irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction
of any New York State court or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents, or for recognition or enforcement of
any judgment, and each of the Parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such federal court. Each Party agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.



     (b) Each Party hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or the other
Transaction Documents in any New York State or federal court. Each Party hereby irrevocably
waives, to the



45









 







fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.



     (c) Each Party to this Agreement irrevocably consents to service of process in the manner and
at the address provided for notices in Section 11.02. Nothing in this Agreement will affect the
right of any Party to this Agreement to serve process in any other manner permitted by law.



     Section 11.14. Confidentiality. The Equity Investor agrees to keep confidential all non
public information, including the Transaction Documents, and other related documents provided to it
by the Company or Administrator, the Collateral Agent, the Escrow Agent, the Investment Manager,
the Controlling Party or any other Person pursuant to or in connection with this Agreement or the
other Transaction Documents; provided that nothing herein shall prevent the Equity Investor from
disclosing any such information (a) to its Related Parties who have a need to know such information
(it being understood that the Persons to whom such disclosure is made will be informed of the
confidential nature of such information and instructed to keep such information confidential), (b)
upon the request or demand of any regulatory authority, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) in connection with the
exercise of any remedies hereunder or under the other Transaction Documents or any suit, action or
proceeding relating to the enforcement of its rights hereunder or thereunder, (e) with the consent
of the Controlling Party or (f) to the extent such information becomes publicly available other
than as a result of a breach of this Section 8.13; provided, further, that prior to any disclosure
of information pursuant to clause (b) or (c) of the proviso above, the Equity Investor shall notify
the Company and the Controlling Party, if legally permitted to do so, of any proposed disclosure as
far in advance of such disclosure as practicable and, upon the Company’s or the Controlling Party’s
request, take all reasonable actions to ensure that any information disclosed is accorded
confidential treatment, or if such notice to the Company and the Controlling Party is prohibited by
law, inform the relevant court, regulatory authority of the Company’s and the Controlling Party’s
interest in the disclosed information and request that such court, regulatory authority inform the
Company and the Controlling Party of the disclosure.



     Section 11.15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE
OTHER TRANSACTION DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES



46









 







HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     Section 11.16. Limited Recourse. Notwithstanding anything to the contrary contained in this
Agreement and the other Transaction Documents, the obligations of the Company under this Agreement
and all other Transaction Documents are solely the obligations of the Company and shall be payable
solely to the extent of funds received by and available to the Company in accordance with this
Agreement. No recourse shall be had for the payment of any amount owing in respect of any
obligation of, or claim against, the Company arising out of or based upon this Agreement or any
other Transaction Document against any holder of a Membership Interest, employee, officer or
Affiliate thereof and, except as specifically provided herein and in the other Transaction
Documents, no recourse shall be had for the payment of any amount owing in respect of any
obligation of, or claim against, the Company arising out of or based upon this Agreement against
the Collateral Agent, the Escrow Agent, the Administrator, the Investment Manager or any holder of
the Membership Interests or any equity interests in any Related Party of any thereof; provided that
the foregoing shall not relieve any such person or entity from any liability they might otherwise
have as a result of willful misconduct, gross negligence or fraudulent actions taken or omissions
by them. The provisions of this Section shall survive the termination or expiration of this
Agreement and payment in full of all of the Obligations.



     Section 11.17. Certain Tax Matters.  (a) It is the intention of the Parties that for U.S.
federal income tax purposes: (i) both the Senior Loan and the Equity Interest shall be treated as
equity interests in the Company; (ii) the Company shall be treated as the owner of the Collateral;
and (iii) the Company shall be treated as a partnership (and shall not be treated as an association
or other entity taxable as a corporation). The terms of this Agreement and the other Transaction
Documents shall be interpreted consistently with this intention, and the Parties agree to not take
any position for U.S. federal income tax purposes (in a filing or otherwise) contrary to this
intention.



     (b) The Parties shall comply with the exception provided in Treasury Regulations section
1.7704-1(h) to prevent interests in the Senior Loan and Equity Interest from being readily tradable
on a secondary market or the substantial equivalent thereof.



     Section 11.18. Headings. Article and Section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.



     Section 11.19. Investment Company Act. Each of the Senior Lender and the Equity Investor
represents and warrants that it is a “qualified purchaser” as



47









 







defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended.



     Section 11.20. Right of Setoff. (a) The Senior Lender and each of its Affiliates is
authorized, to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other obligations
at any time owing by the Senior Lender or any such Affiliate to or for the credit or the account of
the Company against the obligations of the Company hereunder and under the other Transaction
Documents, irrespective of whether or not the Senior Lender or any such Affiliate shall have made
any demand thereunder and although such obligations may be unmatured.



     (b) For the avoidance of doubt, any provision in a Transaction Document requiring a payment to
be made in accordance with Section 5.02 does not, to the extent such payment is to be made to the
Senior Lender or any of its Affiliates, preclude any set off by the Senior Lender or such Affiliate
pursuant to this Section 11.20.



     (c) The rights of the Senior Lender under this Section 11.20 are in addition to all other
rights and remedies (including other rights of set off) that the Senior Lender may have.



     Section 11.21. Role Of Investment Manager And Controlling Party. Each Party hereby accepts
the role and powers of the Investment Manager described in this Agreement and the other Transaction
Documents and understands that the Investment Manager will be solely the agent of the Controlling
Party. In addition, the Controlling Party has ultimate authority with respect to all decisions
regarding the management of the Collateral (which it may delegate, in whole or in part, to the
Investment Manager or otherwise), including decisions as to when to dispose of Collateral. In
exercising such control, the Controlling Party and its agents, including the Investment Manager,
shall have no duty to maximize returns on the Collateral or to take into account the interests of
the Equity Investor or the Senior Lender or any other Secured Party.



[signature pages follow]





48









 








     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and
delivered by their proper and duly authorized signatories as of the day and year first above
written.



	 	 	 	 	 
	 	MAIDEN LANE III LLC, as Company

 	 
	 	By:  	FEDERAL RESERVE BANK OF NEW
YORK, as its sole Managing Member
 	 
	 	 	 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ Sandra C. Krieger	 
	 	 	Name:  	Sandra C. Krieger	 
	 	 	Title:  	Executive Vice President	 
	 
	 	FEDERAL RESERVE BANK OF NEW
         YORK, as Controlling Party

 	 
	 	By:  	/s/ Sandra C. Krieger	 
	 	 	Name:  	Sandra C. Krieger	 
	 	 	Title:  	Executive Vice President	 
	 
	 	FEDERAL RESERVE BANK OF NEW
         YORK, as Senior Lender

 	 
	 	By:  	/s/ Susan McLaughlin	 
	 	 	Name:  	Susan McLaughlin	 
	 	 	Title:  	Vice President Markets	 
	 
	 	AMERICAN INTERNATIONAL GROUP,
         INC., as Equity Investor

 	 
	 	By:  	/s/ Anastasia D. Kelly	 
	 	 	Name:  	Anastasia D. Kelly	 
	 	 	Title:  	Executive Vice President and General Counsel	 
	 
	 	THE BANK OF NEW YORK MELLON, as
         Collateral Agent

 	 
	 	By:  	/s/ Douglas J. Magnolia	 
	 	 	Name:  	Douglas J. Magnolia	 
	 	 	Title:  	Managing Director	 
	 




 











 





Exhibit A to

Master Investment and Credit Agreement




FORM
OF SECURITY AGREEMENT





 





SECURITY AGREEMENT




dated as of November 25, 2008




among




MAIDEN LANE III LLC,

as Borrower




FEDERAL RESERVE BANK OF NEW YORK,

as Senior Lender,




FEDERAL RESERVE BANK OF NEW YORK,

as Controlling Party,




and




THE BANK OF NEW YORK MELLON,

as Collateral Agent




 





 









 





TABLE OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	Section 1. Definitions
	 	 	3	 
	Section 2. Security Interest
	 	 	7	 
	Section 3. Representations, Warranties and Covenants of the Borrower
	 	 	8	 
	Section 4. Administration of Collateral
	 	 	10	 
	Section 5. Collateral Accounts, Escrow Account and Application of Proceeds
	 	 	12	 
	Section 6. Certain Agreements Among Secured Parties
	 	 	14	 
	Section 7. The Collateral Agent
	 	 	15	 
	Section 8. Waivers; Amendment
	 	 	23	 
	Section 9. Notices
	 	 	24	 
	Section 10. Binding Effect
	 	 	24	 
	Section 11. Survival of Agreement
	 	 	24	 
	Section 12. Expenses; Indemnity
	 	 	24	 
	Section 13. Successors and Assigns
	 	 	26	 
	Section 14. Counterparts
	 	 	26	 
	Section 15. Severability
	 	 	27	 
	Section 16. Integration
	 	 	27	 
	Section 17. Applicable Law
	 	 	27	 
	Section 18. Jurisdiction; Consent to Service of Process
	 	 	27	 
	Section 19. Confidentiality
	 	 	28	 
	Section 20. WAIVER OF JURY TRIAL
	 	 	28	 
	Section 21. Limited Recourse
	 	 	29	 
	Section 22. Headings
	 	 	29	 
	Section 23. Waiver of Right of Setoff
	 	 	29	 
	Section 24. Instructions
	 	 	29	 
	Section 25. Further Assurances
	 	 	29	 
	Section 26. Internal Controls
	 	 	30	 
	Section 27. Role of Investment Manager and Controlling Party
	 	 	30	 
	Section 28. No Petition
	 	 	30	 
	Section 29. Maintenance of Books and Records
	 	 	30	 
	Section 30. Termination
	 	 	31	 






	 	 	 
	Schedule A

	 	Approved Sub-Custodians
	 
	 	 
	Exhibit A

	 	Form of Collateral Account Control Agreement
	 
	 	 
	Exhibit B

	 	Form of Escrow Account Control Agreement






 









 






SECURITY AGREEMENT




     This SECURITY AGREEMENT dated as of November 25, 2008 (this “Agreement”) among MAIDEN LANE III
LLC, a Delaware limited liability company (the “Borrower”), FEDERAL RESERVE BANK OF NEW YORK, as
Senior Lender and Controlling Party and THE BANK OF NEW YORK MELLON, as collateral agent for the
Secured Parties hereinafter referred to (in such capacity, together with its successors in such
capacity, the “Collateral Agent”).



     WHEREAS, concurrently with the execution and delivery of this Agreement, the Equity Investor,
the Borrower, the Senior Lender, the Controlling Party and the Collateral Agent are entering into
the Master Investment and Credit Agreement dated as of the date hereof (the “Master Investment and
Credit Agreement”) pursuant to which the Senior Lender has agreed to make the Senior Loans to the
Borrower thereunder upon the terms and subject to the conditions set forth therein; and



     WHEREAS, it is a condition precedent to the obligation of the Senior Lender to make the Senior
Loans to the Borrower under the Master Investment and Credit Agreement that the Borrower shall have
executed and delivered this Agreement; and



     WHEREAS, contemporaneously herewith the Borrower, the Collateral Agent and the Securities
Intermediary are executing and delivering the Collateral Account Control Agreement; and



     WHEREAS, contemporaneously herewith the Borrower, the Collateral Agent, the Escrow Agent and
the Securities Intermediary are executing and delivering the Escrow Account Control Agreement; and



     WHEREAS, the Borrower and the Secured Parties agree that the Collateral Agent shall administer
the Collateral, and the Collateral Agent is willing to so administer the Collateral, pursuant to
the terms and conditions set forth herein;



     NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:



     SECTION 1. Definitions.



     (a) Terms Defined in Master Investment and Credit Agreement. Terms defined in the Master
Investment and Credit Agreement and not otherwise defined in this Section have, as used herein, the
respective meanings provided for therein.



 









 




The rules of construction specified in Section 1.02 of the Master Investment and Credit
Agreement also apply to this Agreement.




     (b) Terms Defined in UCC. As used herein, each of the following terms has the meaning
specified in the UCC:



	 	 	 
	Term	 	UCC Section
	Account

	 	9-102
	Authenticate

	 	9-102
	Chattel Paper

	 	9-102
	Deposit Account

	 	9-102
	Document

	 	9-102
	Entitlement Holder

	 	8-102
	Entitlement Order

	 	8-102
	Financial Asset 

General Intangibles

	 	8-102 & 8-103

9-102
	Instrument

	 	9-102
	Investment Property

	 	9-102
	Letter-of-Credit Right

	 	9-102
	Proceeds

	 	9-102
	Registered Organization

	 	9-102
	Security

	 	8-102
	Securities Account

	 	8-501
	Security Entitlement

	 	8-102
	Supporting Obligation

	 	9-102






     (c) Additional Definitions. The following additional terms, as used herein, have the
following meanings:



     “Collateral” has the meaning set forth in Section 2(a) hereof.



     “Collateral Accounts” means the USD account, account number 630156, maintained by the Borrower
with the Securities Intermediary, including the Expense Reimbursement Sub-Account, the Investment
Reserve Sub-Account and all other accounts and sub-accounts established thereunder for the purpose
of holding property pursuant to this Agreement.



     “Collateral Account Control Agreement” means a Collateral Account Control Agreement
substantially in the form of Exhibit A (with any changes that the Controlling Party shall have
approved) among the Securities Intermediary, the Borrower and the Collateral Agent.



     “Control” has the meaning specified in UCC Section 8-106, 9-104, 9-105, 9-106 or 9-107, as may
be applicable to the relevant Collateral.



4









 





     “Counterparty” has the meaning set forth in the Administration Agreement.



     “Escrow Account” has the meaning set forth in the Administration Agreement.



     “Escrow Account Control Agreement” means an Escrow Account Control Agreement substantially in
the form of Exhibit B (with any changes that the Controlling Party shall have approved) among the
Escrow Agent, the Securities Intermediary, the Borrower and the Collateral Agent.



     “Expense Reimbursement Sub-Account” means such sub-account of the Collateral Accounts holding
cash and Permitted Investments that may be used at any time and from time to time to pay or record
expenses pursuant to Section 5(d).



     “Fees” means (a) the management fees of the Investment Manager under the Investment Management
Agreement and (b) the fees of the Collateral Agent, the Escrow Agent and the Administrator under
the Fee Letter.



     “Forward Closing Date” has the meaning set forth in the Administration Agreement.



     “Investment Reserve Sub-Account” means such sub-account of the Collateral Accounts holding
cash and Permitted Investments that may be used at any time and from time to time to pay or record
the purchase price for any Permitted CDO Liquidation Purchase.



     “Notice Date” has the meaning set forth in the Administration Agreement.



     “Officer’s Certificate” means, with respect to any entity, a certificate signed by the
Chairman, the Vice Chairman, the President, any Vice President, any Assistant Vice President, the
Treasurer, any Assistant Treasurer or any other duly authorized signatory of such entity.



     “Party” means a party to this Agreement.



     “Payment Calculation Report” means the report prepared by the Administrator pursuant to
Section 2.01(a)(iii) of the Administration Agreement.



     “Permitted CDO Liquidation Purchase” means a purchase by the Borrower of all or a portion of
the collateral securing a CDO Issue in connection with the liquidation of such collateral pursuant
to the terms of the Underlying Instruments relating to such CDO Issue.



     “Permitted Investments” means such investments as permitted pursuant to Proper Instructions.



5









 





     “Proper Instructions” has the meaning set forth in Section 7(a)(iv).



     “Records” has the meaning set forth in Section 29.



     “Secured Obligations” means the Borrower’s obligations to the Senior Lender, the Collateral
Agent, the Administrator, the Escrow Agent, the Securities Intermediary, any counterparty to a
Permitted Hedging Transaction and the Controlling Party and its agents (including the Investment
Manager) under each Transaction Document and the Investment Management Agreement, including the
Obligations.



     “Secured Parties” means the holders from time to time of the Secured Obligations.



     “Securities Intermediary” means The Bank of New York Mellon, in its capacity as securities
intermediary (within the meaning of UCC Section 8-102(a)(14)) in respect of the Collateral
Accounts.



     “Security Interest” means the security interest in the Collateral granted hereunder.



     “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New
York; provided that, if perfection or the effect of perfection or non perfection or the priority of
the Security Interest on any Collateral is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than New York, “UCC” means the Uniform Commercial Code as in effect from time
to time in such other jurisdiction for purposes of the provisions hereof relating to such
perfection, effect of perfection or non perfection or priority.



     “Underlying Instruments” means, for any CDO Issue, the “Underlying Instruments” for such CDO
Issue as defined in the applicable Forward Purchase Agreement.



     (d) Terms Generally. The definitions of terms herein (including those incorporated by
reference to the UCC or to another document) apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun includes the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition
of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (ii) any reference herein to any Person shall be construed to
include such Person’s successors and permitted assigns, (iii) the



6









 







words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all
references herein to Sections, Exhibits and Schedules shall be construed to refer to Sections of,
and Exhibits and Schedules to, this Agreement and (v) the word “property” shall be construed to
refer to any and all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.



     SECTION 2. Security Interest.



     (a) In order to secure the Secured Obligations, the Borrower hereby grants to the Collateral
Agent for the benefit of the Secured Parties a continuing security interest in all of the following
property of the Borrower whether now owned or existing or hereafter acquired or arising and
regardless of where located (the “Collateral”):




     (i) all right, title and interest of the Borrower in all Securities Accounts
including, without limitation, the Collateral Accounts and the Escrow Account, and for
each such Securities Account, all Financial Assets held therein or credited thereto
(including all cash, Instruments, Investment Property and all the other assets comprising
each CDO Issue) and all Security Entitlements in respect thereof, and all rights of the
Borrower in respect of the foregoing;




     (ii)
all Accounts;




     (iii) all Chattel Paper;




     (iv) all cash and Deposit Accounts;




     (v) all Documents;




     (vi) all General Intangibles;




     (vii) all Instruments;




     (viii) all Investment Property;




     (ix) all Letter-of-Credit Rights;




     (x) all books and records of the Borrower pertaining to any of its Collateral; and




     (xi) all Proceeds of the Collateral described in the foregoing clauses (i) through
(x);



     (b) With respect to each right to payment or performance included in the Collateral from time
to time, the Security Interest granted therein includes a



7









 







continuing security interest in (i) any Supporting Obligation that supports such payment or
performance and (ii) any Lien that (x) secures such right to payment or performance or (y) secures
any such Supporting Obligation.



     (c) The Security Interest is granted as security only and shall not subject the Collateral
Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Borrower with respect to any of the Collateral or any transaction in connection
therewith.



     SECTION 3. Representations, Warranties and Covenants of the Borrower. The Borrower
represents and warrants to the Collateral Agent and the Secured Parties as of the date hereof, and
covenants with the Collateral Agent and the Secured Parties, as follows:



     (a) The Borrower is a Registered Organization validly existing and in good standing under the
laws of the State of Delaware. The Borrower’s exact legal name is correctly set forth on the
signature page hereof. The Borrower will provide the Collateral Agent with at least 60 days’ prior
written notice of any change in the Borrower’s name, form, jurisdiction of organization,
organizational identification number, federal tax identification number, mailing address or the
address of its registered office from that provided to the Collateral Agent on the Closing Date.



     (b) The Borrower has good and marketable title to all of the Collateral, free and clear of any
adverse claim (as defined in Article 8 of the UCC), other than the Security Interest (and, with
respect to the Escrow Account, Counterparty’s rights prior to the relevant Forward Closing Date as
set forth in the Administration Agreement). The Borrower has not performed any acts that might
prevent the Collateral Agent from enforcing any of the provisions of this Agreement. No financing
statement, security agreement, mortgage or similar or equivalent document or instrument covering
all or part of the Collateral is on file or of record in any jurisdiction in which such filing or
recording would be effective to perfect or record a Lien on such Collateral except for the Security
Interest. After the date of this Agreement, no Collateral will be in the possession or under the
Control of any other Person having a claim thereto or security interest therein, other than the
Security Interest.



     (c) The Security Interest on all Collateral owned by the Borrower (i) has been validly
created, (ii) will attach to each item of such Collateral on the Closing Date (or, if the Borrower
first obtains rights thereto on a later date, on such later date) and (iii) when so attached, will
secure all the Secured Obligations.



     (d) The Collateral Accounts are Securities Accounts. Subject to the execution of the
Collateral Account Control Agreement by the parties thereto, and subject to the representations and
warranties made by the Securities Intermediary thereunder, and so long as the Financial Asset
underlying any Security Entitlement owned by the Borrower is credited to the Collateral Accounts,
(i) the



8









 







Security Interest in such Security Entitlement will be perfected, subject to no prior Liens or
rights of others, (ii) the Collateral Agent will have Control of such Security Entitlement and
(iii) no action based on an “adverse claim” (as defined in Article 8 of the UCC) to such Security
Entitlement or such Financial Asset, whether framed in conversion, replevin, constructive trust,
equitable lien or other theory, may be asserted against the Collateral Agent or any other Secured
Party.



     (e) When a UCC financing statement describing the Collateral as “all personal property” has
been filed in the State of Delaware, the Security Interest will constitute a perfected security
interest in the Collateral to the extent that a security interest therein may be perfected by
filing a financing statement pursuant to the Delaware UCC, prior to all Liens and rights of others
therein. Except for the filing of such UCC financing statement, no registration, recordation or
filing with any governmental body, agency or official is required in connection with the execution
or delivery of this Agreement or the Collateral Account Control Agreement or is necessary for the
validity or enforceability thereof or for the perfection or due recordation of the Security
Interest or for the enforcement of the Security Interest.



     (f) The Borrower will promptly give to the Collateral Agent copies of any notices and other
communications received by it with respect to Security Entitlements as to which the Borrower is the
Entitlement Holder.



     (g) If and so long as the Collateral includes any Security Entitlement in respect of a
Financial Asset issued by a legal entity organized or incorporated under the laws of a jurisdiction
outside the United States of America, the Borrower will take all such action as may be required
under the laws of such foreign jurisdiction to ensure that the Security Interest ranks prior to all
Liens and rights of others therein.



     (h) The Borrower will, from time to time, at its expense, execute, deliver, file and record
any statement, assignment, instrument, document, agreement or other paper and take any other action
(including any filing of financing or continuation statements under the UCC) that from time to time
may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to (i)
create, preserve, perfect, confirm or validate the Security Interest, (ii) cause the Collateral
Agent to have Control of any item of Collateral (if applicable), (iii) enable the Collateral Agent
or the other Secured Parties to obtain the full benefits of the Security Documents or (iv) enable
the Collateral Agent to exercise and enforce any of its rights, powers and remedies with respect to
the Collateral. The Borrower authorizes the Collateral Agent to execute and file such financing
statements or continuation statements in such jurisdictions with such descriptions of collateral
(including “all assets” or “all personal property” or other words to that effect) and other
information set forth therein as the Collateral Agent may deem necessary or desirable for the
purposes set forth in the preceding sentence. The Borrower also ratifies its authorization for the
Collateral Agent to



9









 







file in any such jurisdiction any initial financing statements or amendments thereto if filed
prior to the date hereof.



     (i) The Borrower will, promptly upon request, provide to the Collateral Agent all information
and evidence concerning the Collateral that the Collateral Agent may reasonably request from time
to time to enable it to enforce the provisions of this Agreement.



     (j) Promptly following a request from the Collateral Agent or the Controlling Party to do so,
and at the Borrower’s own expense, the Borrower agrees (i) to take all such lawful action as the
Collateral Agent or the Controlling Party may request to compel or secure the performance and
observance by any obligor of its obligations to the Borrower under or in connection with
(A) agreements or instruments pursuant to which any Collateral is issued in accordance with the
terms thereof (provided that such action is not inconsistent with or in violation of any of the
Borrower’s obligations under such agreements or instruments) and (B) any Transaction Document in
accordance with the terms thereof (provided that such action is not inconsistent with or in
violation of any of the Borrower’s obligations under such Transaction Documents) and (ii) to
exercise any and all rights, remedies, powers and privileges lawfully available to the Borrower, as
owner of the Collateral, under or in connection with such agreements or instruments, or under or in
connection with any Transaction Document, in each case to the extent and in the manner directed by
the Collateral Agent or by the Controlling Party, including the transmission of notices of default
and the institution of legal or administrative actions or proceedings to compel or secure
performance by any such Person of its obligations thereunder. The Borrower further agrees that it
will not (A) exercise any right, remedy, power or privilege available to it under or in connection
with the agreements or instruments pursuant to which any Collateral is issued or under or in
connection with any Transaction Document, (B) take any action to compel or secure performance or
observance by any Person of its obligations to the Borrower as holder of the Collateral under or in
connection with such agreements or instruments or under or in connection with any Transaction
Document or (C) give any consent, request, notice, direction, approval, extension or waiver to any
Person under the agreements or instruments pursuant to which any Collateral is issued or under any
Transaction Document, in each case not required to be exercised, taken, observed or given by the
Borrower pursuant to the terms thereof unless, in each case, it has obtained the prior written
consent of the Controlling Party and such action is not inconsistent with or in violation of any of
the Borrower’s obligations under such agreements, instruments or Transaction Documents, as the case
may be.



     (k) The Borrower owns no assets other than the Collateral.



     (l) The Borrower is a “qualified purchaser” as such term is defined in Section 2(a)(51)(A) of
the Investment Company Act of 1940, as amended.



     SECTION 4. Administration of Collateral.



10









 





     (a) The Collateral Agent shall at all times have all the rights of a secured party under the
UCC (whether or not in effect in the jurisdiction where such rights are exercised) with respect to
the Collateral. In addition, the Collateral Agent shall, upon Proper Instructions from the
Controlling Party, and whether or not an Event of Default has occurred, sell, lease, license or
otherwise dispose of the Collateral or any part thereof, in one or more parcels at public or
private sale, at any exchange, broker’s board or at any of Collateral Agent’s offices or elsewhere,
for cash, on credit or for future delivery, at such time or times and at such price or prices and
upon such other terms as the Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Collateral. To the maximum extent permitted by
applicable law, any Secured Party or the Equity Investor may be the purchaser of any or all of the
Collateral at any such sale and (with the consent of the Collateral Agent, which may be withheld in
its discretion absent direction from the Controlling Party) shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply all of any part of its Secured
Obligations as a credit on account of the purchase price of any Collateral payable at such sale.
Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted
by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the application of any part
of the purchase money paid over to the Borrower or such officer or be answerable in any way for the
misapplication thereof. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of the Borrower, and the Borrower hereby waives (to the
extent permitted by law) all rights of redemption, stay or appraisal that it now has or may at any
time in the future have under any rule of law or statute now existing or hereafter enacted. The
Collateral Agent shall not be obliged to make any sale of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. To the maximum extent permitted by law,
the Borrower hereby waives any claim against the Collateral Agent arising because the price at
which any Collateral may have been sold at such a private sale was less than the price that might
have been obtained at a public sale, even if the Collateral Agent accepts the first offer received
and does not offer such Collateral to more than one offeree. The Collateral Agent may, with the
consent of the Controlling Party, disclaim any warranty, as to title or as to any other matter, in
connection with such sale or other disposition, and its doing so shall not be considered adversely
to affect the commercial reasonableness of such sale or other disposition.



     (b) If the Collateral Agent sells any of the Collateral upon credit, the Borrower will be
credited only with payment actually made by the purchaser,



11









 







received by the Collateral Agent and applied in accordance with Section 5(b) hereof. If the
purchaser fails to pay for the Collateral, the Collateral Agent may resell the same, subject to the
same rights and duties set forth herein.



     (c) Notice of any such sale or other disposition shall be given by the Collateral Agent to the
Borrower and Equity Investor as required by Section 9 hereof.



     (d) Any and all interest and other cash and non-cash distributions in respect of any
Collateral, any and all payments received upon disposition of any Collateral and any and all other
Proceeds of any Collateral shall be paid directly to, and shall be received and held in, the
Collateral Accounts. If any Proceeds of the Collateral are received by the Borrower otherwise than
in the Collateral Accounts, such Proceeds shall be so received in trust for the Collateral Agent,
shall be segregated from other funds and property of the Borrower and shall be forthwith delivered
to the Securities Intermediary for deposit in the Collateral Accounts in the same form as received,
with any necessary endorsements.



     SECTION 5. Collateral Accounts, Escrow Account and Application of Proceeds.



     (a) Collateral Accounts. The Collateral Agent shall have Control over the Collateral
Accounts. The Borrower will make no transfers or withdrawals from the Collateral Accounts without
the prior written consent of the Collateral Agent. The Borrower, the Collateral Agent and the
Securities Intermediary shall always be party to the Collateral Account Control Agreement. The
Collateral Accounts may be further sub-divided into sub-accounts. Funds on deposit in the
Collateral Accounts shall be invested, applied or distributed in the manner set forth in this
Section.



     (b) Application of Proceeds. All amounts available in the Collateral Accounts shall be
distributed by the Collateral Agent on each Payment Date in accordance with Section 5.02 of the
Master Investment and Credit Agreement, subject to clauses (c) and (d) of this Section and Section
11.20 of the Master Investment and Credit Agreement.



     (c) Investment Reserve Sub-Account. In accordance with a Proper Instruction, and subject to
Section 5(d) below, the Collateral Agent shall, from time to time, credit any proceeds from the
Collateral promptly upon receipt of such proceeds to the Investment Reserve Sub-Account (up to the
maximum amount set forth in Section 5.02 of the Master Investment and Credit Agreement (or such
other amount as may be specified by the Controlling Party pursuant to a Proper Instruction)).
Amounts available in the Investment Reserve Sub-Account shall be distributed by the Collateral
Agent, at any time and from time to time pursuant to Proper Instructions from the Controlling Party
or its designee, for use in connection with Permitted CDO Liquidation Purchases, or as otherwise
directed by the Controlling Party.



12









 





     (d) Expense Reimbursement Sub-Account. During the period from the Closing Date until the
first Payment Date, the Collateral Agent shall, from time to time, credit any proceeds from the
Collateral promptly upon receipt of such proceeds to the Expense Reimbursement Sub-Account (up to
the maximum amount set forth in Section 5.02 of the Master Investment and Credit Agreement (or such
other amount as may be specified by the Controlling Party pursuant to a Proper Instruction)) in
priority to the crediting of any such proceeds to the Investment Reserve Sub-Account as provided
for in Section 5(c) above. Amounts available in the Expense Reimbursement Sub-Account shall be
distributed by the Collateral Agent, at any time and from time to time pursuant to Proper
Instructions from the Controlling Party or its designee, (i) to pay investment execution expenses
incurred by the Investment Manager in connection with investments made on behalf of the Borrower,
including third party commissions, (ii) to reimburse the Securities Intermediary for any monies
improperly credited to the Collateral Accounts or in connection with failed trades, foreign
exchange, assumed settlements, returned funds, bounced checks, other account overdrafts or advances
of cash or securities pursuant to the Collateral Account Control Agreement and (iii) other expenses
incurred by, or in the name of, the Borrower that are due and payable between Payment Dates;
provided that the Expense Reimbursement Sub-Account will not be used to pay Costs and Expenses
(other than any Costs and Expenses referred to above).



     (e) Notice of Adverse Claims. The Collateral Agent shall give the Borrower, the Investment
Manager, the Senior Lender and the Controlling Party prompt notice if the Collateral Agent receives
notice or becomes aware that the Collateral Accounts or any Financial Assets held therein or
credited thereto or any Securities Entitlement in respect thereof become subject to any writ,
order, judgment, warrant of attachment, execution or similar process.



     (f) Permitted Investments of Funds in the Collateral Accounts. Any funds held in the
Collateral Accounts shall be invested, and the proceeds of investments shall be reinvested, by the
Collateral Agent in Permitted Investments in accordance with Proper Instructions from the
Controlling Party or its designee. The Collateral Agent shall not be responsible or liable for any
loss resulting from the investment performance of an investment or reinvestment of funds held in
the Collateral Accounts and shall not be responsible for giving any investment advice. In the
absence of any Proper Instruction from the Controlling Party or its designee, the Collateral Agent
shall be under no obligation or duty to invest (or pay interest on) funds held in the Collateral
Accounts.



     (g) Statement of Account. The Collateral Agent from time to time shall provide the Borrower,
the Investment Manager and any Lender upon written request with statements of account relative to
the Collateral Accounts in accordance with the Collateral Agent’s customary practices; provided
that, to the extent that the information contained in such statements of account is supplied by an
institution or institutions other than the Collateral Agent, the Collateral Agent shall not be
responsible for the correctness or accuracy of the information



13









 







received by it except to the extent that such information is manifestly incorrect and/or is
not provided to the Collateral Agent by the time specified in this Agreement or in the other
Transaction Documents and/or where relevant, is not substantially in the form set out in the
relevant Transaction Document. If such information is not provided to the Collateral Agent by the
time specified in this Agreement or in the other Transaction Documents and, where relevant, in the
form set out in the relevant Transaction Document, or if such information is manifestly incorrect,
the Collateral Agent shall use reasonable efforts to make the necessary calculations and shall
incur no liability hereunder for any consequence resulting from making such calculations other than
as a result of its bad faith, willful misconduct, fraudulent actions or gross negligence.



     (h) Instructions for Payment. Any Officer’s Certificate and Proper Instruction given to the
Collateral Agent for payment out of the Collateral Accounts pursuant to this Agreement, including
the Payment Calculation Report, shall set forth on the face thereof the specific amounts of the
allocations, payments, amounts, deposits, transfers or withdrawals addressed therein and such other
information as shall be sufficient to enable the Collateral Agent to carry out the instruction and
take the related actions in accordance with this Agreement. The Collateral Agent shall promptly
comply with any such Proper Instruction made in accordance with the provisions of this Agreement.



     (i) Escrow Account. Unless and until otherwise directed by the Collateral Agent pursuant to
the Escrow Account Control Agreement, the Escrow Agent shall have Control over the Escrow Account.
No transfers or withdrawals will be made from the Escrow Account except in accordance with the
Administration Agreement. The Borrower, the Collateral Agent, the Escrow Agent and the Securities
Intermediary shall always be party to the Escrow Account Control Agreement. The Escrow Account may
be further sub-divided into sub-accounts. Funds on deposit in the Escrow Account shall be
invested, applied or distributed in the manner set forth in Article 3 to the Administration
Agreement.



     SECTION 6. Certain Agreements Among Secured Parties.



     (a) Priorities; Additional Collateral. Each Secured Party by acceptance of the benefits of
this Agreement and the other Transaction Documents agrees that such Secured Party will not hold,
take, accept or obtain any Lien upon any of the Collateral to secure the payment and performance of
the Secured Obligations, except the Security Interest.



     (b) Turnover of Collateral. If a Secured Party acquires custody, control or possession of any
Collateral or the proceeds therefrom other than pursuant to the terms of this Agreement, such
Secured Party shall promptly (but in any event within five Business Days) cause such Collateral or
proceeds to be delivered to the Collateral Agent in accordance with the provisions of this
Agreement. Until such time as such Secured Party shall have complied with the provisions of the



14









 







immediately preceding sentence, such Secured Party shall be deemed to hold such Collateral and
proceeds in trust for the benefit of the Collateral Agent and the other Secured Parties.



     (c) Cooperation of Secured Parties. Each Secured Party will cooperate with the Collateral
Agent and with each other Secured Party in the enforcement of the Security Interest in the
Collateral and otherwise in order to accomplish the purposes of this Agreement and the Security
Documents.



     (d) Limitation upon Certain Independent Actions by Secured Parties. No Secured Party shall
have any right to institute any action or proceeding to enforce any term or provision of the
Security Documents or to enforce any of its rights in respect of the Collateral or to exercise any
other remedy pursuant to the Security Documents or at law or in equity for the purpose of realizing
on the Collateral, or by reason of jeopardy of any Collateral, or for the execution of any trust or
power hereunder (collectively, the “Specified Actions”), unless the Controlling Party shall have
delivered Proper Instructions to the Collateral Agent and the Collateral Agent shall have failed to
act in accordance with such instructions within two Business Days thereafter. In such case but not
otherwise, the Controlling Party may act on behalf of the Secured Parties and shall be entitled to
commence proceedings in any court of competent jurisdiction or to take any other Specified Actions
as the Collateral Agent might have taken pursuant to this Agreement or the Security Documents. The
Borrower acknowledges and agrees that should the Controlling Party act in accordance with this
provision, the Controlling Party will have all the rights, remedies, benefits and powers as are
granted to the Collateral Agent pursuant this Agreement and the other Security Documents.



     (e) No Challenges. In no event shall any Secured Party take any action to challenge, contest
or dispute the validity, extent, enforceability or priority of the Security Interest hereunder or
under any other Security Document with respect to any of the Collateral, or that would have the
effect of invalidating the Security Interest or support any Person who takes any such action. Each
of the Secured Parties agrees that it will not take any action to challenge, contest or dispute the
validity, enforceability or secured status of any other Secured Party’s claims against the Borrower
(other than any such claim resulting from a breach of this Agreement by a Secured Party, or any
challenge, contest or dispute alleging arithmetical error in the determination of a claim), or that
would have the effect of invalidating any such claim, or support any Person who takes any such
action.



     SECTION 7. The Collateral Agent.



     (a) Employment of Collateral Agent and Property to be Held.




     (i) Each Secured Party hereby appoints the Collateral Agent as an agent, and
custodian of assets, of the Borrower and authorizes the Collateral Agent (A) to sign and
deliver the Security Documents as



15









 







Collateral Agent and (B) to take such actions on its behalf and to exercise such
powers as are delegated to the Collateral Agent by the terms of the Transaction Documents,
together with such actions and powers as are reasonably incidental thereto.




     (ii) The Collateral Agent may from time to time employ one or more sub-custodians.
The Collateral Agent may employ as sub-custodians for the Borrower’s securities and other
assets located in foreign jurisdictions the foreign banking institutions and foreign
securities depositories designated in Schedule A hereto (as amended by the Collateral
Agent from time to time with prior written approval from the Controlling Party, and
delivery to the Borrower, the Controlling Party and the Investment Manager of an updated
Schedule A) as sub-custodians permitted pursuant to this clause (“Approved
Sub-Custodian”). The exculpatory provisions of this Section shall apply to any such
sub-agent and to the Related Parties of the Collateral Agent and any such sub-agent;
provided that the Collateral Agent shall remain responsible for the performance of such
duties and exercise of such rights and powers.




     (iii) Concurrently with the execution of this Agreement, and from time to time
thereafter, as appropriate, the Controlling Party shall deliver to the Collateral Agent,
duly certified by a Responsible Officer of the Controlling Party, a certificate setting
forth the names, titles, signatures and scope of authority of all persons authorized to
give Proper Instructions or any other notice, request, direction, instruction, certificate
or instrument on behalf of the Controlling Party. Such certificate may be accepted and
relied upon by the Collateral Agent as conclusive evidence of the facts set forth therein
and shall be considered to be in full force and effect until receipt by the Collateral
Agent of a similar certificate to the contrary.




     (iv) “Proper Instructions,” as such term is used throughout this Agreement, means a
writing signed by the Controlling Party or by one or more person or persons as the
Controlling Party shall have from time to time authorized to give instructions to the
Collateral Agent. Proper Instructions may be standing instructions. Each such writing
shall set forth the specific transaction or type of transaction involved and any
appropriate procedures to be followed. Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices in accordance with
security procedures agreed to by the Controlling Party in any such writing.



     (b) Limited Duties and Responsibilities. The Collateral Agent shall not have any duties or
obligations except those expressly set forth in this Agreement and the other Transaction Documents
to which it is a party. Without limiting the generality of the foregoing, (i) the Collateral Agent
shall not be subject to any fiduciary or other implied duties, implied covenants or implied
obligations



16









 







pursuant to this Agreement or any other Transaction Document, regardless of whether an Event
of Default has occurred and is continuing, (ii) the Collateral Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except discretionary duties and
powers expressly contemplated by the Transaction Documents that the Collateral Agent is required to
exercise by Proper Instructions and (iii) except as expressly set forth in the Transaction
Documents, the Collateral Agent shall not have any duty to disclose, and shall not be liable for
any failure to disclose, any information relating to the Borrower that is communicated to or
obtained by the Collateral Agent or any of its Affiliates in any capacity other than its
Administrator or Escrow Agent capacity. The Collateral Agent shall not be liable for (A) any
action taken or not taken in accordance with Proper Instructions or (B) any action taken or not
taken by it with the consent or at the request of the Controlling Party or in accordance with this
Agreement or any of the Transaction Documents or in the absence of its own bad faith, willful
misconduct, fraudulent actions or gross negligence. The Collateral Agent shall be deemed not to
have knowledge of any Event of Default unless and until written notice thereof is given to the
Collateral Agent by the Borrower, the Investment Manager or the Controlling Party, and the
Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any
statement, warranty or representation made in or in connection with any Transaction Document, the
contents of any certificate, report or other document delivered thereunder or in connection
therewith or (B) the performance or observance of any of the covenants, agreements or other terms
or conditions set forth in any Transaction Document, the validity, enforceability, effectiveness or
genuineness of any Transaction Document or any other agreement, instrument or document, other than
to confirm receipt of items expressly required to be delivered to the Collateral Agent. The
Collateral Agent shall not be responsible for the existence, genuineness or value of any Collateral
or for the validity, perfection, priority or enforceability of the Security Interest, whether
impaired by operation of law or by reason of any action or omission to act on its part under the
Security Documents, absent its own bad faith, willful misconduct, fraudulent actions or gross
negligence.



     (c) Duties of the Collateral Agent with Respect to Property of the Borrower.




     (i) The Collateral Agent shall hold and segregate for the account of the Borrower all
non-cash property to be held by it, including all securities owned by the Borrower, other
than securities which are maintained in (A) a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies (each, a “U.S. Securities System”) or (B) a clearing agency which
acts as a securities depository or in a book-entry system for the central handling of
securities located outside the United States (each, a “Foreign Securities System”) either
through arrangements implemented by the Collateral Agent or by foreign banking



17









 







institutions serving as sub-custodians pursuant to the terms hereof (Foreign
Securities Systems and U.S. Securities Systems are collectively referred to herein as the
“Securities Systems”).




     (ii) Delivery of Securities. The Collateral Agent shall release and deliver
securities owned by the Borrower held by the Collateral Agent, in a Securities System
account of the Collateral Agent or appoint Approved Sub-Custodians, as applicable, only
upon receipt of Proper Instructions from the Controlling Party, which may be continuing
instructions when deemed appropriate by the parties, and:




     (A) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the Collateral Agent;




     (B) To the issuer thereof, or its agent, for transfer into the name of the
Borrower or into the name of any nominee or nominees of the Collateral Agent or
into the name or nominee name of any agent appointed pursuant to Section
7(c)(iii) or into the name or nominee name of any sub-custodian appointed; or
for exchange for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units; provided that,
in any such case, the new securities are to be delivered to the Collateral
Agent;




     (C) For any other purpose, but only upon receipt of Proper Instructions
specifying the securities to be delivered and the person(s) to whom delivery of
such securities shall be made.




     (iii) “Financial Assets” Election. The Collateral Agent and the Borrower agree that
each item of property (whether investment property, financial asset, security, instrument,
cash or other property) credited to the Collateral Accounts shall be treated as a
“financial asset” within the meaning of Sections 8 102(a)(9) and 8 103 of the UCC.




     (iv) Registration of Securities. All securities accepted by the Collateral Agent on
behalf of the Borrower under the terms of this Agreement shall be in “street name” or
other good delivery form. If, however, the Borrower (or the Controlling Party) directs the
Collateral Agent to maintain securities in “street name”, the Collateral Agent shall
utilize its best efforts only to timely collect income due the Borrower on such securities
and to notify the Borrower, the Controlling Party, the Equity Investor and the Investment
Manager on a best efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers. The Borrower and
Collateral Agent shall cooperate to cause (i) Securities in certificated form held by the



18









 







Collateral Agent to be in suitable form for transfer by delivery, or accompanied by
duly executed instruments of transfer or assignment in blank, with signatures
appropriately guaranteed, all in form and substance satisfactory to the Controlling Party
and (ii) securities that are “uncertificated securities” (as defined in Section 8-102 of
the UCC) that are not registered in the name of the Collateral Agent to be subject to a
control agreement whereby the issuer of the uncertificated securities agrees to comply
with any “instruction” (as defined in Section 8-102 of the UCC) originated by the
Collateral Agent and relating to such securities without further consent by the Borrower
or any other person.




     (v) Bank Accounts. The Collateral Agent shall open and maintain a separate bank
account or accounts in the United States as indicated by the Security Documents in the
name of the Borrower, subject only to draft or order by the Collateral Agent acting
pursuant to the terms of this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the account of the
Borrower. Funds held by the Collateral Agent for the Borrower may be deposited by it to
its credit as Collateral Agent in the banking department of the Collateral Agent or in
such other banks or trust companies as it may in its discretion deem necessary or
desirable. Such funds shall be deposited by the Collateral Agent in its capacity as
Collateral Agent and shall be withdrawable by the Collateral Agent only in that capacity.
Any such bank account shall, absent a Proper Instruction to the contrary, be held as a
sub-account of the Collateral Accounts.




     (vi) Collection of Income. The Collateral Agent shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder to which
the Borrower shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with respect
to bearer securities if, on the date of payment by the issuer, such securities are held by
the Collateral Agent or its agent thereof and shall credit such income, as collected, to
the Collateral Accounts. Such amounts shall be invested pending application thereof in
accordance with Section 5 as directed under a Proper Instruction. Without limiting the
generality of the foregoing, the Collateral Agent shall detach and present for payment all
coupons and other income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder.




     (vii) Payment of Borrower Monies. Upon receipt of Proper Instructions, which may be
continuing instructions if so specified in such Proper Instructions, the Collateral Agent
shall pay out monies of the Borrower in accordance with Section 5 hereof (except for
Permitted Investments).



19









 






     (viii) Deposit of Borrower Assets in Securities Systems. The Collateral Agent may
deposit and/or maintain securities owned by the Borrower in a Securities System in
accordance with applicable Board and Securities and Exchange Commission rules and
regulations, if any, and to the extent applicable hereto.




     (ix) Ownership Certificates for Tax Purposes. The Collateral Agent shall execute
ownership and other certificates and affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with respect to securities of the
Borrower held by it and in connection with transfers of such securities.




     (x) Communications Relating to Borrower Securities. The Collateral Agent shall
transmit promptly to the Borrower (with a copy to the Controlling Party, the Equity
Investor and the Investment Manager) all written information and communications
(including, without limitation, pendency of calls, solicitations for amendments,
modifications, consents, waivers and maturities of securities) received by the Collateral
Agent from issuers of the securities being held for the Borrower and shall, in accordance
with Proper Instructions, transmit promptly to such issuers instructions, directions and
notes relating to such securities.




     (xi) Reports to the Borrower, Equity Investor, Controlling Party and Investment
Manager by Independent Public Accountants. The Collateral Agent shall provide the
Borrower, the Equity Investor, the Controlling Party and the Investment Manager at such
times as the Borrower, the Equity Investor, the Controlling Party or the Investment
Manager may reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding securities,
including securities deposited and/or maintained in a Securities System, relating to the
services provided by the Collateral Agent under this Agreement; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the Borrower
(or the Equity Investor, Controlling Party or the Investment Manager) to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.



     (d) Duties of the Collateral Agent with Respect to Property of the Borrower to be Held Outside
of the United States. The Collateral Agent shall use commercially reasonable efforts to require
that each agreement with a foreign banking institution employed as an Approved Sub-Custodian shall
provide that: the Borrower’s assets will not be subject to any right, charge, security interest,
Lien or claim of any kind in favor of the foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or administration or, in the case of cash
deposits, Liens or rights in favor of creditors of the foreign banking institution arising under
bankruptcy, insolvency or similar



20









 







laws; beneficial ownership of the Borrower’s assets will be freely transferable without the
payment of money or value other than for custody or administration; adequate records will be
maintained identifying the assets as belonging to the Borrower; officers of or auditors employed
by, or other representatives of the Borrower, the Controlling Party, the Investment Manager, the
Administrator and the Collateral Agent, including to the extent permitted under applicable law the
independent public accountants for the Borrower, will be given access to the books and records of
the foreign banking institution relating to its actions under its agreement with the Collateral
Agent; and assets of the Borrower held by the foreign sub-custodian will be subject only to the
instructions of the Collateral Agent or its agents.



     (e) Evidence of Authority. Absent bad faith, willful misconduct, fraudulent actions or gross
negligence, the Collateral Agent shall be entitled to rely on, and shall not incur any liability
for relying on, any notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the proper Person. The
Collateral Agent may receive and accept a certificate of a Responsible Officer of the Controlling
Party as conclusive evidence of the authority of any person to act in accordance with such
certificate or of a Responsible Officer of the Managing Member as conclusive evidence of any
determination or of any action by the Managing Member pursuant to the LLC Operating Agreement as
described in such certificate, and such certificate may be considered as in full force and effect
until receipt by the Collateral Agent of written notice to the contrary. The Collateral Agent may
consult with legal counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not taken by it in
reasonable reliance upon the advice of any such counsel, accountants or experts.



     (f) Duties of Collateral Agent with Respect to the Books of Account and Calculation of Net
Asset Value and Net Income. The Collateral Agent shall cooperate with and supply necessary
information to the entity or entities appointed by the Borrower or the Administrator to keep the
books of account of the Borrower and/or compute the net asset value per membership interest of the
Borrower of the outstanding membership interests of the Borrower or, if directed in writing to do
so by the Borrower (or the Controlling Party), shall itself keep such books of account and/or
compute such net asset value per membership interest of the Borrower.



     (g) Other Custody Services. The Collateral Agent shall provide such other services
customarily provided by a collateral agent in connection with a collateralized debt obligation
transaction as specifically requested by Proper Instructions.



     (h) Information as to Secured Obligations. For all purposes of the Security Documents,
including determining the aggregate amount of Secured Obligations or the amount of Secured
Obligations owed to the Senior Lender or



21









 







any other Secured Party, the Collateral Agent will be entitled to rely on information from the
Controlling Party or its own records (or such party as the Controlling Party may direct in a Proper
Instruction).



     (i) Resignation; Successor Collateral Agent. The Controlling Party or Collateral Agent may
terminate this Agreement for any reason upon not less than 30 days’ prior written notice to each
other party hereto; provided that no termination of this Agreement by the Collateral Agent shall be
effective until the Controlling Party shall have consented to the appointment of a successor
Collateral Agent for the Secured Parties. If the Controlling Party shall fail to appoint such
successor within 90 days after notice of termination from the Collateral Agent, then the Collateral
Agent may petition any court of competent jurisdiction for the appointment of such successor at the
sole cost and expense of the Borrower. The indemnity provided to the Collateral Agent under Section
12 shall survive its resignation under this Agreement with respect to any indemnified liabilities
to the extent incurred or arising, or relating to events occurring, before such termination. Upon
acceptance in writing of its appointment as Collateral Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers, privileges and duties of
the retiring Collateral Agent, and the retiring Collateral Agent shall be, upon transfer of the
Collateral Accounts and possession of all Collateral in its control to such successor, discharged
from its duties and obligations hereunder. As of the termination date, all fees and reimbursement
expenses shall be paid to the Collateral Agent in accordance with Section 5.02 of the Master
Investment and Credit Agreement on the next succeeding Payment Date. The fees payable by the
Borrower to a successor Collateral Agent shall be the same as those payable to its predecessor
unless otherwise agreed by the Borrower and such successor. After the Collateral Agent’s
resignation hereunder, the provisions of this clause shall continue in effect for the benefit of
such retiring Collateral Agent, its Approved Sub-Custodians and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while the retiring Collateral
Agent was acting as Collateral Agent.



     (j) Authority to Administer Collateral. Without derogation of the Collateral Agent’s duties
under this Section, as further security for the Secured Obligations, the Borrower hereby appoints
the Collateral Agent as its true and lawful attorney, with full power of substitution, in the name
of the Borrower, the Collateral Agent or otherwise, for the sole use and benefit of the Collateral
Agent, but at the expense of the Borrower, to the extent permitted by law, for the purpose of
taking such action and executing agreements, instruments and other documents, in the name of the
Borrower, as expressly provided herein and as the Collateral Agent or the Controlling Party may
deem necessary or advisable to accomplish the purposes hereof, including to exercise, at any time
and from time to time, all or any of the following powers with respect to all or any of the
Collateral:




     (i) to demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof,



22









 






     (ii) to settle, compromise, compound, prosecute or defend any action or proceeding
with respect thereto,




     (iii) to sell, lease, license or otherwise dispose of the same or the proceeds or
avails thereof, as fully and effectually as if the Collateral Agent were the absolute
owner thereof, and




     (iv) to extend the time of payment of any or all thereof and to make any allowance or
other adjustment with reference thereto;




provided that, except in the case of Collateral that threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Collateral Agent
will give the Controlling Party and the Borrower at least ten days prior written
notice of the time and place of any public sale thereof or the time after which any
private sale or other intended disposition thereof will be made. Any such notice shall
(x) contain the information specified in UCC Section 9-613, (y) be Authenticated and
(z) be sent to the parties required to be notified pursuant to UCC Section 9-611(c);
provided further that, if the Collateral Agent fails to comply with this sentence in
any respect, its liability for such failure shall be limited to the liability (if any)
imposed on it as a matter of law under the UCC; provided further that in taking, or
refusing to take, any action pursuant to this clause, the Collateral Agent shall not
take any action contrary to any Proper Instruction.



     SECTION 8. Waivers; Amendment.



     (a) No failure or delay of the Collateral Agent or any other Party in exercising any power or
right hereunder or under any other Security Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies hereunder and under the other
Security Documents are cumulative and are not exclusive of any rights or remedies that it would
otherwise have. No waiver of any provision of this Agreement or any other Security Document or
consent to any departure by the Collateral Agent or any other Party shall in any event be effective
unless the same shall be by paragraph (b) below, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice or demand on the
Collateral Agent in any case shall entitle the Collateral Agent to any other or further notice or
demand in similar or other circumstances.



     (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
in accordance with the provisions of Section 11.01 of the Master Investment and Credit Agreement;
provided that without the consent of the Collateral Agent, no modification, supplement or waiver of
the Agreement may modify the terms of Section 7 or any other term or provision that



23









 







materially and adversely affects the rights, immunity, indemnity, duties, obligations
liabilities or protection of the Collateral Agent hereunder.


Any such amendment, supplement, modification or waiver shall be binding upon the Collateral Agent,
each other Secured Party and the Borrower. Any purported amendment, waiver, supplement or
modification not complying with the terms of this Section shall be null and void.




     SECTION 9. Notices. Each notice, request or other communication given to any Party hereunder
shall be given in accordance with Section 11.02 of the Master Investment and Credit Agreement and
the notice information set forth in Schedule 11.02 of the Master Investment and Credit Agreement.



     SECTION 10. Binding Effect. This Agreement shall become effective when a counterpart hereof
shall have been executed by each of the Parties and delivered to the Controlling Party.



     SECTION 11. Survival of Agreement. All covenants, agreements, representations and warranties
made by the Collateral Agent herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Transaction Document shall
be considered to have been relied upon by each other Secured Party and shall survive the
consummation of the Transactions, regardless of any investigation made by any such Secured Party or
on its behalf, and shall continue in full force and effect until the Borrower is liquidated in
accordance with the LLC Operating Agreement. Notwithstanding anything to the contrary herein, the
provisions of this Section shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the Transactions, the repayment in
full of all of the Secured Obligations, the invalidity or unenforceability of any term or provision
of this Agreement or any other Transaction Document or any investigation made by or on behalf of
any Party.



     SECTION 12. Expenses; Indemnity.



     (a) The Borrower agrees to pay in accordance with Section 5.02 of the Master Investment and
Credit Agreement (i) all reasonable out-of-pocket expenses incurred by the Collateral Agent in
connection with the preparation, administration and enforcement of this Agreement and the other
Transaction Documents (including such reasonable expenses as are incurred in connection with the
collection, sale or other disposition of any Collateral or to preserve the value of the Collateral
or the validity, perfection, rank or value of the Security Interest), any amendments, modifications
or waivers of the provisions hereof or thereof, the collection, sale or other disposition of any
Collateral or incurred by the Collateral Agent in connection with the enforcement or protection of
its rights in connection with this Agreement and the other Transaction Documents, including in each
case the fees, charges and disbursements of counsel, accountants, financial advisers and other
experts engaged by the Collateral Agent;



24









 




provided that no such expenses, fees, charges and disbursements shall be charged separately to
the extent they are covered as part of the agreed payments of periodic fees to the Collateral
Agent, Administrator or Escrow Agent under the Fee Letter (or otherwise).




     (b) The Borrower agrees to indemnify the Collateral Agent and each of its Related Parties, to
the extent that such Related Party is acting in accordance with this Agreement or any other
Transaction Document, including in accordance with a Proper Instruction (each such Person being
called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected
with or as a result of (i) the execution or delivery of this Agreement or any other Transaction
Document or any agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the transactions
contemplated hereby or (ii) any claim, litigation, investigation or proceeding relating to the
foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter
is initiated by a third party or by the Borrower or any of its Affiliates); provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted primarily from the bad faith, gross negligence,
fraudulent actions or willful misconduct of such Indemnitee; provided, further, that the Borrower
shall not be obligated to pay, indemnify or hold harmless any Indemnitee if such Indemnitee (A)
does not provide reasonably prompt notice to the Borrower (with a copy to the Managing Member) of
any claim for which indemnification is sought or (B) admits any liability or incurs any significant
expenses after receiving actual written notice of the claim (which is sufficiently specific to give
reasonable notice of the existence of the claims and the expenses of such legal proceedings), or
agrees to any settlement without the prior written consent of the Borrower. The Borrower may, in
its sole discretion and at its expense, control the defense of the claim including, without
limitation, designating counsel for the Indemnitees and controlling all negotiations, litigation,
arbitration, settlements, compromises and appeals of any claim. In order to be paid any amount
under this Section on any particular Payment Date in respect of any losses, claims, damages,
liabilities or related expenses, in each case incurred no later than two Business Days prior to the
Notice Date immediately preceding such Payment Date, the request for payment under this Section
must be received by the Borrower, the Managing Member and the Administrator no later than such
Notice Date.



     (c) To the extent permitted by applicable law, no party shall assert, and each hereby waives,
and no party shall have any indemnity obligation with respect to, any claim against any other
party, on any theory of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual



25









 







damages) arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, or the transactions contemplated hereby.



     (d) The provisions of this Section shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby or by the Master Investment and Credit Agreement, the repayment of any of the
Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement,
the Master Investment and Credit Agreement or any other Transaction Document or any investigation
made by or on behalf of any party hereto.



     (e) If any transfer tax, documentary stamp tax or other tax is payable in connection with the
Collateral, the Security Interest or other Transaction, the Borrower will pay such tax and provide
any required tax stamps to the Collateral Agent or as otherwise required by law.



     SECTION 13. Successors and Assigns.



     (a) This Agreement shall be binding upon and inure to the benefit of the Parties and their
respective successors and assigns permitted hereby, except that the Collateral Agent may not assign
or otherwise transfer any of its rights or obligations hereunder without the prior written consent
of the Controlling Party (and any attempted assignment or transfer by the Collateral Agent without
such consent shall be null and void) and only together with assignment of its rights under the
Master Investment and Credit Agreement. If all or any part of any Secured Party’s interest in any
Secured Obligation is assigned or otherwise transferred, the transferor’s rights hereunder, to the
extent applicable to the obligation so transferred, shall be automatically transferred with such
Secured Obligation.



     (b) Any Person (i) into which the Collateral Agent may be merged or consolidated, (ii) which
may result from any merger, conversion or consolidation to which the Collateral Agent shall be a
party or (iii) succeeding to the business of the Collateral Agent, which Person, in any of the
foregoing cases executes an agreement of assumption to perform every obligation of the Collateral
Agent hereunder, shall be the successor to the Collateral Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the parties to this
Agreement, notwithstanding anything in this Agreement to the contrary. The Collateral Agent shall
provide prior written notice of any merger, consolidation or succession pursuant to this clause to
the Borrower, the Equity Investor and the Controlling Party.



     SECTION 14. Counterparts. This Agreement may be executed in counterparts (and by different
Parties on different counterparts), each of which shall constitute an original but all of which
when taken together shall constitute a



26









 







single contract, and shall become effective as provided in Section 10. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually signed counterpart of this Agreement.



     SECTION 15. Severability. If any one or more of the provisions contained in this Agreement
or in any other Transaction Document should be held invalid, illegal or unenforceable in any
respect to the extent permitted by applicable law, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be affected or impaired
thereby (it being understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in any other
jurisdiction). The Parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.



     SECTION 16. Integration. This Agreement and the other Transaction Documents represent the
entire agreement of the Parties with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the Borrower, any Secured Party or
the Controlling Party relative to the subject matter hereof not expressly set forth or referred to
herein or in the other Transaction Documents.



     SECTION 17. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.



     SECTION 18. Jurisdiction; Consent to Service of Process.



     (a) Each Party hereby irrevocably and unconditionally submits, for itself and its property, to
the exclusive jurisdiction of any New York State court or federal court of the United States of
America sitting in New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Transaction Documents, or for
recognition or enforcement of any judgment, and each of the Parties hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such federal court. Each
of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive
and any such final judgment against any Party may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.



     (b) Each Party hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or the other
Transaction Documents in any New York State or federal court. Each Party hereto hereby irrevocably
waives, to



27









 







the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.



     (c) Each Party irrevocably consents to service of process in the manner and at the address
provided for notices in Section 9. Nothing in this Agreement will affect the right of any Party to
serve process in any other manner permitted by law.



     SECTION 19. Confidentiality. The Collateral Agent agrees to keep confidential all non-public
information, including, without limitation, the Transaction Documents, and other related documents
provided to it by the Borrower, the Investment Manager, the Controlling Party or any other Person
pursuant to or in connection with this Agreement or the other Transaction Documents; provided that
nothing herein shall prevent the Collateral Agent from disclosing any such information (a) to its
Related Parties who have a need to know such information (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such information and
instructed to keep such information confidential), (b) upon the request or demand of any regulatory
authority, (c) to the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) in connection with the exercise of any remedies hereunder or under the
other Transaction Documents or any suit, action or proceeding relating to the enforcement of its
rights hereunder or thereunder, (e) with the written consent of the Controlling Party or (f) to the
extent such information becomes publicly available other than as a result of a breach of this
Section; provided, further, that prior to any disclosure of information pursuant to clause (b) or
(c) of the proviso above, the Collateral Agent shall notify the Borrower and the Controlling Party,
if legally permitted to do so, of any proposed disclosure as far in advance of such disclosure as
practicable and, upon the Borrower’s or the Controlling Party’s request, take all reasonable
actions to ensure that any information disclosed is accorded confidential treatment, or if such
notice to the Borrower and the Controlling Party is prohibited by law, inform the relevant court or
regulatory authority of the Borrower’s and the Controlling Party’s interest in the disclosed
information and request that such court or regulatory authority inform the Borrower and the
Controlling Party of the disclosure.



     SECTION 20. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HAVE BEEN INDUCED TO ENTER INTO



28









 







THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     SECTION 21. Limited Recourse. Notwithstanding anything to the contrary contained in this
Agreement and the other Transaction Documents, the obligations of the Borrower under this Agreement
and all other Transaction Documents are solely the obligations of the Borrower and shall be payable
solely to the extent of funds received by and available to the Borrower in accordance with the
Master Investment and Credit Agreement. No recourse shall be had for the payment of any amount
owing in respect of any obligation of, or claim against, the Borrower arising out of or based upon
this Agreement or any other Transaction Document against any holder of a Membership Interest,
employee, officer or Affiliate thereof and, except as specifically provided herein and in the other
Transaction Documents, no recourse shall be had for the payment of any amount owing in respect of
any obligation of, or claim against, the Borrower arising out of or based upon this Agreement by
the Administrator, the Investment Manager or any holder of the Membership Interests of the Borrower
or any Related Party of any thereof; provided, that the foregoing shall not relieve any such person
or entity from any liability they might otherwise have as a result of bad faith, gross negligence,
willful misconduct or fraudulent actions taken or omissions by them. The provisions of this
Section shall survive the termination of the Agreement and payment in full of all of the Secured
Obligations.



     SECTION 22. Headings. Article and Section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.



     SECTION 23. Waiver of Right of Setoff. The Collateral Agent waives all of its rights to set
off and apply any Collateral at any time held and other obligations at any time owing by the
Collateral Agent to or for the credit or the account of the Borrower or any Secured Party against
the obligations of the Borrower or any Secured Party hereunder and under the other Transaction
Documents, irrespective of whether or not the Collateral Agent shall have made any demand
thereunder and although such obligations may be unmatured.



     SECTION 24. Instructions. It is understood that any instruction required to be given,
prepared and/or delivered by the Controlling Party or its designee pursuant to this Agreement will
be given, prepared and/or delivered pursuant to a Proper Instruction.



     SECTION 25. Further Assurances. Each party hereto agrees to do such further acts and things
and to execute and deliver to the Borrower (or to the Controlling Party) such additional
assignments, agreements, powers and instruments, as may be reasonably necessary to carry into
effect the purposes of



29









 







this Agreement or to better assure and confirm unto the Borrower its rights, powers and
remedies hereunder.



     SECTION 26. Internal Controls. The Collateral Agent shall provide its relevant SAS-70
reports to the Borrower on an annual basis, along with quarterly attestations that pertinent
controls remain in place, and such Sarbanes-Oxley sub-certifications as are customarily provided by
the Collateral Agent to its other customers similarly situated.



     SECTION 27. Role of Investment Manager and Controlling Party. Each Party hereby accepts the
role and powers of the Investment Manager described in this Agreement and the other Transaction
Documents and understands that the Investment Manager will be solely the agent of the Controlling
Party. In addition, the Controlling Party has ultimate authority with respect to all decisions
regarding the management of the Collateral (which it may delegate, in whole or in part, to the
Investment Manager or otherwise), including decisions as to when to dispose of Collateral. In
exercising such control, the Controlling Party and its agents, including the Investment Manager,
shall have no duty to maximize returns on the Collateral or to take into account the interests of
any other Secured Party or the Equity Investor.



     SECTION 28. No Petition. Each Party, other than the Borrower, hereby covenants and agrees
that it will not at any time (a) commence or institute against the Borrower or join with or
facilitate any other Person in commencing or instituting against the Borrower, any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, receivership, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or state, or other
jurisdiction, bankruptcy or similar law or statute now or hereafter in effect in connection with
any obligations relating to this Agreement or any of the other Transaction Documents or (b)
participate in any assignment for benefit of creditors, compositions, or arrangements with respect
to the Borrower’s debts. The agreements in this Section shall survive the termination of the
Agreement and payment in full of all of the Secured Obligations.



     SECTION 29. Maintenance of Books and Records.



     (a) For the term of this Agreement, the Collateral Agent shall keep and retain all
information, materials and records in whatever format (collectively, “Records”) which it has or
which come into its possession in connection with the Transaction and the services provided under
this Agreement, in each case to the extent consistent with the Collateral Agent’s internal records
maintenance and records retention policy; provided that prior to any destruction of any Records by
the Collateral Agent in accordance with such policy, the Collateral Agent shall notify the
Controlling Party and provide the Controlling Party with an opportunity to retrieve such Records
from the Collateral Agent. Upon the termination of this Agreement or its services hereunder, the
Collateral Agent and the Controlling Party shall, in good faith, agree on the timing and mechanism
for transferring all



30









 







Records to the Controlling Party. In transferring such Records, the Collateral Agent shall
provide an Officer’s Certificate certifying that (i) it has kept and retained the Records in
accordance with the requirements set forth herein and (ii) the Records being transferred represent
all of the Records that have not been previously delivered or destroyed in compliance with this
Section. Notwithstanding the foregoing, the Collateral Agent may make and retain copies of Records
to satisfy existing internal audit, compliance or record retention requirements, provided that the
Officer’s Certificate includes information as to the copies of Records that it is retaining.



     (b) Upon reasonable notice, the Collateral Agent agrees to afford the Equity Investor, the
Borrower, the Controlling Party, the Senior Lender, the Investment Manager, the Administrator, the
Board and other governmental oversight entities and their respective authorized agents reasonable
access during normal business hours to make examinations of the Records and to cause its personnel
to assist in any such examinations of the Records and allow copies of the Records to be made. Such
examinations will be conducted in a manner which does not unreasonably interfere with the normal
operations or employee relations of the Collateral Agent. The Collateral Agent shall, at the
Equity Investor, the Borrower, the Managing Member, the Controlling Party, the Senior Lender or the
Investment Manager’s request, supply the Equity Investor, the Borrower, the Management Member, the
Controlling Party, the Senior Lender or the Investment Manager with a tabulation of securities
owned by the Borrower and held by the Collateral Agent and shall, when requested to do so by the
Equity Investor, the Borrower, the Managing Member, the Controlling Party or the Investment Manager
and for such compensation as shall be agreed upon between the Borrower and the Collateral Agent,
include certificate numbers in such tabulations. In addition, at the request of the Controlling
Party, the Collateral Agent will meet with one or more of the Controlling Party’s directors or
designated staff at a mutually agreeable time to discuss matters that fall within the scope of this
engagement.



     (c) The Collateral Agent shall use commercially reasonable efforts to provide access to the
Records by means of providing access to a suitable reporting platform.



     SECTION 30. Termination. This Agreement and the Security Interest created or granted hereby
shall terminate on the date on which all of the Collateral has been fully distributed in accordance
with the terms of this Agreement, at which time the Collateral Agent shall (upon certification and
instruction in an Officer’s Certificate delivered to the Collateral Agent by the Controlling Party
or its designee) assign (without recourse upon, or any warranty whatsoever by, the Collateral
Agent) and deliver to the Borrower all documents then in the custody or possession of the
Collateral Agent.



[signature pages follow]




31









 








     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date
set forth above.



	 	 	 	 	 
	 	MAIDEN LANE III LLC

 	 
	 	By  	Federal Reserve Bank of New York,
 	 
	 	 	as Managing Member 	 
	 	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	FEDERAL RESERVE BANK OF NEW YORK,

as Senior Lender

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	FEDERAL RESERVE BANK OF NEW YORK, 
as Controlling Party

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE BANK OF NEW YORK MELLON, 
as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




32









 





Schedule A
to

Security
Agreement


LIST OF APPROVED SUB-CUSTODIANS



None.




33









 






Exhibit A
to

Security
Agreement


FORM OF COLLATERAL ACCOUNT CONTROL AGREEMENT




     AGREEMENT, dated as of November 25, 2008 (the “Agreement”) among Maiden Lane III, LLC
(“Pledgor”) and The Bank of New York Mellon as collateral agent (in such capacity, the “Secured
Party”) and as securities intermediary (in such capacity, the “Securities Intermediary”).



W I T N E S S E T H :




     WHEREAS, Secured Party and Pledgor have entered into a security agreement (the “Security
Agreement”) pursuant to which Pledgor has agreed to pledge to Secured Party the Collateral (as
defined below) in order to secure the repayment of Pledgor’s obligations to certain parties as set
forth under the Security Agreement; and



     WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold the
Collateral and to perform certain other functions as more fully described herein; and



     WHEREAS, Securities Intermediary has agreed to act on behalf of Secured Party and Pledgor in
respect of Collateral delivered to Securities Intermediary by Pledgor for the benefit of the
Secured Party, subject to the terms hereof;



     NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto
agree as follows:



ARTICLE I

DEFINITIONS




     Whenever used in this Agreement, the following words shall have the meanings set forth below:



     1. “Accounts” shall mean the USD account, number 630156, which is a securities account and
such other securities accounts in the name of the Pledgor established and maintained by the
Securities Intermediary in which Collateral shall be deposited, or caused to be deposited, by
Pledgor and pledged to Secured Party, and any sub-accounts thereunder.



     2. “Collateral” shall mean each item of property and all proceeds thereof held in the
Accounts.













 





     3. “Depository” shall mean, for purposes of this Agreement only, the Federal Reserve Bank of
New York for receiving and delivering securities maintained by The Fedwire Securities Service, The
Depository Trust Company and any other clearing corporation within the meaning of Section 8-102 of
the UCC or otherwise authorized to act as a securities depository or clearing agency, and their
respective successors and nominees.



     4. “Instructions” shall mean either Written Instructions or Oral Instructions.



     5. “Oral Instructions” shall mean non-written verbal instructions received by Securities
Intermediary.



     6. “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.



     7. “Written Instructions” shall mean written communications received by Securities
Intermediary via S.W.I.F.T., tested telex, email, letter, facsimile transmission, or other method
or system specified by Securities Intermediary as available for use in connection with this
Agreement.



     The terms “entitlement holder”, “entitlement order”, “financial asset”, “investment property”,
“proceeds”, “security”, “securities account” and “securities intermediary” shall have the meanings
set forth in Articles 8 and 9 of the UCC.



ARTICLE II

APPOINTMENT AND STATUS OF SECURITIES INTERMEDIARY;

ACCOUNTS




     1. Appointment; Identification of Collateral. (a) Secured Party and Pledgor each
hereby appoints Securities Intermediary to perform its duties as hereinafter set forth and
authorizes Securities Intermediary to hold Collateral in the Accounts in registered form in its
name or the name of its nominees. Parties agree that all financial assets (except cash) in the
Accounts will be registered in the name of the Securities Intermediary or the name of its nominees
and no financial asset in the Accounts will be registered in the name of the Pledgor, payable to
the order of the Pledgor or specially indorsed to the Pledgor unless such financial asset has been
further indorsed to the Securities Intermediary or in blank. Securities Intermediary hereby
accepts such appointment and agrees to establish and maintain the Accounts and appropriate records
identifying the Collateral in the Accounts as pledged by Pledgor to Secured Party. Pledgor hereby
authorizes Securities Intermediary to comply with all Oral and Written Instructions, including
entitlement orders, originated by Secured Party with respect to the Collateral without further
consent or direction from Pledgor or any



35









 







other party. The parties hereby agree that the Accounts are and will remain securities accounts as
defined in Section 8-501 of the UCC and the Secured Party is an entitlement holder with respect to
the Accounts.



     2. Status of Securities Intermediary and “Financial Asset” Election. The parties
agree that Securities Intermediary is a securities intermediary, and intend that each item of
property (whether investment property, financial asset, security, instrument, cash or other
property) held in the Accounts shall be treated as a “financial asset” within the meaning of
Sections 8-102(a)(9) and 8-103 of the UCC.



     3. Use of Depositories. Secured Party and Pledgor hereby authorize Securities
Intermediary to utilize Depositories to the extent possible in connection with its performance
hereunder. Collateral held by Securities Intermediary in or maintained by a Depository will be
held subject to the regulations, rules, terms and conditions applicable to such Depository. Where
Collateral is held in or maintained by a Depository, Securities Intermediary shall identify on its
records as belonging to Pledgor and pledged to Secured Party a quantity of securities as part of a
fungible bulk of securities held in Securities Intermediary’s account at such Depository.
Securities deposited in or maintained by a Depository will be represented in accounts which include
only assets held by Securities Intermediary for its customers.



ARTICLE III

COLLATERAL SERVICES




     1. Transfers; Substitutions. The Accounts shall be operated solely on the
Instructions of Secured Party. All transfers of Collateral into or out of the Accounts shall be
made free of payment. Securities Intermediary shall not permit any withdrawal of any Collateral
from the Accounts unless it has received Instructions from Secured Party permitting the item(s) of
Collateral to be transferred from the Accounts.



     2. Payment of Proceeds. Until Securities Intermediary receives a Written Instruction
to the contrary, Securities Intermediary shall credit to the Accounts all proceeds, including
without limitation all interest and principal payments, received by it with respect to the
Collateral.



     3. No Lien or Pledge by Securities Intermediary. Securities Intermediary agrees that
the Accounts and Collateral in the Accounts shall not be subject to any security interest, lien or
right of set-off by Securities Intermediary or any third party claiming through Securities
Intermediary and Securities Intermediary shall not pledge, encumber, hypothecate, transfer, dispose
of, or otherwise grant any third party an interest in, Collateral, except to the extent set forth
in the Security Agreement.



36









 





     4. Notice of Adverse Claims. Except for the claims and interests of Secured Party and
Pledgor, Securities Intermediary does not know of any claim to, or interest in, the Accounts, any
financial asset credited thereto or any security entitlement in respect thereof. Upon receipt of
written notice of any lien, encumbrance or adverse claim against the Accounts or any portion of the
Collateral carried therein, Securities Intermediary shall use reasonable efforts to notify Secured
Party and Pledgor as promptly as practicable under the circumstances.



ARTICLE IV

GENERAL TERMS AND CONDITIONS




     1. Standard of Care; Indemnification. (a) Except as otherwise expressly provided
herein, Securities Intermediary shall not be liable for any costs, expenses, damages, liabilities
or claims, including attorneys’ fees (“Losses”) incurred by or asserted against Pledgor or Secured
Party, except those Losses arising out of the negligence or willful misconduct of Securities
Intermediary. Securities Intermediary shall have no liability whatsoever for the action or
inaction of any Depository. In no event shall Securities Intermediary be liable for special,
indirect or consequential damages, or lost profits or loss of business, arising in connection with
this Agreement.



     (b) Pledgor agrees to indemnify Securities Intermediary and hold Securities Intermediary
harmless from and against any and all Losses sustained or incurred by or asserted against
Securities Intermediary by reason of or as a result of any action or inaction, or arising out of
Securities Intermediary’s performance hereunder, including reasonable fees and expenses of counsel
incurred by Securities Intermediary in a successful defense of claims by Pledgor or Secured Party;
provided, that Pledgor shall not indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary’s or Secured Party’s negligence or willful misconduct. Secured Party
agrees to indemnify Securities Intermediary for Losses sustained or incurred by or asserted against
Securities Intermediary arising out of Secured Party’s negligence, willful misconduct or
Instruction in connection with this Agreement, provided, that Secured Party shall not indemnify
Securities Intermediary for those Losses arising out of Securities Intermediary’s negligence or
willful misconduct. This indemnity shall be a continuing obligation of Pledgor and Secured Party,
as applicable, and their respective successors and assigns, notwithstanding the termination of this
Agreement.



     2. No Obligation Regarding Quality of Collateral. Without limiting the generality of
the foregoing, Securities Intermediary shall be under no obligation to inquire into, and shall not
be liable for, any Losses incurred by Pledgor, Secured Party or any other person as a result of the
receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral which otherwise is
not freely transferable or deliverable without encumbrance in any relevant market.



37









 





     3. No Responsibility Concerning Security Agreement. Pledgor and Secured Party hereby
agree that, notwithstanding references to the Security Agreement in this Agreement, Securities
Intermediary has no interest in, and no duty, responsibility or obligation with respect to, the
Security Agreement (including without limitation, no duty, responsibility or obligation to monitor
Pledgor’s or Secured Party’s compliance with the Security Agreement or to know the terms of the
Security Agreement).



     4. No Duty of Oversight. Securities Intermediary is not at any time under any duty to
monitor the value of any Collateral in the Accounts or whether the Collateral is of a type required
to be held in the Accounts, or to supervise the investment of, or to advise or make any
recommendation for the purchase, sale, retention or disposition of any Collateral.



     5. Advice of Counsel. Securities Intermediary may, with respect to questions of law,
obtain the advice of counsel and shall be fully protected with respect to anything done or omitted
by it in good faith in conformity with such advice.



     6. No Collection Obligations. Securities Intermediary shall be under no obligation to
take action to collect any amount payable on Collateral in default, or if payment is refused after
due demand and presentment.



     7. Fees and Expenses. Pledgor agrees to pay to Securities Intermediary the fees as
may be agreed upon from time to time. Pledgor shall reimburse Securities Intermediary for all
costs associated with transfers of Collateral to Securities Intermediary and records kept in
connection with this Agreement. Pledgor shall also reimburse Securities Intermediary for
out-of-pocket expenses which are a normal incident of the services provided hereunder.



     8. Effectiveness of Instructions; Reliance; Risk Acknowledgements; Additional Terms.
Securities Intermediary shall be entitled to rely upon any Instructions actually received by
Securities Intermediary and reasonably believed by Securities Intermediary to be duly authorized
and delivered.



     9. Recording of Telephone Conversations. The parties hereto acknowledge that telephone
conversations made in connection with this Agreement may be recorded.



     10. Inspection. Upon reasonable request and provided Securities Intermediary shall
suffer no significant disruption of its normal activities, Secured Party or Pledgor shall have
access to Securities Intermediary’s books and records relating to the Accounts during Securities
Intermediary’s normal business hours. Upon reasonable request, copies of any such books and
records shall be provided to Secured Party or Pledgor at its expense.



38









 





     11. Accounts Disclosure. Securities Intermediary is authorized to supply any
information regarding the Accounts which is required by any law or governmental regulation now or
hereafter in effect.



     12. Force Majeure. Securities Intermediary shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control, including without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications service; accidents; labor disputes; acts of civil or military
authority; governmental actions; inability to obtain labor, material, equipment or transportation.



     13. Pricing Services. Securities Intermediary may, as an accommodation, provide
pricing or other information services to Pledgor and/or Secured Party in connection with this
Agreement. Securities Intermediary may utilize any vendor (including securities brokers and
dealers) believed by it to be reliable to provide such information. Under no circumstances shall
Securities Intermediary be liable for any loss, damage or expense suffered or incurred by Pledgor
or Secured Party as a result of errors or omissions with respect to any pricing or other
information utilized by Securities Intermediary hereunder.



     14. No Implied Duties. Securities Intermediary shall have no duties or
responsibilities whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied against Securities Intermediary
in connection with this Agreement. The Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any person (other than the
Collateral Agent) relating to the Accounts and/or any financial asset held thereto pursuant to
which it has agreed, or will agree, to comply with the entitlement orders of such person.



ARTICLE V

MISCELLANEOUS




     1. Termination. This Agreement shall terminate upon (a) Securities Intermediary’s
receipt of Written Instructions from Secured Party expressly stating that Secured Party no longer
claims any security interest in the Collateral and Securities Intermediary’s subsequent transfer of
the Collateral from the Accounts pursuant to Pledgor’s Written Instructions, or (b) by any party
upon not less than ninety (90) days prior written notice of termination to the other parties,
provided that termination pursuant to (b) above shall not affect or terminate Secured Party’s
security interest in Collateral. Upon termination pursuant to (b) above, Securities Intermediary
shall follow such reasonable Written Instructions



39









 







of Secured Party concerning the transfer of Collateral. Except as otherwise provided herein, all
obligations of the parties to each other hereunder shall cease upon termination of this Agreement.



     2. Notices. (a) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Securities Intermediary, shall be sufficiently given if addressed to
Securities Intermediary and received by it at its offices at One Wall Street, New York, New York
10286, or at such other place as Securities Intermediary may from time to time designate in
writing.



     (b) Any notice or other instrument in writing, authorized or required by this Agreement to be
given to Secured Party shall be sufficiently given if addressed to Secured Party and received by it
at its offices at the address provided below, or at such other place as Secured Party may from time
to time designate in writing.


The Bank of New York Mellon

Attention:  Andrew J. Taylor

101 Barclay Street

New York, NY 10286

Telecopy:  (212) 815-2020

Telephone:  (212) 815-2943

E-mail:  andrew.j.taylor@bnymellon.com




     (c) Any notice or other instrument in writing, authorized or required by this Agreement to be
given to Pledgor shall be sufficiently given if addressed to Pledgor and received by it at its
offices at the address provided below, or at such other place as Pledgor may from time to time
designate in writing.


Maiden Lane III LLC

c/o Federal Reserve Bank of New York

FRBNY Investment Support Office

33 Liberty Street New York, New York 10045

Attention: Helen Mucciolo, Senior Vice President

Fax: (212) 720-1953

Telephone: (212) 720-1333

Email: helen.mucciolo@ny.frb.org



with copies to:



Federal Reserve Bank of New York

33 Liberty Street, New York, New York 10045

Attention: Joyce M. Hansen, Deputy General

Counsel and Senior Vice President

Telecopy: (212) 720-1756




40









 







Telephone: (212) 720-5024

E-mail: joyce.hansen@ny.frb.org



and



Davis Polk & Wardwell

450 Lexington Avenue, New York, New York 10017

Attention: Marshall S. Huebner and Bjorn Bjerke

Telephone: (212) 450-4000




     3. Cumulative Rights; No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection herewith,
or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of Securities Intermediary to exercise, and no delay in exercising, any right
will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.



     4. Severability; Amendments; Assignment. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected thereby.
This Agreement may not be amended or modified in any manner except by a written agreement executed
by the parties hereto. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that this Agreement shall
not be assignable by any party without the written consent of the other parties.



     5. Governing Law; Jurisdiction; Jury Trial Waiver; Waiver of Immunity. This Agreement
shall be construed in accordance with the laws of the State of New York. The State of New York
shall be deemed to be the Securities Intermediary’s jurisdiction for purposes of the UCC
(including, without limitation, Section 8-110 thereof). Each Party hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the Parties hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State or, to the extent permitted by law, in such
federal court. Each of the Parties agrees that a final judgment in any such action or proceeding
shall be conclusive. Each Party hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in
any New York



41









 







State or federal court. Each Party hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.



          Each party hereto hereby unconditionally and irrevocably waives any and all right to trial by
jury in any action, suit, counterclaim, or cross claim arising in connection with, out of, or
otherwise relating to this Agreement, the Collateral, or any transaction or agreement arising
therefrom or related thereto.




          If Pledgor or its property is now, or in the future becomes, entitled to any immunity, whether
characterized as sovereign or otherwise (including, without limitation, immunity from set-off, from
service of process, from jurisdiction of any court or tribunal, from attachment in aid of
execution, from attachment prior to the entry of a judgment, or from execution upon a judgment) in
any legal proceeding in Federal or State courts in the United States of America, or in the courts
of the country where Pledgor is chartered, or in the courts of the country in which Pledgor
principally conducts its business, then Pledgor expressly and irrevocably waives, to the maximum
extent permitted by law, any such immunity. To the extent Pledgor receives any such entitlement in
the future, Pledgor shall promptly notify Secured Party of such entitlement.




     6. No Third Party Beneficiaries. In performing hereunder, Securities Intermediary is
acting solely on behalf of Secured Party and Pledgor and no contractual or service relationship
shall be deemed to be established hereby between Securities Intermediary and any other person.



     7. Headings. Section headings are included in this Agreement for convenience only and
shall have no substantive effect on its interpretation.



     8. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall, together, constitute only
one instrument.



     9. USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge that Securities
Intermediary is subject to federal laws, including the Customer Identification Program (CIP)
requirements under the USA PATRIOT Act and its implementing regulations, pursuant to which
Securities Intermediary must obtain, verify and record information that allows Securities
Intermediary to identify each of Pledgor and Secured Party. Accordingly, prior to opening the
Accounts hereunder Securities Intermediary will ask Pledgor and/or Secured Party to provide certain
information including, but not limited to, Pledgor’s and/or Secured Party’s name, physical address,
tax identification number and other information that will help Securities Intermediary to identify
and verify each of Pledgor’s and Secured Party’s identity such as organizational documents,
certificate of good standing, license to do business, or other pertinent identifying information.
Pledgor and Secured Party agree that Securities Intermediary cannot



42









 







open the Accounts hereunder unless and until the Securities Intermediary verifies the Pledgor’s
and/or Secured Party’s identity in accordance with its CIP.



43









 





Exhibit B
to

Security
Agreement


FORM OF ESCROW ACCOUNT CONTROL AGREEMENT



     AGREEMENT, dated as of November 25, 2008 (the “Agreement”) among Maiden Lane III, LLC
(“Pledgor”) and The Bank of New York Mellon as collateral agent (in such capacity, the “Secured
Party”), as escrow agent (in such capacity, the “Escrow Agent”) and as securities intermediary (in
such capacity, the “Securities Intermediary”).



W I T N E S S E T H :




     WHEREAS, Secured Party and Pledgor have entered into a security agreement (the “Security
Agreement”) pursuant to which Pledgor has agreed to pledge to Secured Party the Collateral (as
defined below) in order to secure the repayment of Pledgor’s obligations to certain parties as set
forth under the Security Agreement; and



     WHEREAS, Pledgor and Escrow Agent have entered into an administration agreement (the
“Administration Agreement”) pursuant to which Escrow Agent provides certain services to Pledgor;
and



     WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold the
Collateral and to perform certain other functions as more fully described herein; and



     WHEREAS, Securities Intermediary has agreed to act on behalf of Secured Party and Pledgor in
respect of Collateral delivered to Securities Intermediary by Pledgor for the benefit of the
Secured Party, subject to the terms hereof;



     NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto
agree as follows:



ARTICLE I

DEFINITIONS




     Whenever used in this Agreement, the following words shall have the meanings set forth below:



     1. “Account”
shall mean account number
[          ], which is a securities account in the name of
the Pledgor established and maintained by the Securities Intermediary in which Collateral shall
be deposited, or caused to be deposited, by Pledgor and pledged to Secured Party, and any
sub-accounts thereunder.



44









 





     2. “Collateral” shall mean each item of property and all proceeds thereof held in the Account.



     3. “Depository” shall mean, for purposes of this Agreement only, the Federal Reserve Bank of
New York for receiving and delivering securities maintained by The Fedwire Securities Service, The
Depository Trust Company and any other clearing corporation within the meaning of Section 8-102 of
the UCC or otherwise authorized to act as a securities depository or clearing agency, and their
respective successors and nominees.



     4. “Instructions” shall mean either Written Instructions or Oral Instructions.



     5. “Oral Instructions” shall mean non-written verbal instructions received by Securities
Intermediary.



     6. “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.



     7. “Written Instructions” shall mean written communications received by Securities
Intermediary via S.W.I.F.T., tested telex, email, letter, facsimile transmission, or other method
or system specified by Securities Intermediary as available for use in connection with this
Agreement.



     The terms “entitlement holder”, “entitlement order”, “financial asset”, “investment property”,
“proceeds”, “security”, “securities account” and “securities intermediary” shall have the meanings
set forth in Articles 8 and 9 of the UCC.



ARTICLE II

APPOINTMENT AND STATUS OF SECURITIES INTERMEDIARY;

ACCOUNT




     1. Appointment; Identification of Collateral. (a) Secured Party and Pledgor each
hereby appoints Securities Intermediary to perform its duties as hereinafter set forth and
authorizes Securities Intermediary to hold Collateral in the Account in registered form in its name
or the name of its nominees. Parties agree that all financial assets (except cash) in the Account
will be registered in the name of the Securities Intermediary or the name of its nominees and no
financial asset in the account will be registered in the name of the Pledgor, payable to the order
of the Pledgor or specially indorsed to the Pledgor unless such financial asset has been further
indorsed to the Securities Intermediary or in blank. Securities Intermediary hereby accepts such
appointment and agrees to establish and maintain the Account and appropriate records identifying
the Collateral in the Account as pledged by Pledgor to Secured Party. Pledgor hereby authorizes



45









 







Securities Intermediary to comply with all Oral and Written Instructions, including entitlement
orders, originated by Secured Party with respect to the Collateral without further consent or
direction from Pledgor or any other party. The parties hereby agree that the Account is and will
remain a securities account as defined in Section 8-501 of the UCC and the Secured Party is an
entitlement holder with respect to the Account.



     2. Status of Securities Intermediary and “Financial Asset” Election. The parties
agree that Securities Intermediary is a securities intermediary, and intend that each item of
property (whether investment property, financial asset, security, instrument, cash or other
property) held in the Account shall be treated as a “financial asset” within the meaning of
Sections 8-102(a)(9) and 8-103 of the UCC.



     3. Use of Depositories. Secured Party and Pledgor hereby authorize Securities
Intermediary to utilize Depositories to the extent possible in connection with its performance
hereunder. Collateral held by Securities Intermediary in or maintained by a Depository will be
held subject to the regulations, rules, terms and conditions applicable to such Depository. Where
Collateral is held in or maintained by a Depository, Securities Intermediary shall identify on its
records as belonging to Pledgor and pledged to Secured Party a quantity of securities as part of a
fungible bulk of securities held in Securities Intermediary’s account at such Depository.
Securities deposited in or maintained by a Depository will be represented in accounts which include
only assets held by Securities Intermediary for its customers.



ARTICLE III

COLLATERAL SERVICES




     1. Transfers; Substitutions. The Account shall be operated solely on the Instructions
of Secured Party except as otherwise expressly provided for in this Section 1. All transfers of
Collateral into or out of the Account shall be made free of payment. Securities Intermediary shall
not permit any withdrawal of any Collateral from the Account unless it has received Instructions
from Secured Party permitting the item(s) of Collateral to be transferred from the Account. Unless
and until the Securities Intermediary receives a notice of exclusive control from the Secured
Party, it shall be permitted to take instructions from the Escrow Agent given pursuant to the
Administration Agreement.



     2. Payment of Proceeds. Until Securities Intermediary receives an instruction from
the Escrow Agent to the contrary, Securities Intermediary shall credit to the Account all proceeds,
including without limitation all interest and principal payments, received by it with respect to
the Collateral. Securities Intermediary acknowledges and agrees that the procedures in Article 3
of the Administration Agreement shall constitute an instruction for these purposes.



46









 





     3. No Lien or Pledge by Securities Intermediary. Securities Intermediary agrees that
the Account and Collateral in the Account shall not be subject to any security interest, lien or
right of set-off by Securities Intermediary or any third party claiming through Securities
Intermediary and Securities Intermediary shall not pledge, encumber, hypothecate, transfer, dispose
of, or otherwise grant any third party an interest in, Collateral except to the extent set forth in
the Security Agreement.



     4. Notice of Adverse Claims. Except for the claims and interests of the Secured Party
and Pledgor, the Securities Intermediary does not know of any claim to, or interest in, the
Account, any financial asset credited thereto or any security entitlement in respect thereof. Upon
receipt of written notice of any lien, encumbrance or adverse claim against the Account or any
portion of the Collateral carried therein, Securities Intermediary shall use reasonable efforts to
notify Secured Party and Pledgor as promptly as practicable under the circumstances.



ARTICLE IV

GENERAL TERMS AND CONDITIONS




     1. Standard of Care; Indemnification. (a) Except as otherwise expressly provided
herein, Securities Intermediary shall not be liable for any costs, expenses, damages, liabilities
or claims, including attorneys’ fees (“Losses”) incurred by or asserted against Pledgor or Secured
Party, except those Losses arising out of the negligence or willful misconduct of Securities
Intermediary. Securities Intermediary shall have no liability whatsoever for the action or
inaction of any Depository. In no event shall Securities Intermediary be liable for special,
indirect or consequential damages, or lost profits or loss of business, arising in connection with
this Agreement.



     (b) Pledgor agrees to indemnify Securities Intermediary and hold Securities Intermediary
harmless from and against any and all Losses sustained or incurred by or asserted against
Securities Intermediary by reason of or as a result of any action or inaction, or arising out of
Securities Intermediary’s performance hereunder, including reasonable fees and expenses of counsel
incurred by Securities Intermediary in a successful defense of claims by Pledgor or Secured Party;
provided, that Pledgor shall not indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary’s or Secured Party’s negligence or willful misconduct. Secured Party
agrees to indemnify Securities Intermediary for Losses sustained or incurred by or asserted against
Securities Intermediary arising out of Secured Party’s negligence, willful misconduct or
Instruction in connection with this Agreement, provided, that Secured Party shall not indemnify
Securities Intermediary for those Losses arising out of Securities Intermediary’s negligence or
willful misconduct. This indemnity shall be a continuing obligation of Pledgor and Secured Party,
as applicable, and their respective successors and assigns, notwithstanding the termination of this
Agreement.



47









 





     2. No Obligation Regarding Quality of Collateral. Without limiting the generality of
the foregoing, Securities Intermediary shall be under no obligation to inquire into, and shall not
be liable for, any Losses incurred by Pledgor, Secured Party or any other person as a result of the
receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral which otherwise is
not freely transferable or deliverable without encumbrance in any relevant market.



     3. No Responsibility Concerning Security Agreement. Pledgor and Secured Party hereby
agree that, notwithstanding references to the Security Agreement in this Agreement, Securities
Intermediary has no interest in, and no duty, responsibility or obligation with respect to, the
Security Agreement (including without limitation, no duty, responsibility or obligation to monitor
Pledgor’s or Secured Party’s compliance with the Security Agreement or to know the terms of the
Security Agreement).



     4. No Duty of Oversight. Securities Intermediary is not at any time under any duty to
monitor the value of any Collateral in the Account or whether the Collateral is of a type required
to be held in the Account, or to supervise the investment of, or to advise or make any
recommendation for the purchase, sale, retention or disposition of any Collateral.



     5. Advice of Counsel. Securities Intermediary may, with respect to questions of law,
obtain the advice of counsel and shall be fully protected with respect to anything done or omitted
by it in good faith in conformity with such advice.



     6. No Collection Obligations. Securities Intermediary shall be under no obligation to
take action to collect any amount payable on Collateral in default, or if payment is refused after
due demand and presentment.



     7. Fees and Expenses. Pledgor agrees to pay to Securities Intermediary the fees as
may be agreed upon from time to time. Pledgor shall reimburse Securities Intermediary for all
costs associated with transfers of Collateral to Securities Intermediary and records kept in
connection with this Agreement. Pledgor shall also reimburse Securities Intermediary for
out-of-pocket expenses which are a normal incident of the services provided hereunder.



     8. Effectiveness of Instructions; Reliance; Risk Acknowledgements; Additional Terms.
Securities Intermediary shall be entitled to rely upon any Instructions actually received by
Securities Intermediary and reasonably believed by Securities Intermediary to be duly authorized
and delivered.



48









 





     9. Recording of Telephone Conversations. The parties hereto acknowledge that telephone
conversations made in connection with this Agreement may be recorded.



     10. Inspection. Upon reasonable request and provided Securities Intermediary shall
suffer no significant disruption of its normal activities, Secured Party or Pledgor shall have
access to Securities Intermediary’s books and records relating to the Account during Securities
Intermediary’s normal business hours. Upon reasonable request, copies of any such books and
records shall be provided to Secured Party or Pledgor at its expense.



     11. Account Disclosure. Securities Intermediary is authorized to supply any
information regarding the Account which is required by any law or governmental regulation now or
hereafter in effect.



     12. Force Majeure. Securities Intermediary shall not be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control, including without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications service; accidents; labor disputes; acts of civil or military
authority; governmental actions; inability to obtain labor, material, equipment or transportation.



     13. Pricing Services. Securities Intermediary may, as an accommodation, provide
pricing or other information services to Pledgor and/or Secured Party in connection with this
Agreement. Securities Intermediary may utilize any vendor (including securities brokers and
dealers) believed by it to be reliable to provide such information. Under no circumstances shall
Securities Intermediary be liable for any loss, damage or expense suffered or incurred by Pledgor
or Secured Party as a result of errors or omissions with respect to any pricing or other
information utilized by Securities Intermediary hereunder.



     14. No Implied Duties. Securities Intermediary shall have no duties or
responsibilities whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied against Securities Intermediary
in connection with this Agreement. The Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any person (other than the
Collateral Agent) relating to the Account and/or any financial asset held thereto pursuant to which
it has agreed, or will agree, to comply with the entitlement orders of such person.



ARTICLE V




49









 








MISCELLANEOUS




     1. Termination. This Agreement shall terminate upon (a) Securities Intermediary’s
receipt of Written Instructions from Secured Party expressly stating that Secured Party no longer
claims any security interest in the Collateral and Securities Intermediary’s subsequent transfer of
the Collateral from the Account pursuant to Pledgor’s Written Instructions, or (b) by any party
upon not less than ninety (90) days prior written notice of termination to the other parties,
provided that termination pursuant to (b) above shall not affect or terminate Secured Party’s
security interest in Collateral. Upon termination pursuant to (b) above, Securities Intermediary
shall follow such reasonable Written Instructions of Secured Party concerning the transfer of
Collateral. Except as otherwise provided herein, all obligations of the parties to each other
hereunder shall cease upon termination of this Agreement.



     2. Notices. (a) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Securities Intermediary, shall be sufficiently given if addressed to
Securities Intermediary and received by it at its offices at One Wall Street, New York, New York
10286, or at such other place as Securities Intermediary may from time to time designate in
writing.



     (b) Any notice or other instrument in writing, authorized or required by this Agreement to be
given to Secured Party shall be sufficiently given if addressed to Secured Party and received by it
at its offices at the address provided below, or at such other place as Secured Party may from time
to time designate in writing.


The Bank of New York Mellon

Attention:  Andrew J. Taylor

101 Barclay Street

New York, NY 10286

Telecopy:  (212) 815-2020

Telephone:  (212) 815-2943

E-mail:  andrew.j.taylor@bnymellon.com




     (c) Any notice or other instrument in writing, authorized or required by this Agreement to be
given to Pledgor shall be sufficiently given if addressed to Pledgor and received by it at its
offices at the address provided below, or at such other place as Pledgor may from time to time
designate in writing.


Maiden Lane III LLC

c/o Federal Reserve Bank of New York

FRBNY Investment Support Office

33 Liberty Street New York, New York 10045

Attention: Helen Mucciolo, Senior Vice President

Fax: (212) 720-1953




50









 




Telephone: (212) 720-1333

Email: helen.mucciolo@ny.frb.org



with copies to:



Federal Reserve Bank of New York

33 Liberty Street, New York, New York 10045

Attention: Joyce M. Hansen, Deputy General

Counsel and Senior Vice President

Telecopy: (212) 720-1756

Telephone: (212) 720-5024

E-mail: joyce.hansen@ny.frb.org



and



Davis Polk & Wardwell

450 Lexington Avenue, New York, New York 10017

Attention: Marshall S. Huebner and Bjorn Bjerke

Telephone: (212) 450-4000




     3. Cumulative Rights; No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection herewith,
or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of Securities Intermediary to exercise, and no delay in exercising, any right
will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.



     4. Severability; Amendments; Assignment. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected thereby.
This Agreement may not be amended or modified in any manner except by a written agreement executed
by the parties hereto. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that this Agreement shall
not be assignable by any party without the written consent of the other parties.



     5. Governing Law; Jurisdiction; Jury Trial Waiver; Waiver of Immunity. This Agreement
shall be construed in accordance with the laws of the State of New York. The State of New York
shall be deemed to be the Securities Intermediary’s jurisdiction for purposes of the UCC
(including, without limitation, Section 8-110 thereof). Each Party hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York



51









 







City, and any appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment, and each of the
Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State or, to the extent permitted by
law, in such federal court. Each of the Parties agrees that a final judgment in any such action or
proceeding shall be conclusive. Each Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or relating to this
Agreement in any New York State or federal court. Each Party hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.



          Each party hereto hereby unconditionally and irrevocably waives any and all right to trial by
jury in any action, suit, counterclaim, or cross claim arising in connection with, out of, or
otherwise relating to this Agreement, the Collateral, or any transaction or agreement arising
therefrom or related thereto.




          If Pledgor or its property is now, or in the future becomes, entitled to any immunity, whether
characterized as sovereign or otherwise (including, without limitation, immunity from set-off, from
service of process, from jurisdiction of any court or tribunal, from attachment in aid of
execution, from attachment prior to the entry of a judgment, or from execution upon a judgment) in
any legal proceeding in Federal or State courts in the United States of America, or in the courts
of the country where Pledgor is chartered, or in the courts of the country in which Pledgor
principally conducts its business, then Pledgor expressly and irrevocably waives, to the maximum
extent permitted by law, any such immunity. To the extent Pledgor receives any such entitlement in
the future, Pledgor shall promptly notify Secured Party of such entitlement.




     6. No Third Party Beneficiaries. In performing hereunder, Securities Intermediary is
acting solely on behalf of Secured Party and Pledgor and no contractual or service relationship
shall be deemed to be established hereby between Securities Intermediary and any other person.



     7. Headings. Section headings are included in this Agreement for convenience only and
shall have no substantive effect on its interpretation.



     8. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall, together, constitute only
one instrument.



     9. USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge that Securities
Intermediary is subject to federal laws, including the Customer Identification Program (CIP)
requirements under the USA PATRIOT



52









 







Act and its implementing regulations, pursuant to which Securities Intermediary must obtain, verify
and record information that allows Securities Intermediary to identify each of Pledgor and Secured
Party. Accordingly, prior to opening an Account hereunder Securities Intermediary will ask Pledgor
and/or Secured Party to provide certain information including, but not limited to, Pledgor’s and/or
Secured Party’s name, physical address, tax identification number and other information that will
help Securities Intermediary to identify and verify each of Pledgor’s and Secured Party’s identity
such as organizational documents, certificate of good standing, license to do business, or other
pertinent identifying information. Pledgor and Secured Party agree that Securities Intermediary
cannot open an Account hereunder unless and until the Securities Intermediary verifies the
Pledgor’s and/or Secured Party’s identity in accordance with its CIP.




53











 





Exhibit B to

Master Investment and Credit Agreement




FORM
OF ADMINISTRATION AGREEMENT






ADMINISTRATION AGREEMENT




by and among




MAIDEN LANE III LLC,




FEDERAL RESERVE BANK OF NEW YORK,

as Managing Member




and




THE BANK OF NEW YORK MELLON,

as Administrator and Escrow Agent




November 25, 2008





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1

	Definitions

	 
	 	 	 	 
	ARTICLE 2

	Duties of the Administrator

	 
	 	 	 	 
	Section 2.01. General Duties and Services of the Administrator

	 	 	2	 
	Section 2.02. Instructions to the Administrator from the Managing Member

	 	 	6	 
	Section 2.03. Delivery of Information

	 	 	6	 
	Section 2.04. Third Party Information

	 	 	6	 
	Section 2.05. Engagement of Sub vendors

	 	 	7	 
	 
	 	 	 	 
	ARTICLE 3

	Duties of the Escrow Agent

	 
	 	 	 	 
	Section 3.01. Establishment of Escrow Account

	 	 	7	 
	 
	 	 	 	 
	ARTICLE 4

	Term of Appointment

	 
	 	 	 	 
	ARTICLE 5

Representations and Warranties

	 
	 	 	 	 
	Section 5.01. Representations and Warranties of BNYM

	 	 	10	 
	Section 5.02. Representations and Warranties of ML III

	 	 	11	 
	 
	 	 	 	 
	ARTICLE 6

	Miscellaneous

	 
	 	 	 	 
	Section 6.01. Waivers; Amendment

	 	 	11	 
	Section 6.02. Notices; Electronic Communications

	 	 	12	 
	Section 6.03. Additional Provisions with Respect to the Administrator

	 	 	13	 
	Section 6.04. Survival of Agreement

	 	 	14	 
	Section 6.05. Fees and Expenses; Indemnity

	 	 	15	 
	Section 6.06. Successors and Assigns; Assignments

	 	 	16	 
	Section 6.07. Merger or Consolidation of, or Assumption of the Obligations of, the Administrator

	 	 	16	 
	Section 6.08. Counterparts

	 	 	17	 
	Section 6.09. Severability

	 	 	17	 
	Section 6.10. Applicable Law

	 	 	17	 






 









 






	 	 	 	 	 
	 	 	Page	 
	Section 6.11. WAIVER OF JURY TRIAL

	 	 	17	 
	Section 6.12. Jurisdiction; Consent to Service of Process

	 	 	17	 
	Section 6.13. No Bankruptcy Petition Against ML III

	 	 	18	 
	Section 6.14. Further Assurances

	 	 	18	 
	Section 6.15. Limited Recourse

	 	 	18	 
	Section 6.16. Conflict with the Master Investment and Credit Agreement or Security Documents

	 	 	19	 
	Section 6.17. Third Party Beneficiary

	 	 	19	 
	Section 6.18. Confidentiality

	 	 	19	 
	Section 6.19. Internal Controls

	 	 	20	 
	Section 6.20. Access to Books and Records

	 	 	20	 
	Section 6.21. Maintenance of Books and Records

	 	 	20	 
	Section 6.22. Binding Effect

	 	 	21	 
	Section 6.23. Integration

	 	 	21	 
	Section 6.24. Headings

	 	 	21	 
	Section 6.25. Instructions

	 	 	21	 
	Section 6.26. Role of Investment Manager and Controlling Party

	 	 	21	 
	Section 6.27. Termination

	 	 	21	 
	 
	 	 	 	 
	Exhibit A
List of Escrow Sub Accounts
	 	 	 	 
	Exhibit B Form of Reset Date Notice
	 	 	 	 
	 
	 	 	 	 
	Schedule 2.02 Form of Incumbency Certificate
	 	 	 	 
	Schedule 6.02 Notice Information
	 	 	 	 







ii









 








ADMINISTRATION AGREEMENT




     This ADMINISTRATION AGREEMENT (this “Agreement”), dated as of November 25, 2008 among MAIDEN
LANE III LLC, a Delaware limited liability company (“ML III”), FEDERAL RESERVE BANK OF NEW YORK
(“FRBNY”), as managing member of ML III (in such capacity, the “Managing Member”), THE BANK OF NEW
YORK MELLON (“BNYM”), in its capacity as administrator (in such capacity the “Administrator”) and
in its capacity as escrow agent (in such capacity the “Escrow Agent”).



W I T N E S S E T H :




     WHEREAS, ML III is entering into (i) the Master Investment and Credit Agreement dated as of
November 25, 2008 (the “Master Investment and Credit Agreement”) among ML III, FRBNY, as Senior
Lender and as Controlling Party, and American International Group, Inc. (“AIG”), as Equity
Investor, and (ii) the Security Agreement dated as of November 25, 2008 (the “Security Agreement”)
among ML III, FRBNY, as Senior Lender and as Controlling Party and BNYM, as Collateral Agent.



     WHEREAS, pursuant to the terms of the Security Agreement, ML III is pledging the Collateral as
security for the Secured Obligations;



     WHEREAS, the Managing Member desires to have the Administrator administer ML III’s corporate
affairs, maintain general accounting records, prepare financial statements, perform on behalf of ML
III certain administrative duties that are required to be performed under the Master Investment and
Credit Agreement and the Security Agreement, and perform other services for ML III, and the
Administrator is willing to furnish such services on the terms and conditions herein set forth;



     WHEREAS, the Managing Member desires to have the Escrow Agent establish the Escrow Account,
which shall include certain designated sub-accounts, and administer the Escrow Account, and the
Escrow Agent is willing to provide such services to ML III upon the terms and conditions herein set
forth;



     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
the parties hereto agree as follows:



ARTICLE 1

Definitions




     (a) Unless otherwise defined herein, terms defined in the Master Investment and Credit
Agreement or in the Security Agreement, as applicable,



 









 







and used herein (including terms used in the preamble and the recitals hereto) shall have the
meanings given to them in the Master Investment and Credit Agreement or in the Security Agreement,
as applicable.



     (b) The “Other Definitional Provisions” specified in Section 1.02 of the Master Investment and
Credit Agreement shall apply to this Agreement, including terms defined in the preamble and
recitals hereto.



     (c) Contemporaneously with the execution and delivery of this Agreement (and with respect to
supplements or amendments, from time to time after the date hereof), the Managing Member shall
provide to the Administrator a true, accurate and complete copy of the Master Investment and Credit
Agreement (and any amendments or supplements thereto) on which the Administrator may rely.



ARTICLE 2

Duties of the Administrator




     Section 2.01. General Duties and Services of the Administrator. The Administrator hereby
agrees to perform the following general duties and services and only such duties and services as
are set forth in the Transaction Documents, including this Agreement. No implied duties, covenants
or obligations of the Administrator shall be read into the Transaction Documents and this
Agreement.



     (a) To maintain the records and prepare reports of and provide accounting services to ML III
as follows:




     (i) maintenance of daily general accounting records of ML III in such form and in
sufficient detail as to permit the preparation of financial statements in accordance with
GAAP and preparation of periodic reports as follows:




     (A) statements of net assets;




     (B) statements of income (including supporting detail for coupon,
amortization, and realized and unrealized gains and losses) and supporting
general ledger and trial balances;




     (C) balance sheets;




     (D) statements of cash flows;




     (E) statements of changes in net assets (including support for required
footnote disclosures);



2









 






     (F) appropriate consolidation entries for holdings where ML III is primary
beneficiary (if necessary);




     (G) FAS 157 disclosures;




     (H) income and expense accruals;




     (I) accounting for Permitted Investments;




     (J) daily trial balance with supporting detail available related to line
items in the trial balance; and




     (K) weekly reporting sufficient to facilitate FRBNY reporting requirements;




     (ii) preparation of periodic financial statements and associated footnotes for
certification by ML III’s independent public accountants, including furnishing to the
Senior Lender, the Equity Investor, the Controlling Party and the Managing Member the
annual audited balance sheet and related audited statements of income and cash flows
within 120 days after the end of each fiscal year and the unaudited balance sheet and
related unaudited statements of income within 35 days after the end of each of the first
three fiscal quarters of ML III, excluding footnotes in the case of quarterly financials;




     (iii) on each Notice Date (as defined in Section 6.05(d) of this Agreement), the
Administrator shall start to prepare a draft “Payment Calculation Report” used as a basis
for the Controlling Party to approve payments from ML III for the Payment Date scheduled
to occur immediately succeeding such Notice Date, which will include all requests for
payment received from the date following the preceding Notice Date up to and including
such Notice Date. No later than the last day of the calendar month or, if such date is
not a Business Day, the next succeeding Business Day (or if Notice Dates and Payment Dates
are adjusted to occur more or less frequently than monthly, such other date as the
Controlling Party may specify pursuant to a Proper Instruction), the Administrator will
deliver the draft Payment Calculation Report to the Investment Manager, the Equity
Investor, the Collateral Agent and the Controlling Party. Not later than two Business
Days prior to the Payment Date, the Administrator will deliver the final Payment
Calculation Report, approved by the Controlling Party, to each of the Equity Investor, the
Investment Manager, ML III and the Collateral Agent;




     (iv) monthly re-pricing of the Collateral (other than for the CDO Issues, for which
the re-pricing shall be quarterly) using pricing files received from the Investment
Manager and any other consultants or advisors retained by ML III or the Controlling Party;



3









 






     (v) daily accounting and reconciliation of cash and security trades and other
activity in the Collateral Account;




     (vi) monthly reconciling of the net asset value of the Collateral on deposit in the
Collateral Account to the Investment Manager’s and the Collateral Agent’s records within
15 Business Days after the end of each monthly close commencing with the monthly close for
the first full calendar month following the Closing Date;




     (vii) on a quarterly and annual basis, performing independent pricing of the
Collateral for which commercially reasonable pricing services are available, and providing
comparisons with the Investment Manager’s pricing;




     (viii) prepare and deliver the “Weekly Report” in accordance with Section 4.01 of the
Master Investment and Credit Agreement;




     (ix) prepare and deliver a “Reset Date Notice” in the form of Exhibit B to this
Agreement setting forth the information required by Section 4.02 of the Master Investment
and Credit Agreement; and




     (x) providing all other records, reports, information and accounting services as are
reasonably related to the foregoing or as may be reasonably requested by the Managing
Member.



     The Administrator shall be entitled to retain, at the sole, but reasonable, cost and expense
of ML III (but not subject to separate cost or invoice to ML III from those in the Fee Letter to
the extent such costs and expenses are to be covered by fees paid under the Fee Letter), the
services of any consultant, auditor or advisor to perform any or all of the duties set forth in
this Section 2.01(a) as a Sub-Vendor in accordance with Section 2.05.



     (b) To provide administrative services to ML III as follows:




     (i) assistance and cooperation with ML III’s independent public accountants or other
examiners in connection with their audits and other examinations of ML III;




     (ii) identifying the need for, and preparing for execution by the appropriate Person
on behalf of ML III of, any state, Federal or applicable foreign tax reports or filings
and any income, franchise or other tax returns of ML III as shall be required to be filed
under applicable law, and communicating with the Collateral Agent to facilitate payment of
any such taxes owed (for the avoidance of doubt, the Managing Member shall maintain
control over any decisions regarding tax elections);



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     (iii) taking such actions as necessary to preserve, renew and keep in full force and
effect ML III’s organizational existence, including completing any filings to maintain the
good standing of ML III in Delaware as necessary in the normal conduct of ML III’s
business;




     (iv) cooperating with tax and accounting preparation for other appropriate parties,
as applicable;




     (v) identifying and assisting in the completion of any other filings, including any
financing statements, required to be made on behalf of ML III; and




     (vi) providing other administrative services reasonably related to the foregoing or
as may be reasonably requested by the Managing Member.



     (c) To administer notices and other communications as follows:




     (i) receiving notices (including notices of Liens on the Collateral) and other
communications received by ML III under the Transaction Documents or any other documents
associated with the transactions contemplated by the Transaction Documents and promptly
notifying the Managing Member or other appropriate party, as applicable, upon receipt or
discovery of such notices, consents and other communications; and




     (ii) cooperating with ML III to prepare and send out notices and other communications
as required or permitted under the Transaction Documents, or any other documents
associated with the transactions contemplated by the Transaction Documents.



     (d) To determine LIBOR monthly, calculate the accrued interest payable on each Senior Loan,
the outstanding principal amount of each Senior Loan, the preferred distributions accrued on the
Equity Contribution Amount and the Equity Contribution Amount pursuant to each of the Transaction
Documents and deliver any notices regarding capitalized interest, the outstanding principal amount
of each Senior Loan, the Equity Contribution Amount and changes in interest rates in accordance
with each of the Transaction Documents (including the Reset Date Notice pursuant to Section 4.02 of
the Master Investment and Credit Agreement).



     (e) To take all other actions on behalf of ML III that are required under the Transaction
Documents, or any other documents associated with the transactions contemplated by the Transaction
Documents, as instructed by the Managing Member or its designee, including (i) monitoring the
performance of ML III under such documents to cause it to comply with the representations,
warranties and covenants set forth therein and to avoid a default under such



5









 







documents, (ii) deliver the Payment Calculation Report and reports on positions and their
valuation, (iii) taking the actions that are set forth in this Agreement or that are necessary to
carry out the activities contemplated in this Section 2.01 and (iv) taking any steps reasonably
requested by the Managing Member, the Controlling Party or its designee in connection with its
performance of the obligations under the Transaction Documents.



     Section 2.02. Instructions to the Administrator from the Managing Member. The parties to
this Agreement hereby agree to collaborate in developing day-to-day operating procedures with
respect to the duties listed in Section 2.01 hereof. At any time (either before or after such
procedures have been established) the Administrator may request an instruction in writing from the
Managing Member and may, at its own option, include in such request the course of action it
proposes to take and the date on which it proposes to act, regarding any matter arising in
connection with its duties and obligations hereunder. The Administrator shall refrain from taking
such proposed action if it has not received the written instructions consenting to the taking of
such actions from the Managing Member; provided that the Administrator shall incur no liability
hereunder for any consequences resulting from refraining from taking any such course of action if
not so instructed. All directions and notices from the Managing Member or its designee to the
Administrator shall be in writing and signed by a Responsible Officer of the Managing Member or its
designee or as otherwise agreed to by the parties to this Agreement in the operating procedures.
The Administrator shall receive an incumbency certificate in the form set forth in Schedule 2.02
hereof setting forth each of the Responsible Officers for the Managing Member or its designee
entitled to direct the Administrator, and the Administrator shall be entitled to conclusively rely,
and be protected in so relying, upon any such direction from any such Responsible Officer. The
Administrator shall be entitled to conclusively rely upon the last incumbency certificate received
by it until it receives a new incumbency certificate from the Managing Member or its designee from
any such Responsible Officer. The Administrator hereby acknowledges receipt of such incumbency
certificate from the Managing Member on the date hereof.



     Section 2.03. Delivery of Information. The Administrator shall deliver any reports or other
information that it is required to prepare pursuant to Section 2.01 hereof in accordance with the
notice provisions in Section 6.02 and the notice provisions set forth in the other Transaction
Documents.



     Section 2.04. Third Party Information. To the extent that this Agreement requires the
Administrator to make any calculations based on information provided to the Administrator by other
parties, the Administrator shall make such calculations upon receipt of such information, except to
the extent that such information is manifestly incorrect and/or is not provided to the
Administrator by the time specified in this Agreement or in the other Transaction Documents and/or
where relevant, is not substantially in the form set out in the relevant Transaction Document. The
Administrator shall be entitled to conclusively rely on any and all



6









 







such information and advice it receives from a Responsible Officer of the Managing Member or
its designee, legal counsel and independent accountants (including accountants and counsel for ML
III) pursuant to its duties under this Agreement without any independent verification thereof and
shall not be liable hereunder if it relies on such information or acts in accordance with such
advice and without actual knowledge that such advice is in contravention of the terms of this
Agreement. If such information is not provided to the Administrator by the time specified in this
Agreement or in the other Transaction Documents and, where relevant, in the form set out in the
relevant Transaction Document, or if such information is manifestly incorrect, the Administrator
shall use reasonable efforts to make the necessary calculations and shall incur no liability
hereunder for any consequence resulting from making such calculation.



     Section 2.05. Engagement of Sub-vendors.



     (a) The parties hereto acknowledge that, notwithstanding any term hereof to the contrary, the
Administrator may engage and retain from time to time one or more sub-vendors to execute any or all
of the duties assigned to the Administrator hereunder (each a “Sub-Vendor”) with the consent of the
Managing Member as to the nature of the services being sub-contracted and the identity and
contractual terms of any Sub-Vendor (which contractual terms shall be substantially similar to the
terms of this Agreement, other than with respect to fees and specific services, including with
respect to records retention, maintenance of books and records and expense reimbursement). The
Administrator shall not be relieved of any of its duties hereunder as a result of such delegation
to any Sub-Vendor and shall be responsible for all acts and omissions of such Sub-Vendor, provided
that such responsibility and any resulting liability shall be subject to the same limitations,
including those contained in Section 6.03(d) that would have applied hereunder to such acts and
omissions had they been engaged in by the Administrator itself pursuant to terms of this Agreement.
ML III shall not be responsible for the payment of any fees for the services of such Sub-Vendors,
and such amounts shall be payable by the Administrator out of the fees payable by ML III under the
Fee Letter.



     (b) For the avoidance of doubt, it is hereby expressly acknowledged and agreed that any
Sub-Vendor shall not be, and shall not be construed to be, an assignee for purposes of Section 6.06
hereof.



     (c) ML III hereby acknowledges and agrees that the Administrator will engage and retain Lord
Securities Corporation to perform the corporate services and duties set forth in Section 2.01
pursuant to the corporate services agreement to be entered into on or about the date hereof between
the Administrator and Lord Securities Corporation.



7









 





ARTICLE 3

Duties of the Escrow Agent




     Section 3.01. Establishment of Escrow Account. (a) The Escrow Agent confirms that it has
established account number 630174 in the name of “Maiden Lane III LLC” (such account, the “Escrow
Account”), with the specific sub-accounts set out in Exhibit A hereto. By execution of this
Agreement, the Escrow Agent waives any Lien that it may have in the Escrow Account or any of the
amounts credited thereto other than any Liens granted to it as a Secured Party pursuant to the
Security Agreement.



     (b) The Escrow Agent confirms that the Escrow Account is and will remain a “securities
account” as defined in Section 8-501 of the UCC. The Escrow Agent and ML III agree that each item
of property (whether investment property, financial asset, security, instrument, cash or other
property) credited to the Escrow Account shall be treated as a “financial asset” within the meaning
of Sections 8-102(a)(9) and 8-103 of the UCC.



     (c) Subject to the terms and conditions provided in the Forward Purchase Agreements which ML
III has entered into with various counterparties (each party with whom ML III has entered into a
Forward Purchase Agreement, a “Counterparty”), ML III shall, on the applicable closing date(s)
under each Forward Purchase Agreement (each such date, a “Forward Closing Date”), cause to be
delivered to the Escrow Account from certain funds made available to it pursuant to Sections 2.01
and 3.01 of the Master Investment and Credit Agreement, an amount (the “Escrow Amount”) equal to
the sum of the “Net Payment to Counterparty” amounts set forth in Annex C of the Excluded Assets
and Post Purchase Proceeds Certificates (as defined in the Forward Purchase Agreements) delivered
in connection with such Forward Closing Date and upon such delivery the Escrow Agent shall promptly
credit such amount to the ML III sub-account (which may be made by accounting ledger).



     (d) Following delivery of the Escrow Amount under clause (c) above, the Escrow Agent will
promptly credit the sub-accounts for the relevant Counterparties for the “Net Payment to
Counterparty” amount set out in Annex C of the relevant Excluded Assets and Post Purchase Proceeds
Certificate delivered in respect of such Counterparty for the relevant Forward Closing Date and
under the relevant Forward Purchase Agreement. The Escrow Agent shall make a corresponding debit to
the ML III sub-account (which may be made by accounting ledger) for each credit that it makes to
the sub-account of a Counterparty under this clause (d).



     (e) Pursuant to the terms of each Forward Purchase Agreement, on the relevant Forward Closing
Date, the Counterparty will transfer and convey, or cause to be transferred and conveyed, to the
Escrow Agent for application to such Counterparty’s sub-account all of such Counterparty’s right,
title and interest in and to the relevant CDO Issues, as set forth in Annex C of the Excluded
Assets



8









 







and Post Purchase Proceeds Certificate delivered pursuant to the relevant Forward Purchase
Agreement for the relevant Forward Closing Date.



     (f) With respect to each Forward Purchase Agreement and for the relevant Forward Closing Date,
upon (and only upon) (i) confirmation by the Escrow Agent to (A) the Counterparty that the
condition set forth in Section 3.02(b) of such Forward Purchase Agreement has been met and (B) ML
III that the condition set forth in Section 3.03(c) of such Forward Purchase Agreement has been
met, (ii) delivery by ML III of the applicable Escrow Amount to the Escrow Agent, (iii) transfer of
the applicable CDO Issues by the Counterparty to the Escrow Agent and (iv) confirmation by each of
ML III and the Counterparty to the Escrow Agent that all the conditions set forth in such Forward
Purchase Agreement for the relevant Forward Closing Date have been met (or waived by the party with
the right to waive such condition), the Escrow Agent shall release and deliver the Escrow Amount
then credited to the relevant sub-account for such Counterparty to such account as instructed by
the relevant Counterparty and shall release and transfer the assets, including the relevant CDO
Issues, remaining in the sub-account related to such Counterparty for credit to the Collateral
Account.



     (g) Prior to the delivery of the Escrow Amount and the release and transfer of the remaining
assets pursuant to Section 3.01(f) above, the Escrow Agent shall follow the instructions of each
Counterparty with respect to return or release of any amounts or assets, including the relevant CDO
Issues that were transferred to the Escrow Account, by or on behalf of such Counterparty, and shall
follow ML III’s instructions in all other respects. In preparation for the transfers contemplated
by Section 3.01(f), prior to each relevant Forward Closing Date for such CDO Issues, the Escrow
Agent shall, on behalf of ML III, confirm with the relevant Counterparty (i) such Counterparty’s
ability to give instructions pursuant to this clause (g) and (ii) inform such Counterparty of the
procedure for releasing CDO Issues in connection with such Forward Closing Date for such CDO Issue.



     (h) If an amount is payable by ML III under Section 2(a) of the Shortfall Agreement, the
Escrow Agent shall, to the extent that funds are available in the ML III sub-account, deliver such
amount, in immediately available funds, to AIG-FP on the Adjustment Date (as defined in the
Shortfall Agreement) in accordance with Proper Instructions. To the extent that ML III is required
to make a payment under this clause (h) on a Forward Closing Date, the application of proceeds from
the ML III sub-account pursuant to clause (f) above shall occur prior to any payment pursuant to
this clause (h).



     (i) Unless otherwise instructed by ML III, the Escrow Agent shall transfer any property
remaining in the ML III sub-account at the close of business on a Forward Closing Date to the
Collateral Agent for credit to the Collateral Account.



9









 





ARTICLE 4

Term of Appointment




     This Agreement shall continue in full force and effect until it has been terminated in
accordance with this Article 4. The Managing Member or BNYM may terminate this Agreement for any
reason upon not less than 30 days’ prior written notice to each other party hereto; provided that
no termination of this Agreement by BNYM shall be effective until the Managing Member shall have
appointed a successor Administrator and Escrow Agent. If the Managing Member shall fail to appoint
such successors within 90 days after notice of termination from BNYM, then BNYM may petition any
court of competent jurisdiction for the appointment of such successors at the sole cost and expense
of ML III. As of the termination date, all fees and reimbursement expenses shall be paid to BNYM
in accordance with Section 5.02 of the Master Investment and Credit Agreement on the next
succeeding Payment Date. The indemnity provided to any resigning Administrator or Escrow Agent, as
applicable, under Section 6.05 of this Agreement shall survive its resignation under this Agreement
with respect to any indemnified liabilities to the extent incurred or arising, or relating to
events occurring, before such termination.



ARTICLE 5

Representations and Warranties




     Section 5.01. Representations and Warranties of BNYM. BNYM hereby represents and warrants,
as of the date hereof, that:



     (a) Power; Authorization. It is a corporation duly organized and is validly existing and in
good standing under the laws of New York and has the power and authority, and the legal right, to
execute, deliver and perform this Agreement and all obligations required hereunder and has taken
all necessary organizational action to authorize this Agreement on the terms and conditions hereof,
the execution, delivery and performance of this Agreement and the performance of all obligations
imposed upon it hereunder.



     (b) No Consent. No consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement.



     (c) Enforceable Obligations. This Agreement constitutes a legal, valid and binding agreement
of it, enforceable against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity (whether enforcement
is sought by proceedings in equity or at law).



10









 





     (d) No Conflicts. The execution, delivery and performance of this Agreement and the documents
and instruments required hereunder will not violate any Requirement of Law or any Contractual
Obligation of it, the violation of which would have a material adverse effect on the business,
operations, assets or financial condition of it and will not result in, or require, the creation or
imposition of any Lien on any of its property, assets or revenues pursuant to the provisions of any
Requirement of Law or any such Contractual Obligation.



     Section 5.02. Representations and Warranties of ML III. ML III hereby represents and
warrants, as of the date hereof, that:



     (a) Power; Authorization. ML III has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware and has the power and authority, and the legal
right, to execute, deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary organizational action to authorize this Agreement on the terms and
conditions hereof, the execution, delivery and performance of this Agreement and the performance of
all obligations imposed upon it hereunder.



     (b) No Consent. No consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement.



     (c) Enforceable Obligations. This Agreement constitutes a legal, valid and binding obligation
of ML III, enforceable against ML III in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).



     (d) No Conflicts. The execution, delivery and performance of this Agreement and the documents
and instruments required hereunder will not violate any Requirement of Law or any Contractual
Obligation of ML III, the violation of which would have a material adverse effect on the business,
operations, assets or financial condition of ML III and will not result in, or require, the
creation or imposition of any Lien on any of its property, assets or revenues pursuant to the
provisions of any Requirement of Law or any such Contractual Obligation other than the Security
Interest.



ARTICLE 6

Miscellaneous




     Section 6.01. Waivers; Amendment. (a) No failure or delay of ML III, the Managing Member or
BNYM in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such



11









 







right or power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of ML III and the Managing Member hereunder are cumulative and are not
exclusive of any rights or remedies that such parties would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by ML III or the Managing Member shall in
any event be effective unless the same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on BNYM in any case shall entitle it to any other or further notice or
demand in similar or other circumstances.



     (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
in accordance with the provisions of this Section 6.01. ML III, with the consent of the
Controlling Party, and BNYM may from time to time in accordance with Section 11.01 of the Master
Investment and Credit Agreement, (i) enter with the parties hereto into written amendments,
supplements or modifications hereto for the purpose of adding any provisions to this Agreement or
changing in any manner the rights of the parties hereunder or (ii) waive, on such terms and
conditions as ML III, with the consent of the Controlling Party, and BNYM may specify in such
instrument, any of the obligations of the Administrator or the Escrow Agent pursuant to this
Agreement. Any such waiver and any such amendment, supplement or modification shall be binding
upon each of the parties hereto. In the case of any waiver, ML III, the Administrator and the
Escrow Agent shall be restored to their former position and rights hereunder, and any breach waived
shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent
or other breach, or impair any right consequent thereon. Any purported amendment, supplement or
modification not complying with the terms of this Section 6.01 shall be null and void.



     Section 6.02. Notices; Electronic Communications.



     (a) Except in the case of notices and other communications expressly permitted to be given by
telephone, notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered mail or sent by
fax or e-mail, and all notices and other communications expressly permitted hereunder to be given
by telephone shall be made, to the applicable address, fax number, e-mail address or telephone
number specified for the applicable party in Schedule 6.02 hereto.



     (b) All notices and other communications given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered
by hand or overnight courier service or sent by fax or email or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section or in accordance with the



12









 







latest unrevoked direction from such party given in accordance with this Section. As agreed
to among the parties from time to time, notices and other communications may also be delivered by
e-mail to the e-mail address of a representative of the applicable party provided from time to time
by such party.



     Section 6.03. Additional Provisions with Respect to the Administrator.



     (a) For all purposes of this Agreement, BNYM, in each of its capacities herein, shall be an
independent contractor. Unless expressly authorized by the Managing Member or otherwise expressly
authorized hereunder or under any other Transaction Document, BNYM, in each of its capacities
herein, shall have no authority to act for or represent ML III, the Managing Member or the
Investment Manager in any way and shall not otherwise be deemed an agent of ML III, the Managing
Member, the Controlling Party or the Investment Manager or be deemed to assume the obligations of
ML III, the Managing Member, the Controlling Party or the Investment Manager under any Transaction
Document.



     (b) Nothing contained in this Agreement (i) shall constitute BNYM, in any of its capacities
herein, and any of ML III, the Managing Member, the Controlling Party or the Investment Manager as
being members of any partnership, joint venture, association, syndicate, unincorporated business or
other separate entity, (ii) shall be construed to impose any liability as such on any of them
except as expressly set forth herein or (iii) shall be deemed to confer on any of them any express,
implied or apparent authority to incur any obligation or liability on behalf of the others except
as expressly set forth herein.



     (c) Nothing herein shall prevent BNYM or its Affiliates from engaging in other businesses or,
in their sole discretion, from acting in a similar capacity as an administrator for any other
Person even though such Person may engage in business activities similar to those of ML III.



     (d) Notwithstanding any term appearing in this Agreement to the contrary, BNYM in any of its
capacities herein, (i) shall not be liable for any action taken or omitted to be taken by it or any
of such persons in accordance with this Agreement or the Transaction Documents or in connection
herewith, unless such actions or omissions constitute bad faith, wilful misconduct, gross
negligence or fraudulent actions, (ii) shall not be liable with respect to any action it takes or
omits to take in accordance with a direction from the Managing Member or its designee (so long as
BNYM actions or omissions do not constitute willful misconduct, gross negligence, bad faith or
fraudulent actions), (iii) may refuse to make loans to any Person (iv) shall not be liable for the
title, validity, sufficiency, value, genuineness or transferability of any Collateral, (v) may rely
on any notice, direction, instruction, instrument or document reasonably believed by it to be
genuine and to have been signed or presented by a Responsible Officer (and need not investigate any
fact or matter stated in any such notice, direction, instruction, instrument or document), and BNYM
shall be entitled to presume the genuineness, legal capacity and due authority of any signature
appearing thereon



13









 




(provided that the foregoing shall not be construed to relieve BNYM from its responsibility to
act in accordance with the most recent incumbency certificate it has received setting forth the
Responsible Officers of the Managing Member or its designee from time to time, in accordance with
the terms of this Agreement), (vi) may consult with and obtain advice from legal counsel with
respect to any question or matter arising hereunder or relating hereto, and the opinion or advice
of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by BNYM in accordance therewith and (vii) shall not be deemed to have
notice of any fact or matter unless and until actually known to BNYM or notice thereof referencing
this Agreement in writing is received by BNYM at its notice address provided for in Section 6.02.




     (e) BNYM shall be responsible for maintaining and preserving its operations, facilities and
systems (including its computer and communication systems) in a manner consistent with commercial
and supervisory standards prevalent in its industry. So long as BNYM shall have complied with the
foregoing maintenance or preservation requirements and provided that any delay or failure to take
such action as may be required under this Agreement could not be prevented by the exercise of
reasonable care by BNYM, BNYM shall not be liable for any delay or failure to take any action as
may be required under this Agreement to the extent that any such delay or failure is caused by an
act of God or acts of declared or undeclared war, acts of terrorism, public disorder, rebellion or
sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar events
or the interruption or suspension of any external communication or power systems. The preceding
sentence shall not relieve BNYM from using its reasonable best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement and BNYM shall provide ML III and
the Managing Member with written notice of any such failure or delay. BNYM agrees that it shall
enter into and shall maintain in effect, at all times during the term of this Agreement, with
appropriate parties one or more agreements making reasonable provision for (i) periodic back-up of
computer files and data with respect to any accounts held by it, and (ii) emergency use of
electronic data processing equipment to provide services under this Agreement.



     (f) Nothing in this Agreement shall affect any obligation BNYM may have in any capacity not
contemplated in this Agreement.



     Section 6.04. Survival of Agreement. All covenants, agreements, representations and
warranties made by BNYM and ML III herein shall be considered to have been relied upon by each
other party hereto and shall survive the execution and delivery of this Agreement, regardless of
any investigation made by the parties hereto or on their behalf, and shall continue in full force
and effect as long as this Agreement has not been terminated. Notwithstanding anything to the
contrary herein, the provisions of Section 6.05 shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby or by the Master Investment and Credit Agreement, the repayment of any of the



14









 







Secured Obligations, the invalidity or unenforceability of any term or provision of this
Agreement or the Master Investment and Credit Agreement or any other Transaction Document or any
investigation made by or on behalf of the Senior Lender, the Equity Investor, ML III, the Managing
Member or the Controlling Party.



     Section 6.05. Fees and Expenses; Indemnity. (a) ML III agrees to pay to each of the
Administrator and the Escrow Agent in accordance with Section 5.02 of the Master Investment and
Credit Agreement, such fees for its services as are required to be paid pursuant to the terms of
the Fee Letter. The parties to this Agreement hereby agree to undertake good faith negotiations
regarding any additional fees, as necessary and applicable, for any action to be taken by the
Administrator or the Escrow Agent (pursuant to direction or instruction of the Managing Member)
which is not already expressly required by it or reasonably related thereto pursuant to this
Agreement and would cause the Administrator or the Escrow Agent additional undue burden.



     (b) ML III agrees to pay or reimburse, in accordance with Section 5.02 of the Master
Investment and Credit Agreement, each of the Administrator and the Escrow Agent for all of its
reasonable out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to, this Agreement and
any other documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including the reasonable fees
and disbursements of counsel and filing and recording fees and expenses.



     (c) ML III agrees to indemnify BNYM and each of its Related Parties (each such Person being
called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected
with or as a result of (A) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties thereto of their respective
obligations hereunder or the consummation of the transactions contemplated hereby or (B) any claim,
litigation, investigation or proceeding relating to the foregoing, whether or not any Indemnitee is
a party thereto (and regardless of whether such matter is initiated by a third party or by ML III
or any of its Affiliates); provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted primarily from the bad faith, gross negligence, fraudulent actions or willful misconduct
of such Indemnitee; provided, further, that ML III shall not be obligated to pay, indemnify or hold
harmless any Indemnitee if such Indemnitee (i) does not provide reasonably prompt notice to ML III
(with a copy to the Managing Member) of any claim for which indemnification is sought or (ii)
admits any liability or incurs any



15









 







significant expenses after receiving actual written notice of the claim (which is sufficiently
specific to give reasonable notice of the existence of the claims and the expenses of such legal
proceedings), or agrees to any settlement without the prior written consent of ML III. ML III may,
in its sole discretion and at its expense, control the defense of the claim including, without
limitation, designating counsel for the Indemnitees and controlling all negotiations, litigation,
arbitration, settlements, compromises and appeals of any claim.



     (d) All amounts payable under this Section 6.05 shall be payable in accordance with Section
5.02 of the Master Investment and Credit Agreement. Any request for payment under this Article 6
must be (i) for expenses incurred no later than two Business Days prior to the Notice Date and (ii)
received by ML III and the Managing Member no later than the Notice Date, so as to be paid in
connection with payments to be made on the next succeeding Payment Date. “Notice Date” means the
22nd day of each month, commencing on the first such date to occur after the Closing Date, or, if
such 22nd day is not a Business Day, the next Business Day thereafter, or such other day as may be
specified by the Controlling Party or its designee pursuant to a Proper Instruction; provided that
a Notice Date will not occur less frequently than semi-annually.



     (e) To the extent permitted by applicable law, no party shall assert, and each hereby waives,
and no party shall have any obligation with respect to, any claim against any other party, on any
theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, or the transactions contemplated hereby.



     (f) The provisions of this Article 6 shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby or by the Master Investment and Credit Agreement, the repayment of any of the
Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement,
the Master Investment and Credit Agreement or any other Transaction Document or any investigation
made by or on behalf of any party hereto.



     Section 6.06. Successors and Assigns; Assignments. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Administrator nor the Escrow Agent may assign or
transfer any or all its rights and obligations hereunder without the prior written consent of the
Managing Member. Any assignment or transfer of rights or obligations under this Agreement that
does not comply with this Section 6.06 shall be null and void.



     Section 6.07. Merger or Consolidation of, or Assumption of the Obligations of, the
Administrator. Any Person (a) into which BNYM may be



16









 







merged or consolidated, (b) which may result from any merger, conversion or consolidation to
which BNYM shall be a party or (c) succeeding to the business of BNYM, which Person, in any of the
foregoing cases executes an agreement of assumption to perform every obligation of BNYM hereunder,
shall be the successor to BNYM under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties to this Agreement, notwithstanding anything in
this Agreement to the contrary. BNYM shall provide prior written notice of any merger,
consolidation or succession pursuant to this Section 6.07 to the Managing Member and the
Controlling Party.



     Section 6.08. Counterparts. This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an original but all of
which when taken together shall constitute a single contract, and shall become effective when
counterparts shall have been executed and delivered by each party hereto. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.



     Section 6.09. Severability. In the event that any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any respect to the extent
permitted by applicable law, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.



     Section 6.10. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.



     Section 6.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 6.11.



17









 





     Section 6.12. Jurisdiction; Consent to Service of Process. (a) Each party hereby irrevocably
and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New
York State court or federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.



     (b) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any New
York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.



     (c) Each party to this Agreement irrevocably consents to service of process in the manner and
at the address provided for notices in Section 6.02.



     Section 6.13. No Bankruptcy Petition Against ML III. Each party, other than ML III, hereby
covenants and agrees that it will not at any time (i) commence or institute against ML III or join
with or facilitate any other Person in commencing or instituting against ML III, any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, receivership, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or state, or other
jurisdiction, bankruptcy or similar law or statute now or hereafter in effect in connection with
any obligations relating to this Agreement or any of the other Transaction Documents or (ii)
participate in any assignment for benefit of creditors, compositions, or arrangements with respect
to ML III’s debts. The agreements in this Section 6.13 shall survive the termination of this
Agreement and payment in full of all of the Secured Obligations.



     Section 6.14. Further Assurances. Each party hereto agrees to do such further acts and
things and to execute and deliver such additional assignments, agreements, powers and instruments,
as may be reasonably necessary to carry into effect the purposes of this Agreement or to better
assure and confirm unto the parties hereto its rights, powers and remedies hereunder.



     Section 6.15. Limited Recourse. Notwithstanding anything to the contrary contained in this
Agreement, the obligations of ML III under this Agreement are solely the obligations of ML III and
shall be payable solely to the extent of funds received by and available to ML III in accordance
with the Master



18









 







Investment and Credit Agreement. No recourse shall be had for the payment of any amount owing
in respect of any obligation of, or claim against, ML III arising out of or based upon this
Agreement against any holder of a membership interest, employee, officer or Affiliate thereof and,
except as specifically provided herein, no recourse shall be had for the payment of any amount
owing in respect of any obligation of, or claim against, ML III arising out of or based upon this
Agreement against the Administrator, the Escrow Agent, the Investment Manager or any holder of the
Membership Interests of ML III or any Related Party of any thereof; provided, that the foregoing
shall not relieve any such person or entity from any liability they might otherwise have as a
result of bad faith, willful misconduct, gross negligence or fraudulent actions taken or omissions
by them. The provisions of this Section 6.15 shall survive the termination or expiration of this
Agreement and the Secured Obligations.



     Section 6.16. Conflict with the Master Investment and Credit Agreement or Security Documents.
If this Agreement shall require that any action be taken with respect to any matter and the Master
Investment and Credit Agreement or Security Documents shall require that a different action be
taken with respect to such matter, and such actions shall be mutually exclusive, or if this
Agreement should otherwise conflict with the Master Investment and Credit Agreement or Security
Documents, the Master Investment and Credit Agreement and Security Documents shall govern.



     Section 6.17. Third Party Beneficiary. The parties hereto agree that the Secured Parties are
express third party beneficiaries of this Agreement.



     Section 6.18. Confidentiality. BNYM agrees to keep confidential all nonpublic information
provided to it by ML III, the Managing Member, the Administrator, the Escrow Agent, the Collateral
Agent, the Investment Manager, the Controlling Party or any other Person pursuant to or in
connection with this Agreement or the other Transaction Documents; provided that nothing herein
shall prevent BNYM from disclosing any such information (a) to its employees, directors, agents,
attorneys, accountants and other professional advisors or those of any of its affiliates who have a
need to know such information (collectively, its “Representatives”), (b) upon the request or demand
of any Governmental Authority, (c) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law, (d) in connection
with any litigation or similar proceeding, (e) that has been publicly disclosed other than by BNYM
or any of its Representatives in violation of this Section 6.18 or any other applicable
confidentiality obligation owing to ML III, (f) if agreed by ML III and the Managing Member in
their sole discretion or (g) to the limited extent required for it to fulfill its obligations under
this Agreement; provided, further, (i) pursuant to clause (b) above, BNYM shall notify ML III and
the Managing Member, if legally permitted to do so, of any proposed disclosure contemporaneously
with such disclosure and at such time request that the Governmental Authority to whom such
disclosure is made accord confidential treatment to the disclosed information and (ii) pursuant to
clauses (c)



19









 







and (d) above, prior to any disclosure of such information, BNYM shall notify ML III and the
Managing Member, if legally permitted to do so, of any proposed disclosure as far in advance of
such disclosure as practicable and upon ML III’s or the Managing Member’s written request, and, at
ML III’s or the Managing Member’s sole cost and expense, take all reasonable actions designed to
ensure that any information disclosed shall be accorded confidential treatment. BNYM further agrees
that it shall be responsible for compliance by each of its Representatives with this Section 6.18.



     Section 6.19. Internal Controls. The Administrator shall provide its relevant SAS-70 reports
to ML III on an annual basis, along with quarterly attestations that customary controls remain in
place, and such Sarbanes-Oxley sub-certifications as are customarily provided by the Administrator
to its other customers similarly situated.



     Section 6.20. Access to Books and Records. BNYM agrees to afford the Managing Member, the
Investment Manager, the Controlling Party, the Equity Investor, the Board of Governors of the
Federal Reserve System (the “Board”) and other governmental oversight entities and their respective
authorized agents reasonable access during normal business hours to make examinations of the
Records (as defined below) and to cause its personnel to assist in any such examinations of such
records and allow copies of such records to be made. Such examinations will be conducted in a
manner which does not unreasonably interfere with the normal operations or employee relations of
BNYM. In addition, at the request of the Managing Member, BNYM will meet with one or more of the
Managing Member’s directors or designated staff at a mutually agreeable time and place to discuss
matters that fall within the scope of this engagement.



     Section 6.21. Maintenance of Books and Records. Except as otherwise directed by the Managing
Member, for the term of this Agreement, BNYM shall maintain the books and records of ML III in
accordance with the terms of this Agreement and make easily accessible all such information,
materials and records in whatever format (collectively, “Records”) which it has or which come into
its possession in connection with the transaction and the services provided under this Agreement,
in each case to the extent consistent with BNYM’s internal records and maintenance and records
retention policy; provided that prior to any destruction of any Records by BNYM in accordance with
such policy, BNYM shall notify the Managing Member and provide the Managing Member with an
opportunity to take possession of such Records from BNYM. Upon the termination of this Agreement
or its services hereunder, BNYM and the Managing Member shall agree on the timing and mechanism for
transferring all Records to the Managing Member. In transferring such Records, BNYM shall provide
an Officer’s Certificate certifying that (a) as to whether it has kept and retained the Records in
accordance with the requirements set forth herein and (b) the Records being transferred represent
all of the Records that have not been previously delivered or destroyed in compliance with this
Section 7.22. Notwithstanding the foregoing, BNYM may make and retain copies of Records to



20









 







satisfy existing internal audit or compliance requirements, provided that the Officer’s
Certificate includes information as to the copies of Records that it is retaining.



     Section 6.22. Binding Effect. This Agreement shall become effective when a counterpart
hereof shall have been executed by each of the parties and delivered to the Controlling Party.



     Section 6.23. Integration. This Agreement and the other Transaction Documents represent the
entire agreement of the parties with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by ML III, the Administrator, the
Escrow Agent, any Secured Party or the Controlling Party relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Transaction Documents. Each party to this
Agreement hereby irrevocably waives any right to exercise any lien or right of set off or
counterclaim, or any other right it may have at law or otherwise to exercise such lien or right of
set off or counterclaim to appropriate and apply to the payment of any amounts due and owning to it
under this Agreement.



     Section 6.24. Headings. Article and Section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.



     Section 6.25. Instructions. It is understood that any instruction or Officer’s Certificate
required to be given, prepared and/or delivered by the Controlling Party pursuant to this Agreement
or any other Transaction Document may be given, prepared and/or delivered by the Investment Manager
to the extent such authority is given pursuant to a Proper Instruction, and to the extent that any
instruction or Officer’s Certificate is to be given, prepared and/or delivered by both the
Investment Manager and the Controlling Party, the Controlling Party’s instructions or Officer’s
Certificate shall control.



     Section 6.26. Role of Investment Manager and Controlling Party. Each party hereby accepts
the role and powers of the Investment Manager described in this Agreement and the other Transaction
Documents and understands that the Investment Manager will be solely the agent of the Controlling
Party. In addition, the Controlling Party has ultimate authority with respect to all decisions
regarding the management of the Collateral (which it may delegate, in whole or in part, to the
Investment Manager or otherwise), including decisions as to when to dispose of Collateral. In
exercising such control, the Controlling Party and its agents, including the Investment Manager,
shall have no duty to maximize returns on the Collateral or to take into account the interests of
the Equity Investor or any other Secured Party.



21









 





     Section 6.27. Termination. This Agreement shall terminate at such time as the Security
Agreement terminates in accordance with Section 30 thereof.



[signature pages follow]




22









 





          IN WITNESS WHEREOF, the parties hereto have caused this Administration Agreement to be
executed as of the date first above written.



	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON,


as Administrator and Escrow Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Signature Page to Administration Agreement]





23









 





	 	 	 	 	 
	 	MAIDEN LANE III LLC

 	 
	 	By:  	FEDERAL RESERVE BANK OF NEW YORK, as its sole Managing Member
 	 
	 	 	 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Signature Page to Administration Agreement]





24









 





	 	 	 	 	 
	 	FEDERAL RESERVE BANK OF

NEW YORK, as the sole Managing 

Member of Maiden
Lane III LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Signature Page to Administration Agreement]





25









 





Exhibit A


LIST OF ESCROW SUB-ACCOUNTS


Exhibit A - 1








 





Exhibit B
to

Administrative
Agreement


FORM OF RESET DATE NOTICE




Reset Date:                     ,                    




     Reference is made to the Master Investment and Credit Agreement dated as of November 25, 2008
(as amended, modified or supplemented from time to time, the “Master Agreement”; the terms defined
therein being used herein as therein defined), among MAIDEN LANE III LLC as Company, FEDERAL
RESERVE BANK OF NEW YORK in its capacity as Controlling Party, FEDERAL RESERVE BANK OF NEW YORK as
Senior Lender, AMERICAN INTERNATIONAL GROUP, INC. as Equity Investor and THE BANK OF NEW YORK
MELLON as Collateral Agent.



     The undersigned [Responsible Officer] of the Administrator hereby certifies as of the date
hereof that he/she is the                      of the Administrator, and that, as such, he/she is
authorized to execute and deliver this Reset Date Notice to the Company, the Senior Lender, the
Equity Investor, the Collateral Agent, the Controlling Party and the Investment Manager on behalf
of Administrator, and hereby certifies on behalf of the Administrator that as of the Reset Date
specified above:




	 	1.	 	LIBOR for the Calculation Period commencing on the Reset Date is ___% per
annum.
	 
	 	2.	 	Interest rate applicable to each Senior Loan for the Calculation Period
commencing on the Reset Date is ___% per annum.
	 
	 	3.	 	Preferred distribution rate applicable to the Equity Interest for the
Calculation Period commencing on the Reset Date is ___% per annum.
	 
	 	4.	 	Amount of interest accrued on the outstanding principal amount of all
Senior Loans and to be capitalized on the Reset Date specified above is $___
	 
	 	5.	 	[Amount of preferred distributions accrued on the Equity Interest (not to
be added to the Equity Contribution Amount) on the Reset Date specified above is
$___] [Amount of preferred distributions accrued on the Equity Interest and to
be added to the Equity Contribution Amount on the Reset Date specified above is
$___]






Exhibit B - 1









 








     IN WITNESS WHEREOF, the undersigned Responsible Officer has executed this Reset Date Notice on
behalf of the Administrator as of the Reset Date specified above.



	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON, 

as Administrator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




Exhibit B - 2









 





SCHEDULE
2.02 TO ADMINISTRATIVE AGREEMENT  — FORM OF INCUMBENCY CERTIFICATE


CORPORATE SECRETARY’S CERTIFICATE


          The undersigned, Michael Held, Corporate Secretary and Senior Vice President of the Federal
Reserve Bank of New York (the “Bank”), hereby certifies on behalf of the Bank as follows:



	 	1.	 	Each of the below listed individuals is a duly appointed officer of the Bank, holding
the office set forth below opposite his/her name and that set forth below is a true and
correct copy of his/her specimen signature.
	 
	 	2.	 	Each of the below listed individuals is authorized, pursuant to Section 2.02 of the
Administration Agreement dated as November 25, 2008 (the “Administration Agreement”) by
and among the Bank as Managing Member, Maiden Lane III LLC (“MLIII”) and The Bank of New
York Mellon as Administrator (the “Administrator”) and Escrow Agent, on behalf of the Bank
in its capacity as the Managing Member of MLIII, to direct the Administrator and to
provide notice to the Administrator with respect to any matters provided for in the
Administration Agreement.
	 
	 	3.	 	Each of the below listed individuals is authorized, pursuant to Section 7(a)(iii) of
the Security Agreement dated as of November 25, 2008 (the “Security Agreement”) by and
among MLIII as Borrower, the Bank as Senior Lender and Controlling Party and The Bank of
New York Mellon as Collateral Agent (the “Collateral Agent”), on behalf of the Bank in its
capacity as Controlling Party under the Security Agreement, to give Proper Instructions
(as such term is defined in the Security Agreement) to the Collateral Agent with respect
to any matter that the Controlling Party is authorized to give Proper Instructions to the
Collateral Agent under the terms of the Security Agreement.





	 	 	 	 	 
	Name	 	Title	 	Signature
	 
	Sandy C. Krieger

	 	Executive Vice President
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Helen Mucciolo

	 	Senior Vice President
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Maria Grace Ambrosio

	 	Vice President
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Jim M. Mahoney

	 	Vice President
	 	 
	 

	 	 	 	 





[signature page follows]




Scheduel 2.02 - 1








 





          IN WITNESS WHEREOF, I have hereunto subscribed my name as of this 25th day of
November, 2008.



	 	 	 	 	 
	 	FEDERAL RESERVE BANK OF NEW YORK

33 Liberty Street

New York, NY 10045

 	 
	 	By:  	 	 
	 	 	Michael Held 	 
	 	 	Corporate Secretary



Senior Vice President 	 
	 




Scheduel 2.02 - 2









 





SCHEDULE 6.02
TO ADMINISTRATIVE AGREEMENT — NOTICE INFORMATION


ML III


Maiden Lane III LLC

c/o Federal Reserve Bank of New York

33 Liberty Street New York, New York 10045

Attention: Helen Mucciolo, Senior Vice President

Fax: (212) 720-1953

Telephone: (212) 720-1333

Email: helen.mucciolo@ny.frb.org




with copies to:



Federal Reserve Bank of New York

33 Liberty Street, New York, New York 10045

Attention: Joyce M. Hansen, Deputy General Counsel and

Senior Vice President

Telecopy: (212) 720-1756

Telephone: (212) 720-5024

E-mail: joyce.hansen@ny.frb.org



Davis Polk & Wardwell

450 Lexington Avenue, New York, New York 10017

Attention: Marshall S. Huebner and Bjorn Bjerke

Telephone: (212) 450-4000




MANAGING MEMBER



Federal Reserve Bank of New York

33 Liberty Street New York, New York 10045

Attention: Sarah Dahlgren, Senior Vice President

Telecopy: (212) 720-6019

Telephone: (212) 720-7537

E-mail: sarah.dahlgren@ny.frb.org




ADMINISTRATOR AND ESCROW AGENT



The Bank of New York Mellon

Attention: Andrew J. Taylor

101 Barclay Street

New York, NY 10286

Telecopy: (212) 815-2020

Telephone: (212) 815-2943

E-mail: andrew.j.taylor@bnymellon.com





Scheduel 6.02 - 1








 






Exhibit C to

Master Investment and Credit Agreement




FORM OF SHORTFALL AGREEMENT








SHORTFALL AGREEMENT

BETWEEN

MAIDEN LANE III LLC

AND

AIG FINANCIAL PRODUCTS CORP.




     This Agreement, made and entered into as of November 25, 2008, by and between Maiden Lane III
LLC., a Delaware limited liability company (“ML III”), and AIG Financial Products Corp., a Delaware
corporation (“AIG-FP”).



WITNESSETH:




     WHEREAS, as of October 31, 2008, AIG-FP was party to the derivative transactions listed on
Schedule A hereto (the “Derivative Transactions”), with an aggregate notional value of
$53,510,385,969;



     WHEREAS, AIG-FP and ML III have entered into a termination agreement with each counterparty to
the Derivative Transactions, each with a trade date of November 10, 2008 (the “Termination
Agreements”), whereby inter alia, each Derivative Transaction would be terminated and each of the
parties to the Derivative Transactions would be released of all of its duties and obligations
thereunder;



     WHEREAS, ML III has entered into a forward purchase agreement with each counterparty to the
Derivative Transactions (the “Purchase Agreements”) whereby ML III will purchase certain CDO Issues
underlying the Derivative Transactions;



     WHEREAS, ML III has entered into the Master Investment and Credit Agreement, dated as of
November 25, 2008, with the Federal Reserve Bank of New York, American International Group, Inc.
(“AIG”) and The Bank of New York Mellon (the “Master Investment and Credit Agreement”) in
connection with obtaining certain loans and equity contributions to purchase the CDO Issues;



     WHEREAS, ML III entered into the Purchase Agreements and the Master Investment and Credit
Agreement in partial reliance on AIG-FP’s promise to make the payments, if any, described herein
and AIG-FP has entered into the Termination Agreements in partial reliance on ML III’s promises to
make the payments, if any, described herein;



     WHEREAS, AIG-FP has delivered collateral to the counterparties to the Derivative Transactions
(the “Counterparties”) as set forth on Schedule A hereto, as previously determined by ML III or its
designee(s), in consultation with AIG-FP (with respect to each Derivative Transaction, the “Posted
Collateral”); and



     WHEREAS, as of October 31, 2008, the difference between the notional value of each Derivative
Transaction and the market value of the related CDO Issue, or portion of a CDO Issue, as
applicable, underlying such Derivative Transaction was as set forth in Schedule A hereto under the
heading “Negative Mark-to-Market,” as previously determined by ML III or its designee(s), in
consultation with AIG-FP (with respect to each Derivative Transaction, the “Transaction Value”);



     NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto
agree as follows:



     1. Definitions. Capitalized terms used, but not defined, herein shall have the
meanings ascribed to them in the Purchase Agreements, or, if not defined therein, the Master
Investment and Credit Agreement.




          (a) “Adjustment Date” means the fifth Business Day following the final Forward Closing
Date, or such other date as may be agreed to by ML III and AIG-FP.














 





          (b) “Collateral Excess Amount” means, with respect to each Derivative Transaction, the
amount by which (i) the Posted Collateral for the portion of the Derivative Transaction that
terminated as a result of consummation of the transactions contemplated by the related
Termination Agreement and Forward Purchase Agreement exceeds (ii) the Transaction Value for
such consummated transactions.




          (c) “Collateral Shortfall Amount” means, with respect to each Derivative Transaction,
the amount by which (i) the Transaction Value for the portion of the Derivative Transaction
that terminated as a result of consummation of the transactions contemplated by the related
Termination Agreement and Forward Purchase Agreement exceeds (ii) the Posted Collateral for
such portion of such terminated Derivatives Transaction.



     2. Adjustment Payments.




          (a) On the Adjustment Date, if the aggregate Collateral Excess Amounts exceed the
aggregate Collateral Shortfall Amounts, ML III shall, on the Adjustment Date, pay or cause
to be paid, in immediately available funds, the amount of such excess to AIG-FP.




          (b) On the Adjustment Date, if the aggregate Collateral Shortfall Amounts exceed the
aggregate Collateral Excess Amounts, AIG-FP shall pay, in immediately available funds, the
amount of such excess to ML III for credit to the Collateral Account.




          (c) To the extent ML III has received amounts by means of set-off credit to the amounts
otherwise payable by ML III to the Counterparties, or otherwise has collected fixed amount
payments accrued prior to the Trade Date, ML III shall pay such amounts to AIG-FP on the
first Payment Date following such collection or set off (to the extent collected or set off
by the second day prior to the relevant Notice Date), with such amounts to be determined by
ML III, or its designee(s), in consultation with AIG-FP.



     3. AIG-FP’s Representations and Warranties.




          (a) Organization; Powers. AIG-FP is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has all requisite power
and authority to execute, deliver and perform its obligations hereunder.




          (b) Authorization; No Conflict. The execution, delivery and performance of this
Agreement by AIG-FP have been duly authorized by all requisite corporate and, if required,
stockholder action and will not (A) result in the violation by AIG-FP of (1) any provision
of law, statute, rule or regulation, or of the certificate or articles of incorporation or
other constitutive documents or bylaws of AIG-FP, (2) any order of any nation or government,
any state or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative functions of or pertaining to government, any
securities exchange and any self-regulatory organization (each, a “Governmental Authority”)
or (3) any provision of any indenture, agreement or other instrument to which AIG-FP is a
party or by which it or any of its property is or may be bound, (B) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement or other
instrument or (C) result in the creation or imposition of any mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the same economic
effect as any of the foregoing) upon or with respect to any property or assets now owned or
hereafter acquired by AIG-FP.



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          (c) Enforceability. This Agreement has been duly executed and delivered by AIG-FP and
constitutes a legal, valid and binding agreement of AIG-FP enforceable against AIG-FP in
accordance with its terms, except that such enforceability may be limited by bankruptcy,
insolvency, or other similar laws of general applicability affecting the enforcement of
creditors’ rights generally and by the court’s discretion in relation to equitable remedies.




          (d) Governmental Approvals. No action, consent or approval of, registration or filing
with or any other action by any Governmental Authority is or will be required to be taken,
obtained or made by AIG-FP in connection with the transactions contemplated hereunder except
(i) such as have been made or obtained and are in full force and effect and (ii) with
respect to any Governmental Authority other than a Governmental Authority of the United
States or any state thereof, if the failure to take such action, obtain such consent or
approval, or register or file with such Governmental Authority could not reasonably be
expected to have a Material Adverse Effect.




          (e) Litigation; Compliance with Laws.




          (i) Except as set forth in the financial statements attached to AIG’s most
recently filed form 10-Q, there are no actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the knowledge
of AIG-FP, threatened against or affecting AIG-FP or any business, property or
rights of AIG-FP as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a material impairment of the
totality of the rights and remedies of, or benefits available to ML III under this
Agreement and the Transaction Documents taken as a whole.




          (ii) AIG-FP is not in violation of any law, rule or regulation (including any
zoning, building, ordinance, code or approval or any building permits) or any
restrictions of record or is in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where such violation or
default could reasonably be expected to result in a material impairment of the
totality of the rights and remedies of, or benefits available to ML III under this
Agreement and the Transaction Documents taken as a whole.



     4. Covenant not to make certain amendments to any Purchase Agreements In
consideration of AIG-FP’s agreement in Section 2 above, ML III hereby covenants not to amend any
Purchase Agreement in a manner that will cause AIG-FP to be liable to any Counterparty for a
greater portion of the Combined Settlement Amount (as defined in the Termination Agreements) than
it would have been under the Purchase Agreement in the form originally entered into between the
Counterparty and ML III. For the avoidance of doubt, this provision shall have no impact on ML
III’s ability to exercise discretion in accordance with the terms of the Purchase Agreements,
including determinations of whether and when a CDO Issue becomes an Excluded Asset or whether and
when the conditions for the purchase of a CDO Issue have been met or on ML III’s ability to waive
any such condition.



     5. No Bankruptcy Petition Against ML III. AIG-FP hereby covenants and agrees that it
will not at any time (i) commence or institute against ML III or join with or facilitate any other
Person in commencing or instituting against ML III, any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, receivership, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state, or other jurisdiction, bankruptcy or similar
law or statute now or hereafter in effect in connection with any obligations relating to this
Agreement or any of the other Transaction Documents or (ii) participate in any assignment for
benefit of creditors, compositions, or arrangements with respect to ML III’s debts. The agreements
in this Section 5 shall survive the termination of this Agreement and payment in full of all
obligations under this Agreement.



     6. Waivers. AIG-FP hereby waives any failure or delay on the part of ML III in
asserting or enforcing any of its rights or in making any claims or demands hereunder.



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     7. Opinion. AIG-FP shall cause to be delivered to ML III an opinion substantially in
the form of the opinion required under Section 7.01(c)(i)(D) of the Master Investment and Credit
Agreement with respect to its entry into this Agreement.



     8. Notices. Any notice, instruction, request, consent, demand or other communication
required or contemplated by this Agreement shall be in writing, shall be given or made or
communicated by hand delivery or fax, confirmed by telephone, addressed as follows:



	 	 	 	 	 
	 

	 	If to ML III:
	 	Maiden Lane III LLC
	 

	 	 	 	c/o Federal Reserve Bank of New York
	 

	 	 	 	33 Liberty Street New York, New York 10045
	 

	 	 	 	Attention: Helen Mucciolo, Senior Vice President
	 

	 	 	 	Telecopy: (212) 720-1333
	 

	 	 	 	Telephone: (212) 720-1593
	 

	 	 	 	E-mail: helen.mucciolo@ny.frb.org
	 
	 	 	 	 
	 

	 	with copies to:	 	 
	 
	 	 	 	 
	 

	 	 	 	Federal Reserve Bank of New York
	 

	 	 	 	33 Liberty Street New York, New York 10045
	 

	 	 	 	Attention: Joyce M. Hansen, Deputy General Counsel and Senior Vice
President
	 

	 	 	 	Telecopy: (212) 720-1756

Telephone: (212) 720-5024
	 

	 	 	 	E-mail: joyce.hansen@ny.frb.org
	 
	 

	 	 	 	Davis Polk & Wardwell
	 

	 	 	 	450 Lexington Avenue, New York, New York 10017
	 

	 	 	 	Attention: Bjorn Bjerke
	 

	 	 	 	Telephone: (212) 450-4000
	 
	 	 	 	 
	 

	 	If to AIG-FP:
	 	AIG Financial Products Corp.
	 

	 	 	 	50 Danbury Road
	 

	 	 	 	Wilton, CT
	 

	 	 	 	06897-4444
	 

	 	 	 	Attn: Chief Financial Officer
	 

	 	 	 	Phone: (203) 222-4700
	 

	 	 	 	Fax: (203) 222-4780
	 
	 	 	 	 
	 

	 	with copies to:	 	 
	 
	 	 	 	 
	 

	 	 	 	AIG Financial Products Corp.
	 

	 	 	 	50 Danbury Road
	 

	 	 	 	Wilton, CT
	 

	 	 	 	06897-4444
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Phone: (203) 222-4700
	 

	 	 	 	Fax: (203) 222-4780
	 
	 	 	 	 
	 

	 	 	 	Weil, Gotshal & Manges LLP
	 

	 	 	 	767 Fifth Avenue
	 

	 	 	 	New York, NY 10103
	 

	 	 	 	Attention: Jason A.B. Smith
	 

	 	 	 	Telephone: (212) 310-8000






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     9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.



     10. Jurisdiction; Consent to Service of Process.




          (a) Each party hereby irrevocably and unconditionally submits, for itself and its
property, to the exclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for recognition
or enforcement of any judgment, and each of the Parties hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by law, in such
federal court. Each of the Parties agrees that a final judgment in any such action or
proceeding shall be conclusive.




          (b) Each party hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to this
Agreement in any New York State or federal court. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.




          (c) Each party irrevocably consents to service of process in the manner provided for
notices in Section 8. Nothing in this Agreement will affect the right of any party to serve
process in any other manner permitted by law.



     11. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     12. Limited Recourse. Notwithstanding anything to the contrary contained in this
Agreement, the obligations of ML III under this Agreement are solely the obligations of ML III and
shall be payable solely to the extent of funds received by and available to ML III in accordance
with the Transaction Documents. No recourse shall be had for the payment of any amount owing in
respect of any obligation of, or claim against, ML III arising out of or based upon this Agreement
against any holder of a Membership Interest, employee, officer or Affiliate thereof and, except as
specifically provided herein, no recourse shall be had for the payment of any amount owing in
respect of any obligation of, or claim against, ML III arising out of or based upon this Agreement
against any holder of the Membership Interests or any equity interests in any Related Party of any
such holder; provided that the foregoing shall not relieve any such person or entity from any
liability they might otherwise have as a result of willful misconduct, gross negligence or
fraudulent actions taken or omissions by them. The provisions of this Section shall survive the
termination or expiration of this Agreement and payment in full of any and all obligations arising
from this Agreement.



     13. Default. Upon and default by either party hereunder and the expiration of all
applicable grace periods, the non-defaulting party shall have all rights and remedies available
under applicable law.



     14. Miscellaneous.



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          (a) All headings herein are for convenience of reference only and shall be disregarded
in the interpretation hereof.




          (b) This Agreement may be signed in any number of counterparts, each of which shall be
an original; but such counterparts shall together constitute one and the same instrument.




          (c) In the event of an assumption of AIG-FP’s obligations under this Agreement by a
successor, such successor shall succeed to and be substituted for AIG-FP with the same
effect as if it had been named herein, and upon such assumption, AIG-FP shall be relieved of
any further obligation hereunder. This Agreement may not be assigned by AIG-FP without the
prior written consent of ML III.




          (d) In case any provision in this Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.



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     IN WITNESS WHEREOF, each of the parties hereto has caused this Shortfall Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and year first above
written.



MAIDEN LANE III LLC




By: FEDERAL RESERVE BANK OF NEW YORK,
 as its sole Managing Member




	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	AIG FINANCIAL PRODUCTS CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 














 









Schedule A

to

Shortfall Agreement




List of Derivative Transactions

















 








Exhibit D to

Master Investment and Credit Agreement




FORM OF RESET DATE NOTICE




Reset Date: ________,____




     Reference is made to the Master Investment and Credit Agreement dated as of November 25, 2008
(as amended, modified or supplemented from time to time, the “Master Agreement”; the terms defined
therein being used herein as therein defined), among MAIDEN LANE III LLC as Company, FEDERAL
RESERVE BANK OF NEW YORK in its capacity as Controlling Party, FEDERAL RESERVE BANK OF NEW YORK as
Senior Lender, AMERICAN INTERNATIONAL GROUP, INC. as Equity Investor and THE BANK OF NEW YORK
MELLON as Collateral Agent.



     The undersigned [Responsible Officer] of the Administrator hereby certifies as of the date
hereof that he/she is the ___of the Administrator, and that, as such, he/she is
authorized to execute and deliver this Reset Date Notice to the Company, the Senior Lender, the
Equity Investor, the Collateral Agent, the Controlling Party and the Investment Manager on behalf
of Administrator, and hereby certifies on behalf of the Administrator that as of the Reset Date
specified above:




	 	1.	 	LIBOR for the Calculation Period commencing on the Reset Date is ___% per
annum.
	 
	 	2.	 	Interest rate applicable to each Senior Loan for the Calculation Period
commencing on the Reset Date is ___% per annum.
	 
	 	3.	 	Preferred distribution rate applicable to the Equity Interest for the
Calculation Period commencing on the Reset Date is ___% per annum.
	 
	 	4.	 	Amount of interest accrued on the outstanding principal amount of all
Senior Loans and to be capitalized on the Reset Date specified above is $___
	 
	 	5.	 	[Amount of preferred distributions accrued on the Equity Interest (not to
be added to the Equity Contribution Amount) on the Reset Date specified above is
$___] [Amount of preferred distributions accrued on the Equity Interest and to
be added to the




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	 	 	 	Equity Contribution Amount on the Reset Date specified above is
$___]





[Signature Page Follows]



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     IN WITNESS WHEREOF, the undersigned Responsible Officer has executed this Reset Date Notice on
behalf of the Administrator as of the Reset Date specified above.


	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON, as 
Administrator


 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




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Exhibit E to

Master Investment and Credit Agreement




FORM OF DRAWDOWN CERTIFICATE




Dated as of [ ], 2008




     Pursuant to Section 2.02(b) of the Master Investment and Credit Agreement dated as of November
25, 2008 (as amended, modified or supplemented from time to time, the “Master Agreement”; the terms
defined therein being used herein as therein defined) among MAIDEN LANE III LLC as Company, FEDERAL
RESERVE BANK OF NEW YORK as Controlling Party, FEDERAL RESERVE BANK OF NEW YORK as Senior Lender,
AMERICAN INTERNATIONAL GROUP, INC. as Equity Investor and THE BANK OF NEW YORK MELLON as Collateral
Agent, the undersigned [Full Name], [Title], of the Managing Member of Maiden Lane III LLC, hereby
requests a drawdown under the Senior Facility on behalf of the Company as follows:




	 	1.	 	The proposed Drawdown Date is ___(or if that day is
not a Business Day, the next Business Day).
	 
	 	2.	 	The proposed drawdown is to be used to fund [the aggregate Purchase Payment
to be made in respect of the CDO Issues specified on schedule hereto][the Shortfall
Payment payable by the Company pursuant to Section 2(a) of the Shortfall Agreement].
	 
	 	3.	 	The aggregate principal amount requested is $___[(or, if less,
the Available Senior Commitment).]
	 
	 	4.	 	Each condition specified in Section 7.02 of the Master Agreement is
satisfied on the date of this Drawdown Certificate.
	 
	 	5.	 	This Drawdown Certificate is irrevocable.





[signature page follows]




62









 








     IN WITNESS WHEREOF, the undersigned has caused this Drawdown Certificate to be executed in its
name and behalf by its duly authorized representative as of the date first above-written.



	 	 	 	 	 
	 	MAIDEN LANE III LLC, as Company

 	 
	 	By:  	Federal Reserve Bank of New York, as its
 	 
	 	 	Managing Member 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	Name:	 	 	 
	 	Title:	 	 	 
	 




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Schedule to the

Drawdown Certificate





     Each of the following CDO Issues to be purchased pursuant to the Forward Purchase Agreement dated
as of November [ ], 2008 between [Counterparty] and Maiden Lane III LLC:



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Notional	 	Purchase
	 	 	 	 	 	 	 	 	Exposure	 	Payment
	CUSIP	 	Counterparty	 	Portfolio Name	 	Tranche Name	 	(USD)	 	(USD)
	Aggregate Purchase Payment






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Exhibit F to

Master Investment and Credit Agreement




FORM OF WEEKLY REPORT




     Date of this Report (Weekly Reporting Date): ___,___



     Weekly period covered by this Report: ___,___to ___,___



     Reference is made to the Master Investment and Credit Agreement dated as of November 25, 2008
(as amended, modified or supplemented from time to time, the “Master Agreement”; the terms defined
therein being used herein as therein) among MAIDEN LANE III LLC as Company, FEDERAL RESERVE BANK OF
NEW YORK as Controlling Party, FEDERAL RESERVE BANK OF NEW YORK as Senior Lender, AMERICAN
INTERNATIONAL GROUP, INC. as Equity Investor and THE BANK OF NEW YORK MELLON as Collateral Agent.



     The undersigned [Responsible Officer] of the Administrator hereby certifies as of the date
hereof that he/she is the ___of the Administrator, and that, as such, he/she is
authorized to execute and deliver this Weekly Report to the Company, the Senior Lender, the Equity
Investor, the Collateral Agent, the Controlling Party and the Investment Manager on behalf of the
Administrator, and hereby certifies on behalf of the Administrator as follows:



     1. During the period from [the Closing Date][the preceding Weekly Reporting Date] to the
Weekly Reporting Date specified above, the aggregate amount of Proceeds (as defined in the Security
Agreement) with respect to the Collateral received by the Collateral Agent was $___and such
amount was deposited in the Collateral Accounts.



     2. During the period from [the Closing Date][the preceding Weekly Reporting Date] to the
Weekly Reporting Date specified above, the aggregate amount of distributions paid from the
Collateral Accounts was $___. Such amount was made in accordance with the application of
proceeds set out in Section 5.02 of the Master Agreement and was comprised of the following
payments:



	 	 	 	 	 
	Disbursement Item	 	Amount	 
	Costs, Expenses, Fees, indemnity
	 	$	                    	 
	Permitted Hedging Transactions
	 	$	                    	 






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	Disbursement Item	 	Amount	 
	Funding of Expense Reimbursement Sub-Account
	 	$	                    	 
	Funding of Investment Reserve Sub-Account
	 	$	                    	 
	Principal of all Senior Loans
	 	$	                    	 
	Interest on all Senior Loans
	 	$	                    	 
	Return of Equity Contribution Amount
	 	$	                    	 
	Distributions in respect of Equity Interest
	 	$	                    	 
	Permitted Hedging Transactions (counterparty as sole defaulting or affected party)
	 	$	                    	 
	Contingent Interest on the Senior Loans
	 	$	                    	 
	Excess Amounts released in respect of the Equity Interest
	 	$	                    	 
	Total:
	 	$	                    	 






     3. As of the Weekly Reporting Date specified above, after taking into account the payments, if
any, referred to in Section 2 above and all new Senior Loans made, if any, the outstanding
aggregate principal amount of all Senior Loans is $___and the Available Senior Commitment is
$___.



     4. As of the Weekly Reporting Date specified above, after taking into account the payments
referred to in Section 2 above, if any, the undistributed balance of the Equity Contribution Amount
is $___.



[signature page follows]




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     IN WITNESS WHEREOF, the undersigned Responsible Officer has executed this Weekly Report on
behalf of the Administrator as of the Weekly Reporting Date specified above.



	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON, as 


Administrator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




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Exhibit G to

Master Investment and Credit Agreement




FORM OF CLOSING CERTIFICATE

Dated as of November [ ], 2008





     Pursuant to Section 7.01(b) of the Master Investment and Credit Agreement dated as of November
25, 2008 (as amended, modified or supplemented from time to time, the “Master Agreement”; the terms
defined therein being used herein as therein defined) among MAIDEN LANE III LLC as the Company (the
“Company”), FEDERAL RESERVE BANK OF NEW YORK as Controlling Party, FEDERAL RESERVE BANK OF NEW YORK
as the Senior Lender, AMERICAN INTERNATIONAL GROUP, INC. as the Equity Investor and THE BANK OF NEW
YORK MELLON as Collateral Agent, the undersigned [Full Name], [Title] of the Federal Reserve Bank
of New York, the Managing Member of Maiden Lane III LLC, hereby certifies on behalf of the Company
as follows:




	 	1.	 	Attached hereto as Annex 1 is a true and complete copy of a Certificate of
Good Standing from the Company’s jurisdiction of organization dated as of a recent date
prior to the date hereof.
	 
	 	2.	 	Attached hereto as Annex 2 is a true and complete copy of the Limited
Liability Company Agreement (the “LLC Operating Agreement”) of the Company dated as of
October 14, 2008, as amended and restated on November 24, 2008, and such LLC Operating
Agreement has not been amended, repealed, modified or restated since such date.
	 
	 	3.	 	Attached hereto as Annex 3 is a true and complete certified copy of the
Certificate of Formation of the Company as in effect on the date hereof, and such
Certificate of Formation has not been amended, repealed, modified or restated.
	 
	 	4.	 	Each of the representations and warranties made by the Company in or pursuant to the
Master Agreement and each other Transaction Document is true and correct on and as of the
date hereof as if made on and as of the date hereof.
	 
	 	5.	 	No Event of Default has occurred as of the date hereof and no Default or Event of
Default shall have occurred after giving effect to the transactions contemplated by the
Master Agreement or the other Transaction Documents.




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	 	6.	 	Each of the individuals set forth below (a) is a duly appointed and acting officer of
the Managing Member, holding the offices set forth opposite their name, and the signatures
set forth opposite their names are the
signatures of such persons as of the date hereof, and (b) is authorized (i) on behalf of
the Managing Member acting in any capacity, including as the sole Managing Member of the
Company, to enter into any transactions forming a part of, in connection with or
incidental to the Transactions, including to execute and deliver on behalf of the Company,
and to cause the Company to perform its obligations under, each of the Transaction
Documents to which it is a party, and (ii) to execute, deliver and cause the Managing
Member and/or the Company to perform its obligations under all contracts, instruments,
documents, correspondence and any other papers as a part of, in connection with, or
incidental to the Transactions.





	 	 	 	 	 
	Name	 	Title	 	Signature
	[     ]
	 	[     ]	 	                    
	 
	 	 	 	 
	[     ]
	 	[     ]	 	                    






[signature page follows]




69









 








     IN WITNESS WHEREOF, the undersigned has caused this Closing Certificate to be executed in its
name and behalf by its duly authorized representative as of the date first above-written.



	 	 	 	 	 
	 	MAIDEN LANE III LLC, as Company

 	 
	 	By:  	Federal Reserve Bank of New York, as its
 	 
	 	 	 Managing Member 	 



	 	 	 	 	 
	 	By:  	 	 
	 	Name:	 	 	 
	 	Title:	 	 	 
	 




70









 





Exhibit H to
Master Investment and Credit Agreement


FORM OF OPINION OF COUNSEL
TO THE COMPANY




November 25, 2008



	 	 	 	 	 
	To

	 	Federal Reserve Bank of New York,
	 	 
	 

	 	as the Senior Lender and	 	 
	 

	 	the Controlling Party, and	 	 
	 

	 	American International Group, Inc.,	 	 
	 

	 	as the Equity Investor	 	 






Ladies and Gentlemen:




     We have acted as special counsel for Maiden Lane III LLC, a Delaware limited liability
company, in connection with the Master Investment and Credit Agreement dated as of November 25,
2008 (the “Master Agreement”) among Maiden Lane III LLC (the “Company”), Federal Reserve Bank of
New York, as the Controlling Party (the “Controlling Party”), Federal Reserve Bank of New York, as
the Senior Lender (the “Senior Lender”), American International Group, Inc., as the Equity Investor
(the “Equity Investor”), and The Bank of New York Mellon, as the Collateral Agent (the “Collateral
Agent”).



     Terms used (but not defined) herein have the meanings assigned to them in the Master
Agreement.



     We have reviewed executed copies of:




     (a) the Master Agreement;




     (b) the Administration Agreement dated as of November 25, 2008 among the Company,
Federal Reserve Bank of New York, as the Managing Member (the “Managing Member”), and Bank
of New York Mellon, as Administrator (the “Administrator”);




     (c) the Shortfall Agreement dated as of November 25, 2008 between the Company and AIG
Financial Products Corp;



 










 




	 	 	 	 	 	 	 
	Federal Reserve Bank of New York

	 	 	2	 	 	November 25, 2008
	American International Group, Inc.
	 	 	 	 	 	 







     (d) the Security Agreement dated as of November 25, 2008 (the “Security Agreement”)
among the Company, the Controlling Party, the Senior Lender and the Collateral Agent;




     (e) the Collateral Account Control Agreement dated as of November 25, 2008 (the
“Collateral Account Control Agreement”) among the Company, the Collateral Agent and The
Bank of New York Mellon, as Securities Intermediary (the “Securities Intermediary”); and




     (f) the Escrow Account Control Agreement dated as of November 25, 2008 (the “Escrow
Account Control Agreement”) among the Company, the Collateral Agent and the Securities
Intermediary.



     The documents listed in items (a) through (f), inclusive, above are sometimes hereinafter
referred to as the “Transaction Documents”. The documents listed in items (d) through (f),
inclusive, above are sometimes hereinafter referred to as the “Collateral Documents”.



     We have also examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and certificates of public officials and
officers of the Managing Member of the Company and have conducted such other investigations of fact
and law as we have deemed necessary or advisable for purposes of this opinion. In addition, we
have relied as to certain matters of fact upon the representations of the Company contained in the
Transaction Documents.



     Based on the foregoing, and subject to the assumptions and qualifications set forth below, we
are of the opinion that:



     1. The Company is a limited liability company validly existing and in good standing under the
laws of the State of Delaware.



     2. The execution, delivery and performance by the Company of each Transaction Document to
which it is a party are within its powers and have been duly authorized by all necessary limited
liability company action. The Company has duly executed and delivered each Transaction Document to
which it is a party.



     3. The execution, delivery and performance by the Company of each Transaction Document to
which it is a party require no action by or in respect of, or filing with, any governmental body,
agency or official under United States federal or New York state law (other than filings and
recordings to perfect security interests granted) and do not contravene, or constitute a default
under, any provision of (a) applicable United States federal or New York state law or regulation or
the Delaware Limited Liability Company Act, in each case that in our experience is normally
applicable to general limited liability companies in relation to transactions of the type
contemplated by the Transaction Documents or



 









 





	 	 	 	 	 	 	 
	Federal Reserve Bank of New York

	 	 	3	 	 	November 25, 2008
	American International Group, Inc.
	 	 	 	 	 	 





(b) the Amended and Restated Limited Liability Company Agreement of the Company dated as of
November 24, 2008.




     4. Each Transaction Document constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms.



     5. The Security Agreement is effective to create, in favor of the Collateral Agent for the
benefit of the Secured Parties as security for the Secured Obligations, a valid security interest
(the “Article 9 Security Interest”) in the Company’s right, title and interest in that portion of
the Collateral (as defined in the Security Agreement (the “New York Article 9 Collateral”)) in
which a security interest may be created pursuant to Article 9 of the Uniform Commercial Code as in
effect in the State of New York on the date hereof (the “UCC”).



     6. Upon the establishment of the collateral account pursuant to the terms of the Security
Agreement (the “Collateral Account”) in the name of the Company and the due execution and delivery
of the Collateral Account Control Agreement by the parties thereto, the Article 9 Security Interest
in the Collateral Account and all security entitlements (as defined in Section 8-102(a)(17) of the
UCC) with respect to financial assets (as defined in Section 8-102(a)(9) of the UCC) credited
thereto will be perfected.



     The foregoing opinions are subject to the following assumptions and qualifications:




     (a) Our opinions in paragraphs 4 to 6, inclusive, above are subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of
reasonableness and equitable principles of general applicability.




     (b) We express no opinion as to the effect of fraudulent conveyance, fraudulent
transfer or similar provisions of applicable law on the opinions expressed above.




     (c) We express no opinion as to any provision in the Transaction Documents that
purports to indemnify any Person for its own gross negligence or willful misconduct.




     (d) We express no opinion as to provisions in the Transaction Documents that purport
to create rights of set-off in favor of participants, or that provide for set-off to be
made, otherwise than in accordance with applicable laws.




     (e) We express no opinion as to provisions in the Transaction
Documents that purport to waive objections to venue, claims that a particular jurisdiction
is an inconvenient forum or the like.



 









 





	 	 	 	 	 	 	 
	Federal Reserve Bank of New York

	 	 	4	 	 	November 25, 2008
	American International Group, Inc.
	 	 	 	 	 	 







     (f) We express no opinion as to whether a United States federal court would have
subject-matter or personal jurisdiction over a controversy arising under the Transaction
Documents.




     (g) We express no opinion as to the United States federal or any state securities
laws.




     (h) We express no opinion as to the right, title or interest of the Company in or to
any collateral or the value given therefor.




     (i) Except as expressly set forth in paragraphs 5 and 6 above, we express no opinion
as to the creation, attachment, perfection or priority of any security interest.




     (j) We note the possible unenforceability in whole or in part of certain remedial
provisions of the Collateral Documents, although the inclusion of such provisions does not
render any of the Collateral Documents invalid and, subject, to the extent applicable, to
Section 9-408(c) of the UCC, each of the Collateral Documents contains, in our judgment,
adequate remedial provisions for the practical realization of the rights and benefits
afforded thereby.




     (k) Any security interest in proceeds is subject to the limitations set forth in
Section 9-315 of the UCC.




     (l) With respect to our opinion set forth in paragraph 6 above, we have assumed that
the Collateral Account Control Agreement is a valid and binding agreement of the
Securities Intermediary, enforceable against the Securities Intermediary in accordance
with its terms.




     (m) We have assumed that the execution, delivery and performance by the Company of
each Transaction Document to which it is a party does not contravene, or constitute a
default under, any law, rule or regulation (other than United States federal and New York
State laws, rules and regulations and the Delaware Limited Liability Company Act, in each
case that in our experience is normally applicable to Delaware limited liability companies
in relation to transactions of the type contemplated by the Transaction Documents) or any
order, injunction, decree, agreement, contract or instrument to which it is a party or by
which it is bound.




     (n) As to various provisions in the Transaction Documents that grant the Controlling
Party, the Administrator, the Collateral Agent, the Senior Lender or the Equity Investor
certain rights to make determinations or take actions in their discretion, we assume that
such discretion will be exercised in good faith and in a commercially reasonable manner.



 









 





	 	 	 	 	 	 	 
	Federal Reserve Bank of New York

	 	 	5	 	 	November 25, 2008
	American International Group, Inc.
	 	 	 	 	 	 







     (o) Our opinions in paragraphs 5 and 6 above are limited to Articles 8 and 9 of the
UCC. We express no opinion as to (i) the effect, if any, of the United States Assignment
of Claims Act, as amended, or any similar state law, rule or regulation, (ii) the
creation, perfection or priority of any security interest in or lien on any Collateral
that is not New York Article 9 Collateral.



     The foregoing opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and, with respect to paragraphs 1 and 2 and clauses (a) and (b) of
paragraph 3 above only, the Delaware Limited Liability Company Act. The foregoing opinion is
limited to the Company, and we express no opinion with respect to the powers, authorizations,
governmental actions or filings or any other subject matter of our opinion with respect to the
Federal Reserve Bank of New York, acting as Managing Member of the Company or otherwise.



     This opinion is delivered to you in connection with the above matter. This opinion may not be
relied upon by you for any other purpose or relied upon by any other person without our prior
written consent.



Very truly yours,





 











 








Exhibit I to

Master Investment and Credit Agreement




FORM OF OPINION OF DELAWARE COUNSEL

TO COMPANY






November 25, 2008




The Bank of New York Mellon, as Collateral Agent,

and the Senior Lender, Equity Investor and Controlling Party

party to the Credit Agreement (as defined below)




          Re:       Maiden Lane III LLC 



Ladies and Gentlemen:




          We
have acted as special Delaware counsel to Maiden Lane III LLC, a Delaware limited liability
company (the “Company”), in connection with certain matters of Delaware law set forth below
relating to that certain (i) Master Investment and Credit Agreement dated as of November 25, 2008
(the “Credit Agreement”) among the Company, Federal Reserve Bank of New York, as Controlling Party
(in such capacity, the “Controlling Party”), Federal Reserve Bank of New York, as Senior Lender (in
such capacity, the “Senior Lender”), American International Group, Inc., as Equity Investor (in
such capacity, the “Equity Investor”), and The Bank of New York Mellon, as Collateral Agent (in
such capacity, the “Collateral Agent”), and (ii) Security Agreement dated as of November 25, 2008
(the “Security Agreement” and collectively with the Credit Agreement, the “Loan Documents”) among
the Company, the Controlling Party, the Senior Lender and the Collateral Agent. Capitalized terms
used herein and not otherwise herein defined are used as defined in the Security Agreement.
Non-capitalized terms used in connection with the opinion given herein with respect to matters
within the scope of Article 9 of the Uniform Commercial Code are used as defined in the Uniform
Commercial Code as enacted and presently in effect in the State of Delaware (the “Delaware UCC”),
to the extent that they are defined in the Delaware UCC.




          In rendering this opinion, we have examined and relied upon copies of the following documents
in the forms provided to us: the Loan Documents; the UCC-1 Financing Statement naming the Company
as “debtor” and the Collateral Agent as “secured party” to be filed in the Office of the Secretary
of State of the State of Delaware (the “State Office”) in the form attached hereto as Exhibit
I (the “Financing Statement”); and a certification of good standing of the Company obtained as
of a recent date from the State Office. In such examinations, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies or drafts of documents to be
executed and the legal competence and



 









 






The Bank of New York Mellon

November 25, 2008

Page 2



capacity of natural persons to complete the execution of documents. We have further assumed for
purposes of this opinion: (i) the due formation or organization, valid existence and good standing
of each entity that is a signatory to any of the documents examined by us under the laws of the
jurisdiction of its formation or organization; (ii) the due authorization, authentication,
adoption, approval, certification, acknowledgement, execution, filing, indexing and delivery, as
applicable, of the above referenced documents by each of the parties thereto; (iii) that the
Financing Statement accurately provides the mailing address of the Company and the name and mailing
address of the Collateral Agent; (iv) that the Company was not originally, is not and will not be
organized or existing under the laws of any jurisdiction other than the State of Delaware; (v) that
each of the Loan Documents constitutes a legal, valid and binding obligation of each of the parties
thereto and is enforceable against each of the parties thereto in accordance with its terms; and
(vi) that the documents examined by us are in full force and effect, express the entire
understanding of the parties thereto with respect to the subject matter thereof and have not been
supplemented, amended or otherwise modified. No opinion is expressed herein with respect to the
requirements of, or compliance with, federal or state securities or blue sky laws. As to any facts
material to our opinion, other than those assumed, we have relied without independent investigation
on the above-referenced documents and on the accuracy as of the date hereof of the matters therein
contained. We have not reviewed any documents other than those referenced above in connection with
rendering this opinion and we have assumed there are no documents that are contrary to or
inconsistent with the opinion herein expressed.




          Based
on and subject to the foregoing and to the further assumptions and qualifications set
forth below, and limited in all respects to matters of Delaware law, it is our opinion that solely
to the extent that the Delaware UCC is applicable to the perfection of the security interest of
the Collateral Agent in the Collateral owned or acquired by the Company (the “Company
Collateral”), (A) the Financing Statement is in sufficient
form for filing with the State Office
under the Delaware UCC with respect to the portion of the Company Collateral as to which a
security interest can be perfected by filing a financing statement in the State Office under the
Delaware UCC (the “Filing Collateral”), and (B) upon the proper filing of the Financing Statement
in the State Office pursuant to the provisions of the Delaware UCC, the security interest of the
Collateral Agent in the Filing Collateral will be perfected.




          In connection with the opinion set forth above, we have assumed (i) that the Security
Agreement creates or, with respect to after-acquired property, will create in favor of the
Collateral Agent a valid security interest in and to the Filing Collateral, which security
interest has attached or, with respect to after-acquired property, will attach under the Uniform
Commercial Code as in effect in the State of New York (the “New York UCC”), and (ii) that under
the New York UCC, the substantive laws of the Delaware UCC (and not the Delaware UCC choice-of-law
rules) govern the perfection of a security interest in the Filing Collateral.




          In addition, in connection with the opinion set forth above, we express no opinion as to (i)
the effect of perfection or nonperfection or the priority of any security interest of the
Collateral Agent in any portion of the Filing Collateral, (ii) the existence, legality, validity,
binding effect or enforceability of any security interest under the Security Agreement or














 






The Bank
of New York Mellon 

November
25, 2008

Page3



otherwise, (iii) the rights or interests of any of the parties to the Security Agreement or any
other person or entity in, or title of any such parties, persons or entities to, any of the
Collateral, or as to the value of any such Collateral, (iv) any Collateral until such Collateral is
acquired by the Company, (v) in the case of any Collateral that is secured by other property, the
rights or interests of any of the parties to the Security Agreement or any other person or entity
in, or title of any such parties, persons or entities to, any of such underlying property, (vi) any
Collateral other than the Filing Collateral, (vii) any Filing Collateral due from any government or
any agency or instrumentality thereof, (viii) any Filing Collateral that constitutes fixtures,
as-extracted collateral or timber to be cut, (ix) any Filing Collateral that constitutes commercial
tort claims,(x) any Filing Collateral that constitutes consumer goods, (xi) any Filing Collateral
that constitutes goods subject to a negotiable document of title and (xii) transactions excluded
from the application of Article 9 of the Delaware UCC pursuant to the provisions of Section 9-109
thereof. Further, to the extent the opinion set forth above relates to proceeds, such opinion is
subject to the qualification that the perfection of an interest in proceeds is subject to the
limitations and requirements of Section 9-315 of the Delaware UCC.




     Further, in connection with the opinion set forth above, we note that the security interest
of the Collateral Agent in the Filing Collateral may be subject to the rights of account debtors
in respect of such Filing Collateral, claims and defenses of such account debtors and terms of
agreements with such account debtors.



     In addition, in connection with the opinion set forth above, we express no opinion as to any
actions that may be required to be taken periodically under the Delaware UCC or other applicable
law in order for the effectiveness of the Financing Statement, or the perfection of the security
interest of the Collateral Agent in the Filing Collateral, to be maintained. We note, however,
that the perfection of the security interest of the Collateral Agent in the Filing Collateral and
the effectiveness of the Financing Statement will either terminate or be materially limited (i)
unless an appropriate continuation statement is properly filed (a) within the period of six months
prior to the expiration of the five-year period from the date of the original filing of the
Financing Statement and (b) if a prior continuation statement has been filed, within the period of
six months prior to the expiration of the Financing Statement continued by such prior continuation
statement, (ii) if the Company changes its name so as to make the Financing Statement seriously
misleading, unless an amendment to the Financing Statement that renders the Financing Statement
not seriously misleading is properly filed within four months after such a change in name, (iii)
if the Company changes its jurisdiction of formation or organization to another jurisdiction, four
months after the Company changes its jurisdiction of formation or organization to another
jurisdiction, unless such security interest is perfected in such new jurisdiction within such
time, (iv) if the Company transfers the Filing Collateral to a person or entity that thereby
becomes a debtor and is located in another jurisdiction, one year after the Company transfers such
Filing Collateral to a person or entity that thereby becomes a debtor and is located in another
jurisdiction, unless such security interest is perfected in such new jurisdiction within such
time, and (v) if the Company becomes organized under the laws of another jurisdiction in addition
to the State of Delaware.













 







The Bank of New York Mellon

November 25, 2008

Page 4




          Further, the opinion set forth above is subject to the effect of (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors’ rights and remedies, as from time to time in effect,
(ii) application of equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (iii) principles of course of dealing or course of
performance and standards of good faith, fair dealing, materiality and reasonableness that may be
applied by a court to the exercise of rights and remedies by, and other acts of, a creditor.




          The opinion expressed herein is intended solely for the benefit of the addressees hereof in
connection with the matters contemplated hereby and may not be relied upon by any other person or
entity or for any other purpose without our prior written consent; provided, that the addressees’
successors and permitted assigns under the Loan Documents may rely as to matters of Delaware law
upon the opinion in connection with the matters set forth herein. This opinion speaks only as of
the date hereof and is based on our understandings and assumptions as to present facts and our
review of the above-referenced documents and the application of Delaware law as the same exist on
the date hereof, and we undertake no obligation to update or supplement this opinion after the date
hereof for the benefit of any person or entity (including any person or entity granted reliance in
the preceding sentence) with respect to any facts or circumstances that may hereafter come to our
attention or any changes in facts or law that may hereafter occur or take effect.




Very truly yours,














 











EXHIBIT I





FINANCING STATEMENT














 








Exhibit J to

Master Investment and Credit Agreement




FORM OF OPINION OF COUNSEL

TO THE EQUITY INVESTOR


November 25, 2008




To the Persons on

Schedule I Attached Hereto




Re: Maiden Lane III LLC




Ladies and Gentlemen:




          We have acted as special counsel to (i) American International Group, Inc., a Delaware
corporation (“AIG”), and (ii) AIG Financial Products Corp., a Delaware corporation
(“AIG-FP” and, together with AIG, the “Transaction Parties”), in connection with
the following transactions (collectively, the “Transactions”):




          i. the purchase by AIG of an equity interest in Maiden Lane III LLC, a Delaware limited
liability company (“ML III”), pursuant to the Master Investment and Credit Agreement, dated
as of November 25, 2008 (the “Master Investment and Credit Agreement”), by and among ML
III, the Federal Reserve Bank of New York, as Senior Lender and Controlling Party, AIG, as Equity
Investor, and The Bank of New York Mellon, as Collateral Agent;




          ii. the entry by AIG-FP into the Shortfall Agreement, dated as of November 25, 2008 (the
“Shortfall Agreement”), by and between ML III and AIG-FP;




          iii. the entry by AIG into the Amended and Restated Limited Liability Company Agreement of
Maiden Lane III LLC, dated as of November 24, 2008 (the “LLC Agreement”), by and between
the Federal Reserve Bank of New York, as Managing Member, and AIG, as Member; and




Enforceability





 









 







Maiden Lane III LLC

November 25, 2008

Page 2




          iv. the entry by AIG-FP into the various termination agreements set forth in Exhibit A
hereto, pursuant to which certain derivative transactions between AIG-FP and the various
counterparties party thereto are scheduled to be terminated.




               Unless otherwise defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Master Investment and Credit Agreement. The documents specified in clauses
(i) through (iii) are collectively referred to herein as the “Operative Documents”, and the
documents specified in clause (iv) are collectively referred to herein as the “Additional
Operative Documents” and, together with the Operative Documents, the “Relevant
Documents”.



               This opinion is being furnished to you pursuant to Sections 7.01(c)(ii) and (iv) of the Master
Investment and Credit Agreement. Unless otherwise specified herein, “Applicable Laws”
means the laws, rules and regulations of the State of New York and the United States of America.



               In rendering the opinions expressed below, we have examined originals or copies (certified or
otherwise identified to our satisfaction) of (i) the Relevant Documents, (ii) the Security
Agreement, (iii) each Forward Purchase Agreement, and (iv) the Administration Agreement. We have
also examined originals or copies (certified or otherwise identified to our satisfaction) of such
agreements, documents and records, and other certificates, opinions and instruments, as we have
deemed relevant and necessary as a basis for the opinions expressed below. We have relied, as to
factual matters, solely and without independent investigation, on the representations, covenants
and other provisions of the documents and on the oral or written statements, covenants and
representations of officers and other representatives of the Transaction Parties, and others, and
we have assumed the compliance by such parties with such provisions, statements, covenants and
representations, and the accuracy of such statements. In addition, we draw to your attention that
you have received opinions of in-house counsel to AIG and AIG-FP of even date herewith upon which
we have relied in rendering the opinions set forth herein.



               In our examination we have assumed without independent investigation (i) the proper legal
capacity of all natural persons; (ii) the genuineness of all signatures (including endorsements);
(iii) the authenticity of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents; (iv) that such documents whether originals
or photostatic copies have not been amended or modified since the date they were submitted to us by
written or oral agreement of the parties thereto, by the conduct of the parties thereto, or
otherwise; (v) that the parties to the documents (other than the Transaction Parties to the extent
of our opinion set forth in paragraph 1) had the power, corporate or other, to enter into and



Enforceability




 









 





Maiden Lane III LLC

November 25, 2008

Page 3



perform all obligations thereunder; (vi) that such documents have been duly authorized by all
requisite action, corporate or other (other than any requisite action by the Transaction Parties to
the extent of our opinion set forth in paragraph 3), and that such documents have been duly
executed, delivered and, as applicable, authenticated by the parties thereto (other than the
Transaction Parties to the extent of our opinion set forth in paragraph 3) whom we assume were
duly organized and are validly existing and in good standing (other than the Transaction Parties to
the extent of our opinion set forth in paragraph 1); (vii) such documents constitute valid and
binding obligations of such parties, enforceable against the parties thereto (other than the
Transaction Parties, to the extent of our opinion set forth in paragraph 3); (viii) there are no
other agreements or arrangements that will alter the terms and conditions of such documents; and
(ix) the execution, delivery and performance of such documents by each party (other than the
Transaction Parties to the extent of our opinion set forth in paragraph 2) and the consummation of
the transactions contemplated thereby will not conflict with, result in a breach of any of the
terms and provisions of, constitute a default under or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of (x) the charter and by-laws or similar
organic documents of such party, (y) any indenture, contract, lease, mortgage, deed of trust,
judgment, order, decree or other instrument or agreement to which such party is a party or by which
such party is bound or (z) any law, order, rule or regulation applicable to such party of any
federal or state regulatory body, any court, administrative agency, or other governmental
instrumentality having jurisdiction over such party. We have also assumed without independent
investigation that (i) as to all parties, no authorization, consent or other approval of or notice
to or filing with any court, governmental authority or regulatory body is required to authorize, or
is required in connection with, the execution, delivery and performance of such documents by such
parties, except those which have already been obtained, and that the execution, delivery and
performance of such documents by such parties will not violate any law, rule or regulation,
consent, order or decree of any governmental authority, and (ii) there has not been any fraud,
duress, undue influence or material mistake of fact.




          Based upon the foregoing and subject to further qualifications set forth below, we are of the
opinion, as of the date hereof, that:




     1. Each of the Transaction Parties (a) is validly existing and in good standing under the laws
of the State of Delaware and (b) had full corporate power and authority to enter into the
Additional Operative Documents at the time of their execution and has full corporate power and
authority to enter into the Operative Documents and to perform its obligations under the Relevant
Documents, in each case to which it is a party.



Enforceability




 









 








Maiden Lane III LLC

November 25, 2008

Page 4




     2. With respect to each Transaction Party, the execution and delivery of the Operative
Documents to which such Transaction Party is a party and the performance by such Transaction Party
of its obligations under each of the Relevant Documents to which such Transaction Party is a party
does not conflict with, or constitute a default under or violate, pursuant to (i) in the case of
AIG, the terms of the Certificate of Incorporation or the By-Laws of AIG, and, in the case of
AIG-FP, the terms of the Certificate of Incorporation or the By-Laws of AIG-FP, or (ii) any
statute, rule, or regulation, by which AIG or AIG-FP, as applicable, or any of their properties are
bound, that in our experience is normally applicable to corporations in relation to transactions of
the type contemplated by the Transaction Documents and that would have a material adverse effect on
such Transaction Party.



     3. With respect to each Transaction Party, each of the Relevant Documents to which such
Transaction Party is a party has been duly authorized by all necessary corporate action of such
Transaction Party and has been duly and validly executed and delivered by such Transaction Party
and each such Relevant Document (other than the LLC Agreement for which we do not provide an
opinion) constitutes a legal, valid and binding obligation of such Transaction Party enforceable
against such Transaction Party in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and
except that (A) rights to indemnification and contribution thereunder may be limited by federal or
state securities laws or public policy relating thereto, (B) no opinion is expressed with respect
to Section 11.19 of the Master Investment and Credit Agreement, and (C) no opinion is expressed
with respect to any provision of the Relevant Documents providing for liquidated damages.



          We are members of the Bar of the State of New York and we do not purport to be experts on, or
express any opinion herein concerning, any law other than the laws of the State of New York, the
corporate laws of the State of Delaware and the federal laws of the United States of America;
provided that we give no opinion with respect to the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended or
the Trust Indenture Act of 1939, as amended. Without limiting the generality of the foregoing, we
express no opinion herein as to the laws of any other jurisdiction.




          The foregoing opinions are subject to the following qualifications:




     (a) The qualification of any opinion herein by the use of the words “to our knowledge” or “of
which we are aware” means the conscious awareness of facts or



Enforceability




 









 








Maiden Lane III LLC

November 25, 2008

Page 5



other information by any lawyer in
our firm actively involved in the transactions contemplated by the Relevant Documents. Except as
specifically and expressly set forth herein, we have not undertaken any investigation to determine
the existence of such documents or facts, and no inference as to our knowledge thereof shall be
drawn from the fact of our representation of any party or otherwise.




     (b) Our opinion in paragraph 1(a) is based solely upon certificates of good standing issued by
the Secretary of State of the State of Delaware



     The opinions expressed herein shall be effective only as of the date of this opinion letter.
We do not assume responsibility for updating this opinion letter as of any date subsequent to the
date of this opinion letter, and assume no responsibility for advising you of any changes in the
legal authorities or in the facts with respect to any matters described in this opinion letter that
may occur subsequent to the date of this opinion letter or of the discovery subsequent to the date
of this opinion letter of information not previously known to us pertaining to the events occurring
prior to the date of this opinion letter or the discovery of an inaccuracy in any of the
representations or warranties upon which we have relied in rendering this opinion letter.



     The opinions expressed herein are rendered solely for your benefit in connection with the
transactions described herein. These opinions may not be used or relied upon by any other person,
nor may this letter or any copies thereof be furnished to a third party, filed with a governmental
agency, quoted, cited or otherwise referred to without our prior written consent.



	 	 	 	 	 
	 	Very truly yours,

 	 
	 	 	 
	 	 	 
	 	 	 
	 



Enforceability




 









 








Maiden Lane III LLC

November 25, 2008

Page 6




SCHEDULE I




List of Addressees




Federal Reserve Bank of New York

(as Senior Lender and Controlling Party)

33 Liberty Street

New York, NY, 10045




American International Group, Inc.

(as Equity Investor)

70 Pine Street

New York, NY, 10270




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Exhibit K to

Master Investment and Credit Agreement




FORM OF OPINION OF COUNSEL

TO THE COLLATERAL AGENT, THE ESCROW

AGENT AND THE ADMINISTRATOR




November 25, 2008




To the Parties Listed on the Attached Schedule A




Ladies and Gentlemen:




          We have acted as counsel to The Bank of New York Mellon (“BNYM”) in connection with the
execution and delivery by BNYM of (i) the Master Investment and Credit Agreement dated as of
November 25, 2008 (the “Credit Agreement”) among Maiden Lane III LLC, the Federal Reserve Bank of
New York, as controlling party, American International Group, Inc., as equity investor and BNYM, as
collateral agent; (ii) the Administration Agreement dated as of November 25, 2008 (the
“Administration Agreement”) among Maiden Lane III LLC, the Federal Reserve Bank of New York as
managing member of Maiden Lane III LLC and BNYM, as administrator and escrow agent; (iii) the
Security Agreement dated as of November 25, 2008 (the “Security Agreement”) among Maiden Lane III
LLC as borrower, the Federal Reserve Bank of New York, as senior lender and controlling party and
BNYM, as collateral agent; (iv) the Collateral Account Control Agreement dated as of November 25,
2008 (the “Account Control Agreement”) between Maiden Lane III LLC and BNYM, as collateral agent
and securities intermediary; and (v) the Escrow Account Control Agreement dated November 5, 2008
(the “Escrow Account Control Agreement”) between Maiden Lane III LLC and BNYM, as collateral agent,
escrow agent and securities intermediary. We are rendering this opinion letter to you at the
request of BNYM.




          In connection with this opinion, we have examined and relied upon:





	 	(a)	 	the Credit Agreement;
	 
	 	(b)	 	the Administration Agreement;
	 
	 	(c)	 	the Security Agreement;
	 
	 	(d)	 	the Account Control Agreement;
	 
	 	(e)	 	the Escrow Account Control Agreement;






 









 










November 25, 2008





     (f) the BNYM Assistant Secretary’s Certificate, dated November 25, 2008, including
BNYM’s charter as in effect the date hereof (the “Charter), and By-laws, amended and
restated as of July 1, 2008, each attached as an exhibit thereto; and




     (g) the certificate dated November 25, 2008 issued by the New York State Banking
Department.


Items (a) to (e) above are referred to in this letter as the “Transaction Documents”. In such
examination of the Transaction Documents, we have assumed the genuineness of all signatures, the
authenticity of all documents, agreements and instruments submitted to us as originals, the
conformity to original documents, agreements and instruments of all documents, agreements and
instruments submitted to us as copies or specimens, the authenticity of the originals of such
documents, agreements and instruments submitted to us as copies or specimens, and the accuracy of
the matters set forth in the documents, agreements and instruments we reviewed. As to matters of
fact relevant to the opinion expressed herein, we have relied upon the representations and
warranties contained in the Transaction Documents and certificates and oral or written statements
and other information obtained from BNYM, the other parties to the transaction referenced herein,
and public officials and assumed that each of the above was (as of the date made) and is (as of
the date hereof) accurate. Except as expressly set forth herein, we have not undertaken any
independent investigation (including, without limitation, conducting any review, search or
investigation of any public files, records or dockets) to determine the existence or absence of
the facts that are material to our opinion, and no inference as to our knowledge concerning such
facts should be drawn from our reliance on the representations of BNYM and others in connection
with the preparation and delivery of this letter.




          Other than with respect to BNYM, we have assumed (x) the legal capacity of all natural
persons and (y) that the Transaction Documents have been duly authorized, executed and delivered
by all parties thereto, that all such parties are validly existing and in good standing under the
laws of their respective jurisdictions of organization, that all such parties had the power and
legal right to execute and deliver the Transaction Documents, and that the Transaction Documents
constitute the legal, valid and binding obligation of all such parties, enforceable against all
such parties in accordance with its terms. We have also assumed that the Transaction Documents we
have reviewed evidence the entire agreement between the parties, and have not been amended,
modified or supplemented in writing or otherwise by any other agreement or understanding of the
parties or by waiver of any material provision thereof.




          We have also assumed that each of the Transaction Documents is in consideration of or relate
to an obligation arising out of a transaction covering in the aggregate not less than U.S.
$1,000,000.




          We express no opinion concerning the laws of any jurisdiction other than the laws of the State
of New York, and to the extent expressly referred to in this letter, the federal laws of the United
States of America.




-2-









 








November 25, 2008




          Based upon our examination of the documents set forth above and the assumptions set forth
herein, subject to the limitations and qualifications set forth herein, and having regard for
legal considerations which we deem relevant, we are of the following opinions:




          1. BNYM is duly organized and validly existing under the laws of the State of New York.




          2. BNYM has the corporate authority to execute, deliver and perform its obligations under the
Transaction Documents.




          3. The execution and delivery by BNYM of the Transaction Documents and the performance of its
obligations thereunder do not violate or conflict with its Charter or Bylaws.




          4. The Transaction Documents have been duly authorized, executed and delivered by BNYM.




          5. The Transaction Documents constitute the legal, valid and binding obligation of BNYM
enforceable against BNYM in accordance with their respective terms.




          Our opinion in paragraph 5 above is subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, receivership or other laws relating to or affecting
creditors’ rights generally, general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity), and to the discretion of a court or other authority or
body to invalidate or decline to enforce any right, remedy or provision of the Transaction
Documents determined by it to be a penalty. However, the enforcement of rights with respect to
indemnification and contribution obligations and provisions relating to severability, provisions
purporting to waive or limit rights to trial by jury, oral amendments to written agreements or
rights of set-off, provisions relating to submission to jurisdiction, venue or service of process,
or provisions purporting to prohibit, restrict or require the consent of the other party for the
transfer of, or the creation, attachment or perfection of a security interest in, the Transaction
Documents or an interest therein, may be limited by applicable law or considerations of public
policy.




     We are furnishing this letter to you solely for your benefit in connection with the
Transaction Documents. Without our prior written consent, this letter is not to be relied upon,
used, circulated, quoted or otherwise referred to by, or assigned to, any other person (including
any person that seeks to assert your rights in respect of this letter (other than your successor in
interest by means of merger, consolidation, transfer of a business or other similar transaction))
or for any other purpose. In addition, we disclaim any obligation to update this letter for changes
in fact or law, or otherwise.




	 	 	 
	 

	 	Very truly yours,






-3-









 






November 25, 2008




SCHEDULE A




The Bank of New York Mellon

101 Barclay Street, New York, NY 10286




Federal Reserve Bank of New York

33 Liberty Street, New York, New York 10045




American International Group, Inc.

70 Pine Street, New York, New York 10270





-4-











 








Exhibit L to

Master Investment and Credit Agreement




FORM OF OPINION OF COUNSEL

TO AIG-FP



November 25, 2008




To the Persons on

Schedule I Attached Hereto




Re: Maiden Lane III LLC




Ladies and Gentlemen:




          We have acted as special counsel to (i) American International Group, Inc., a Delaware
corporation (“AIG”), and (ii) AIG Financial Products Corp., a Delaware corporation
(“AIG-FP” and, together with AIG, the “Transaction Parties”), in connection with
the following transactions (collectively, the “Transactions”):




          i. the purchase by AIG of an equity interest in Maiden Lane III LLC, a Delaware limited
liability company (“ML III”), pursuant to the Master Investment and Credit Agreement, dated
as of November 25, 2008 (the “Master Investment and Credit Agreement”), by and among ML
III, the Federal Reserve Bank of New York, as Senior Lender and Controlling Party, AIG, as Equity
Investor, and The Bank of New York Mellon, as Collateral Agent;




          ii. the entry by AIG-FP into the Shortfall Agreement, dated as of November 25, 2008 (the
“Shortfall Agreement”), by and between ML III and AIG-FP;




          iii. the entry by AIG into the Amended and Restated Limited Liability Company Agreement of
Maiden Lane III LLC, dated as of November 24, 2008 (the “LLC Agreement”), by and between
the Federal Reserve Bank of New York, as Managing Member, and AIG, as Member; and




Enforceability






 












 





Maiden Lane III LLC

November 25, 2008

Page 2




          iv. the entry by AIG-FP into the various termination agreements set forth in Exhibit A
hereto, pursuant to which certain derivative transactions between AIG-FP and the various
counterparties party thereto are scheduled to be terminated.




               Unless otherwise defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Master Investment and Credit Agreement. The documents specified in clauses
(i) through (iii) are collectively referred to herein as the “Operative Documents”, and the
documents specified in clause (iv) are collectively referred to herein as the “Additional
Operative Documents” and, together with the Operative Documents, the “Relevant
Documents”.



               This opinion is being furnished to you pursuant to Sections 7.01(c)(ii) and (iv) of the Master
Investment and Credit Agreement. Unless otherwise specified herein, “Applicable Laws”
means the laws, rules and regulations of the State of New York and the United States of America.



               In rendering the opinions expressed below, we have examined originals or copies (certified or
otherwise identified to our satisfaction) of (i) the Relevant Documents, (ii) the Security
Agreement, (iii) each Forward Purchase Agreement, and (iv) the Administration Agreement. We have
also examined originals or copies (certified or otherwise identified to our satisfaction) of such
agreements, documents and records, and other certificates, opinions and instruments, as we have
deemed relevant and necessary as a basis for the opinions expressed below. We have relied, as to
factual matters, solely and without independent investigation, on the representations, covenants
and other provisions of the documents and on the oral or written statements, covenants and
representations of officers and other representatives of the Transaction Parties, and others, and
we have assumed the compliance by such parties with such provisions, statements, covenants and
representations, and the accuracy of such statements. In addition, we draw to your attention that
you have received opinions of in-house counsel to AIG and AIG-FP of even date herewith upon which
we have relied in rendering the opinions set forth herein.



               In our examination we have assumed without independent investigation (i) the proper legal
capacity of all natural persons; (ii) the genuineness of all signatures (including endorsements);
(iii) the authenticity of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents; (iv) that such documents whether originals
or photostatic copies have not been amended or modified since the date they were submitted to us by
written or oral agreement of the parties thereto, by the conduct of the parties thereto, or
otherwise; (v) that the parties to the documents (other than the Transaction Parties to the extent
of our opinion set forth in paragraph 1) had the power, corporate or other, to enter into and



Enforceability





 









 








Maiden Lane III LLC

November 25, 2008

Page 3



perform all obligations thereunder; (vi) that such documents have been duly authorized by all
requisite action, corporate or other (other than any requisite action by the Transaction Parties to
the extent of our opinion set forth in paragraph 3), and that such documents have been duly
executed, delivered and, as applicable, authenticated by the parties thereto (other than the
Transaction Parties to the extent of our opinion set forth in paragraph 3) whom we assume were
duly organized and are validly existing and in good standing (other than the Transaction Parties to
the extent of our opinion set forth in paragraph 1); (vii) such documents constitute valid and
binding obligations of such parties, enforceable against the parties thereto (other than the
Transaction Parties, to the extent of our opinion set forth in paragraph 3); (viii) there are no
other agreements or arrangements that will alter the terms and conditions of such documents; and
(ix) the execution, delivery and performance of such documents by each party (other than the
Transaction Parties to the extent of our opinion set forth in paragraph 2) and the consummation of
the transactions contemplated thereby will not conflict with, result in a breach of any of the
terms and provisions of, constitute a default under or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of (x) the charter and by-laws or similar
organic documents of such party, (y) any indenture, contract, lease, mortgage, deed of trust,
judgment, order, decree or other instrument or agreement to which such party is a party or by which
such party is bound or (z) any law, order, rule or regulation applicable to such party of any
federal or state regulatory body, any court, administrative agency, or other governmental
instrumentality having jurisdiction over such party. We have also assumed without independent
investigation that (i) as to all parties, no authorization, consent or other approval of or notice
to or filing with any court, governmental authority or regulatory body is required to authorize, or
is required in connection with, the execution, delivery and performance of such documents by such
parties, except those which have already been obtained, and that the execution, delivery and
performance of such documents by such parties will not violate any law, rule or regulation,
consent, order or decree of any governmental authority, and (ii) there has not been any fraud,
duress, undue influence or material mistake of fact.




          Based upon the foregoing and subject to further qualifications set forth below, we are of the
opinion, as of the date hereof, that:




     1. Each of the Transaction Parties (a) is validly existing and in good standing under the laws
of the State of Delaware and (b) had full corporate power and authority to enter into the
Additional Operative Documents at the time of their execution and has full corporate power and
authority to enter into the Operative Documents and to perform its obligations under the Relevant
Documents, in each case to which it is a party.



Enforceability






 









 








Maiden Lane III LLC

November 25, 2008

Page 4




     2. With respect to each Transaction Party, the execution and delivery of the Operative
Documents to which such Transaction Party is a party and the performance by such Transaction Party
of its obligations under each of the Relevant Documents to which such Transaction Party is a party
does not conflict with, or constitute a default under or violate, pursuant to (i) in the case of
AIG, the terms of the Certificate of Incorporation or the By-Laws of AIG, and, in the case of
AIG-FP, the terms of the Certificate of Incorporation or the By-Laws of AIG-FP, or (ii) any
statute, rule, or regulation, by which AIG or AIG-FP, as applicable, or any of their properties are
bound, that in our experience is normally applicable to corporations in relation to transactions of
the type contemplated by the Transaction Documents and that would have a material adverse effect on
such Transaction Party.



     3. With respect to each Transaction Party, each of the Relevant Documents to which such
Transaction Party is a party has been duly authorized by all necessary corporate action of such
Transaction Party and has been duly and validly executed and delivered by such Transaction Party
and each such Relevant Document (other than the LLC Agreement for which we do not provide an
opinion) constitutes a legal, valid and binding obligation of such Transaction Party enforceable
against such Transaction Party in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and
except that (A) rights to indemnification and contribution thereunder may be limited by federal or
state securities laws or public policy relating thereto, (B) no opinion is expressed with respect
to Section 11.19 of the Master Investment and Credit Agreement, and (C) no opinion is expressed
with respect to any provision of the Relevant Documents providing for liquidated damages.



               We are members of the Bar of the State of New York and we do not purport to be experts on, or
express any opinion herein concerning, any law other than the laws of the State of New York, the
corporate laws of the State of Delaware and the federal laws of the United States of America;
provided that we give no opinion with respect to the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended or
the Trust Indenture Act of 1939, as amended. Without limiting the generality of the foregoing, we
express no opinion herein as to the laws of any other jurisdiction.



               The foregoing opinions are subject to the following qualifications:



     (a) The qualification of any opinion herein by the use of the words “to our knowledge” or “of
which we are aware” means the conscious awareness of facts or



Enforceability





 









 








Maiden Lane III LLC

November 25, 2008

Page 5



other information by any lawyer in our firm actively involved in the transactions contemplated
by the Relevant Documents. Except as specifically and expressly set forth herein, we have not
undertaken any investigation to determine the existence of such documents or facts, and no
inference as to our knowledge thereof shall be drawn from the fact of our representation of any
party or otherwise.




     (b) Our opinion in paragraph 1(a) is based solely upon certificates of good standing issued by
the Secretary of State of the State of Delaware



     The opinions expressed herein shall be effective only as of the date of this opinion letter.
We do not assume responsibility for updating this opinion letter as of any date subsequent to the
date of this opinion letter, and assume no responsibility for advising you of any changes in the
legal authorities or in the facts with respect to any matters described in this opinion letter that
may occur subsequent to the date of this opinion letter or of the discovery subsequent to the date
of this opinion letter of information not previously known to us pertaining to the events occurring
prior to the date of this opinion letter or the discovery of an inaccuracy in any of the
representations or warranties upon which we have relied in rendering this opinion letter.



               The opinions expressed herein are rendered solely for your benefit in connection with the
transactions described herein. These opinions may not be used or relied upon by any other person,
nor may this letter or any copies thereof be furnished to a third party, filed with a governmental
agency, quoted, cited or otherwise referred to without our prior written consent.



	 	 	 
	 

	 	Very truly yours,






Enforceability






 









 








Maiden Lane III LLC

November 25, 2008

Page 6




SCHEDULE I




List of Addressees




Federal Reserve Bank of New York

(as Senior Lender and Controlling Party)

33 Liberty Street

New York, NY, 10045




American International Group, Inc.

(as Equity Investor)

70 Pine Street

New York, NY, 10270




Enforceability