Document:

Exhibit 4.3

                             PINNACLE SYSTEMS, INC.

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                             (As amended July, 2000)

         1. Purposes of the Plan. The purposes of this Supplemental Stock Option
Plan are:

                  o    to attract and retain the best  available  personnel  for
                       positions of substantial responsibility,

                  o    to  provide   additional   incentive  to  Employees   and
                       Consultants, and

                  o    to promote the success of the Company's business.

         Options granted under the Plan will be Nonstatutory Stock Options.

         2. Definitions. As used herein, the following definitions shall apply:

                  (a)  "Administrator"  means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.

                  (b) "Applicable  Laws" means the requirements  relating to the
administration  of stock option  plans under U. S. state  corporate  laws,  U.S.
federal and state  securities  laws,  the Code,  any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable  laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

                  (c) "Board" means the Board of Directors of the Company.

                  (d)  "Code"  means  the  Internal  Revenue  Code of  1986,  as
amended.

                  (e)  "Committee"  means a committee of Directors  appointed by
the Board in accordance with Section 4 of the

                  Plan.  (f)  "Common  Stock"  means  the  Common  Stock  of the
Company.

                  (g)  "Company"  means  Pinnacle  Systems,  Inc.,  a California
corporation.

                  (h)  "Consultant"  means any  person,  including  an  advisor,
engaged by the  Company or a Parent or  Subsidiary  to render  services  to such
entity.

                  (i) "Director" means a member of the Board.

                  (j)  "Disability"  means  total and  permanent  disability  as
defined in Section 22(e)(3) of the Code.

<PAGE>

                  (k) "Employee" means any person, excluding Officers,  employed
by the Company or any Parent or  Subsidiary of the Company.  A Service  Provider
shall  not  cease  to be an  Employee  in the case of (i) any  leave of  absence
approved by the Company or (ii)  transfers  between  locations of the Company or
between the Company,  its Parent,  any  Subsidiary,  or any  successor.  Neither
service as a Director  nor payment of a director's  fee by the Company  shall be
sufficient to constitute "employment" by the Company.

                  (l) "Exchange Act" means the Securities  Exchange Act of 1934,
as amended.

                  (m) "Fair Market  Value" means,  as of any date,  the value of
Common Stock determined as follows:

                           (i) If the Common Stock is listed on any  established
stock exchange or a national  market system,  including  without  limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market  Value  shall be the closing  sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of  determination,  as reported in
The  Wall  Street  Journal  or such  other  source  as the  Administrator  deems
reliable;

                           (ii) If the  Common  Stock is  regularly  quoted by a
recognized  securities  dealer but  selling  prices are not  reported,  the Fair
Market  Value of a Share of Common  Stock shall be the mean between the high bid
and low asked prices for the Common  Stock on the last market  trading day prior
to the day of  determination,  as reported  in The Wall  Street  Journal or such
other source as the Administrator deems reliable;

                           (iii) In the absence of an established market for the
Common  Stock,  the Fair Market Value shall be  determined  in good faith by the
Administrator.

                  (n)  "Notice of Grant"  means a written or  electronic  notice
evidencing  certain  terms and  conditions of an  individual  Option grant.  The
Notice of Grant is part of the Option Agreement.

                  (o) "Officer"  means a person who is an officer of the Company
within  the  meaning  of  Section  16 of the  Exchange  Act  and the  rules  and
regulations promulgated thereunder.

                  (p)  "Option"  means  a  nonstatutory   stock  option  granted
pursuant  to the Plan,  that is not  intended to qualify as an  incentive  stock
option  within  the  meaning  of  Section  422 of the Code  and the  regulations
promulgated thereunder.

                  (q) "Option  Agreement" means an agreement between the Company
and an Optionee  evidencing  the terms and  conditions of an  individual  Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

                  (r)  "Option   Exchange   Program"  means  a  program  whereby
outstanding  options  are  surrendered  in  exchange  for  options  with a lower
exercise price.

                  (s)  "Optioned  Stock"  means the Common  Stock  subject to an
Option.

                  (t)  "Optionee"  means  the  holder of an  outstanding  Option
granted under the Plan.

                  (u)  "Parent"  means a "parent  corporation,"  whether  now or
hereafter existing, as defined in Section 424(e) of the Code.

                                       -2-
<PAGE>

                  (v) "Plan" means this 1996 Supplemental Stock Option Plan.

                  (w) "Service  Provider" means an Employee or Consultant who is
not also a Director or Officer.

                  (x) "Share" means a share of the Common Stock,  as adjusted in
accordance with Section 12 of the Plan.

                  (y) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.

         3. Stock Subject to the Plan.  Subject to the  provisions of Section 12
of the Plan,  the maximum  aggregate  number of Shares which may be optioned and
sold under the Plan is  11,800,000  Shares.  The Shares may be  authorized,  but
unissued, or reacquired Common Stock.

         If an Option  expires  or becomes  unexercisable  without  having  been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased  Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

         4. Administration of the Plan.

                  (a) The Plan shall be  administered  by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

                  (b) Powers of the Administrator.  Subject to the provisions of
the  Plan,  and in the  case of a  Committee,  subject  to the  specific  duties
delegated  by the Board to such  Committee,  the  Administrator  shall  have the
authority, in its discretion:

                           (i) to determine  the Fair Market Value of the Common
Stock;

                           (ii) to select the Service  Providers to whom Options
may be granted hereunder;

                           (iii) to determine whether and to what extent Options
are granted hereunder;

                           (iv) to  determine  the  number  of  shares of Common
Stock to be covered by each Option granted hereunder;

                           (v) to approve  forms of agreement  for use under the
Plan;

                           (vi) to  determine  the  terms  and  conditions,  not
inconsistent  with the terms of the Plan, of any award granted  hereunder.  Such
terms and conditions  include,  but are not limited to, the exercise price,  the
time or times when Options may be exercised  (which may be based on  performance
criteria),  any vesting acceleration or waiver of forfeiture  restrictions,  and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto,  based in each case on such factors as the  Administrator,  in
its sole discretion, shall determine;

                           (vii) to reduce the  exercise  price of any Option to
the then  current Fair Market Value if the Fair Market Value of the Common Stock
covered  by such  Option  shall  have  declined  since the date the  Option  was
granted;

                           (viii) to institute an Option Exchange Program;

                                      -3-
<PAGE>

                           (ix) to construe and  interpret the terms of the Plan
and awards granted pursuant to the Plan;

                           (x)  to  prescribe,   amend  and  rescind  rules  and
regulations  relating to the Plan,  including rules and regulations  relating to
sub-plans  established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

                           (xi) to  modify  or amend  each  Option  (subject  to
Section 14(b) of the Plan), including the discretionary  authority to extend the
post-termination  exercisability  period of  Options  longer  than is  otherwise
provided for in the Plan;

                           (xii) to authorize any person to execute on behalf of
the  Company  any  instrument  required  to  effect  the  grant of an  Option or
previously granted by the Administrator;

                           (xiii)  to  determine  the  terms  and   restrictions
applicable to Options;

                           (xiv) to allow  Optionees to satisfy  withholding tax
obligations  by  electing  to have the  Company  withhold  from the Shares to be
issued upon exercise of an Option or Stock  Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld  shall be  determined on the date that
the  amount of tax to be  withheld  is to be  determined.  All  elections  by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable; and

                           (xv)  to  make  all   other   determinations   deemed
necessary or advisable for administering the Plan.

                  (c) Effect of Administrator's  Decision.  The  Administrator's
decisions,  determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

         5. Eligibility.  Options may be granted to Service Providers other than
Officers  (except as set forth  herein)  and  Directors.  Officers  shall not be
eligible to receive Options under this Plan; provided, however, that Options may
be  granted  to an  Officer  not  previously  employed  by  the  Company,  as an
inducement  essential to the individual's  entering into an employment  contract
with the Company.

         6.  Limitation.  Neither the Plan nor any Option  shall  confer upon an
Optionee any right with respect to continuing the Optionee's  relationship  as a
Service Provider with the Company,  nor shall they interfere in any way with the
Optionee's  right or the Company's  right to terminate such  relationship at any
time, with or without cause.

         7. Term of Plan.  The Plan shall become  effective upon its adoption by
the  Board.  It shall  continue  in effect  for ten (10)  years,  unless  sooner
terminated under Section 14 of the Plan.

         8.  Term of  Option.  The term of each  Option  shall be  stated in the
Option Agreement.

         9. Option Exercise Price and Consideration.

                  (a)  Exercise  Price.  The per  share  exercise  price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator.

                                      -4-
<PAGE>

                  (b) Waiting Period and Exercise  Dates.  At the time an Option
is granted,  the Administrator  shall fix the period within which the Option may
be exercised and shall determine any conditions  which must be satisfied  before
the Option may be exercised.

                  (c) Form of Consideration.  The Administrator  shall determine
the acceptable  form of  consideration  for exercising an Option,  including the
method of payment. Such consideration may consist entirely of:

                           (i) cash;

                           (ii) check;

                           (iii) promissory note;

                           (iv)  other  Shares  which  (A) in the case of Shares
acquired  upon  exercise of an option,  have been owned by the Optionee for more
than six months on the date of  surrender,  and (B) have a Fair Market  Value on
the date of surrender equal to the aggregate  exercise price of the Shares as to
which said Option shall be exercised;

                           (v)  consideration  received by the  Company  under a
cashless  exercise  program  implemented  by the Company in connection  with the
Plan;

                           (vi)  a  reduction  in  the  amount  of  any  Company
liability  to  the  Optionee,   including  any  liability  attributable  to  the
Optionee's participation in any Company-sponsored  deferred compensation program
or arrangement;

                           (vii) such other  consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws; or

                           (viii) any  combination  of the foregoing  methods of
payment.

         10. Exercise of Option.

                  (a)  Procedure  for  Exercise;  Rights as a  Shareholder.  Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such  conditions as determined by the  Administrator
and set forth in the  Option  Agreement.  An Option may not be  exercised  for a
fraction of a Share.

                           An Option shall be deemed  exercised when the Company
receives:  (i) written or electronic  notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment  for the Shares  with  respect to which the  Option is  exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator  and permitted by the Option Agreement and the Plan. Shares issued
upon  exercise of an Option  shall be issued in the name of the  Optionee or, if
requested  by the  Optionee,  in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate  entry on the books
of the Company or of a duly authorized transfer agent of the Company),  no right
to vote or receive  dividends or any other rights as a  shareholder  shall exist
with respect to the Optioned Stock,  notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares  promptly  after the
Option is exercised.  No  adjustment  will be made for a

                                      -5-
<PAGE>

dividend  or other  right  for which  the  record  date is prior to the date the
Shares are issued, except as provided in Section 13 of the Plan.

                           Exercising an Option in any manner shall decrease the
number of Shares  thereafter  available,  both for  purposes of the Plan and for
sale  under the  Option,  by the  number  of  Shares  as to which the  Option is
exercised.

                  (b) Termination of Relationship as a Service  Provider.  If an
Optionee ceases to be a Service  Provider,  other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option  Agreement,  and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified  time in the Option  Agreement,  the Option  shall
remain  exercisable for three (3) months  following the Optionee's  termination.
If, on the date of  termination,  the  Optionee  is not  vested as to his or her
entire Option,  the Shares  covered by the unvested  portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option  within the time  specified  by the  Administrator,  the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

                  (c)  Disability  of  Optionee.  If an Optionee  ceases to be a
Service  Provider as a result of the  Optionee's  Disability,  the  Optionee may
exercise  his or her Option  within such period of time as is  specified  in the
Option Agreement,  to the extent the Option is vested on the date of termination
(but in no event  later than the  expiration  of the term of such  Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement,  the Option shall remain exercisable for twelve (12) months following
the Optionee's termination.  If, on the date of termination, the Optionee is not
vested as to his or her  entire  Option,  the  Shares  covered  by the  unvested
portion of the Option  shall  revert to the Plan.  If,  after  termination,  the
Optionee does not exercise his or her Option within the time  specified  herein,
the Option shall  terminate,  and the Shares covered by such Option shall revert
to the Plan.

                  (d) Death of  Optionee.  If an  Optionee  dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option  Agreement  (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person  who  acquires  the  right to  exercise  the  Option by  bequest  or
inheritance,  but only to the  extent  that the  Option is vested on the date of
death.  In the absence of a specified time in the Option  Agreement,  the Option
shall  remain  exercisable  for twelve  (12)  months  following  the  Optionee's
termination.  If, at the time of death,  the Optionee is not vested as to his or
her entire  Option,  the Shares  covered by the  unvested  portion of the Option
shall  immediately  revert to the  Plan.  The  Option  may be  exercised  by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or  distribution.  If the Option is not so exercised  within the time  specified
herein, the Option shall terminate,  and the Shares covered by such Option shall
revert to the Plan.

                  (e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option  previously  granted based
on  such  terms  and  conditions  as  the  Administrator   shall  establish  and
communicate to the Optionee at the time that such offer is made.

         11.  Non-Transferability of Options. Unless determined otherwise by the
Administrator,  an  Option  may not be sold,  pledged,  assigned,  hypothecated,
transferred,  or disposed of in any manner  other than by will or by the laws of
descent  or  distribution  and may be  exercised,  during  the  lifetime  of the
Optionee,   only  by  the  Optionee.   If  the  Administrator  makes  an  Option
transferable,  such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

                                      -6-
<PAGE>

         12. Adjustments Upon Changes in Capitalization,  Dissolution, Merger or
Asset Sale.

                  (a) Changes in Capitalization.  Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding  Option, and the number of shares of Common Stock which have
been  authorized for issuance under the Plan but as to which no Options have yet
been  granted  or which  have been  returned  to the Plan upon  cancellation  or
expiration of an Option,  as well as the price per share of Common Stock covered
by each such  outstanding  Option,  shall be  proportionately  adjusted  for any
increase or decrease in the number of issued  shares of Common  Stock  resulting
from a  stock  split,  reverse  stock  split,  stock  dividend,  combination  or
reclassification  of the Common Stock,  or any other increase or decrease in the
number  of  issued  shares  of  Common  Stock   effected   without   receipt  of
consideration  by  the  Company;  provided,  however,  that  conversion  of  any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of  consideration."  Such adjustment shall be made by the Board,
whose  determination  in that respect  shall be final,  binding and  conclusive.
Except as  expressly  provided  herein,  no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

                  (b) Dissolution or  Liquidation.  In the event of the proposed
dissolution or liquidation of the Company,  the Administrator  shall notify each
Optionee as soon as  practicable  prior to the  effective  date of such proposed
transaction.  The Administrator in its discretion may provide for an Optionee to
have the right to exercise  his or her Option  until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the  Option  would not  otherwise  be  exercisable.  In  addition,  the
Administrator  may provide that any Company  repurchase option applicable to any
Shares  purchased  upon exercise of an Option shall lapse as to all such Shares,
provided the proposed  dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent it has not been previously exercised, an
Option will terminate  immediately  prior to the  consummation  of such proposed
action.

                  (c)  Merger  or Asset  Sale.  In the  event of a merger of the
Company with or into another  corporation,  or the sale of substantially  all of
the  assets of the  Company,  each  outstanding  Option  shall be  assumed or an
equivalent option or right substituted by the successor  corporation or a Parent
or  Subsidiary  of the  successor  corporation.  In the event that the successor
corporation  refuses to assume or substitute for the Option,  the Optionee shall
fully  vest in and  have the  right  to  exercise  the  Option  as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable.  If an Option  becomes  fully  vested  and  exercisable  in lieu of
assumption  or  substitution  in the  event of a merger or sale of  assets,  the
Administrator  shall notify the Optionee in writing or  electronically  that the
Option shall be fully vested and  exercisable  for a period of fifteen (15) days
from the date of such notice, and the Option shall terminate upon the expiration
of such  period.  For the  purposes  of this  paragraph,  the  Option  shall  be
considered  assumed if,  following  the merger or sale of assets,  the option or
right  confers  the right to  purchase  or  receive,  for each Share of Optioned
Stock,  immediately  prior to the  merger or sale of assets,  the  consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common  Stock for each Share held on the  effective
date of the transaction (and if holders were offered a choice of  consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely  common stock of the successor  corporation  or its
Parent,  the Administrator  may, with the consent of the successor  corporation,
provide for the  consideration  to be received  upon the exercise of the Option,
for each Share of  Optioned  Stock to be solely  common  stock of the  successor
corporation  or  its  Parent  equal  in  fair  market  value  to the  per  share
consideration  received  by  holders  of Common  Stock in the  merger or sale of
assets.

         13.  Date of Grant.  The date of grant of an Option  shall be,  for all
purposes,  the date on which the Administrator makes the determination  granting
such Option,  or such other later date as is  determined  by the

                                      -7-
<PAGE>

Administrator.  Notice of the  determination  shall be provided to each Optionee
within a reasonable time after the date of such grant.

         14. Amendment and Termination of the Plan.

                  (a)  Amendment  and  Termination.  The  Board  may at any time
amend,  alter,  suspend  or  terminate  the Plan.

                  (b)  Effect  of  Amendment  or   Termination.   No  amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee,  unless  mutually  agreed  otherwise  between  the  Optionee  and  the
Administrator, which agreement must be in writing and signed by the Optionee and
the  Company.  Termination  of the Plan  shall not  affect  the  Administrator's
ability to exercise the powers  granted to it hereunder  with respect to options
granted under the Plan prior to the date of such termination.

15.      Conditions Upon Issuance of Shares.

                  (a) Legal  Compliance.  Shares shall not be issued pursuant to
the  exercise of an Option  unless the  exercise of such Option and the issuance
and  delivery of such Shares  shall  comply  with  Applicable  Laws and shall be
further  subject to the approval of counsel for the Company with respect to such
compliance.

                  (b) Investment Representations. As a condition to the exercise
of an Option the  Company  may  require  the person  exercising  such  Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased  only for  investment  and without any  present  intention  to sell or
distribute  such Shares if, in the opinion of counsel  for the  Company,  such a
representation is required.

         16.  Inability  to Obtain  Authority.  The  inability of the Company to
obtain authority from any regulatory body having  jurisdiction,  which authority
is deemed by the  Company's  counsel to be necessary to the lawful  issuance and
sale of any Shares  hereunder,  shall  relieve the Company of any  liability  in
respect of the failure to issue or sell such  Shares as to which such  requisite
authority shall not have been obtained.

         17. Reservation of Shares.  The Company,  during the term of this Plan,
will at all times reserve and keep  available  such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      -8-
<PAGE>

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT

         Unless  otherwise  defined herein,  the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.       NOTICE OF STOCK OPTION GRANT

         [Optionee's Name and Address]

         You have  been  granted  an  option  to  purchase  Common  Stock of the
Company,  subject  to the  terms  and  conditions  of the Plan  and this  Option
Agreement, as follows:

         Grant Number
                                                     ---------------------------

         Date of Grant
                                                     ---------------------------

         Vesting Commencement Date
                                                     ---------------------------

         Exercise Price per Share                    $
                                                      --------------------------

         Total Number of Shares Granted
                                                     ---------------------------

         Total Exercise Price                        $
                                                      --------------------------

         Type of Option:                             Nonstatutory Stock Option

         Term/Expiration Date:
                                                     ---------------------------

         Vesting Schedule:

         Subject to the  Optionee  continuing  to be a Service  Provider on such
dates,  this Option shall vest and become  exercisable  in  accordance  with the
following schedule:

         25% of the Shares  subject to the Option shall vest twelve months after
the Vesting  Commencement  Date,  and 1/48th of the Shares subject to the Option
shall vest upon the last day of each month thereafter,  beginning with the first
full quarter after the one year anniversary of the Vesting Commencement Date.

         Termination Period:

         This Option may be exercised for three (3) months after Optionee ceases
to be a Service  Provider.  Upon the death or Disability  of the Optionee,  this
Option may be exercised  for such longer  period as provided in the Plan.  In no
event  shall this Option be  exercised  later than the  Term/Expiration  Date as
provided above.

<PAGE>

II.      AGREEMENT

         1. Grant of Option. The Plan Administrator of the Company hereby grants
to the  Optionee  named  in the  Notice  of  Grant  attached  as  Part I of this
Agreement  (the  "Optionee")  an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the  "Exercise  Price"),  subject to the terms and
conditions of the Plan,  which is incorporated  herein by reference.  Subject to
Section  14(b) of the Plan,  in the event of a  conflict  between  the terms and
conditions of the Plan and the terms and  conditions  of this Option  Agreement,
the terms and conditions of the Plan shall prevail.

         2. Exercise of Option.

                  (a) Right to Exercise.  This Option is exercisable  during its
term in accordance with the Vesting  Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

                  (b) Method of Exercise. This Option is exercisable by delivery
of an  exercise  notice,  in the  form  attached  as  Exhibit  A (the  "Exercise
Notice"),  which shall state the election to exercise the Option,  the number of
Shares  in  respect  of which  the  Option is being  exercised  (the  "Exercised
Shares"),  and such other  representations  and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed  by the Optionee and  delivered to the  Secretary of the Company.  The
Exercise Notice shall be accompanied by payment of the aggregate  Exercise Price
as to all  Exercised  Shares.  This Option shall be deemed to be exercised  upon
receipt by the Company of such fully  executed  Exercise  Notice  accompanied by
such aggregate Exercise Price.

                  No Shares  shall be issued  pursuant  to the  exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such  compliance,  for  income  tax  purposes  the  Exercised  Shares  shall  be
considered  transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

         3. Method of Payment.  Payment of the aggregate Exercise Price shall be
by any of the  following,  or a  combination  thereof,  at the  election  of the
Optionee:

                  (a)      cash; or

                  (b)      check; or

                  (c)      promissory note; or

                  (d)  consideration  received by the  Company  under a cashless
exercise program implemented by the Company in connection with the Plan; or

                  (e)  surrender of other Shares which (i) in the case of Shares
acquired  upon  exercise of an option,  have been owned by the Optionee for more
than six (6) months on the date of surrender,  and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate  Exercise Price of the Exercised
Shares; or

                  (f) a reduction in the amount of any Company  liability to the
Optionee,  including any liability attributable to the Optionee's  participation
in any Company-sponsored deferred compensation program or arrangement; or

                                      -2-
<PAGE>

                  (g) such other  consideration  and  method of payment  for the
issuance of Shares to the extent permitted by Applicable Laws.

         4. Non-Transferability of Option. This Option may not be transferred in
any manner  otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this  Option  Agreement  shall be  binding  upon the  executors,
administrators, heirs, successors and assigns of the Optionee.

         5. Term of Option.  This Option may be  exercised  only within the term
set out in the Notice of Grant,  and may be  exercised  during such term only in
accordance with the Plan and the terms of this Option Agreement.

         6. Tax Consequences.  Some of the federal tax consequences  relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE,  AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE  OPTIONEE  SHOULD  CONSULT A TAX ADVISER  BEFORE  EXERCISING  THIS OPTION OR
DISPOSING OF THE SHARES.

                  (a)  Exercising  the Option.  The Optionee  may incur  regular
federal  income tax  liability  upon  exercise of an NSO. The  Optionee  will be
treated as having received  compensation  income (taxable at ordinary income tax
rates) equal to the excess,  if any, of the Fair Market  Value of the  Exercised
Shares on the date of  exercise  over their  aggregate  Exercise  Price.  If the
Optionee is an Employee or a former  Employee,  the Company  will be required to
withhold  from his or her  compensation  or collect from Optionee and pay to the
applicable  taxing  authorities  an amount in cash equal to a percentage of this
compensation  income  at the time of  exercise,  and may  refuse  to  honor  the
exercise  and  refuse to  deliver  Shares if such  withholding  amounts  are not
delivered at the time of exercise.

                  (b)  Disposition  of Shares.  If the Optionee holds NSO Shares
for at least one year,  any gain realized on  disposition  of the Shares will be
treated as long-term capital gain for federal income tax purposes.

         7. Entire Agreement;  Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with  respect to the subject  matter  hereof and  supersede in their
entirety all prior  undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof,  and may not be modified  adversely to the
Optionee's  interest  except by means of a writing  signed  by the  Company  and
Optionee.  This agreement is governed by the internal  substantive laws, but not
the choice of law rules, of California.

         8. NO GUARANTEE OF CONTINUED SERVICE.  OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES  PURSUANT TO THE  VESTING  SCHEDULE  HEREOF IS EARNED
ONLY BY  CONTINUING  AS A SERVICE  PROVIDER AT THE WILL OF THE COMPANY  (AND NOT
THROUGH THE ACT OF BEING HIRED,  BEING  GRANTED AN OPTION OR  PURCHASING  SHARES
HEREUNDER).  OPTIONEE FURTHER  ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,  THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT  CONSTITUTE  AN EXPRESS OR IMPLIED  PROMISE  OF  CONTINUED  ENGAGEMENT  AS A
SERVICE  PROVIDER FOR THE VESTING PERIOD,  FOR ANY PERIOD,  OR AT ALL, AND SHALL
NOT  INTERFERE  WITH  OPTIONEE'S  RIGHT  OR THE  COMPANY'S  RIGHT  TO  TERMINATE
OPTIONEE'S  RELATIONSHIP  AS A SERVICE  PROVIDER  AT ANY TIME,  WITH OR  WITHOUT
CAUSE.

                                      -3-
<PAGE>

         By your  signature and the  signature of the  Company's  representative
below,  you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed  the Plan and  this  Option  Agreement  in their  entirety,  has had an
opportunity  to obtain the  advice of counsel  prior to  executing  this  Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding,  conclusive and final all decisions
or  interpretations of the Administrator upon any questions relating to the Plan
and Option  Agreement.  Optionee  further  agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE:                                  PINNACLE SYSTEMS, INC.

-----------------------------------        -------------------------------------
Signature                                  By

-----------------------------------        -------------------------------------
Print Name                                 Title

-----------------------------------
Residence Address

-----------------------------------

                                      -4-
<PAGE>

                                    EXHIBIT A

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                                 EXERCISE NOTICE

Pinnacle Systems, Inc.
280 N. Bernardo Avenue
Mountain View, CA 94043
Attention: Secretary

         1. Exercise of Option. Effective as of today, ________________,  199__,
the undersigned  ("Purchaser") hereby elects to purchase  ______________  shares
(the  "Shares") of the Common Stock of Pinnacle  Systems,  Inc. (the  "Company")
under and pursuant to the 1996  Supplemental  Stock Option Plan (the "Plan") and
the Stock Option Agreement dated, 19___ (the "Option  Agreement").  The purchase
price for the Shares shall be $, as required by the Option Agreement.

         2. Delivery of Payment.  Purchaser herewith delivers to the Company the
full purchase price for the Shares.

         3. Representations of Purchaser.  Purchaser acknowledges that Purchaser
has received,  read and understood the Plan and the Option  Agreement and agrees
to abide by and be bound by their terms and conditions.

         4. Rights as  Shareholder.  Until the  issuance  (as  evidenced  by the
appropriate  entry on the books of the Company or of a duly authorized  transfer
agent of the  Company) of the Shares,  no right to vote or receive  dividends or
any other  rights as a  shareholder  shall  exist with  respect to the  Optioned
Stock,  notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as  practicable  after exercise of the Option.
No  adjustment  will be made for a dividend  or other right for which the record
date is prior to the date of  issuance,  except as provided in Section 13 of the
Plan.

         5. Tax  Consultation.  Purchaser  understands that Purchaser may suffer
adverse tax  consequences as a result of Purchaser's  purchase or disposition of
the Shares.  Purchaser  represents  that  Purchaser has  consulted  with any tax
consultants  Purchaser  deems  advisable  in  connection  with the  purchase  or
disposition  of the Shares and that  Purchaser is not relying on the Company for
any tax advice.

         6. Entire  Agreement;  Governing Law. The Plan and Option Agreement are
incorporated  herein  by  reference.  This  Agreement,  the Plan and the  Option
Agreement  constitute  the entire  agreement  of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements  of the  Company and  Purchaser  with  respect to the subject  matter
hereof, and may not be modified adversely to the Purchaser's  interest except by
means of a writing  signed by the  Company  and  Purchaser.  This  agreement  is
governed by the internal  substantive  laws, but not the choice of law rules, of
California.

<PAGE>

Submitted by:                                 Accepted by:

OPTIONEE:                                     PINNACLE SYSTEMS, INC.

-----------------------------------           ----------------------------------
Signature                                     By

-----------------------------------           ----------------------------------
Print Name                                    Title

                                              ----------------------------------
                                              Date Received

Address:                                      Address:
-------                                       -------

                                              280 N. Bernardo Avenue
-----------------------------------           Mountain View, CA  94043

-----------------------------------

                                      -2-<PAGE>   1

                                                                     EXHIBIT 4.2

CUSIP: __________
No. R-1
                                                                   $__________

Unless and until it is exchanged in whole or in part for Notes in definitive
registered form, this Note may not be transferred except as a whole by the
Depositary to the nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.

                             ARROW ELECTRONICS, INC.
                 8.20% Senior Exchange Note due October 1, 2003

         ARROW ELECTRONICS, INC., A New York corporation (the "Company", which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to Cede & Co., or
registered assigns, at the office or agency of the Company in New York, New
York, the principal sum of __________ Million Dollars on October 1, 2003, in the
coin or currency of the United States, and to pay interest semi-annually on
April 1 and October 1 of each year, commencing April 1, 2001 on said principal
sum at said office or agency, in like coin or currency, at the rate per annum
specified in the title of this Note, from the April 1 or the October 1, as the
case may be, next preceding the date of this Note to which interest has been
paid or duly provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date of this Note, or
unless no interest has been paid or duly provided for on this Note, in which
case from October 6, 2000, until payment of said principal sum has been made or
duly provided for; provided, that payment of interest may be made at the option
of the Company by check mailed to the address of the person entitled thereto as
such address shall appear on the Security Register or by wire transfer as
provided in the Indenture. Notwithstanding the foregoing, if the date hereto is
after March 15 or September 15, as the case may be, and before the following
April 1 or October 1, this Note shall bear interest from such April 1 or October
1; provided, that if the Company shall default in the payment of interest due on
such April 1 or October 1, then this Note shall bear interest from the next
preceding April 1 or October 1, to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for on this Note, from
October 6, 2000. The interest so payable on any April 1 or October 1 will,
subject to certain exceptions provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Note is registered at
the close of business on the March 15 or September 15, as the case may be, next
preceding such April 1 or October 1, whether or not such day is a Business Day.

<PAGE>   2

         Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.

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

                                    2
<PAGE>   3
         IN WITNESS WHEREOF, ARROW ELECTRONICS, INC., has caused this instrument
to be signed manually or by facsimile by its duly authorized officers and has
caused a facsimile of its corporate seal to be affixed hereunto or imprinted
hereon.

Date:    ______________

(SEAL)                                      ARROW ELECTRONICS, INC.

                                            By_________________________

                                            By_________________________

                          CERTIFICATE OF AUTHENTICATION

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

Dated:   ______________

                                             THE BANK OF NEW YORK,
                                              as Trustee

                                             By_________________________
                                                      Authorized Signatory

                                       3
<PAGE>   4
                                REVERSE OF NOTES

                             ARROW ELECTRONICS, INC.

                 8.20% Senior Exchange Note due October 1, 2003

         This Note is one of a duly authorized issue of debentures, notes, bonds
or other evidences of indebtedness of the Company (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture dated as of January 15, 1997 (herein called
"Indenture"), duly executed and delivered by the Company to The Bank of New York
(as successor to Bank of Montreal Trust Company) (herein called the "Trustee"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of the
Securities. The Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any) and may otherwise vary as in the
Indenture provided. This Note is one of a series designated as the 8.20% Senior
Exchange Notes due October 1, 2003 of the Company, limited in aggregate
principal amount to $425,000,000.

         Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal but shall not
pay interest on overdue installments of interest. If a payment date is not a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.

         In case an Event of Default with respect to the 8.20% Senior Exchange
Notes due October 1, 2003 shall have occurred and be continuing, the Principal
hereof and the interest accrued hereon, if any, may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.

         The Indenture contains provisions that provide that, without prior
notice to any Holders, the Company and the Trustee may amend the Indenture and
the Securities of any series with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities of all
series affected by such supplemental indenture (all such series voting as one
class), and the Holders of a majority in aggregate principal amount of the
outstanding Securities of all series affected thereby (all such series voting as
one class) by written notice to the Trustee may waive future compliance by the
Company with any provision of the Indenture or the Securities of such series
provided that, without the consent of
                                       4
<PAGE>   5

each Holder of the Securities of each series affected thereby an amendment or
waiver, including a waiver of past defaults, may not: (i) extend the stated
maturity of the Principal of, or any sinking fund obligation or any installment
of interest on such Holder's Security, or reduce the principal amount thereof or
the rate of interest thereon (including any amount in respect of original issue
discount), or any premium payable with respect thereto, or adversely affect the
rights of such Holder under any mandatory redemption or repurchase provision or
any right of redemption or repurchase at the option of such Holder, or reduce
the amount of the principal of an Original Issue Discount Security that would be
due and payable upon an acceleration of the maturity or the amount thereof
provable in bankruptcy, or change any place of payment where, or the currency in
which, any Security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or after
the due date therefor; (ii) reduce the percentage in principal amount of
outstanding Securities of the relevant series the consent of whose Holders is
required for any such supplemental indenture or for any waiver of compliance
with certain provision of the Indenture or certain Defaults and their
consequences proved for in the Indenture; (iii) waive a Default in the payment
of Principal of or interest on any Security of such Holder; or (iv) modify any
of the provisions of the Indenture governing supplemental indentures with the
consent of Securityholders, except to increase any such percentage or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security affected thereby.

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

         The Indenture provides that a series of Securities may include one or
more tranches (each, a "tranche") of Securities, including Securities issued in
a Periodic Offering. The Securities of different tranches may have one or more
different terms, including authentication dates and public offering prices, but
all the Securities within each such tranche shall have identical terms,
including authentication date and public offering price. Notwithstanding any
other provision of the Indenture, subject to certain exceptions, with respect to
sections of the Indenture concerning the execution, authentication and terms of
the Securities, redemption of the Securities, Events of Default of the
Securities,

                                       5
<PAGE>   6

defeasance of the Securities and amendment of the Indenture, if any series of
Securities includes more than one tranche, all provisions of such sections
applicable to any series of Securities shall be deemed equally applicable to
each tranche of any series of Securities in the same manner as though originally
designated a series unless otherwise provided with respect to such series or
tranche pursuant to Section 2.3 of the Indenture establishing such series or
tranche.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the Principal of and interest on this Note in
the manner, at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.

         The Notes are issuable initially only in registered form without
coupons in denominations of $1,000 and any multiple of $1,000 at the office or
agency of the Company in the Borough of Manhattan, The City of New York, and in
the manner and subject to the limitations provided in the Indenture, but,
without the payment of any service charge, Notes may be exchanged for a like
aggregate principal amount of Notes of other authorized denominations.

         The Company will, subject to the exceptions and limitations described
below, pay as additional interest on the Notes any additional amounts (the
"Additional Amounts") that are necessary in order that the net payment by the
Company's paying agents of the principal of and interest on the Notes to a
holder who is a non-United States person, after deduction for any present or
future tax, assessment or governmental charge of the United States or a
political subdivision or taxing authority thereof or therein, imposed by
withholding with respect to the payment, will not be less than the amount
provided in the Notes to be then due and payable; provided, however, that the
foregoing obligation to pay Additional Amounts shall not apply: (1) to a tax,
assessment or governmental charge that is imposed or withheld solely by reason
of the holder, or a fiduciary, settlor, beneficiary, member or shareholder of
the holder if the holder is an estate, trust, partnership or corporation, or a
person holding a power over an estate or trust administered by a fiduciary
holder, being considered as (a) being or having been present or engaged in trade
or business in the United States or having or having had a permanent
establishment in the United States; (b) having a current or former relationship
with the United States, including a relationship as a citizen or resident
thereof; (c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled foreign
corporation with respect to the United States or a corporation that has
accumulated earnings to avoid United States federal income tax; or (d) being or
having been a "10-percent shareholder" of the Company as defined in section
871(h)(3) of the United States Internal Revenue Code or any successor provision;
(2) to any holder that is not the sole beneficial owner of such Note, or a
portion thereof, or that is a fiduciary or partnership, but only to the extent
that a beneficiary or settlor with respect to the

                                    6

<PAGE>   7
fiduciary, a beneficial owner or member of the partnership would not have been
entitled to the payment of an Additional Amount had the beneficiary, settlor,
beneficial owner or member received directly its beneficial or distributive
share of the payment; (3) to a tax, assessment or governmental charge that is
imposed or withheld solely by reason of the failure of the holder or any other
person to comply with certification, identification or information reporting
requirements concerning the nationality, residence, identity or connection with
the United States of the holder or beneficial owner of such note, if compliance
is required by statute, by regulation of the United States Treasury Department
or by an applicable income tax treaty to which the United States is a party as a
precondition to exemption from such tax, assessment or other governmental
charge; (4) to a tax, assessment or governmental charge that is imposed
otherwise than by withholding by the Company or a paying agent from the payment;
(5) to a tax, assessment or governmental charge that is imposed or withheld
solely by reason of a change in law, regulation, or administrative or judicial
interpretation that becomes effective more than 15 days after the payment
becomes due or is duly provided for, whichever occurs later; (6) to an estate,
inheritance, gift, sales, excise, transfer, wealth or personal property tax or a
similar tax, assessment or governmental charge; (7) to any tax, assessment or
other governmental charge required to be withheld by any paying agent from any
payment of principal of or interest on any note, if such payment can be made
without such withholding by any other paying agent; or (8) in the case of any
combination of items (1), (2), (3), (4), (5), (6) and (7).

         The Securities will be redeemable in whole or from time to time in
part, at the option of the Company on any date (a "Redemption Date"), at a
redemption price equal to the greater of (i) 100 percent of the principal amount
of the Securities to be redeemed and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (exclusive of the
interest accrued to such Redemption Date) discounted to such Redemption Date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 25 basis points, plus, in either case, accrued and
unpaid interest on the principal amount being redeemed to such Redemption Date;
provided that installments of interest on the Securities which are due and
payable on an Interest Payment Date falling on or prior to the relevant
Redemption Date shall be payable to the holders of such Securities, registered
as such at the close of business on the relevant record date according to their
terms and the provisions of the Indenture.

         The Notes will be redeemable, as a whole, but not in part, at the
option of the Company, at a redemption price equal to 100% of their principal
amount, together with interest accrued thereon to the date fixed for redemption,
if (a) as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change in,
or amendments to, official positions regarding the application or interpretation
of such laws, regulations or

                                       7
<PAGE>   8
rulings, which change or amendment is announced or becomes effective on or after
the date hereof, the Company becomes or will become obligated to pay Additional
Amounts with respect to either series of Notes as described above or (b) any act
is taken by a taxing authority of the United States on or after the date of this
Offering Circular, whether or not such act is taken with respect to the Company
or any affiliate, that results in a substantial probability that the Company
will or may be required to pay such Additional Amounts.

         For purposes of this Note, the following terms have the following
meanings:

         "Business Day" means any calendar day that is not a Saturday, Sunday or
legal holiday in New York, New York and on which commercial banks are open for
business in New York, New York.

         "Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Offered Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Offered Securities.

         "Comparable Treasury Price" means with respect to any Redemption Date
for the Offered Securities (i) the average of five Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than
five such Reference Treasury Dealer Quotations, the average of all such
quotations.

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

         "Independent Investment Banker" means Goldman, Sachs & Co. or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.

         "Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement under which the Company is a
party or beneficiary.

         The term "Original Issue Discount Security" as defined in the Indenture
means any Security that provides for an amount less than the principal amount of

                                    8
<PAGE>   9
a particular security to be due and payable upon a declaration of acceleration
of the maturity of that security pursuant to Section 6.2 of the Indenture.

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

         "Reference Treasury Dealer Quotations" means with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.

         "Treasury Rate" means, with respect to any Redemption Date for the
Offered Securities, (i) the yield, under the heading which represents the
average for the immediately preceding week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the Maturity Date,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall, be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity to the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The Treasury
Rate shall be calculated on the third Business Date preceding the Redemption
Date.

         All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar
amounts used in or resulting from such calculations will be rounded to the
nearest cent (with one-half cent being rounded upwards).

         Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.

         Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, a

                                       9
<PAGE>   10
new Note or Notes of authorized denominations for an equal aggregate principal
amount will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.

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

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

                                       10
<PAGE>   11

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

(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE)

---------------------------------------

---------------------------------------------------------

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(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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the within Note and all right thereunder, hereby

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irrevocably constituting and appointing, such person attorney

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to transfer such Note on the books of the Issuer, with full

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power of substitution in the premises.

Dated:
      -------------------------

NOTICE:  The signature to this assignment must correspond with the name as
         written upon the face of the within Note in every particular
         without alteration or enlargement or any change whatsoever.

                                       11

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