Document:

EX-4.B

 

Exhibit 4(B)

TERMS OF THE MANDATORY CONVERTIBLE NOTES

The terms and conditions (each a “Condition”, and together the “Terms of the Notes”)
of the 9 per cent. Mandatory Convertible Notes due 2010, issued in the form of notes (the
“Notes”) and mandatorily convertible into registered shares of, and unconditionally and
irrevocably guaranteed by, UBS AG (as further defined below, the “Shares”), in the
aggregate principal amount of Swiss Francs (“CHF”) 13,000,000,000 (thirteen billion Swiss
Francs), established pursuant to certain purchase agreements among UBS Convertible
Securities (Jersey) Ltd. (the “Issuer”), UBS AG (the “Guarantor” or “UBS AG”), and the
purchasers named therein. Terms used herein have the meaning ascribed to them in Condition
18:

	1	 	Form and Denomination, Printing and Delivery of the Notes

	 	(a)	 	The aggregate principal amount of the Notes is divided into Notes with
denominations of CHF 100,000,000 (one hundred million Swiss Francs) each. The Notes
entitle the Holders and, in certain circumstances, the Issuer to convert at any time
during the Conversion Period, and require the Issuer to convert on the Maturity Date,
any Notes outstanding and not yet converted on such date, into Shares in accordance
with the Terms of the Notes. The Notes may not be redeemed for cash.

	 	(b)	 	The Notes and all rights in connection therewith are documented in the form
of a Permanent Global Certificate until exchanged at the option of the Issuer for
individually certificated Notes pursuant to Condition 1(e). Each Holder retains a
quotal co-ownership interest (Miteigentumsanteil) in the Permanent Global Certificate
to the extent of his claim against the Issuer. Except as provided below, no printing
of individually certificated Notes will occur and no Holder will have the right to
request printing and delivery of individually certificated Notes.

	 	(c)	 	The Permanent Global Certificate will be deposited by or on behalf of the
Issuer with SIS and shall remain in safekeeping with SIS during the entire duration of
the issue and until the complete conversion of the Notes or exchange for individually
certificated Notes.

	 	(d)	 	Holders do not have at any time the right to demand the delivery of
individually certificated Notes. However, if UBS AG, acting as Paying and Conversion
Agent, determines that printing of individually certificated Notes is necessary or
desirable or if, under Swiss law, the enforcement of obligations under the Notes may
only be ensured by means of individually certificated Notes, UBS AG, acting as Paying
and Conversion Agent, shall, without any costs to the Holders, arrange for the
printing and delivery of such individually certificated Notes to Holders.

1

 

	 	(e)	 	Individually certificated Notes which are mutilated, lost or destroyed may,
in accordance with applicable legal procedures, be replaced, at the Specified Office
of UBS AG, acting as Paying and Conversion Agent, upon payment by the respective
Holder of such costs as may be incurred in connection therewith, and on such terms as
to evidence and indemnity as UBS AG may reasonably require and, in the case of
mutilation, upon surrender of the mutilated, individually certificated Notes.

	 	(f)	 	Should individually certificated Notes be printed, such Notes will not be
issued in bearer form but exclusively in registered form for U.S. tax purposes,
whereby, inter alia, title will pass exclusively by registration of the Holders in a
noteholders’ register (the “Register”) to be established and maintained by a registrar
(the “Registrar”) appointed by the Issuer and acting on its behalf and duly notified
to the Holders in accordance with Condition 12. Should such individually certificated
Notes be printed, individually certificated coupons will not be printed. The Holders
will be required to present the individually certificated Notes to the Issuer in order
to claim payments of interest.

	 	(g)	 	Should individually certificated Notes be printed, the Notes may be
transferred only by lodging the individually certificated Notes at the specified
office of the Registrar. No transfer of Notes will be valid unless and until entered
into the Register. A Note may be registered only in the name of, and transferred to, a
named person.

	 	(h)	 	The expression “Note(s)” shall refer to quotal co-ownership interests in the
Permanent Global Certificate together with all rights thereby evidenced, and the
expression “Holder” shall refer to any person entitled to such quotal co-ownership
interests and rights.

	2	 	Coupon Payments

	(a)	 	Payment of Coupon Amount

	 	(i)	 	Each Note entitles the Holder thereof to receive in accordance with and
subject to Conditions 2 (a) (ii), 2 (a) (iii) and 2 (b), interest in an amount per
annum that is equal to 9 per cent. of the principal amount of such Note, payable
annually in arrear on each Coupon Payment Date (the Swiss Franc amount in respect of
each Note so calculated being the “Coupon Amount”).

	 	(ii)	 	Payment of the Coupon Amount on each Coupon Payment Date is at the discretion
of the Issuer, provided that, subject to Condition 2 (b), the Issuer shall be required
to pay the Coupon Amount in full on any Coupon Payment Date if during the previous
twelve (12) months UBS AG has:

	 	(A)	 	paid any dividend, interest or similar payments to holders of Junior
Instruments; or

2

 

	 	(B)	 	paid any dividend, interest or similar payments to holders of Parity
Instruments; or

	 	(C)	 	redeemed, repurchased or otherwise acquired any Junior Instruments or
Parity Instruments for any consideration (or any monies are paid to or made
available for a sinking fund for, or for redemption of, any such securities),
other than in connection with: (w) transactions in securities effected by or for
the account of customers of UBS AG or any of its subsidiaries or in connection
with the distribution or trading of, or market making in respect of, Junior
Instruments or Parity Instruments; (x) the satisfaction by UBS AG or any of its
subsidiaries of its obligations under any employee benefit plans or similar
arrangements with or for the benefit of employees, officers, directors or
consultants; (y) a reclassification of the capital stock of UBS AG or any of its
subsidiaries or the exchange or conversion of one class or series of such capital
stock for another class or series of such capital stock; or (z) the purchase of
fractional interests in shares of the capital stock of UBS AG or any of its
majority-owned subsidiaries pursuant to the provisions of any security being
converted into or exchanged for such capital stock.

	 	(iii)	 	The entitlement of the Holder of any Note to receive Coupon Amounts, subject
to Conditions 2 (a) (ii) and 2 (b), will:

	 	(A)	 	in the case of the voluntary conversion of such Note at the option of
the Holder pursuant to Condition 3 (c), cease from the Coupon Payment Date
immediately preceding the relevant Conversion Date or, if converted such that the
relevant Conversion Date falls prior to the first Coupon Payment Date, from the
Payment Date; or

	 	(B)	 	in case of an early conversion pursuant to Condition 3 (b) or
Condition 3 (d), include accrued and unpaid Coupon Amounts to but excluding the
Conversion Date plus the Net Present Value Amounts, as further provided in
Condition 3 (b) or Condition 3 (d); or

	 	(C)	 	upon conversion at the Maturity Date include the entitlement to
receive the Coupon Amount in relation to the Interest Period immediately preceding
the Maturity Date; or

	 	(D)	 	in case of an accelerated conversion pursuant to Condition 9, include
accrued and unpaid Coupon Amounts to but excluding the Conversion Date plus the
Net Present Value Amounts, as further provided in Condition 9;

	 	 	 	provided in each case that if the delivery of the Shares or payment of any amount due
is improperly withheld or refused, the entitlement to receive the Coupon Amount will

3

 

	 	 	 	continue until the day on which all Shares and all sums due in respect of such Note up
to that day are received by or on behalf of the relevant Holder.

	 	(iv)	 	The amount of the Coupon Amount payable in respect of any period which is not
a full Interest Period shall be calculated on an actual/actual basis, i.e., on the
basis of the actual number of days in the relevant period from (and including) the
first day of such period to (but excluding) the last day of such period divided by the
number of days from (and including) the immediately preceding Coupon Payment Date (or,
if none, the Payment Date) to (but excluding) the next Coupon Payment Date.

	(b)	 	No Payment of Coupon Amount
	 
	 	 	The Issuer is not entitled to and will not pay any Coupon Amount scheduled for payment on
any Coupon Payment Date in accordance with Condition 2 (a) or the Net Present Value Amounts
payable on any scheduled payment date if and to the extent:

	 	(i)	 	the aggregate amount of (x) all Coupon Amounts payable on such Coupon Payment
Date, and/or as the case may be the aggregate accrued and unpaid Coupon Amounts and
Net Present Value Amounts payable on the relevant scheduled payment date, together
with the amount of any distributions or dividends paid or scheduled to be paid to
holders of Parity Instruments and Junior Instruments on such Coupon Payment Date or
scheduled payment date, as the case may be, and (y) all other payments (other than
redemption payments) made since the date of the most recent audited accounts of UBS AG
on or in respect of any Parity Instruments or Junior Instruments, in each case to the
extent that such payments have not already been accounted or provided for in
determining Distributable Profits, would exceed the amount of the Distributable
Profits of UBS AG in its most recent audited unconsolidated (parent company) accounts;
and

	 	(ii)	 	either at the time of such payment or immediately thereafter (giving effect
to such payment only), the Solvency Condition would not be fulfilled or UBS AG would
be in breach of the applicable regulatory capital requirements of the Swiss Federal
Banking Commission, whether general or specific to UBS AG.

	 	If a Coupon Amount is not due and payable because the Issuer shall have exercised its
discretion not to make payment in respect thereof pursuant to Condition 2 (a) (ii) or
because the Issuer is not entitled to make such payment pursuant to this Condition 2 (b),
or if the Net Present Value Amounts are not payable pursuant to this Condition 2 (b), the
Issuer shall notify the Holders thereof at least twenty (20) Business Days prior to the
relevant Coupon Payment Date or, in the case of accrued and unpaid Coupon Amounts and Net
Present Value Amounts due on any date other than a Coupon Payment Date, as soon as
reasonably practicable, such notice to be given in accordance with Condition 13. Claims for
any such Coupon Amount not paid by the Issuer shall irrevocably terminate and the Holders
of Notes shall no longer be entitled thereto. Non-payment by the Issuer of any

4

 

Coupon Amount or Net Present Value Amounts pursuant to this Condition 2 (b) shall not
constitute an Accelerated Conversion Event.

	(c)	 	Adjustment of Conversion Price in case of Non-Payment of Coupon Amount

In the event of non-payment of a Coupon Amount and/or Net Present Value Amounts pursuant to
Condition 2 (a) (ii) or Condition 2 (b), the Minimum Conversion Price and Maximum
Conversion Price shall each be adjusted by being divided by one plus the fraction having as
its numerator (i) the amount of the unpaid Coupon Amount and/or Net Present Value Amounts
per Note divided by the Maximum Conversion Ratio, and having as its denominator (ii) the
arithmetic average of the VWAP of the Shares on the Relevant Exchange on each of the five
consecutive Trading Days beginning on the third Trading Day immediately following the
giving of notice by the Issuer to Holders that any scheduled payment of a Coupon Amount
and/or Net Present Value Amounts will not be made.

	3	 	Conversion, Purchase and Cancellation

The Notes shall not be redeemed nor be redeemable for cash in any circumstances other
than in accordance with Condition 10.

Each conversion will be effected by reference to article 4a para. 3 of the articles of
incorporation of UBS AG to create new Shares thereunder.

	(a)	 	Mandatory Conversion on Maturity Date

Unless previously converted, or purchased and cancelled as provided in paragraph (f) below,
each Note will be converted on the Maturity Date into such number of Shares as is equal to
the Maturity Conversion Ratio, provided that if a Holder holds more than one Note, the
number of Shares to be delivered upon conversion will be calculated by reference to the
aggregate number of Notes held by such Holder, rounded down, if necessary, to the nearest
whole number of Shares.

The Maturity Conversion Ratio shall be calculated as the arithmetic average of the fifteen
(15) Conversion Ratios, unless otherwise provided herein, calculated on the basis of the
VWAP of the Shares on each of the fifteen (15) consecutive Trading Days ending on the third
(3rd) Trading Day prior to the Maturity Date (in each case calculated to five decimal
places, with 0.000005 being rounded down)

The Conversion Ratio for each such Trading Day shall be determined as follows:

	 	(i)	 	if the VWAP on any such Trading Day is less than or equal to the Minimum
Conversion Price, the Conversion Ratio for such Trading Day shall be equal to the
principal amount of one Note divided by the Minimum Conversion Price (the “Maximum
Conversion Ratio”);

5

 

	 	(ii)	 	if the VWAP on any such Trading Day is greater than or equal to the Maximum
Conversion Price, the Conversion Ratio for such Trading Day shall be equal to the
principal amount of one Note divided by the Maximum Conversion Price (the “Minimum
Conversion Ratio”); and

	 	(iii)	 	if the VWAP on any such Trading Day is greater than the Minimum Conversion
Price but less than the Maximum Conversion Price, the Conversion Ratio for such
Trading Day shall be equal to the principal amount of one Note divided by the VWAP on
such Trading Day.

Fractions of Shares will not be delivered and no payment of cash shall be made in respect
thereof.

	(b)	 	Early Conversion at the Option of the Issuer

Subject to a period of at least twenty (20) days’ and not more than thirty (30) days’ prior
notice to the Holders given pursuant to Condition 13, which notice shall be irrevocable,
the Issuer may convert all but not some only of the Notes into Shares at any time during
the Conversion Period, but not within three (3) Trading Days prior to a shareholders’
meeting of UBS AG, at the Maximum Conversion Ratio provided that this option may only be
exercised if (i) the limitations set forth in Condition 2 (b) in respect of the payment of
any Coupon Amounts and Net Present Value Amounts will not apply and (ii) the Shares to be
delivered thereupon have the same entitlements (including dividends) as the other
outstanding Shares.

Upon such conversion Holders shall receive (i) the number of Shares equal to the Maximum
Conversion Ratio, provided that if more than one Note is converted by the same Holder, the
number of Shares to be delivered upon conversion will be determined by reference to the
aggregate number of Notes held by such Holder, (ii) accrued and unpaid Coupon Amounts to
but excluding the Conversion Date and (iii) the Net Present Value Amounts, which shall be
payable three (3) Business Days following the relevant Conversion Date.

Fractions of Shares will not be delivered and no payment of cash shall be made in respect
thereof.

	(c)	 	Voluntary Conversion at the Option of the Holders

Each Note will be convertible at the option of a Holder at any time during the Conversion
Period at the Minimum Conversion Ratio. The number of Shares to be delivered upon such
conversion will be determined by reference to the aggregate number of Notes deposited by
such Holder at any time.

Fractions of Shares will not be delivered and no payment shall be made in respect thereof.

6

 

	(d)	 	Early Conversion at the Option of Holders upon a Change of Control

In the event of a Change of Control of UBS AG, a Holder may, during the period of thirty
(30) days commencing on the occurrence of the Change of Control (the “Change of Control
Conversion Period”), convert the Notes into Shares at the Maturity Conversion Ratio (for
these purposes calculated on the basis of the arithmetic average of the VWAP on each of the
five (5) Trading Days ending on the Trading Day preceding the relevant Conversion Date).

Holders who have converted Notes pursuant to this Condition 3 (d) will, subject to
Condition 2 (b), also be entitled to receive (i) accrued and unpaid Coupon Amounts to but
excluding the Conversion Date and (ii) the Net Present Value Amounts, which shall be
payable three (3) Business Days following the relevant Conversion Date. Fractions of Shares
will not be delivered and no payment shall be made in respect thereof.

Upon the occurrence of a Change of Control, UBS AG shall promptly notify the Holders of
such occurrence.

A “Change of Control” occurs when

	 	(i)	 	any person, directly or indirectly or acting in concert with third parties,
acquires equity securities of UBS AG which, added to equity securities of UBS AG
already owned, exceed the threshold of
331/3 per cent. of the voting rights of UBS AG
whether or not such rights are exercisable; or

	 	(ii)	 	an offer to acquire all of the Shares has become unconditional in all
respects (excluding any conditions subsequent), provided that the Shares tendered
together with the equity securities of UBS AG already held by the offeror (whether
directly, indirectly or in concert with third parties) exceed the
threshold of
331/3 per
cent. of the voting rights of UBS AG whether or not such voting rights are
exercisable; or

	 	(iii)	 	UBS AG consolidates with or merges into any other person save where,
following such consolidation or merger, the shareholders of UBS AG immediately prior
to such consolidation or merger, hold fifty (50) per cent. or more of the voting
rights (whether exercisable or not) of such other corporation; or

	 	(iv)	 	all or substantially all of the properties or assets of UBS AG and its
subsidiaries taken as a whole are sold or disposed of, directly or indirectly.

	(e)	 	Conversion Procedures

	(i)	 	Conversion Notices

7

 

To exercise the right to convert all or any Notes pursuant to Conditions 3 (c) or 3 (d), a
Holder must deposit during the Conversion Period a duly completed notice of conversion in
the form set forth in Schedule 1 hereto (the “Conversion Notice”) together with the
relevant individually certificated Note(s) or, if no individually certificated Notes have
been printed, reasonable clearing instructions to the Paying and Conversion Agent allowing
for a transfer of the relevant Note(s) through SIS to the Paying and Conversion Agent. A
Conversion Notice, once duly completed and deposited as aforesaid, shall be irrevocable
without the consent of the Issuer. Notes duly presented and/or transferred for conversion
shall be cancelled in their entirety by the Paying and Conversion Agent and, upon delivery
of the relevant Shares and (in the case of conversion pursuant to Condition 3 (d)) payment
of the relevant accrued and unpaid Coupon Amount and Net Present Value Amounts, shall be
considered redeemed.

Conversion rights may be exercised only in respect of the whole of the principal amount of
a Note.

A Conversion Notice shall be deemed to be presented if received before 4.00 p.m. CET on a
Business Day at the Specified Office of the Paying and Conversion Agent. Any Conversion
Notice presented after 4.00 p.m. CET on a Business Day or on a day that it not a Business
Day will be deemed to have been received on the following Business Day.

	(ii)	 	Delivery of Shares

The Shares to be delivered upon conversion of Notes in accordance with this Condition 3
will be new Shares to be issued from the conditional capital of UBS AG with the same
entitlements and subject to the same restrictions as the other outstanding Shares as of the
Conversion Date. Upon delivery of the new Shares, the Holder is entitled to receive
dividends, pre-emptive rights and other rights pertaining to the new Shares provided such
delivery takes place on or before the last Business Day prior to the Ex-Date. “Ex-Date”
means the day on which the Shares are traded on the Relevant Exchange “ex-dividend” or
“ex-right”.

As soon as practicable, and in any event not later than the date falling three (3) Trading
Days after the relevant Conversion Date, the Issuer will effect delivery of the Shares
through SIS or any other appropriate settlement organisation in accordance with directions
given by the relevant Holder in the relevant Conversion Notice or otherwise available to
the Issuer. At the time of such delivery of the Shares, the then valid share registration
rules of UBS AG will apply.

8

 

	(iii)	 	Taxes and other Costs

Any Swiss Federal Stamp Duty, if due, as well as the fee of the Relevant Exchange, if any,
payable upon issue and/or the delivery of the Shares upon the conversion of Notes will be
paid or reimbursed by the Issuer. The Issuer will, however, not pay (i) any tax payable in
connection with any subsequent sale or transfer of Shares by the holder thereof or (ii) any
tax or other cost (other than Swiss Federal Stamp Duty) payable in connection with the
sale, transfer or delivery of Share(s) in or to a country other than Switzerland or Jersey,
which shall be borne by the Holder of the relevant Notes.

	(f)	 	Purchase and Cancellation

The Issuer and the Guarantor and any of their respective subsidiaries may at any time
purchase Notes, in the open market or otherwise. Any purchase shall be made in accordance
with applicable laws or regulations, including (without limitation) applicable stock
exchange regulations.

Any Note purchased by the Issuer or the Guarantor or any of their subsidiaries may be held,
resold or surrendered for cancellation. All Notes which are converted or which are
surrendered for cancellation, shall forthwith be cancelled. All Notes so cancelled shall be
forwarded to the Specified Office of the Paying and Conversion Agent and cannot be reissued
or resold.

	4	 	Payments

The Issuer will make payment of the Coupon Amount, if any, and any other payments in
cash to be made under the Notes to the Holders through the Paying and Conversion Agent,
irrespective of any future transfer restrictions and notwithstanding any bilateral or
multilateral payment or clearing agreement which may be applicable at the time of such
payments. If the due date for any payment by the Issuer does not fall on a Business Day,
the Issuer undertakes to effect payment through the Paying and Conversion Agent for value
the Business Day immediately following such due date and Holders will not be entitled to
any additional sum in relation thereto.

The Issuer undertakes that payments shall be made in freely disposable Swiss Francs without
collection cost to the Holders, and, unless otherwise provided for by applicable law and
subject to Condition 7, without any restrictions and whatever the circumstances may be,
irrespective of nationality, residence or domicile of the Holders and without requiring any
affidavit or the fulfillment of any other formality.

If printed, individually certificated Notes must be delivered and, if appropriate,
surrendered in order to receive payment.

9

 

	5	 	Statute of Limitations

Claims for payment of Coupon Amounts and any other amounts payable in respect of the
Notes or for the delivery of the Shares, respectively, cease to be enforceable by legal
action in accordance with the applicable Swiss statute of limitations, presently after ten
(10) years (in case of claims for the delivery of the Shares) and five (5) years (in the
case of claims for the payment of Coupon Amounts) from their relevant due dates for payment
and/or delivery.

	6	 	Adjustments to the Conversion Price

Any adjustment to the Conversion Price in accordance with this Condition 6 will be
made in relation to the Maximum Conversion Price and the Minimum Conversion Price and will
thereby result in an adjustment of the Maximum Conversion Ratio and the Minimum Conversion
Ratio.

	(a)	 	Events leading to Adjustments to the Conversion Price

	(i)	 	Increase of share capital by means of capitalization of reserves, profits or premiums by
distribution, division or consolidation of Shares

In the event of a change in UBS AG’s share capital by means of capitalization of reserves,
profits or premiums, by means of the distribution of Shares, and in the event of division
or consolidation of Shares, the Conversion Price shall be adjusted by multiplying the
Conversion Price in force immediately prior to such change by the result of the following
formula:

NOld / NNew

where:

NOld          is the number of Shares existing before the change in share capital; and

NNew          is the number of Shares existing after the change in share capital;

provided, however, that no such adjustment shall be made under this Condition 6(a)(i) in
respect of any dividend or distribution that is to be taken into account for the purposes
of determining whether or not a Capital Distribution has been paid or made.

Such adjustment shall become effective on the date on which the Shares are traded ex-Shares
(or similar) on the Relevant Exchange.

10

 

	(ii)	 	Issues of Shares or Other Securities by way of conferring subscription or purchase rights

If (a) UBS AG grants to holders of Shares any rights or options, warrants or other rights
to subscribe for or acquire Shares, Other Securities or securities convertible or
exchangeable into Shares or Other Securities or (b) any third party with the agreement of
UBS AG issues to holders of Shares any rights, options or warrants to purchase any Shares,
Other Securities or securities convertible or exchangeable into Shares or Other Securities
(the rights referred to in (a) and (b) collectively and individually being the “Purchase
Rights”), the Conversion Price shall be adjusted by multiplying the Conversion Price in
force immediately prior to such issue or grant by the result of the following formula:

(Pcum - R) / Pcum

where

Pcum is the Closing Price of one Share on whichever is the later of (x) the last
Trading Day preceding the date on which the Shares are first traded ex-Purchase Rights on
the Relevant Exchange following the relevant issue or grant or (y) the Trading Day when the
price for the Purchase Right is announced, or, if the day the subscription or purchase
price is announced is not a Trading Day, the next following Trading Day; and

R     is the value of the Purchase Right relating to one Share or Other Security,
such value to be calculated as follows:

	 	(A)	 	in the event that the Purchase Rights relate to Shares:

R = Pcum - TERP

where:

TERP =     (NOld x Pcum + NNew x (Prights + Div)) / (NOld + NNew)

and:

TERP     is the theoretical ex-rights price; and

NOld is the number of Shares existing before the change in share capital; and

NNew is the number of Shares being newly issued; and

Prights is the price at which one new Share can be subscribed,
exercised or purchased for; and

11

 

Div   is the amount (in Swiss Francs) by which the dividend
entitlement per existing Share exceeds the dividend entitlement per new
Share, (x) if dividends have already been proposed to the general meeting
of shareholders but not yet paid, based on the proposed dividend amount, or
(y) if dividends have not yet been proposed based on the last paid
dividend;

	 	 	 	provided, however, that no such adjustment shall be made if the subscription or
purchase price at which one new Share can be subscribed or purchased is at least
95 per cent. of the Closing Price of one Share on whichever is the later of (x)
the last Trading Day preceding the date on which the Shares are first traded
ex-Purchase Rights on the Relevant Exchange following the relevant issue or
grant or (y) the Trading Day when the price for the Purchase Right is announced,
or, if the day the subscription or purchase price is announced is not a Trading
Day, the next following Trading Day;

	 	(B)	 	in the event the Purchase Rights relate to Other Securities or to
securities convertible or exchangeable into Shares or Other Securities and where
such Purchase Rights, or Other Securities are traded on a regulated stock exchange
in Switzerland, the European Union, the United States of America, Canada or Japan:

R = Nrights x Prights

where:

Nrights is the number of Purchase Rights granted per Share; and

Prights is the average of the last paid prices (in Swiss Francs) (or,
if no dealing is recorded, the arithmetic mean of the bid and offered
prices) on a spot basis of one Purchase Right on all Trading Days of such
rights or, if the subscription period or purchase period in respect thereof
is longer than ten (10) Trading Days, the average of the last paid prices
(or, if no dealing is recorded, the arithmetic mean of the bid and offered
prices) on a spot basis on the first ten (10) Trading Days.

	 	(C)	 	in all other cases where neither of the previous paragraphs (A) or
(B) is applicable:
	 
	 	 	 	R will be determined by the Issuer in consultation with the Guarantor.

Such adjustment shall become effective (i) in the case of Condition 6 (a) (ii) (A), on the
date on which the Shares are traded ex-Purchase Rights on the Relevant Exchange or, if the
subscription or exercise price is announced only at a later time, one Trading Day after the
announcement of the price for the Purchase Right, (ii) in the case of Condition 6 (a) (ii)

12

 

(B), one(1) Trading Day after (x) the end of the subscription or purchase period or (y) the
tenth (10th) day of the subscription or purchase period, whichever is sooner, and (iii) in
the case of Condition 6 (a) (ii) (C), on the date determined by the Issuer in consultation
with the Guarantor.

	(iii)	 	Capital Distributions

	 	(A)	 	If and whenever UBS AG shall pay or make any Capital Distribution to
shareholders of UBS AG, the Conversion Price shall be adjusted by multiplying the
Conversion Price in force immediately prior to the Effective Date by the following
fraction:
	 
	 	 	 	A — B

     A
	 
	 	 	 	where:

	 	 	 	A	 	is the average of the daily VWAP on each of the five
consecutive Trading Days commencing on the first date on which the Shares
are traded ex the relevant Capital Distribution on the Relevant Exchange;
and
	 
	 	 	 	B	 	is the portion of the Fair Market Value of the
aggregate Capital Distribution attributable to one Share.

	 	 	 	Such adjustment shall become effective on the Effective Date or, if later, the
first date upon which the Fair Market Value of the relevant Capital Distribution
is capable of being determined as provided herein.

	 	 	 	“Capital Distribution” means any Dividend (the “Relevant Dividend”) paid or made
in respect of a fiscal year of UBS AG (the “Relevant Fiscal Year”) if the sum
of:

	 	(i)	 	the Fair Market Value of the Relevant Dividend per
Share; and

	 	(ii)	 	the aggregate of the Fair Market Value of any other
Dividend per Share paid or made in respect of the Relevant Fiscal Year
(disregarding for such purpose any amount previously determined to be a
Capital Distribution in respect of the Relevant Fiscal Year),

	 	 	 	such sum being the “Current Year’s Dividend”, exceeds the Threshold Amount, and
in such case the amount of the relevant Capital Distribution shall be the amount
by which the Current Year’s Dividends exceeds the Threshold Amount.

13

 

“Effective Date” means the first date on which the Shares are traded ex-the
relevant Dividend on the Relevant Exchange.

“Threshold Amount” means CHF 2.20 per Share.

	 	(B)	 	For the purposes of the above, Fair Market Value shall (subject as
provided in the definition of “Dividend”) be determined as at the Effective Date.

	 	(C)	 	In making any calculations for the purposes of this Condition
6(a)(iii), such adjustments (if any) shall be made as the Issuer in consultation
with the Guarantor may determine in good faith to be appropriate to reflect (i)
any consolidation or sub-division of any Shares or the issue of Shares by way of
capitalization of profits or reserves (or any like or similar event) or any
increase in the number of Shares in issue in relation to the fiscal year of UBS AG
in question, or (ii) any change in the fiscal year of UBS AG. For purposes hereof,
any adjustment in relation to a Capital Distribution shall be made irrespective of
any adjustment of the Conversion Price pursuant to Condition 2 (c).

	(iv)	 	Consolidations, Mergers

In the event of any consolidation of UBS AG with, or merger of UBS AG into, any other
company where UBS AG is not the continuing entity or the acquisition of the legal or
beneficial ownership of all or substantially all of the assets owned by UBS AG, either
directly or indirectly, by one or more persons, the Issuer and the Guarantor shall (as far
as legally possible) ensure that each Note shall be convertible into the number of shares
(or other equity securities, including depositary receipts issued for the same) and any
other consideration (including cash) issued or delivered to the holder of the number of
Shares into which such Note could have been converted upon exercise of the Conversion
Rights by the Holder of such Note immediately prior to one of the aforementioned events.
Thereafter, the adjustment provisions of this Condition 6 (a) shall apply mutatis mutandis
in respect of such shares or other equity securities and references to Shares in these
Terms of the Notes shall be construed as references to such shares or other equity
securities.

	(v)	 	Other Events

If the Issuer or the Guarantor determines, after consultation with the Majority Holders,
that notwithstanding sub-paragraphs (i) to (iii) of this Condition 6 (a) an adjustment
should be made to the Conversion Price as a result of one or more events or circumstances
not referred to in this Condition 6 (a) or circumstances have arisen which might have an
adverse effect on the right to convert Notes and no adjustment to the Conversion Price
under this Condition 6 (a) would otherwise arise, the Issuer and the Guarantor shall engage
the advice or services of a Common Expert to determine as soon as practicable what
adjustment, if any, to the Conversion Price or amendment, if any, to the terms of this
Condition 6 is fair and reasonable to take account thereof and the date on which such
adjustment or

14

 

amendment should take effect. The Issuer shall promptly notify the Holders of any event or
circumstance contemplated by this Condition 6(a)(v).

	(b)	 	Calculation of Adjustments

	 	(i)	 	Each determination and adjustment to be made pursuant to Condition 6 (a)
(including but not limited to the determination of the Fair Market Value as defined in
Condition 18) shall be calculated in good faith by the Issuer in consultation with the
Guarantor. If any doubt shall arise as to whether an adjustment is to be made to the
Conversion Price or as to the appropriate adjustment to the Conversion Price
(including, without limitation, as to the appropriate determination of any
calculation, factor or element), and following consultation between the Issuer, the
Guarantor and a Common Expert, a written opinion of such Common Expert in respect
thereof shall be conclusive and binding on all parties, save in the case of manifest
error.

	 	(ii)	 	In the case of any adjustment, the resulting Conversion Price, if not an
integral multiple of CHF 0.01, shall be rounded down to the nearest multiple of CHF
0.01.
	 
	 	(iii)	 	The Issuer will give notice to the Holders in accordance with Condition 13:

	 	(A)	 	not less than twenty (20) days before the earlier of (x) the date
fixed for participation in, and the date on which any relevant resolution is to be
submitted to the shareholders of UBS AG for approval in respect of, any issue,
grant or distribution as described in sub-paragraphs (a) (i), (ii) or (iii) of
this Condition 6, or (y) the date of any other publicly announced event which
would give rise to an adjustment to the Conversion Price as described above, or
(z) the date of occurrence of any other publicly announced matter affecting the
rights attaching to the Notes or the Shares as described; and

	 	(B)	 	as soon as practicable after either the date on which any adjustment
to the Conversion Price becomes effective or, if no adjustment is required, the
date on which it is possible to determine that such is the case.

	 	 	 	Any notice given pursuant to sub-paragraph (A) above shall give particulars of the
relevant issue, grant, distribution or other such event (but only to the extent that
such particulars are publicly available) and specify the date for participation therein
and the adjusted Conversion Price (if then determinable).
	 
	 	 	 	Any notice given pursuant to sub-paragraph (B) above shall give particulars of the
relevant adjustment (if any).

	(c)	 	Events not Giving Rise to Adjustments
	 
	 	 	No adjustment to the Conversion Price will be made:

15

 

	 	(i)	 	as a result of any issue or distribution of Shares or Other Securities if the
pre-emptive right (Bezugsrecht) in respect thereof under the Swiss Federal Code of
Obligations has been validly excluded by resolution of the general meeting of
shareholders of UBS AG unless a pre-emptive right in respect thereof is granted to the
shareholders of UBS AG by UBS AG or by a third party with the agreement of UBS AG,
provided that the subscription or purchase price at which one new Share or Other
Security can be subscribed or purchased is at least 95 per cent. of the arithmetic
average of the VWAP on each of the five (5) Trading Days ending on the Trading Day
preceding the date of announcement of such issue or distribution; or

	 	(ii)	 	as a result of any issue of bonds convertible into Shares or bonds with
options to subscribe for Shares, such issue being in connection with a conditional
increase of the share capital of UBS AG, irrespective of whether in respect of such
issue the advance subscription rights to acquire such bonds (Vorwegzeichnungsrecht)
have been excluded or not, unless advance subscription rights have been granted and
are traded on the Relevant Exchange or on the SWX, provided that the implied
conversion price for such bonds is at least 95 per cent. of the arithmetic average of
the VWAP on each of the five (5) Trading Days ending on the Trading Day preceding the
date of announcement of such issue; or

	 	(iii)	 	if Shares or Other Securities (including pre-emptive rights, options or
warrants in relation to Shares or Other Securities) are issued, offered or granted to,
or for the benefit of, directors, consultants or employees, or former directors or
employees, of UBS AG or any of its subsidiaries or any associated company or to
trustees to be held for the benefit of any such person in any such case pursuant to
any employee share or option scheme, unless the usage of the conditional capital for
the issuance of new Shares or Other Securities in relation to or under such scheme has
not been approved by the shareholders of UBS AG; or

	 	(iv)	 	if an increase in the Conversion Price, would result from such adjustment,
except in the case of an exchange of the Shares for Other Securities or a
consolidation of Shares; or

	 	(v)	 	if the Conversion Price would fall below the nominal value of a Share. In
this case, the Conversion Price will be adjusted to the nominal value of a Share; or

	 	(vi)	 	in respect of any Capital Distribution where the Current Year’s Dividend does
not exceed the Threshold Amount.

	(d)	 	Maximum Conversion Price Reset
	 
	 	 	Following and in addition to any other adjustment if, at any time prior to 10 December
2008, UBS AG issues in one or more transactions:

16

 

	 	(i)	 	Shares (or other equity securities having essentially the same economic
characteristics as the Shares) at an issue price per Share (or other equity security)
below the Reference Share Price, other than Shares issued upon conversion or exercise
of any securities or options; or

	 	(ii)	 	convertible securities with an initial conversion price below the Reference
Share Price; or
	 
	 	(iii)	 	mandatory convertible securities (or equivalent instruments) which

	 	(x)	 	bear interest at a rate in excess of 9 per cent. per annum and the
maximum conversion price of the new issue is equal to or higher than the Maximum
Conversion Price; or

	 	(y)	 	bear interest at a rate equal to or less than 9 per cent. per annum and
the maximum conversion price of the new issue is less than the Maximum Conversion
Price; or

	 	(z)	 	bear interest at a rate in excess of 9 per cent. per annum and the
maximum conversion price of the new issue is less then the Maximum Conversion
Price;

	 	where the aggregate gross proceeds received by UBS AG from such transaction(s) exceeds CHF
5,000,000,000, then

	 	(A)	 	in case of (i) and (ii) then the prevailing Maximum Conversion Price shall be
reduced according to the following formula:

	 	 	 	 	 
	 	 	MCP(Adjusted) = MCP(Old) x RP(New) / RP(Old),
	 
	 	 	 	 
	 

	 	where	 	 
	 
	 	 	 	 
	 

	 	MCP(Adjusted)
	 	is the adjusted Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	MCP(Old)
	 	is the prevailing Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	RP(New)
	 	is the issue price of the Shares or other equity securities (in the
case of (i) above) or the conversion price (in the case of (ii) above); and
	 
	 	 	 	 
	 

	 	RP(Old)
	 	is the Minimum Conversion Price;

	 	(B)	 	in case of (iii) (x) the then prevailing Maximum Conversion Price shall be
reduced according to the following formula:

17

 

	 	 	 	 	 
	 	 	MCP(Adjusted) = MCP(Old) x [1-[(Int(New) - 0.09) x D]]
	 
	 	 	 	 
	 

	 	where	 	 
	 
	 	 	 	 
	 

	 	MCP(Adjusted)
	 	is the adjusted Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	MCP(Old)
	 	is the prevailing Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	Int(New)	 	
is the interest rate in the new issue of mandatory convertible
securities (or equivalent instruments); and
	 
	 	 	 	 
	 	 	D     is the number of days to the Maturity Date divided by 365;

	 	(C)	 	in the case of (iii) (y), the Maximum Conversion Price will be adjusted
according to the following formula:

	 	 	 	 	 
	 	 	MCP(Adjusted) = MCP(Old) / 1.17 x [1 + (0.17 x MCP(New) / MCP(Old))]
	 
	 	 	 	 
	 

	 	where	 	 
	 
	 	 	 	 
	 

	 	MCP(Adjusted)
	 	is the adjusted Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	MCP(Old)
	 	is the prevailing Maximum Conversion Price; and
	 
	 	 	 	 
	 

	 	MCP(New)
	 	is the maximum conversion price of the new issue; and

	 	(D)	 	in the case of (iii) (z), the Maximum Conversion Price will be adjusted
	 
	 	 	 	first in accordance with (C), and
	 
	 	 	 	then in accordance with (B) above;
	 
	 	 	 	provided that in no circumstances shall the Maximum Conversion Price be reduced below
the prevailing Minimum Conversion Price.
	 
	 	 	 	Such reduction of the Maximum Conversion Price will take effect on the date on which
the proceeds of the relevant issuance are received by UBS AG.

	7	 	Payment of Additional Amounts, Taxation

All payments under the Notes with respect to Coupon Amounts and/or Net Present Value
Amounts by or on behalf of the Issuer or the Guarantor, as the case may be, to the Holders
shall be made free and clear of, and without withholding or deduction for, any taxes,
duties, assessments or governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or within Jersey or Switzerland, as the case may be, or

18

 

any political sub-division thereof or any authority therein or thereof having power to tax,
unless such withholding or deduction is required by law. In the event that any payments by
or on behalf of the Issuer or the Guarantor, as the case may be, are required to be made
subject to withholding or deduction for any such taxes, duties, assessments or governmental
charges, the Issuer or the Guarantor, as the case may be, shall pay such additional amounts
(“Additional Amounts”) as may be necessary in order that the net amounts received by a
Holder after such withholding or deduction shall equal the respective amounts which would
otherwise have been receivable by such Holder in respect of the relevant Notes in the
absence of such withholding or deduction. However, no such Additional Amounts shall be
payable on account of any taxes, duties, assessments or governmental charges which:

	 	(a)	 	are payable otherwise than by deduction or withholding from payments under
these Terms of the Notes; or

	 	(b)	 	are payable by reason of the Holder of a Note having, or having had, some
personal or business connection with Jersey or Switzerland and not merely by reason of
the holding of the Notes; or

	 	(c)	 	are payable by reason of a change in law that becomes effective more than
thirty (30) days after the relevant payment becomes due, or is duly provided for and
notice thereof is published in accordance with Condition 12, whichever occurs later;
or

	 	(d)	 	are required to be made or withheld or deducted on payments to individuals
pursuant to European Council Directive 2003/48/EC (the “EU Savings Tax Directive”) or
any other directive implementing the conclusions of the ECOFIN Council meeting of
26-27 November 2000 on the taxation of savings income, or any law implementing or
complying with, or introduced to conform to, the EU Savings Tax Directive, including,
but not limited to, the Agreement between the European Community and the Confederation
of Switzerland dated as of 26th October 2004 (the Swiss Savings Tax
Agreement) providing for measures equivalent to those laid down in the EU Savings Tax
Directive or any law or other governmental regulation implementing or complying with,
or introduced in order to conform to, the Swiss Savings Tax Agreement.

Any reference in the Terms of the Notes to any amounts payable in
respect of the Notes shall be deemed also to refer to any
Additional Amounts in respect thereof which may be payable under
this Condition 7.

	8	 	Status

The Notes constitute direct, unconditional, unsecured and subordinated obligations of
the Issuer, ranking junior to the claims of all secured or unsecured creditors of the
Issuer but, subject to Condition 10, ranking senior to the shares of the Issuer, except for
such preferences as are provided for by any mandatorily applicable provision of law.

19

 

	9	 	Accelerated Conversion

Each of the following events (each event an “Accelerated Conversion Event”) shall give
rise to the consequences set out in this Condition 9:

	 	(a)	 	Non-Performance: there is a failure by the Issuer (under the Notes) or the
Guarantor (under the Guarantee) (i) to pay any Coupon Amount or any Net Present Value
Amounts when due and payable under the Terms of the Notes, or (ii), subject to
Condition 10 (a), to deliver Shares upon conversion of any Notes, and in any such case
such failure continues for a period of thirty (30) days; or

	 	(b)	 	Breach of Other Obligations: the Issuer or the Guarantor does not perform or
comply with any one or more of their other respective obligations under the Terms of
the Notes or the Guarantee, respectively, and where such default is incapable of
remedy or, if capable of remedy, is not remedied within sixty (60) days after notice
of such default shall have been given by a Holder to the Issuer; or

	 	(c)	 	Insolvency: the Issuer or the Guarantor is (or is deemed by law or a court to
be) bankrupt or unable to pay its debts, stops or suspends payment of all or a
material part of its debts, initiates or becomes subject to proceedings relating to
itself under any applicable bankruptcy, liquidation, insolvency, composition
(Nachlassvertrag), administration or insolvency law, proposes or makes a stay of
execution, a general assignment or an arrangement or composition with or for the
benefit of the relevant creditors in respect of any of such debts or a moratorium is
agreed or declared in respect of or affecting any debts of the Issuer or the Guarantor
and such moratorium adversely affects the interests of the Holders or any status,
proceeding, proposal, arrangement or composition whatsoever analogous to the foregoing
occurs in respect of the Issuer or the Guarantor; or

	 	(d)	 	Cross-Default: the Issuer or the Guarantor fails to pay any amount due in
respect of any other present or future loan or other indebtedness of the Issuer or the
Guarantor for or in respect of borrowed money or any indemnity in respect of any
borrowed money, in each case after any applicable grace period, provided that the
aggregate amount of the amounts so due but unpaid equals or exceeds CHF 300,000,000 or
its equivalent in another currency (on the basis of the middle spot rate for the
relevant currency against the Swiss Franc as quoted by any leading bank at the place
of payment of such debt on the day on which this paragraph operates, as determined in
good faith by the Issuer in consultation with the Guarantor), provided that this
Condition 9 (d) shall not apply if a competent court or the Swiss Federal Banking
Commission has ordered that such amount should not be paid; or

	 	(e)	 	the Shares are no longer listed on the SWX or any successor thereof, a
recognized stock exchange in Switzerland, a regulated market in the European Union or
a recognized stock exchange in the United States of America, Canada or Japan.

20

 

The Issuer will inform the Holders without delay that an event mentioned under paragraph
(b), (c), (d) or (e) above has occurred.

If an Accelerated Conversion Event occurs, any Holder may serve a written notice upon the
Issuer, such notice having the effect that from the Trading Day immediately following the
date on which such notice is given the outstanding Notes held by such Holder shall be
converted into Shares at the Maximum Conversion Ratio. Holders who have converted Notes
pursuant to this Condition 9 will, subject to Condition 2 (b) also be entitled to receive
(i) accrued and unpaid Coupon Amounts to but excluding the Conversion Date plus (ii) the
Net Present Value Amounts.

	10	 	Inability to Deliver Shares

	 	(a)	 	Should the Issuer become bankrupt (as such term is defined in Article 8 of the
Interpretation (Jersey) Law 1954) or otherwise be wound-up, the claim of the Holders
against the Issuer for the delivery of Shares shall be converted into a direct claim
of the Holders against the Guarantor for the delivery of Shares.

	 	(b)	 	If upon liquidation due to insolvency (Bankenkonkurs; art. 33 et seq. of the
Swiss Federal Banking Act) or the voluntary winding-up and liquidation, UBS AG becomes
legally barred from creating and delivering or is unable to create and deliver Shares
upon conversion of the Notes, the claims of the Holders against the Issuer under these
Terms of the Notes or against the Guarantor under the Guarantee for the delivery of
Shares shall be converted into a monetary claim against UBS AG that entitles the
Holder to participate in the liquidation proceeds of UBS AG pro rata in accordance
with the number of Shares to which such Holder would have been entitled in accordance
with the Maximum Conversion Ratio.
	 
	 	 	 	Notwithstanding the above, but subject to Condition 2(b) and mandatory law, the claims
of the Holders for the payment of any Coupon Amount and Net Present Value Amounts shall
continue to exist for so long as the Shares have not been delivered upon conversion.
Any such claims for Coupon Amounts and Net Present Value Amounts as well as any other
claims for amounts due and payable shall comprise a claim in the liquidation proceeds
of the Issuer for such amounts.

	 	(c)	 	Save for such obligations as may be preferred by mandatory provisions of
applicable law, the claims of a Holder against UBS AG pursuant to Condition 10(b)
shall be subordinated as follows: (i) monetary claims in lieu of the delivery of
Shares shall rank junior to the claims of all creditors of UBS AG and shall rank pari
passu with the rights of the holders of Shares then in issue; and (ii) claims for any
Coupon Amount and Net Present Value Amounts shall rank junior to all Senior Creditors,
pari passu with other Parity Instruments, and senior to the holders of Shares and
Junior Instruments.

21

 

	11	 	Substitution of the Issuer

The Issuer may, without the consent of the Holders, at any time be substituted in
respect of all rights and obligations arising under or in connection with the Notes by any
non-Swiss company of which not less than 95 per cent. of the capital and voting rights are
directly or indirectly held by the Issuer or the Guarantor (the “New Issuer”), provided
that:

	 	(a)	 	the New Issuer is in a position to fulfill all payment obligations arising
from or in connection with the Notes in freely convertible Swiss Francs without any
need to deduct or withhold any taxes or duties at source,

	 	(b)	 	the New Issuer has obtained to this effect all necessary governmental
authorizations of the country of its domicile or its deemed residence for tax
purposes, and

	 	(c)	 	the Guarantor has issued its irrevocable and unconditional guarantee as per
Art. 111 of the Swiss Federal Code of Obligations (in the same form as set out in
Condition 12) in respect to the obligations of the New Issuer under the Notes.

A notice of any such substitution shall be given to the Holders in accordance with
Condition 13.

In the event of such substitution, any reference in the Terms of the Notes to the Issuer
shall be deemed to refer to the New Issuer and any reference to Jersey (as far as made in
connection with the Issuer) shall be deemed to refer to the country in which the New Issuer
has its domicile or is deemed resident for tax purposes, as the case requires.

	12	 	Guarantee
	 
	 	 	As security for the Notes, the Guarantor has issued the following unconditional and
irrevocable Guarantee:

	 	 	Quote

	 	 	Guarantee

	 	 	(in the meaning of Article 111 of the Swiss Federal Code of Obligations, hereinafter called
the “Guarantee”)

	 	1.	 	Being informed that UBS Convertible Securities (Jersey) Ltd. (hereinafter
called the “Issuer”), is issuing and selling 9 per cent. Mandatory Convertible Notes
due 2010, mandatorily convertible into registered shares of UBS AG (the “Notes”), in
the aggregate principal amount of CHF 13,000,000,000 (thirteen billion Swiss Francs)
due 5 March 2010, UBS AG, Zurich, Switzerland (hereinafter called the “Guarantor”),
hereby irrevocably and unconditionally guarantees to the holders of the Notes
(hereinafter called the “Holders”) in accordance with Article 111 of the Swiss Federal

22

 

	 	 	 	Code of Obligations, irrespective of the validity of the Notes, the purchase
agreements entered into by the Issuer, the Guarantor and the purchasers named therein
on or as of 18 February 2008 or any other agreement entered into in relation to the
Notes (hereinafter called the “Agreements”) and waiving all rights of objection and
defence arising from or under the Notes or the Agreements, the due payment of all
amounts due and payable by the Issuer under and pursuant to the terms and conditions
of the Notes (the “Terms of the Notes”) and, upon conversion of the Notes pursuant to
the Terms of the Notes, the due delivery of the Shares. Accordingly, the Guarantor
agrees to pay or deliver to the Holders within seven (7) days after the receipt by
the Guarantor of a Holder’s first written demand for payment and confirmation in
writing that an amount has become due and payable by the Issuer under the Notes and
such amount remains unpaid, or that as a result of the conversion of the Notes Shares
were required to be delivered by the Issuer but were not delivered, any amount due
and payable and/or any number of Shares to be delivered by the Issuer under and
pursuant to the Terms of the Notes. Demands for payment may be made by any Holder for
sums due under the Notes with respect to Coupon Amounts and/or Net Present Value
Amounts to the date of such payment and to any Additional Amounts (as defined in
Clause 2 hereof) payable pursuant to the Terms of the Notes. The same applies by
analogy to demands for delivery of Shares.

	 	2.	 	All payments due under the Notes with respect to Coupon Amounts and/or Net
Present Value Amounts by the Guarantor under this Guarantee to the Holders through the
Paying and Conversion Agent shall be made free and clear of, and without withholding
or deduction for, any taxes, duties, assessments or governmental charges of whatever
nature imposed, levied, collected, withheld or assessed by or within Switzerland, as
the case may be, or any political sub-division thereof or any authority therein or
thereof having power to tax, unless such withholding or deduction is required by law.
In the event that any payments by or on behalf of the Guarantor are required to be
made subject to withholding or deduction for any such taxes, duties, assessments or
governmental charges, the Guarantor shall pay such additional amounts (“Additional
Amounts”) as may be necessary in order that the net amounts received by a Holder after
such withholding or deduction shall equal the respective amounts which would otherwise
have been receivable by such Holder in respect of the relevant Notes in the absence of
such withholding or deduction. However, no such Additional Amounts shall be payable on
account of any taxes, duties or governmental charges which:

	 	(a)	 	are payable otherwise than by deduction or withholding from
payments under this Guarantee; or

	 	(b)	 	are payable by reason of the Holder of a Note having, or having
had, some personal or business connection with Jersey or Switzerland and not
merely by reason of the holding of the Notes; or

	 	(c)	 	are payable by reason of a change in law that becomes effective
more than thirty (30) days after the relevant payment becomes due, or is duly
provided for and notice thereof is published in accordance with Condition 13 of
the Terms of the Notes, whichever occurs later; or

23

 

	 	(d)	 	are required to be made or withheld or deducted on payments to
individuals pursuant to European Council Directive 2003/48/EC (the “EU Savings
Tax Directive”) or any other directive implementing the conclusions of the
ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income,
or any lay implementing or complying with, or introduced to conform to, the EU
Savings Tax Directive, including, but not limited to, the Agreement between the
European Community and the Confederation of Switzerland dated as of
26th October 2004 (the Swiss Savings Tax Agreement) providing for
measures equivalent to those laid down in the EU Savings Tax Directive or any
law or other governmental regulation implementing or complying with, or
introduced in order to conform to, the Swiss Savings Tax Agreement.

	 	3.	 	Notwithstanding any other provision hereof, and to the extent an amount is
not due and payable pursuant to the Terms of the Notes, the Guarantor shall not be
obliged to make any payment under this Guarantee if and to the extent:

	 	(i)	 	the aggregate amount of (x) all Coupon Amounts payable on such Coupon
Payment Date and/or as the case may be the aggregate accrued and unpaid Coupon
Amounts and Net Present Value Amounts payable on the relevant scheduled payment
date, together with the amount of any distributions or dividends paid or
scheduled to be paid to holders of Parity Instruments and Junior Instruments on
such Coupon Payment Date or scheduled payment date, as the case may be, and (y)
all other payments (other than redemption payments) made since the date of the
most recent audited accounts of the Guarantor on or in respect of any Parity
Instruments or Junior Instruments, in each case to the extent that such payments
have not already been accounted or provided for in determining Distributable
Profits, would exceed the amount of the Distributable Profits of the Guarantor
in its most recent audited unconsolidated (parent company) accounts; and

	 	(ii)	 	either at the time of such payment or immediately thereafter (giving
effect to such payment only), the Solvency Condition would not be fulfilled or
the Guarantor would be in breach of the applicable regulatory capital
requirements of the Swiss Federal Banking Commission, whether general or
specific to the Guarantor.

	 	 	 	For the purposes of this Clause the following definitions shall apply:

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

24

 

	 	 	 	law. The “appropriation to general statutory reserve” is under current law equal to
up to 5 per cent. of annual profit to the extent the general reserves of the
Guarantor do not equal 20 per cent. of the paid-in share capital plus 10 per cent. of
the amount distributed as a dividend from profit for the period in excess of 5 per
cent. of the par value of the Guarantor common shares;

	 	 	 	“Junior Instruments” means (i) ordinary shares of the Guarantor, (ii) participation
certificates of the Guarantor, if any and (iii) any class of preference shares, or
any preferred securities or similar securities (that rank pari passu with preference
            shares), directly issued by the Guarantor and treated as paid-in capital, pursuant to
Swiss banking laws and regulations;
	 
	 	 	 	“Parity Instruments” means any securities, obligations and other instruments which
are (i) directly issued by the Guarantor (excluding Junior Instruments), or (ii)
issued by any subsidiaries of the Guarantor (and entitled to the benefit of a
guarantee or support agreement or similar undertaking of the Guarantor that ranks
equally with the guarantees issued by the Guarantor in relation to Tier 1
Securities), and in each case qualify as Tier 1 Capital of the Issuer (without
regards to quantitative limits), pursuant to Swiss banking laws and regulations;
	 
	 	 	 	“Solvency Condition” means, at any relevant time, the Guarantor is solvent by virtue
of (i) its Assets exceeding its Liabilities (other than its Liabilities to persons
who are not creditors) and (ii) the Guarantor being able to pay its debts as they
fall due; for the purposes of this definition “Assets” means the total assets of the
Guarantor, on an unconsolidated basis, as shown in the latest published audited
balance sheet of the Guarantor, and “Liabilities” means the total liabilities of the
Guarantor, on an unconsolidated basis, excluding shareholders’ equity, as shown in
the latest published audited balance sheet of the Guarantor;
	 
	 	 	 	“Tier 1 Capital” means Core Capital which has the meaning ascribed to it under Swiss
banking laws and the Swiss Federal Banking Commission’s regulatory capital adequacy
regulations or any successor requirements replacing these;
	 
	 	 	 	“Tier 1 Securities” means any obligation of the Guarantor or, as the case may be, a
Subsidiary or other entity which is, or is capable of being, treated as Tier 1
Capital of the Guarantor on a consolidated or unconsolidated basis.

	 	4.	 	The Guarantee constitutes a direct, unconditional, unsecured and subordinated
obligation of the Guarantor as hereinafter provided, except for such preferences as
are provided by any mandatory applicable provision of law.

	 	(a)	 	If, upon liquidation due to insolvency (Bankenkonkurs; art. 33 et
seq. of the Swiss Federal Banking Act) or the voluntary winding-up and
liquidation, the Guarantor becomes legally barred from creating and delivering
or is unable to create and deliver Shares upon conversion of the Notes, the
claims of the

25

 

	 	 	 	Holders against the Guarantor under this Guarantee for the delivery of Shares
shall be converted into a monetary claim against the Guarantor that entitles
the Holder to participate in the liquidation proceeds of the Guarantor pro
rata in accordance with the number of Shares to which such Holder would have
been entitled in accordance with the Maximum Conversion Ratio. Any claims of
Holders for Coupon Amounts as well as any or other claims for amounts due and
payable shall comprise a claim in the liquidation proceeds of the Guarantor

	 	(b)	 	Save for such obligations as may be preferred by mandatory
provisions of applicable law, the claims of a Holder against the Guarantor under
this Guarantee shall be subordinated as follows: (i) monetary claims in lieu of
the delivery of Shares shall rank junior to the claims of all creditors of the
Guarantor and shall rank pari passu with the rights of the holders of Shares
then in issue; and (ii) claims for any Coupon Amount and any Net Present Value
Amounts shall rank junior to all Senior Creditors, pari passu with other Parity
Instruments, and senior to the holders of Shares and Junior Instruments.

	 	5.	 	Payments under the Guarantee shall be made in lawful currency of the
Confederation of Switzerland. The Guarantor undertakes to pay to the Holders without
costs for the Holders, without any restrictions, and whatever the circumstances may
be, irrespective of nationality or domicile of the beneficiary of such payments and
without requiring any affidavit or the fulfilment of any other formality, any sums due
pursuant to the Guarantee in Swiss Francs freely disposable. Any transfer tax, which
might possibly be imposed on the transfer of such funds to a Holder shall be borne by
the Guarantor.

	 	6.	 	If any payment obligation of the Guarantor in favour of the Holders has to be
converted by law from Swiss Francs into a currency other than Swiss Francs (to obtain
a judgment, execution, or for any other reason), the Guarantor undertakes as a
separate and independent obligation to indemnify the Holders for any shortfall caused
by the fluctuations of the exchange rates applied for such conversions. The rates of
exchange to be applied in calculating such shortfall shall be the Guarantor’s spot
rates of exchange prevailing between Swiss Francs and the currency other than Swiss
Francs on the date on which such conversions are necessary.

	 	7.	 	The Guarantee shall give rise to a separate and independent cause of action
against the Guarantor, shall apply irrespective of any waiver or indulgence granted to
the Issuer by any Holder from time to time and shall continue in full force and effect
notwithstanding any judgment or order against the Issuer and/or the Guarantor.

	 	8.	 	Notwithstanding any reference to the Notes herein, the Guarantor acknowledges
that this Guarantee is an undertaking pursuant to Art. 111 of the Swiss Federal Code
of Obligations (Garantie) and not merely a surety. Its obligations hereunder are of
non-accessory nature (nicht-akzessorische Garantie-Verpflichtung), independent of the
obligations of the Issuer under the Notes.

26

 

	 	9.	 	The original of this Guarantee shall be deposited with and kept for and on
behalf of the Holders by Niederer Kraft & Frey, Attorneys-at-Law, Bahnhofstrasse 13,
CH-8001 Zurich.
	 
	 	10.	 	The Guarantee is governed by Swiss law.
	 
	 	 	 	Any dispute regarding the Guarantee which may arise between any Holder and the
Guarantor shall be governed by Swiss law and shall fall within the exclusive
jurisdiction of the Commercial Court of the Canton of Zurich, the place of
jurisdiction being Zurich 1, with the right of appeal to the Swiss Federal Supreme
Court, whose decision shall be final. The Guarantor hereby irrevocably submits for
any such action or proceeding to the jurisdiction of the aforesaid courts.

	 	11.	 	Terms and expressions not otherwise defined in the Guarantee shall have the
same meaning as defined in the Terms of the Notes.

	 	 	Unquote

	13	 	Notices

All notices to Holders regarding the Notes shall be given in writing by the Issuer to
the Holders in accordance with the written instructions given last by any Holder to the
Issuer. For the purposes of any matters relating to actions or approvals or agreement of
the Majority Holders, the Issuer shall only take account of Holders who have identified
themselves to the Issuer pursuant to this Condition 13.

	14	 	Listing

The Notes will not be listed or admitted to trading on any stock exchange or other
securities market.

The Issuer will procure that, prior to the commencement of the Conversion Period, the
Shares to be issued on conversion will be listed on the SWX, or a recognized stock exchange
in Switzerland, or any regulated market in the European Union or any recognized stock
exchange in the United States of America, Canada or Japan, on the same segment as the other
Shares outstanding at such time.

	15	 	Currency Indemnity

If any payment obligation of the Issuer in favour of the Holders has to be converted
by law from Swiss Francs into a currency other than Swiss Francs (to obtain a judgment,
execution, or for any other reason), the Issuer undertakes as a separate and independent
obligation to indemnify the Holders for any shortfall caused by fluctuations of the
exchange rates applied for such conversions. The rates of exchange to be applied in
calculating such shortfall shall be UBS AG’s spot rates of exchange prevailing between
Swiss Francs

27

 

and the currency other than Swiss Francs on the date on which such conversions are
necessary.

	16	 	Governing Law and Jurisdiction

The Notes, the Terms of the Notes and the Permanent Global Certificate shall in every
respect (including without limitation questions of form, content and interpretation) be
subject to and governed by Swiss law.

Any dispute which might arise between Holders on the one hand and the Issuer and the
Guarantor on the other hand regarding the Notes, the Permanent Global Certificate and/or
any individually certificated Notes (if such are printed) and/ or the Guarantee shall be
settled in accordance with Swiss law and falls within the exclusive jurisdiction of the
Commercial Court of the Canton of Zurich, the place of jurisdiction being Zurich 1, with
the right of appeal to the Swiss Federal Supreme Court, whose decision shall be final. The
Issuer designates as its representative for the service of judicial documents pursuant to
paragraph 30 of the Rules of Civil Procedure of the Canton of Zurich, and elects special
domicile pursuant to Article 50 of the Swiss Act of Debt Enforcement and Bankruptcy, the
head office of UBS AG in Zurich, Switzerland.

The Holders are also at liberty to enforce their rights and to take legal action before the
competent courts of Jersey, or the country of domicile of the New Issuer or any other
competent court or authority, in which case Swiss law shall be applicable as provided for
in the first paragraph of this Condition 16.

	17	 	Amendment to the Terms of the Notes

The Terms of the Notes may be amended from time to time by agreement between the
Issuer, the Guarantor and the Majority Holders.

Notice of any such amendment shall be notified to the Holders in accordance with Condition
13 above.

Any such amendment shall be binding on the Issuer, the Guarantor and the Holders in
accordance with its terms.

	18	 	Definitions

In these Terms of the Notes:

	 	(1)	 	“Additional Amounts” has the meaning given to it in Condition 7;

	 	(2)	 	“Business Day” means any day (other than Saturday or Sunday) on which banks
are open for the whole day for business in Zurich;

28

 

	 	(3)	 	“Capital Distribution” has the meaning given to it in Condition 6 (a) (iii);
	 
	 	(4)	 	“Change of Control Conversion Period” has the meaning given to it in
Condition 3 (d);
	 
	 	(5)	 	“Common Expert” means an independent investment bank of international repute
or a “Big 4” accounting firm (an “Expert”) selected by the Issuer in consultation with
the Guarantor and the Majority Holders by mutual agreement. If the Issuer and the
Majority Holders do not mutually agree on a Common Expert within seven days from the
beginning of the appointment process, each of the Issuer and the Majority Holders
shall select an Expert, whereby the Experts thus selected shall together select a
third Expert. In case the two selected Experts do not mutually agree on a third Expert
within seven days after being appointed, each of them shall select another Expert,
whereby a Swiss Notary Public appointed by the Majority Holders will pick one of these
two Experts as third Expert by drawing lots. In the case of the appointment of three
Experts, references in these Conditions to a Common Expert shall be deemed to refer to
these three Experts, deciding by majority decision. Decisions of the Common Expert
shall be final and binding on the Issuer, the Guarantor, the Holders and the Paying
and Conversion Agent. The fees and costs of the Common Expert shall be divided equally
among the Issuer and the Holders.
	 
	 	(6)	 	“Conversion Date” means either (w) the date on which a Conversion Notice is
deemed to have been presented by a Holder in accordance with Condition 3 (e) (i), or
(x) in the case of early conversion by the Issuer pursuant to Condition 3 (b), the
date specified by the Issuer in its notice of early conversion pursuant to Condition 3
(b), (y) in the case of Condition 9, the Trading Day following service of notice by
the relevant Holder to the Issuer or (z) in the case of conversion on the Maturity
Date pursuant to Condition 3 (a), the Maturity Date;
	 
	 	(7)	 	“Conversion Notice” has the meaning given to it in Condition 3 (e) (i);
	 
	 	(8)	 	“Conversion Period” means the period commencing on 6 September 2008 and
ending on the twentieth (20th) Trading Day prior to the Maturity Date, or, in case of
early conversion of the Notes pursuant to Condition 3 (b), ending on the fifth (5th)
Trading Day prior to the date fixed for early conversion or, in the case of early
conversion of the Notes pursuant to Condition 3 (d), the Change of Control Conversion
Period;
	 
	 	(9)	 	“Conversion Price” means the Maximum Conversion Price and the Minimum
Conversion Price;
	 
	 	(10)	 	“Conversion Ratio” means the number of Shares to be delivered upon conversion
of one Note as determined pursuant to Condition 3;

29

 

	 	(11)	 	“Coupon Amount” has the meaning given to it in Condition 2 (a);
	 
	 	(12)	 	“Coupon Payment Date” means each of 5 March 2009 and 5 March 2010;
	 
	 	(13)	 	“Distributable Profits” means, for any financial year of UBS AG, profit that
may be distributed in accordance with Swiss law and regulation then applicable.
Currently, for any financial year of UBS AG, distributable profits are equal to profit
brought forward, plus profit for the period, minus appropriation to general statutory
reserve, plus other reserves, each as shown in the audited unconsolidated balance
sheet and statement of appropriation of retained earnings of the Issuer and as
determined in accordance with accounting standards applicable under Swiss law. The
“appropriation to general statutory reserve” is under current law equal to up to 5 per
cent. of annual profit to the extent the general reserves of UBS AG do not equal 20
per cent of the paid-in share capital plus 10 per cent. of the amount distributed as a
dividend from profit for the period in excess of 5 per cent. of the par value of UBS
AG common shares;
	 
	 	(14)	 	“Dividend” means any dividend or distribution to shareholders of UBS AG
(including a spin-off) whether of cash, assets, Shares or other property, and however
described and where a dividend in cash is announced which is to be, or at the election
of a shareholder or shareholders of UBS AG may be, satisfied by the issue or delivery
of Shares or other property or assets, or where a capitalization of profits or
reserves is announced which is to be, or at the election of a shareholder or
shareholders of UBS AG may be, satisfied by the payment of cash, then the dividend in
question shall be treated as a dividend in cash of the greater of (i) such cash amount
and (ii) if a distribution of Shares, the average of the daily VWAP in respect of the
Shares on each of the five consecutive Trading Days ending on the Trading Day
immediately preceding the date of announcement of the relevant dividend or, if a
distribution of other property or assets, the Fair Market Value of such other property
or assets (as at the date of the first public announcement of such dividend or
capitalization (as the case may be) or if later, as at the date on which the number of
Shares, or such other amount of property or assets, as the case may be, which may be
issued or transferred and delivered is determined.
	 
	 	(15)	 	“Fair Market Value” means, with respect to any property on any date, the fair
market value of that property as determined in good faith by the Issuer in
consultation with the Guarantor provided that (i) the Fair Market Value of a Dividend
in cash or a Dividend that is treated as a Dividend in cash shall be the amount of
such Dividend and (ii) the Fair Market Value of any other cash amount shall be the
amount of such cash.
	 
	 	(16)	 	“Guarantee” means the guarantee issued by UBS AG pursuant to Condition 12.

30

 

	 	(17)	 	“Holder” means a holder of a co-ownership interest in accordance with
Condition 1 (b) holder of individually certificated Notes;
	 
	 	(18)	 	“Interest Period” means the period beginning on (but excluding) the Payment
Date and ending on (and including) the first Coupon Payment Date and the next period
beginning on (but excluding) the first Coupon Payment Date and ending on (and
including) the Maturity Date;
	 
	 	(19)	 	“Issue Price” means 100 per cent. of the principal amount of a Note;
	 
	 	(20)	 	“Junior Instruments” means (i) ordinary shares of UBS AG, (ii) participation
certificates of UBS AG, if any and (iii) any class of preference shares, or any
preferred securities or similar securities (that rank pari passu with preference
            shares), directly issued by UBS AG and treated as paid-in capital, pursuant to Swiss
banking laws and regulations;
	 
	 	(21)	 	“Majority Holders” means at any time the Holders of a majority of the
principal amount of Notes outstanding at such time who have identified themselves to
the Issuer in accordance with Condition 13.
	 
	 	(22)	 	“Maturity Conversion Ratio” has the meaning given to it in Condition 3 (a);
	 
	 	(23)	 	“Maturity Date” means 5 March 2010;
	 
	 	(24)	 	“Maximum Conversion Price” means CHF 60.23, subject to adjustment as provided
for herein, in which case “Maximum Conversion Price” shall mean the adjusted Maximum
Conversion Price at any given time;
	 
	 	(25)	 	“Maximum Conversion Ratio” has the meaning given to it in Condition 3 (a);
	 
	 	(26)	 	“Minimum Conversion Price” means 51.48, subject to adjustment as provided for
herein, in which case “Minimum Conversion Price” shall mean the adjusted Minimum
Conversion Price at any given time;
	 
	 	(27)	 	“Minimum Conversion Ratio” has the meaning given to it in Condition 3 (a);
	 
	 	(28)	 	“Net Present Value Amounts” means, in respect of a Note, an amount in CHF
(rounded, if necessary, to the nearest CHF 0.01, with CHF 0.005 being rounded down)
calculated by the Issuer in consultation with the Guarantor on or about the third
Business Day before the relevant Conversion Date, equal to the aggregate amount of all
Coupon Amounts relating to such Note (excluding accrued and unpaid Coupon Amounts to
but excluding the Conversion Date) in respect of Coupon Payment Dates falling after
the relevant Conversion Date and up to and including the Maturity Date, discounted, in
each case, from the relevant Coupon Payment

31

 

	 	 	 	Date to the relevant Conversion Date by reference to appropriate CHF inter-bank
offered rates and swap rates quoted by UBS AG for the same or similar periods;

	 	(29)	 	“Other Securities” means equity securities of the Guarantor other than the
Shares;
	 
	 	(30)	 	“Parity Instruments” means any securities, obligations and other instruments
which are (i) directly issued by UBS AG (excluding Junior Instruments), or (ii) issued
by any subsidiaries of UBS AG (and entitled to the benefit of a guarantee or support
agreement or similar undertaking of UBS AG that ranks equally with the guarantees
issued by UBS AG in relation to Tier 1 Securities), and in each case qualify as Tier 1
Capital of the Issuer (without regards to quantitative limits), pursuant to Swiss
banking laws and regulations;
	 
	 	(31)	 	“Payment Date” means 5 March 2008;
	 
	 	(32)	 	“Paying and Conversion Agent” means UBS AG in its function as payment and
conversion agent for the Notes acting on behalf of the Issuer;
	 
	 	(33)	 	“Permanent Global Certificate” means the permanent global certificate in
bearer form, representing the Notes;
	 
	 	(34)	 	“Reference Share Price” means CHF 51.48 (adjusted pro rata for any
adjustments to the Conversion Price made herein);
	 
	 	(35)	 	“Relevant Exchange” means (i) in the case of Shares, SWX Europe or any
successor thereof or, if the Shares are no longer admitted to trading on SWX Europe,
the principal stock exchange or securities market on which the Shares are traded, and
(ii) in the case of Other Securities, the principal stock exchange or securities
market on which the Other Securities are traded;
	 
	 	(36)	 	“Senior Creditors” means (i) unsubordinated creditors of UBS AG, (ii)
creditors of UBS AG whose claims are, or are expressed to be, subordinated (whether
only in the event of the winding-up of UBS AG or otherwise), by operation of law or
pursuant to their terms, to the claims of unsubordinated creditors of UBS AG but not
further or otherwise and (iii) other subordinated creditors of UBS AG (whether as
aforesaid or otherwise) except those whose claims, by operation of law or pursuant to
their terms, rank or are expressed to rank pari passu with or junior to the claims for
Coupon Amounts;
	 
	 	(37)	 	“Shares” means fully paid registered shares of currently CHF 0.10 nominal
value each of UBS AG;
	 
	 	(38)	 	“SIS” means SIS SegaInterSettle AG;

32

 

	 	(39)	 	“Solvency Condition” means, at any relevant time, UBS AG is solvent by virtue
of (i) its Assets exceeding its Liabilities (other than its Liabilities to persons who
are not creditors) and (ii) UBS AG being able to pay its debts as they fall due; for
the purposes of this definition “Assets” means the total assets of UBS AG, on an
unconsolidated basis, as shown in the latest published audited balance sheet of UBS
AG, and “Liabilities” means the total liabilities of UBS AG, on an unconsolidated
basis, excluding shareholders’ equity, as shown in the latest published audited
balance sheet of UBS AG;
	 
	 	(40)	 	“Specified Office” means the offices of UBS AG, acting as Paying and
Conversion Agent, at the following address: UBS AG, Global Treasury, CH-8098 Zurich,
fax no +41 44 239 50 09, and copy to fax no +41 44 23463 63;
	 
	 	(41)	 	“Subsidiary” means, in respect of UBS AG at any particular time, any other
person;

	 	(a)	 	Control: whose affairs and policies UBS AG controls or has
the power to control (directly or indirectly), whether by ownership of share
capital, contract, the power to appoint or remove members of the governing
body of that person or otherwise; or

	 	(b)	 	Consolidation: whose financial statements are, in accordance
with applicable law and generally accepted accounting principles, consolidated
with those of UBS AG.

	 	(42)	 	“Swiss Federal Stamp Duty” means any stamp tax or stamp duty in accordance
with the Swiss Federal Stamp Tax Act (Bundesgesetz über die Stempelabgaben) of 27 June
1973 and the Swiss Federal Stamp Tax Ordinance (Verordnung über die Stempelabgaben) of
3 December 1973, as amended from time to time.

	 	(43)	 	“SWX” means the SWX Swiss Exchange or any successor to the SWX Swiss
Exchange;

	 	(44)	 	“Tier 1 Capital” means Core Capital which has the meaning ascribed to it
under Swiss banking laws and the Swiss Federal Banking Commission’s regulatory capital
adequacy regulations or any successor requirements replacing these;

	 	(45)	 	“Tier 1 Securities” means any obligation of UBS AG or, as the case may be, a
Subsidiary or other entity which is, or is capable of being, treated as Tier 1 Capital
of UBS AG on a consolidated or unconsolidated basis;

	 	(46)	 	“Trading Day” means any day (other than a Saturday or Sunday) on which the
Relevant Exchange is open for business and Shares may be dealt in;

33

 

	 	(47)	 	"Volume-Weighted Average Price” or “VWAP” means, in respect of any time
period, the volume-weighted average price of one Share on the Relevant Exchange for
the relevant time period, calculated by UBS AG from the Bloomberg L.P. (“Bloomberg”)
page “VAP” (or such other page as may replace such page on Bloomberg or, in the event
such page is not available, such other service or services as may be used by UBS AG
for the purpose of calculating the VWAP).

34

 

Annex A to the Terms of the Notes

Form of Conversion Notice

CONVERSION NOTICE

	 	 	 
	To:

	 	UBS AG
	 

	 	Global Treasury
	 

	 	CH-8098 Zurich
	 

	 	Fax: +41 44 23950 09
	 
	 	 
	 

	 	copy to Group Legal
	 

	 	Fax: +41 44 234 63 63
	 
	 	 
	 

	 	(the “Conversion Agent”)
	 
	 	 
	 

	 	as Agent of
	 
	 	 
	 

	 	UBS Convertible Securities (Jersey) Ltd. (the “Issuer”); and
	 

	 	UBS AG (the “Guarantor”)
	 
	 	 
	From:

	 	                    [Investor]
	 

	 	(the “Investor”)

Referring to the terms and conditions of the CHF 13,000,000,000 9 per cent Mandatory
Convertible Notes due 2010 issued by UBS Convertible Securities (Jersey) Ltd. and
unconditionally and irrevocably guaranteed on a subordinated basis by UBS AG, and to
article 4a para. 3 of the articles of incorporation of UBS AG the Investor

	1	 	herewith exercises its Conversion Rights pursuant to Condition [3(c)
“Voluntary Conversion at the Option of the Holders” | 3(d) “Early Conversion at the
Option of the Holders upon a Change of Control | 9 “Accelerated Conversion"] in
respect of ___[number] Notes with an aggregate principal amount of CHF ___;
	 
	2	 	requests that, in accordance with the Terms of the Notes, the Conversion
Agent accepts this Conversion Notice and procures the delivery of ___Shares
(being the number of shares calculated by dividing the aggregate principal amount of
all Notes converted hereby by the Minimum Conversion Price);
	 
	3	 	requests to have the Shares pursuant to para. 2 above delivered to ___
[specify details];
	 
	4	 	in case of Condition [3(d) “Early Conversion at the Option of the Holders
upon a Change of Control | 9 “Accelerated Conversion"] requests to have amount in CHF
equal to accrued and unpaid Coupon Amounts to but excluding the Conversion Date plus
the Net Present Value Amounts, multiplied by the number of Notes converted hereby,
transferred to the following account ___.

35

 

	5	 	Terms used herein in uppercase but not defined herein shall have the meaning
ascribed to them in the Terms of the Notes.

Investor

 

36EX-10.1

 

EXHIBIT 10.1

Tower Group, Inc.

2004 Long Term Equity Compensation Plan

Restricted Stock Award Agreement

			
	SECTION 1.	 	GRANT OF RESTRICTED STOCK

     (a)     Restricted Stock. Subject to the terms and conditions set forth in the Notice of
Restricted Stock Grant and this Restricted Stock Award Agreement (together, the “Agreement”), the
Company grants to the Grantee on the Grant Date the Restricted Stock set forth in the Notice of
Restricted Stock Grant. It has been determined that the value of the past services performed by the
Grantee equals or exceeds the par value of the shares subject to this Agreement.

     (b)     Plan and Defined Terms. The Restricted Stock is granted pursuant to the Plan, a copy of
which the Grantee acknowledges having received. All terms and conditions applicable to the
Restricted Stock set forth in the Plan and not set forth herein are hereby incorporated, herein by
reference. To the extent any provision hereof is inconsistent with a provision of the Plan, the
provision of the Plan will govern. All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings ascribed to them in the Plan.

			
	SECTION 2.	 	FORFEITURE AND TRANSFER RESTRICTIONS

     (a)     Forfeiture Restrictions. If the Grantee’s employment is terminated for any reason other
than (i) death, (ii) Disability (as defined below) or (iii) termination by the Company (or a
Subsidiary, as applicable) without Cause (as defined below), the Grantee shall forfeit to the
Company any shares of Restricted Stock that are subject to a Period of Restriction at the time of
such termination of employment. If the Grantee’s employment terminates due to the Grantee’s death
or Disability, or if the Grantee’s employment is terminated by the Company (or a Subsidiary, as
applicable) without Cause, any shares of Restricted Stock then subject to a Period of Restriction
shall immediately vest and become free of the forfeiture and transfer restrictions described in
this Section 2 on the date of the Grantee’s termination of employment.

     (b)     Definition of “Cause.” If the Grantee has an employment agreement with the Company or a
Subsidiary, the term “Cause” shall have the meaning ascribed to such term in the Grantee’s
employment agreement. If the Grantee’s employment agreement does not define the term “Cause,” or if
the Grantee does not have an employment agreement with the Company or a Subsidiary, the term
“Cause” shall mean (i) the willful engaging by the Grantee in misconduct that is injurious to the
Company or a Subsidiary (monetarily or otherwise), (ii) the Grantee’s conviction of, or pleading
guilty or nolo contendere to, a crime involving moral turpitude or a felony, (iii) any serious or
continuing breach by the Grantee of any material term of any agreement with the Company or
Subsidiary or any confidentiality, non-solicitation, or non-competition covenant to which the
Grantee is subject, or (iv) the Grantee’s failure to perform, in a timely, professional and
competent manner, (A) the orders’ or requests of the Board; (B) the orders or requests of the CEO
or the Grantee’s direct supervisor; or (C) any material duties under any agreement with the Company
or a Subsidiary.

 

 

     (c)     Definition of “Disability.” The Grantee’s employment shall be deemed to have terminated
due to the Grantee’s Disability if the Grantee is entitled to long-term disability benefits under
the Company’s long-term disability plan or policy, as in effect on the date of termination of
Grantee’s employment.

     (d)     Transfer Restrictions. During the Period of Restriction, the Restricted Stock may not be
sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed
of.

     (e)     Lapse of Restrictions. The Period of Restriction shall lapse as to the Restricted Stock in
accordance with the Notice of Restricted Stock Grant. Subject to the terms of the Plan and Section
4(a) hereof, upon lapse of the Period of Restriction, the Grantee shall own the shares that are
subject to this Agreement free of all restrictions otherwise imposed by this Agreement.

     (f)     Employment Agreement. Notwithstanding the foregoing, if the terms of any employment
agreement between the Grantee and the Company or a Subsidiary provides more favorable terms
concerning the impact of the Grantee’s termination of employment on the Grantee’s restricted stock
awards, such terms of the Employment Agreement shall govern.

			
	SECTION 3.	 	STOCK CERTIFICATES

     The shares of Restricted Stock subject to this Agreement shall be registered in the Grantee’s
name in certificate or book-entry form. If a certificate is issued, it shall bear an appropriate
legend referring to the restrictions and it shall be held by the Company, or its agent, on behalf
of the Grantee until the Period of Restriction has lapsed or otherwise has been satisfied. If the
shares are registered in book entry form the restrictions shall be placed on the book-entry
registration. The Grantee may also be required to execute and return to the Company a blank stock
power for each Restricted Stock certificate (or instruction letter, with respect to shares
registered in book-entry form), which will permit transfer to the Company, without further action,
of all or any portion of the Restricted Stock that is forfeited in accordance with this Agreement.

     Except for the transfer restrictions, and subject to such other restrictions, if any, as
determined by the Committee, the Grantee shall have all other rights of a holder of shares,
including the right to receive dividends paid (whether in cash or property) with respect to the
Restricted Stock and the right to vote (or to execute proxies for voting) such shares. If all or
part of a dividend in respect of the Restricted Stock is paid in the form of shares or any other
security issued by the Company, such shares or other securities shall be held by the Company
subject to the same restrictions as the Restricted Stock in respect of which the dividend was
issued.

-2-

 

			
	SECTION 4.	 	MISCELLANEOUS PROVISIONS

     (a)     Tax Withholding. In accordance with Article 17 of the Plan (or a successor provision), the
Committee shall have the power and the right to deduct or withhold, or require the Grantee to remit
to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the
Grantee’s FICA obligations) required by law to be withheld with respect to this Award. The Grantee
may elect that the withholding requirement be satisfied by by directing the surrender to the
Company of shares of Restricted Stock having a Fair Market Value equal to the minimum statutory
withholding that could be imposed on the transaction. Any such election by a Grantee shall be
irrevocable, made in writing and signed by the Grantee.

     (b)     Ratification of Actions. By accepting this Agreement, the Grantee and each person claiming
under or through the Grantee shall be conclusively deemed to have indicated the Grantee’s
acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement
by the Company, the Board, the Committee or any designee thereof.

     (c)     Notice. Any notice to be served hereunder shall be given personally in writing to the
Grantee or to the Secretary of the Company (as the case may be) or shall be couriered or posted by
registered mail to the Company (to the attention of its Secretary) at its principal executive
office or to the Grantee at the address that he most recently provided in writing to the Company.
Any such notice sent by post shall be deemed served three days after it is posted, and, in proving
such service, it shall be sufficient to prove that the notice was properly addressed and put in the
post or couriered.

     (d)     Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, as such laws are applied to contracts entered into and performed in
such jurisdiction, without giving effect to conflicts of law principles.

     (e)     Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     (f)     Modification or Amendment. This Agreement may only be modified or amended by written
agreement executed by the parties hereto; provided, however, that the adjustments permitted
pursuant to Section 4.3 of the Plan (or a successor provision) may be made without such written
agreement.

     (g)     Severability. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid
provision had not been included.

     (h)     References to Plan. All references to the Plan shall be deemed references to the Plan as
may be amended from time to time.

-3-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]