Document:

Exhibit 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: 22541L AT 0

  
	
   

  	
   

  	
  ISIN: US22541LAT08

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRINCIPAL AMOUNT:
  $1,000,000

  

NO. 1

 

CREDIT SUISSE
FIRST BOSTON (USA), INC.

Reverse Convertible Securities Linked to the Performance of The Ryland Group,
Inc.

due March 31, 2006

 

 

CREDIT SUISSE FIRST BOSTON (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
12.00% per annum on the principal amount from March 31, 2005.  The coupon will represent an interest
component and an option premium.  The
coupon payment will be payable quarterly in arrears on June 30, 2005, September
30, 2005, December 30, 2005 and March 31, 2006.

 

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 FIRST BOSTON (USA), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  By:

  	
  /s/ John A. Ehinger

  	
   

  
	
   

  	
   

  	
  Name: John A. Ehinger

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Raymond Disco

  	
   

  
	
   

  	
   

  	
  Name: Raymond Disco

  
	
   

  	
   

  	
  Title: Assistant Treasurer

  

 

 

CERTIFICATE OF AUTHENTICATION

 

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

 

Dated:  March
31, 2005

 

	
   

  	
  JPMORGAN CHASE BANK,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tai B. Lee

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

F-2

 

[REVERSE OF NOTE]

 

CREDIT SUISSE
FIRST BOSTON (USA), INC.

Reverse Convertible Securities Linked to the Performance of The Ryland Group,
Inc.

due March 31, 2006

 

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 The Ryland Group, Inc. due March 31, 2006 (the “Note”).

 

A coupon will be payable on this Note of
12.00% per annum on the principal amount from March 31, 2005.  The coupon will represent an interest
component and an option premium.  The
coupon payment will be payable quarterly in arrears on June 30, 2005, September
30, 2005, December 30, 2005 and March 31, 2006.

 

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 

 

R-1

 

upon an acceleration of the maturity thereof or the
amount thereof provable in bankruptcy, or 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 $10,000 or any integral
multiple thereof at the office or agency of the 

 

R-2

 

Company in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture.

 

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 March 31, 2006 (the “Maturity Date”);
however, if a Market Disruption Event exists on any valuation date, as
determined by the Calculation Agent, the Maturity Date will be the later of
March 31, 2006 and the third Business Day following the date on which the final
share price is calculated.

 

Redemption Amount

 

The Company will redeem the Securities at maturity for
a Redemption Amount that will be based upon the performance of the common stock
of The Ryland Group, Inc. (the “reference shares”) during the term of the
Securities (the “Redemption Amount”).   The Redemption Amount is calculated as
follows:

 

(1)    If the price
of the reference shares on the New York Stock Exchange (the “relevant exchange”)
is not less than or equal to the knock-in level, which is 80% of the Initial
Share Price, at all times from but not including March 28, 2005, which is the
initial setting date, to and including March 24, 2006 (the “valuation date”),
the Redemption Amount will equal a cash payment equal to 100% of the principal
amount of the Securities at maturity.

 

(2)    If (i) the
price of the reference shares on the relevant exchange is less than or equal to
the knock-in level at any time from but not including the initial setting date
to and including the valuation date and (ii) the closing price of the reference
shares on that exchange on the valuation date (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 at
maturity.

 

(3)    Otherwise,
Holders will receive the physical delivery amount.  The physical delivery amount will be the
number of reference shares per $1,000 principal amount of the Securities equal
to $1,000 divided by the Initial Share Price.

 

The “Initial Share Price” is equal to $63.64.

 

A “Business Day” is 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 or executive
order to close and that is also a trading day.

 

R-3

 

A “Market
Disruption Event” is, 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.

 

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 on the Chicago Mercantile Exchange and the Chicago Board Options
Exchange (collectively, 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 March 31, 2006 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.

 

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 Securities and Exchange Commission (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 

 

R-4

 

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 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 

 

R-5

 

notice as
soon as practicable to the Trustee, stating the adjustment of the Initial Share
Price and physical delivery amount.

 

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 your 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;

 

R-6

 

(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;

 

(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 

 

R-7

 

stock
dividend with respect to each of the reference shares times (ii) the prior
physical delivery amount.

 

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 extraordinary 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 extraordinary 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 

 

R-8

 

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 extraordinary dividend date and the total number of additional
reference shares offered for 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
extraordinary 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 

 

R-9

 

value of
that type of property as a percentage of the total value of all of the property
distributed in the reorganization event.

 

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.

 

R-10

 

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 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
Indenture) will be determined by the Calculation Agent and will equal, for each
Note, the arithmetic average, as determined by the Calculation Agent, of the
fair value of the Securities as determined by at least three but not more than
five broker-dealers (which may include Credit Suisse First Boston LLC or any of
the Company’s other subsidiaries or affiliates) as will make such fair value
determination available to the Calculation Agent.

 

Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in the Borough of Manhattan,
The City of New York, a new Note or Securities of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Indenture,
without charge except for any tax or other governmental charge imposed in
connection therewith.

 

R-11

 

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.

 

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 First Boston 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.

 

R-12

 

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.

  
	
   

  	
   

  	
   

  

 

R-13Exhibit 4.1

 

 

2004 MERCER
INSURANCE GROUP, INC.

STOCK INCENTIVE PLAN

Effective June 16,
2004

(As Approved By Shareholders On June 16,
2004)

 

 

2004 MERCER
INSURANCE GROUP, INC.

STOCK INCENTIVE PLAN

 

TABLE OF CONTENTS

 

	
  ARTICLE

  	
   

  
	
   

  	
   

  
	
  ARTICLE 1.
  PURPOSE OF THE PLAN; TYPES OF AWARDS

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2. DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3.
  ADMINISTRATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4.
  COMMON STOCK SUBJECT TO THE PLAN

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5. ELIGIBILITY

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6.
  STOCK OPTIONS IN GENERAL

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7.
  TERM, VESTING AND EXERCISE OF OPTIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8.
  EXERCISE OF OPTIONS FOLLOWING TERMINATION OF EMPLOYMENT OR SERVICE

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9. RESTRICTED
  STOCK

  	
   

  
	
   

  	
   

  
	
  ARTICLE 10.
  ADJUSTMENT PROVISIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE 11.
  GENERAL PROVISIONS

  	
   

  

 

 

ARTICLE 1.  PURPOSE OF THE PLAN;
TYPES OF AWARDS

 

1.1  Purpose.  The Mercer Insurance Group, Inc.
2004 Stock Incentive Plan is intended to provide selected employees and
non-employee directors of Mercer Insurance Group and its Subsidiaries with an
opportunity to acquire Common Stock of the Corporation.  The Plan is designed to help the Corporation
attract, retain and motivate employees and non-employee directors to make
substantial contributions to the success of the Corporation’s business and the
businesses of its Subsidiaries.  Awards
will be granted under the Plan based, among other things, on a participant’s
level of responsibility and performance.

 

1.2  Authorized
Plan Awards.  Incentive Stock
Options, Nonqualified Stock Options, and Restricted Stock may be awarded within
the limitations of the Plan herein described.

 

ARTICLE
2.  DEFINITIONS

 

2.1  “Agreement.”  A written or electronic agreement between the
Corporation and a Participant evidencing the grant of an Award.  A Participant may be issued one or more
Agreements from time to time, reflecting one or more Awards.

 

2.2  “Award.”  The grant of a Stock Option or Restricted
Stock.

 

2.3  “Board.”  The Board of Directors of the Corporation.

 

2.4  “Change in
Control.”  Except as otherwise provided
in an Agreement, the first to occur of any of the following events:

 

(a)  any “Person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), except for any of the
Corporation’s employee benefit plans, or any entity holding the Corporation’s
voting securities for, or pursuant to, the terms of any such plan (or any trust
forming a part thereof) (the “Benefit Plan(s)”), is or becomes the beneficial
owner, directly or indirectly, of the Corporation’s securities representing
19.9% or more of the combined voting power of the Corporation’s then
outstanding securities other than pursuant to a transaction excepted in
Clause (d);

 

(b)  there occurs a contested proxy solicitation
of the Corporation’s shareholders that results in the contesting party
obtaining the ability to vote securities representing 19.9% or more of the
combined voting power of the Corporation’s then outstanding securities;

 

(c)  a binding written agreement is executed
providing for a sale, exchange, transfer or other disposition of all or
substantially all of the assets of the Corporation to another entity, except to
an entity controlled directly or indirectly by the Corporation;

 

(d)  the shareholders of the Corporation approve a
merger, consolidation, or other reorganization of the Corporation, unless:

 

(i)  under the terms of the agreement providing
for such merger, consolidation or reorganization, the shareholders of the
Corporation immediately before such merger, consolidation or reorganization,
will own, directly or indirectly immediately following

 

1

 

such merger, consolidation or reorganization, at least
51% of the combined voting power of the outstanding voting securities of the
Corporation resulting from such merger, consolidation or reorganization (the “Surviving
Corporation”) in substantially the same proportion as their ownership of the
voting securities immediately before such merger, consolidation or
reorganization;

 

(ii)  under the terms of the agreement providing
for such merger, consolidation or reorganization, the individuals who were
members of the Board immediately prior to the execution of such agreement will
constitute at least 51% of the members of the board of directors of the
Surviving Corporation after such merger, consolidation or reorganization; and

 

(iii)  based on the terms of the agreement providing
for such merger, consolidation or reorganization, no Person (other than
(A) the Corporation or any Subsidiary of the Corporation, (B) any
Benefit Plan, (C) the Surviving Corporation or any Subsidiary of the
Surviving Corporation, or (D) any Person who, immediately prior to such
merger, consolidation or reorganization had beneficial ownership of 19.9% or
more of the then outstanding voting securities) will have beneficial ownership
of 19.9% or more of the combined voting power of the Surviving Corporation’s
then outstanding voting securities;

 

(e)  a plan of liquidation or dissolution of the
Corporation, other than pursuant to bankruptcy or insolvency laws, is adopted;
or

 

(f)  during any period of two consecutive years,
individuals, who at the beginning of such period, constituted the Board cease
for any reason to constitute at least a majority of the Board unless the
election, or the nomination for election by the Corporation’s shareholders, of
each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.

 

Notwithstanding Clause (a), a Change in Control
shall not be deemed to have occurred if a Person becomes the beneficial owner,
directly or indirectly, of the Corporation’s securities representing 19.9% or
more of the combined voting power of the Corporation’s then outstanding
securities solely as a result of an acquisition by the Corporation of its
voting securities which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 19.9% or more of the combined voting power of the Corporation’s then
outstanding securities; provided, however, that if a Person becomes a
beneficial owner of 19.9% or more of the combined voting power of the
Corporation’s then outstanding securities by reason of share purchases by the
Corporation and shall, after such share purchases by the Corporation, become
the beneficial owner, directly or indirectly, of any additional voting
securities of the Corporation (other than as a result of a stock split, stock
dividend or similar transaction), then a Change in Control of the Corporation
shall be deemed to have occurred with respect to such Person under Clause (a).  In no event shall a Change in Control of the
Corporation be deemed to occur under Clause (a) with respect to Benefit
Plans.

 

2.5  “Code.”  The Internal Revenue Code of 1986, as
amended.

 

2

 

2.6  “Code of
Conduct.”  The policies and procedures
related to employment of employees by the Corporation or a Subsidiary set forth
in the Corporation’s employee handbook. 
The Code of Conduct may be amended and updated at any time.  The term “Code of Conduct” shall also include
any other policy or procedure that may be adopted by the Corporation or a
Subsidiary and communicated to Employees and Non-Employee Directors of the
Corporation or a Subsidiary.

 

2.7  “Committee.”  The Compensation Committee of the Board.

 

2.8  “Common
Stock.”  The common stock of the
Corporation (no par value) as described in the Corporation’s Articles of
Incorporation, or such other stock as shall be substituted therefor.

 

2.9  “Corporation.”  Mercer Insurance Group, Inc., a Pennsylvania
corporation.

 

2.10  “Employee.”  Any common law employee of the Corporation or
a Subsidiary.  An Employee does not
include any individual who: (i) does not receive payment for services
directly from the Corporation’s or a Subsidiary’s payroll; (ii) is
employed by an employment agency that is not a Subsidiary; or (iii) who
renders services pursuant to a written arrangement that expressly provides that
the service provider is not eligible for participation in the Plan, regardless
if such person is later determined by the Internal Revenue Service or a court
of law to be a common law employee.

 

2.11  “Exchange
Act.”  The Securities Exchange Act
of 1934, as amended.

 

2.12  “Incentive
Stock Option.”  A Stock Option intended
to satisfy the requirements of Code Section 422(b).

 

2.13  “Non-Employee
Director.”  A member of the Board who is
not an Employee.

 

2.14  “Nonqualified
Stock Option.”  A Stock Option which does
not satisfy the requirements of Code Section 422(b).

 

2.15  “Optionee.”  A Participant who is awarded a Stock Option
pursuant to the provisions of the Plan.

 

2.16  “Participant.”  An Employee or Non-Employee Director to whom
an Award has been granted and remains outstanding.

 

2.17  “Performance
Criteria.”  Any objective determination
based on one or more of the following areas of performance of the Corporation,
a Subsidiary, or any division, department or group of either which includes,
but is not limited to: (a) earnings, (b) cash flow, (c) revenue,
(d) financial ratios, (e) market performance, (f) shareholder
return, (g) operating profits (including earnings before interest, taxes,
depreciation and amortization), (h) earnings per share, (i) return on
assets, (j) return on equity, (k) return on investment,
(l) stock price, (m) asset quality, (n) expense reduction, (o) systems
conversion, (p) special projects as determined by the Committee, and
(q) acquisition integration initiatives. 
Performance Criteria shall be established by the Committee prior to the
issuance of a Performance Grant.

 

3

 

2.18  “Performance
Goal.”  One or more goals established by
the Committee, with respect to an Award intended to constitute a Performance
Grant, that relate to one or more Performance Criteria.  A Performance Goal shall relate to such period
of time, not less than one year (unless coupled with a vesting schedule of at
least one year) or more than five years, as may be specified by the Committee
at the time of the awarding of a Performance Grant.

 

2.19  “Performance
Grant.”  An Award, the vesting or receipt
without restriction of which, is conditioned on the satisfaction of one or more
Performance Goals.

 

2.20  “Plan.”  The Mercer Insurance Group, Inc.
2004 Stock Incentive Plan.

 

2.21  “Restricted
Stock.”  An award of Common Stock pursuant
to the provisions of the Plan, which award is subject to such restrictions and
other conditions, including achievement of one or more performance goals, as
may be specified by the Committee at the time of such award.

 

2.22  “Retirement.”  The termination of a Participant’s employment
following the first day of the month coincident with or next following
attainment of age 65, as the term “Normal Retirement Date” is defined in
the Mercer Insurance Group, Inc. Employee Stock Ownership Plan, or attainment
of age 55 and the completion of five (5) years service as described
in the Mercer Insurance Group, Inc. Employee Stock Ownership Plan.

 

2.23  “Securities
Act.”  The Securities Act of 1933,
as amended.

 

2.24   “Stock Option” or “Option.”  A grant of a right to purchase Common Stock
pursuant to the provisions of the Plan.

 

2.25  “Subsidiary.”  A subsidiary corporation, as defined in Code
Section 424(f), that is a subsidiary of a relevant corporation.

 

2.26  “Termination
or Dismissal For Cause.”  Termination of
an Employee by the Corporation or a Subsidiary or dismissal of a Non-Employee
Director from the Board after:

 

(a)  any
government regulatory agency recommends or orders in writing that the
Corporation or a Subsidiary terminate the employment of such Employee or
relieve him or her of his or her duties;

 

(b)  such Employee or Non-Employee Director is
convicted of or enters a plea of guilty or nolo  contendere to a
felony, a crime of falsehood, or a crime involving fraud or moral turpitude, or
the actual incarceration of the Employee or Non-Employee Director for a period
of 45 consecutive days;

 

(c)  a determination by the Committee that such
Employee willfully failed to follow the lawful instructions of the Board or any
officer of the Corporation or a Subsidiary after such Employee’s receipt of
written notice of such instructions, other than a failure resulting from the
Employee’s incapacity because of physical or mental illness;

 

(d)  a determination by the Committee that the
willful or continued failure by such Employee or Non-Employee Director to
substantially and satisfactorily perform his duties with

 

4

 

the Corporation or
a Subsidiary (other than any such failure resulting from the Employee or
Non-Employee Director being “disabled” (as defined in the Corporation’s group
long term disability policy) or as a result of physical or mental illness),
within a reasonable period of time after a demand for substantial performance
or notice of lack of substantial or satisfactory performance is delivered to
the Employee or Non-Employee Director, which demand identifies the manner in
which the Employee or Non-Employee Director has not substantially or
satisfactorily performed his or her duties; or

 

(e)  a determination by the Committee that such
Employee or Non-Employee Director has failed to conform to the Corporation’s
Code of Conduct.

 

For purposes of the Plan, no act, or failure to act,
on a Employee’s or Non-Employee Director’s part shall be deemed “willful”
unless done, or omitted to be done, by such Employee or Non-Employee Director
not in good faith and without reasonable belief that such Employee’s or
Non-Employee Director’s action or omission was in the best interest of the
Corporation or a Subsidiary.

 

ARTICLE
3.  ADMINISTRATION

 

3.1  The
Committee.  The Plan shall be
administered by the Compensation Committee of the Board composed of two or more
members of the Board, all of whom are (a) ”non-employee directors” as such
term is defined under the rules and regulations adopted from time to time by
the Securities and Exchange Commission pursuant to Section 16(b) of the
Exchange Act, and (b) ”outside directors” within the meaning of
Code Section 162(m).  The Board may
from time to time remove members from, or add members to, the Committee.  Vacancies on the Committee, however caused,
shall be filled by the Board.

 

3.2  Powers
of the Committee.

 

(a)  The Committee shall be vested with full
authority to make such rules and regulations as it deems necessary or desirable
to administer the Plan and to interpret the provisions of the Plan, unless
otherwise determined by a majority of the disinterested members of the
Board.  Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive, and
binding upon all Participants and any person claiming under or through a
Participant, unless otherwise determined by a majority of the disinterested
members of the Board.

 

(b)  Subject to the terms, provisions and
conditions of the Plan and subject to review and approval by a majority of the
disinterested members of the Board, the Committee shall have exclusive
jurisdiction to:

 

(i)  determine and select the Employees and Non-Employee
Directors to be granted Awards (it being understood that more than one Award
may be granted to the same person);

 

(ii)  determine the number of shares subject to
each Award;

 

(iii)  determine the date or dates when the Awards
will be granted;

 

5

 

(iv)  determine the exercise price of shares
subject to an Option in accordance with Article 6;

 

(v)  determine the date or dates when an Option
may be exercised within the term of the Option specified pursuant to Article 7;

 

(vi)  determine whether an Option constitutes an
Incentive Stock Option or a Nonqualified Stock Option;

 

(vii)  determine the Performance Criteria and
establish Performance Goals with respect thereto, to be applied to an Award;
and

 

(viii)  prescribe the form, which shall be consistent
with the Plan document, of the Agreement evidencing any Awards granted under
the Plan.

 

3.3  Liability.  No member of the Board or the Committee shall
be liable for any action or determination made in good faith by the Board or
the Committee with respect to this Plan or any Awards granted under this Plan.

 

3.4  Establishment
and Certification of Performance Goals. 
The Committee shall establish, prior to grant, Performance Goals with
respect to each Award intended to constitute a Performance Grant.  Except as may otherwise be provided in
Article 8 hereof, no Option that is intended to constitute a Performance
Grant may be exercised until the Performance Goal or Goals applicable thereto
is or are satisfied, nor shall any share of Restricted Stock that is intended
to constitute a Performance Grant be released to a Participant until the
Performance Goal or Goals applicable thereto is or are satisfied.

 

3.5  No
Waiver of Performance Goals.  Except
as may otherwise be provided in Article 8 hereof, the Committee or the
Board shall not waive any Performance Goals with respect to the grant of any
Award hereunder.

 

3.6  Performance
Grants Not Mandatory.  Nothing herein
shall be construed as requiring that any Award be made a Performance Grant.

 

ARTICLE 4.  COMMON STOCK SUBJECT TO
THE PLAN

 

4.1  Common
Stock Authorized.

 

(a)  The initial total aggregate number of shares
of Common Stock for which Options may be granted under the Plan or which may be
awarded as Restricted Stock under the Plan shall not exceed 876,555.  Notwithstanding the foregoing, the number of
shares of Common Stock available for issuance under the Plan shall
automatically increase on the first trading day of January of each calendar
year during the term of the Plan, beginning with calendar year 2005, by an
amount equal to one percent (1%) of the shares of Common Stock outstanding
on the last trading day in December of the immediately preceding calendar
year.  No Incentive Stock Options may be
granted on the basis of the additional shares of Common Stock resulting from
such annual increases.  The limitation
established by the preceding sentence shall also be subject to adjustment as
provided in Article 10.

 

6

 

(b)  The maximum aggregate number of shares of
Common Stock for which Restricted Stock may be awarded under the Plan shall not
exceed 250,000.  The limitation
established by the preceding sentence shall be subject to adjustment in
proportion to any increase in the total number of shares available for issuance
under the Plan as provided in Section 4.1(a) above and Article 10.

 

(c)  The maximum aggregate number of shares of
Common Stock for which Incentive Stock Options may be granted under the Plan
shall not exceed 500,000.  The limitation
established by the preceding sentence shall be subject to adjustment as
provided in Article 10.

 

(d)  The maximum aggregate number of shares of
Common Stock for which Awards may be granted under the Plan to non-employee
directors shall not exceed 350,000.  The
limitation established by the preceding sentence shall be subject to adjustment
as provided in Article 10.

 

(e)  If any Option is exercised by tendering
Common Stock, either actually or by attestation, to the Corporation as full or
partial payment in connection with the exercise of such Option under the Plan,
or if the tax withholding requirements are satisfied through such tender, only
the number of shares of Common Stock issued net of the Common Stock tendered
shall be deemed delivered for purposes of determining the maximum number of
shares available for Awards under the Plan.

 

4.2  Shares
Available.  The Common Stock to be
issued under the Plan shall be the Corporation’s Common Stock which shall be
made available at the discretion of the Board, either from authorized but
unissued Common Stock or from Common Stock acquired by the Corporation,
including shares purchased in the open market. 
In the event that any outstanding Award under the Plan for any reason
expires, terminates, or is forfeited, the shares of Common Stock allocable to
such expiration, termination, or forfeiture may thereafter again be made
subject to an Award under the Plan.

 

ARTICLE
5.  ELIGIBILITY

 

5.1  Participation.  Awards shall be granted by the Committee only
to persons who are Employees and Non-Employee Directors.

 

5.2  Incentive
Stock Option Eligibility.  Incentive
Stock Option Awards may only be granted to Employees of the Corporation.  Notwithstanding any other provision of the
Plan to the contrary, an individual who owns more than ten percent of the total
combined voting power of all classes of outstanding stock of the Corporation
shall not be eligible for the grant of an Incentive Stock Option, unless the
special requirements set forth in Sections 6.1 and 7.1 are satisfied.  For purposes of this section, in determining
stock ownership, an individual shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers and sisters (whether by the
whole or half blood), spouse, ancestors and lineal descendants.  Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be considered as being
owned proportionately by or for its shareholders, partners or
beneficiaries.  “Outstanding stock” shall
include all stock actually issued and outstanding immediately before the grant
of the

 

7

 

Option.  “Outstanding stock” shall not include shares
authorized for issue under outstanding Options held by the Optionee or by any
other person.

 

ARTICLE 6.  STOCK OPTIONS IN
GENERAL

 

6.1  Exercise
Price.  The exercise price of an
Option to purchase a share of Common Stock shall be, in the case of an
Incentive Stock Option, not less than 100% of the fair market value of a share
of Common Stock on the date the Option is granted, except that the exercise
price shall be not less than 110% of such fair market value in the case of an
Incentive Stock Option granted to any individual described in the second
sentence of Section 5.2.  The
exercise price of an Option to purchase a share of Common Stock shall be, in
the case of a Nonqualified Stock Option, not less than 100% of the fair market
value of a share of Common Stock on the date the Option is granted.  The exercise price shall be subject to
adjustment pursuant to the limited circumstances set forth in Article 10.

 

6.2  Limitation
on Incentive Stock Options.  The
aggregate fair market value (determined as of the date an Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by any individual in any calendar year (under the Plan and
all other plans maintained by the Corporation and Subsidiaries) shall not
exceed $100,000.

 

6.3  Determination
of Fair Market Value.

 

(a)  If the Common Stock is not listed on an
established stock exchange or exchanges but is listed on NASDAQ, the fair
market value per share shall be the closing sale price for the Common Stock on
the day an Option is granted.  If no sale
of Common Stock has occurred on that day, the fair market value shall be
determined by reference to such price for the next preceding day on which a
sale occurred.

 

(b)  If the Common Stock is not listed on an
established stock exchange or on NASDAQ, fair market value per share shall be
the mean between the closing dealer “bid” and “asked” prices for the Common
Stock for the day an Option is granted, and if no “bid” and “asked” prices are
quoted for the day an Option is granted, the fair market value shall be
determined by reference to such prices on the next preceding day on which such
prices were quoted.

 

(c)  If the Common Stock is listed on an
established stock exchange or exchanges, the fair market value shall be deemed
to be the closing price of Common Stock on such stock exchange or exchanges on
the day an Option is granted.  If no sale
of Common Stock has been made on any stock exchange on that day, the fair
market value shall be determined by reference to such price for the next
preceding day on which a sale occurred.

 

(d)  In the event that the Common Stock is not
traded on an established stock exchange or on NASDAQ, and no closing dealer “bid”
and “asked” prices are available on the day an Option is granted, then fair
market value will be the price established by the Committee in good faith.

 

8

 

In connection with determining the fair market value
of a share of Common Stock on any relevant day, the Committee may use any
source deemed reliable; and its determination shall be final and binding on all
affected persons, absent clear error.

 

6.4  Limitation
on Option Awards.  Awards under this
Plan (and any other plan of the Corporation or a Subsidiary providing for stock
option awards) to an Employee described in Code Section 162(m)(3) shall
not exceed, in the aggregate, Options to acquire 50,000 shares of Common
Stock during any period of 12 consecutive months.  Such limitation shall be subject to
adjustment in the manner described in Article 10.

 

6.5  Transferability
of Options.

 

(a)  Except as provided in Subsection (b), an
Option granted hereunder shall not be transferable other than by will or the
laws of descent and distribution, and such Option shall be exercisable, during
the Optionee’s lifetime, only by him or her.

 

(b)  An Optionee may, with the prior approval of
the Committee, transfer a Nonqualified Stock Option for no consideration to or
for the benefit of one or more members of the Optionee’s “immediate family”
(including a trust, partnership or limited liability company for the benefit of
one or more of such members), subject to such limits as the Committee may
impose, and the transferee shall remain subject to all terms and conditions
applicable to the Option prior to its transfer. 
The term “immediate family” shall mean an Optionee’s spouse, parents,
children, stepchildren, adoptive relationships, sisters, brothers and
grandchildren (and, for this purpose, shall also include the Optionee).

 

ARTICLE 7.  TERM, VESTING AND
EXERCISE OF OPTIONS

 

7.1  Term and
Vesting.  Each Option granted under
the Plan shall terminate on the date determined by the Committee, and specified
in the Agreement; provided, however, that (i) each intended Incentive
Stock Option granted to an individual described in the second sentence of Section 5.2
shall terminate not later than five years after the date of the grant,
(ii) each other intended Incentive Stock Option shall terminate not later
than ten years after the date of grant, and (iii) each Option granted
under the Plan which is intended to be a Nonqualified Stock Option shall
terminate not later than ten years and one month after the date of grant.  Each Option granted under the Plan shall be
fully exercisable (i.e., become 100% vested) only after the earlier of the date
on which (i) the Optionee has completed one year of continuous employment
with, or service with respect to, the Corporation or a Subsidiary immediately
following the date of the grant of the Option (or such later date as may be
specified in an Agreement, including a date that may be tied to the
satisfaction of one or more Performance Goals); (ii) unless otherwise
provided in an Agreement, a Change in Control occurs; and (iii) unless
otherwise provided in an Agreement, the Optionee’s death, being “disabled” (as
defined in the Corporation’s long term disability policy) or Retirement after
completing three or more years of service from the date of the grant of the
Option.  Except as provided in
Article 8 an Option may be exercised only during the continuance of the
Optionee’s employment, with or service with respect to, the Corporation.

 

9

 

7.2  Exercise.

 

(a)  A person electing to exercise an Option shall
give notice to the Corporation of such election and of the number of shares he
or she has elected to purchase and shall at the time of exercise tender the
full exercise price of the shares he or she has elected to purchase.  The exercise notice shall be delivered to the
Corporation in person, by certified mail, or by such other method (including
electronic transmission) and in such form as determined by the Committee.  The exercise price shall be paid in full, in
cash, upon the exercise of the Option; provided, however, that in lieu of cash,
with the approval of the Committee at or prior to exercise, an Optionee may
exercise an Option by tendering to the Corporation shares of Common Stock owned
by him or her and having a fair market value equal to the cash exercise price
applicable to the Option (with the fair market value of such stock to be
determined in the manner provided in Section 6.3) or by delivering such
combination of cash and such shares as the Committee in its sole discretion may
approve; further provided, however, that no such manner of exercise shall be
permitted if such exercise would violate Section 402 of the Sarbanes-Oxley
Act of 2002.  Notwithstanding the
foregoing, Common Stock acquired pursuant to the exercise of an Incentive Stock
Option may not be tendered as payment unless the holding period requirements of
Code Section 422(a)(1) have been satisfied, and Common Stock not acquired
pursuant to the exercise of an Incentive Stock Option may not be tendered as
payment unless it has been held, beneficially and of record, for at least six
months (or such longer time as may be required by applicable securities law or
accounting principles to avoid adverse consequences to the Corporation or a
Participant).

 

(b)  A person holding more than one Option at any
relevant time may, in accordance with the provisions of the Plan, elect to
exercise such Options in any order.

 

(c)  At the request of the Participant and to the
extent permitted by applicable law, the Committee may, in its sole discretion,
selectively approve arrangements whereby the Participant irrevocably authorizes
a third party to sell shares of Common Stock (or a sufficient portion of the
shares) acquired upon the exercise of an Option and to remit to the Corporation
a sufficient portion of the sales proceeds to pay the entire exercise price and
any tax withholding required as a result of such exercise.

 

7.3  Deferred
Delivery of Nonqualified Stock Option Shares.  The Committee may approve an arrangement
whereby an Optionee may elect to defer receipt of Common Stock otherwise
issuable to him or her upon exercise of a Nonqualified Stock Option.  Any such arrangement, if approved at all,
shall be subject to such terms and conditions as the Committee, in its sole
discretion, may specify, which terms and conditions may (but need not) include
provision for the award of additional shares to take into account dividends
paid subsequent to exercise of the Option. 
No exercise of discretion under this section with respect to an event or
person shall create an obligation to exercise such discretion in any similar or
same circumstance.

 

ARTICLE 8.  EXERCISE OF OPTIONS
FOLLOWING TERMINATION

OF EMPLOYMENT OR SERVICE

 

8.1  Retirement;
Other Termination by Corporation or Subsidiary; Change in Control.  In the event of an Optionee’s termination of
employment or service as a Non-Employee Director

 

10

 

(i) due to
Retirement, (ii) by the Corporation or a Subsidiary other than Termination
for Cause, or (iii) due to a Change in Control, such Optionee’s Option
shall lapse at the earlier of the expiration of the term of such Option or:

 

(a)  in the case of an Incentive Stock Option,
three months from the date of such termination of employment; and

 

(b)  in the case of a Nonqualified Stock Option,
one year from the date of such termination of employment or service as a
Non-Employee Director.

 

8.2  Death or
Total Disability.  In the event of an
Optionee’s termination of employment or service as a Non-Employee Director due
to death or being “disabled” (as defined in the Corporation’s group long term
disability policy), such Optionee’s Option shall lapse at the earlier of the
expiration of the term of such Option or:

 

(a)  in the case of an Incentive Stock Option, one
year from the date of such termination of employment; and

 

(b)  in the case of a Nonqualified Stock Option,
one year from the date of such termination of employment or service as a
Non-Employee Director.

 

8.3  Termination
or Dismissal For Cause; Other Termination by Optionee.  In the event of an Optionee’s Termination or
Dismissal For Cause, or in the event of termination of employment at the
election of an Optionee, such Optionee’s Option shall lapse upon such
termination.

 

8.4  Special
Termination Provisions for Options.

 

(a)  In the event that an Optionee’s employment or
service as a Non-Employee Director is terminated and the Committee deems it
equitable to do so, the Committee may, in its discretion and subject to the
approval of a majority of the disinterested members of the Board, waive any
continuous service requirement for vesting (but not any Performance Goal or
Goals) specified in an Agreement pursuant to Section 7.1 and permit
exercise of an Option held by such Optionee prior to the satisfaction of such
continuous service requirement.  Any such
waiver may be made with retroactive effect, provided it is made within
60 days following the Optionee’s termination of employment or service as a
Non-Employee Director.

 

(b)  In the event the Committee waives the
continuous service requirement with respect to an Option as set forth in Section 8.4(a)
above and the circumstance of an Optionee’s termination of employment or
service as a Non-Employee Director is described in Section 8.1, the
affected Option will lapse as otherwise provided in the relevant section.

 

(c)  In the event the Committee waives the
continuous service requirement with respect to an Option as set forth in
Section 8.4(a) above, such Option shall lapse at the earlier of the
expiration of the term of such Option or:

 

(i)  in the case of an Incentive Stock Option,
three months from the date of termination of employment; and

 

11

 

(ii)  in the case of a Nonqualified Stock Option,
one year from the date of termination of employment or service as a
Non-Employee Director.

 

ARTICLE
9.  RESTRICTED STOCK

 

9.1  In
General.  Each Restricted Stock Award
shall be subject to such terms and conditions as may be specified in the
Agreement issued to a Participant to evidence the grant of such Award.  Subject to Section 3.6, a Restricted
Stock Award shall be subject to a vesting schedule or Performance Goals, or
both.

 

9.2  Minimum
Vesting Period for Certain Restricted Stock Awards.  Each Restricted Stock Award granted to a
Participant shall be fully exercisable (i.e., become 100% vested) only after
the earlier of the date on which (i) the Participant has completed one
year of continuous employment with, or service with respect to, the Corporation
or a Subsidiary immediately following the date that the Restricted Stock was
awarded (or such later date as may be specified in an Agreement, including a
date that may be tied to the satisfaction of one or more Performance Goals);
(ii) unless otherwise provided in an Agreement, a Change in Control
occurs; or (iii) unless otherwise provided in an Agreement, the
Participant’s death, being “disabled” (as defined in the Corporation’s group
long term disability policy) or Retirement after completing three or more years
of service from the date of the Award.

 

9.3  Waiver
of Vesting Period for Certain Restricted Stock Awards.  In the event that a Participant’s employment
or service as a Non-Employee Director is terminated and the Committee deems it
equitable to do so, the Committee may, in its discretion and subject to the
approval of a majority of the disinterested members of the Board, waive any
minimum vesting period (but not any Performance Goal or Goals) with respect to
a Restricted Stock Award held by such Participant.  Any such waiver may be made with retroactive
effect, provided it is made within 60 days following such Participant’s
termination of employment or service as a Non-Employee Director.

 

9.4  Limitation
on Restricted Stock Awards.  Grants
under this Plan (and any other plan of the Corporation or a Subsidiary
providing for restricted stock awards) to any Employee described in Code
Section 162(m)(3) shall not exceed, in the aggregate, Restricted Stock
Awards for 25,000 shares of Common Stock during any period of
12 consecutive months.  Such
limitation shall be subject to adjustment in the manner described in
Article 10.

 

9.5  Issuance
and Retention of Share Certificates By Corporation.  One or more share certificates shall be
issued upon the grant of a Restricted Stock Award; but until such time as the
Restricted Stock shall vest or otherwise become distributable by reason of
satisfaction of one or more Performance Goals, the Corporation shall retain
such share certificates.

 

9.6  Stock
Powers.  At the time of the grant of
a Restricted Stock Award, the Participant to whom the grant is made shall
deliver such stock powers, endorsed in blank, as may be requested by the
Corporation.

 

9.7  Release
of Shares.  Within 30 days
following the date on which a Participant becomes entitled under an Agreement
to receive shares of previously Restricted Stock, the Corporation

 

12

 

shall deliver to
him or her a certificate evidencing the ownership of such shares, together with
an amount of cash (without interest) equal to the dividends that have been paid
on such shares with respect to record dates occurring on and after the date of
the related Award.

 

9.8  Forfeiture
of Restricted Stock Awards.  In the
event of the forfeiture of a Restricted Stock Award, by reason of a Participant’s
termination of employment or termination of service as a Non-Employee Director
prior to vesting, the failure to achieve a Performance Goal or otherwise, the
Corporation shall take such steps as may be necessary to cancel the affected
shares and return the same to its treasury.

 

9.9  Assignment,
Transfer, Etc. of Restricted Stock Rights. 
The potential rights of a Participant to shares of Restricted Stock may
not be assigned, transferred, sold, pledged, hypothecated, or otherwise
encumbered or disposed of until such time as unrestricted certificates for such
shares are received by him or her.

 

9.10  Deferred
Delivery of Formerly Restricted Stock. 
The Committee may approve an arrangement whereby a Participant may elect
to defer receipt of Restricted Stock beyond the date on which a restriction
terminates or a Performance Goal is satisfied with respect thereto.  Any such arrangement, if approved at all,
shall be subject to such terms and conditions as the Committee, in its sole
discretion, may specify, including terms covering the accumulation or distribution
of dividends previously paid with respect to the subject shares and those that
may thereafter be paid.

 

ARTICLE 10.  ADJUSTMENT PROVISIONS

 

10.1  Share
Adjustments.

 

(a)  In the event that the shares of Common Stock
of the Corporation, as presently constituted, shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Corporation, or if the number of such shares of Common Stock shall be
changed through the payment of a stock dividend, stock split or reverse stock
split, then (i) the shares of Common Stock authorized hereunder to be made
the subject of Awards, (ii) the shares of Common Stock then subject to
outstanding Awards and the exercise price thereof (where relevant),
(iii) the maximum number of Awards that may be granted within a 12-month
period and (iv) the nature and terms of the shares of stock or securities
subject to Awards hereunder shall be increased, decreased or otherwise changed
to such extent and in such manner as may be necessary or appropriate to reflect
any of the foregoing events.

 

(b)  If there shall be any other change in the
number or kind of the outstanding shares of the Common Stock of the
Corporation, or of any stock or other securities into which such Common Stock
shall have been changed, or for which it shall have been exchanged, and if a
majority of the disinterested members of the Board shall, in its sole
discretion, determine that such change equitably requires an adjustment in any
Award which was theretofore granted or which may thereafter be granted under
the Plan, then such adjustment shall be made in accordance with such
determination.

 

13

 

(c)  The grant of an Award pursuant to the Plan
shall not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge, to consolidate, to dissolve, to liquidate or to
sell or transfer all or any part of its business or assets.

 

10.2  Corporate
Changes.  A liquidation or
dissolution of the Corporation, a merger or consolidation in which the
Corporation is not the surviving Corporation or a sale of all or substantially
all of the Corporation’s assets, shall cause each outstanding Award to
terminate, except to the extent that another corporation may and does, in the
transaction, assume and continue the Award or substitute its own awards.

 

10.3  Fractional
Shares.  Fractional shares resulting
from any adjustment in Awards pursuant to this article may be settled as the
Committee shall determine.

 

10.4  Binding
Determination.  To the extent that
the foregoing adjustments relate to stock or securities of the Corporation,
such adjustments shall be made by a majority of the disinterested members of
the Board, whose determination in that respect shall be final, binding and
conclusive.  Notice of any adjustment
shall be given by the Corporation to each holder of an Award which shall have
been so adjusted.

 

ARTICLE 11.  GENERAL PROVISIONS

 

11.1  Effective
Date.  The Plan shall become
effective upon the approval of the Plan by the shareholders of the Corporation
within 12 months of adoption by the Board.

 

11.2  Termination
of the Plan.  Unless previously
terminated by the Board, the Plan shall terminate on, and no Award shall be
granted after, the day immediately preceding the tenth anniversary of its
adoption by the Board.

 

11.3  Limitation
on Termination, Amendment or Modification.

 

(a)  The Board
may at any time terminate, amend, modify or suspend the Plan, provided that,
without the approval of the shareholders of the Corporation, no amendment or
modification shall be made solely by the Board which:

 

(i)  increases the maximum number of shares of
Common Stock as to which Awards may be granted under the Plan (except as
provided in Section 10.1);

 

(ii)  changes the class of eligible Participants;
or

 

(iii)  otherwise requires the approval of
shareholders under applicable state law or under applicable federal law to
avoid potential liability or adverse consequences to the Corporation or a
Participant.

 

(b)  No amendment, modification, suspension or
termination of the Plan shall in any manner affect any Award theretofore
granted under the Plan without the consent of the Participant or any person validly
claiming under or through the Participant.

 

14

 

11.4  No
Right to Grant of Award or Continued Employment or Service.  Nothing contained in this Plan or otherwise
shall be construed to (a) require the grant of an Award to an individual
who qualifies as an Employee or Non-Employee Director, or (b) confer upon
a Participant any right to continue in the employ or service of the Corporation
or any Subsidiary or limit in any respect the right of the Corporation or of
any Subsidiary to terminate the Participant’s employment or service at any time
and for any reason.

 

11.5  No
Obligation.  No exercise of
discretion under this Plan with respect to an event or person shall create an
obligation to exercise such discretion in any similar or same circumstance,
except as otherwise provided or required by law.

 

11.6  Withholding
Taxes.

 

(a)  Subject to the provisions of
Subsection (b), the Corporation will require, where sufficient funds are
not otherwise available, that a Participant who is an Employee pay or reimburse
to it any withholding taxes at such time as withholding is required by law.

 

(b)  With the permission of the Committee, a
Participant who is an Employee may satisfy the withholding obligation described
in Subsection (a), in whole or in part, by electing to have the
Corporation withhold shares of Common Stock (otherwise issuable to him or her)
having a fair market value equal to the amount required to be withheld.  An election by a Participant who is an Employee
to have shares withheld for this purpose shall be subject to such conditions as
may then be imposed thereon by any applicable securities law.

 

11.7  Listing
and Registration of Shares.

 

(a)  No Option granted pursuant to the Plan shall
be exercisable in whole or in part, and no share certificate shall be
delivered, if at any relevant time the Committee determines in its discretion
that the listing, registration or qualification of the shares of Common Stock
subject to an Award on any securities exchange or under any applicable law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, such Award, until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.

 

(b)  If a registration statement under the
Securities Act with respect to the shares issuable under the Plan is not in
effect at any relevant time, as a condition of the issuance of the shares, a
Participant (or any person claiming through a Participant) shall give the
Committee a written or electronic statement, satisfactory in form and substance
to the Committee, that he or she is acquiring the shares for his or her own account
for investment and not with a view to their distribution.  The Corporation may place upon any stock
certificate for shares issued under the Plan the following legend or such other
legend as the Committee may prescribe to prevent disposition of the shares in
violation of the Securities Act or other applicable law:

 

‘THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (“ACT”) AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN

 

15

 

EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL
FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED.’

 

11.8  Disinterested
Director.  For purposes of this Plan,
a director shall be deemed “disinterested” if such person could qualify as a
member of the Committee under Section 3.1.

 

11.9  Gender;
Number.  Words of one gender,
wherever used herein, shall be construed to include each other gender, as the
context requires.  Words used herein in
the singular form shall include the plural form, as the context requires, and vice
versa.

 

11.10  Applicable
Law.  Except to the extent preempted
by federal law, this Plan document, and the Agreements issued pursuant hereto,
shall be construed, administered, and enforced in accordance with the domestic
internal law of the Commonwealth of Pennsylvania.

 

11.11  Headings.  The headings of the several articles and
sections of this Plan document have been inserted for convenience of reference
only and shall not be used in the construction of the same.

 

16

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