Document:

Exhibit 4.1

 

SKYWEST, INC.

2006 LONG-TERM INCENTIVE PLAN

 

SkyWest, Inc. (the “Company”), a Utah
corporation, hereby establishes and adopts the following 2006 Long-Term
Incentive Plan (the “Plan”).

 

1.                                      PURPOSE
OF THE PLAN

 

The purpose of the Plan is to assist the
Company and its Subsidiaries in attracting and retaining selected individuals
to serve as directors, employees, consultants and/or advisors of the Company
who are expected to contribute to the Company’s success and to achieve
long-term objectives which will inure to the benefit of all stockholders of the
Company through the additional incentives inherent in the Awards hereunder.

 

2.                                      DEFINITIONS

 

2.1.                            “Award” shall mean any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Award, Other Stock Unit
Award or any other right, interest or option relating to Shares or other
property (including cash) granted pursuant to the provisions of the Plan.

 

2.2.                            “Award Agreement” shall mean any written
agreement, contract or other instrument or document evidencing any Award
granted by the Committee hereunder, including through an electronic medium.

 

2.3.                            “Board” shall mean the board of directors
of the Company.

 

2.4.                            “Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

2.5.                            “Committee” shall mean the Compensation
Committee of the Board, consisting of no fewer than two Directors, each of whom
is “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act.
With respect to any Awards granted by the Subcommittee, references in this Plan
to the “Committee” shall mean the Subcommittee.

 

2.6.                            “Covered Employee” shall mean an employee
of the Company who is a “covered employee” within the meaning of
Section 162(m) of the Code.

 

2.7.                            “Director” shall mean a non-employee member of the Board.

 

2.8.                            “Dividend Equivalents” shall have the meaning set forth in
Section 12.5.

 

2.9.                            “Employee” shall mean any employee of the
Company or any Subsidiary and any prospective employee conditioned upon, and
effective not earlier than, such person’s becoming an employee of the Company
or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean
any consultant or advisor who provides services to the Company or any
Subsidiary, so long as such person (i) renders bona fide services that are
not in connection with

 

 

the offer and sale of the Company’s securities in a capital-raising
transaction and (ii) does not directly or indirectly promote or maintain a
market for the Company’s securities.

 

2.10.                     “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.

 

2.11.                     “Fair Market Value” shall mean, with
respect to any property other than Shares, the market value of such property
determined by such methods or procedures as shall be established from time to time
by the Committee. The Fair Market Value of Shares as of any date shall be the
per Share average of the high and low trading prices of the Shares as reported
on the NASDAQ Stock Market on that date (or if there were no reported prices on
such date, on the last preceding date on which the prices were reported) or, if
the Company is not then listed on the NASDAQ Stock Market, on such other
principal securities exchange on which the Shares are traded, and if the
Company is not listed on the NASDAQ Stock Market or any other securities
exchange, the Fair Market Value of Shares shall be determined by the Committee
in its sole discretion using appropriate criteria.

 

2.12.                     “Freestanding Stock Appreciation Right”
shall have the meaning set forth in Section 6.1.

 

2.13.                     “Limitations” shall have the meaning set
forth in Section 10.5.

 

2.14.                     “Option” shall mean any right granted to a
Participant under the Plan allowing such Participant to purchase Shares at such
price or prices and during such period or periods as the Committee shall
determine.

 

2.15.                     “Other Stock Unit Award” shall have the
meaning set forth in Section 8.1.

 

2.16.                     “Participant” shall mean an Employee or
Director who is selected by the Committee to receive an Award under the Plan.

 

2.17.                     “Payee” shall have the meaning set forth in
Section 13.1.

 

2.18.                     “Performance Award” shall mean any Award of
Performance Shares or Performance Units granted pursuant to Article 9.

 

2.19.                     “Performance Period” shall mean that period
established by the Committee at the time any Performance Award is granted or at
any time thereafter during which any performance goals specified by the
Committee with respect to such Award are to be measured.

 

2.20.                     “Performance Share” shall mean any grant
pursuant to Article 9 of a unit valued by reference to a designated number
of Shares, which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance
goals during the Performance Period as the Committee shall establish at the
time of such grant or thereafter.

 

2.21.                     “Performance Unit” shall mean any grant
pursuant to Section 9 of a unit valued by reference to a designated amount
of property other than Shares (or cash), which value may be paid to the
Participant by delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance 

 

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goals during the Performance Period as the Committee shall establish at
the time of such grant or thereafter.

 

2.22.                     “Permitted Assignee” shall have the meaning
set forth in Section 12.3.

 

2.23.                     “Prior Plans” shall mean, collectively, the
Company’s Executive Stock Incentive Plan and the Company’s 2001 Allshare Stock
Option Plan.

 

2.24.                     “Restricted Stock” shall mean any Share
issued with the restriction that the holder may not sell, transfer, pledge or
assign such Share and with such other restrictions as the Committee in its sole
discretion, may impose (including any restriction on the right to vote such
Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.

 

2.25.                     “Restricted Stock Award” shall have the
meaning set forth in Section 7.1.

 

2.26.                     “Shares” shall mean the shares of common
stock, no par value, of the Company.

 

2.27.                     “Stock Appreciation Right” shall mean the
right granted to a Participant pursuant to Section 6.

 

2.28.                     “Subcommittee” shall mean a subcommittee of
the Committee consisting of each member of the Compensation Committee of the
Board who is both: (i) an “outside director” within the meaning of Section
162(m) of the Code, and (ii) an “independent director” for purpose of the rules
and regulations of the NASDAQ Stock Market (or such other principal securities
market on which the Shares are traded).

 

2.29.                     “Subsidiary” shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning with
the Company if, at the time of the granting of the Award, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

 

2.30.                     Substitute Awards” shall mean Awards
granted or Shares issued by the Company in assumption of, or in substitution or
exchange for, awards previously granted, or the right or obligation to make
future awards, by a company acquired by the Company or any Subsidiary or with
which the Company or any Subsidiary combines.

 

2.31.                     “Tandem Stock Appreciation Right” shall
have the meaning set forth in Section 6.1.

 

2.32.                     “Vesting Period” shall have the meaning set
forth in Section 7.1.

 

3.                                      SHARES
SUBJECT TO THE PLAN

 

3.1                               Number of Shares. (a)  Subject to adjustment as provided in
Section 12.2, a total of 6,000,000 Shares shall be authorized for grant
under the Plan. Any Shares that are subject to Awards of Options or Stock
Appreciation Rights shall be counted against this limit as one (1) 

 

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Share for every one (1) Share granted. Any Shares that are subject to
Awards other than Options or Stock Appreciation Rights shall be counted against
this limit as two and one-half (2.5) Shares
for every one (1) Share granted.

 

(b)                                 If
any Shares subject to an Award or to an award under the Prior Plans are forfeited
(other than as a result of expiration of the Award’s term if the Award is an
Option or Stock Appreciation Right), or any Award or award under the Prior
Plans is settled for cash, the Shares shall, to the extent of such forfeiture
or cash settlement, again be available for Awards under the Plan, subject to
Section 3.1(d) below. Notwithstanding anything to the contrary contained
herein, the following Shares shall not be added to the Shares authorized for
grant under paragraph (a) of this Section: (i) Shares subject to an Option or
Stock Appreciation Right that expires at the conclusion of its term without
being exercised, (ii) Shares tendered by the Participant or withheld by the
Company in payment of the purchase price of an Option, (iii) Shares tendered by
the Participant or withheld by the Company to satisfy any tax withholding
obligation with respect to an Award, (iv) Shares repurchased by the Company
with Option proceeds, and (v) Shares subject to a Stock Appreciation Right that
are not issued in connection with the stock settlement of the Stock
Appreciation Right on exercise thereof.

 

(c)                                  Substitute
Awards shall not reduce the Shares authorized for grant under the Plan or
authorized for grant to a Participant in any calendar year.

 

(d)                                 Any
Shares that again become available for grant pursuant to this Article shall be
added back as one (1) Share if such Shares were subject to Options or Stock
Appreciation Rights granted under the Plan or options or stock appreciation
rights granted under the Prior Plans, and as two and one-half (2.5) Shares if
such Shares were subject to Awards other than Options or Stock Appreciation
Rights granted under the Plan.

 

3.2.                            Character
of Shares. Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued shares, treasury shares or shares purchased in the open
market or otherwise.

 

4.                                      ELIGIBILITY
AND ADMINISTRATION

 

4.1.                            Eligibility. Any Employee or Director
shall be eligible to be selected as a Participant.

 

4.2.                            Administration. (a) The Plan shall be
administered by the Committee. Subject to Section 4.2(c) below, the other
provisions of the Plan and such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board, the
Committee shall have full power and authority to: (i) select the Employees
and Directors to whom Awards may from time to time be granted hereunder;
(ii) determine the type or types of Awards, not inconsistent with the
provisions of the Plan, to be granted to each Participant hereunder;
(iii) determine the number of Shares to be covered by each Award granted
hereunder; (iv) determine the terms and conditions, not inconsistent with
the provisions of the Plan, of any Award granted hereunder; (v) determine
whether, to what extent and under what circumstances Awards may be settled in
cash, Shares or other property; (vi) determine whether, to what extent,
and under what circumstances cash, Shares, other property and other amounts
payable with respect to an Award made under the Plan shall be deferred either
automatically or at the election 

 

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of the Participant; (vii) determine whether, to what extent and under
what circumstances any Award shall be canceled or suspended;
(viii) interpret and administer the Plan and any instrument or agreement
entered into under or in connection with the Plan, including any Award
Agreement; (ix) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent that the
Committee shall deem desirable to carry it into effect; (x) establish such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; (xi) determine whether any Award, other
than an Option or Stock Appreciation Right, will have Dividend Equivalents; and
(xii) make any other determination and take any other action that the
Committee deems necessary or desirable for administration of the Plan.

 

(b)                                 Decisions
of the Committee shall be final, conclusive and binding on all persons or
entities, including the Company, any Participant, and any Subsidiary. A
Participant or other holder of an Award may contest a decision or action of the
Committee with respect to such person or Award only on the grounds that such
decision is arbitrary and capricious or unlawful, and any review of such
decision or action shall be limited to determining whether the Committee’s
decision or action was arbitrary and capricious or unlawful. A majority of the
members of the Committee may determine its actions and fix the time and place
of its meetings.

 

(c)                                  Notwithstanding
Section 4.2(a) above, to the extent required to qualify Awards to officers as “qualified
performance-based compensation” under Section 162(m) of the Code or comply with
applicable securities law or the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded), the Subcommittee rather than the full Compensation Committee shall have
power and authority to grant Awards to officers and Directors of the Company,
subject to such orders or resolutions not inconsistent with the provisions of
the Plan as may from time to time be adopted by the Board. The Subcommittee’s
authority hereunder with respect to Awards to officers and Directors of the
Company shall include all of the powers set forth in Section 4.2(a)(i) through
(xii) above.

 

(d)                                 The
full Committee may also delegate to the Subcommittee the right to grant Awards
to Employees who are not Directors or officers of the Company and the authority
to take action on behalf of the Committee pursuant to the Plan to cancel or
suspend Awards to Employees who are not Directors or officers of the Company.

 

(e)                                  Any
action within the scope of its authority by the Subcommittee under Section
4.2(c) or (d) shall be deemed for all purposes under the Plan to have been
taken by the full Committee and references in the Plan to the Committee shall
be deemed to include the Subcommittee unless the context otherwise requires.

 

5.                                      OPTIONS

 

5.1.                            Grant
of Options. Options may be granted hereunder to Participants either alone
or in addition to other Awards granted under the Plan. Any Option shall be
subject to the terms and conditions of this Article and to such additional
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall deem desirable.

 

5.2.                            Award
Agreements. All Options granted pursuant to this Article shall be evidenced
by a written Award Agreement in such form and containing such terms and
conditions 

 

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as the Committee shall determine which are not inconsistent with the
provisions of the Plan. The terms of Options need not be the same with respect
to each Participant. Granting an Option pursuant to the Plan shall impose no
obligation on the recipient to exercise such Option. Any individual who is
granted an Option pursuant to this Article may hold more than one Option
granted pursuant to the Plan at the same time.

 

5.3.                            Option
Price. Other than in connection with Substitute Awards, the option price
per each Share purchasable under any Option granted pursuant to this Article
shall not be less than 100% of the Fair Market Value of such Share on the date
of grant of such Option. Other than pursuant to Section 12.2, the Committee
shall not without the approval of the Company’s stockholders (a) lower the
option price per Share of an Option after it is granted, (b) cancel an Option
when the option price per Share exceeds the Fair Market Value of the underlying
Shares in exchange for another Award (other than in connection with Substitute
Awards), and (c) take any other action with respect to an Option that may be
treated as a repricing under the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded).

 

5.4.                            Option Term. The term of each Option shall
be fixed by the Committee in its sole discretion; provided that no Option shall
be exercisable after the expiration of seven (7) years from the date the Option
is granted, except in the event of death or disability.

 

5.5.                            Exercise of Options. Vested Options
granted under the Plan shall be exercised by the Participant or by a Permitted
Assignee thereof (or by the Participant’s executors, administrators, guardian
or legal representative, as may be provided in an Award Agreement) as to all or
part of the Shares covered thereby, by the giving of written notice of exercise
to the Company or its designated agent, specifying the number of Shares to be
purchased, accompanied by payment of the full purchase price for the Shares
being purchased. Unless otherwise provided in an Award Agreement, full payment
of such purchase price shall be made at the time of exercise and shall be made
(a) in cash or cash equivalents (including certified check or bank check or
wire transfer of immediately available funds), (b) by tendering previously
acquired Shares (either actually or by attestation, valued at their then Fair
Market Value), (c) with the consent of the Committee, by delivery of other
consideration (including, where permitted by law and the Committee, other
Awards) having a Fair Market Value on the exercise date equal to the total
purchase price, (d) with the consent of the Committee, by withholding Shares
otherwise issuable in connection with the exercise of the Option, (e) through
any other method specified in an Award Agreement, or (f) any combination of any
of the foregoing. The notice of exercise, accompanied by such payment, shall be
delivered to the Company at its principal business office or such other office
as the Committee may from time to time direct, and shall be in such form,
containing such further provisions consistent with the provisions of the Plan,
as the Committee may from time to time prescribe. In no event may any Option
granted hereunder be exercised for a fraction of a Share. No adjustment shall
be made for cash dividends or other rights for which the record date is prior
to the date of such issuance.

 

5.6.                            Form
of Settlement. In its sole discretion, the Committee may provide, at the
time of grant, that the Shares to be issued upon an Option’s exercise shall be
in the form of Restricted Stock or other similar securities, or may reserve the
right so to provide after the time of grant.

 

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5.7.                            Incentive
Stock Options. The Committee may grant Options intended to qualify as “incentive
stock options” as defined in Section 422 of the Code, to any employee of the
Company or any Subsidiary, subject to the requirements of Section 422 of the
Code. Solely for the purposes of determining whether Shares are available for
the grant of “incentive stock options” under the Plan, the maximum aggregate
number of Shares with respect to which “incentive stock options” may be issued
under the Plan shall be 6,000,000 Shares.

 

6.                                      STOCK APPRECIATION RIGHTS

 

6.1.                            Grant
and Exercise. The Committee may provide Stock Appreciation Rights (a) in
conjunction with all or part of any Option granted under the Plan or at any
subsequent time during the term of such Option (“Tandem Stock Appreciation
Right”), (b) in conjunction with all or part of any Award (other than an
Option) granted under the Plan or at any subsequent time during the term of
such Award, or (c) without regard to any Option or other Award (a “Freestanding
Stock Appreciation Right”), in each case upon such terms and conditions as the
Committee may establish in its sole discretion.

 

6.2.                            Terms
and Conditions. Stock Appreciation Rights shall be subject to such terms
and conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee, including the following:

 

(a)                                  Upon
the exercise of a Stock Appreciation Right, the holder shall have the right to
receive the excess of (i) the Fair Market Value of one Share on the date
of exercise, over (ii) the designated based value per Share (the “Base
Amount”) with respect to the right on the date of grant (or in the case of a
Tandem Stock Appreciation Right on the date of grant of the related Option) as
specified by the Committee in its sole discretion, which Base Amount per Share,
except in the case of Substitute Awards or in connection with an adjustment
provided in Section 12.2, shall not be less than the Fair Market Value of
one Share on such date of grant of the right or the related Option, as the case
may be.

 

(b)                                 Upon
the exercise of a Stock Appreciation Right, the Committee shall determine in
its sole discretion whether payment shall be made in cash, in whole Shares or
other property, or any combination thereof.

 

(c)                                  Any
Tandem Stock Appreciation Right may be granted at the same time as the related
Option is granted or at any time thereafter before exercise or expiration of
such Option.

 

(d)                                 Any
Tandem Stock Appreciation Right related to an Option may be exercised only when
the related Option would be exercisable and the Fair Market Value of the Shares
subject to the related Option exceeds the option price at which Shares can be
acquired pursuant to the Option. In addition, (i) if a Tandem Stock
Appreciation Right exists with respect to less than the full number of Shares
covered by a related Option, then an exercise or termination of such Option
shall not reduce the number of Shares to which the Tandem Stock Appreciation
Right applies until the number of Shares then exercisable under such Option
equals the number of Shares to which the Tandem Stock Appreciation Right
applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to
a person then subject to Section 16 of the 

 

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Exchange Act shall be exercised during the first six (6) months of its
term for cash, except as provided in Article 11.

 

(e)                                  Any
Option related to a Tandem Stock Appreciation Right shall no longer be
exercisable to the extent the Tandem Stock Appreciation Right has been
exercised.

 

(f)                                    The
provisions of Stock Appreciation Rights need not be the same with respect to
each recipient.

 

(g)                                 The
Committee may impose such other conditions or restrictions on the terms of
exercise and the exercise price of any Stock Appreciation Right, as it shall
deem appropriate. Notwithstanding the foregoing provisions of this Section
6.2(g), but subject to Section 12.2, a Freestanding Stock Appreciation
Right shall have the same terms and conditions as Options, including (i) a Base
Amount per Share not less than Fair Market Value of a Share on the date of
grant to an employee of the Company or a Subsidiary, and (ii) a term not
greater than seven (7) years. In addition to the foregoing, but subject to
Section 12.2, the Committee shall not without approval of the Company’s stock
holders (a) reduce the Base Amount per Share under any Stock Appreciation Right
after it is granted, (b) cancel a Stock Appreciation Right when the Base Amount
per Share exceeds the Fair Market Value of the underlying Shares in exchange
for another Award (other than in connection with Substitute Awards), and (c)
take any other action with respect to a Stock Appreciation Right that may be
treated as a repricing under the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded).

 

(h)                                 The
Committee may impose such terms and conditions on Stock Appreciation Rights
granted in conjunction with any Award (other than an Option) as the Committee
shall determine in its sole discretion.

 

7.                                      RESTRICTED
STOCK AWARDS

 

7.1.                            Grants. Awards of Restricted Stock may be
issued hereunder to Participants either alone or in addition to other Awards
granted under the Plan (a “Restricted Stock Award”), and such Restricted Stock
Awards shall also be available as a form of payment of Performance Awards and
other earned cash-based incentive compensation. A Restricted Stock Award shall
be subject to vesting restrictions imposed by the Committee covering a period
of time specified by the Committee (the “Vesting Period”). The Committee has
absolute discretion to determine whether any consideration (other than
services) is to be received by the Company or any Subsidiary as a condition
precedent to the issuance of Restricted Stock.

 

7.2.                            Award
Agreements. The terms of any Restricted Stock Award granted under the Plan
shall be set forth in a written Award Agreement which shall contain provisions
determined by the Committee and not inconsistent with the Plan. The terms of
Restricted Stock Awards need not be the same with respect to each Participant

 

7.3.                            Rights
of Holders of Restricted Stock. Beginning on the date of grant of the
Restricted Stock Award and subject to execution of the Award Agreement, the
Participant shall become a shareholder of the Company with respect to all
Shares subject to the Award Agreement and shall have all of the rights of a
shareholder, including the right to vote such Shares and the right to receive
distributions made with respect to such Shares; provided, however, that except as

 

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otherwise provided in an Award Agreement any Shares or any other
property (other than cash) distributed as a dividend or otherwise with respect
to any Restricted Stock as to which the restrictions have not yet lapsed shall
be subject to the same restrictions as such Restricted Stock.

 

7.4.                            Minimum Vesting Period. Except for certain
limited situations (including the death, disability or retirement of the
Participant, or a Change in Control as defined in Article 11), or special
circumstances determined by the Committee, such as the achievement of
performance objectives, Restricted Stock Awards subject solely to the continued
employment of employees of the Company or a Subsidiary shall have a Vesting
Period of not less than three (3) years from date of grant (but permitting pro
rata vesting over such time); provided that such minimum Vesting Period shall
not be applicable to (i) grants to new hires to replace forfeited awards from a
prior employer, or (ii) grants of Restricted Stock in payment of Performance
Awards and other earned cash-based incentive compensation. Subject to the
foregoing minimum Vesting Period requirements, the Committee may, in its sole
discretion and subject to the limitations imposed under Section 162(m) of the
Code and the regulations thereunder in the case of a Restricted Stock Award
intended to comply with the performance-based exception under Code Section
162(m), waive the forfeiture period and any other conditions set forth in any
Award Agreement subject to such terms and conditions as the Committee shall
deem appropriate. The minimum Vesting Period requirements of this Section shall
not apply to Restricted Stock Awards granted to Directors or to any consultants
or advisors who provide services to the Company or any Subsidiary.

 

8.                                      OTHER
STOCK UNIT AWARDS

 

8.1.                            Grants. Other Awards of units having a
value equal to an identical number of Shares (“Other Stock Unit Awards”) may be
granted hereunder to Participants, in addition to other Awards granted under
the Plan. Other Stock Unit Awards shall also be available as a form of payment
of other Awards granted under the Plan and other earned cash-based incentive
compensation.

 

8.2.                            Award
Agreements. The terms of Other Stock Unit Award granted under the Plan
shall be set forth in a written Award Agreement which shall contain provisions
determined by the Committee and not inconsistent with the Plan. The terms of
such Awards need not be the same with respect to each Participant.

 

8.3.                            Vesting.
Except for certain limited situations (including the death, disability or
retirement of the Participant, or a Change in Control as defined in Article
11), or special circumstances determined by the Committee, such as the
achievement of performance objectives, Other Stock Unit Awards subject solely
to the continued employment of employees of the Company or any Subsidiary shall
be subject to a vesting period determined by the Committee of not less than
three (3) years from date of grant (but permitting pro rata vesting over such
time); provided, that such minimum vesting period shall not be applicable to
(i) grants to new hires to replace forfeited awards from a prior employer, or
(ii) grants of Other Stock Unit Awards in payment of Performance Awards and
other earned cash-based incentive compensation. Subject to the foregoing
minimum vesting period requirements, the Committee may, in its sole discretion
and subject to the limitations imposed under Section 162(m) of the Code and the
regulations thereunder in the case of a Other Stock Unit Award intended to
comply with the performance-based exception under Code Section 162(m), waive
the forfeiture period and any other

 

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conditions set forth in any Award Agreement subject to such terms and
conditions as the Committee shall deem appropriate. The minimum vesting period
requirements of this Section shall not apply to Other Stock Unit Awards granted
to Directors or to any consultants or advisors who provide services to the
Company or any Subsidiary.

 

8.4.                            Payment.
Except as provided in Article 10 or as maybe provided in an Award
Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property,
or any combination thereof, in the sole discretion of the Committee at the time
of payment. Other Stock Unit Awards may be paid in a lump sum or in
installments or, in accordance with procedures established by the Committee, on
a deferred basis subject to the requirements of Section 409A of the Code.

 

9.                                      PERFORMANCE
AWARDS

 

9.1.                            Grants.
Performance Awards in the form of Performance Shares or Performance Units, as
determined by the Committee in its sole discretion, may be granted hereunder to
Participants, for no consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to other Awards granted
under the Plan. The performance goals
to be achieved for each Performance Period shall be conclusively determined by
the Committee and may be based upon the criteria set forth in Section 10.2.

 

9.2.                            Award Agreements. The terms of any Performance Award granted
under the Plan shall be set forth in a written Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with the
Plan, including whether such Awards shall have Dividend Equivalents. The terms
of Performance Awards need not be the same with respect to each Participant.

 

9.3.                            Terms and Conditions. The performance criteria to be achieved
during any Performance Period and the length of the Performance Period shall be
determined by the Committee upon the grant of each Performance Award. The
amount of the Award to be distributed shall be conclusively determined by the
Committee.

 

9.4.                            Payment. Except as provided in Article 11 or as may
be provided in an Award Agreement, Performance Awards will be distributed only
after the end of the relevant Performance Period. Performance Awards may be
paid in cash, Shares, other property, or any combination thereof, in the sole
discretion of the Committee at the time of payment. Performance Awards may be
paid in a lump sum or in installments following the close of the Performance
Period or, in accordance with procedures established by the Committee, on a
deferred basis subject to the requirements of Section 409A of the Code.

 

10.                               CODE
SECTION 162(m) PROVISIONS

 

10.1.                     Covered Employees. Notwithstanding any
other provision of the Plan, if the Committee determines at the time a
Restricted Stock Award, a Performance Award or an Other Stock Unit Award is
granted to a Participant who is, or is likely to be, as of the end of the tax
year in which the Company would claim a tax deduction in connection with such Award,
a Covered Employee, then the Committee may provide that this Article 10 is
applicable to such Award.

 

10

 

10.2.                     Performance Criteria. If the Committee
determines that a Restricted Stock Award, a Performance Award or an Other Stock
Unit Award is subject to this Article 10, the lapsing of restrictions thereon
and the distribution of cash, Shares or other property pursuant thereto, as
applicable, shall be subject to the achievement of one or more objective
performance goals established by the Committee, which shall be based on the
attainment of specified levels of one or any combination of the following: net
sales; revenue; revenue growth; operating income; pre- or after-tax income
(before or after allocation of corporate overhead and bonus); net earnings;
earnings per share; net income; division, group or corporate financial goals;
return on equity; total shareholder return; return on assets or net assets;
attainment of strategic and operational initiatives; appreciation in and/or
maintenance of the price of the Shares or any other publicly-traded securities
of the Company; market share; gross profits; earnings (including earnings
before taxes, earnings before interest and taxes or earnings before interest, taxes,
depreciation and amortization); economic value-added models; comparisons with
various stock market indices; reductions in costs; cash flow (before or after
dividends) cash flow per share (before or after dividends); return on capital
(including return on total capital or return on invested capital; cash flow
return on investment; improvement in or attainment of expense levels or working
capital levels; cash margins; cost per available seat mile; revenue per
available seat mile; revenue per revenue seat mile; operating margin adjusted
for total interest expense; percentage of flights completed on time; percentage
of scheduled flights completed; lost passenger baggage; aircraft utilization;
and revenue per employee. Such performance goals also may be based solely by
reference to the Company’s performance or the performance of a Subsidiary,
division, business segment or business unit of the Company, or based upon the
relative performance of other companies or upon comparisons of any of the
indicators of performance relative to other companies. The Committee may also
exclude charges related to an event or occurrence which the Committee
determines should appropriately be excluded, including (a) reorganizations,
restructurings and discontinued operations, (b) other extraordinary
non-recurring items, (c) an event either not directly related to the operations
of the Company or not within the reasonable control of the Company’s
management, or (d) the cumulative effects of tax or accounting changes in
accordance with generally accepted accounting principles. Such performance
goals shall be set by the Committee within the time period prescribed by, and
shall otherwise comply with the requirements of, Section 162(m) of the
Code, and the regulations thereunder.

 

10.3.                     Adjustments.
Notwithstanding any provision of the Plan (other than Article 11), with respect
to any Restricted Stock, Performance Award or Other Stock Unit Award that is
subject to this Section 10, the Committee may adjust downwards, but not
upwards, the amount payable pursuant to such Award, and the Committee may not
waive the achievement of the applicable performance goals, except in the case
of the death or disability of the Participant or as otherwise determined by the
Committee in special circumstances.

 

10.4.                     Restrictions.
The Committee shall have the power to impose such other restrictions on Awards
subject to this Article as it may deem necessary or appropriate to ensure
that such Awards satisfy all requirements for “performance-based compensation” within
the meaning of Section 162(m) of the Code.

 

10.5.                     Limitations on Grants to Individual Participants.
Subject to adjustment as provided in Section 12.2, no Participant may be
granted (i) Options or Stock Appreciation Rights during any rolling 36-month
period with respect to more than 1,000,000 Shares or (ii) Restricted 

 

11

 

Stock, Performance Awards and/or Other Stock Unit Awards that are
denominated in Shares in any rolling 36-month period with respect to more than
500,000 Shares (the “Limitations”). In addition to the foregoing, the maximum
dollar value payable to any Participant in any rolling 12-month period with
respect to Performance Awards is $5,000,000. If an Award is cancelled, the
cancelled Award shall continue to be counted toward the applicable Limitations.

 

11.                               CHANGE
IN CONTROL PROVISIONS

 

11.1.                     Impact on
Certain Awards. Award Agreements may provide that in the event of a Change
in Control of the Company (as defined in Section 11.3): (i) Options and Stock
Appreciation Rights outstanding as of the date of the Change in Control shall
be cancelled and terminated without payment therefore if the Fair Market Value
of one Share as of the date of the Change in Control is less than the per Share
Option exercise price or the Base Amount per Share of the Stock Appreciation
Right, and (ii) all Performance Awards shall be considered to be earned and
payable (either in full or pro rata based on the portion of Performance Period
completed as of the date of the Change in Control), and any deferral or other
restriction shall lapse and such Performance Awards shall be immediately
settled or distributed.

 

11.2.                     Assumption or
Substitution of Certain Awards. (a) 
Unless otherwise provided in an Award Agreement, in the event of a
Change in Control of the Company in which the successor company assumes or
substitutes for an Option, Stock Appreciation Right, Restricted Stock Award or
Other Stock Unit Award, if a Participant’s employment with such successor
company (or a subsidiary thereof) terminates within the time period following
such Change in Control set forth in the Award Agreement and under the
circumstances specified in the Award Agreement: (i) Options and Stock
Appreciation Rights outstanding as of the date of such termination of
employment will immediately vest, become fully exercisable, and may thereafter
be exercised for a period of time set forth in the Award Agreement, (ii)
restrictions and deferral limitations on Restricted Stock shall lapse and the
Restricted Stock shall become free of all restrictions and limitations and
become fully vested, and (iii) the restrictions and deferral limitations and
other conditions applicable to any Other Stock Unit Awards or any other Awards
shall lapse, and such Other Stock Unit Awards or such other Awards shall become
free of all restrictions, limitations or conditions and become fully vested and
transferable to the full extent of the original grant. For the purposes of this
Section 11.1, an Option, Stock Appreciation Right, Restricted Stock Award
or Other Stock Unit Award shall be considered assumed or substituted for if
following the Change in Control the Award confers the right to purchase or
receive, for each Share subject to the Option, Stock Appreciation Right, Restricted
Stock Award or Other Stock Unit Award immediately prior to the Change in
Control, the consideration (whether stock, cash or other securities or
property) received in the transaction constituting a Change in Control by
holders of Shares for each Share held on the effective date of such transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the transaction
constituting a Change in Control is not solely common stock of the successor
company, the Committee may, with the consent of the successor company, provide
that the consideration to be received upon the exercise or vesting of an
Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit
Award, for each Share subject thereto, will be solely common stock of the
successor company substantially equal in fair market value to the per share
consideration received by holders of Shares in the transaction constituting a
Change in Control.

 

12

 

The determination of such substantial equality of value of
consideration shall be made by the Committee in its sole discretion and its
determination shall be conclusive and binding.

 

(b)                                 Unless otherwise
provided in an Award Agreement, in the event of a Change in Control of the
Company in which the successor company does not assume or substitute for an
Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit
Award: (i) Options and Stock Appreciation Rights outstanding as of the date of
the Change in Control shall immediately vest and become fully exercisable, (ii)
restrictions and deferral limitations on Restricted Stock shall lapse and the
Restricted Stock shall become free of all restrictions and limitations and
become fully vested, and (iii) the restrictions and deferral limitations and
other conditions applicable to any Other Stock Unit Awards or any other Awards
shall lapse, and such Other Stock Unit Awards or such other Awards shall become
free of all restrictions, limitations or conditions and become fully vested and
transferable to the full extent of the original grant.

 

(c)                                  Notwithstanding
any other provision of the Plan, the Committee, in its discretion, may
determine that, upon the occurrence of a Change in Control of the Company, each
Option and Stock Appreciation Right outstanding shall terminate within a
specified number of days after notice to the Participant, and/or that each
Participant shall receive, with respect to each Share subject to such Option or
Stock Appreciation Right, an amount equal to the excess of the Fair Market
Value of such Share immediately prior to the occurrence of such Change in
Control over the exercise price per share of such Option and/or Stock
Appreciation Right; such amount to be payable in cash, in one or more kinds of
stock or property (including the stock or property, if any, payable in the
transaction) or in a combination thereof, as the Committee, in its discretion,
shall determine.

 

11.3.                     Change in
Control. For purposes of the Plan, unless otherwise provided in an Award
Agreement, Change in Control means the occurrence of any one of the following
events:

 

(a)                                  During
any twenty-four (24) month period, individuals who, as of the beginning of such
period, constitute the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the
beginning of such period whose election or nomination for election was approved
by a vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation of
proxies by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;

 

(b)                                 any
“person” (as such term is defined in the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board (the “Company Voting Securities”); provided, however,
that the event described in this paragraph (b) shall not be 

 

13

 

deemed to be a Change in Control by virtue of any of the following
acquisitions:  (i) by the Company or any subsidiary, (ii) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary, (iii) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) pursuant to a
Non-Qualifying Transaction, as defined in paragraph (c) below, or (v) by any
person of Voting Securities from the Company, if a majority of the Incumbent
Board approves in advance the acquisition of beneficial ownership of 50% or
more of Company Voting Securities by such person;

 

(c)                                  the
consummation of a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Company or any of its subsidiaries
that requires the approval of the Company’s stockholders, whether for such
transaction or the issuance of securities in the transaction (a “Business Combination”),
unless immediately following such Business Combination:  (i) more than 60% of the total voting
power of (A) the corporation resulting from such Business Combination (the
“Surviving Corporation”),
or (B) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities eligible
to elect directors of the Surviving Corporation (the “Parent Corporation”), is
represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination; (ii) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 50% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation); and (iii) at least a
majority of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (i), (ii) and (iii) above shall be
deemed to be a “Non-Qualifying Transaction”);

 

(d)                                 the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or the consummation of a sale of all or
substantially all of the Company’s assets; or

 

(e)                                  the
occurrence of any other event that the Board determines by a duly approved resolution
constitutes a Change in Control.

 

Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 50% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that
if after such acquisition by the Company such person becomes the beneficial
owner of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.

 

14

 

12.                               GENERALLY APPLICABLE PROVISIONS

 

12.1.                     Amendment and
Termination of the Plan. The Board may, from time to time, alter, amend,
suspend or terminate the Plan as it shall deem advisable, subject to any
requirement for stockholder approval imposed by applicable law, including the
rules and regulations of the NASDAQ Stock Market (or such other principal
securities market on which the Shares are traded) provided that the Board may
not amend the Plan in any manner that would result in noncompliance with Rule
16b-3 of the Exchange Act; and further provided that the Board may not, without
the approval of the Company’s stockholders, amend the Plan to (a) increase the
number of Shares that may be the subject of Awards under the Plan (except for
adjustments pursuant to Section 12.2), (b) expand the types of awards available
under the Plan, (c) materially expand the class of persons eligible to
participate in the Plan, (d) amend any provision of Section 5.3, (e) increase
the maximum permissible term of any Option specified by Section 5.4 or the
maximum permissible term of a Freestanding Stock Appreciation Right specified
by Section 5.5(g), (f) amend any provision of Section 10.5, or (g) take any
action with respect to an Option or Stock Appreciation Right that may be
treated as a repricing under the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded), including reducing the exercise price or Base Amount (as applicable)
or exchanging an Option or Stock Appreciation Right for cash or another Award. In
addition, no amendments to, or termination of, the Plan shall in any way impair
the rights of a Participant under any Award previously granted without such
Participant’s consent.

 

12.2.                     Adjustments. In the event of any merger,
reorganization, consolidation, recapitalization, dividend or distribution
(whether in cash, shares or other property, other than a regular cash
dividend), stock split, reverse stock split, spin-off or similar transaction or
other change in corporate structure affecting the Shares or the value thereof,
such adjustments and other substitutions shall be made to the Plan and to
Awards as the Committee, in its sole discretion, deems equitable or appropriate
taking into consideration the accounting and tax consequences, including such
adjustments in the aggregate number, class and kind of securities that may be
delivered under the Plan, the Limitations, the maximum number of Shares that
may be issued under “incentive stock options” and, in the aggregate or to any
one Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Awards granted under the Plan (including, if
the Committee deems appropriate, the substitution of similar options to
purchase the shares of, or other awards denominated in the shares of, another
company) as the Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of Shares subject to any Award
shall always be a whole number.

 

12.3.                     Transferability of Awards. Except as
provided below, and except as otherwise authorized by the Committee in an Award
Agreement, no Award and no Shares subject to Awards described in Article 8 that
have not been issued or as to which any applicable restriction, performance or
deferral period has not lapsed, may be sold, assigned, transferred, pledged or
otherwise encumbered, other than by will or the laws of descent and
distribution, and such Award may be exercised during the life of the
Participant only by the Participant or the Participant’s guardian or legal
representative. Notwithstanding the foregoing if provided for in an Award
Agreement, a Participant may assign or transfer an Award with the consent of
the Committee (each transferee thereof, a “Permitted Assignee”) (a) to the
Participant’s spouse, children, or grandchildren (including any adopted step
children and grandchildren); (b) to a trust or partnership for the benefit of
one or more person referred to in clause (a); or (c) for charitable 

 

15

 

donations;  provided that such
Permitted Assignee shall be bound by and subject to all of the terms and
conditions of the Plan and the Award Agreement relating to the transferred
Award and shall execute an agreement satisfactory to the Company evidencing such
obligations; and provided further that such Participant shall remain bound by
the terms and conditions of the Plan. The Company shall cooperate with any
Permitted Assignee and the Company’s transfer agent in effectuating any
transfer permitted under this Section. Any transfer of an Award or Shares in
violation of this Section 12.3 shall be null and void.

 

12.4.                     Termination of Employment. The Committee
shall determine and set forth in each Award Agreement whether any Awards
granted in such Award Agreement will continue to be exercisable, and the terms
of such exercise, on and after the date that a Participant ceases to be
employed by or to provide services to the Company or any Subsidiary (including
as a Director), whether by reason of death, disability, voluntary or
involuntary termination of employment or services, or otherwise. The date of
termination of a Participant’s employment or services will be determined by the
Committee, which determination will be final.

 

12.5.                     Deferral;
Dividend Equivalents. The
Committee shall be authorized to establish procedures pursuant to which the
payment of any Award may be deferred. Subject to the provisions of the Plan and
any Award Agreement, the recipient of an Award (including any deferred Award)
other than an Option or Stock Appreciation Right may, if so determined by the
Committee, be entitled to receive, currently or on a deferred basis, cash,
stock or other property dividends, or cash payments in amounts equivalent to
cash, stock or other property dividends on Shares (“Dividend Equivalents”) with
respect to the number of Shares covered by the Award, as determined by the
Committee, in its sole discretion. The Committee may provide that such amounts
and Dividend Equivalents (if any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested and may provide that such amounts and
Dividend Equivalents are subject to the same vesting or performance conditions
as the underlying Award.

 

13.                               MISCELLANEOUS

 

13.1.                     Tax
Withholding. The Company shall have the right to make all payments or
distributions pursuant to the Plan to a Participant (or a Permitted Assignee
thereof) (any such person, a “Payee”) net of any applicable federal, state and
local taxes required to be paid or withheld as a result of (a) the grant of any
Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the
delivery of Shares or cash, (d) the lapse of any restrictions in connection
with any Award or (e) any other event occurring pursuant to the Plan. The
Company or any Subsidiary shall have the right to withhold from wages or other
amounts otherwise payable to such Payee such withholding taxes as may be
required by law, or to otherwise require the Payee to pay such withholding
taxes. If the Payee shall fail to make such tax payments as are required, the
Company or its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
such Payee or to take such other action as may be necessary to satisfy such
withholding obligations. The Committee shall be authorized to establish
procedures for election by Participants to satisfy such obligation for the
payment of such taxes by tendering previously acquired Shares (either actually
or by attestation, valued at their then Fair Market Value) that have been owned
for a period of at least six months (or such other period to avoid accounting
charges against the Company’s earnings), or by directing the Company to retain
Shares (up to the Participant’s minimum required tax

 

16

 

withholding rate or such other rate that will not trigger a negative
accounting impact) otherwise deliverable in connection with the Award.

 

13.2.                     Right of
Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of
an Award hereunder shall confer upon any Employee or Director the right to
continue in the employment or service of the Company or any Subsidiary or
affect any right that the Company or any Subsidiary may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) any such Employee or Director at any time for any reason “at will.”  Except as specifically provided by the
Committee, the Company shall not be liable for the loss of existing or
potential profit from an Award granted in the event of termination of an
employment or other relationship. No Employee or Participant shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees or Participants under the Plan.

 

13.3.                     Prospective
Recipient. The prospective recipient of any Award under the Plan shall not,
with respect to such Award, be deemed to have become a Participant, or to have
any rights with respect to such Award, until and unless such recipient shall
have executed an agreement or other instrument evidencing the Award and
delivered a copy thereof to the Company, and otherwise complied with the then
applicable terms and conditions of the Plan and Award Agreement.

 

13.4.                     Substitute Awards. Notwithstanding any
other provision of the Plan, the terms of Substitute Awards may vary from the
terms set forth in the Plan to the extent the Committee deems appropriate to
conform, in whole or in part, to the provisions of the awards in substitution
for which they are granted.

 

13.5.                     Cancellation
of Award. Notwithstanding anything to the contrary contained herein, all
outstanding Awards granted to any Participant shall be canceled if the
Participant, without the consent of the Company, while employed by the Company
or any Subsidiary or after termination of such employment or service,
establishes a relationship with a competitor of the Company or any Subsidiary
or engages in activity that is in conflict with or adverse to the interest of
the Company or any Subsidiary, as determined by the Committee in its sole
discretion. The Committee may provide in an Award Agreement that if within the
time period specified in the Agreement the Participant establishes a
relationship with a competitor or engages in an activity referred to in the
preceding sentence, the Participant will forfeit any gain realized on the
vesting or exercise of the Award and must repay such gain to the Company.

 

13.6.                     Stop Transfer
Orders. All certificates for Shares delivered under the Plan pursuant to
any Award shall be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions. Any
provision herein to the contrary notwithstanding, the Company shall have no
obligation to issue any Shares pursuant to an Award if the Committee determines
in good faith that such issuance would violate applicable federal, state or
foreign securities laws.

 

17

 

13.7.                     Nature of
Payments. All Awards made pursuant to the Plan are in consideration of
services performed or to be performed for the Company or any Subsidiary,
division or business unit of the Company. Any income or gain realized pursuant
to Awards under the Plan and any Stock Appreciation Rights constitute a special
incentive payment to the Participant and shall not be taken into account, to
the extent permissible under applicable law, as compensation for purposes of
any of the employee benefit plans of the Company or any Subsidiary except as
may be determined by the Committee or by the Board or board of directors of the
applicable Subsidiary.

 

13.8.                     Other Plans. Nothing contained in the Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.

 

13.9.                     Severability.
If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (a) be deemed limited to the extent that such court of
competent jurisdiction deems it lawful, valid and/or enforceable and as so
limited shall remain in full force and effect, and (b) not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable by a court of competent jurisdiction, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full
would be unlawful or otherwise invalid or unenforceable, then such
unlawfulness, invalidity or unenforceability shall not prevent such payment or
benefit from being made or provided in part, to the extent that it would not be
unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
the Plan.

 

13.10.              Construction. As
used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to
be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

 

13.11.              Unfunded Status of
the Plan. The Plan is intended to constitute an “unfunded” plan for
incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver the Shares or payments in lieu of or with respect to Awards hereunder;
provided, however, that the existence of such trusts or other arrangements is
consistent with the unfunded status of the Plan.

 

13.12.              Governing Law. The
Plan and all determinations made and actions taken thereunder, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Utah, without reference to principles of
conflict of laws, and construed accordingly.

 

18

 

13.13.              Effective Date of
Plan; Termination of Plan. The Plan shall be effective on the date of the
approval of the Plan by the holders of a majority the shares voted at a duly
constituted meeting of the stockholders of the Company. The Plan shall be null and
void and of no effect if the foregoing condition is not fulfilled and no Award
shall be granted until the stockholders of the Company approve the Plan. Awards
may be granted under the Plan at any time and from time to time following
stockholder approval of the Plan until the tenth anniversary of the effective
date of the Plan, on which date the Plan will expire except as to Awards then
outstanding under the Plan. Such outstanding Awards shall remain in effect
until they have been exercised or terminated, or have expired.

 

13.14.              Foreign Employees.
Awards may be granted to Participants who are foreign nationals or employed
outside the United States, or both, on such terms and conditions different from
those applicable to Awards to Employees employed in the United States as may,
in the judgment of the Committee, be necessary or desirable in order to
recognize differences in local law or tax policy. The Committee also may impose
conditions on the exercise or vesting of Awards in order to minimize the
Company’s obligation with respect to tax equalization for Employees on
assignments outside their home country.

 

13.15.              Compliance with
Section 409A of the Code. This Plan is intended to comply and shall be
administered in a manner that is intended to comply with Section 409A of the
Code and shall be construed and interpreted in accordance with such intent. To
the extent that an Award or the payment, settlement or deferral thereof is
subject to Section 409A of the Code, the Award shall be granted, paid, settled
or deferred in a manner that will comply with Section 409A of the Code,
including regulations or other guidance issued with respect thereto, except as
otherwise determined by the Committee. Any provision of this Plan that would
cause the grant of an Award or the payment, settlement or deferral thereof to
fail to satisfy Section 409A of the Code shall be amended to comply with
Section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under Section
409A of the Code.

 

13.16.              Captions. The
captions in the Plan are for convenience of reference only, and are not
intended to narrow, limit or affect the substance or interpretation of the
provisions contained herein.

 

19Exhibit 4.01

[FACE OF NOTE]

Unless this certificate 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 certificate 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 is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.

 

	
  REGISTERED

  	
   

  	
  CUSIP: 225434BD0

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRINCIPAL AMOUNT: $2,600,000

  
	
  NO. 1

  	
   

  	
   

  

 

	
  CREDIT SUISSE (USA), INC.

  Reverse Convertible Securities Linked to the Performance of eBay Inc.

  due May 22, 2007

  

 

CREDIT SUISSE (USA), INC., a Delaware corporation (the
“Company”, which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, at the office or agency of the Company in New York,
New York, the Redemption Amount (as defined on the reverse hereof) on the
Maturity Date (as defined on the reverse hereof), in the coin or currency of
the United States and to pay a coupon of 12.0% per annum on the
principal amount from May 22, 2006. The coupon payment will be payable
quarterly in arrears on August 22, 2006, November 22, 2006, February 22,
2007, and May 22, 2007.

Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have been
manually signed by the Trustee under the Indenture referred to on the reverse
hereof.

 

 F-1
 

 

IN WITNESS WHEREOF, the Company has caused this Note
to be duly executed under its corporate seal.

	
  

  	
  CREDIT SUISSE (USA), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  By:

  	
  /s/ Peter Feeney

  
	
   

  	
   

  	
  Name: Peter Feeney

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE (USA), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Grace Koo

  
	
   

  	
   

  	
  Name: Grace Koo

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
				

 

 

 

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

Dated:  May 22,
2006

	
  

  	
  JPMORGAN CHASE, N.A.,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ignazio Tamburello

  
	
   

  	
   

  	
  Name: Ignazio Tamburello

  
	
   

  	
   

  	
  Title: Authorized Signatory

  

 

 F-2

 

 

[REVERSE OF NOTE]

CREDIT SUISSE
(USA), INC.

Reverse Convertible Securities Linked to the Performance of eBay Inc.

due May 22, 2007

This Note is one
of a duly authorized issue of debentures, notes, bonds or other evidences of
indebtedness of the Company (the “Securities”) of the series hereinafter
specified, all issued or to be issued under and pursuant to a senior indenture,
dated as of June 1, 2001 (the “Indenture”), between the Company and
JPMorgan Chase Bank, as trustee (the “Trustee”), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company, and the Holders of the Securities. The
Securities may be issued in one or more series, which different series may be
issued in various aggregate principal amounts, may mature at different times,
may bear interest (if any) at different rates, may be subject to different
redemption provisions (if any), may be subject to different sinking, purchase
or analogous funds (if any) and may otherwise vary as provided in the Indenture.
This Note is one of a series designated as the Reverse Convertible Securities
Linked to the Performance of eBay Inc., due
May 22, 2007 (the “Note”).

A coupon will be payable on this Note of
12.0% per annum on the principal amount from May 22, 2006. The coupon
payment will be payable quarterly in arrears on August 22, 2006, November 22,
2006, February 22, 2007, and May 22, 2007.

This Note is payable in the manner, with the effect
and subject to the conditions provided in the Indenture.

If a payment date is not a business day as defined in
the Indenture at a place of payment, payment may be made at that place on the
next succeeding day that is a business day, and no interest shall accrue for
the intervening period.

The Indenture provides that, without prior notice to
any Holders, the Company and the Trustee may amend the Indenture and the
Securities of any series with the written consent of the Holders of a majority
in principal amount of the outstanding Securities of all series affected by
such amendment (all such series voting as one class), and the Holders of a
majority in principal amount of the outstanding Securities of all series
affected thereby (all such series voting as one class) may waive future
compliance by the Company with any provision of the Indenture or the Securities
of such series by written notice to the Trustee; provided that, without the
consent of each Holder of the Securities of each series affected thereby, an
amendment or waiver, including a waiver of past defaults, may not: (i) extend
the stated maturity of the Principal of, or any sinking fund obligation or any
installment of interest on, such Holder’s Security, or reduce the principal
amount thereof or the rate of interest thereon (including any amount in respect
of original issue discount), or any premium payable with respect thereto, or
adversely affect the rights of such Holder under any mandatory redemption or
repurchase provision or any right of redemption or repurchase at the option of
such Holder, or reduce the amount of the Principal of an Original Issue
Discount Security that would be due and payable upon an acceleration of the
maturity thereof or the amount thereof provable in bankruptcy, or 

 R-1
 

 

 

change any place of
payment where, or the currency in which, any Security of such series or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the due date therefor;
(ii) reduce the percentage in principal amount of outstanding Securities
of the relevant series the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain provisions of
the Indenture or certain Defaults and their consequences provided for in the
Indenture; (iii) waive a Default in the payment of Principal of or
interest on any Security of such Holder; or (iv) modify any of the
provisions of the Indenture governing supplemental indentures with the consent
of Securityholders except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Security affected thereby.

The Indenture provides that, subject to certain
conditions, the Holders of at least a majority in principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the
Principal as is then accelerable) of the outstanding Securities of all series
affected (voting as a single class), by notice to the Trustee, may waive an
existing Default or Event of Default with respect to the Securities of such
series and its consequences, except a Default in the payment of Principal of or
interest on any Security or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the Holder
of each outstanding Security affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default with respect to the Securities of such
series arising therefrom shall be deemed to have been cured, for every purpose
of the Indenture; but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereto.

The Indenture provides that a series of Securities may
include one or more tranches (each a “tranche”) of Securities, including
Securities issued in a Periodic Offering. The Securities of different tranches
may have one or more different terms, including authentication dates and public
offering prices, but all the Securities within each such tranche shall have
identical terms, including authentication date and public offering price. Notwithstanding
any other provision of the Indenture, subject to certain exceptions, with
respect to sections of the Indenture concerning the execution, authentication
and terms of the Securities, redemption of the Securities, Events of Default of
the Securities, defeasance of the Securities and amendment of the Indenture, if
any series of Securities includes more than one tranche, all provisions of such
sections applicable to any series of Securities shall be deemed equally
applicable to each tranche of any series of Securities in the same manner as
though originally designated a series unless otherwise provided with respect to
such series or tranche pursuant to a board resolution or a supplemental
indenture establishing such series or tranche.

No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the Redemption Amount of
this Note in the manner, at the place, at the time and in the coin or currency
herein prescribed.

The Securities are issuable initially only in
registered form without coupons in denominations of $1,000 and any integral
multiples of $1,000 in excess of that amount at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and in the manner
and subject to the limitations provided in the Indenture.

 R-2
 

 

 

The Securities will not be redeemable at the option of
the Company prior to maturity.

The Company will not be required to pay any Additional
Amounts on the Securities.

Maturity
Date

The Maturity Date of the Securities is May 22, 2007 (the “Maturity Date”);
however, if a market disruption event exists on the Valuation Date, as
determined by the Calculation Agent, the Maturity Date will be the later of May 22,
2007, and the third business day following the date on which the closing price
for the reference shares is calculated.

Redemption
Amount

The Company will redeem the Securities at maturity for
a redemption amount in cash that will be based on the performance of the
reference shares during the term of the Securities (the “redemption amount”):

(1)          If
the closing price of the reference shares on the Nasdaq National Market (the “relevant
exchange”) is not less than the knock-in level, which is 80% of the Initial
Share Price, on any day from but not including May 17, 2006, which is the
initial setting date, to and including May 16, 2007 (the “Valuation Date”),
the redemption amount will equal a cash payment equal to 100% of the principal
amount of the Securities.

(2)          If
(i) the closing price of the reference shares on the relevant exchange is
less than the knock-in level on any day from but not including May 17,
2006, which is the initial setting date, to and including the Valuation Date
and (ii) the closing price of the reference shares on the relevant
exchange on the Valuation Date, which we refer to as the final share price, is
greater than or equal to the Initial Share Price, the redemption amount will
equal a cash payment equal to 100% of the principal amount of the Securities.

(3)          Otherwise,
the redemption amount will be the physical delivery amount. The physical
delivery amount will be the number of reference shares per $1,000 principal
amount of Securities equal to $1,000 divided by the Initial Share Price. The
market value of the physical delivery amount will be less than the principal
amount of the Securities and may be zero.

The “Initial Share Price” is $29.51.

A “business day” means a day, other than a Saturday,
Sunday or a day on which banking institutions in New York, New York are
generally authorized or obligated by law, regulation or executive order to
close and that is also a Trading Day.

A “trading day” means any day, as determined by the
Calculation Agent, on which trading is generally conducted for reference shares
(or, but for the occurrence of a market disruption event, would have been
generally conducted) on the relevant exchange and for options 

 

 R-3
 

 

and other derivative instruments on the reference
shares on the Chicago Mercantile Exchange and the Chicago Board Options Exchange,
which we refer to collectively as the related exchanges, other than a day on
which the relevant exchange or the related exchanges are scheduled to close
prior to their regular weekday closing time.

Market
Disruption Events

If no final share price is available on the Valuation
Date because of a market disruption event, as determined by the Calculation
Agent in its sole discretion, the Calculation Agent may postpone the
calculation of the final share price until the earlier of the date such market
disruption event has ceased or three trading days after the Valuation Date, as
the case may be. On such third trading day, in the event there still exists a
market disruption event, the Calculation Agent will determine the final share
price using its good faith estimate of the value for the reference shares as of
the closing time on the relevant exchange on such date. If a market disruption
event exists on the Valuation Date, the Maturity Date of the Securities will be
the later of the original Maturity Date and the third business day following
the day on which the final share price is calculated. No interest will accrue
or other payment be payable because of any postponement of the Maturity Date.

A “market disruption event” means the occurrence or
existence of any suspension of or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by any relevant exchange or
market or otherwise) of, or the unavailability, through a recognized system of
public dissemination of transaction information, of accurate price, volume or
related information in respect of (a) the reference shares or (b) any
options or futures contracts, or any options on such futures contracts,
relating to the reference shares if, in each case, in the determination of the
Calculation Agent, in its sole discretion, any such suspension, limitation or
unavailability is material.

For purposes of determining whether a market
disruption event has occurred:  (1) a
limitation on the hours or number of days of trading will not constitute a
market disruption event if it results from an announced change in the regular
business hours of the relevant exchange; (2) a decision permanently to
discontinue trading in the relevant options or futures contract will not
constitute a market disruption event; (3) limitations pursuant to New York
Stock Exchange Rule 80A—Index Arbitrage Trading Restrictions (or any
applicable rule or regulation enacted or promulgated by the New York Stock
Exchange, any other self-regulatory organization or the SEC of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations will constitute a market disruption event; (4) a suspension
of trading in an options contract on the reference shares by the primary
securities market trading in such options, if available, by reason of (x) a
price change exceeding limits set by such securities exchange or market, (y) an
imbalance of orders relating to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts will constitute a suspension or
material limitation of trading in options contracts related to the reference
shares notwithstanding that such suspension or material limitation is less than
two hours; (5) a suspension, absence or material limitation of trading on
the primary securities market on which options contracts related to the
reference shares are traded will not include any time when such securities
market is itself closed for trading under ordinary circumstances; and (6) a
“suspension or material limitation” on an exchange or in a market will include
a suspension or material limitation of trading by one class 

 R-4
 

 

 

of investors provided
that such suspension continues for more than two hours of trading or during the
last one-half hour period preceding the close of trading on the relevant
exchange or market (but will not include limitations imposed on certain types
of trading under New York Stock Exchange Rule 80A or any applicable rule or
regulation enacted or promulgated by the New York Stock Exchange, NASDAQ, any
other self-regulatory organization or the SEC of a similar scope or as a
replacement for Rule 80A, as determined by the Calculation Agent) and will
not include any time when such exchange or market is closed for trading as part
of such exchange’s or market’s regularly scheduled business hours.

Antidilution
Adjustments

General

The Calculation Agent will adjust the Initial Share Price
and the physical delivery amount if certain corporate actions and other events
described below (each of which, an “adjustment event”), occur, and the
Calculation Agent determines that such adjustment event has a diluting or
concentrative effect on the theoretical value of the reference shares. Set
forth below are examples of how adjustment events may lead to adjustments to
the Initial Share Price and the physical delivery amount.

Upon the occurrence of an adjustment event that the
Calculation Agent determines has a diluting or concentrative effect on the
theoretical value of the reference shares, for purposes only of determining
whether (i) the price of the reference shares is less than or equal to the
knock-in level and (ii) the final share price is less than or equal to the
Initial Share Price, the Calculation Agent will typically adjust the Initial
Share Price according to the following formula:

	
  adjusted initial share price  =  initial
  share price X

  	
   

  	
  prior physical delivery amount

  
	
   

  	
   

  	
  adjusted physical delivery amount

  

 

The physical delivery amount will be adjusted by the
Calculation Agent as set forth in the specific examples below.

The adjustments described below do not cover all events
that could affect the value of the Securities.

Adjustments

If an adjustment event occurs and the Calculation Agent
determines that the event has a diluting or concentrative effect on the
theoretical value of the reference shares, the Calculation Agent will calculate
a corresponding adjustment to the Initial Share Price and the physical delivery
amount as the Calculation Agent determines appropriate to account for that
diluting or concentrative effect. The Calculation Agent will also determine the
effective date of that adjustment, and the replacement of the reference shares,
if applicable, in the event of consolidation or merger. Upon making any such
adjustment, the Calculation Agent will give notice as soon as practicable to
the Trustee, stating the adjustment of the Initial Share Price and physical
delivery amount.

 R-5
 

 

 

If more than one adjustment event occurs, the Calculation
Agent will make an adjustment for each such adjustment event in the order in
which they occur, and on a cumulative basis. Accordingly, having adjusted the
Initial Share Price and the physical delivery amount for the first such
adjustment event, the Calculation Agent will adjust the Initial Share Price and
the physical delivery amount for the second adjustment event, applying the
required adjustment to the Initial Share Price and the physical delivery amount
as already adjusted for the first adjustment event, and so on for each
subsequent adjustment event.

The Calculation Agent will not have to adjust the Initial
Share Price and the physical delivery amount for any adjustment event unless the adjustment would result in a
change to the Initial Share Price or the physical delivery amount of at least
0.1% in the Initial Share Price or the physical delivery amount that would
apply without the adjustment. The Initial Share Price and the physical delivery
amount resulting from any adjustment would be rounded up or down, as appropriate,
to, in the case of the Initial Share Price, the nearest cent, and, in the case
of the physical delivery amount, the nearest thousandth, with one-half cent and
five ten-thousandths, respectively, being rounded upwards.

If an adjustment event requiring antidilution adjustment
occurs, the Calculation Agent will make any adjustments with a view to
offsetting, to the extent practical, any change in the Holders’ economic
position relative to the Securities that results solely from that event. The
Calculation Agent may, in its sole discretion, modify any antidilution
adjustments as necessary to ensure an equitable result.

The Calculation Agent has sole discretion in making all
determinations with respect to antidilution adjustments, including any
determination as to whether an adjustment event requiring an antidilution
adjustment has occurred, as to the nature of the adjustment required and how it
will be made. In the absence of manifest error, those determinations will be
conclusive for all purposes and will be binding on the Holders and the Company,
without any liability on the part of the Calculation Agent. Upon written
request, the Calculation Agent will provide information about any adjustments
it makes.

Events requiring an antidilution
adjustment

The following is a list of adjustment events that may
require an antidilution adjustment:

(a)                                  a subdivision, consolidation
or reclassification of the reference shares or a free distribution or dividend
of any reference shares to existing holders of reference shares by way of
bonus, capitalization or similar issue;

(b)                                 a dividend or other
distribution to existing holders of reference shares of (i) the reference
shares, (ii) other share capital or securities granting the right to
payment of dividends equally or proportionately with such payments to holders
of the reference shares or (iii) any other type of securities, rights or
warrants in any case for payment (in cash or otherwise) at less than the
prevailing market price as determined by the Calculation Agent;

(c)                                  the declaration by the
issuer of the reference shares of an extraordinary or special dividend or other
distribution whether in cash or reference shares or other assets;

 R-6
 

 

 

(d)                                 a repurchase of its common
stock by the issuer of the reference shares whether out of profits or capital
and whether the consideration for such repurchase is cash, securities or
otherwise;

(e)                                  a consolidation of the
issuer of the reference shares with another company or merger of the issuer of
the reference shares with another company; and

(f)                                    any other similar event that
may have a diluting or concentrative effect on the theoretical value of the
reference shares.

Certain
adjustment events are discussed in greater detail below.

Stock splits

A stock split is an increase in the number of a corporation’s
outstanding shares of stock without any change in its stockholders’ equity. As
a result of a stock split, each outstanding share will be worth less.

If the reference shares are subject to a stock split, the
Calculation Agent will adjust the physical delivery amount to equal the sum of
the prior physical delivery amount—i.e., the physical delivery amount before
that adjustment—and the product of (i) the number of additional shares
issued in the stock split with respect to each of the reference shares times (ii) the
prior physical delivery amount.

Reverse stock splits

A reverse stock split is a decrease in the number of a
corporation’s outstanding shares of stock without any change in its
stockholders’ equity. As a result of a reverse stock split, each outstanding
share will be worth more.

If the reference shares are subject to a reverse stock
split, the Calculation Agent will adjust the physical delivery amount to equal
the product of the prior physical delivery amount and the quotient of (i) the
number of reference shares outstanding immediately after the reverse stock
split becomes effective divided by (ii) the number of reference shares
outstanding immediately before the reverse stock split becomes effective.

Stock dividends

In a stock dividend, a corporation issues additional shares
of its stock to all holders of its outstanding stock in proportion to the
shares they own. As a result of a stock dividend, each outstanding share will
be worth less.

If the reference shares are subject to a stock dividend
payable in the reference shares, then the Calculation Agent will adjust the
physical delivery amount to equal the sum of the prior physical delivery amount
and the product of (i) the number of additional shares issued in the stock
dividend with respect to each of the reference shares times (ii) the prior
physical delivery amount.

 R-7
 

 

 

Other dividends and distributions

If the issuer of the reference shares declares a dividend
to be distributed to holders of record of the reference shares as of a date
falling in the period that begins on the day immediately following the
Valuation Date and ends on the day immediately prior to the Maturity Date, any
such dividend will not be paid to Holders.

The physical delivery amount will not be adjusted to
reflect any dividends or distributions paid with respect to the reference
shares, other than (i) stock dividends described above; (ii) issuances
of transferable rights and warrants as described in “—Transferable rights and
warrants” below; and (iii) extraordinary dividends as described below.

A dividend or other distribution with respect to the
reference shares will be deemed to be an “extraordinary dividend” if its per
share value exceeds that of the immediately preceding non-extraordinary
dividend, if any, for the reference shares by an amount equal to at least
10.00% of the market price of the reference shares on the business day before
the extraordinary dividend date. The ex dividend date for any dividend or other
distribution is the first day on which the reference shares trade without the
right to receive that dividend or distribution. If an extraordinary dividend
occurs, the Calculation Agent will adjust the physical delivery amount to equal
the product of (1) the prior physical delivery amount times (2) a
fraction, the numerator of which is the market price of the reference shares on
the business day before the ex dividend date and the denominator of which is
the amount by which that market price exceeds the extraordinary dividend
adjustment amount. The “extraordinary dividend adjustment amount” with respect
to an extraordinary dividend for the reference shares equals:  (i) for an extraordinary dividend that
is paid in lieu of a regular quarterly dividend, the amount of the
extraordinary dividend per share of the reference shares minus the amount per
share of the immediately preceding dividend, if any, that was not an
extraordinary dividend for the reference shares, or (ii) for an
extraordinary dividend that is not paid in lieu of a regular quarterly
dividend, the amount per share of the extraordinary dividend.

To the extent an extraordinary dividend is not paid in
cash, the value of the non-cash component will be determined by the Calculation
Agent. A distribution on the reference shares that is a dividend payable in the
reference shares, an issuance of rights or warrants or a spin-off event and
that is also an extraordinary dividend will result in an adjustment to the
physical delivery amount only as described in “Stock dividends” above, “Transferable
rights and warrants” below or “Reorganization events” below, as the case may
be, and not as described here.

Transferable rights and warrants

If the issuer of the reference shares issues transferable
rights or warrants to all holders of the reference shares to subscribe for or
purchase the reference shares at an exercise price per share that is less than
the market price of the reference shares on the business day before the
extraordinary dividend date for the issuance, then the physical delivery amount
will be adjusted by multiplying the prior physical delivery amount by the
following fraction:  (i) the
numerator will be the sum of the number of reference shares outstanding at the
close of business on the day before that ex dividend date and the total number
of additional reference shares offered for 

 R-8
 

 

 

subscription or purchase under those transferable rights or
warrants, and (ii) the denominator will be the sum of the number of
reference shares outstanding at the close of business on the day before that ex
dividend date and the product of (1) the total number of additional
reference shares offered for subscription or purchase under the transferable
rights or warrants times (2) the exercise price of those transferable
rights or warrants divided by the market price on the business day before that
extraordinary dividend date.

Reorganization events

Each of the following may be a reorganization event:  (i) the reference shares are
reclassified or changed; (ii) the issuer of the reference shares has been
subject to a merger, consolidation or other combination and either is not the
surviving entity or is the surviving entity but all outstanding reference
shares are exchanged for or converted into other property; (iii) a
statutory share exchange involving outstanding reference shares and the
securities of another entity occurs, other than as part of an event described
above; (iv) the issuer of the reference shares effects a spin-off (i.e.,
issues to all holders of reference shares common stock equity securities of
another issuer) other than as part of an event described above; (v) the
issuer of the reference shares sells or otherwise transfers its property and
assets as an entirety or substantially as an entirety to another entity (each
of the events in clauses (i) through (v) above, a “merger event”); (vi) a
takeover offer, tender offer, exchange offer, solicitation, proposal or other
event by any entity or person that results in such entity or person purchasing,
or otherwise obtaining or having the right to obtain, by conversion or other
means, not less than a majority of the outstanding voting reference shares as
determined by the Calculation Agent, based upon the making of filings with
governmental or self-regulatory agencies or such other information as the
Calculation Agent deems relevant, which we refer to as a tender offer; (vii) the
exchange on which the reference shares trade announces that pursuant to the rules of
such exchange, the reference shares cease (or will cease) to be listed, traded
or publicly quoted on it for any reason (other than a merger event or tender
offer) and are not immediately re-listed, re-traded or re-quoted on another
major U.S. exchange or quotation system (a “delisting event”); and (viii) the
issuer of the reference shares is liquidated, dissolved or wound up or is
subject to a proceeding under any applicable bankruptcy, insolvency or other
similar law (each, an “insolvency event”).

Adjustments for reorganization events

If a merger event occurs and a holder of the reference
shares that makes no election, vote or decision in connection with such merger
event would receive as full or partial consideration ordinary or common shares
of any person (other than the issuer of the reference shares) that are publicly
quoted, traded or listed on any major U.S. exchange or quotation system (the “new
shares”), then the Calculation
Agent will adjust the physical delivery amount so as to consist of the amount
and type of property distributed in the reorganization event in respect of the
prior physical delivery amount. In this instance, if more than one type of
property is distributed, the physical delivery amount will be adjusted so as to
consist of each type of property distributed, in a proportionate amount, so
that the value of each type of property comprising the new physical delivery
amount as a percentage of the total value of the new physical delivery amount
equals the value of that type of property as a percentage of the total value of
all of the property distributed in the reorganization event.

 R-9
 

 

 

If a tender offer occurs, and the holder of the reference
shares can elect to receive new shares as full or partial consideration in
respect of such tender offer, then the Calculation Agent will adjust the
physical delivery amount in accordance with the preceding paragraph.

If a merger event occurs, and the consideration in respect
of such event does not consist in full or in part of new shares (or in the case
of a tender offer, a holder of the reference shares would not be able to elect
to receive in full or in part any new shares as consideration in respect of
such tender offer), then the Calculation Agent will accelerate the Maturity
Date to the day which is four business days after the approval date (as defined
below). The amount payable at maturity will be determined as described below
under “Events of default and acceleration.” 
The approval date is the closing date of a merger event or, in the case
of a tender offer, the date on which the person or entity making the tender
offer acquires or acquires the right to obtain the relevant percentage of
reference shares.

If a delisting event or an insolvency event occurs, the
Calculation Agent will accelerate the Maturity Date to the day which is four
business days after the announcement date (as defined below). On the Maturity
Date, the Company will pay to each Holder the physical delivery amount and for
the purposes of such calculation, the final share price will be deemed to be
the closing price of the reference shares on the business day immediately prior
to the announcement date. The announcement date means, in the case of a
delisting event, the day of the first public announcement by the relevant
exchange that the reference shares will cease to trade or be publicly quoted on
such exchange, or, in the case of an insolvency event, the day of the first
public announcement of the institution of a proceeding or presentation of a
petition or passing of a resolution (or other analogous procedure in any
jurisdiction) that leads to an insolvency event with respect to the issuer of
the reference shares.

If a merger event or tender offer occurs, coupon payment
amounts will accrue on the Securities through the approval date and be paid on
the accelerated Maturity Date. Such coupon payments will be calculated using a
360-day year comprised of twelve 30-day months. If a delisting
event or an insolvency event occurs, the Company will pay all remaining
scheduled unpaid coupon payments due to a Holder through the scheduled Maturity
Date on the accelerated Maturity Date.

For the purposes of making an adjustment required by a
reorganization event, the Calculation Agent will determine the value of each
type of property distributed in the distribution, in its sole discretion. For
any property distributed consisting of new shares, the Calculation Agent will
use the closing price of the new shares on the approval date. The Calculation
Agent may value other types of property in any manner it determines, in its
sole discretion, to be appropriate. If a holder of the common stock of the
issuer of the reference shares elects to receive different types or
combinations of types of property in the reorganization event, such property
will consist of the types and amounts of each type distributed to a holder that
makes no election, as determined by the Calculation Agent.

If a reorganization event occurs and the Calculation Agent
adjusts the physical delivery amount to consist of the property distributed in
the reorganization event as described above, the Calculation Agent will make
further antidilution adjustments for later events that affect such property, or
any component of such property, comprising the new physical delivery amount. The

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Calculation Agent will do so to the same extent that it
would make adjustments if the common stock of the issuer of the reference
shares was outstanding and was affected by the same kinds of events. If a
subsequent reorganization event affects only a particular component of the
physical delivery amount, the required adjustment will be made with respect to
that component, as if it alone were the physical delivery amount. For example,
if the issuer of the reference shares merges into another company and each
share of its common stock is converted into the right to receive two new shares
of the surviving company and a specified amount of cash, the physical delivery
amount will be adjusted to consist of two new shares and the specified amount
of cash per reference share. The Calculation Agent will adjust the common share
component of the new physical delivery amount to reflect any later stock split
or other event, including any later reorganization event, that affects the new
shares, to the extent described in this section entitled “Antidilution
adjustments” as if the new shares were the common stock of the issuer of the
reference shares. In that event, the cash component will not be adjusted but
will continue to be a component of the physical delivery amount. Consequently,
Holders who receive reference shares at maturity will be entitled to receive,
for each $1,000 of the outstanding principal amount of the Securities being
exchanged, all components of the physical delivery amount in effect on the
exchange date, with each component having been adjusted on a sequential and
cumulative basis for all relevant events requiring adjustment on or before the
exchange date.

If a reorganization event occurs, the property distributed
in the event will be substituted for the common stock of the issuer of the
reference shares as described above. Consequently, references to the common
stock of the issuer of the reference shares mean any property that is
distributed in a reorganization event and comprises the adjusted physical
delivery amount. Similarly, references to the issuer of the reference shares
mean any successor entity in a reorganization event.

Events of Default and Acceleration

In case an Event of Default (as defined in the
Indenture) with respect to the Securities shall have occurred and be
continuing, the amount declared due and payable upon any acceleration of the
Securities (in accordance with the acceleration provisions set forth in the
prospectus) will be determined by the Calculation Agent and will equal, for
each security, the arithmetic average, as determined by the Calculation Agent,
of the fair market value of the Securities as determined by at least three but
not more than five broker-dealers (which may include Credit Suisse Securities
(USA) LLC or any of the Company’s other subsidiaries or affiliates) as will
make such fair market value determinations available to the Calculation Agent.

The Company, the Trustee and any agent of the Company
or the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon) for the
purpose of receiving payment of, or on account of, the redemption amount
hereof, and for all other purposes, and neither the Company nor the Trustee nor
any agent of the Company or the Trustee shall be affected by any notice to the
contrary.

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No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or any indenture supplemental thereto or
in any Note, or because of any indebtedness evidenced thereby, shall be had
against any incorporator as such, or against any past, present or future
stockholder, officer, director or employee, as such, of the Company or of any
successor, either directly or through the Company or any successor, under any rule of
law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance hereof and as
part of the consideration for the issue hereof.

The Calculation Agent for the Securities (the “Calculation
Agent”) is Credit Suisse International. The calculations and determinations of
the Calculation Agent will be final and binding upon all parties (except in the
case of manifest error). The Calculation Agent will have no responsibility for
good faith errors or omissions in its calculations and determinations, whether
caused by negligence or otherwise.

Terms used herein that are defined in the Indenture
and not otherwise defined herein shall have the respective meanings assigned
thereto in the Indenture.

The laws of the State of New York (without regard to
conflicts of laws principles thereof) shall govern this Note.

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  FOR VALUE RECEIVED, the
  undersigned hereby sell(s), assign(s) and transfer(s) unto

  
	
   

  
	
  [PLEASE INSERT SOCIAL
  SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE]

  
	
   

  
	
   

  
	
  [PLEASE PRINT OR
  TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

  
	
   

  
	
  the within Note
  and all rights thereunder, hereby irrevocably constituting and appointing

  
	
   

  	
  Attorney to

  
	
  transfer such
  Note on the books of the Issuer, with full power of substitution in the
  premises.

  

 

	
  

  	
   

  	
  Signature:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE:The signature to this assignment must
  correspond

  
	
   

  	
   

  	
  with the name as written upon the face of the within
  Note in

  
	
   

  	
   

  	
  every particular without alteration or enlargement
  or any

  
	
   

  	
   

  	
  change whatsoever.

  
				

 

 

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