Document:

<PAGE>   1
                                                                     Exhibit 4.4

                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                      UBS PREFERRED FUNDING COMPANY LLC III

                              DATED AS OF -, 2001

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                                TABLE OF CONTENTS

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ARTICLE I
         DEFINED TERMS
Section 1.1  Definitions.........................................................................................    2
Section 1.2  Headings............................................................................................   11

ARTICLE II
         CONTINUATION AND TERM;
         ADMISSION OF SECURITYHOLDERS
Section 2.1  Continuation........................................................................................   11
Section 2.2  Admission of Securityholders........................................................................   11
Section 2.3  Name................................................................................................   11
Section 2.4  Term................................................................................................   12
Section 2.5  Registered Agent and Office.........................................................................   12
Section 2.6  Principal Executive Offices.........................................................................   12
Section 2.7  Qualification in Other Jurisdictions................................................................   12

ARTICLE III
         PURPOSE AND POWERS OF THE COMPANY;
         BY-LAWS; SUPPORT AGREEMENT
Section 3.1  Purposes and Powers.................................................................................   12
Section 3.2  By-Laws.............................................................................................   13
Section 3.3  Bank Subordinated Guarantee.........................................................................   13

ARTICLE IV
         CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1  Form of Contribution................................................................................   13
Section 4.2  Contributions with Respect to the Common Securityholders............................................   13
Section 4.3  Contributions with Respect to the Preferred Securityholders.........................................   13
Section 4.4  Allocation of Profits and Losses....................................................................   13
Section 4.5  Withholding.........................................................................................   14
Section 4.6  Securities as Personal Property.....................................................................   14

ARTICLE V
         SECURITYHOLDERS
Section 5.1  Powers of Securityholders...........................................................................   15
Section 5.2  Partition...........................................................................................   15
Section 5.3  Resignation.........................................................................................   15
Section 5.4  Liability of Securityholders........................................................................   15
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ARTICLE VI
         MANAGEMENT
Section 6.1  Management of the Company...........................................................................   15
Section 6.2  Limits on Board of Directors' Powers................................................................   20
Section 6.3  Reliance by Third Parties...........................................................................   20
Section 6.4  No Management by Any Preferred Securityholders......................................................   21
Section 6.5  Business Transactions of the Common Securityholder with the Company.................................   21
Section 6.6  Outside Businesses..................................................................................   21
Section 6.7  Duties of Directors.................................................................................   21
Section 6.8  Additional Directors................................................................................   21

ARTICLE VII
         COMPANY SECURITIES; SUBORDINATED NOTES
Section 7.1  Company Common Securities...........................................................................   22
Section 7.2  General Provisions Regarding Company Preferred Securities and Company Parity
         Preferred Securities....................................................................................   23
Section 7.3  Company Preferred Securities........................................................................   25
Section 7.4  General Provisions Regarding Subordinated Notes.....................................................   34

ARTICLE VIII
         VOTING AND MEETINGS
Section 8.1  Voting Rights of Preferred Securityholders..........................................................   34
Section 8.2  Voting Rights of Common Securityholders.............................................................   35
Section 8.3  Meetings of the Securityholders.....................................................................   35

ARTICLE IX
         DIVIDENDS
Section 9.1  Dividends...........................................................................................   36
Section 9.2  Limitations on Distributions........................................................................   37
Section 9.3  No Dividend Instruction.............................................................................   37

ARTICLE X
         BOOKS AND RECORDS
Section 10.1  Financial Statements...............................................................................   37
Section 10.2  Limitation on Access to Records....................................................................   37
Section 10.3  Accounting Method..................................................................................   38
Section 10.4  Annual Audit.......................................................................................   38

ARTICLE XI
         TAX MATTERS
Section 11.1  Company Tax Returns................................................................................   38
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Section 11.2  Tax Reports........................................................................................   39
Section 11.3  Taxation as a Partnership..........................................................................   39
Section 11.4  Taxation of Securityholders........................................................................   39

ARTICLE XII
         EXPENSES
Section 12.1  Expenses...........................................................................................   39
Section 12.2  Contribution to Funds of the Company...............................................................   40

ARTICLE XIII
         TRANSFERS OF SECURITIES BY SECURITYHOLDERS
         AND RELATED MATTERS
Section 13.1      Right of Assignee to Become a Preferred Securityholder.........................................   40
Section 13.2      Events of Cessation of Security Ownership......................................................   40
Section 13.3      Persons Deemed Preferred Securityholders.......................................................   40
Section 13.4      The Company Preferred Certificates.............................................................   41
Section 13.5      Transfer of Company Preferred Certificates.....................................................   41
Section 13.6      Mutilated, Destroyed, Lost or Stolen Company Preferred Certificates............................   42
Section 13.7      Restrictions on Transfers of Securities........................................................   43

ARTICLE XIV
         MERGERS, CONSOLIDATIONS AND SALES
Section 14.1      The Company....................................................................................   43

ARTICLE XV
         DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1      No Dissolution.................................................................................   44
Section 15.2      Events Causing Dissolution.....................................................................   44
Section 15.3      Notice of Dissolution..........................................................................   45
Section 15.4      Liquidation....................................................................................   45
Section 15.5      Certain Restrictions on Liquidation Payments...................................................   45
Section 15.6      Termination....................................................................................   45

ARTICLE XVI
         MISCELLANEOUS
Section 16.1      Amendments.....................................................................................   46
Section 16.2      Amendment of Certificate of Formation..........................................................   46
Section 16.3      Successors.....................................................................................   46
Section 16.4      Law; Severability..............................................................................   46
Section 16.5      Filings........................................................................................   46
Section 16.6      Power of Attorney..............................................................................   47
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Section 16.7      Exculpation....................................................................................   47
Section 16.8      Indemnification................................................................................   47
Section 16.9      Additional Documents...........................................................................   48
Section 16.10     Notices........................................................................................   48
Section 16.11     Nominee Letter.................................................................................   49
Section 16.12     Counterparts...................................................................................   49
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ANNEX A           -   Form of UBS AG Subordinated Guarantee Agreement
ANNEX B           -   Form of Administration Agreement
ANNEX C           -   By-Laws of the Company
ANNEX D           -   Form of Subordinated Note of UBS AG
ANNEX E           -   List of Initial Directors and Officers
ANNEX F           -   Investment Policies
ANNEX G           -   Form of Certificate Evidencing Company Preferred Securities
ANNEX H           -   Form of No Dividend Instruction
ANNEX I           -   Form of Nominee Letter
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<PAGE>   6
                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                      UBS PREFERRED FUNDING COMPANY LLC III

                  This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
of UBS Preferred Funding Company LLC III, a Delaware limited liability company
(the "Company"), is made as of -, 2001, among UBS AG, a bank organized under
the laws of Switzerland (the "Bank"), as initial Securityholder (as defined
below) and holder of the Company Common Securities (as defined below), and the
Persons (as defined below), who may from time to time become additional
Securityholders of the Company in accordance with the provisions hereof.

                                   WITNESSETH

                  WHEREAS, the Bank, as initial Securityholder, has formed a
limited liability company pursuant to the Delaware Limited Liability Company
Act, 6 Del.C. Section 18-101, et seq., as amended from time to time (the
"Delaware Act"), by filing a Certificate of Formation of the Company (the
"Certificate of Formation") with the office of the Secretary of State of the
State of Delaware on May 29, 2001, and has entered into the Limited Liability
Company Agreement of the Company, dated as of May 29, 2001 and effective as of
May 29, 2001, (the "Original Agreement");

                  WHEREAS, the initial Securityholder desires to amend and
restate the Original Agreement as provided in this Amended and Restated Limited
Liability Company Agreement of the Company (as amended, modified or supplemented
from time to time in accordance with its terms, this "Agreement") and to
continue the Company as a limited liability company under the Delaware Act in
accordance with the provisions of this Agreement; and

                  WHEREAS, simultaneously with the Bank's execution and delivery
of this Agreement, the Bank is executing and delivering the UBS AG Subordinated
Guarantee Agreement, dated as of the date hereof, substantially in the form of
Annex A hereto (as amended, modified or supplemented from time to time in
accordance with its terms, the "Bank Subordinated Guarantee").

                  NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the initial
Securityholder hereby agrees as follows:

<PAGE>   7

                                    ARTICLE I
                                  DEFINED TERMS

                  Section 1.1 Definitions. Unless the context otherwise
requires, the terms defined in this Article I shall, for the purposes of this
Agreement, have the meanings herein specified.

                           "Administration Agreement" means the Administration
         Agreement between the Company and the Administrator, dated as of -,
         2001, as amended, modified or supplemented from time to time in
         accordance with its terms (attached hereto as Annex B).

                           "Administrative Action" means any judicial decision,
         official administrative pronouncement, published or private ruling,
         regulatory procedure, notice or announcement (including any notice or
         announcement of intent to adopt such procedures or regulations) by any
         legislative body, court, governmental authority or regulatory body
         having appropriate jurisdiction.

                           "Administrator" means the branch of the Bank located
         in Stamford, Connecticut, in its capacity as the service provider under
         the Administration Agreement.

                           "Affiliate" means, with respect to a specified
         Person, any Person directly or indirectly controlling, controlled by,
         or under common control with the specified Person.

                           "Affiliate Securities" means any securities issued by
         the Bank or a subsidiary of the Bank and includes the Subordinated
         Notes.

                           "Agreement" has the meaning specified in the second
         Recital of this Agreement.

                           "Applicable Procedures" means, with respect to any
         transfer or transaction involving a Company Preferred Security, the
         rules and procedures of the Clearing Agency for such Company Preferred
         Security, in each case to the extent applicable to such transaction and
         as in effect from time to time.

                           "authorized person" has the meaning specified in
         Section 2.1(b).

                           "Available Distributable Profits" means, for any
         financial year of the Bank, (i) if there are no Bank Parity Securities
         outstanding, Distributable Profits for the immediately preceding
         financial year of the Bank, and (ii) if there are Bank Parity
         Securities outstanding, then an amount determined as the product of (x)
         Distributable Profits for such immediately preceding financial year of
         the Bank and (y) a ratio (I) the numerator of which is the aggregate
         amount of full dividends on the Company Preferred Securities to be paid
         on the Dividend Payment Dates which occur during the then current
         financial year (but excluding dividends paid on January of the current
         year and including dividends to be paid on January of the following
         year in the case of calculations occurring after - 2011) and (II)

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<PAGE>   8
         the denominator of which is the sum of the amount determined pursuant
         to clause (I) plus the aggregate amount of full dividends on the Bank
         Parity Securities to be paid on dividend payment dates which occur
         during the then current financial year.

                           "Bank" has the meaning specified in the Preamble of
         this Agreement.

                           "Bank Junior Obligations" means (i) ordinary shares
         of the Bank, (ii) each class of preferred or preference shares or
         similar securities of the Bank that ranks junior to the most senior
         ranking preferred or preference shares or similar securities of the
         Bank, (iii) any indebtedness, guarantee or support agreement or similar
         undertaking of the Bank in respect of any subsidiary securities that
         rank junior to the Bank Subordinated Guarantee.

                           "Bank Parity Securities" means (i) each class of
         preferred or preference shares or similar securities of the Bank that
         ranks equally with the most senior ranking preferred or preference
         shares or similar securities of the Bank and (ii) any securities issued
         by any subsidiaries of the Bank and entitled to the benefit of any
         guarantee or support agreement or similar undertaking of the Bank that
         ranks equally with the Bank Subordinated Guarantee.

                           "Bank Subordinated Guarantee" has the meaning
         specified in the third Recital to this Agreement.

                           A "Bankruptcy Event" shall be deemed to occur if (i)
         at any time the Bank's unconsolidated unsubordinated liabilities exceed
         its unconsolidated total assets (valued at the higher of their
         going-concern and their liquidation value), as calculated based on the
         most recent unconsolidated interim balance sheet of the Bank, and the
         unsubordinated creditors of the Bank do not agree to subordinate their
         claims to the extent that such liabilities exceed such assets; or (ii)
         the Swiss Federal Banking Commission exercises the broad discretion
         granted to it under Swiss Banking Law before the occurrence of such an
         excess as described in (i), above, by withdrawing the banking license
         of the affected bank, which has then been required to go into
         liquidation pursuant to Article 23 quinquies of the Swiss Banking Law.
         In the case of the occurrence of the events described in (i) above, the
         Board of Directors of the Bank, pursuant to Article 725 paragraph 2 of
         the Swiss Code of Obligations, must then notify the competent court of
         such excess and upon such notification, such court must declare the
         bankruptcy of the Bank in accordance with Article 725a paragraph 1 of
         the Swiss Code of Obligations and Article 35 paragraph 2 of the Swiss
         Banking Law.

                           "Board of Directors" means the Directors of the
         Company as constituted in accordance with the provisions of this
         Agreement and of the By-Laws.

                           "Business Day" means a day on which (i) the
         Trans-European Automated Real-Time Gross Settlement Express Transfer
         System ("TARGET") is operating, (ii) banks are open for business and
         carrying out transactions in U.S. dollars in London, Luxembourg, and
         Wilmington, Delaware.

                                       -3-

<PAGE>   9
                           "By-Laws" means the By-Laws of the Company in the
         form of Annex C hereto, as they may be amended from time to time by the
         Board of Directors of the Company in accordance with the provisions of
         this Agreement (which By-Laws are, for all purposes of this Agreement,
         deemed to be incorporated herein and to be a part hereof).

                           "Capital Event" means the determination by the Bank
         after consultation with the Swiss Federal Banking Commission that the
         Company Preferred Securities cannot be included in calculating the Tier
         1 capital of the Bank on a consolidated basis.

                           "Capital Limitation" has the meaning specified in
         Section 7.3(b)(iii).

                           "Cayman Islands Branch" means the branch of the Bank
         located in the Cayman Islands.

                           "Certificate of Designations" means a Certificate of
         Designations establishing the terms and conditions of the Company
         Preferred Securities or the Company Parity Preferred Securities adopted
         by the Board of Directors pursuant to Section 7.2(a) and any and all
         amendments thereof.

                           "Clearing Agency" means an organization registered as
         a "clearing pursuant to Section 17A of the Securities Exchange Act of
         1934, as amended. DTC will be the initial Clearing Agency.

                           "Clearing Agency Participant" means a broker, dealer,
         bank, other financial institution or other Person for whom from time to
         time a Clearing Agency effects book-entry transfers and pledges of
         securities deposited with the Clearing Agency.

                           "Clearstream" means Clearstream Banking societe
         anonyme.

                           "Closing Date" means a "closing date" or "time of
         delivery" under the Underwriting Agreement.

                           "Code" means the Internal Revenue Code of 1986, as
         amended from time to time, or any corresponding United States federal
         tax statute enacted after the date of this Agreement. A reference to a
         specific section (Section) of the Code (or any Treasury regulation
         promulgated thereunder) refers not only to such section but also to any
         corresponding provision of any United States federal tax statute (or
         any Treasury regulation promulgated thereunder) enacted after the date
         of this Agreement, as such specific section or corresponding provision
         is in effect on the date of application of the provisions of this
         Agreement containing such reference.

                           "Common Securityholder" means a Securityholder that
         owns one or more Company Common Securities. Initially, the Bank will be
         the only Common Securityholder.

                                       -4-

<PAGE>   10
                           "Company" has the meaning specified in the Preamble
         of this Agreement.

                           "Company Common Securities" means the securities of
         the Company representing the common limited liability company interests
         in the Company described in this Agreement.

                           "Company Junior Securities" means the Company Common
         Securities and any classes or series of equity securities of the
         Company (representing limited liability company interests in the
         Company) now or hereafter issued, other than any class or series of
         equity securities of the Company (representing limited liability
         company interests in the Company) expressly designated as being on
         parity with the Company Preferred Securities as to dividend rights and
         rights upon dissolution, liquidation or winding up of the Company.

                           "Company Parity Preferred Securities" means any class
         or series of equity securities of the Company (representing limited
         liability company interests in the Company) expressly designated as
         being on parity with the Company Preferred Securities as to dividend
         rights and rights upon dissolution, liquidation or winding up of the
         Company.

                           "Company Preferred Certificate" means a certificate
         substantially in the form attached hereto as Annex G, evidencing the
         Company Preferred Securities held by a Preferred Securityholder, which
         has been duly executed as provided in Section 13.4.

                           "Company Preferred Securities" means the - %
         Noncumulative Company Preferred Securities, aggregate liquidation
         preference $-, offered by the Company pursuant to a Prospectus dated
         -, 2001 together with any subsequent offering by the Company of -%
         Noncumulative Company Preferred Securities (each representing a
         preferred limited liability company interest in the Company).

                           "Company Security" means a limited liability company
         interest in the Company, including the right of the holder thereof to
         any and all benefits to which a Securityholder may be entitled as
         provided in this Agreement, together with the obligations of a
         Securityholder to comply with all of the terms and provisions of this
         Agreement, and includes the Company Junior Securities, the Company
         Preferred Securities and the Company Parity Preferred Securities from
         time to time outstanding.

                           "Delaware Act" has the meaning specified in the first
         Recital of this Agreement.

                           "Definitive Dividend" means, as to a Dividend Payment
         Date and related Dividend Period, dividends that are due and payable
         because (i) they are not limited by the Capital Limitation and (ii)
         either (x) they are with respect to a Mandatory Dividend Payment Amount
         due on a Mandatory Dividend Payment Date or (y) a No Dividend
         Instruction was not delivered and they are not limited by the
         Distributable Profits Limitation.

                                       -5-

<PAGE>   11

                           "Directors" means each of the Persons listed as
         directors on Annex E hereto until such Persons shall resign or
         otherwise be duly removed as a Director, and each Person who may from
         time to time be designated to serve as a successor to any Director of
         the Company or as an additional Director of the Company, in each case
         in accordance with the provisions of this Agreement and of the By-Laws.

                           "Distributable Profits" means, for any financial year
         of the Bank, profit that may be distributed in accordance with Swiss
         law then applicable. Currently, for any financial year of the Bank,
         distributable profits are equal to profit brought forward, plus profit
         for the period, minus appropriation to general statutory reserve plus
         other reserves, each as shown in the audited unconsolidated balance
         sheet and statement of appropriation of retained earnings of the Bank
         and as determined in accordance with accounting standards applicable
         under Swiss law.

                           "Distributable Profits Limitation" means the
         limitation on dividends specified in Section 7.3(b)(iv).

                           "Distributable Profits Limitation Certificate" has
         the meaning specified in Section 7.3(b)(iv).

                           "Dividend Payment Date" has the meaning specified in
         Section 7.3(b)(i).

                           "Dividend Period" has the meaning specified in
         Section 7.3(b)(i).

                           "dividends" means, when used with respect to Company
         Preferred Securities, distributions on the Company Preferred Securities
         in the amounts and in the manner set forth in this Agreement.

                           "DTC" means The Depository Trust Company.

                           "Eligible Investments" means, pursuant to the
         Investment Policies, the assets or investments which the Company may
         hold and consist of (i) the Subordinated Notes issued by the Cayman
         Islands branch of UBS AG with an aggregate principal amount of $-,
         and (ii) other securities issued by the Bank acting through a branch,
         agency or other office located outside of the United States or by a
         non-U.S. branch of a non-U.S. subsidiary of the Bank.

                           "Euroclear" means Morgan Guaranty Trust Company of
         New York, Brussels office, as operator of the Euroclear System (or its
         successor).

                           "Financial Year" means, with respect to the Company,
         (i) the period commencing upon the formation of the Company and ending
         on December 31, 2000 and (ii) any subsequent twelve month period
         commencing on January 1 and ending on December 31

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<PAGE>   12
         and, with respect to the Bank, means any twelve-month period commencing
         on January 1 and ending on December 31.

                           "Investment Company Act Event" means the receipt by
         the Bank of an opinion of a nationally recognized law firm in the
         United States experienced in such matters to the effect that there is
         more than an insubstantial risk that the Company or the Trust is an
         "investment company" within the meaning of the 1940 Act.

                           "Investment Policies" means the investment policies
         of the Company in the form of Annex F hereto, as amended from time to
         time by the Board of Directors of the Company in accordance with the
         provisions of this Agreement (which investment policies are, for
         purposes of this Agreement, deemed to be incorporated herein and to be
         a part hereof).

                           "Junior Creditors" means all holders of any Bank
         Junior Obligations.

                           "liquidation preference" means, with respect to each
         Company Preferred Security, as of any time of determination, the
         liquidation preference thereof as specified in Section 7.3(a).

                           "London Banking Day" means a day on which dealings in
         deposits in U.S. dollars are transacted in the London interbank market.

                           "majority (or other stated percentage) in liquidation
         preference" means Preferred Securityholder(s) who are the record owners
         of Company Preferred Securities the aggregate liquidation preference of
         which represent more than 50% (or not less than the stated percentage)
         of the aggregate liquidation preference of all Company Preferred
         Securities then outstanding.

                           "Mandatory Dividend Payment Amount" has the meaning
         specified in Section 7.3(b)(ii).

                           "Mandatory Dividend Payment Date" has the meaning
         specified in Section 7.3(b)(ii).

                           "1940 Act" means the Investment Company Act of 1940,
         as amended.

                           "No Dividend Instruction" has the meaning specified
         in Section 9.3.

                           "Nondefinitive Dividends" means, as to a Dividend
         Payment Date and related Dividend Period, dividends that are not
         Definitive Dividends.

                           "Officers" means each of the Persons listed as an
         Officer on Annex E hereto until such Persons shall resign or otherwise
         be duly removed as an Officer and each Person

                                       -7-

<PAGE>   13
         who may from time to time be duly appointed an Officer by the Board of
         Directors or pursuant to Section 6.1(b) and acting in accordance with
         the provisions of this Agreement and of the By-Laws.

                           "Opinion of Counsel" means a written opinion of
         counsel, who may be counsel to the Company, and who shall be reasonably
         acceptable to the Registrar.

                           "Original Agreement" has the meaning specified in the
         first Recital of this Agreement.

                           "Owner" means each Person who is the record owner
         reflected on the securities register maintained by the Registrar.

                           "Paying Agency Agreement" means the Paying Agency
         Agreement, dated -, 2001, between the Company, the Trust, the Bank,
         Wilmington Trust Company and BNP Paribas pursuant to which the Company
         appointed Wilmington Trust Company and BNP Paribas as paying agents for
         the Company Preferred Securities.

                           "Person" means any individual, corporation,
         association, partnership (general or limited), joint venture, trust,
         estate, limited liability company, or other legal entity or
         organization.

                           "Power of Attorney" means the power of attorney
         granted pursuant to Section 16.6.

                           "Preferred Securityholder" means a Securityholder
         that holds Company Preferred Securities or Company Parity Preferred
         Securities.

                           "Prospectus" means the prospectus, dated -, 2001,
         pursuant to which the Company Preferred Securities and the Trust
         Preferred Securities are being offered.

                           "Purchase Price" for any Company Preferred Security
         means the amount paid per $1,000 of liquidation preference of such
         Company Preferred Security pursuant to an Underwriting Agreement under
         which such Company Preferred Securities are being purchased, payment of
         which shall constitute the contribution to capital contemplated by
         Section 4.3.

                           "Rating Agency" means, at any time, Moody's Investors
         Service, Inc. or Standard & Poor's Ratings Group, if either one is
         rating the Company Preferred Securities at the time or, if neither is
         providing a rating for the Company Preferred Securities at such time,
         then a "nationally recognized statistical rating organization" as that
         term is defined for purposes of Rule 436(g)(2) under the Securities
         Act.

                           "Registrar" has the meaning specified in Section
         13.5(a).

                                       -8-

<PAGE>   14
                           "Registrar and Transfer Agency Agreement" means the
         Registrar and Transfer Agency Agreement, dated as of -, 2001, between
         the Company and Wilmington Trust Company, pursuant to which the Company
         has appointed Wilmington Trust Company as registrar and transfer agent
         for the Company Preferred Securities, as such agreement may be amended,
         modified or supplemented from time to time.

                           "Relevant Period" means (i) in the case of Bank
         Parity Securities that pay dividends less frequently than
         semi-annually, one year and (ii) in the case of Bank Parity Securities
         that pay dividends semi-annually or more frequently than semi-annually,
         six months (in each case ending on or including the date on which the
         related dividend on a Bank Parity Security is paid but not including
         the corresponding day in the month that is twelve or six months prior
         thereto).

                           "Securities Act" means the Securities Act of 1933, as
         amended.

                           "Securities Register" has the meaning specified in
         Section 13.5(a).

                           "Securityholder" means any Person that holds a
         Company Security and is admitted as a member and securityholder
         pursuant to the provisions of this Agreement and of the Delaware Act,
         in its capacity as a securityholder and as a member of the Company. For
         purposes of the Delaware Act, the Common Securityholders and the
         Preferred Securityholders shall constitute separate classes or groups
         of Securityholders and of members.

                           "Subordinated Notes" means the Subordinated Notes
         issued by the Cayman Islands Branch, having an aggregate principal
         amount of $- in substantially the form of Annex D hereto.

                           "Swiss Banking Law" means the Swiss Federal Law
         Relating to Banks and Savings Banks of November 8, 1934, as amended.

                           "Swiss Federal Banking Commission" means the Swiss
         Federal Banking Commission and, if any successor governmental authority
         succeeds to the bank regulatory functions of the Swiss Federal Banking
         Commission in Switzerland, such successor governmental authority;
         provided, however, that if the Bank becomes domiciled in a jurisdiction
         other than Switzerland, then each reference herein to the Swiss Federal
         Banking Commission shall be deemed to instead refer to the governmental
         authority having primary regulatory authority with respect to the
         Bank's capital adequacy in such other jurisdiction.

                           "Tax Event" means the receipt by the Bank of an
         opinion of a nationally recognized law firm or other tax advisor (which
         may be an accounting firm) in Switzerland or the United States, as
         appropriate, experienced in such matters to the effect that there is
         more than an insubstantial risk that (A) the Company or the Trust is or
         will be subject to more than a de minimis amount of additional taxes,
         duties or other governmental charges, (B)

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<PAGE>   15

         the Bank is or will be required to pay any additional amounts in
         respect of any taxes, duties or other governmental charges with respect
         to payments of interest or principal on the Subordinated Notes and with
         respect to any payments on the Trust Preferred Securities, (C) the
         Company is or will be required to pay any additional amounts in respect
         of any taxes, duties or other governmental charges with respect to
         payments of dividends on the Company Preferred Securities or the Trust
         is or will be required to pay any additional amounts in respect of any
         taxes, duties or other governmental charges with respect to
         distributions on the Trust Preferred Securities, or (D) the treatment
         of any of the Company's items of income, gain, loss, deduction or
         expense, or the treatment of any item of income, gain, loss, deduction
         or expense of the Bank related to the Subordinated Notes or its
         ownership of the Company, in each case as reflected on the tax returns
         (including estimated returns) filed (or to be filed) by the Company or
         the Bank, will not be respected by a taxing authority, as a result of
         which the Company or the Bank is or will be subject to more than a de
         minimis amount of additional taxes, duties or other governmental
         charges or civil liabilities, the effect of which cannot be avoided by
         the Company or the Bank taking reasonable measures available to it
         without any adverse effect on or material cost to the Bank or the
         Company (as determined by the Bank in its sole discretion).

                           "Tax Matters Partner" means the party designated as
         such in Section 11.1(a).

                           "Transaction Documents" has the meaning specified in
         Section 6.1(e)(i).

                           "Transfer Agent" has the meaning specified in Section
         13.5(a).

                           "Trust" means, with respect to the Company Preferred
         Securities, UBS Preferred Funding Trust I, a Delaware statutory
         business trust, and, with respect to any Company Parity Preferred
         Securities, such Trust or another trust performing a substantially
         similar function with respect to such Company Parity Preferred
         Securities.

                           "Trust Certificates" means, with respect to Company
         Preferred Securities issued to the Trust, the certificates issued by
         the Trust representing undivided beneficial ownership of such Company
         Preferred Securities.

                           "Trust Preferred Securities" means the -%
         Noncumulative Trust Preferred Securities, aggregate liquidation amount
         $-, offered by the Trust pursuant to the Prospectus together with any
         subsequent offering by the Trust of -% Noncumulative Trust Preferred
         Securities, in each case representing an undivided interest in number
         of Company Preferred Securities and the Bank Subordinated Guarantee.

                           "Underwriting Agreement" means an underwriting
         agreement among the Company, the Bank and one or more underwriters or
         initial purchasers relating to the Company Preferred Securities or a
         series of the Company Parity Preferred Securities (and, if the Company
         Preferred Securities or the series of Company Parity Preferred
         Securities are

                                      -10-

<PAGE>   16
         being held through a Trust (such as UBS Preferred Funding Trust I in
         the case of the 8.622% Noncumulative Company Preferred Securities), the
         related trust certificates).

                           "United States" means the United States of America,
         its territories and possessions, any state of the United States, and
         the District of Columbia.

                           "U.S. dollars," "dollars," "U.S.$" and "$" mean the
         currency of the United States of America.

                  Section 1.2 Headings. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.

                                   ARTICLE II
                             CONTINUATION AND TERM;
                          ADMISSION OF SECURITYHOLDERS

                  Section 2.1  Continuation.

                  (a) The Securityholders hereby agree to the continuation of
the Company as a limited liability company under and pursuant to the provisions
of the Delaware Act and of this Agreement and agree that the rights, duties and
liabilities of the Securityholders shall be as provided in the Delaware Act,
except as otherwise provided herein or in the By-Laws.

                  (b) Any Person designated as an "authorized person" by the
Board of Directors is authorized to execute, deliver and file on behalf of the
Company any and all amendments to and restatements of the Certificate of
Formation, as an authorized person within the meaning of the Delaware Act.

                  Section 2.2 Admission of Securityholders. Upon the execution
of this Agreement, the Bank shall become and be designated as, automatically and
without any further act on the part of any Person being necessary, the Common
Securityholder. Without execution of this Agreement, upon the payment to the
Company for the Company Preferred Securities being acquired by a Person in
connection with the issuance of the Company Preferred Securities on the Closing
Date pursuant to the terms of the related Underwriting Agreement, which action
shall be deemed to constitute a request by such Person that the books and
records of the Company reflect its admission as a Preferred Securityholder, such
Person shall thereupon be admitted to the Company as a Preferred Securityholder
and shall be bound by all the terms and conditions hereof and of the Company
Preferred Securities.

                  Section 2.3 Name. The name of the Company being formed hereby
is "UBS Preferred Funding Company LLC III". The Company will maintain "UBS" as
part of its name for as long as any Trust Preferred Securities remain
outstanding unless, because of a merger or other

                                      -11-

<PAGE>   17
business combination involving the Bank or a change by the Bank of its own name,
inclusion of "UBS" as part of the Company's name is no longer appropriate.
Subject to such limitation, the business of the Company may be conducted upon
compliance with all applicable laws under any other name designated by the Board
of Directors.

                  Section 2.4 Term. The term of the Company shall commence upon
the date a certificate of formation shall have been filed in the office of the
Secretary of State of the State of Delaware and shall continue perpetually,
unless the Company is dissolved in accordance with the provisions of the
Delaware Act and this Agreement. The existence of the Company as a separate
legal entity shall continue until the cancellation of the Certificate of
Formation in the manner required by the Delaware Act.

                  Section 2.5 Registered Agent and Office. The Company's
registered agent in the State of Delaware shall be The Corporation Trust
Company, 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801 and its registered office in the State of Delaware shall be c/o the
registered agent. At any time, the Board of Directors may designate another
registered agent and/or registered office.

                  Section 2.6 Principal Executive Offices. The principal
executive offices of the Company shall be determined by the Board of Directors.
The Board of Directors may change the location of the Company's principal place
of business; provided, however, that such change has no material adverse effect
upon any Preferred Securityholder.

                  Section 2.7 Qualification in Other Jurisdictions. The Board of
Directors shall cause the Company to be qualified or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company conducts business and in which such qualification or registration is
required by law or deemed advisable by the Board of Directors. Each Person
designated by the Board of Directors as an "authorized person" is authorized to
execute, deliver and file on behalf of the Company any certificates (and any
amendments or restatements thereof) necessary for the Company to qualify to do
business in each jurisdiction in which the Board of Directors has determined
that the Company shall conduct business.

                                   ARTICLE III
                       PURPOSE AND POWERS OF THE COMPANY;
                           BY-LAWS; SUPPORT AGREEMENT

                  Section 3.1 Purposes and Powers. The sole purposes of the
Company are to issue Company Preferred Securities, Company Parity Preferred
Securities and Company Common Securities and to use substantially all of the
proceeds thereof to acquire and hold the Subordinated Notes and other Eligible
Investments and, except as otherwise expressly limited herein, to enter into,
make and perform all contracts and other undertakings, and engage in all
activities and transactions, as the Board of Directors may reasonably deem
necessary or advisable for the carrying out of the foregoing purposes of the
Company in all events without causing the Company to be treated as other

                                      -12-

<PAGE>   18
than a partnership that is not a publicly traded partnership for U.S. federal
income tax purposes. The Company may not conduct any other business or
operations except as contemplated by the preceding sentence. The Company shall
have the power and authority to take any and all actions necessary, appropriate,
proper, advisable, incidental or convenient to or for the furtherance of the
purposes of the Company as set forth herein.

                  Section 3.2 By-Laws. The Board of Directors, Officers and
Securityholders shall be subject to the express provisions of this Agreement and
of the By-Laws. In case of any conflict between any provisions of this Agreement
and any provisions of the By-Laws, the provisions of this Agreement shall
control.

                  Section 3.3 Bank Subordinated Guarantee. Upon execution and
delivery of the Bank Subordinated Guarantee by the Bank, the provisions of the
Bank Subordinated Guarantee shall be deemed to be incorporated herein and to be
a part hereof except to the extent any such provisions shall conflict with any
express provisions of this Agreement or of the Delaware Act.

                                   ARTICLE IV
                CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES

                  Section 4.1 Form of Contribution. The contribution to the
Company with respect to a Securityholder may, as determined by the Board of
Directors in its discretion, be in cash or other legal consideration.

                  Section 4.2 Contributions with Respect to the Common
Securityholders. The Common Securityholder shall contribute to the Company on or
prior to the issuance of the Company Preferred Securities, cash in the amount of
[2000].

                  Section 4.3 Contributions with Respect to the Preferred
Securityholders. On each Closing Date, there shall be contributed to the capital
of the Company, with respect to each Person who purchases a Company Preferred
Security on such Closing Date, an amount in cash equal to the Purchase Price for
such Company Preferred Security (such amount being such Person's capital
contribution to the Company). Preferred Securityholders, in their capacity as
Securityholders of the Company, shall not be required to make any additional
contributions to the Company (except as may be required by law).

                  Section 4.4 Allocation of Profits and Losses. Except as
otherwise provided in Section 7.3, the profits and losses of the Company for any
Financial Year (or portion thereof) shall be allocated as follows:

                           (a) all gains and losses resulting from any
         disposition (including, without limitation, any redemption or
         prepayment) of assets by the Company shall be allocated 100% to the
         Common Securityholders;

                                      -13-

<PAGE>   19
                           (b) except as otherwise provided in a Certificate of
         Designations, net profit of the Company (determined without regard to
         the amount of any gains and losses described in subparagraph (a) of
         this Section 4.4) shall be allocated (i) pro rata among the Preferred
         Securityholders until the amount so allocated equals the amount of
         dividends paid during such Financial Year (or portion thereof), as
         determined on a when-paid basis with respect to the Company Preferred
         Securities or Company Parity Preferred Securities held by such
         Preferred Securityholder, as adjusted pursuant to Sections 7.3 and 4.3
         or in any Certificate of Designations after the delivery of a No
         Dividend Instruction, and (ii) thereafter to the Common
         Securityholders; and

                           (c) expenses, deductions and net loss of the Company
         (determined without regard to the amount of any gains and losses
         described in subparagraph (a) of this Section 4.4) shall be allocated
         100% to the Common Securityholders.

Notwithstanding the foregoing, the Tax Matters Partner shall have the power to
alter any such allocations for federal, state, and local income tax purposes if
such alteration is necessary to cause such allocations to have "substantial
economic effect" (within the meaning of Treasury regulation section
1.704-1(b)(2)) or to ensure that such allocations are otherwise in accordance
with the interests of the Securityholders (within the meaning of Treasury
regulation section 1.704-1(b)(3)) determined on the basis of the economic
arrangements of the parties as described in this Agreement.

                  Section 4.5 Withholding. The Company shall comply with any
withholding requirements under U.S. federal, state and local and foreign law and
shall remit amounts withheld to and file required forms with applicable
jurisdictions. Subject to the provisions of Section 7.3 to the extent that the
Company is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Securityholder, the amount
withheld shall be deemed to be a distribution in the amount of the withholding
to such Securityholder. The Company will, however, be required to pay additional
amounts so that the net amount received by a Preferred Securityholder after
withholding will not be less than the Mandatory Dividend Payment Amount then due
and payable as described in Section 7.3(c). To the fullest extent permitted by
law, in the event of any claimed over-withholding, Securityholders shall be
limited to an action against the applicable jurisdiction. If the amount required
to be withheld from a distribution was not withheld from such distribution, the
Company may reduce subsequent distributions by the amount of such withholding to
the extent the Company was not required to pay Additional Amounts with respect
to such withholding. Each Securityholder, by its acceptance of Securities, shall
be deemed to agree to furnish the Company with any representations and forms as
shall reasonably be requested by the Company to assist it in determining the
extent of, and in fulfilling, its withholding obligations.

                  Section 4.6 Securities as Personal Property. Each
Securityholder hereby agrees that its Company Securities shall for all purposes
be personal property. A Securityholder has no interest in specific property of
the Company.

                                      -14-
<PAGE>   20
                                    ARTICLE V
                                 SECURITYHOLDERS

                  Section 5.1 Powers of Securityholders. The Securityholders
shall have the power to exercise any and all rights or powers granted to the
Securityholders pursuant to the express terms of this Agreement and of the
By-Laws and shall be subject in all respects to the provisions hereof and
thereof.

                  Section 5.2 Partition. Each Securityholder waives any and all
rights that it may have to maintain an action for partition of the property of
the Company.

                  Section 5.3 Resignation. A Securityholder may resign from the
Company prior to the dissolution and winding up of the Company only upon the
assignment of its entire ownership interest in any Company Securities (including
by any redemption, repurchase or other acquisition by the Company of such
Company Securities) in accordance with the provisions of this Agreement. A
resigning Securityholder shall not be entitled to receive any distribution and
shall not otherwise be entitled to receive the fair value of its Company
Securities except as otherwise expressly provided for in this Agreement.

                  Section 5.4  Liability of Securityholders.

                  (a) Except as otherwise required by the Delaware Act, (i) the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company and (ii) no Securityholder shall be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being a
Securityholder of the Company.

                  (b) A Securityholder, in its capacity as such, shall have no
liability in excess of (i) the amount of its capital contributions, (ii) its
share of any assets and undistributed profits of the Company, (iii) any amounts
required to be paid by such Securityholder pursuant to this Agreement or any
payment and/or indemnity in connection with the registration of transfers of
Company Securities and (iv) the amount of any distributions wrongfully
distributed to it to the extent set forth in the Delaware Act.

                                   ARTICLE VI
                                   MANAGEMENT

                  Section 6.1 Management of the Company.

                  (a) Except as otherwise expressly provided in this Agreement
or in the By-Laws or as required in the Delaware Act, the business and affairs
of the Company shall be managed, and all actions required under this Agreement
shall be determined, solely and exclusively by the Board of Directors, which
shall have all rights and powers on behalf and in the name of the Company to

                                      -15-

<PAGE>   21
perform all acts necessary and desirable to the objects and purposes of the
Company, including the right to appoint Officers and to authorize any Officer to
act on behalf of the Company. Any action taken by the Board of Directors or any
duly appointed and acting Officer in accordance with this Agreement or the
By-Laws shall constitute the act of, and shall serve to bind, the Company.

                  (b) The number of directors of the Company initially shall be
three, which number may be increased as provided in this Agreement, in any
Certificate of Designations or in the By-Laws, but shall never be less than
three nor more than five. The names of the Directors who have been appointed by
the Company pursuant to the written consent of the Company's sole member, dated
as of May 29, 2001, shall serve until the first annual meeting of
Securityholders and until their successors are duly elected and qualify, are set
forth in Annex E hereto. These Directors may increase the number of Directors
and may fill any vacancy, whether resulting from an increase in the number of
directors or otherwise, on the Board of Directors occurring before the first
annual meeting of Securityholders in the manner provided in the By-Laws. The
names of the initial Officers, and their offices, are set forth in Annex E
hereto. Each such Officer shall have the duties and responsibilities that would
apply to his or her office if the Company were a corporation established under
the Delaware General Corporation Law, except to the extent that the Directors
from time-to-time determine otherwise.

                  (c) Each member of the Board of Directors shall be a "manager"
of the Company for all purposes of, and within the meaning of, the Delaware Act.

                  (d) Without limiting the generality of the foregoing, and
subject to the provisions of Section 6.2, the Board of Directors shall have all
authority, rights and powers in the management of the business of the Company to
do any and all other acts and things necessary, proper, convenient or advisable
to effectuate the purposes of this Agreement, provided that in exercising its
authority, rights and powers in the management of the business of the Company,
the Board of Directors shall use commercially reasonable efforts in order that
any such action does not cause the Company to be treated as an association or as
a "publicly traded partnership" (within the meaning of Section 7704 of the
Code), including by way of illustration, but not by way of limitation, the
following:

                           (i) to authorize the Company or any Officer of the
         Company on behalf of the Company, to engage in transactions and
         dealings, including transactions and dealings with any Securityholder
         or any Affiliate of any Securityholder and including the entering into
         and performance by the Company of one or more agreements with any
         Person whereby, subject to the supervision and control of the Board of
         Directors, any such other Person shall render or make available to the
         Company managerial, investment, advisory or related services, office
         space and other services and facilities upon such terms and conditions
         as may be provided in such agreement or agreements (including, if
         deemed fair and equitable by the Board of Directors, the compensation
         payable thereunder by the Company);

                           (ii) to call meetings of Securityholders or any class
         or series thereof;

                                      -16-

<PAGE>   22
                           (iii) to issue Company Securities, including Company
         Common Securities and Company Preferred Securities, in accordance with
         the provisions of this Agreement;

                           (iv) to pay all expenses incurred in forming the
         Company to the extent not paid by the Bank;

                           (v) to purchase, hold and dispose of Eligible
         Investments in accordance with the Investment Policies established from
         time to time by the Board of Directors and otherwise in accordance with
         the provisions of this Agreement;

                           (vi) to authorize (A) the entering into by the
         Company of the Administration Agreement, the Registrar and Transfer
         Agency Agreement and the Paying Agency Agreement and (B) the
         performance by the Company of its obligations thereunder;

                           (vii) to authorize (A) the entering into by the
         Company of the Underwriting Agreement and (B) the performance by the
         Company of its obligations thereunder, including the offer and sale of
         the Company Preferred Securities pursuant thereto;

                           (viii) to authorize the performance by the Company of
         its obligations under the Subordinated Guarantee;

                           (ix) to authorize (A) the entering into by the
         Company of similar agreements (or other agreements not inconsistent
         herewith) in the future and (B) the performance by the Company of its
         obligations thereunder;

                           (x) to authorize, suspend, pay, declare or otherwise
         determine and make dividends, in cash or otherwise, on Company
         Securities, in accordance with the provisions of this Agreement and of
         the Delaware Act;

                           (xi) to establish, when a record date is not
         otherwise established by this Agreement, record date with respect to
         all actions to be taken hereunder that require a record date to be
         established, including with respect to allocations, dividends and
         voting rights;

                           (xii) to establish or set aside in their discretion
         any reserve or reserves for contingencies and for any other proper
         Company purpose;

                           (xiii) to redeem or repurchase on behalf of the
         Company, Company Securities which may be so redeemed or repurchased in
         accordance with the provisions of this Agreement;

                           (xiv) to appoint (and dismiss from appointment)
         attorneys and agents on behalf of the Company, and employ (and dismiss
         from employment) any and all Persons providing legal, accounting or
         financial services to the Company, or such other employees

                                      -17-

<PAGE>   23
         or agents as the Directors deem necessary or desirable for the
         management and operation of the Company;

                           (xv) to incur and pay all expenses and obligations
         incident to the operation and management of the Company, including,
         without limitation, the services referred to in the preceding
         paragraph, taxes, interest, rent and insurance;

                           (xvi) to acquire and enter into any contract of
         insurance necessary or desirable for the protection or conservation of
         the Company and its assets or otherwise in the interest of the Company
         as the Board of Directors shall determine;

                           (xvii) to open accounts and deposit, maintain and
         withdraw funds in the name of the Company in banks, savings and loan
         associations, brokerage firms or other financial institutions, which
         bank accounts if opened prior to one month after the Closing Date for
         the Company Preferred Securities may be opened by any Officer that is
         authorized to do so by a written consent of any Director;

                           (xviii) to effect a dissolution or liquidation of the
         Company, if the Bank is liquidated, whether voluntarily or
         involuntarily, subject to applicable regulatory requirements, including
         the prior approval of the Swiss Federal Banking Commission if then
         required under applicable guidelines or policies of the Swiss Federal
         Banking Commission, and to act as liquidating trustee or the Person
         winding up the Company's affairs, all in accordance with and subject to
         the provisions of this Agreement and of the Delaware Act;

                           (xix) to bring and defend on behalf of the Company
         actions and proceedings at law or equity before any court or
         governmental, administrative or other regulatory agency, body or
         commission or otherwise;

                           (xx) to prepare and cause to be prepared reports,
         statements and other relevant information for distribution to
         Securityholders as may be required or determined to be appropriate by
         the Board of Directors from time to time;

                           (xxi) to prepare and file all necessary returns and
         statements and pay all taxes, assessments and other impositions
         applicable to the assets of the Company;

                           (xxii) to execute all other documents or instruments,
         perform all duties and powers and do all things for and on behalf of
         the Company in all matters necessary or desirable or incidental to the
         foregoing;

                           (xxiii) to purchase and maintain on behalf of the
         Company insurance to protect any Director or Officer against any
         liability asserted against him or her, or incurred by him or her,
         arising out of his or her status as such, and

                           (xxiv) to amend this Agreement in accordance with
         Section 16.1.

                                      -18-

<PAGE>   24
                  (e) (i) Notwithstanding anything in this Agreement to the
contrary, without the need for consent of any other Person, including the Board
of Directors, the Company is authorized to purchase the Subordinated Notes and
to enter into and perform the Underwriting Agreement relating to the Company
Preferred Securities (including the offer and sale of the Company Preferred
Securities pursuant thereto), the Subordinated Notes Purchase Agreement, the
Administration Agreement, the Paying Agency Agreement, the Calculation Agency
Agreement, the member interest certificates in respect of the Company Preferred
Securities, the Registrar and Transfer Agency Agreement relating to the Company
Preferred Securities, the Registrar and Transfer Agency Agreement relating to
the Trust Preferred Securities, the Amended and Restated Trust Agreement of the
Trust and amendments and restatements thereof, and other similar agreements (and
other agreements not inconsistent therewith) (the "Transaction Documents") and
any Officer or Director of the Company may (A) on behalf of the Company, execute
and deliver, and cause the Company (1) to perform its obligations under, (2) to
satisfy any conditions required to be satisfied by the Company as a condition
precedent to the effectiveness of, and (3) to take such other actions as such
Officer or Director may deem appropriate with respect to, each of the
Transaction Documents; and (B) cause the Company to issue Company Common
Securities and the Company Preferred Securities on the Closing Date under the
Purchase Agreement relating to Company Preferred Securities in accordance with
this Agreement.

                  (ii) Subject to the provisions of Section 6.2 below, the
expression of any power or authority of the Board of Directors shall not in any
way limit or exclude any other power or authority which is not specifically or
expressly set forth in this Agreement.

                  (f) The determination as to any of the following matters, made
in good faith by or pursuant to the direction of the Board of Directors
consistent with this Agreement and in the absence of actual receipt of an
improper benefit in money, property or services or active and deliberate
dishonesty established by a court, shall be final and conclusive and shall be
binding upon the Company and every Securityholder: the amount of the net income
of the Company for any period and the amount of assets at any time legally
available for the payment of dividends, redemption of the Company Securities or
the payment of other distributions on the Company Securities; the amount of
paid-in surplus, net assets, other surplus, annual or other net profit, net
assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose or time of creation of any gain or loss
on disposition of the Company's assets; the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the fair value, or any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Company; and any matters relating
to the acquisition, holding and disposition of any assets by the Company.

                  (g) The Board of Directors shall cause the Company to use its
available funds, after satisfaction of the Company's liabilities and other
obligations, for distributions to Securityholders in accordance with this
Agreement, and establishment by the Company of such reserves as the Board of
Directors shall deem to be necessary or appropriate to purchase Eligible
Investments in accordance with the Investment Policies, as such policies and
guidelines may be

                                      -19-
<PAGE>   25
changed from time to time by the Board of Directors as provided herein; provided
that such new policies and guidelines cannot be inconsistent with the express
provisions of this Agreement.

                  Section 6.2 Limits on Board of Directors' Powers. Anything in
this Agreement to the contrary notwithstanding, the Board of Directors shall not
cause or permit the Company to, and the Company shall not:

                           (a) acquire any assets other than as expressly
         provided in the Investment Policies;

                           (b) acquire any securities or other assets that give
         the Company U.S. source income;

                           (c) for so long as any Trust Certificates settle and
         clear through DTC, Euroclear or Clearstream, acquire or own any
         securities other than Eligible Investments;

                           (d) possess Company property for other than a Company
         purpose;

                           (e) admit a Person as a Securityholder, except as
         expressly provided in this Agreement;

                           (f) perform any act that would subject any Preferred
         Securityholder to liability for (A) the debts, obligations and
         liabilities of the Company in any jurisdiction, except as expressly
         provided in this Agreement, or (B) a tax on "unrelated business taxable
         income" under the Code as a consequence of such act;

                           (g) engage in any activity that would cause the
         Company to be treated as an association or as a "publicly traded
         partnership" (within the meaning of Section 7704 of the Code);

                           (h) engage in any activity that is not consistent
         with the purposes of the Company, as set forth in Section 3.1 of this
         Agreement; or

                           (i) borrow money or enter into repurchase agreements,
         reverse repurchase agreements, or other securities lending transactions
         or take any action that could reasonably be expected to cause a Tax
         Event, Capital Event or Investment Company Act Event to occur.

                  Section 6.3 Reliance by Third Parties. Persons dealing with
the Company are entitled to rely conclusively upon the power and authority of
the Board of Directors and of any duly appointed and acting Officers. In dealing
with the Board of Directors or any Officer duly appointed and acting as set
forth in this Agreement or in the By-Laws, no Person shall be required to
inquire into the authority of the Board of Directors or any such Officer to bind
the Company. Persons dealing with the Company are entitled to rely conclusively
on the power and authority of the Board

                                      -20-

<PAGE>   26
of Directors or any Officer duly appointed and acting as set forth in this
Agreement or in the By-Laws.

                  Section 6.4 No Management by Any Preferred Securityholders.
Except as otherwise expressly provided herein, no Preferred Securityholder, in
its capacity as a Preferred Securityholder of the Company, shall take part in
the day-to-day management, operation or control of the business and affairs of
the Company. The Preferred Securityholders, in their capacity as Preferred
Securityholders of the Company, shall not be agents of the Company and shall not
have any right, power or authority to transact any business in the name of the
Company or to act for or on behalf of or to bind the Company.

                  Section 6.5 Business Transactions of the Common Securityholder
with the Company. Subject to Sections 6.1 and 6.2 of this Agreement and
applicable law, a Common Securityholder and any of its Affiliates may hold
deposits of, and enter into business transactions with, the Company and, subject
to applicable law, shall have the same rights and obligations with respect to
any such matter as Persons who are not a Common Securityholder or Affiliates
thereof.

                  Section 6.6 Outside Businesses. Any Director, Officer,
Securityholder or Affiliate thereof may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Company, and the Company
and the Securityholders shall have no rights by virtue of this Agreement in and
to such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Company, shall not be deemed wrongful or improper. No Director, Officer,
Securityholder or Affiliate thereof shall be obligated to present any particular
investment opportunity to the Company even if such opportunity is of a character
that, if presented to the Company, could be taken by the Company, and any
Director, Officer, Securityholder or Affiliate thereof shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment opportunity. Any
Securityholder or Affiliate thereof may engage or be interested in any financial
or other transaction with any other Securityholder or Affiliate thereof.

                  Section 6.7 Duties of Directors. The Board of Directors shall,
in considering any proposed action or inaction with respect to the Subordinated
Notes pursuant to Section 6.1(d), take into account the interest of both the
Preferred Securityholders and the Bank, as owner of the Company Common
Securities. To the fullest extent permitted by law, no member of the Board of
Directors shall have any liability to any Preferred Securityholder or the
Company for not voting to take any enforcement action under the Subordinated
Notes in the event of a default by the Cayman Islands Branch in performing any
of its obligations (including payment obligations) thereunder.

                  Section 6.8 Additional Directors. If at any time the aggregate
of unpaid Definitive Dividends on the Company Preferred Securities or any
Company Parity Preferred Securities equals or exceeds an amount equal to three
semi-annual dividend payments, the holders of Company Preferred Securities and
any Company Parity Preferred Securities, voting together as a single class, will
have the exclusive right to elect two additional directors. Holders of a
majority of Company Preferred Securities and Company Parity Preferred Securities
may exercise this right by written

                                      -21-
<PAGE>   27
consent or at a meeting of such holders called for such purpose. This meeting
may be called at the request of any holder of Company Preferred Securities or
Company Parity Preferred Securities. This right will continue either until all
unpaid Definitive Dividends have been paid in full or until full dividends have
been paid on the Company Preferred Securities for two consecutive dividend
periods. While this right continues, any vacancy in the office of the additional
directors may be filled only by the holders of Company Preferred Securities and
Company Parity Preferred Securities voting as described above.

                                   ARTICLE VII
                     COMPANY SECURITIES; SUBORDINATED NOTES

                  Section 7.1 Company Common Securities.

                  (a) The Bank, as the initial Common Securityholder, shall be
deemed to have been issued [2000] Company Common Securities upon its designation
as the Common Securityholder pursuant to Section 2.2 of this Agreement. Upon
issuance as provided in this Agreement, the Company Common Securities so issued
shall be deemed duly authorized, validly issued, fully paid and nonassessable.

                  (b) Company Common Securities shall not be evidenced by any
certificate or other written instrument, but shall only be evidenced by this
Agreement.

                  (c) The Common Securityholders will receive dividends out of
interest payments received by the Company on the Subordinated Notes and other
Eligible Investments, if any, not required to be applied to fund dividends with
respect to the Company Preferred Securities or expenses of the Company. However,
as long as the Company Preferred Securities or the Company Parity Preferred
Securities are outstanding, no dividends or other distributions (including
redemptions and purchases) may be made with respect to Company Common Securities
unless full dividends on all Company Preferred Securities and Company Parity
Preferred Securities have been paid as provided in Section 7.3.

                  (d) Subject to the rights, if any, of the Preferred
Securityholders (to the limited extent provided in Section 8.1), all voting
rights are vested in the Company Common Securities. The Common Securityholders
are entitled to vote in proportion to the stated amounts represented by their
Company Common Securities.

                  (e) If the Company dissolves, liquidates or winds up (whether
voluntarily or involuntary) after all debts and liabilities of the Company have
been satisfied and there have been paid or set aside for the Preferred
Securityholders the full preferential amounts to which such holders are
entitled, the Common Securityholders will be entitled to share equally and
ratably in any assets remaining.

                                      -22-

<PAGE>   28
                  Section 7.2 General Provisions Regarding Company Preferred
Securities and Company Parity Preferred Securities.

                  (a) There is hereby authorized for issuance and sale Company
Preferred Securities having an aggregate initial liquidation preference of $|X|.
The specific designation, dividend rate, liquidation preference, redemption
terms, voting rights, exchange limitations and other powers, preferences and
special rights and limitations of the Company Preferred Securities are set forth
in Section 7.3 hereof. Upon issuance as provided in this Agreement, the Company
Preferred Securities and the Company Parity Preferred Securities (if any) so
issued, shall be deemed duly authorized, validly issued, fully paid and
nonassessable.

                  The Company has the power to create and issue additional
preferred limited liability company interests in the Company that are junior to
the Company Preferred Securities as to payment of dividends and payments of
amounts upon dissolution, liquidation or winding up of the Company ("Company
Junior Securities") or that are on a parity with the Company Preferred
Securities as to payment of dividends and payments of amounts upon dissolution,
liquidation or winding up of the Company ("Company Parity Preferred Securities")
and admit the purchasers of such limited liability company interests to the
Company as members of the Company. So long as any Company Preferred Securities
remain outstanding, additional Company Parity Preferred Securities may be issued
only with the consent of the holders of two-thirds (based on the aggregate
liquidation preference) of the Company Preferred Securities and Company Parity
Preferred Securities, voting together as a single class, and only if the Bank
Subordinated Guarantee is amended so that such Company Parity Preferred
Securities benefit from the Bank Subordinated Guarantee in the same manner as
the Company Preferred Securities without any adverse effect on holders of the
Company Preferred Securities. See Section 7.3(h).

                  The Company may not, without the consent of each Preferred
Securityholder, authorize, create or increase the authorized amount of, or issue
any class or series of equity securities of or limited liability company
interests in the Company, or any warrants, options or other rights convertible
or exchangeable into any class or series of any equity securities of or limited
liability company interests in the Company, ranking prior to the Company
Preferred Securities, either as to dividend rights or rights on dissolution,
winding up or termination of the Company.

                  Subject to the express provisions of this Agreement and of the
By-Laws, the Board of Directors shall have authority to fix the terms of Company
Parity Preferred Securities that may be issued by the Company by adopting in
accordance with the provisions of this Agreement a Certificate of Designations
relating to such Company Parity Preferred Securities that shall set forth the
preferences and other terms of such series, including without limitation the
following: (1) the title and stated value of such series; (2) the number or
amount by aggregate liquidation preference of securities of such series offered
and the initial liquidation preference per security or minimum denomination of
such series; (3) the dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such series; (4) whether such
Company Parity Preferred Securities are cumulative or not and, if cumulative,
the date from which dividends on such Company Parity Preferred Securities shall
accumulate; (5) the provisions for a sinking fund, if any, for such

                                      -23-

<PAGE>   29
series; (6) the provisions for redemption, if applicable, of such series; (7)
any voting rights of such series; (8) the relative ranking and preferences of
such series as to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company; (9) any limitations on issuance of any
Company Parity Preferred Securities ranking senior to or on a parity with such
series of Company Preferred Securities as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company; (10)
whether such Company Parity Preferred Securities will be eligible for issuance
as book-entry Company Parity Preferred Securities; and (11) any other specific
terms, preferences, rights, limitations or restrictions of such series. Upon
such adoption by the Board of Directors, each such Certificate of Designations
shall thereupon be incorporated into and deemed to be part of this Agreement.

                  (b) All Company Preferred Securities and Company Parity
Preferred Securities shall rank senior to all Company Junior Securities in
respect of the right to receive dividends or other distributions and the right
to receive payments out of the assets of the Company upon voluntary or
involuntary dissolution, winding-up or termination of the Company in accordance
with the provisions hereof (subject to the provisions of Section 7.3 or any
Certificate of Designations). All Company Preferred Securities and Company
Parity Preferred Securities redeemed, purchased or otherwise acquired by the
Company shall be canceled. The Company Preferred Securities and Company Parity
Preferred Securities shall be issued in registered form only.

                  (c) Neither the Bank, the Company nor any of their respective
Affiliates shall have the right to vote or give or withhold consent with respect
to any Company Preferred Security or Company Parity Preferred Security owned by
it, directly or indirectly, and, for purposes of any matter upon which the
Preferred Securityholders may vote or give or withhold consent as provided in
this Agreement, Company Preferred Securities and Company Parity Preferred
Securities owned by any of the Bank, the Company or any of their respective
Affiliates shall be treated as if they were not outstanding.

                  (d) Anything in this Agreement to the contrary
notwithstanding:

                           (i) as long as any Company Preferred Securities are
         outstanding, no Company Parity Preferred Securities may be redeemed or
         repurchased unless the Company concurrently redeems an approximately
         equal proportion of the aggregate liquidation preference of the
         outstanding Company Preferred Securities or each Rating Agency then
         rating the Company Preferred Securities informs the Company in writing
         that the redemption or repurchase of such Company Parity Preferred
         Securities would not result in a reduction or withdrawal of the rating
         then assigned by that Rating Agency to the Company Preferred
         Securities, and

                           (ii) as long as any Company Preferred Securities or
         Company Parity Preferred Securities remain outstanding, the Company may
         issue or authorize the issuance of any Company Preferred Securities or
         Company Parity Preferred Securities only with the approval of the
         holders of two-thirds (based on the aggregate liquidation preference)
         of the Company Preferred Securities and Company Parity Preferred
         Securities, voting together as

                                      -24-

<PAGE>   30
         a single class, and only if the Bank Subordinated Guarantee is amended
         prior thereto so that such additional Company Parity Preferred
         Securities benefit from the Bank Subordinated Guarantee in
         substantially the same manner as the Company Preferred Securities
         without any adverse effect on the holders of the Company Preferred
         Securities.

                  (e) In purchasing Company Preferred Securities or Company
Parity Preferred Securities, each Preferred Securityholder agrees with the Bank
and the Company that the Bank, the Company and the Preferred Securityholders (i)
will treat Preferred Securityholders as holders of the Company Preferred
Securities or Company Parity Preferred Securities for all purposes, and not as
the holders of an interest in the Bank, the Cayman Islands Branch or in any
other Person and (ii) will follow allocations made by the Company pursuant to
Section 4.4 of this Agreement.

                  Section 7.3  Company Preferred Securities.

                  (a) Designation. There shall hereby be designated as a series
of preferred limited liability company interests in the Company a series
identified as the Company's "|X|% Noncumulative Company Preferred Securities",
liquidation preference $25 per security and aggregate liquidation preference
$|X| (the "Company Preferred Securities").

                  The holders of the Company Preferred Securities (or of any
other Company Security) will have no preemptive rights with respect to any
limited liability company interests in the Company or any other securities of
the Company convertible into or carrying rights or options to purchase any such
securities. Company Preferred Securities will not be convertible into Company
Common Securities or any other class or series of limited liability company
interests in the Company and will not be subject to any sinking fund or other
obligation of the Company for its repurchase or retirement.

                  A Company Preferred Security shall be represented by the
corresponding Company Preferred Certificate.

                  (b)      Dividends.

                           (i) Dividends on the Company Preferred Securities
         will be payable from the date of initial issuance on a noncumulative
         basis, quarterly in arrears on 15 June, 15 September, 15 December, and
         15 March each year (each a "Dividend Payment Date" and each period from
         and including a Dividend Payment Date, or the date of initial issuance
         as applicable, to but not including the next Dividend Payment Date, a
         "Dividend Period") for the Dividend Period then ending, but only if the
         Company has legally available funds for such purpose and satisfies the
         other qualifications described below. Dividends will be payable on the
         liquidation preference for each Dividend Period at a fixed rate per
         annum on the liquidation preference equal to |X| % (calculated on the
         basis of a year of twelve 30-day months)|X|. Dividends will be
         mandatorily due and payable in the circumstances described in Section
         7.3(b)(ii) below, except that dividends will never be mandatorily due
         and payable if the Capital Limitation described below in Section
         7.3(b)(iii) applies. If dividends on a Dividend

                                      -25-

<PAGE>   31
         Payment Date are neither mandatorily due and payable nor prohibited by
         application of the Capital Limitation, then (i) payment of dividends on
         the Company Preferred Securities will be limited by the Bank's
         Available Distributable Profits (see Section 7.3(b)(iv), below) and
         (ii) if the Bank delivers, on or before the tenth Business Day
         immediately preceding such Dividend Payment Date, an instruction (a "No
         Dividend Instruction") to the Company not to pay dividends on such
         Dividend Payment Date or to pay less than full dividends on such
         Dividend Payment Date, dividends payable on the related Dividend
         Payment Date will be limited as provided in such No Dividend
         Instruction (see Section 7.3(b)(v) below).

                           If any dividends will be payable on the Company
         Preferred Securities on a day that is not a Business Day, those
         dividends will instead be paid on the next Business Day. No interest or
         other payment will be due as a result of any such adjustment.

                           (ii) The Company is required to pay dividends on the
         Company Preferred Securities in three circumstances, as follows:

                                    (A) If the Bank declares or pays dividends
                  or makes any other payment or distribution on any Bank Junior
                  Obligations and the Capital Limitation does not apply, then
                  the Company will be required to pay full dividends on the
                  Company Preferred Securities during the one-year period
                  beginning on and including the earlier of the date on which
                  such dividend was declared or the date on which such dividend
                  or other payment was made.

                                    (B) If the Bank or any of its subsidiaries
                  redeems, repurchases or otherwise acquires any Bank Parity
                  Securities or Bank Junior Obligations for any consideration,
                  except by conversion into or exchange for shares or Bank
                  Junior Obligations and except as described below (and provided
                  that the Capital Limitation does not apply), then the Company
                  will be required to pay dividends on the Company Preferred
                  Securities during the one-year period beginning on and
                  including the date on which such redemption, repurchase or
                  other acquisition occurred.

                                    (C) If (x) the Bank or any of its
                  subsidiaries declares or pays any dividends or makes any other
                  payment or distribution on any Bank Parity Securities on any
                  date and (y) during the Relevant Period ending on and
                  including such date there occurred a Dividend Payment Date as
                  to which the Company paid no dividends or less than full
                  dividends on the Company Preferred Securities, and provided
                  that the Capital Limitation does not apply, then on that date
                  the Company will be required to pay a special dividend on the
                  Company Preferred Securities. The special dividend will be
                  payable on that date whether or not that date is otherwise a
                  Dividend Payment Date and, if it is a Dividend Payment Date,
                  will be in addition to any other dividends required to be paid
                  on such Dividend Payment Date. The special dividend will be in
                  an amount that, when taken together with dividends previously
                  paid on the Company Preferred Securities during the Relevant
                  Period, represents the same proportion of full dividends on
                  the Company Preferred Securities for all Dividend Payment
                  Dates

                                      -26-

<PAGE>   32
                  during the Relevant Period that the dividend on Bank Parity
                  Securities paid on such date bears to full dividends on such
                  Bank Parity Securities for the Relevant Period.

                           Notwithstanding paragraph (B) above, the Company will
         not be required to pay dividends solely as a result of (a) repurchases,
         redemptions or other acquisitions of Bank Parity Securities or ordinary
         shares in connection with any employment contract, benefit plan or
         other similar arrangement with or for the benefit of any one or more
         employees, officers, directors or consultants, in connection with a
         dividend reinvestment or shareholder share purchase plan or in
         connection with the issuance of Bank Parity Securities or Bank Junior
         Obligations (or securities convertible into or exercisable for such
         Bank Parity Securities or Bank Junior Obligations) as consideration in
         an acquisition transaction, (b) market-making in the Bank Parity
         Securities or ordinary shares as part of the securities business of the
         Bank or any of its subsidiaries, (c) the purchase of fractional
         interests in shares of Bank Parity Securities or Bank Junior
         Obligations pursuant to the conversion or exchange provisions of such
         Bank Parity Securities or Bank Junior Obligations or the security being
         converted or exchanged, (d) any declaration of a dividend in connection
         with any shareholder's rights plan, or the issuance of rights, shares
         or other property under any shareholder's rights plan, or the
         redemption or repurchase of rights pursuant to any such plan, or (e)
         any dividend in the form of shares, warrants, options or other rights
         where the dividend shares or the shares issuable upon exercise of such
         warrants, options or other rights are the same shares as that on which
         the dividend is being paid or ranks pari passu with or junior to such
         shares.

                           Any Dividend Payment Date or other date on which
         dividends on the Company Preferred Securities are required to be paid
         as described in paragraph (A), (B) or (C) above is a "Mandatory
         Dividend Payment Date." The amount of dividends required to be paid on
         any Mandatory Dividend Payment Date (after giving effect to the Capital
         Limitation, if applicable) is called the "Mandatory Dividend Payment
         Amount". If a Dividend Payment Date is a Mandatory Dividend Payment
         Date, the Company will be required to pay the Mandatory Dividend
         Payment Amount as dividends on that date whether or not there are
         Available Distributable Profits and whether or not interest is paid on
         the Subordinated Notes.

                           (iii) The prohibition on the payment of dividends on
         the Company Preferred Securities as described below is called the
         "Capital Limitation".

                           Unless the Swiss Federal Banking Commission expressly
         permits otherwise, the Company will not pay dividends on the Company
         Preferred Securities on any Dividend Payment Date (whether or not it is
         a Mandatory Dividend Payment Date) if on such date the Bank is not in
         compliance, or because of a distribution by the Bank or any of its
         subsidiaries of profits of the Bank (including a payment of dividends
         on the Company Preferred Securities) would not be in compliance, with
         the Swiss Federal Banking Commission's minimum capital adequacy
         requirements applicable to the Bank as then in effect.

                                      -27-

<PAGE>   33
                           (iv) The limitation or prohibition on the payment of
         dividends on the Company Preferred Securities as described below is
         called the "Distributable Profits Limitation". The Distributable
         Profits Limitation will not limit or prohibit payment of dividends up
         to the Mandatory Dividend Payment Amount as to a Mandatory Dividend
         Payment Date.

                           On or before the Dividend Payment Date in April of
         each year, the Bank will deliver a certificate to the Company (a
         "Distributable Profits Limitation Certificate") specifying: (i) the
         Distributable Profits of the Bank for the financial year ending on the
         preceding December 31 and (ii) the Available Distributable Profits for
         payment of dividends on the Company Preferred Securities on the
         Dividend Payment Dates in the then current year.

                            Unless the Company is required to pay as dividends
         the Mandatory Dividend Payment Amount for a Mandatory Dividend Payment
         Date, (A) the aggregate amount of dividends on the Company Preferred
         Securities that the Company may pay on the Dividend Payment Date in
         April of the current year may not exceed the lesser of full dividends
         and the Available Distributable Profits set forth in such Distributable
         Profits Limitation Certificate, and (B) the aggregate amount of
         dividends on the Company Preferred Securities that the Company may pay
         on any subsequent Dividend Payment Date in the current year (or in
         January of the following year in the case of Dividend Payment Dates
         occurring after 2011) may not exceed the lesser of full dividends and
         the remaining amount of such Available Distributable Profits (after
         giving effect to the payment of dividends pursuant to this subclause or
         subclause (A), above).

                           (v) Except for the Mandatory Dividend Payment Amounts
         required to be paid on Mandatory Dividend Payment Dates:

                                    (A) dividends on Company Preferred
                  Securities will not be payable on a Dividend Payment Date if,
                  on or before the tenth Business Day immediately preceding such
                  Dividend Payment Date, the Bank delivers a No Dividend
                  Instruction to the Company instructing it not to pay dividends
                  on such Dividend Payment Date; and

                                    (B) if, on or before the tenth Business Day
                  immediately preceding such Dividend Payment Date, the Bank
                  delivers a No Dividend Instruction to the Company limiting but
                  not prohibiting the payment of dividends on such Dividend
                  Payment Date, dividends on the Company Preferred Security will
                  be payable on such Dividend Payment Date only to the extent
                  permitted by such No Dividend Instruction.

                           If a No Dividend Instruction is given, then the
         Company must promptly give notice to holders of the Company Preferred
         Securities in the manner described in Section 7.3(i) of the fact that
         it has received a No Dividend Instruction and the amount of dividends,
         if any, that will be paid on the related Dividend Payment Date.

                                                      -28-
<PAGE>   34
                  (c) Additional Amounts. If the Company or the Trust is
required to withhold any taxes, duties or other governmental charges with
respect to any payment of dividends on the Company Preferred Securities or the
Trust Preferred Securities, the Company will be required to pay as additional
amounts included in the mandatory dividend payment (and the Bank will be
required to include in any related payment made by it under the Bank
Subordinated Guarantee) an amount sufficient that the net amount received by the
holder of the Company Preferred Securities or Trust Preferred Securities, as
applicable, after the withholding, will not be less than the Mandatory Dividend
Payment Amount. However, the Company will not be required to pay any such
additional amounts to the extent that the taxes, duties or other governmental
charges are imposed or levied by Switzerland or the Cayman Islands because the
holder or beneficial owner of Trust Preferred Securities or Company Preferred
Securities (other than the Trust):

                           (i) has some connection with Switzerland or the
         Cayman Islands, as applicable, other than being a holder or beneficial
         owner of those Trust Preferred Securities or Company Preferred
         Securities; or

                           (ii) has not made a declaration of non-residence in,
         or other lack of connection with, Switzerland or the Cayman Islands, as
         applicable, or any similar claim for exemption, if the Company has
         given the beneficial owner of those Trust Preferred Securities or
         Company Preferred Securities or its nominee at least 60 days' prior
         notice of an opportunity to make the declaration or claim.

                  (d) Ranking and Liquidation Preference. The Company Preferred
Securities ordinarily will rank senior to the Company Common Securities as to
payment of dividends. However, the Bank has the right to shift the dividend
preference of the Company Preferred Securities to the Company Common Securities
on any Dividend Payment Dates to the extent that the Mandatory Dividend Payment
Amount then required to be paid as dividends on the Company Preferred Securities
(if any) is less than full dividends on the Company Preferred Securities. If the
Bank shifts the dividend preference to the Company Common Securities, the
interest payment received by the Company on the Subordinated Notes will be
returned as dividends to the Bank as holder of the Company Common Securities
before any dividends are paid on the Company Preferred Securities.

                  As long as any Company Preferred Securities are outstanding,
the Bank, to the fullest extent permitted by law, will take no voluntary action
to cause the Company to dissolve or liquidate unless the Bank also liquidates.
If the Bank is liquidated, whether voluntarily or involuntarily (and whether in
connection with the occurrence of a Bankruptcy Event or otherwise), the Company
will be liquidated.

                  If the Company dissolves, liquidates, or winds up, then, after
the claims of any creditors of the Company are satisfied, the holders of the
Company Preferred Securities will be entitled to receive, before any
distribution of assets is made to the holders of Company Junior Securities upon
liquidation, liquidating distributions in respect of the Company Preferred
Securities in the amount of the liquidation preference of their Company
Preferred Securities plus an amount

                                      -29-
<PAGE>   35
equal to unpaid dividends, if any, on the Company Preferred Securities with
respect to the current Dividend Period accrued on a daily basis to the date of
liquidation, plus an amount equal to unpaid Definitive Dividends for any prior
Dividend Period, but without interest and without accumulation of unpaid
Nondefinitive Dividends for any prior Dividend Period.

                  Notwithstanding and as a limitation on the foregoing, the
holders of the Company Preferred Securities may not receive liquidating
distributions in a liquidation of the Company in an amount exceeding the
liquidating distributions to which they would have been entitled had they
instead owned preferred shares of the Bank having an aggregate liquidation
preference equal to the aggregate liquidation preference of the Company
Preferred Securities and bearing dividends at the rate of dividends applicable
to the Company Preferred Securities. The holders of the Company Common
Securities will be entitled to share pro rata in any remaining assets of the
Company only after holders of the Company Preferred Securities have received the
amounts described above.

                  (e) Voting Rights. Except as expressly required by applicable
law, or except as indicated below, the holders of Company Preferred Securities
will not be entitled to vote. In the event the holders of Company Preferred
Securities are entitled to vote as indicated below, each $25 liquidation
preference of Company Preferred Securities will be entitled to one vote on
matters on which holders of Company Preferred Securities are entitled to vote.

                  If at any time the aggregate of unpaid dividends equals or
exceeds an amount equal to three semi-annual or six quarterly dividend payments,
the holders of the Company Preferred Securities and any Company Parity Preferred
Securities, voting together as a single class, will have the exclusive right to
elect two additional Directors of their choosing. Holders of a majority (based
on the aggregate liquidation preference) of the Company Preferred Securities and
any Company Parity Preferred Securities may exercise this right by written
consent or at a meeting of holders of Company Preferred Securities and Company
Parity Preferred Securities called for such purpose. This right will continue
until all unpaid dividends have been paid in full or until full dividends have
been paid on the Company Preferred Securities and Company Parity Preferred
Securities for two consecutive Dividend Periods. While this right continues, any
vacancy in the office of the additional Directors may be filled only by the
holders of the Company Preferred Securities and any Company Parity Preferred
Securities voting as described above.

                  A meeting of holders of Company Preferred Securities or
Company Parity Preferred Securities will be called at the request of holders of
25% (based on the aggregate liquidation preference) of the Company Preferred
Securities and any Company Parity Preferred Securities.

                  As long as any Company Preferred Securities and Company Parity
Preferred Securities are outstanding, the Company may not, without the consent
or vote of the holders of at least 66 2/3% of the outstanding Company Preferred
Securities and any Company Parity Preferred Securities (based on the aggregate
liquidation preference), voting together as a single class:

                           (i) change or remove any provision of this Agreement
         (including the terms of the Company Preferred Securities), issue any
         Company Parity Preferred Securities,

                                      -30-
<PAGE>   36
         redeem or repurchase any Company Common Securities, or consent to a
         change in the booking location of the issuance of the Subordinated
         Notes to a branch or other office of the Bank other than the Cayman
         Islands branch of the Bank, in each case, if such action would
         materially and adversely affect the rights, preferences, powers or
         privileges of the Company Preferred Securities and such Company Parity
         Preferred Securities;

                           (ii) to the fullest extent permitted by law,
         liquidate, dissolve or terminate the Company without the concurrent
         liquidation of the Bank;

                           (iii) amend or modify the Company's Investment
         Policies; or

                           (iv) merge, convert, consolidate, reorganize or
         effect any other business combination involving the Company, unless the
         resulting entity will have no class or series of equity securities
         either authorized or outstanding that ranks ahead of the Company
         Preferred Securities as to dividends or as to the distribution of
         assets upon liquidation, dissolution or winding up, except the same
         number of shares of such equity securities with the same preferences,
         conversion or other rights, voting powers, restrictions, limitations as
         to dividends or other distributions, qualifications or terms or
         conditions or redemption as the shares of equity securities of the
         Company that are authorized and outstanding immediately prior to such
         transaction, and each holder of Company Preferred Securities
         immediately prior to such transaction shall receive securities with the
         same preferences, conversion or other rights, voting powers,
         restrictions, limitations as to dividends or other distributions,
         qualifications or terms or conditions or redemption of the resulting
         entity as the Company Preferred Securities held by such holder
         immediately prior to the transaction.

                  Notwithstanding the foregoing, without the consent of any
holder of Company Preferred Securities or Company Parity Preferred Securities,
the Bank may amend or supplement this Agreement:

                           (i) to correct or supplement any provision in this
         Agreement which may be defective or inconsistent with any other
         provision therein, or to make any other provisions with respect to
         matters or questions arising under this Agreement, so long as any such
         action shall not materially adversely affect the interests of the
         holders of Company Preferred Securities; or

                           (ii) to cure any ambiguity or correct any mistake.

                  As long as any Company Preferred Securities are outstanding,
the Company may not, without the consent of the holder of each outstanding
Company Preferred Security, authorize, create or increase the authorized amount
of, or issue any class or series of, any equity securities of or limited
liability company interests in the Company, or any warrants, options or other
rights convertible or exchangeable into any class or series of any equity
securities of or limited liability company interests in the Company, ranking
prior to the Company Preferred Securities, either as to dividend rights or
rights on dissolution, liquidation or winding-up of the Company.

                                      -31-
<PAGE>   37
                  (f) Redemption. The Company Preferred Securities may not be
redeemed before the Dividend Payment Date regularly scheduled to occur in
- 2006, unless a Tax Event, an Investment Company Act Event or a Capital Event
occurs, in which case the Company may redeem the Company Preferred Securities in
whole (but not in part) at any time on not less than 30 nor more than 60 days'
notice. On or after the Dividend Payment Date regularly scheduled to occur in
- 2006, the Company may redeem the Company Preferred Securities on any Dividend
Payment Date for cash, in whole or in part, on not less than 30 nor more than 60
days' notice.

                  The redemption price for such redemptions will be:

                           (i) 100% of the liquidation preference of the Company
         Preferred Securities being redeemed; plus

                           (ii) an amount equal to unpaid dividends, if any, on
         the Company Preferred Securities with respect to the current Dividend
         Period (whether or not declared) accrued on a daily basis to the date
         fixed for redemption; plus

                           (iii) an amount equal to unpaid Definitive Dividends
         for any prior Dividend Period, without interest and without
         accumulation of unpaid Nondefinitive Dividends for any prior Dividend
         Period.

                  The Company will also have the right to redeem the Company
Preferred Securities in whole (but not in part) at any time prior to the
Dividend Payment Date regularly scheduled to occur in - 2006 upon the occurrence
of a Tax Event, an Investment Company Act Event or a Capital Event.

                  Any redemption of Company Preferred Securities must comply
with applicable regulatory requirements, including the prior approval of the
Swiss Federal Banking Commission if then required under applicable guidelines or
policies of the Swiss Federal Banking Commission. If dividends on any Company
Preferred Securities are unpaid, no Company Preferred Securities may be redeemed
unless all outstanding Company Preferred Securities are redeemed and the Company
may not purchase or otherwise acquire any Company Preferred Securities, except
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Company Preferred Securities.

                  The Company Preferred Securities will not be subject to any
sinking fund or mandatory redemption and will not be convertible into any other
securities of or limited liability company interests in the Company or any
securities of the Bank.

                  As long as any Company Preferred Securities are outstanding,
other Company Parity Preferred Securities may not be redeemed or repurchased
unless the Company concurrently redeems an approximately equal proportion of the
aggregate liquidation preference of the outstanding Company Preferred Securities
or each rating agency then rating the Company Preferred Securities informs the
Company in writing that the redemption or repurchase of such Company Parity
Preferred

                                      -32-
<PAGE>   38
Securities would not result in a reduction or withdrawal of the rating then
assigned by that rating agency to the Company Preferred Securities.

                  If fewer than all of the outstanding Company Preferred
Securities are to be redeemed, the amount of Company Preferred Securities to be
redeemed shall be determined by the Board of Directors, and the securities to be
redeemed shall be determined by lot or pro rata as may be determined by the
Board of Directors in its sole discretion to be equitable; provided, that such
method satisfies any applicable requirements of any securities exchange on which
the Company Preferred Securities or any Trust Preferred Securities may then be
listed and, if the Company Preferred Securities or Trust Preferred Securities
are then held by DTC or its nominee in the form of a global security, any
applicable requirements of DTC. The Company will promptly notify the registrar
and transfer agent for the Company Preferred Securities in writing of the
securities selected for redemption and, in the case of any partial redemption,
the liquidation preference to be redeemed.

                  In the event that payment of the redemption price in respect
of any Company Preferred Securities is improperly withheld or refused and not
paid either by the Company or by the Bank pursuant to the Bank Subordinated
Guarantee, dividends on such Company Preferred Securities, shall continue to
accumulate from the date fixed for redemption to the date of actual payment of
such Redemption Price.

                  Any Company Preferred Securities redeemed shall be canceled.
There shall be no prescription period in respect of uncollected dividends on the
Company Preferred Securities.

                  The Preferred Securityholders, by acceptance of such Company
Preferred Securities, acknowledge and agree to the subordination provisions in,
and other terms of, the Company Preferred Securities Guarantee.

                  (g) Registrar and Transfer Agent. Wilmington Trust Company, or
another entity that the Bank may designate from time to time, will act as
registrar and transfer agent for the Company Preferred Securities.

                  Registration of transfers of Company Preferred Securities will
be effected without charge by or on behalf of the Company, but upon payment of
any tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Company will not be required to register or cause to
be registered the transfer of Company Preferred Securities after such Company
Preferred Securities have been called for redemption.

                  In the event of a partial redemption of the Company Preferred
Securities that would result in a delisting of the Trust Preferred Securities
from any securities exchange on which the Trust Preferred Securities are then
listed, the Company will redeem the Company Preferred Securities in whole.

                                      -33-
<PAGE>   39
                  (h) Notices. Notices to holders of the Company Preferred
Securities will be mailed by first-class mail, postage prepaid, to the holders'
addresses appearing in the Company's records.

                  (i) Governing Law. The Company Preferred Securities are
governed by, and shall be construed in accordance with, the laws of the State of
Delaware (without regard to principles of conflict of laws).

                  (j) Additional Information. For so long as any Company
Preferred Securities are outstanding, the Company will furnish to holders and
beneficial owners of Trust Preferred Securities and Company Preferred Securities
and to prospective purchasers designated by such holders upon request the
information required to be delivered pursuant to the Securities Act.

                  Section 7.4  General Provisions Regarding Subordinated Notes.

                  (a) The Company may sell the Subordinated Notes only upon the
affirmative vote of both a majority of the Board of Directors and the holders of
two-thirds (based on the aggregate liquidation preference) of the Company
Preferred Securities and Company Parity Preferred Securities (if any), voting
together as a single class.

                  (b) The Company may not agree to any modification or amendment
to the Subordinated Notes as long as any Company Preferred Securities or Company
Parity Preferred Securities (if any) are outstanding unless holders of
two-thirds (based on the aggregate liquidation preference) of the Company
Preferred Securities and Company Parity Preferred Securities (if any), voting as
a class, consent to such modification or amendment. Such consent to modification
or amendment of the Subordinated Notes shall not be required if (i) the proposed
amendment or modification would not materially and adversely affect the rights,
preferences, powers or privileges of the holders of the Company Preferred Stock
and (ii) the Company has received a letter from each of Moody's Investors
Service Inc. and Standard & Poor's Ratings Services to the effect that such
amendment will not result in a downgrading of its respective rating then
assigned to the Company Preferred Securities.

                                  ARTICLE VIII
                               VOTING AND MEETINGS

                  Section 8.1 Voting Rights of Preferred Securityholders. (a)
Except as shall be otherwise expressly provided in Section 7.3(e) or otherwise
herein, in the By-Laws or in any Certificate of Designations adopted by the
Board of Directors or as otherwise required by the Delaware Act, the Preferred
Securityholders shall have no right or power to vote on any question or matter
or in any proceeding or to be represented at, or to receive notice of, any
meeting of Securityholders.

                                      -34-
<PAGE>   40
                  (b) Notwithstanding that Preferred Securityholders holding
Company Preferred Securities are entitled to vote or consent under the
circumstances described in this Agreement, the By-Laws or any Certificate of
Designations, any of the Company Preferred Securities that are owned by the
Bank, the Common Securityholder, the Company or any of their respective
Affiliates, either directly or indirectly, shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be treated as if
they were not outstanding except for Company Preferred Securities purchased or
acquired by the Bank or its Affiliates in connection with transactions effected
by or for the account of customers of the Bank or any of its Affiliates or in
connection with the distribution or trading of or market-making in connection
with such Company Preferred Securities; provided, however, that Persons (other
than Affiliates of the Bank) to whom the Bank or any of its Affiliates have
pledged Company Preferred Securities may vote or consent with respect to such
pledged Company Preferred Securities pursuant to the terms of such pledge.

                  Section 8.2 Voting Rights of Common Securityholders. Except as
otherwise provided herein, and except as otherwise required by the Delaware Act,
all voting rights of the Securityholders shall be vested exclusively in the
Common Securityholders. The Company Common Securities shall entitle the Common
Securityholders to vote in proportion to their percentage ownership interest in
the Company upon all matters upon which Common Securityholders have the right to
vote. All Common Securityholders shall have the right to vote separately as a
class on any matter on which the Common Securityholders have the right to vote
regardless of the voting rights of any other Securityholder.

                  Section 8.3 Meetings of the Securityholders.

                  (a) Meetings of the Securityholders of any class or of all
classes of Securities may be called at any time by the Chairman of the Board (if
any), the President or the Board of Directors or as provided by this Agreement
or the By-Laws. A meeting of holders of Company Preferred Securities or Company
Parity Preferred Securities will be called at the request of holders of 25%
(based on the aggregate liquidation preference) of the Company Preferred
Securities and any Company Parity Preferred Securities. Except to the extent
otherwise provided, the following provisions shall apply to meetings of
Securityholders.

                  (b) Securityholders may vote in person or by proxy at such
meeting. Whenever a vote, consent or approval of Securityholders is permitted or
required under this Agreement, such vote, consent or approval may be given at a
meeting of Securityholders or by written consent.

                  (c) Each Securityholder may authorize any Person to act for it
by proxy on all matters in which a Securityholder is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Securityholder or its
attorney-in-fact. Every proxy shall be revocable at the pleasure of the
Securityholder executing it at any time before it is voted.

                  (d) Each meeting of Securityholders shall be conducted by the
Board of Directors or by such other Person that the Board of Directors may
designate.

                                      -35-
<PAGE>   41
                  (e) Any required approval of Preferred Securityholders may be
given at a separate meeting of such Preferred Securityholders convened for such
purpose or at a meeting of Securityholders of the Company or pursuant to written
consent. The Board of Directors shall cause a notice of any meeting at which
Preferred Securityholders holding Company Preferred Securities or Company Parity
Preferred Securities are entitled to vote pursuant to Section 7.3, any
Certificate of Designations adopted by the Board of Directors or Article XIV of
this Agreement, or of any matter upon which action may be taken by written
consent of such Preferred Securityholders, to be mailed to each holder of record
of the Company Preferred Securities or Company Parity Preferred Securities. Each
such notice shall include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
action proposed to be taken at such meeting on which such Preferred
Securityholders are entitled to vote or of such matters upon which written
consent is sought and (iii) instructions for the delivery of proxies or
consents.

                  (f) Subject to Section 8.3(e) of this Agreement, the Board of
Directors, in their sole discretion, shall establish all other provisions
relating to meetings of Securityholders, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any
Securityholders, waiver of any such notice, action by consent without a meeting,
the establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote.

                                   ARTICLE IX

                                    DIVIDENDS

                  Section 9.1 Dividends.

                  (a) Subject to the terms of this Article IX, Preferred
Securityholders shall receive periodic dividends, if any, in accordance with
Article VII of this Agreement or any Certificate of Designations duly adopted by
the Board of Directors, and Common Securityholders shall receive periodic
dividends and distributions, subject to Article VII of this Agreement or any
Certificate of Designations duly adopted by the Board of Directors, and to the
provisions of the Delaware Act, when, as and if declared by the Board of
Directors, in its discretion. A dividend shall constitute a distribution within
the meaning of the Delaware Act.

                  (b) A Securityholder shall not be entitled to receive any
dividend or other distribution with respect to any dividend payment date (and
any such dividend or other distribution shall not be considered due and
payable), irrespective of whether such dividend or other distribution is payable
automatically or has been declared by the Directors, until such time as the
Company shall have funds legally available for the payment of such dividend to
such Securityholder pursuant to the terms of this Agreement and the Delaware
Act, and notwithstanding any provision of Section 18-606 of the Delaware Act to
the contrary, until such time, a Securityholder shall not have the status of a
creditor of the Company, or the remedies available to a creditor of the Company;
provided however that a Preferred Securityholder and a holder of Preferred Trust
Securities may exercise such rights or remedies as provided herein or in any
other agreement or document.

                                      -36-
<PAGE>   42
                  Section 9.2 Limitations on Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not
make a distribution (including a dividend) to any Securityholder on account of a
Company Security if such distribution would violate Section 18-607 of the
Delaware Act or other applicable law.

                  Section 9.3 No Dividend Instruction.

                  (a) At any time, and from time to time, the Common
Securityholder may, at its option, deliver to the Company a written instruction
in the form of Annex H hereof on or before the tenth Business Day immediately
preceding any dividend payment date for the Company Preferred Securities
instructing the Company not to pay dividends, or to limit but not prohibit
dividends, on such Dividend Payment Date (a "No Dividend Instruction"). As
described in Section 7.3(b)(v), upon receipt of a No Dividend Instruction with
respect to the Company Preferred Securities and except to the extent permitted
by such No Dividend Instruction, no dividend shall become due and payable on the
Company Preferred Securities (or any Company Parity Preferred Securities or
Company Junior Securities (other than the Company Common Securities)) on the
dividend payment date immediately succeeding the date of receipt of such
instruction. A No Dividend Instruction shall only be effective for the dividend
payment date immediately succeeding the date of receipt of such instruction by
the Company. If such dividend payment date is a Mandatory Dividend Payment Date,
then such No Dividend Instruction shall be of no force or effect. If at any time
there is more than one Common Securityholder, a No Dividend Instruction shall
not be effective until signed by all of the Common Securityholders.

                  (b) Notwithstanding Section 9.3(a), dividends on the Company
Preferred Securities will be definitive, due and payable on each Mandatory
Dividend Payment Date whether or not a No Dividend Instruction has been given or
is deemed given with respect to such Mandatory Dividend Payment Date.

                                    ARTICLE X
                                BOOKS AND RECORDS

                  Section 10.1 Financial Statements. The Board of Directors
shall, as soon as available after the end of each Financial Year of the Company,
cause to be prepared and mailed to each Common Securityholder of record the
audited financial statements of the Company for such Financial Year prepared in
accordance with generally accepted accounting principles. So long as any Company
Preferred Securities are outstanding, the Company will furnish to holders and
beneficial owners of Company Preferred Securities and to prospective purchasers
designated by such holders upon request, the most recent annual audited
financial statements and, if prepared, semi- annual unaudited financial
statements of the Company then available, together with a brief description of
the Company's business.

                  Section 10.2 Limitation on Access to Records. Each
Securityholder has the right, subject to this Agreement and to reasonable
standards established by the Board of Directors to obtain

                                      -37-
<PAGE>   43
from the Company from time to time upon reasonable request for any purpose
reasonably related to such Securityholder's interest as a member in the Company,
information regarding the affairs of the Company. Notwithstanding any provision
of this Agreement, the Board of Directors may, to the maximum extent permitted
by law, keep, or cause to be kept, confidential from the Preferred
Securityholders, for such period of time as the Board of Directors deems
reasonable, any information the disclosure of which the Board of Directors
reasonably believes to be in the nature of trade secrets or other information
the disclosure of which the Board of Directors in good faith believe is not in
the best interest of the Company or could damage the Company or its business or
which the Company or the Board of Directors are required by law or by an
agreement with any Person to keep confidential.

                  Section 10.3 Accounting Method. For both financial and tax
reporting purposes and for purposes of determining profits and losses, the books
and records of the Company shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Company transactions and be
appropriate and adequate for the Company's business.

                  Section 10.4 Annual Audit. As soon as practical after the end
of each Financial Year, but not later than 90 days after such end, the financial
statements of the Company shall be audited by a firm of independent certified
public accountants selected by the Board of Directors, and such financial
statements shall be accompanied by a report of such accountants containing their
opinion. The cost of such audits shall be an expense of the Company and paid by
the Company.

                                   ARTICLE XI
                                   TAX MATTERS

                  Section 11.1 Company Tax Returns.

                  (a) The Common Securityholder is hereby designated as the
Company's "Tax Matters Partner" under Section 6231(a)(7) of the Code and shall
have all the powers and responsibilities of such position as provided in the
Code. The Tax Matters Partner is specifically directed and authorized to take
whatever steps the Bank, in its discretion, deems necessary or desirable to
perfect such designation, including filing any forms or documents with the
Internal Revenue Service and taking such other action as may from time to time
be required under the Treasury Regulations. Expenses incurred by the Tax Matters
Partner in its capacity as such shall be borne by the Company.

                  (b) The Tax Matters Partner shall cause to be prepared and
timely filed all tax returns required to be filed for the Company. The Tax
Matters Partner may, in its discretion, cause the Company to make or refrain
from making any federal, state or local income or other tax elections for the
Company that it deems necessary or advisable, including, without limitation, any
election under Section 754 of the Code or any successor provision.

                                      -38-
<PAGE>   44
                  Section 11.2 Tax Reports. The Tax Matters Partner shall, as
promptly as practicable and in any event within 90 days of the end of each
Financial Year, cause to be prepared and mailed by the Company to each Preferred
Securityholder of record Internal Revenue Service Schedule K-1 and any other
forms that are necessary or advisable in order to permit the Securityholders to
comply with U.S. federal and any other income tax requirements.

                  Section 11.3 Taxation as a Partnership. The Company shall take
any necessary steps to be treated as a partnership for U.S. federal income tax
purposes and shall not file any election to be treated as anything other than a
partnership for such purposes.

                  Section 11.4 Taxation of Securityholders. As provided in
Section 4.4(b), profits shall be allocated to the Preferred Securityholders on a
when-paid basis. The Securityholders intend that allocations of income and loss
for U.S. federal income tax purposes be consistent with the economic allocations
of income under this Agreement.

                                   ARTICLE XII

                                    EXPENSES

                  Section 12.1 Expenses. Except as otherwise provided in this
Agreement, the Common Securityholder shall be responsible for, and shall pay,
all expenses out of funds of the Company determined by the Board of Directors to
be available for such purpose, provided that such expenses or obligations are
those of the Company or are otherwise incurred by or pursuant to the direction
of the Board of Directors in connection with this Agreement, including, without
limitation:

                           (a) all costs and expenses related to the business of
         the Company and all routine administrative expenses of the Company,
         including the maintenance of books and records of the Company, the
         preparation and dispatch to the Securityholders of checks, financial
         reports, tax returns and notices required pursuant to this Agreement
         and the holding of any meetings of the Securityholders;

                           (b) all expenses incurred in connection with any
         litigation involving the Company (including the cost of any
         investigation and preparation) and the amount of any judgment or
         settlement paid in connection therewith (other than expenses incurred
         by any Director in connection with any litigation brought by or on
         behalf of any Securityholder against such Director);

                           (c) all expenses for indemnity or contribution
         payable by the Company to any Person;

                           (d) all expenses incurred in connection with the
         collection of amounts due to the Company from any Person;

                                      -39-
<PAGE>   45
                           (e) all expenses incurred in connection with the
         preparation of amendments or restatements to this Agreement; and

                           (f) all expenses incurred in connection with the
         dissolution, winding up or termination of the Company.

                  Section 12.2 Contribution to Funds of the Company. The Bank
will from time to time either (a) contribute (or cause others, including the
Stamford branch of the Bank, to contribute) to the Company such additional funds
as are necessary in order to enable the Company to pay its expenses described in
Section 12.1 on or before any date when any such expenses are due or (b)
directly pay the Company's expenses then due and payable and not otherwise paid.

                                  ARTICLE XIII
                   TRANSFERS OF SECURITIES BY SECURITYHOLDERS
                               AND RELATED MATTERS

                  Section 13.1 Right of Assignee to Become a Preferred
Securityholder. An assignee of Company Preferred Securities or Company Parity
Preferred Securities shall become a Preferred Securityholder upon compliance
with the provisions of Section 13.5 of this Agreement.

                  Section 13.2 Events of Cessation of Security Ownership. A
Person shall cease to be a Securityholder upon the lawful assignment of all of
its Securities (including by any redemption or other repurchase by the Company)
or as otherwise provided herein.

                  Section 13.3 Persons Deemed Preferred Securityholders. The
Company may treat the Person in whose name any Company Preferred Certificate
shall be registered on the books and records of the Company as the sole holder
of such Company Preferred Certificate and of the Company Preferred Securities or
Company Parity Preferred Securities represented by such Company Preferred
Certificate for purposes of receiving dividends or other distributions and for
all other purposes whatsoever and, accordingly, shall, to the fullest extent
permitted by law, not be bound to recognize any equitable or other claim to or
interest in such Company Preferred Certificate or in the Company Preferred
Securities or Company Parity Preferred Securities represented by such Company
Preferred Certificate on the part of any other Person, whether or not the
Company shall have actual or other notice thereof. Notwithstanding the foregoing
or anything to the contrary herein, the Company agrees that at any time that the
Trust shall be a holder of any Company Preferred Securities, each holder of a
preferred certificate issued by the Trust shall, upon presentation to the
Company or the Registrar of reasonable evidence thereof, have the right to the
fullest extent permitted by law and without the need for any other action of any
other person, including the trustee under the Trust and any other holder of any
other of such preferred certificates, (a) to enforce, in the name of the Trust,
the Trust's rights under the Company Preferred Securities and the Bank
Subordinated Guarantee represented by the preferred certificates of such holder
and (b) to withdraw from the Trust upon written notice to such trustee and the
Company and hold directly the underlying

                                      -40-
<PAGE>   46
Company Preferred Securities represented by such preferred certificates (in
which case such holder will be entitled directly to enforce its rights under the
Bank Subordinated Guarantee).

                  Section 13.4 The Company Preferred Certificates.

                  (a) Company Preferred Certificates evidencing fractions of
Company Preferred Securities or Company Parity Preferred Securities shall not be
issued. Each Company Preferred Certificate shall be signed, manually or by
facsimile, by the President, any Vice-President or the Secretary of the Company.
Company Preferred Certificates, other than Company Preferred Certificates held
by a Trust, shall also be signed, manually or by facsimile, by the Registrar.
Company Preferred Certificates bearing the signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Company shall be validly issued notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Company Preferred Certificates or did not hold such offices at
the date of delivery of such Company Preferred Certificates. A transferee of a
Company Preferred Certificate shall become a Securityholder, upon due
registration of such Company Preferred Certificate in such transferee's name
pursuant to Section 13.5.

                  (b) Upon their original issuance, Company Preferred
Certificates evidencing the Company Preferred Securities or Company Parity
Preferred Securities shall be issued in the form of one or more Company
Preferred Certificates.

                  Section 13.5 Transfer of Company Preferred Certificates.

                  (a) The Board of Directors shall provide for the registration
and transfer of each class of Company Preferred Certificates in a record thereof
(each a "Securities Register") and shall appoint a securities registrar (the
"Registrar") and transfer agent (the "Transfer Agent") to act on its behalf;
provided, however, that without any action on the part of the Board of Directors
being necessary, Wilmington Trust Company is hereby appointed as the initial
Registrar and Transfer Agent. Subject to the other provisions of this Article
XIII, upon surrender for registration of transfer of any Company Preferred
Certificate, the Board of Directors shall cause one or more new Company
Preferred Certificates to be issued in the name of the designated transferee or
transferees. Every Company Preferred Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Board of Directors duly executed by the Preferred
Securityholder or his or her attorney duly authorized in writing. Any
registration of transfer shall be effected upon the Transfer Agent being
satisfied with the documents of title and identity of the Person making the
request upon the receipt by the Transfer Agent of any applicable certificate
relating to transfer restrictions as described below, and subject to such
reasonable regulations as the Company may from time to time establish. Each
Company Preferred Certificate surrendered for registration of transfer shall be
canceled by the Board of Directors. A transferee of a Company Preferred
Certificate shall be admitted to the Company as a Preferred Securityholder and
shall be entitled to the rights and subject to the obligations of a Preferred
Securityholder hereunder upon receipt by such transferee of a Company Preferred
Certificate. By acceptance of a Company Preferred Certificate, each transferee
shall be bound by this Agreement. The transferor of a Preferred

                                      -41-
<PAGE>   47
Certificate, in whole, shall cease to be a Preferred Securityholder at the time
that the transferee of such Company Preferred Certificate is admitted to the
Company as a Preferred Securityholder in accordance with this Section 13.5.

                  (b) Upon surrender for registration of transfer of any Company
Preferred Certificate at the office or agency of the Company or the Registrar
maintained for that purpose, subject to Section 13.6, the Company shall deliver
or cause to be delivered to the Registrar in a form duly executed on behalf of
the Company in the manner provided for in Section 13.4(a), and the Registrar
shall countersign in the manner provided in and to the extent required by
Section 13.4(a) and deliver, in the name of the designated transferee or
transferees, one or more new Company Preferred Certificates in authorized
denominations of a like aggregate liquidation preference dated the date of
execution by such Registrar.

                  The Registrar shall not be required, (i) to issue, register
the transfer of or exchange any Company Preferred Security or Company Parity
Preferred Securities during a period beginning at the opening of business 15
days before the day of selection for redemption of such Company Preferred
Securities or Company Parity Preferred Securities and ending at the close of
business on the day of mailing of the notice of redemption, or (ii) to register
the transfer of or exchange any Company Preferred Security or Company Parity
Preferred Securities so selected for redemption in whole or in part, except, in
the case of any such Company Preferred Security or Company Parity Preferred
Securities to be redeemed in part, any portion thereof not to be redeemed.

                  No service charge shall be made for any registration of
transfer or exchange of Company Preferred Certificates, but the Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Company Preferred
Certificates.

                  Section 13.6 Mutilated, Destroyed, Lost or Stolen Company
Preferred Certificates. If (a) any mutilated Company Preferred Certificate shall
be surrendered to the Registrar, or if the Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Company Preferred
Certificate, and (b) there shall be delivered to the Registrar and the Company
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Company Preferred Certificate
shall have been acquired by a bona fide purchaser, the Company shall sign, the
Registrar shall countersign to the extent required under Section 13.4(a), and
the Company and the Registrar shall make available for delivery (all in the
manner provided for in Section 13.4), in exchange for or in lieu of any
mutilated, destroyed, lost or stolen Company Preferred Certificate, a new
Company Preferred Certificate of like class, tenor and denomination. In
connection with the issuance of any new Company Preferred Certificate under this
Section 13.6, the Company or the Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Company Preferred Certificate issued
pursuant to this Section shall constitute conclusive evidence of a limited
liability company interest in the Company corresponding to that evidenced by the
lost, stolen or destroyed Company Preferred Certificate, as if originally
issued, whether or not the lost, stolen or destroyed Company Preferred
Certificate shall be found at any time.

                                      -42-
<PAGE>   48
                  Section 13.7 Restrictions on Transfers of Securities.

                  (a) Company Preferred Securities or Company Parity Preferred
Securities may not be sold or otherwise transferred unless such securities are
registered under the Securities Act or an exemption from the registration
requirements thereof is available, and the Company Preferred Certificates shall
bear a legend to this effect unless the Bank and the Company determine otherwise
in compliance with applicable law.

                  (b) No Company Preferred Security or Company Parity Preferred
Security shall be transferred, in whole or in part, except in accordance with
the terms and conditions set forth in this Agreement or any Certificate of
Designations. Any transfer or purported transfer of any Company Preferred
Security or Company Parity Preferred Security not made in accordance with this
Agreement shall be null and void.

                  (c) The Company Common Securities may be sold, assigned or
otherwise transferred by the Bank to a direct or indirect wholly owned
subsidiary of the Bank, which subsidiary shall be admitted as a member of the
Company with respect to the Company Common Securities transferred upon such
Person's execution and delivery of a counterpart of this Agreement.

                                   ARTICLE XIV
                        MERGERS, CONSOLIDATIONS AND SALES

                  Section 14.1 The Company. The Company may not, without the
prior approval of holders of at least 66 2/3% of the outstanding Company
Preferred Securities and any Company Parity Preferred Securities (based on the
aggregate liquidation preference), voting as a single class, merge, convert,
consolidate, reorganize or effect any other business combination involving the
Company, unless the resulting entity will have no class or series of equity
securities either authorized or outstanding that ranks ahead of the Company
Preferred Securities or the Company Parity Preferred Securities as to dividends
or as to the distribution of assets upon liquidation, dissolution or winding up,
except the same number of shares of such equity securities with the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions or redemption as the shares of equity securities of the Company that
are authorized and outstanding immediately prior to such transaction, and each
holder of Company Preferred Securities or the Company Parity Preferred
Securities immediately prior to such transaction shall receive securities with
the same preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions or redemption of the resulting entity as the Company Preferred
Securities or the Company Parity Preferred Securities held by such holder
immediately prior to the transaction.

                                      -43-
<PAGE>   49
                                   ARTICLE XV
                    DISSOLUTION, LIQUIDATION AND TERMINATION

                  Section 15.1 No Dissolution. The Company shall not be
dissolved by the admission of Securityholders. The death, insanity, retirement,
resignation, expulsion, bankruptcy or dissolution of a Securityholder, or the
occurrence of any other event which terminates the continued membership of a
Securityholder in the Company, shall not in and of itself cause the Company to
be dissolved and its affairs wound up. Upon the occurrence of any such event,
the business of the Company shall be continued without dissolution. The
bankruptcy of a Securityholder (as defined in Section 18-101(1) and 18-304 of
the Delaware Act) shall not cause a Securityholder to cease to be a member of
the Company. Notwithstanding any other provision of this Agreement, each
Securityholder waives any right it might have under the Delaware Act to agree in
writing to dissolve the Company upon the bankruptcy of a Securityholder, or the
occurrence of an event that causes a Securityholder to cease to be a member of
the Company.

                  Section 15.2 Events Causing Dissolution. The Company shall be
dissolved and its affairs shall be wound up in accordance with the Delaware Act
if any of the following events occur:

                           (a) a decree or order by a court of competent
         jurisdiction shall have been entered adjudging the Company a bankrupt
         or insolvent, or approving as properly filed a petition seeking
         reorganization, arrangement, adjustment or composition of the Company
         under any applicable federal or state bankruptcy or similar law, and
         such decree or order shall have continued undischarged and unstayed for
         a period of 90 days; or a decree or order of a court having
         jurisdiction in the premises for the appointment of a receiver,
         liquidator, trustee, assignee, sequestrator or similar official in
         bankruptcy or insolvency of the Company or of all or substantially all
         of its property, or for the winding up or liquidation of its affairs,
         shall have been entered, and such decree or order shall have continued
         undischarged and unstayed for a period of 90 days or the Company shall
         institute proceedings to be adjudicated a voluntary bankrupt, or shall
         consent to the filing of a bankruptcy proceeding against it, or shall
         file a petition or answer or consent seeking reorganization,
         arrangement, adjustment or composition under any applicable federal or
         state bankruptcy or similar law, or shall consent to the filing of any
         such petition, or shall consent to the appointment of a receiver,
         liquidator, trustee, assignee, sequestrator or similar official in
         bankruptcy or insolvency of the Company or of all or substantially all
         of its property, or shall make an assignment for the benefit of
         creditors, or shall admit in writing its inability to pay its debts
         generally as they become due and its willingness to be adjudged a
         bankrupt, or limited liability company action shall be taken by the
         Company in furtherance of any of the aforesaid purposes;

                           (b) the Bank is liquidated;

                           (c) the entry of a decree of judicial dissolution of
         the Company under Section 18-802 of the Delaware Act;

                                      -44-
<PAGE>   50
                           (d) in connection with the redemption, repurchase or
         exchange of all outstanding Company Preferred Securities;

                           (e) the written consent of all Securityholders;

                           (f) at any time there are no members of the Company
         unless the Company is continued in accordance with the Delaware Act or
         this Agreement; or

                           (g) the entry of a judgment initiating judicial
         liquidation in respect of the Bank under Swiss law or any other
         liquidation of the Bank under Swiss law.

                  Section 15.3 Notice of Dissolution. Upon the dissolution of
the Company, the Board of Directors shall promptly notify the Securityholders of
such dissolution.

                  Section 15.4 Liquidation. Upon dissolution of the Company, the
Board of Directors or, in the event that the dissolution is caused by an event
described in Sections 15.2(b) or (c) of this Agreement and there are no
Directors, a Person or Persons who may be approved by the Preferred
Securityholders holding not less than a majority in liquidation amount, as
liquidating trustees, shall immediately commence to wind up the Company's
affairs; provided, however, that a reasonable time shall be allowed for the
orderly liquidation of the assets of the Company and the satisfaction of
liabilities to creditors so as to minimize the losses attendant upon a
liquidation. The proceeds of liquidation shall be distributed, as realized, in
the manner provided in Section 18-804 of the Delaware Act, subject to the
provisions of Section 15.5.

                  Section 15.5 Certain Restrictions on Liquidation Payments. In
the event of any voluntary or involuntary dissolution of the Company (other than
as set forth in any Certificate of Designations), Preferred Securityholders
holding Company Preferred Securities or Company Parity Preferred Securities at
the time outstanding shall be entitled to receive out of the assets of the
Company legally available for distribution to Securityholders, before any
distribution of assets is made to Common Securityholders or any other Company
Junior Securities, liquidating distributions in respect of the Company Preferred
Securities or Company Parity Preferred Securities in the amount of the
liquidation preference, plus an amount equal to unpaid dividends, if any,
thereon with respect to the current Dividend Payment accrued on a daily basis to
the date of liquidation, plus an amount equal to unpaid Definitive Dividends for
any prior Dividend Period, but without interest and without accumulation of
unpaid Nondefinitive Dividends for any prior dividend period. If, upon any such
liquidation, the liquidating distribution can be paid only in part because the
Company has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Company on
the Company Preferred Securities or Company Parity Preferred Securities shall be
paid on a pro rata basis.

                  Section 15.6 Termination. The Company shall terminate when all
of the assets of the Company have been distributed in the manner provided for in
this Article XV, and the Certificate of Formation shall have been canceled in
the manner required by the Delaware Act.

                                      -45-
<PAGE>   51
                                   ARTICLE XVI

                                  MISCELLANEOUS

                  Section 16.1 Amendments. This Agreement may be amended by a
written instrument executed by an Officer designated by the Board of Directors
without the consent of any Preferred Securityholder; provided, however, that no
amendment shall be made, and any such purported amendment shall be void and
ineffective, to the extent that such amendment (a) would have a material adverse
effect on a Preferred Securityholder (including, without limitation, amendments
to Sections 6.2 and 6.7), (b) would result in causing the Company to be treated
as anything other than a partnership for purposes of United States federal
income taxation would result in the Company being deemed to be required to
register under the Investment Company Act, or (c) has not received the prior
requisite approval of the holders of the Company Preferred Securities and the
Company Parity Preferred Securities, as applicable, as may be expressly provided
in this Agreement, the By-Laws or any Certificate of Designations duly adopted
by the Board of Directors.

                  Section 16.2 Amendment of Certificate of Formation. In the
event this Agreement shall be amended pursuant to Section 16.1, the Board of
Directors shall cause the Certificate of Formation to be amended to reflect such
change if it deems such amendment of the Certificate of Formation to be
necessary or appropriate.

                  Section 16.3 Successors. This Agreement shall be binding as to
the executors, administrators, estates, heirs and legal successors, or nominees
or representatives, of the Securityholders.

                  Section 16.4 Law; Severability. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
In particular, this Agreement shall be construed to the maximum extent possible
to comply with all of the terms and conditions of the Delaware Act. If,
nevertheless, it shall be determined by a court of competent jurisdiction that
any provisions or wording of this Agreement shall be invalid or unenforceable
under the Delaware Act or other applicable law, such invalidity or
unenforceability shall not invalidate the entire Agreement. In that case, this
Agreement shall be construed so as to limit any term or provision so as to make
it enforceable or valid within the requirements of applicable law, and, in the
event such term or provisions cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions. If it shall be
determined by a court of competent jurisdiction that any provision relating to
the distributions and allocations of the Company or to any fee payable by the
Company is invalid or unenforceable, this Agreement shall be construed or
interpreted so as (a) to make it enforceable or valid and (b) to make the
distributions and allocations as closely equivalent to those set forth in this
Agreement as is permissible under applicable law.

                  Section 16.5 Filings. Following the execution and delivery of
this Agreement, the Board of Directors shall cause to be promptly prepared any
documents required to be filed and recorded under the Delaware Act, and the
Board of Directors shall cause to be promptly filed and recorded each such
document in accordance with the Delaware Act and, to the extent required by
local law, to be filed and recorded or notice thereof to be published in the
appropriate place in each

                                      -46-
<PAGE>   52
jurisdiction in which the Company may hereafter establish a place of business.
The Board of Directors shall also promptly cause to be filed, recorded and
published such statements of fictitious business name and any other notices,
certificates, statements or other instruments required by any provision of any
applicable law of the United States or any state or other jurisdiction which
governs the conduct of its business from time to time.

                  Section 16.6 Power of Attorney. Each Preferred Securityholder
does hereby constitute and appoint each Person specifically authorized by the
Board of Directors to act as its true and lawful representative and
attorney-in-fact, in its name, place and stead to make, execute, sign, deliver
and file (a) any amendment of the Certificate of Formation required because of
an amendment to this Agreement or in order to effectuate any change in the
ownership of the Company Securities, (b) any amendments to this Agreement made
in accordance with the terms hereof and (c) all such other instruments,
documents and certificates which may from time to time be required by the laws
of the United States of America, the State of Delaware or any other
jurisdiction, or any political subdivision or agency thereof, to effectuate,
implement and continue the valid and subsisting existence of the Company or to
dissolve the Company or for any other purpose consistent with this Agreement and
the transactions contemplated hereby.

                  The power of attorney granted hereby is coupled with an
interest and shall (a) survive and not be affected by the subsequent death,
incapacity, disability, dissolution, termination or bankruptcy of the Preferred
Securityholder granting the same or the transfer of all or any portion of such
Preferred Securityholder's Preferred Securities and (b) extend to such Preferred
Securityholder's successors, assigns and legal representatives.

                  Section 16.7 Exculpation.

                  (a) No Director or Officer shall have personal liability to
the Company or the Securityholders for monetary damages for breach of, in the
case of a Director, such Director's fiduciary duty (if any) or, in the case of a
Director or an Officer, for any act or omission performed or omitted by such
Director or Officer in good faith on behalf of the Company, except for such
Director's or Officer's gross negligence or willful misconduct.

                  (b) Each Director and Officer shall be fully protected in
relying in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any Person as to
matters that such Director or Officer reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which distributions to Securityholders might properly be paid.

                  Section 16.8 Indemnification. To the fullest extent permitted
by applicable law, each Director and Officer shall be entitled to
indemnification from the Company for any loss, damage, claim or expense
(including reasonable attorney's fees) incurred by such Director or Officer

                                      -47-
<PAGE>   53
by reason of any act or omission performed or omitted by such Director or
Officer in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such Director or
Officer by this Agreement, except with respect to any act or omission determined
by a court of competent jurisdiction to have constituted gross negligence or
wilful misconduct of such Director or Officer; provided, however, that any
indemnity under this Section 16.8 shall be provided out of and to the extent of
Company assets only, and no Securityholder shall have any personal liability on
account thereof. The right to indemnification under this Section 16.8 is a
contract right. The Company may purchase and maintain insurance to protect any
director or officer against liability asserted against him or her, or incurred
by him or her, arising out of his or her status as such.

                  Without limiting the foregoing, the Company's directors shall
have no personal liability to the Company or its Securityholders for monetary
damages (i) for not voting to take enforcement action with respect to the
Subordinated Notes or other Affiliate Securities owned by the Company, if any,
prior to the occurrence of a Bankruptcy Event or (ii) at any time for breach of
any such director's fiduciary duty (if any) except for such director's gross
negligence or willful misconduct.

                  Section 16.9 Additional Documents. Each Preferred
Securityholder, upon the request of the Board of Directors, agrees to perform
all further acts and execute, acknowledge and deliver any documents that may be
reasonably necessary to carry out the provisions of this Agreement.

                  Section 16.10 Notices. All notices provided for in this
Agreement shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by registered or certified mail, as
follows:

                  (i)   If given to the Company, at the address set forth below:

                           UBS AG
                           677 Washington Boulevard
                           Stamford, CT 06901
                           Attention:  Robert Mills
                           Telephone:  203-719-6065
                           Facsimile:  203-719-0340

                           With copies to:

                           UBS AG
                           299 Park Avenue
                           New York, NY 10171
                           Attention:  Robert Dinerstein
                           Telephone:  212-821-3301
                           Facsimile:  212-821-5804

                                      -48-
<PAGE>   54
                  (ii) If given to any Securityholder, at the address set forth
in the Securities Register.

                  Subject to Section 7.3 of this Agreement or any Certificate of
Designations, each such notice, request or other communication shall be
effective (a) if given by telecopier, when transmitted to the number specified
in such registration books and the appropriate confirmation is received, (b) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (c) if given by any
other means, when delivered at the address specified in the Securities Register.

                  Section 16.11 Nominee Letter. At the request of any Person who
is or has agreed to become a holder of Company Preferred Securities as a nominee
or on behalf of another Person, the Company shall provide such nominee with a
letter substantially in the form of Annex I.

                  Section 16.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original of this
Agreement and all of which together shall constitute one and the same agreement.

                                      -49-
<PAGE>   55
                  IN WITNESS WHEREOF, the Bank and the Common Securityholder
have executed this Agreement as of the date first above stated.

                       UBS AG

                       By:
                          -----------------------------------------------------
                             Name: Robert Mills
                             Title: Chief Financial Officer- Americas and
                                    Regional Chief Operating Officer

                       By:
                          -----------------------------------------------------
                             Name: Robert Dinerstein
                             Title: Managing Director

Accepted and agreed by:
UBS Preferred Funding Trust III

By:      Wilmington Trust Company,
         not in its individual capacity,
         but solely as Trustee

         By:
            -------------------------------
              Name:
              Title:

<PAGE>   56
                                                                         Annex A
                                                     to the Amended and Restated

                                             Limited Liability Company Agreement

                [Form of UBS AG Subordinated Guarantee Agreement]

                                       A-1
<PAGE>   57
                        SUBORDINATED GUARANTEE AGREEMENT

                                     UBS AG

                                AS THE GUARANTOR

                               DATED AS OF -, 2001
<PAGE>   58
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATIONS

Section 1.01.  Definitions and Interpretation.........................     2

                                   ARTICLE II
                               TRUST INDENTURE ACT

Section 2.01.  Trust Indenture Act; Application.......................     9
Section 2.02.  Lists of Holders of Securities.........................     9
Section 2.03.  Reports by the Guarantee Trustee.......................     9
Section 2.04.  Periodic Reports to Guarantee Trustee..................    10
Section 2.05.  Evidence of Compliance with Conditions Precedent.......    10
Section 2.06.  Events of Default; Waiver..............................    10
Section 2.07.  Event of Default; Notice...............................    11
Section 2.08.  Rights of Holders......................................    11
Section 2.09.  Conflicting Interests..................................    12
Section 2.10.  Powers, Duties and Rights of Guarantee Trustee.........    12
Section 2.11.  Certain Rights of Guarantee Trustee....................    14
Section 2.12.  Not Responsible for Recitals or Issuance of Guarantee..    16

                                   ARTICLE III
                                GUARANTEE TRUSTEE

Section 3.01.  Guarantee Trustee; Eligibility.........................    16
Section 3.02.  Appointment, Removal and Resignation of Guarantee
                Trustee...............................................    17

                                   ARTICLE IV
                                    GUARANTEE

Section 4.01.  Guarantee..............................................    18
Section 4.02.  Delivery of Guarantor Certificate......................    19
Section 4.03.  Waiver of Notice and Demand............................    19
Section 4.04.  Obligations Not Affected...............................    20
Section 4.05.  Action Against Guarantor...............................    21
Section 4.06.  Independent Obligations................................    21
</TABLE>

<PAGE>   59
<TABLE>
<S>                                                                      <C>
Section 4.07.  Taxes..................................................    21
Section 4.08.  Rights Not Separately Transferable.....................    22

                                    ARTICLE V
                      LIMITATIONS OF TRANSACTIONS; RANKING

Section 5.01   Limitation of Transactions.............................    22
Section 5.02.  Ranking................................................    24

                                   ARTICLE VI
                                   TERMINATION

Section 6.01.  Termination............................................    24

                                   ARTICLE VII
                                 INDEMNIFICATION

Section 7.01.  Exculpation............................................    25
Section 7.02.  Indemnification........................................    25

                                  ARTICLE VIII
                                  MISCELLANEOUS

Section 8.01.  Successors and Assigns.................................    26
Section 8.02.  Amendments.............................................    26
Section 8.03.  Judgment Currency Indemnity............................    26
Section 8.04.  Assignment of the Guarantor............................    27
Section 8.05.  Notices................................................    27
Section 8.06.  Governing Law..........................................    29
Section 8.07.  Jurisdiction...........................................    29

EXHIBIT A    Guarantor's Certificate..................................   A-1
</TABLE>

                                       ii
<PAGE>   60
CROSS-REFERENCE TABLE(1)

<TABLE>
<CAPTION>
SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED      SECTION OF GUARANTEE
<S>                                                     <C>
310(a)..............................................    3.01(a)
310(b)..............................................    2.09, 3.01(c)
310(c)..............................................    Inapplicable
311(a)..............................................    2.02(b)
311(b)..............................................    2.02(b)
311(c)..............................................    Inapplicable
312(a)..............................................    2.02(a)
312(b)..............................................    2.02(b)
313.................................................    2.03
314(a)..............................................    2.04
314(b)..............................................    Inapplicable
314(c)..............................................    2.05
314(d)..............................................    Inapplicable
314(f)..............................................    Inapplicable
315(a)..............................................    2.10(c), 2.10(d)
315(b)..............................................    2.07
315(c)..............................................    2.10(c)
315(d)..............................................    2.10(d)
316(a)..............................................    2.08
</TABLE>

--------

(1)   This Cross-Reference Table does not constitute part of the Guarantee and
      shall not affect the interpretation of any of its terms or provisions.

                                       iii
<PAGE>   61
            SUBORDINATED GUARANTEE AGREEMENT (this "Guarantee"),
dated as of -, 2001, is executed and delivered by UBS AG, a bank organized
under the laws of Switzerland, with its principal executive offices in Zurich
and Basel, Switzerland (together with its successors, the "Guarantor"), and
WILMINGTON TRUST COMPANY, a bank and trust company incorporated under the laws
of the State of Delaware, in its capacity as trustee, for the benefit of the
Initial Holder and any subsequent holders from time to time of the Company
Preferred Securities (as defined herein) of UBS Preferred Funding Company LLC
III, a Delaware limited liability company (together with its successors, the
"Company").

                                   WITNESSETH

            WHEREAS, pursuant to the Amended and Restated Limited Liability
Company Agreement of the Company (as amended from time to time, the "LLC
Agreement") dated as of the date hereof among the Guarantor, UBS Preferred
Funding Trust III (together with its successors, the "Trust") and the holders
from time to time of the Company Preferred Securities (as defined below), the
Company is issuing on the date hereof its -% Noncumulative Company Preferred
Securities, having an aggregate liquidation preference of $-, representing
preferred limited liability company interests in the Company (the "Company
Preferred Securities"); and

            WHEREAS, in order to induce the Initial Holder to purchase the
Company Preferred Securities, the Guarantor desires irrevocably and
unconditionally to agree, to the extent set forth herein, to pay to the Initial
Holder and any subsequent Holders from time to time of the Company Preferred
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein;

            NOW, THEREFORE, in consideration of the purchase by the Initial
Holder and any subsequent Holder from time to time of Company Preferred
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Initial Holder and any subsequent Holders from time to time of the Company
Preferred Securities.
<PAGE>   62
                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATIONS

            Section 1.01. Definitions and Interpretation. In this Guarantee,
unless the context otherwise requires:

                  (a) capitalized terms used in this Guarantee but not defined
      in the preamble above have the respective meanings assigned to them in
      this Section 1.01;

                  (b) a term defined anywhere in this Guarantee has the same
      meaning throughout;

                  (c) all references to "the Guarantee" or "this Guarantee" are
      to this Guarantee as modified, supplemented or amended from time to time;

                  (d) all references in this Guarantee to Articles and Sections
      are to Articles and Sections of this Guarantee, unless otherwise
      specified; and

                  (e) a reference to the singular includes the plural and vice
      versa.

            "Additional Amounts" means an amount paid as further Dividends in
order that the net amounts received by the Holders of the Company Preferred
Securities or Trust Preferred Securities, as applicable, after withholding or
deduction of any Relevant Tax required by law to be deducted or withheld by the
Company or the Trust, as applicable, equals the amount which would have been
received in respect of the Company Preferred Securities or Trust Preferred
Securities, as applicable, in the absence of such withholding or deduction,
except that no Additional Amounts are payable to a Holder of the Company
Preferred Securities or Trust Preferred Securities, as applicable, with respect
to any Company Preferred Securities or Trust Preferred Securities, as
applicable, if the Relevant Jurisdiction is Switzerland or the Cayman Islands
(i) to the extent that such Relevant Tax is imposed or levied by virtue of such
Holder (or the beneficial owner) of such Company Preferred Securities or (other
than the Trust) Trust Preferred Securities having some connection with the
Relevant Jurisdiction, other than being a Holder (or beneficial owner) of such
Company Preferred Securities or Trust Preferred Securities or (ii) to the extent
that such Relevant Tax is imposed or levied by virtue of such Holder (or
beneficial owner) (other than the Trust) not having made a declaration of
non-residence in, or other lack of connection with, the Relevant Jurisdiction or
any similar claim for exemption, if the Guarantor or its agent has provided the
beneficial owner of such

                                       -2-
<PAGE>   63
Company Preferred Securities or Trust Preferred Securities, or its nominee, with
at least 60 days' prior written notice of an opportunity to make such a
declaration or claim.

            "Administrative Action" means any judicial decision, official
administrative pronouncement, published or private ruling, regulatory procedure,
notice or announcement (including any notice or announcement of intent to adopt
such procedures or regulations) by any legislative body, court, governmental
authority or regulatory body having appropriate jurisdiction.

            "Affiliate" means, with respect to any specified person, any other
Person that directly or indirectly controls or is controlled by, or is under
common control with, such specified Person.

            "Assets" means the consolidated gross assets of the Guarantor, all
as shown by the published audited consolidated balance sheet of the Guarantor,
all valued in such a manner as the Guarantor or any liquidator (as the case may
be) may determine and calculated in accordance with international accounting
standards.

            "Authorized Officer" of a Person means any Person that is authorized
to bind such Person.

            "Bankruptcy Event" has the meaning assigned to it in the LLC
Agreement.

            "Base Liquidation Amount" means, with respect to each $-
liquidation preference of Company Preferred Securities at any date, an amount
equal to (i) $- plus (ii) an amount equal to unpaid Dividends, if any, on the
Company Preferred Securities with respect to the Dividend Period in which the
liquidation of the Guarantor commenced (whether as a result of a Bankruptcy
Event or otherwise), accrued on a daily basis to the date of such commencement,
plus (iii) an amount equal to unpaid Definitive Dividends for any prior Dividend
Period, without interest and without accumulation of unpaid Nondefinitive
Dividends for any prior Dividend Period.

            "Business Day" has the meaning assigned to it in the LLC Agreement.

            A "Capital Loss" shall be deemed to occur if the Guarantor's assets
are less than the sum of (i) its Liabilities and (ii) one-half of its share
capital and statutory reserves, each as shown on and as calculated based on the
latest published annual unaudited consolidated balance sheet of the Guarantor.

                                      -3-
<PAGE>   64
            "Company" has the meaning assigned to it in the preamble to this
Guarantee.

            "Company Common Securities" has the meaning assigned to it in the
LLC Agreement.

            "Company Preferred Securities" has the meaning assigned to it in the
first recital to this Guarantee.

            "Corporate Trust Office" means the principal trust office of the
Guarantee Trustee at which, at any particular time, its corporate trust business
shall be administered, which office at the date hereof is located at Wilmington
Trust Company, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.

            "Corresponding Amount" means, (i) for each $- liquidation amount
of Trust Preferred Securities, $- liquidation preference of Company Preferred
Securities and (ii) for each $- liquidation preference of Company Preferred
Securities, $- liquidation amount of Trust Preferred Securities.

            "Covered Person" means any Holder or beneficial owner of Company
Preferred Securities.

            "Definitive Dividends" has the meaning assigned to it in the LLC
Agreement.

            "Dividend Payment Date" means quarterly in arrears on - January,
-April, - July, - October.

            "Dividend Period" has the meaning assigned to it in the LLC
Agreement.

            "Dividend Rate" means, on any day, the dividend rate applicable to
the Company Preferred Securities as determined pursuant to Section 7.3(b) of the
LLC Agreement.

            "Dividends" means distributions on the Company Preferred Securities
in the amounts and in the manner set forth in the LLC Agreement.

            "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee.

                                       -4-
<PAGE>   65
            "Guarantee" has the meaning set forth in the preamble to this
Guarantee.

            "Guarantee Additional Amounts" has the meaning set forth in Section
4.07.

            "Guarantee Payments" has the meaning assigned to it in Section 4.01.

            "Guarantee Trustee" means Wilmington Trust Company, a bank and trust
company incorporated under the laws of the State of Delaware, and its
successors, in its capacity as trustee under this Guarantee, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee by executing a counterpart hereof and becoming a
party hereto, and thereafter means each such Successor Guarantee Trustee.

            "Guarantor" has the meaning assigned to it in the preamble to this
Guarantee.

            "Guarantor Certificate" has the meaning assigned to it in Section
4.02.

            "Holder" means any holder, as registered on the books and records of
the Company or the Trust, of Company Preferred Securities or Trust Preferred
Securities, as the case may be; provided, however, that, in determining whether
the holders of the requisite percentage of Company Preferred Securities or Trust
Preferred Securities, as the case may be, have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the Guarantor or any
Affiliate of the Guarantor (other than the Trust).

            "Indemnified Person" means the Guarantee Trustee, the Initial
Holder, any Affiliate of the Guarantee Trustee, or any officer, director,
shareholder, member, partner, employee, representative, nominee, custodian or
agent of the Guarantee Trustee.

            "Initial Holder" means the Trust as the initial holder of the
Company Preferred Securities.

            "Initial Subordinated Notes" means the Subordinated Promissory Notes
dated the date hereof issued by the Cayman Islands branch of the Guarantor.

            "Investment Company Act" means the U.S. Investment Company Act of
1940, as amended from time to time, or any successor legislation.

            "Liabilities" means the consolidated gross liabilities of the
Guarantor, all as shown by the latest published audited consolidated balance
sheet of the Guarantor, as

                                       -5-
<PAGE>   66
adjusted for contingencies and for subsequent events, all valued in such a
manner as the Guarantor or any liquidator (as the case may be) may determine and
calculated in accordance with international accounting standards.

            "Liquidation Distribution" means, with respect to each $25
liquidation preference of Company Preferred Securities, an amount equal to the
lesser of (i) the Base Liquidation Amount and (ii) an amount calculated as (A)
the amount of remaining assets of the Guarantor determined to be available for
distribution in respect of this Guarantee, the Parity Preferred Shares and the
Parity Guarantees in any insolvency of the Guarantor, without giving effect to
any distributions hereunder or under the terms of any Parity Guarantees,
multiplied by (B) a fraction, (x) the numerator of which is the Base Liquidation
Amount as of the date the liquidation of the Guarantor commenced (whether as a
result of a Bankruptcy Event or otherwise), and (y) the denominator of which is
the aggregate principal or face amount of all claims, without duplication, under
the Company Preferred Securities (determined as if the Company Preferred
Securities were Parity Preferred Shares), the Parity Preferred Shares and the
Parity Guarantees determined to be payable out of such remaining assets of the
Guarantor.

            "LLC Agreement" has the meaning assigned to it in the first recital
to this Guarantee.

            "Majority (or Other Stated Percentage) in liquidation amount of the
Company Preferred Securities" means, except as provided by the Trust Indenture
Act, a vote by the Holder(s) of more than 66 2/3% (or other stated percentage)
of the aggregate liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid Dividends
to the date upon which the voting percentages are determined) of all Company
Preferred Securities, voting as a class.

            "Mandatory Dividend Payment Amount" has the meaning assigned to it
in the LLC Agreement.

            "Mandatory Dividend Payment Date" has the meaning assigned to it in
the LLC Agreement.

            "Nondefinitive Dividends" has the meaning assigned to it in the LLC
Agreement.

            "Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person.

                                       -6-
<PAGE>   67
            "Ordinary Shares" means the ordinary shares of the Guarantor and any
other shares of the Guarantor's capital stock ranking junior to the Parity
Preferred Shares, if any, in each case issued by the Guarantor from time to
time.

            "Parity Guarantee" means any guarantee issued by the Guarantor from
time to time of any equity preferred or preference shares issued by any
subsidiary of the Guarantor from time to time, if such guarantee ranks pari
passu with the Guarantor's obligations under this Guarantee.

            "Parity Preferred Shares" means the most senior ranking equity
preferred or preference shares outstanding and issued by the Guarantor from time
to time.

            "Parity Securities" means, collectively, the Parity Guarantees, the
Parity Preferred Shares and the Parity Subsidiary Securities.

            "Parity Subsidiary Securities" means any parity securities issued by
a subsidiary of the Guarantor from time to time that are guaranteed by the
Guarantor under a Parity Guarantee.

            "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

            "Potential Securityholder" has the meaning assigned to it in Section
5.01(d).

            "Qualified Subsidiary" means a subsidiary of the Guarantor which
satisfies the conditions to be considered a "company controlled by the parent
company" under Rule 3a-5 of the Investment Company Act, or any successor
provision.

            "Redemption Price" means, for each $25 liquidation preference of
Company Preferred Securities, in the case of a redemption of Company Preferred
Securities pursuant to Section 7.3(f) of the LLC Agreement, the amount
determined pursuant to Section 7.3(f) of the LLC Agreement.

            "Relevant Jurisdiction" means Switzerland or the Cayman Islands.

            "Relevant Tax" means any present or future taxes, duties,
assessments or governmental charges of whatever nature, imposed or levied by or
on behalf of any Relevant Jurisdiction or any authority therein or thereof
having the power to tax.

                                       -7-
<PAGE>   68
            "Responsible Officer" means, with respect to the Guarantee Trustee,
any officer within the Corporate Trust Office of the Guarantee Trustee with
direct responsibility for the administration of the Guarantee, including any
vice president, any assistant vice president, any secretary, any assistant
secretary, the treasurer, any assistant treasurer or other officer of the
Guarantee Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.

            "Solvent" means (i) the Guarantor is able to pay its debts as they
fall due and (ii) the Guarantor's Assets exceed its Liabilities (other than its
liabilities to persons who are not senior creditors).

            "Subordinated Notes" means the Initial Subordinated Notes and, upon
maturity or redemption thereof, any successor subordinated notes that constitute
the assets of the Company.

            "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.01.

            "Trust" has the meaning assigned to it in the first recital to this
Guarantee.

            "Trust Agreement" means the Amended and Restated Trust Agreement,
dated as of -, 2001 and as from time to time amended, modified or
supplemented, among the Company, as grantor, Wilmington Trust Company, as
trustee, and the holders from time to time of the Trust Preferred Securities.

            "Trust Indenture Act" means the U.S. Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.

            "Trust Preferred Securities" means -% Noncumulative Trust
Preferred Securities issued by the Trust.

            "UBS AG Senior Liabilities" has the meaning assigned to it in
Section 5.02(a).

                                       -8-
<PAGE>   69
                                   ARTICLE II
                               TRUST INDENTURE ACT

            Section 2.01. Trust Indenture Act; Application.

            (a) This Guarantee is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee and shall, to the
extent applicable, be governed by such provisions. A term defined in the Trust
Indenture Act has the same meaning when used in this Guarantee, unless otherwise
defined in this Guarantee or unless the context otherwise requires.

            (b) If and to the extent that any provision of this Guarantee
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

            Section 2.02.  Lists of Holders of Securities.

            (a) The Guarantee Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders of Company Preferred Securities. If the Guarantee Trustee
is not the Registrar, the Guarantor shall furnish to the Guarantee Trustee
quarterly on or before -January, -April, -July and -October of each
year, and at such other times as the Guarantee Trustee may request in writing, a
list, in such form and as of such date as the Guarantee Trustee may reasonably
require, containing all the information in the possession or control of the
Registrar, the Guarantor or any of its paying agents other than the Guarantee
Trustee as to the names and addresses of Holders of Company Preferred
Securities.

            (b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

            Section 2.03. Reports by the Guarantee Trustee. Within 60 days after
- of each year, the Guarantee Trustee shall provide to the Holders of the
Company Preferred Securities (and, for so long as the Initial Holder is the
Holder of the Company Preferred Securities, also to the Holders of the Trust
Preferred Securities), such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.

                                      -9-
<PAGE>   70
            Section 2.04. Periodic Reports to Guarantee Trustee. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and information
as required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act. Delivery of such
reports, information and documents to the Guarantee Trustee is for informational
purposes only and the Guarantee Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Guarantee Trustee is entitled to rely
exclusively on Officers' Certificates).

            Section 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate and shall
include:

                  (a) a statement that each officer signing the Officers'
      Certificate has read the covenant or condition and the definition relating
      thereto;

                  (b) a brief statement of the nature and scope of the
      examination or investigation undertaken by each officer in rendering the
      Officers' Certificate;

                  (c) a statement that each such officer has made such
      examination or investigation as, in such officer's opinion, is necessary
      to enable such officer to express an informed opinion as to whether or not
      such covenant or condition has been complied with; and

                  (d) a statement as to whether, in the opinion of each such
      officer, such condition or covenant has been complied with.

            Section 2.06. Events of Default; Waiver. The Holders of a Majority
in liquidation amount of the Company Preferred Securities may, by vote, on
behalf of the Holders of all of the Company Preferred Securities, waive any past
Event of Default and its consequences except an Event of Default in respect of a
covenant or provision hereof which cannot be modified or amended without the
consent of each Holder of Company Preferred Securities (and, for so long as the
Initial Holder is the Holder of the Company Preferred Securities, also of each
Holder of Trust Preferred Securities). Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Guarantee, but

                                      -10-
<PAGE>   71
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.

            Section 2.07. Event of Default; Notice.

            (a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Company Preferred Securities (and, for so long as the Initial
Holder is the Holder of the Company Preferred Securities, also to the Holders of
the Trust Preferred Securities), notices of all Events of Default actually known
to a Responsible Officer of the Guarantee Trustee, unless such defaults have
been cured before the giving of such notice; provided, that, the Guarantee
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Company
Preferred Securities.

            (b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless a Responsible Officer of the Guarantee Trustee shall
have received written notice, or a Responsible Officer of the Guarantee Trustee
charged with the administration of this Guarantee shall have obtained actual
knowledge, of such Event of Default.

            Section 2.08.  Rights of Holders.

            (a) The Holders of a Majority in liquidation amount of the Company
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee.

            (b) If the Guarantee Trustee fails to enforce its rights under this
Guarantee after a Holder of Company Preferred Securities has made a written
request, such Holder of Company Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee's
rights under Article 4, without first instituting a legal proceeding against the
Company, the Guarantee Trustee or any other person or entity. Notwithstanding
the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder
of Company Preferred Securities may directly institute a proceeding in such
Holder's own name against the Guarantor for enforcement of Article 4 for such
payment.

                                      -11-
<PAGE>   72
            (c) Notwithstanding any other provision of this Agreement, for so
long as the Trust is the Holder of any Company Preferred Securities, any Holder
of Trust Preferred Securities shall have the right, upon the occurrence of an
Event of Default, to institute a suit directly against the Guarantor for
enforcement of its payment and other obligations hereunder with respect to a
Corresponding Amount of Company Preferred Securities.

            Section 2.09. Conflicting Interests. The LLC Agreement shall be
deemed to be specifically described in this Guarantee for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

            Section 2.10. Powers, Duties and Rights of Guarantee Trustee.

            (a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders of the Company Preferred Securities, and the Guarantee
Trustee shall not transfer this Guarantee to any Person except a Holder of
Company Preferred Securities exercising his or her rights pursuant to Section
2.08(b) or to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The
right, title and interest of the Guarantee Trustee shall automatically vest in
any Successor Guarantee Trustee, and such vesting and cessation of title shall
be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.

            (b) If an Event of Default actually known to a Responsible Officer
of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee for the benefit of the Holders of the Company
Preferred Securities.

            (c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing or waiver of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee, and no implied covenants shall be read into this
Guarantee against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06 and is
actually known to a Responsible Officer of the Guarantee Trustee), the Guarantee
Trustee shall exercise such of the rights and powers vested in it by this
Guarantee, and use the same degree of care and skill in its exercise thereof, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.

            (d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

                                      -12-
<PAGE>   73
                  (i) prior to the occurrence of any Event of Default and after
      the curing or waiving of all such Events of Default that may have
      occurred:

                        (A) the duties and obligations of the Guarantee Trustee
            shall be determined solely by the express provisions of this
            Guarantee, and the Guarantee Trustee shall not be liable except for
            the performance of such duties and obligations as are specifically
            set forth in this Guarantee, and no implied covenants or obligations
            shall be read into this Guarantee against the Guarantee Trustee; and

                        (B) in the absence of bad faith on the part of the
            Guarantee Trustee, the Guarantee Trustee may conclusively rely, as
            to the truth of the statements and the correctness of the opinions
            expressed therein, upon any certificates or opinions furnished to
            the Guarantee Trustee and conforming to the requirements of this
            Guarantee; provided that in the case of any such certificates or
            opinions that by any provision hereof are specifically required to
            be furnished to the Guarantee Trustee, the Guarantee Trustee shall
            be under a duty to examine the same to determine whether or not they
            conform to the requirements of this Guarantee (but need not confirm
            or investigate the accuracy of any mathematical calculations or
            other facts stated therein);

                  (ii) the Guarantee Trustee shall not be liable for any error
      of judgment made in good faith by a Responsible Officer of the Guarantee
      Trustee, unless it shall be proved that the Guarantee Trustee was
      negligent in ascertaining the pertinent facts upon which such judgment was
      made;

                  (iii) the Guarantee Trustee shall not be liable with respect
      to any action taken or omitted to be taken by it in good faith in
      accordance with the direction of the Holders of a Majority in liquidation
      amount of the Company Preferred Securities relating to the time, method
      and place of conducting any proceeding for any remedy available to the
      Guarantee Trustee, or the exercise of any trust or power conferred upon
      the Guarantee Trustee under this Guarantee; and

                  (iv) no provision of this Guarantee shall require the
      Guarantee Trustee to expend or risk its own funds or otherwise incur
      personal financial liability in the performance of any of its duties or in
      the exercise of any of its rights or powers, if the Guarantee Trustee
      shall have reasonable grounds for believing that the repayment of such
      funds or liability, or indemnity, satisfactory

                                      -13-
<PAGE>   74
      to the Guarantee Trustee, against such expense, risk or liability, is not
      assured to it under the terms of this Guarantee.

            Section 2.11.  Certain Rights of Guarantee Trustee.

            (a)   Subject to the provisions of Section 2.10:

                  (i) The Guarantee Trustee may conclusively rely, and shall be
      fully protected in acting or refraining from acting upon, any resolution,
      certificate, statement, instrument, opinion, report, notice, request,
      direction, consent, order, bond, debenture, note, other evidence of
      indebtedness or other paper or document (whether in its original or
      facsimile form) believed by it to be genuine and to have been signed, sent
      or presented by the proper party or parties.

                  (ii) Any direction or act of the Guarantor contemplated by
      this Guarantee shall be sufficiently evidenced by an Officers'
      Certificate.

                  (iii) Whenever, in the administration of this Guarantee, the
      Guarantee Trustee shall deem it desirable that a matter be proved or
      established before taking, suffering or omitting any action hereunder, the
      Guarantee Trustee (unless other evidence is herein specifically
      prescribed) may, in the absence of bad faith on its part, request and
      conclusively rely upon an Officers' Certificate which, upon receipt of
      such request, shall be promptly delivered by the Guarantor.

                  (iv) The Guarantee Trustee shall have no duty to see to any
      recording, filing or registration of any instrument (or any rerecording,
      refiling or registration thereof).

                  (v) The Guarantee Trustee may, at the expense of the
      Guarantor, consult with counsel of its selection, and the advice or
      opinion of such counsel with respect to legal matters shall be full and
      complete authorization and protection in respect of any action taken,
      suffered or omitted by it hereunder in good faith and in accordance with
      such advice or opinion. Such counsel may be counsel to the Guarantor or
      any of its Affiliates and may include any of its employees. The Guarantee
      Trustee shall have the right at any time to seek instructions concerning
      the administration of this Guarantee from any court of competent
      jurisdiction.

                  (vi) The Guarantee Trustee shall be under no obligation to
      exercise any of the rights or powers vested in it by this Guarantee at the
      request or direction of any Holder, unless such Holder shall have provided
      to the Guarantee

                                      -14-
<PAGE>   75
      Trustee such security and indemnity, satisfactory to the Guarantee
      Trustee, against the costs, expenses (including attorneys' fees and
      expenses and the expenses of the Guarantee Trustee's agents, nominees or
      custodians) and liabilities that might be incurred by it in complying with
      such request or direction, including such reasonable advances as may be
      requested by the Guarantee Trustee; provided, that nothing contained in
      this Section 2.11(a)(vi) shall be taken to relieve the Guarantee Trustee,
      upon the occurrence of an Event of Default, of its obligation to exercise
      the rights and powers vested in it by this Guarantee.

                  (vii) The Guarantee Trustee shall not be bound to make any
      investigation into the facts or matters stated in any resolution,
      certificate, statement, instrument, opinion, report, notice, request,
      direction, consent, order, bond, debenture, note, other evidence of
      indebtedness or other paper or document, but the Guarantee Trustee, in its
      discretion, may make such further inquiry or investigation into such facts
      or matters as it may see fit but shall incur no liability or additional
      liability of any kind by reason of such inquiry or investigation.

                  (viii)The Guarantee Trustee may execute any of the trusts or
      powers hereunder or perform any duties hereunder either directly or by or
      through agents, nominees, custodians or attorneys, and the Guarantee
      Trustee shall not be responsible for any misconduct or negligence on the
      part of any agent or attorney appointed with due care by it hereunder.

                  (ix) Any action taken by the Guarantee Trustee or its agents
      hereunder shall bind the Holders of the Company Preferred Securities, and
      the signature of the Guarantee Trustee or its agents alone shall be
      sufficient and effective to perform any such action. No third party shall
      be required to inquire as to the authority of the Guarantee Trustee to so
      act or as to its compliance with any of the terms and provisions of this
      Guarantee, both of which shall be conclusively evidenced by the Guarantee
      Trustee or its agent taking such action.

                  (x) Whenever in the administration of this Guarantee the
      Guarantee Trustee shall deem it desirable to receive instructions with
      respect to enforcing any remedy or right or taking any other action
      hereunder, the Guarantee Trustee (i) may request written instructions from
      the Holders of a Majority in liquidation amount of the Company Preferred
      Securities, (ii) may refrain from enforcing such remedy or right or taking
      such other action until such written instructions are received and (iii)
      shall be protected in conclusively relying on or acting in accordance with
      such written instructions.

                                      -15-
<PAGE>   76
                  (xi) The Guarantee Trustee shall not be liable for any action
      taken, suffered, or omitted to be taken by it in good faith and reasonably
      believed by it to be authorized or within the discretion or rights or
      powers conferred upon it by this Guarantee.

            (b) No provision of this Guarantee shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.

            Section 2.12. Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.

                                   ARTICLE III
                                GUARANTEE TRUSTEE

            Section 3.01. Guarantee Trustee; Eligibility.

            (a) There shall at all times be a Guarantee Trustee which shall:

                  (i)   not be an Affiliate of the Guarantor; and

                  (ii) be a corporation organized and doing business under the
      laws of the United States of America or any state or territory thereof or
      of the District of Columbia, and be permitted by the Securities and
      Exchange Commission to act as an institutional trustee under the Trust
      Indenture Act, authorized under such laws to exercise corporate trust
      powers, having a combined capital and surplus of at least 50 million U.S.
      dollars ($50,000,000), and subject to supervision or examination by
      federal, state, territorial or District of Columbia authority. If such
      corporation publishes reports of condition at least annually, pursuant to
      law or to the requirements of the supervising or examining authority
      referred to above, then, for the purposes of this Section 3.01(a)(ii), the
      combined capital and surplus of such corporation shall be deemed to be its
      combined capital and surplus as set forth in its most recent report of
      condition so published.

                                      -16-
<PAGE>   77
            (b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 3.01(a), the Guarantee Trustee shall immediately resign
in the manner and with the effect set out in Section 3.02(c).

            (c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

            Section 3.02. Appointment, Removal and Resignation of Guarantee
Trustee.

            (a) Subject to Section 3.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor except during an
Event of Default.

            (b) The Guarantee Trustee shall not be removed in accordance with
Section 3.02(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.

            (c) The Guarantee Trustee appointed to office shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

            (d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 3.02 within 60 days after
delivery of an instrument of removal or resignation, the Guarantee Trustee
resigning or being removed may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.

            (e) No Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.

                                      -17-
<PAGE>   78
            (f) Upon termination of this Guarantee or removal or resignation of
the Guarantee Trustee pursuant to this Section 3.02, and before the appointment
of any Successor Guarantee Trustee, the Guarantor shall pay to the Guarantee
Trustee all amounts to which it is entitled to the date of such termination,
removal or resignation.

                                   ARTICLE IV
                                    GUARANTEE

            Section 4.01. Guarantee.

            (a) The Guarantor irrevocably and unconditionally agrees with the
Guarantee Trustee, the Initial Holder and the Holders from time to time of the
Company Preferred Securities, subject to the limitations set forth in this
Guarantee, to pay in full to the Initial Holder and each subsequent Holder of
Company Preferred Securities, whether such rights under this Guarantee are
asserted by the Guarantee Trustee or directly by any such Holder (without
duplication of amounts theretofore paid to the Holders of the Company Preferred
Securities by the Company), regardless of any defense, right of set-off or
counterclaim that the Company may have or assert:

                  (i) on each Mandatory Dividend Payment Date, Dividends on the
      Company Preferred Securities in an amount equal to the Mandatory Dividend
      Payment Amount;

                  (ii) on each other Dividend Payment Date, Dividends (if any)
      on the Company Preferred Securities that have become Definitive Dividends
      as to such Dividend Payment Date because the Guarantor did not deliver a
      No Dividend Instruction (as defined in the LLC Agreement);

                  (iii) on each Redemption Date, the Redemption Price payable
      with respect to the Company Preferred Securities called for redemption by
      the Company;

                  (iv) upon any voluntary or involuntary dissolution,
      liquidation or winding up of the Company, the Liquidation Distribution;
      and

                  (v) any Additional Amounts payable by the Company with respect
      to the payment set forth in clauses (i) through (iv), above, under the LLC
      Agreement;

                                      -18-
<PAGE>   79
(collectively, the "Guarantee Payments"); provided that, if a Bankruptcy Event
has occurred as to the Guarantor, the Guarantee Payments payable under clause
(i), (ii), (iii) and (iv) above of this Section 4.01 shall be an amount equal to
the lesser of (A) the aggregate amount of Guarantee Payments pursuant to such
clause of this Section 5.01 without giving effect to this proviso and (B) an
amount calculated as (1) the remaining assets of the Guarantor in the related
bankruptcy or insolvency proceeding after satisfaction of all claims which, as a
matter of law, are prior to those of holders of this Guarantee or any Parity
Guarantee multiplied by (2) a fraction, (x) the numerator of which is the
aggregate amount of Guarantee Payments pursuant to such clause of this Section
4.01 without giving effect to this proviso and (y) the denominator of which is
the aggregate principal or face amount of all claims under this Guarantee and
the Parity Guarantees. All Guarantee Payments shall include interest accrued on
such Guarantee Payments, at a rate per annum equal to the stated Dividend Rate
of the Company Preferred Securities, since the date of the claim asserted under
this Guarantee relating to such Guarantee Payments.

            (b) The Guarantor's obligation to make any of the payments listed in
(i) through (iii) of subsection (a) above may be satisfied by direct payment of
the required amounts (which shall be in United States dollars) by the Guarantor
to the Holders or by causing the Company to pay such amounts to the Holders.

            Section 4.02. Delivery of Guarantor Certificate. As of each (x)
Dividend Payment Date with respect to which the Company has not paid the full
amount of Dividends at the Dividend Rate payable as contemplated by clause (i)
or (ii), as applicable, of Section 4.01(a) or (y) Redemption Date with respect
to which the Company has not paid the Redemption Price in full, the Guarantor
shall deliver an Officers' Certificate to the Guarantee Trustee within five
Business Days after such Dividend Payment Date or Redemption Date, as
applicable, substantially in the form attached as Exhibit A (the "Guarantor
Certificate").

            Section 4.03. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of this Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Company or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.

                                      -19-
<PAGE>   80
            Section 4.04. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:

                  (a) the release or waiver, by operation of law or otherwise,
      of the performance or observance by the Company of any express or implied
      agreement, covenant, term or condition relating to the Company Preferred
      Securities to be performed or observed by the Company;

                  (b) the extension of time for the payment by the Company of
      all or any portion of the Dividends, Redemption Price, Liquidation
      Distribution or any other sums payable under the terms of the Company
      Preferred Securities or the extension of time for the performance of any
      other obligation under, arising out of, or in connection with, the Company
      Preferred Securities; provided that nothing in this Guarantee shall affect
      or impair any valid extension;

                  (c) any failure, omission, delay or lack of diligence on the
      part of the Holders of the Company Preferred Securities to enforce, assert
      or exercise any right, privilege, power or remedy conferred on such
      Holders pursuant to the terms of the Company Preferred Securities, or any
      action on the part of the Company granting indulgence or extension of any
      kind;

                  (d) the voluntary or involuntary liquidation, dissolution,
      sale of any collateral, receivership, insolvency, bankruptcy, assignment
      for the benefit of creditors, reorganization, arrangement, composition or
      readjustment of debt of, or other similar proceedings affecting, the
      Company or any of the assets of the Company;

                  (e) any invalidity of, or defect or deficiency in, the Company
      Preferred Securities;

                  (f) the settlement or compromise of any obligation guaranteed
      hereby or hereby incurred; or

                  (g) any other circumstance whatsoever that might otherwise
      constitute a legal or equitable discharge or defense of a guarantor, it
      being the intent of this Section 4.04 that the obligations of the
      Guarantor hereunder shall be absolute and unconditional under any and all
      circumstances.

            There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

                                      -20-
<PAGE>   81
            Section 4.05. Action Against Guarantor. The Guarantor waives any
right or remedy to require that any action be brought first against the Company
or any other person or entity before proceeding directly against the Guarantor.

            Section 4.06. Independent Obligations. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the Company
with respect to the Company Preferred Securities, and that the Guarantor shall
be liable as principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee notwithstanding the occurrence of any
event referred to in subsections (a) through (g), inclusive, of Section 4.04. It
is further understood that all rights of a Holder of a Company Preferred
Security against the Guarantor under this Guarantee, and all corresponding
obligations of the Guarantor to such Holder, are separate and independent of the
rights and corresponding obligations between the Guarantor and the respective
Holders of the other Company Preferred Securities.

            Section 4.07. Taxes. All payments in respect of the Guarantee
Payments (including interest accrued thereon, if any) by the Guarantor shall be
made without withholding or deduction for or on account of any Relevant Tax,
unless the withholding or deduction of such Relevant Tax is required by law. In
that event, the Guarantor shall pay, as further Guarantee Payments, such
additional amounts as may be necessary in order that the net amounts received by
a Holder (or a third party on its behalf) after such withholding or deduction
will equal the amount which would have been received in respect of the Guarantee
Payments (including interest accrued thereon, if any) in the absence of such
withholding or deduction ("Guarantee Additional Amounts"), except that no such
Guarantee Additional Amounts shall be payable to a Holder (or a third party on
its behalf) with respect to any Guarantee Payments (including interest accrued
thereon, if any), (i) to the extent that such Relevant Tax is imposed or levied
by virtue of such Holder (or the beneficial owner of Company Preferred
Securities to which such Guarantee Payments relate) (other than the Trust)
having some connection with the Relevant Jurisdiction, other than being a Holder
of Company Preferred Securities (or beneficial owner of Company Preferred
Securities) or (ii) to the extent that such the Relevant Tax is imposed or
levied by virtue of such Holder (or beneficial owner) (other than the Trust) not
having made a declaration of non-residence in, or other lack of connection with,
the Relevant Jurisdiction or any similar claim for exemption, if the Guarantor
or its agent has provided the beneficial owner of such Company Preferred
Securities or its nominee with at least 60 days' prior written notice of any
opportunity to make such a declaration or claim.

                                      -21-
<PAGE>   82
            Section 4.08. Rights Not Separately Transferable. This Guarantee is
a guarantee for the benefit of each Holder from time to time of Company
Preferred Securities with respect to each Company Preferred Security held by
such Holder. Upon transfer of any Company Preferred Securities to a third party,
a Holder thereof shall no longer have any rights hereunder with respect to such
Company Preferred Securities. The rights under this Guarantee with respect to a
Company Preferred Security are not separately transferable from such Company
Preferred Security. The Initial Holder, by its execution of this Guarantee,
hereby accepts the rights under this Guarantee as initial purchaser and acquirer
of the Company Preferred Securities with the understanding that such rights
shall be transferred by operation of law to any subsequent Holder acquiring a
Company Preferred Security from the Initial Holder or from a subsequent Holder
of Company Preferred Securities.

                                    ARTICLE V
                      LIMITATIONS OF TRANSACTIONS; RANKING

            Section 5.01.  Limitation of Transactions.

            (a) The Guarantor, for so long as any Company Preferred Securities
remain outstanding, shall not issue any preferred or preference shares ranking
senior on liquidation to its obligations under this Guarantee or give any
guarantee in respect of any preferred securities or preferred or preference
shares issued by any of its subsidiaries if such guarantee would rank senior to
this Guarantee, unless this Guarantee is amended to give the Holders of the
Company Preferred Securities such rights and entitlements as are contained in or
attached to such other guarantee so that this Guarantee ranks pari passu with
such guarantee and pari passu on liquidation with any declared dividend or
declared liquidation payments of such preferred or preference shares.

            (b) The Guarantor shall pay all amounts required to be paid pursuant
to this Guarantee in respect of any Dividends on the Company Preferred
Securities payable in respect of the most recent Dividend Period prior to any
dividend or other payment (except dividends in the form of the Ordinary Shares)
upon the Ordinary Shares.

            (c) The Guarantor, for so long as any Trust Preferred Securities or
Company Preferred Securities remain outstanding, shall not (i) issue any
liquidation preference participation rights (not being capital stock) ranking
senior to or pari passu with the right to liquidation payments under its Parity
Preferred Shares, (ii) create, incur or permit to exist any debt junior to its
obligations under this Guarantee or (iii) create, incur or permit to exist any
debt that ranks pari passu with this Guarantee unless such debt contains a
provision substantially similar to proviso contained in Section 4.01.

                                      -22-
<PAGE>   83
            (d) The Guarantor, for so long as any Trust Preferred Securities or
Company Preferred Securities remain outstanding, shall (i) maintain, or shall
cause any one or more Qualified Subsidiaries (each, a "Potential
Securityholder") to maintain, 100% ownership of the Company Common Securities.
The Guarantor may transfer or permit the transfer of the Company Common
Securities from one Potential Securityholder to another Potential
Securityholder; provided that prior to such transfer it has received an opinion
of a nationally recognized U.S. law firm experienced in such matters to the
effect that (A) the Company will continue to be treated as a partnership for
United States federal income tax purposes and such transfer will not cause the
Company to be classified as an association or publicly traded partnership
taxable as a corporation for United States federal income tax purposes, (B) such
transfer will not cause the Company or the Trust to be required to register
under the Investment Company Act and (C) such transfer will not adversely affect
the limited liability of the Holders of the Company Preferred Securities.

            (e) The Guarantor, for so long as any Trust Preferred Securities or
Company Preferred Securities remain outstanding, (i) shall use its commercially
reasonable efforts to ensure that the Company will not be an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes, (ii) shall cause the Company to remain a limited liability
company and not to voluntarily dissolve, wind up, liquidate or be terminated,
except as permitted by the LLC Agreement and (iii) shall use its commercially
reasonable efforts to ensure that the Trust will not be classified as other than
a grantor trust for United States federal income tax purposes.

            (f) The Guarantor, for so long as any of the Company Preferred
Securities are outstanding, shall, to the fullest extent permitted by law, not
permit, or take any action to cause, the dissolution, liquidation, termination
or winding up of the Company, unless the Guarantor is itself in liquidation.

            (g) If the Company Preferred Securities are distributed to Holders
of Trust Preferred Securities in connection with the involuntary or voluntary
dissolution, winding-up or liquidation of the Trust, the Guarantor shall use its
commercially reasonable efforts to cause the Company Preferred Securities to be
listed on the Luxembourg Stock Exchange or on such other national securities
exchange or similar organization as the Trust Preferred Securities are then
listed or quoted on.

                                      -23-
<PAGE>   84
            Section 5.02.  Ranking.

            (a) The Guarantee will constitute a general and unsecured obligation
of UBS AG and, in liquidation of UBS AG, will rank, both as to payment and in
liquidation:

                  (i) subordinate and junior to all deposits and other
      liabilities of the Guarantor (including those in respect of bonds, notes
      and debentures that do not expressly rank pari passu with the obligations
      of the Guarantor under this Agreement); and

                  (ii) senior to the Ordinary Shares and any other securities of
      the Guarantor expressed to rank junior to the most senior preference
      shares of the Guarantor (if any) from time to time outstanding.

The foregoing liabilities that rank senior to the Guarantee are collectively
called "UBS AG Senior Liabilities".

            (b) Payments under this Guarantee (other than payments upon a
winding-up or dissolution, by bankruptcy or otherwise, in Switzerland of the
Guarantor) are conditional upon the Guarantor not being in default in the
payment of UBS AG Senior Liabilities and being Solvent at the time of payment. A
report as to the insolvency of the Guarantor by two persons, each being a
managing director, director or other authorized officer or agent of the
Guarantor or employees of the independent accountants of the Guarantor will, in
the absence of manifest error be treated and accepted by the Guarantor, the
holders of Company Preferred Securities and all other interested parties as
correct and sufficient evidence thereof.

                                   ARTICLE VI
                                   TERMINATION

            Section 6.01. Termination. This Guarantee shall terminate upon, and
be of no further force and effect from the earlier of (i) full payment of the
Redemption Price of all Company Preferred Securities or purchase and
cancellation of all Company Preferred Securities or (ii) upon full payment of
the Liquidation Distribution, plus Additional Amounts thereon, if any, as
payable upon liquidation of the Company. Notwithstanding the foregoing, this
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Company Preferred Securities must restore
payment of any sums paid under the Company Preferred Securities or under this
Guarantee for any reason whatsoever.

                                      -24-
<PAGE>   85
                                   ARTICLE VII
                                 INDEMNIFICATION

            Section 7.01.  Exculpation.

            (a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, liability, expense, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith in
accordance with this Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Guarantee or by law, except that an Indemnified
Person shall be liable for any such loss, liability, expense, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.

            (b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Dividends to Holders of Company Preferred Securities
might properly be paid.

            Section 7.02. Indemnification. The Guarantor agrees to indemnify
each Indemnified Person for, and to hold each Indemnified Person harmless
against, any and all loss, liability, damage, claim or expense (including taxes
other than taxes based on the income of any such Indemnified Person) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 7.02 shall
survive the termination of this Guarantee or the earlier resignation or removal
of the Guarantee Trustee.

                                      -25-
<PAGE>   86
                                  ARTICLE VIII
                                  MISCELLANEOUS

            Section 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Company Preferred Securities then outstanding.

            Section 8.02. Amendments. Except for those changes (i) required
under Section 5.01(a) above, which may be made unilaterally by the Guarantor
without the consent of the Holders of the Company Preferred Securities, or (ii)
provided for in the two penultimate sentences of this paragraph, this Guarantee
may be modified by the Guarantor and the Guarantee Trustee only with the prior
approval of the Holders of not less than 662/3% in liquidation amount of the
Company Preferred Securities (excluding any Company Preferred Securities held by
the Guarantor or any of its Affiliates, other than Company Preferred Securities
purchased or acquired by the Guarantor or its Affiliates in connection with
transactions effected by or for the account of customers of the Guarantor or any
of its Affiliates in connection with the distribution or trading of or
market-making in connection with such securities and except that persons (other
than Affiliates of the Guarantor) to whom the Guarantor or any of its
subsidiaries have pledged Company Preferred Securities may vote or convert with
respect to such pledged securities pursuant to the terms of such pledge). This
Guarantee may be amended without the consent of the Holders of the Company
Preferred Securities to (i) cure any ambiguity, (ii) correct or supplement any
provision in this Guarantee that may be defective or inconsistent with any other
provision of this Guarantee, (iii) add to the covenants, restrictions or
obligations of the Guarantor, (iv) conform to any change in the Investment
Company Act, the Trust Indenture Act or the rules or regulations of either such
Act and (v) modify, eliminate and add to any provision of this Guarantee to such
extent as may be necessary or desirable; provided that no such amendment made in
reliance upon clause (v) above shall have a material adverse effect on the
rights, preferences or privileges of the Holders of the Company Preferred
Securities. Except as provided in the preceding sentence, Sections 4.01, 4.02,
4.07 and the form of Exhibit A may not be amended without the prior approval of
each Holder of the Company Preferred Securities. Any amendment hereof in
accordance with this Section 8.02 shall be binding on all Holders of Company
Preferred Securities.

            Section 8.03.  Judgment Currency Indemnity.

            (a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert an amount due from the Guarantor under any provision of
this Guarantee to a currency other than U.S. dollars, the parties agree, to the
fullest extent that

                                      -26-
<PAGE>   87
they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures Wilmington Trust Company
could purchase such other currency with U.S. dollars at its Wilmington office on
the second Business Day preceding the day on which final judgment is given.

            (b) The obligations of the Guarantor in respect of any amount due to
the Guarantee Trustee or any Holders under this Agreement shall, notwithstanding
any judgment in a currency other than U.S. dollars, be discharged only to the
extent that on the Business Day following receipt by the Guarantee Trustee or
such Holders, as the case may be, of any amount adjudged to be so due in such
other currency the Guarantee Trustee or such Holders, as the case may be, may in
accordance with normal banking procedures purchase U.S. dollars with such other
currency.

            (c) If the amount of U.S. dollars so purchased is less than the
amount originally due to the Guarantee Trustee or such Holders, as the case may
be, in U.S. dollars, the Guarantor agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify the Guarantee Trustee or such Holders, as the case may
be, against such loss.

            (d) If the amount of dollars so purchased exceeds the amount
originally due to the Guarantee Trustee or such Holders, as the case may be, in
U.S. dollars, agree to remit any remaining amount to the Guarantor.

            Section 8.04. Assignment of the Guarantor. The Guarantor may not
assign its obligations under the Guarantee, except in the case of a merger or
consolidation where the Guarantor is not the surviving entity, or a sale of
substantially all of its assets, and then only to the entity which is the
survivor of such merger or consolidation or the Purchaser in such sale.

            Section 8.05. Notices. All notices provided for in this Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:

                  (a) If given to the Guarantee Trustee, at the Guarantee
      Trustee's mailing address set forth below:

            Wilmington Trust Company
            1100 North Market Street
            Wilmington, DE 19890
            Attention:  Corporate Trust Administration
            Telephone No.:  302-651-1000

                                      -27-
<PAGE>   88
                  (b) If given to the Guarantor, at the Guarantor's mailing
      address set forth below (or such other address as the Guarantor may give
      notice of to the Holders of the Company Preferred Securities):

            UBS AG

            Bahnhofstrasse 45
            Zurich, Switzerland
            Attention:  General Counsel
            Telephone No.:  011 41-1-234 11 11

            and

            Aeschenvorstadt 1
            Basel, Switzerland
            Attention:  General Counsel
            Telephone No.:  011 41-61-288 20 20

            With copies to:

            UBS AG
            299 Park Avenue
            New York, NY 10171
            Attention:  Robert Dinerstein
            Telephone:  212-821-3301
            Facsimile:  212-821-5804

                  (c) If given to any Holder of Company Preferred Securities, at
      the address set forth on the books and records of the Company.

            All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

                                      -28-
<PAGE>   89
            SECTION 8.06. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

            Section 8.07. Jurisdiction. Any claim or proceeding brought by the
Guarantee Trustee on behalf of Holders or a Holder to enforce the obligations of
the Guarantor hereunder shall be brought exclusively in a court of competent
jurisdiction in New York. Any claim or proceeding relating to the application of
Articles 2 and 3, and the definitions of terms as used therein, including,
without limitation, any claims, counter-claims and cross-claims asserted against
the Guarantee Trustee in connection therewith, shall be brought in a court of
competent jurisdiction in the State of New York.

                                      -29-
<PAGE>   90
            This GUARANTEE is executed as of the day and year first above
written.

                              UBS AG,
                              as Guarantor

                              By: _______________________________
                                  Name:  Robert Mills
                                  Title: Chief Financial Officer- Americas and
                                         Regional Chief Operating Officer

                              By: _______________________________
                                  Name:  Robert Dinerstein
                                  Title: Managing Director

WILMINGTON TRUST COMPANY,
as Guarantee Trustee

By: ______________________________
    Name:
    Title:

<PAGE>   91
                                                                       EXHIBIT A

                                     UBS AG
                              OFFICERS' CERTIFICATE

[Date]

      The undersigned, Robert Mills, Chief Financial Officer -- Americas and
Regional Chief Operating Officer, and Robert Dinerstein, Managing Director, of
UBS AG, a bank organized under the laws of Switzerland, pursuant to Section 4.02
of the Subordinated Guarantee Agreement, dated as of -, 2001 (the
"Guarantee"), executed and delivered by UBS AG, as guarantor, Wilmington Trust
Company, in its capacity as trustee pursuant to the Trust Agreement, and
Wilmington Trust Company, as trustee, for the benefit of the Holders from time
to time of the -% Noncumulative Company Preferred Securities (the "Company
Preferred Securities") of UBS Preferred Funding Company LLC III, do hereby
certify as of the date hereof on behalf of UBS AG as follows (capitalized terms
used herein without definitions have the meanings assigned to them in the
Guarantee):

            1. We have read and are familiar with the provisions of the
     Guarantee (including, without limitation, Section 4.02 thereof) and all
     definitions therein.

            2. We have reviewed all corporate documents necessary to state the
     facts contained herein and are duly authorized to certify to those facts.

            3. In our opinion, we have made such examination or investigation as
     is necessary to enable us to express an informed opinion as to the facts
     certified herein.

            4. [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries has
     redeemed, repurchased or otherwise acquired (other than (I) in connection
     with transactions effected by or for the account of customers of the
     Guarantor or any of its subsidiaries or in connection with the
     distribution, trading or market-making in respect of such securities, (II)
     in connection with the satisfaction by the Guarantor or any of its
     subsidiaries of its obligations under any employee benefit plans or similar
     arrangements with or for the benefit of employees, officers, directors or
     consultants, (III) as a result of a reclassification of the capital stock
     of the Guarantor or any of its subsidiaries or the exchange or conversion
     of one class or series of such capital stock for another class or series of
     such capital stock or (IV) the purchase of fractional interests in shares
     of the capital stock of the Guarantor or any of its subsidiaries pursuant
     to the conversion or exchange provisions of such capital stock

                                       A-1
<PAGE>   92
     or the security being converted or exchanged) for any consideration (and
     moneys [have] [have not] been paid to or made available for a sinking fund
     or for redemption of any such shares) any Ordinary Shares or any Parity
     Securities during the twelve month period immediately preceding and
     including the date hereof.

            5. [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries has
     declared or made a dividend or other payment in respect of the Ordinary
     Shares that pay dividends annually, if any, during the twelve month period
     immediately preceding and including the date hereof.

            6. [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries has
     declared or made a dividend or other payment in respect of the Ordinary
     Shares that pay dividends semi-annually, if any, during the six month
     period immediately preceding and including the date hereof.

            7. [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries has
     declared or made a dividend or other payment in respect of the Ordinary
     Shares that pay dividends quarterly, if any, during the three month period
     immediately preceding and including the date hereof.

            8. (a) [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries
     has declared or made a dividend or other payment in respect of the Parity
     Securities that pay dividends annually, if any, during the twelve month
     period immediately preceding and including the date hereof.

            (b) A dividend or other payment in respect of the Parity Securities
     that pay dividends annually, if any, was declared or made [in full] [at __%
     of the stated dividend rate for such Parity Securities].

            9. (a) [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries
     has declared or made a dividend or other payment in respect of its Parity
     Securities that pay dividends semi-annually, if any, during the six month
     period immediately preceding and including the date hereof.

            (b) A dividend or other payment in respect of the Parity Securities
     that pay dividends semi-annually, if any, was declared or made [in full]
     [at __% of the stated dividend rate for such Parity Securities].

            10. (a) [Neither] [Either] UBS AG [nor] [or] any of its subsidiaries
      has declared or made a dividend or other payment in respect of the Parity
      Securities

                                       A-2
<PAGE>   93
     that pay dividends quarterly, if any, during the three month period
     immediately preceding and including the date hereof.

            (b) A dividend or other payment in respect of the Parity Securities
     that pay dividends quarterly, if any, was declared or made [in full] [at
     __% of the stated dividend rate for such Parity Securities.]

                                       A-3
<PAGE>   94
         IN WITNESS WHEREOF, the undersigned have duly executed as of the date
first set forth above.

                              UBS AG

                              By: _______________________________
                                  Name:  Robert Mills
                                  Title: Chief Financial Officer- Americas and
                                         Regional Chief Operating Officer

                              By: _______________________________
                                  Name:  Robert Dinerstein
                                  Title: Managing Director

<PAGE>   95
                                                                         Annex B
                                                     to the Amended and Restated
                                             Limited Liability Company Agreement

                                    FORM OF

                            ADMINISTRATION AGREEMENT

                                     BETWEEN

                      UBS PREFERRED FUNDING COMPANY LLC III

                                       AND

                                     UBS AG,
                       ACTING THROUGH ITS STAMFORD BRANCH

                              DATED AS OF |X|, 2001
<PAGE>   96
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Section 1.    Administrative Services                                         2
Section 2.    Compensation; Indemnities                                       3
Section 3.    Term                                                            4
Section 4.    Obligation to Supply Information                                4
Section 5.    The Administrator's Liability and Standard of Care              4
Section 6.    Reliance on Information Obtained from Third Parties             5
Section 7.    Notices                                                         5
Section 8.    Amendment                                                       6
Section 9.    No Joint Venture                                                6
Section 10.   Assignment                                                      6
Section 11.   Governing Law                                                   6
Section 12.   Submission to Jurisdiction                                      6
Section 13.   Execution in Counterparts                                       7
Section 14.   Section Headings                                                7
Section 15.   Entire Agreement                                                7
</TABLE>
<PAGE>   97
                  ADMINISTRATION AGREEMENT (this "Agreement"), dated as of |X|,
2001, between UBS Preferred Funding Company LLC III, a Delaware limited
liability company (the "Company") and UBS AG, a bank organized under the laws of
Switzerland (the "Bank"), acting through its Stamford branch, as administrator
(the "Administrator").

                                   WITNESSETH

                  WHEREAS, the Company proposes to engage in the following
activities (among others):

                           (a) to purchase newly issued undated subordinated
         notes (the "Subordinated Notes"), issued by the Bank through its Cayman
         Islands branch office, in an aggregate principal amount of $|X|;

                           (b) to issue (i) 2,000 common limited liability
         company interests in the Company (the "Company Common Securities"),
         representing all of the common limited liability company interests in
         the Company, to the Bank, acting through its Cayman Islands branch, at
         an aggregate purchase price of [$2,000]; and (ii) |X| % Noncumulative
         Company Preferred Securities with an aggregate liquidation preference
         of $|X| (the "Company Preferred Securities"), representing preferred
         limited liability company interests in the Company to UBS Preferred
         Funding Trust II, a Delaware statutory business trust (the "Trust"),
         the proceeds of which will be used to purchase the Subordinated Notes
         and pay certain expenses relating to the foregoing offering;

                           (c) to enter into any agreements in connection with
         the foregoing (together with the Amended and Restated Limited Liability
         Company Agreement of the Company (the "Company Agreement"), the
         "Transaction Documents");

                           (d) to enter into any agreement providing for the
         management and administration of the activities of the Company; and

                           (e) to engage in such activities and to exercise such
         powers permitted to limited liability companies under the laws of the
         State of Delaware that are incidental to or connected with the
         foregoing business or purposes or necessary to accomplish the foregoing
         or any other lawful purpose which is, in each case, not inconsistent
         with the Company Agreement as amended from time to time; and

                  WHEREAS, the Company has requested that the Administrator
provide assistance to the Company and perform various services for the Company,
and the

                                       -1-
<PAGE>   98
Administrator is willing to furnish such services on the terms and conditions
herein set forth. In connection herewith, the Administrator has also requested
certain indemnities from the Company.

                  NOW, THEREFORE, in mutual consideration of these premises, the
parties hereto agree as follows:

                  Section 1. Administrative Services. The Administrator hereby
agrees to provide corporate management and administrative services to the
Company and the Company hereby authorizes the Administrator to provide such
services, including:

                           (a) taking such actions, as Administrator on behalf
         of the Company (including through directors or officers of the Company
         or through employees of the Administrator who are authorized by the
         Company), as are necessary or desirable for the Company to remain
         organized and qualified in all appropriate jurisdictions and to carry
         out its business in such manner as the directors of the Company
         determine and as the Company shall from time to time reasonably request
         in order to effect transactions of the type described in the
         Preliminary Statement to this Agreement;

                           (b) providing, or causing to be provided, clerical,
         bookkeeping and other services necessary and appropriate for the
         Company, including, without limitation, the following services:

                                    (i) providing such banking and investment
                  services as may be agreed upon from time to time;

                                    (ii) providing from its employees
                  signatories to the Company's bank and investment accounts;

                                    (iii) maintaining any books and records that
                  are required in the ordinary course of the business of the
                  Company (the "Business"), are agreed between the parties and
                  are required in order to comply with any laws or regulations
                  of the State of Delaware and in such form and manner as may be
                  agreed upon from time to time;

                                    (iv) preparing such periodic reports and
                  accounting information as may be requested from time to time
                  by the board of directors;

                                    (v) dealing with correspondence relating to
                  the Business;

                                       -2-
<PAGE>   99
                                    (vi) providing a Company Secretary;

                                    (vii) providing non-exclusive telephone,
                  telecopy, telex, post office box and duplicating facilities
                  and within its premises and such other non-exclusive space and
                  ancillary services as may be necessary for the other purposes
                  of the Business including facilities for meetings of the
                  directors of the Company from time to time;

                                    (viii) complying with the terms of the
                  Company Agreement all agreements to which the Company is a
                  party and, without prejudice to the foregoing, not entering
                  into, on behalf of the Company, any commitments, loans or
                  obligations nor charging, mortgaging, pledging, encumbering or
                  otherwise restricting or disposing of the Company's property
                  or assets and generally not taking any action inconsistent
                  with the Business; and

                                    (ix) keeping confidential all documents,
                  materials and other information relating to the Business and
                  not disclosing any of the aforesaid without the prior consent
                  of the Company unless it shall in good faith determine that
                  such disclosure is necessary to protect the interests of the
                  Administrator; and

                           (c) undertaking such other administrative services as
         may be reasonably requested by the Company, including providing notices
         to third parties on behalf of the Company and providing such other
         services as are necessary or desirable for the Company to carry out its
         duties and obligations under the Transaction Documents.

                  Any of the above services may, if the Administrator or the
Company deems it necessary or desirable, be subcontracted by the Administrator;
provided that prior written consent is obtained from the Company of such
subcontract and, provided further that notwithstanding such subcontract, the
Administrator shall remain responsible for performance of the services set forth
above.

                  Section 2. Compensation; Indemnities.

                  (a) The Company agrees to pay to the Administrator, in
consideration for the Administrator's services described in paragraphs (a)-(c)
of Section 1, an annual fee as determined periodically by the Company and the
Administrator, which fee in no event shall exceed the value of the services
provided by the Administrator to the Company on an arm-length basis.

                                       -3-
<PAGE>   100
                  (b) The Company shall pay and shall indemnify and hold
harmless the Administrator and the Administrator's directors, officers,
employees and agents (each of the foregoing an "Administrator Indemnified
Person") from and against any and all losses, liabilities (including liabilities
for penalties), actions, suits, judgments, demands, damages, costs and expenses
(including, without limitation, under any securities laws, rules or regulations)
arising from or relating to the transactions contemplated hereby (all of the
foregoing being collectively referred to as "Indemnified Amounts"), provided,
however, that the Company shall have no obligation to indemnify any
Administrator Indemnified Person hereunder in respect of Indemnified Amounts to
the extent any such losses, liabilities, actions, suits, judgments, demands,
damages, costs and expenses resulted from the negligence or willful misconduct
of such Administrator Indemnified Person.

                  (c) The Administrator shall pay and shall protect, indemnify
and hold harmless the Company and its directors, officers, employees and agents
and all Persons affiliated with the Company (each of the foregoing a "Company
Indemnified Person") from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages, costs
and expenses (including, without limitation, reasonable fees and expenses of
counsel) of any nature (including, without limitation, under any securities
laws, rules or regulations) arising from or relating to the Administrator's
negligence or willful misconduct or that of its directors, officers, employees
and agents in connection with the exercise of the Administrator's rights and/or
the performance of the Administrator's duties hereunder.

                  (d) This Section 2 shall survive the termination of this
Agreement.

                  Section 3. Term. The Company may terminate this Agreement upon
at least 90 days' written notice to the Administrator.

                  Section 4. Obligation to Supply Information. The Company shall
forward to the Administrator such information in connection with the Transaction
Documents as the Administrator may from time to time reasonably request in
connection with the performance of its obligations hereunder.

                  Section 5. The Administrator's Liability and Standard of Care.
The Administrator assumes no liability for anything other than the services
rendered by it pursuant to Section 1. Without limiting the generality of the
foregoing, it is agreed that the Administrator assumes no liability with respect
to any of the Company's obligations under the Transaction Documents.

                  The Administrator shall perform its duties hereunder
diligently and with the same standard of care exercised by a prudent person in
connection with the performance of the same or similar duties and, in no event
with less care than the

                                       -4-
<PAGE>   101
Administrator exercises or would exercise in connection with the same or similar
obligations if those obligations were the direct obligations of the
Administrator.

                  Section 6. Reliance on Information Obtained from Third
Parties. The Company recognizes that the accuracy and completeness of the
records maintained and the information supplied by the Administrator hereunder
is dependent upon the accuracy and completeness of the information obtained by
the Administrator from the parties to the Transaction Documents and other
sources and the Administrator shall not be responsible for any inaccuracy in the
information so obtained or for any inaccuracy in the records maintained by the
Administrator hereunder that may result therefrom.

                  Section 7. Notices. All notices and other communications to be
given shall be in writing (including by facsimile transmission) and delivered to
the relevant address or number specified below (or such other address or number
as may be notified in accordance with this Section 7) and shall take effect at
the time of receipt.

                  The Company:

                  UBS Preferred Funding Company LLC III
                  c/o UBS AG
                  677 Washington Boulevard
                  Stamford, CT 06901
                  Attention:     Robert Mills
                  Telephone:     203-719-6065
                  Facsimile:     203-719-0340

                  With copies to:

                  UBS AG
                  299 Park Avenue
                  New York, NY 10171
                  Attention:     Robert Dinerstein
                  Telephone:     212-821-3301
                  Facsimile:     212-821-5804

                  The Administrator:

                  UBS AG (Stamford)

                  UBS AG
                  677 Washington Boulevard
                  Stamford, CT 06901

                                       -5-
<PAGE>   102
                  Attention:     Robert Mills
                  Telephone:     203-719-6065
                  Facsimile:     203-719-0340

                  With copies to:

                  UBS AG
                  299 Park Avenue
                  New York, NY 10171
                  Attention:     Robert Dinerstein
                  Telephone:     212-821-3301
                  Facsimile:     212-821-5804

                  Section 8. Amendment. No waiver, alteration, modification,
amendment or supplement of the terms of this Agreement shall be effective unless
accomplished by written instrument signed by all parties hereto.

                  Section 9. No Joint Venture. Nothing contained in this
Agreement shall constitute the Administrator and the Company as members of any
partnership, joint venture, association, syndicate or unincorporated business.

                  Section 10. Assignment. This Agreement may not be assigned by
any party without the prior written consent of the other parties, provided that
the parties hereby agree that if the Bank sells, assigns or otherwise transfers
the Company Common Securities to a wholly owned subsidiary of the Bank, the
Bank's rights (and obligations) under this Agreement (including those of the
Administrator) may be assigned to such subsidiary. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

                  Section 11. GOVERNING LAW. THIS ADMINISTRATION AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, UNITED STATES OF AMERICA.

                  Section 12. Submission to Jurisdiction. The Bank irrevocably
consents and agrees, that any legal action, suit or proceeding against it with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement may be brought in the courts of the State of New
York or the courts of the United States of America located in The City of New
York and until amounts due and to become due under this Agreement have been
paid, hereby irrevocably consents and submits to the non-exclusive jurisdiction
of each such court in personam, generally and unconditionally with respect to
any such action, suit or proceeding for itself and in respect of its properties,
assets and revenues. Service of process upon the branch in any such action, suit
or proceeding shall be deemed in every respect service of process upon the

                                       -6-
<PAGE>   103
Bank. The Bank hereby irrevocably and unconditionally waives, to the fullest
extent permitted by law, except as otherwise provided for in this Agreement, any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions, suit or proceedings brought in the United States Federal
courts located in The City of New York or the courts of the State of New York
and hereby further irrevocably and unconditionally waive and agree not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum. The provisions of this
Section 12 shall survive any termination of this Agreement, in whole or in part.

                  Section 13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Agreement.

                  Section 14. Section Headings. Section headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.

                  Section 15. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings with respect to
such matters between the parties.

                                       -7-
<PAGE>   104
                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.

                         UBS AG,
                         acting through its Stamford branch

                         By:
                             ---------------------------------------
                             Name: Robert Mills
                             Title:   Chief Financial Officer- Americas and
                             Regional Chief Operating Officer

                         By:
                             ---------------------------------------
                             Name: Robert Dinerstein
                             Title:   Managing Director

                         UBS PREFERRED FUNDING COMPANY LLC III

                         By:
                             ---------------------------------------
                             Name: Robert Mills
                             Title:   President and Managing Director

<PAGE>   105
                                                                         Annex D
                                                     to the Amended and Restated
                                             Limited Liability Company Agreement

                      [Form of Subordinated Note of UBS AG]

                                       D-1
<PAGE>   106
                                                                         Annex D

                       FORM OF SUBORDINATED NOTE

                                     UBS AG,
                    acting through its Cayman Islands branch

                         -% PERPETUAL SUBORDINATED NOTE

            UBS AG, a bank organized under the laws of Switzerland (the "Bank"),
acting through its Cayman Islands branch (the "Cayman Islands branch"), for
value received, hereby promises to pay to UBS PREFERRED FUNDING COMPANY LLC III,
a Delaware limited liability company (the "Company"), principal and interest on
the principal amount of this Subordinated Note (this "Subordinated Note"), under
the terms and conditions described hereunder.

            Section 1. Definitions. The following terms are used herein with the
meanings assigned to them below:

                  "Administrative Action" means any judicial decision, official
      administrative pronouncement, published or private ruling, regulatory
      procedure, notice or announcement (including any notice or announcement of
      intent to adopt such procedures or regulations) by any legislative body,
      court, governmental authority or regulatory body having appropriate
      jurisdiction.

                  "Bank" means UBS AG, a bank organized under the laws of
      Switzerland, acting through its Cayman Islands branch.

                  A "Bankruptcy Event" shall be deemed to occur if (i) at any
      time the Bank's unconsolidated unsubordinated liabilities exceed its
      unconsolidated total assets (valued at the higher of their going-concern
      and their liquidation value), as calculated based on the most recent
      unconsolidated interim balance sheet of the Bank and the unsubordinated
      creditors of the Bank do not agree to subordinate their claims to the
      extent that such liabilities exceed such assets; or (ii) the Swiss Federal
      Banking Commission exercises the broad discretion granted to it under the
      Swiss Banking Law before the occurrence of such an excess as described in
      (i), above, by withdrawing the banking license of the affected bank, which
      has then been required to go into liquidation pursuant to Article 23
      quinquies of the Swiss Banking Law.

                                       D-1
<PAGE>   107
                  "Business Day" means a day on which (i) the Trans-European
      Automated Real-Time Gross Settlement Express Transfer System ("TARGET") is
      operating, (ii) banks are open for business and carrying out transactions
      in U.S. dollars in London, Luxembourg and Wilmington, Delaware, U.S.A.

                  "Capital Event" means the determination by the Bank after
      consultation with the Swiss Federal Banking Commission that the Company
      Preferred Securities cannot be included in calculating the Tier 1 capital
      of the Bank on a consolidated basis.

                  "Cayman Islands branch" means the branch of the Bank located
      in the Cayman Islands.

                  "Company" means UBS Preferred Funding Company LLC III, a
      Delaware limited liability company.

                  "Company Agreement" means the Amended and Restated Limited
      Liability Company Agreement of the Company, as amended and restated as of
      the Issue Date of the Company Preferred Securities.

                  "Company Common Securities" means the securities of the
      Company representing the common limited liability company interests in the
      Company.

                  "Company Preferred Securities" means the -% Noncumulative
      Company Preferred Securities, aggregate liquidation preference $-, offered
      by the Company pursuant to a Prospectus dated - 2001 together with any
      subsequent offering by the Company of -% Noncumulative Company Preferred
      Securities, each representing preferred limited liability company
      interests in the Company.

                  "Dividend Payment Date" means, with respect to dividends on
      the Company Preferred Securities, the date on which such dividends are
      payable under the Company Agreement.

                  "Eligible Investments" means, pursuant to the Investment
      Policies, the assets or investments which the Company may hold and consist
      of (i) the Subordinated Notes and (ii) other securities issued by the Bank
      acting through a branch, agency or other office located outside of the
      United States or by a non- U.S. branch of a non-U.S. subsidiary of the
      Bank.

                                       D-2
<PAGE>   108
                  "Interest Payment Date" means, with respect to the
      Subordinated Notes, each date on which interest is payable, as specified
      in Section 3(a).

                  "Interest Period" has the meaning ascribed thereto in Section
      3.

                  "Investment Company Act Event" means the receipt by the Bank
      of an opinion of a nationally recognized law firm in the United States
      experienced in such matters to the effect that there is more than an
      insubstantial risk that the Company or the Trust is an "investment
      company" within the meaning of the 1940 Act.

                  "Investment Policies" means the investment policies of the
      Company as set forth in Annex F of the Company Agreement.

                  "Issue Date" means the date of initial issuance of the Company
      Preferred Securities and the Trust Preferred Securities.

                  "1940 Act" means the Investment Company Act of 1940, as
      amended.

                  "Subordinated Notes" means the -% Perpetual Subordinated
      Notes issued by the Cayman Islands branch under the Subordinated Notes
      Purchase Agreement, including this Subordinated Note.

                  "Subordinated Notes Purchase Agreement" means the Subordinated
      Notes Purchase Agreement, dated -, 2001, between the Bank, acting
      through the Cayman Islands branch, and the Company.

                  "Swiss Federal Banking Commission" means the Swiss Federal
      Banking Commission and, if any successor governmental authority succeeds
      to the bank regulatory functions of the Swiss Federal Banking Commission
      in Switzerland, such successor governmental authority; provided, however,
      that if the Bank becomes domiciled in a jurisdiction other than
      Switzerland, then each reference herein to the Swiss Federal Banking
      Commission shall be deemed to instead refer to the governmental authority
      having primary regulatory authority with respect to the Bank's capital
      adequacy in such other jurisdiction.

                  "Tax Event" means the receipt by the Bank of an opinion of a
      nationally recognized law firm or other tax advisor (which may be an
      accounting firm) in Switzerland or the United States, as appropriate,
      experienced in such matters to the effect that there is more than an
      insubstantial risk that (A) the Company or the Trust is or will be subject
      to more than a de minimis amount of additional taxes, duties or other
      governmental charges, (B) the Bank is or will be

                                       D-3
<PAGE>   109
      required to pay any additional amounts in respect of any taxes, duties or
      other governmental charges with respect to payments of interest or
      principal on the Subordinated Notes and with respect to any payments on
      the Trust Preferred Securities, (C) the Company is or will be required to
      pay any additional amounts in respect of any taxes, duties or other
      governmental charges with respect to payments of dividends on the Company
      Preferred Securities or the Trust is or will be required to pay any
      additional amounts in respect of any taxes, duties or other governmental
      charges with respect to distributions on the Trust Preferred Securities,
      or (D) the treatment of any of the Company's items of income, gain, loss,
      deduction or expense, or the treatment of any item of income, gain, loss,
      deduction or expense of the Bank related to the Subordinated Notes or its
      ownership of the Company, in each case as reflected on the tax returns
      (including estimated returns) filed (or to be filed) by the Company or the
      Bank, will not be respected by a taxing authority, as a result of which
      the Company or the Bank is or will be subject to more than a de minimis
      amount of additional taxes, duties or other governmental charges or civil
      liabilities, the effect of which cannot be avoided by the Company or the
      Bank taking reasonable measures available to it without any adverse effect
      on or material cost to the Bank or the Company (as determined by the Bank
      in its sole discretion).

                  "Trust" means UBS Preferred Funding Trust III, a Delaware
      statutory business trust.

                  "Trust Preferred Securities" means the -% Noncumulative
      Trust Preferred Securities, aggregate liquidation amount $-, offered by
      the Trust together with any subsequent offering by the Trust of -%
      Noncumulative Trust Preferred Securities, in each case representing an
      equal number of Company Preferred Securities.

                  "UBS AG Senior Liabilities" has the meaning set forth in
      Section 6(a).

                  "U.S. dollars," "dollars," "U.S.$" and "$" mean the currency
      of the United States of America.

            Section 2. Form of Subordinated Notes. This Subordinated Note is one
of a duly authorized issue of the Subordinated Notes of the Bank in the
aggregate principal amount of $- designated as its -% Perpetual Subordinated
Notes and purchased pursuant to the Subordinated Notes Purchase Agreement. The
Subordinated Notes are represented by a single definitive note in registered
form.

                                       D-4
<PAGE>   110
            Section 3.  Payments of Interest.

            (a) Interest on the Subordinated Notes is payable from the date of
initial issuance as follows (or, if any such day is not a Business Day, the next
Business Day, but without any additional interest or other payment in respect of
such delay) (each an "Interest Payment Date" and the period from and including
an Interest Payment Date, or the date of initial issuance, as applicable, to but
not including the next Interest Payment Date, an "Interest Period"):

                  for each Interest Period at a fixed rate per annum on the
      principal amount of this Subordinated Note equal to -% (calculated on
      the basis of a 360-day year consisting of twelve 30-day months); and

            (b) Interest due on an Interest Payment Date is deferrable at the
option of the Cayman Islands branch to the extent that, pursuant to the Company
Agreement, dividends on the Company Preferred Securities due on the
corresponding Dividend Payment Date would constitute Nondefinitive Dividends (as
defined in the Company Agreement). Interest deferred in this manner will not
itself bear interest.

            Section 4. Redemption. The Subordinated Notes are redeemable with
the consent of the Swiss Federal Banking Commission and at the option of the
Cayman Islands branch:

                  (a) on the Interest Payment Date in - 2006 or any Interest
      Payment Date occurring after that date, in whole or in part, at a
      redemption price equal to 100% of their principal amount plus interest
      accrued but unpaid to the date fixed for redemption; and

                  (b) prior to the Interest Payment Date in - 2006, in whole
      but not in part, if a Tax Event an Investment Company Act Event or a
      Capital Event occurs at a redemption price equal to 100% of their
      principal amount plus interest accrued but unpaid to the date fixed for
      redemption, or

            Section 5. Additional Amounts. If the Cayman Islands branch is
required to withhold any taxes, duties or other governmental changes with
respect to any payment in respect of this Subordinated Note, the Cayman Islands
branch will pay such additional amounts as shall be required so that the amount
received by the Company under this Subordinated Note is not less than the amount
that would have been received in the absence of any such additional taxes,
duties or other governmental charges.

                                       D-5
<PAGE>   111
            Section 6.  Subordination.

            (a) This Subordinated Note constitutes a general and unsecured
obligation of the Bank and, in liquidation of the Bank, will rank, both as to
payment and in liquidation:

                  (i) subordinate and junior to all deposits and other
      liabilities of the Bank (including those in respect of bonds, notes and
      debentures that do not expressly rank pari passu with the obligations of
      the Bank under the Subordinated Notes; and

                  (ii) senior to the ordinary shares and any other securities of
      the Bank expressed to rank junior to the most senior preference shares of
      the Bank (if any) from time to time outstanding.

The foregoing liabilities that rank senior to this Subordinated Note are
collectively called "UBS AG Senior Liabilities".

            (b) Payments under the Subordinated Notes (other than payments upon
a winding-up or dissolution, by bankruptcy or otherwise, in Switzerland of the
Bank) are conditional upon the Bank (i) not being in default in the payment of
UBS AG Senior Liabilities, (ii) being able to pay its debts as they fall due and
(iii) having consolidated gross assets in excess of consolidated gross
liabilities (other than liabilities to persons who are not senior creditors) at
the time of payment. A report as to the insolvency of the Bank by two persons,
each being a managing director, director or other authorized officer or agent of
the Bank or employees of the independent accountants of the Bank will, in the
absence of manifest error be treated and accepted by the Bank, the holders of
Company Preferred Securities and all other interested parties as correct and
sufficient evidence thereof.

            Section 7. Failure of Payment. If the Bank fails to make a payment
when due of an installment of interest on this Subordinated Note, the Company
shall be entitled to seek to enforce payment only of the defaulted installment
of interest but not in respect of any failure to pay interest due under this
Subordinated Note that was deferred because the dividends on the Company
Preferred Securities on the corresponding Dividend Payment Date would have
constituted Nondefinitive Dividends (as defined in the Company Agreement). The
Company may, in its discretion, proceed to protect and enforce its rights by
such appropriate judicial proceedings as the Company shall deem most effectual
to protect and enforce any such rights, whether for the specific performance of
any covenant or agreement in the Subordinated Notes Purchase Agreement or in aid
of the exercise of any power granted therein, or to enforce any other proper
remedy. Except with respect to a failure of payment of principal, the principal
amount of this Subordinated Note shall not be subject to acceleration or become
due and

                                       D-6
<PAGE>   112
payable, whether upon notice or otherwise, upon the failure of the Bank to make
a payment when due of an installment of interest or a winding-up of the Bank.

            If a Bankruptcy Event or a Capital Event occurs, then this
Subordinated Note shall be canceled and the Bank's obligations hereunder
(including, without limitation, its obligations to pay principal and interest,
including interest not paid on any Interest Payment date as specified in Section
3(b) shall be forgiven.

            If the Bank is liquidated and upon commencement of the related
liquidation proceedings the Subordinated Notes are still outstanding, then the
Subordinated Notes or other Eligible Investments shall be distributed by the
Company to the Bank, as holder of the Company Common Securities.

            Section 8. Forgiveness of Debt. If a Bankruptcy Event or a Capital
Event occurs, then this Subordinated Note or successor Eligible Investments then
held by the Company shall be canceled and the Bank's obligations thereunder
(including, without limitation, its obligations to pay principal and interest,
including any interest deferred in accordance with Section 3(b)) shall be
forgiven.

            Section 9. Transfer of the Subordinated Note. This Subordinated Note
may not be sold and may not be divided into denominations of less than $25.

            Section 10. GOVERNING LAW. THIS SUBORDINATED NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED
STATES OF AMERICA.

            Section 11. Submission to Jurisdiction. The Bank irrevocably
consents and agrees, that any legal action, suit or proceeding against it with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement may be brought in the courts of the State of New
York or the courts of the United States of America located in New York City and
until amounts due and to become due under this Subordinated Note have been paid,
hereby irrevocably consents and submits to the non-exclusive jurisdiction of
each such court in personam, generally and unconditionally with respect to any
such action, suit or proceeding for itself and in respect of its properties,
assets and revenues. Service of process upon the branch in any such action, suit
or proceeding shall be deemed in every respect service of process upon the Bank.
The Bank hereby irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any of the aforesaid action, suits or proceedings brought in the
United States Federal courts located in New York City or the courts of the State
of New York and hereby further irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought

                                      D-7
<PAGE>   113
in an inconvenient forum. The provisions of this Section 11 shall survive any
termination of this Subordinated Note, in whole or in part.

            Section 12. Modification and Amendment. This Subordinated Note may
be modified or amended only by the written agreement of the Cayman Islands
branch and the Company.

                                       D-8
<PAGE>   114
      IN WITNESS WHEREOF, the Bank has caused this instrument to be duly
executed.

Dated:  -, 2001

                              UBS AG,
                              acting through its Cayman Islands branch

                              By: _____________________________________
                                  Name:  Robert Mills
                                  Title: Chief Financial Officer- Americas and
                                         Regional Chief Operating Officer

                              By: _____________________________________
                                  Name:  Robert Dinerstein
                                  Title: Managing Director
<PAGE>   115
                                                                         Annex E
                                                     to the Amended and Restated
                                             Limited Liability Company Agreement

                     LIST OF INITIAL DIRECTORS AND OFFICERS

Name                                             Position and Offices Held
--------------------------------------------------------------------------------
Robert Mills                                     Managing Director and President
Per Dyrvik                                       Director and Treasurer
Robert Dinerstein                                Director and Secretary

                                       E-1
<PAGE>   116
                                                                         Annex F
                                                     to the Amended and Restated
                                             Limited Liability Company Agreement

                               INVESTMENT POLICIES

         The Company will maintain its assets in a manner that will not require
the Company to be registered as an investment company under the 1940 Act. The
Company will not (i) invest in the securities of other issuers for the purpose
of exercising control over such issuers, (ii) underwrite securities of other
issuers, (iii) actively trade in investments, (iv) offer securities in exchange
for property or (v) make loans to third parties, including, without limitation,
officers, directors or other affiliates of the Company.

         The Company may not hold or invest in any securities other than the
Subordinated Notes issued by the Cayman Islands branch of the Bank with an
aggregate principal amount of $- or other securities issued by the Bank acting
through a branch, agency or other office located outside of the United States or
by a non-U.S. branch of a non-U.S. subsidiary of the Bank (together, "Eligible
Investments"). With respect to any Eligible Investments other than the
Subordinated Notes purchased by the Company, the terms thereof must be
established in good faith to reflect, to the extent deemed advisable by the
Bank, arm's-length market terms at the time of purchase and the purchase by the
Company of Eligible Investments must be approved by the affirmative vote of a
majority of the entire Board of Directors.

         Upon receipt at of the principal amount of the Subordinated Notes, the
Company will either invest the principal amount received in other Eligible
Investments or, if the Company elects to redeem the Company Preferred Securities
at such time (subject to having received prior approval of the Swiss Federal
Banking Commission to do so, if then required), apply such amount to the
redemption price of the Company Preferred Securities.

         Capitalized terms not defined herein have the meanings ascribed to such
terms in the Amended and Restated Limited Liability Company Agreement, dated -
2001, of UBS Preferred Funding Company LLC III, as the same may be amended from
time to time.

                                       F-1
<PAGE>   117
                                                                         Annex G
                                                     to the Amended and Restated
                                             Limited Liability Company Agreement

                                                               AMOUNT OF COMPANY
CERTIFICATE NUMBER -                                   PREFERRED SECURITIES:  $-

                  -% NONCUMULATIVE COMPANY PREFERRED SECURITIES
                  (liquidation preference $1,000 per security)
                                       of
                      UBS PREFERRED FUNDING COMPANY LLC III

                  UBS PREFERRED FUNDING COMPANY LLC III, a limited liability
company formed under the laws of the State of Delaware (the "Company"), hereby
certifies that UBS Preferred Funding Trust I (the "Securityholder") is the
registered owner of Company Preferred Securities representing preferred limited
liability company interests in the Company, which are designated the -%
Noncumulative Company Preferred Securities, liquidation preference $1,000 per
security and aggregate liquidation preference $- (the "Company Preferred
Securities"). Subject to certain obligations which may arise under the Delaware
Limited Liability Company Act (the "Delaware Act"), no additional payments will
be required pursuant to the Delaware Act for the Company Preferred Securities to
represent preferred limited liability company interests in the Company, as to
which the Securityholders of the Company who hold the Company Preferred
Securities (the "Securityholders"), in their capacities as such, have no
liability in excess of their obligations to make payments provided for in the
LLC Agreement (as defined below) and their share as provided in the LLC
Agreement of the Company's assets and undistributed profits (subject to their
obligation to repay any funds wrongfully distributed to them), and are
transferable on the books and records of the Company, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer and otherwise in accordance with the provisions of the
LLC Agreement. The powers, preferences and special rights and limitations of the
Company Preferred Securities are set forth in, and this certificate and the
Company Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Limited Liability Company Agreement of the Company dated as of -, 2001 as
the same may be amended from time to time in accordance with its terms (the "LLC
Agreement"), authorizing the issuance of the Company Preferred Securities and
determining the powers, preferences and other special rights and limitations,
regarding dividends, voting, return of capital and otherwise, and other matters
relating to the Company Preferred Securities. Capitalized terms used herein but
not defined herein shall have the meaning given them in the LLC Agreement. The
Securityholder is entitled to the benefits of the Bank Subordinated Guarantee of
UBS AG, a bank organized under the laws of Switzerland, dated as of -, 2001 (the
"Bank Subordinated Guarantee") to the extent provided therein. The Company will
furnish a copy of the LLC Agreement and the Bank Subordinated

                                       G-1
<PAGE>   118
Guarantee to the Securityholder without charge upon written request to the
Company at its principal place of business.

                  All dividends and redemption price and other payments and all
other monetary rights and obligations in respect of the Company Preferred
Securities shall be performed in U.S. dollars.

                  The Securityholder, by accepting this certificate, is deemed
to have agreed to be bound by the provisions of the LLC Agreement. Upon receipt
of this certificate, the Securityholder is admitted to the Company as a
Preferred Securityholder, is bound by the LLC Agreement and is entitled to the
benefits thereunder.

                  This certificate shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to principles
of conflict of laws).

                                       G-2
<PAGE>   119
                  IN WITNESS WHEREOF, this certificate has been executed on
behalf of the Company by a duly authorized officer as of this - day of -, 2001.

                                   UBS PREFERRED FUNDING COMPANY LLC III

                                   By: ______________________________________
                                       Name: Robert Mills
                                       Title:   President and Managing Director

                                       G-3
<PAGE>   120
                                                                         Annex H
                                                         to the Amended Restated
                                             Limited Liability Company Agreement

                         FORM OF NO DIVIDEND INSTRUCTION
     (pursuant to Section 9.3 of the Amended and Restated Limited Liability
           Company Agreement of UBS Preferred Funding Company LLC III)

                                                                          [Date]

UBS Preferred Funding Company LLC III
[----------------]
[----------------]
[----------------]
Attention:  [________________]

[----------------]
[----------------]
[----------------]
Attention:  [________________]

         Re:      Dividends on Company Preferred Securities

                  Reference is made to the Amended and Restated Limited
Liability Company Agreement, dated as of -, 2001 (as amended from time to time
the "Agreement"), of UBS Preferred Funding Company LLC III (the "Company").
Terms used herein and defined in the Agreement are used herein as so defined.

                  Pursuant to Section 9.3 of the Agreement, the undersigned, as
the Common Securityholder[s], hereby instruct[s] the Company to pay [ ]% of the
otherwise scheduled dividends on the Company Preferred Securities on the
dividend payment date for such series immediately following the date of receipt
of this letter. All amounts otherwise payable on such series of Company
Preferred Securities shall be paid on the Company Common Securities in
accordance with the Agreement.

                                                      [Common Securityholder(s)]

                                                      --------------------------
                                                      Name:
                                                      Title:

                                       H-1
<PAGE>   121
                                                                         Annex I
                                                         to Amended and Restated
                                                     Limited Liability Agreement

                             FORM OF NOMINEE LETTER

                                                                          [Date]

                  Re:      -% Noncumulative Company Preferred Securities

To the nominee holder of the above-referenced securities,
   c/o [Common Depositary]

Ladies and Gentlemen:

                  With respect to any -% Noncumulative Company Preferred
Securities of UBS Preferred Funding Company LLC III (the "Company") that you may
hold as a nominee on behalf of another person or for your own account, you are
hereby authorized to omit from any statement that you may be required to furnish
to the Company under paragraph (a)(1)(i) or para graph (a)(3)(i) of United
States Treasury Regulations Section 1.6031(c)-1T (the "Regulation") that part of
the information described in paragraphs (a)(1)(ii)(E) and (a)(3)(ii)(D) of the
Regulation regarding the method of acquisition and acquisition cost and that
part of the information described in paragraphs (a)(1)(ii)(F) and (a)(3)(ii)(E)
of the Regulation regarding the net proceeds from the transfer.

                  This authorization shall continue in effect for each taxable
year of the Company unless modified or revoked in writing by the Company more
than 60 days before the beginning of such taxable year.

                                                       Sincerely yours,

                                       I-1<PAGE>   1
                                                                  EXHIBIT (4)(C)

                      ====================================

                          FOURTH SUPPLEMENTAL INDENTURE

                                     between

                            CONSUMERS ENERGY COMPANY

                                       and

                              THE BANK OF NEW YORK

                            Dated as of May 31, 2001

                      ====================================

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
                                                     ARTICLE I.
                                                    DEFINITIONS

<S>               <C>                                                                                           <C>
SECTION 1.1.      Definition of Terms.............................................................................2

                                                     ARTICLE II.
                                     GENERAL TERMS AND CONDITIONS OF THE NOTES

SECTION 2.1.      Designation and Principal Amount................................................................3
SECTION 2.2.      Maturity........................................................................................3
SECTION 2.3.      Form and Payment................................................................................3
SECTION 2.4.      Global Note.....................................................................................4
SECTION 2.5.      Interest........................................................................................5

                                                    ARTICLE III.
                                              REDEMPTION OF THE NOTES

SECTION 3.1.      Special Event Redemption........................................................................6
SECTION 3.2.      Optional Redemption by Issuer...................................................................6
SECTION 3.3.      No Sinking Fund.................................................................................7

                                                     ARTICLE IV.
                                        EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 4.1.      Extension of Interest Payment Period............................................................7
SECTION 4.2.      Notice of Extension.............................................................................8

                                                     ARTICLE V.
                                                     EXPENSES

SECTION 5.1.      Payment of Expenses.............................................................................8
SECTION 5.2.      Payment Upon Resignation or Removal.............................................................9

                                                     ARTICLE VI.
                                                   SUBORDINATION

SECTION 6.1.      Agreement to Subordinate........................................................................9

</TABLE>

                                       i

<PAGE>   3

<TABLE>

                                                    ARTICLE VII.
                                            COVENANT TO LIST ON EXCHANGE
<S>               <C>                                                                                           <C>
SECTION 7.1.      Listing on an Exchange.........................................................................10

                                                    ARTICLE VIII.
                                                    FORM OF NOTES

SECTION 8.1.      Form of Note...................................................................................10

                                                     ARTICLE IX.
                                              ORIGINAL ISSUE OF NOTES

SECTION 9.1.      Original Issue of Notes........................................................................16

                                                     ARTICLE X.
                                                   MISCELLANEOUS

SECTION 10.1      Provisions of Indenture for the Sole Benefit of Parties and
                  Holders of Trust Securities....................................................................16
SECTION 10.2      Ratification of Indenture......................................................................16
SECTION 10.3.     Trustee Not Responsible for Recitals...........................................................16
SECTION 10.4.     Governing Law..................................................................................16
SECTION 10.5.     Separability...................................................................................17
SECTION 10.6.     Counterparts...................................................................................17

</TABLE>

                                       ii

<PAGE>   4

            FOURTH SUPPLEMENTAL INDENTURE, dated as of May 31, 2001, (the
"Fourth Supplemental Indenture"), between Consumers Energy Company, a Michigan
Corporation (the "Issuer"), and The Bank of New York, as trustee (the "Trustee")
under the Indenture dated as of January 1, 1996 between the Issuer and the
Trustee (the "Indenture").

            WHEREAS, the Issuer executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Issuer's Securities to be
issued from time to time in one or more series as might be determined by the
Issuer under the Indenture, in an unlimited aggregate principal amount which may
be authenticated and delivered as provided in the Indenture; and

            WHEREAS, Section 2.3 of the Indenture permits the terms of any
series of Securities to be established in an indenture supplemental to the
Indenture; and

            WHEREAS, Section 8.1(d) of the Indenture provided that a
supplemental indenture may be entered into without the consent of any Holders of
Securities to supplement certain provisions of the Indenture; and

            WHEREAS, Section 8.1(e) of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Trustee without
the consent of any Holders of the Securities to establish the form and terms of
the Securities of any series; and

            WHEREAS, pursuant to the terms of the Indenture, the Issuer desires
to provide for the establishment of a new series of its Securities to be known
as its 9% subordinated Debentures due June 30, 2031 (the "Notes"), the form and
substance of such Notes and the terms, provisions and conditions thereof to be
set forth as provided in the Indenture and this Fourth Supplemental Indenture;
and

            WHEREAS, Consumers Energy Company Financing IV, a Delaware statutory
business trust (the "Trust"), has offered to the public $125 million aggregate
liquidation amount of its 9% Trust Preferred Securities (the "Preferred
Securities"), representing undivided beneficial interests in the assets of the
Trust and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Issuer of $3,866,000
aggregate liquidation amount of its 9% Trust Common Securities (together the
"Trust Securities"), in $128,866,000 aggregate principal amount of the Notes;
and

            WHEREAS, the Issuer wishes to supplement Section 13.2 of the
Indenture with respect to the Notes and the Preferred Securities; and

            WHEREAS, the Issuer has requested that the Trustee execute and
deliver this Fourth Supplemental Indenture and all requirements necessary to
make this Fourth Supplemental Indenture a valid instrument in accordance with
its terms, and to make the Notes, when executed by the Issuer and authenticated
and delivered by the Trustee, the valid obligations of the Issuer, have been
performed, and the execution and delivery of this Fourth Supplemental Indenture
has been duly authorized in all respects.

                                       1

<PAGE>   5

            NOW THEREFORE, in consideration of the purchase and acceptance of
the Notes by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Notes and the terms,
provisions and conditions thereof, the Issuer covenants and agrees with the
Trustee as follows:

                                   ARTICLE I.
                                   DEFINITIONS

SECTION 1.1.       Definition of Terms.

            Unless the context otherwise requires:

            (a)    a term defined in the Indenture has the same meaning when
used in this Fourth Supplemental Indenture;

            (b)    a term defined anywhere in this Fourth Supplemental Indenture
has the same meaning throughout;

            (c)    the singular includes the plural and vice versa;

            (d)    a reference to a Section or Article is to a Section or
Article of this Fourth Supplemental Indenture;

            (e)    headings are for convenience of reference only and do not
affect interpretation;

            (f)    the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Redemption Tax
Opinion; (iv) No Recognition Opinion; (v) Preferred Security Certificate; (vi)
Property Trustee; (vii) Regular Trustees; (viii) Special Event; (ix) Tax Event;
(x) Underwriting Agreement; (xi) Investment Company Event; and (xii)
Distribution;

            (g)    the following terms have the meanings given to them in this
Section 1.1(g):

            "Additional Interest" shall have the meaning set forth in Section
2.5.

            "Compounded Interest" shall have the meaning set forth in Section
4.1.

            "Coupon Rate" shall have the meaning set forth in Section 2.5.

            "Declaration" means the Amended and Restated Declaration of Trust of
Consumers Energy Company Financing IV, a Delaware statutory business trust,
dated as of          ,      .

            "Deferred Interest" shall have the meaning set forth in Section 4.1.

                                       2

<PAGE>   6

            "Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Notes held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.

            "Extended Interest Payment Period" shall have the meaning set forth
in Section 4.1.

            "Global Note" shall have the meaning set forth in Section 2.4.

            "Non Book-Entry Preferred Securities" shall have the meaning set
forth in Section 2.4.

            "Optional Redemption Price" shall have the meaning set forth in
Section 3.2.

                                   ARTICLE II.
                    GENERAL TERMS AND CONDITIONS OF THE NOTES

SECTION 2.1.       Designation and Principal Amount.

            There is hereby authorized and established a series of unsecured
Securities designated the "9% subordinated Debentures due June 30, 2031",
limited in aggregate principal amount to $125,000,000 (except as contemplated in
Section 2(f)(2) of the Indenture).

SECTION 2.2.       Maturity.

            The Maturity Date of the Notes is June 30, 2031.

SECTION 2.3.       Form and Payment.

            The Notes shall be issued in fully registered form without interest
coupons. Principal and interest on the Notes issued in certificated form will be
payable, the transfer of such Notes will be registrable and such Notes will be
exchangeable for Notes bearing identical terms and provisions, at the office or
agency of the Trustee in the Borough of Manhattan, the City of New York;
provided, however, that payment of interest may be made at the option of the
Issuer by check mailed to the Holder at such address as shall appear in the
Security Register or by wire transfer to an account maintained by the Holder.
Notwithstanding the foregoing, so long as the Holder of any Notes is the
Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Notes held by the
Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.

                                       3

<PAGE>   7

SECTION 2.4.      Global Note.

            (a)    In connection with a Dissolution Event,

                   (i)  the Notes may be presented to the Trustee by the
      Property Trustee in exchange for a global Note in an aggregate principal
      amount equal to the aggregate principal amount of all outstanding Notes (a
      "Global Note"), to be registered in the name of the Clearing Agency, or
      its nominee, and delivered by the Trustee to the Clearing Agency for
      crediting to the accounts of its participants pursuant to the instructions
      of the Regular Trustees and the Clearing Agency will act as Depository for
      the Notes. The Issuer upon any such presentation, shall execute a Global
      Note in such aggregate principal amount and deliver the same to the
      Trustee for authentication and delivery in accordance with the Indenture
      and this Fourth Supplemental Indenture. Payments on the Notes issued as a
      Global Note will be made to the Depositary; and

                   (ii) if any Preferred Securities are held in non book-entry
      certificated form, the Notes may be presented to the Trustee by the
      Property Trustee and any Preferred Security Certificate which represents
      Preferred Securities other than Preferred Securities held by the Clearing
      Agency or its nominee ("Non Book-Entry Preferred Securities") will be
      deemed to represent beneficial interests in Notes presented to the Trustee
      by the Property Trustee having an aggregate principal amount equal to the
      aggregate liquidation amount of the Non Book-Entry Preferred Securities
      until such Preferred Security Certificates are presented to the Security
      Registrar for transfer or reissuance at which time such Preferred Security
      Certificates will be canceled and a Note, registered in the name of the
      holder of the Preferred Security Certificate or the transferee of the
      holder of such Preferred Security Certificate, as the case may be, with an
      aggregate principal amount equal to the aggregate liquidation amount of
      the Preferred Security Certificate canceled, will be executed by the
      Issuer and delivered to the Trustee for authentication and delivery in
      accordance with the Indenture and this Fourth Supplemental Indenture.

            (b)    Except as provided in (c) below, a Global Note may be
transferred, in whole but not in part, only to another nominee of the
Depositary, or to a successor Depositary selected or approved by the Issuer or
to a nominee of such successor Depositary.

            (c)    If at any time the Depositary notifies the Issuer that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Securities Exchange Act of 1934, as amended, or other applicable statute or
regulation, and a successor Depositary for such series is not appointed by the
Issuer within 90 days after the Issuer receives such notice or becomes aware of
such condition, as the case may be, the Issuer will execute, and, subject to
Section 2.8 of the Indenture, the Trustee, upon written notice from the Issuer,
will authenticate and deliver the Notes in definitive registered form, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for such Global Note. In
addition, the Issuer may at any time determine that the Notes shall no longer be
represented by a Global Note. In such event the Issuer will execute, and subject
to Section 2.8 of the Indenture, the Trustee, upon receipt of an Officers'
Certificate

                                       4

<PAGE>   8

evidencing such determination by the Issuer, will authenticate and deliver the
Notes in definitive registered form, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Note in
exchange for such Global Note. Upon the exchange of the Global Note for such
Notes in definitive registered form, in authorized denominations, the Global
Note shall be canceled by the Trustee. Such Notes in definitive registered form
issued in exchange for the Global Note shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Notes to the Depositary for delivery to the
Persons in whose names such Notes are so registered.

SECTION 2.5.       Interest.

            (a)    Each Note will bear interest at the rate of 9% per annum (the
"Coupon Rate") from the original date of issuance until the principal thereof
becomes due and payable, and on any overdue principal and (to the extent that
payment of such interest is enforceable under applicable law) on any overdue
installment of interest, at the Coupon Rate, compounded quarterly, payable
(subject to the provisions of Article IV) quarterly in arrears on March 31, June
30, September 30, and December 31 of each year (each, an "Interest Payment
Date," commencing on June 30, 2001), to the Person in whose name such Note or
any predecessor Note is registered, at the close of business on the regular
record date for such interest installment, which, in respect of any Notes of
which the Property Trustee is the Holder or a Global Note, shall be the close of
business on the Business Day next preceding that Interest Payment Date.
Notwithstanding the foregoing sentence, if the Preferred Securities are no
longer in book-entry only form or, except if the Notes are held by the Property
Trustee, the Notes are not represented by a Global Note, the regular record date
for such interest installment shall be the fifteenth day of the month in which
the applicable Interest Payment Date occurs.

            (b)    The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed, will
be computed on the basis of the actual number of days elapsed in such a 90-day
period. In the event that any date on which interest is payable on the Notes is
not a Business Day, then payment of interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.

            (c)    If, at any time while the Property Trustee is the Holder of
any Notes, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Issuer will pay as additional interest ("Additional
Interest") on the Notes held by the Property Trustee, such additional amounts as
shall be required so that the net amounts received and retained by the Trust and
the Property Trustee after paying such taxes, duties, assessments or other
governmental charges will be equal to the amounts the Trust and the Property

                                       5

<PAGE>   9

Trustee would have received had no such taxes, duties, assessments or other
governmental charges been imposed.

                                  ARTICLE III.
                             REDEMPTION OF THE NOTES

SECTION 3.1.       Special Event Redemption.

            If (a) a Tax Event has occurred and is continuing and (i) the Issuer
has received a Redemption Tax Opinion, or (ii) The Regular Trustees shall have
been informed by tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, or (b) an Investment Company Event has occurred and is continuing,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b) and Article
Eleven of the Indenture, the Issuer shall have the right upon not less than 30
days' nor more than 60 days' notice to the Holders of the Notes to redeem the
Notes, in whole, for cash within 90 days' following the occurrence of such
Special Event (the "90 Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest thereon to
the date of such redemption (the "Redemption Price"), provided that, if at the
time there is available to the Issuer or the Trust the opportunity to eliminate,
within the 90 Day Period, the Special Event by taking some ministerial action
("Ministerial Action"), such as filing a form or making an election, or pursuing
some other similar reasonable measure which has no adverse effect on the Issuer,
the Trust or the Holders of the Trust Securities issued by the Trust, the Issuer
shall pursue such Ministerial Action in lieu of redemption, and, provided,
further, that the Issuer shall have no right to redeem the Notes while the Trust
is pursuing any Ministerial Action pursuant to its obligations under the
Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Issuer
determines, and the Issuer shall deposit with the Trustee an amount sufficient
to pay the Redemption Price by 12:00 noon, New York time, on the date such
Redemption Price is to be paid.

SECTION 3.2.      Optional Redemption by Issuer.

            (a)    Subject to the provisions of Section 3.2(b) and to the
provisions of Article Eleven of the Indenture, the Issuer shall have the right
to redeem the Notes, in whole or in part, from time to time, on or after June
30, 2006, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon to the date of such
redemption (the "Optional Redemption Price"). Any redemption pursuant to this
paragraph will be made upon not less than 30 days' nor more than 60 days' notice
to the Holder of the Notes, at the Optional Redemption Price. If the Notes are
only partially redeemed pursuant to this Section 3.2, the Notes will be redeemed
on a pro rata basis; provided that, if at the time of redemption the Notes are
registered as a Global Note, the Depository shall determine, in accordance with
its procedures, the principal amount of such Notes held by each Holder of Notes
to be redeemed. The Optional Redemption Price shall be paid prior to 12:00 noon,
New York time, on the date of such redemption or at such earlier time as the
Issuer determines and the Issuer shall deposit with the Trustee an amount
sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time, on
the date such Optional Redemption Price is to be paid.

                                       6

<PAGE>   10

            (b)    If a partial redemption of the Notes would result in the
delisting of the Preferred Securities from any national securities exchange or
other organization on which the Preferred Securities are then listed, the Issuer
shall not be permitted to effect such partial redemption and may only redeem the
Notes in whole.

SECTION 3.3.       No Sinking Fund.

            The Notes are not entitled to the benefit of any sinking fund.

                                   ARTICLE IV.
                      EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 4.1.       Extension of Interest Payment Period.

            The Issuer shall have the right, at any time and from time to time
during the term of the Notes, to defer payments of interest by extending the
interest payment period of such Notes for a period not exceeding 20 consecutive
quarters (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that, no
Extended Interest Payment Period may extend beyond the Maturity Date. To the
extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
this Section 4.1, will bear interest thereon at the Coupon Rate compounded
quarterly for each quarter of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Issuer shall
pay all interest accrued and unpaid on the Notes, including any Additional
Interest and Compounded Interest (together, "Deferred Interest") that shall be
payable to the Holders of the Notes in whose names the Notes are registered in
the Security Register on the First record date after the end of the Extended
Interest Payment Period. Prior to the termination of any Extended Interest
Payment Period, the Issuer may further extend such period, provided that such
period together with all such further extensions thereof shall not exceed 20
consecutive quarters. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the Issuer may
commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Issuer may prepay at any time
all or any portion of the interest accrued during an Extended Interest Payment
Period.

            The limitations set forth in Section 3.5 of the Indenture shall
apply during any Extended Interest Payment Period.

SECTION 4.2.       Notice of Extension.

            (a)    If the Property Trustee is the only registered Holder of the
Notes at the time the Issuer elects an Extended Interest Payment Period, the
Issuer shall give written notice to the Regular Trustees, the Property Trustee
and the Trustee of its election of such Extended Interest Payment Period one
Business Day before the earlier of (i) the next succeeding date on which
Distributions

                                       7

<PAGE>   11

on the Trust Securities issued by the Trust are payable, or (ii) the date the
Trust is required to give notice of the record date, or the date such
Distributions are payable, to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Preferred Securities, but in
any event at least one Business Day before such record date.

            (b)    If the Property Trustee is not the only Holder of the Notes
at the time the Issuer elects an Extended Interest Payment Period, the Issuer
shall give the Holders of the Notes and the Trustee written notice of its
election of such Extended Interest Payment Period one Business Days before the
earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the
Issuer is required to give notice of the record or payment date of such interest
payment to the New York Stock Exchange or other applicable self-regulatory
organization or to Holders of the Notes.

            (c)    The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period permitted
under Section 4.1.

                                   ARTICLE V.
                                    EXPENSES

SECTION 5.1.       Payment of Expenses.

            In connection with the offering, sale and issuance of the Notes to
the Property Trustee and in connection with the sale of the Trust Securities by
the Trust, the Issuer, in its capacity as borrower with respect to the Notes,
shall:

            (a)    pay all costs and expenses relating to the offering, sale and
issuance of the Notes, including commissions to the underwriters payable
pursuant to the Underwriting Agreement and the Pricing Agreements, and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.6 of the Indenture;

            (b)    pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including commissions to
the underwriters in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets);

            (c)    be primarily liable for any indemnification obligations
arising with respect to the Declaration; and

                                       8

<PAGE>   12

            (d)    pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.

SECTION 5.2.       Payment Upon Resignation or Removal.

            Upon termination of this Fourth Supplemental Indenture or the
Indenture or the removal or resignation of the Trustee pursuant to Section 6.10
of the Indenture, the Issuer shall pay to the Trustee all amounts accrued to the
date of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Property Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Issuer shall pay to the Delaware Trustee or the Property
Trustee, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.

                                   ARTICLE VI.
                                  SUBORDINATION

SECTION 6.1.       Agreement to Subordinate.

            The Issuer covenants and agrees, and each Holder of Notes issued
hereunder, by such Holder's acceptance thereof likewise covenants and agrees,
that pursuant to Section 2.3(f)(9) of the Indenture all Notes shall be issued as
Subordinated Securities subject to the provisions of Article Twelve of the
Indenture and this Article VI; and each Holder of a Note by its acceptance
thereof accepts and agrees to be bound by such provisions.

                                  ARTICLE VII.
                          COVENANT TO LIST ON EXCHANGE

SECTION 7.1.       Listing on an Exchange.

            In connection with the distribution of the Notes to the holders of
the Preferred Securities upon a Dissolution Event, the Issuer will use its best
efforts to list such Notes on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.

                                  ARTICLE VIII.
                                  FORM OF NOTES

SECTION 8.1.       Form of Note.

            The Notes and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms and the Notes
shall have such additional terms as may be set forth in such form:

                                       9
<PAGE>   13

                             (FORM OF FACE OF NOTE)

            [IF THE NOTE IS TO BE A GLOBAL NOTES, INSERT - This Note is a Global
Note within the meaning of the Indenture hereinafter referred to, and is
registered in the name of, a Depositary or a nominee of a Depositary. This Note
is exchangeable for Notes registered in the name of a person other than the
Depositary or its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Note (other than a transfer of this Note as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.

            Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.]

No.
            $

CUSIP NO. 21051E202

                            CONSUMERS ENERGY COMPANY

                           9% SUBORDINATED DEBENTURES
                                DUE JUNE 30, 2031

            Consumers Energy Company, a Michigan corporation (the "Issuer",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of one hundred twenty eight million eight
hundred sixty six thousand Dollars ($128,866,000) on June 30, 2001, and to pay
interest on said principal sum from May 31, 2001, or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, quarterly (subject to deferral as
set forth herein) in arrears on March 31, June 30, September 30, and December 31
of each year commencing June 30, 2001 at the rate of 9% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded quarterly. The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on this Note is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any

                                       10

<PAGE>   14

such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
person in whose name this Note (or one or more Predecessor Securities, as
defined in said Indenture) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the Business Day next preceding such Interest Payment Date. [IF PURSUANT TO
THE PROVISIONS OF THE INDENTURE THE DEBENTURES ARE NO LONGER REPRESENTED BY A
GLOBAL NOTE -- which shall be the close of business on the 15th day of the month
in which such Interest Payment Date occurs.] If and to the extent the Issuer
shall default in the payment of the interest due on such Interest Payment Date,
interest shall be paid to the person in whose name this Note is registered at
the close of business on a subsequent record date (which shall not be less than
five Business Days prior to the date of payment of such defaulted interest)
established by notice given by mail by or on behalf of the Issuer to the Holder
of this Note not less than 15 days preceding such subsequent Record Date. The
principal of (and premium, if any) and the interest on this Note shall be
payable at the office or agency of the Trustee in the Borough of Manhattan, the
City of New York maintained for that purpose in any coin or currency of the
United States of America that at the time is legal tender for payment of public
and private debts; provided, however, that payment of interest may be made at
the option of the Issuer by check mailed to the registered Holder at such
address as shall appear in the Security Register or by wire transfer to an
account maintained by the Holder. Notwithstanding the foregoing, so long as the
Holder of this Note is the Property Trustee, the payment of the principal of
(and premium, if any) and interest on this Note will be made at such place and
to such account as may be designated by the Property Trustee.

            The indebtedness evidenced by this Note is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Note is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this Note,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
so provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.

            This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

            The provisions of this Note are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.

                                       11

<PAGE>   15

            IN WITNESS WHEREOF, the Issuer has caused this instrument to be
executed.

Dated

                                              Consumers Energy Company

[Seal]                                        By:
                                              Name:
                                              Title

Attest:

By:
Name:
Title:

                     (FORM OF CERTIFICATE OF AUTHENTICATION)

                          CERTIFICATE OF AUTHENTICATION

            This is one of the Securities of the series of Securities described
in the within-mentioned Indenture.

                                              --------------------------------
                                              as Trustee

                                              By
                                               Authorized Signatory

                            (FORM OF REVERSE OF NOTE)

            This Note is one of a duly authorized series of Securities of the
Issuer (herein sometimes referred to as the "Notes"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of January 1, 1996, duly executed and delivered between
the Issuer and The Bank of New York, a New York banking corporation, as Trustee
(the "Trustee"), as supplemented by certain supplemental indentures, including
the Fourth Supplemental Indenture dated as of May 31, 2001, between the Issuer
and the Trustee (the Indenture as so supplemented, the "Indenture"), to which
Indenture and all indentures supplemental thereto reference is hereby made

                                       12

<PAGE>   16

for a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the Holders of the Notes.
By the terms of the Indenture, the Notes are issuable in series that may vary as
to amount, date of maturity, rate of interest and in other respects as provided
in the Indenture. This series of Notes is limited in aggregate principal amount
as specified in said Fourth Supplemental Indenture.

            The Issuer shall have the right to redeem this Note at the option of
the Issuer, without premium or penalty, in whole or in part at any time on or
after June 30, 2001 or at any time in certain circumstances upon the occurrence
of a Special Event, at a redemption price equal to 100% of the principal amount
plus any accrued but unpaid interest, to the date of such redemption. Any
redemption pursuant to this paragraph will be made upon not less than 30 days
nor more than 60 days' notice. If the Notes are only partially redeemed by the
Issuer pursuant to an Optional Redemption, the Notes will be redeemed pro rata.

            In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

            In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.

            The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes and other Indenture securities of each
series affected at the time Outstanding and affected (voting as one class), as
defined in the Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Notes; provided, however, that the
Company and the Trustee may not, without the consent of the Holder of each Note
then Outstanding and affected thereby: (a) change the time of payment of the
principal (or any installment) of any Note, or reduce the principal amount
thereof, or reduce the rate or change the time of payment of interest thereon,
or impair the right to institute suit for the enforcement of any payment on any
Note when due or (b) reduce the percentage in principal amount of the Notes, the
consent of whose Holders is required for any such modification or for any waiver
provided for in the Indenture. The Indenture also contains provisions providing
that prior to the acceleration of the maturity of any Note or other securities
outstanding under the Indenture, the Holders of a majority in aggregate
principal amount of Notes of and other Securities Outstanding under the
Indenture with respect to which a default or/an Event of Default shall have
occurred and be continuing (voting as one class) may on behalf of the Holders of
all such affected Securities (including the Notes) waive any past default and
its consequences, except a default or an Event of Default in respect of a
covenant or provision of the Indenture or of any Note or other Security which
cannot be modified or amended without the consent of the Holder of each Note or
other Security affected. Any such consent or waiver by the registered Holder of
this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such Holder and upon all future Holders and owners of this

                                       13

<PAGE>   17

Note and of any Note issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Note.

            No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.

            The Issuer shall have the right at any time during the term of the
Notes and from time to time to extend the interest payment period of such Notes
for up to 20 consecutive quarters (an "Extended Interest Payment Period"), at
the end of which period the Issuer shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Notes to
the extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Issuer
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any such
Extended Interest Payment Period and upon the payment of all accrued and unpaid
interest and any additional amounts then due, the Issuer may commence a new
Extended Interest Payment Period.

            As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable by the registered Holder hereof on
the Security Register of the Issuer, upon surrender of this Note for
registration of transfer at the office or agency of the Trustee in the City and
State of New York accompanied by a written instrument or instruments of transfer
in form satisfactory to the Issuer or the Trustee duly executed by the
registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of authorized denominations and for the same
aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such transfer,
but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.

            Prior to due presentment for registration of transfer of this Note,
the Issuer, the Trustee, any paying agent and the Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Note shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Security Registrar) for the purpose
of receiving payment of or on account of the principal hereof and premium, if
any, and interest due hereon and for all other purposes, and neither the Issuer
nor the Trustee nor any paying agent nor any Security Registrar shall be
affected by any notice to the contrary.

            No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Issuer or of any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly waived and
released.

                                       14
<PAGE>   18

            Notes of this series so issued are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and therein
set forth, Notes of this series so issued are exchangeable for a like aggregate
principal amount of Notes of this series in authorized denominations, as
requested by the Holder surrendering the same.

            All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

                              [END OF FORM OF NOTE]

                                   ARTICLE IX.
                             ORIGINAL ISSUE OF NOTES

SECTION 9.1.       Original Issue of Notes.

            Notes in the aggregate principal amount of $128,866,000 may, upon
execution of this Fourth Supplemental Indenture, be executed by the Issuer and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Issuer,
in accordance with Section 2.4 of the Indenture.

                                   ARTICLE X.
                                  MISCELLANEOUS

SECTION 10.1       Provisions of Indenture for the Sole Benefit of Parties and
                   Holders of Trust Securities.

            Notwithstanding Section 13.2 of the Indenture, for so long as any
Trust Securities remain outstanding, the Issuer's obligations under the
Indenture and this Fourth Supplemental Indenture will also be for the benefit of
the holders of the Trust Securities, and the Issuer acknowledges and agrees that
such holders will be entitled to enforce certain payment obligations under the
Notes directly against the Issuer to the extent provided in the Declaration.

SECTION 10.2       Ratification of Indenture.

            The Indenture, as supplemented by this Fourth Supplemental
Indenture, is in all respects ratified and confirmed, and this Fourth
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.

                                       15

<PAGE>   19

SECTION 10.3.      Trustee Not Responsible for Recitals.

            The recitals herein contained are made by the Issuer and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
Fourth Supplemental Indenture.

SECTION 10.4.      Governing Law.

            This Fourth Supplemental Indenture and each Note shall be deemed to
be a contract made under the internal laws of the State of Michigan, and for all
purposes shall be construed in accordance with the laws of said State; provided,
however, that the rights, duties and obligations of the Trustee are governed and
construed in accordance with the laws of the State of New York.

SECTION 10.5.      Separability.

            In case any one or more of the provisions contained in this Fourth
Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Fourth
Supplemental Indenture or of the Notes, but this Fourth Supplemental Indenture
and the Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.

SECTION 10.6.      Counterparts.

            This Fourth Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.

                                       16

<PAGE>   20

            IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written.

                                    Consumers Energy Company

                                    By: /s/ Alan M. Wright
                                        Name:  Alan M. Wright
                                        Title: Executive Vice President,
                                               Chief Financial Officer and Chief
                                               Administrative Officer

[Seal]
Attest:

By: /s/ Adam Norlander

                                    The Bank of New York, as Trustee

                                    By: /s/ Paul Schmalzel
                                        Name:  Paul Schmalzel
                                        Title: Vice President

                                       17

<PAGE>   21

STATE OF MICHIGAN        )
                )ss.
COUNTY OF WAYNE          )

      On the 31st day of May, 2001, before me personally came Alan M. Wright,
to me known, who, being by me duly sworn, did depose and say that he resides at
Ann Arbor, Michigan; that he is Executive Vice President, Chief Financial
Officer and Chief Administrative Officer of Consumers Energy Company, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.

[Notarial Seal]

/s/ Leslie C. Higdon

Notary Public,      Wayne     County,      Michigan

My Commission Expires: 10/5/04

                                       18

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