Document:

Exhibit 4.09

[FACE OF NOTE]

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

	
  REGISTERED

  	
  CUSIP: 22541FDW3

  
	
   

  	
   

  
	
  NO. 1

  	
  PRINCIPAL AMOUNT: $1,000,000

  

 

	
  CREDIT SUISSE (USA),
  INC.

  ProNotes Linked to the Value of the S&P 500 Index

  due January 29, 2010

  

 

CREDIT SUISSE (USA), INC., a Delaware corporation (the
“Company”, which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede
& Co., or registered assigns, at the office or agency of the Company in New
York, New York, the Redemption Amount (as defined on the reverse hereof) on the
maturity date (as defined on the reverse hereof), in the coin or currency of
the United States.

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

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

This Note will not pay
interest.

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

	
  

  	
   

  	
   

  
	
  

  	
  CREDIT SUISSE (USA), INC.

  
	
   

  	
   

  
	
  [SEAL]

  	
  By:

  	
  /s/ Peter Feeney

  
	
   

  	
   

  	
  Name: Peter Feeney

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE (USA), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Grace Koo

  
	
   

  	
   

  	
  Name: Grace Koo

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
				

 

CERTIFICATE OF AUTHENTICATION

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

	
  Dated: July 31, 2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE, N.A.,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ignazio Tamburello

  
	
   

  	
   

  	
  Name: Ignazio Tamburello

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
				

 

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[REVERSE OF NOTE]

CREDIT SUISSE
(USA), INC.

ProNotes Linked to the Value of the S&P 500 Index

due January 29, 2010

This Note is one
of a duly authorized issue of debentures, notes, bonds or other evidences of
indebtedness of the Company (the “Securities”) of the series hereinafter
specified, all issued or to be issued under and pursuant to a senior indenture,
dated as of June 1, 2001 (the “Indenture”), between the Company and JPMorgan
Chase Bank, as trustee (the “Trustee”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company, and the Holders of the Securities.  The Securities may be issued in one or more
series, which different series may be issued in various aggregate principal
amounts, may mature at different times, may bear interest (if any) at different
rates, may be subject to different redemption provisions (if any), may be
subject to different sinking, purchase or analogous funds (if any) and may
otherwise vary as provided in the Indenture. 
This Note is one of a series designated as the ProNotes Linked to the
Value of the S&P 500 Index, due January 29, 2010 (the “Note”).

This Note will not pay interest.

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

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

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

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

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

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

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

The Securities are issuable initially only in
registered form without coupons in denominations of $10,000 and any integral
multiples of $1,000 in excess of that amount at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and in the manner
and subject to the limitations provided in the Indenture.

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

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

Maturity
Date

The maturity date of the Securities is January 29, 2010 (the “maturity date”);
however, if a market disruption event exists on the valuation date, as
determined by the Calculation Agent, the maturity date will be the later of January 29, 2010, and the fifth business day
following the date on which the closing price for the reference shares is
calculated.

Redemption
Amount

The Company will redeem the Securities at maturity for
a redemption amount in cash that will be equal to the principal amount of the
Securities multiplied by the sum of 1 plus the index return, calculated as set
forth below (the “redemption amount”). 
If the final index level is greater than the initial index level, the
index return will equal the percentage increase of the index subject to a cap
of 35%.  If the final index level is
equal to or less than the initial index level, the index return will equal
zero, and the redemption amount will be equal to the principal amount of the
Securities at maturity.

How the index return will be calculated depends on
whether the final index level is greater than or less than or equal to the
initial index level:

·                  If the final
index level is greater than the initial index level, then the index return will
equal:

	
  final index level - initial
  index level*

  	
   

  
	
  initial index level

  	
   

  

*                    Index
return is subject to a cap of 35%.

Thus, if the final index level is greater than the
initial index level, the index return will be a positive number, in which case
the redemption amount will be greater than the principal amount of the
Securities at maturity, but in no case more than 135%.

·                  If the final
index level is less than or equal to the initial index level, then the index
return will equal zero, and the redemption amount will equal the principal
amount of the securities.

For purposes of calculating the index return, the
initial index level is 1268.40, the level on July 26, 2006, the date the
Securities are priced for initial sale to the public.  The final index level will equal the closing
level of the reference index on the valuation date, subject to postponement if
a market disruption even occurs.

The “valuation
date” is January 26, 2010, subject to postponement if a market disruption event
occurs on that date.

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

An “index business day” is
any day that is (or, but for the occurrence of a market disruption event, would
have been) a day on which trading is generally conducted on the exchanges and
related exchanges (each as defined below), other than a day on which one or
more of the exchanges or related exchanges is scheduled to close prior to its
regular weekday closing time. “Exchange,” means the principal exchange on which
any stock underlying the reference index is traded. “Related exchange” means
any exchange on which futures or options contracts relating to the reference
index are traded.

Market
Disruption Events

A “market disruption
event” is, in respect of the reference index, the occurrence or existence on
any index business day during the one-half hour period that ends at the relevant
valuation time, of any suspension of or limitation imposed on trading (by
reason of movements in price exceeding limits permitted by the relevant
exchange or otherwise) on:

(a) the exchanges in
securities that comprise 20% or more of the level of the reference index based
on a comparison of (1) the portion of the level of the reference index
attributable to each security in which trading is, in the determination of the
Calculation Agent, materially suspended or materially limited relative to (2)
the overall level of the reference index, in the case of (1) or (2) immediately
before that suspension or limitation;

(b) a related exchange in
options contracts on the reference index; or

(c) a related exchange in
futures contracts on the reference index;

in the case of (a), (b)
or (c) if, in the determination of the Calculation Agent, such suspension or
limitation is material.

If the Calculation Agent
determines that a market disruption event exists in respect of the reference
index on the valuation date, then the valuation date for the reference index
will be postponed to the first succeeding index business day on which the
Calculation Agent determines that no market disruption event exists in respect
of the reference index, unless in respect of the valuation date the Calculation
Agent determines that a market disruption event exists in respect of the
reference index on each of the five index business days immediately following
the scheduled valuation date.  In that
case, (a) the fifth succeeding index business day following the scheduled
valuation date will be deemed to be the final valuation date for the reference
index, notwithstanding the market disruption event in respect of the reference
index, and (b) the Calculation Agent will determine the index level for the
reference index on that deemed valuation date in accordance with the formula
for and method of calculating the reference index last in effect prior to the
commencement of the market disruption event in respect of the reference index
using exchange traded prices on the relevant exchanges (as determined by the
Calculation Agent in its sole and absolute discretion) or, if trading in any
security or securities comprising the reference index has been materially
suspended or materially limited, its good faith estimate of the prices that
would have prevailed on the exchanges (as determined by the Calculation Agent
in its sole and absolute discretion) but for the suspension or

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limitation, as of the
valuation time on that deemed final valuation date, of each such security
comprising the reference index (subject to the provisions described under “Adjustments
to the calculation of the reference index” below).

In the event that a
market disruption event exists in respect of the reference index on the
valuation date, the maturity date of the securities will be postponed to the
fifth business day following the day as of which the closing level on the final
valuation date for the reference index has been calculated.  No interest or other payment will be payable
because of any such postponement of the maturity date.

Adjustments
to the calculation of the reference index

If the reference index is
(a) not calculated and announced by its sponsor but is calculated and announced
by a successor acceptable to the Calculation Agent or (b) replaced by a
successor index using, in the determination of the Calculation Agent, the same
or a substantially similar formula for and method of calculation as used in
such reference index, then such reference index will be deemed to be the index
so calculated and announced by that successor sponsor or that successor index,
as the case may be.

Upon any selection by the
Calculation Agent of a successor index, the Calculation Agent will cause notice
to be furnished to us and the trustee, which will provide notice of the
selection of the successor index to the registered holders of the securities in
the manner set forth below.

If (x) on or prior to a
valuation date any index sponsor makes, in the determination of the Calculation
Agent, a material change in the formula for or the method of calculating a
reference index or in any other way materially modifies a reference index
(other than a modification prescribed in that formula or method to maintain
such reference index in the event of changes in constituent stocks and
capitalization and other routine events) or (y) on any valuation date an index
sponsor (or a successor sponsor) fails to calculate and announce a reference
index, then the Calculation Agent will calculate the redemption amount using,
in lieu of a published level for such reference index, the level for such
reference index as at the valuation time on the valuation date as determined by
the Calculation Agent in accordance with the formula for and method of
calculating such reference index last in effect prior to that change or
failure, but using only those securities that comprised such reference index
immediately prior to that change or failure.

Events of Default and Acceleration

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

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

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

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

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

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

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

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

  
	
   

  
	
   

  
	
   

  
	
   

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

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
    Attorney to 

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature:

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
						

 

 R-7BP - x1-55385 - Imperial Industries, Inc. - Exhibit 10.1

EXHIBIT 10.1

IMPERIAL INDUSTRIES, INC.

DIRECTORS’ STOCK OPTION PLAN

ARTICLE I

Purpose

The purpose of the IMPERIAL INDUSTRIES, INC. Directors’ Stock Option Plan (the “Plan”) is to secure for IMPERIAL INDUSTRIES, INC. and its stockholders the benefits arising from stock ownership by its Directors. The Plan will provide a means whereby eligible Directors may purchase shares of the common stock, $.01 par value, of IMPERIAL INDUSTRIES, INC. pursuant to options granted in accordance with the Plan.

ARTICLE II

Definitions

The following capitalized terms used in the Plan shall have the respective meanings set forth in this Article:

2.1

“Board” shall mean the Board of Directors of IMPERIAL INDUSTRIES, INC.

2.2

“Change of Control” shall mean the occurrence of any of the following acts:

(a)

The acquisition, other than (i) from the Company directly or (ii) by any shareholder who at the time of Board adoption of the Plan owns in excess of 10% of the outstanding Common Stock, by any person, entity or group, within the meaning of ‘13(d) or 14(d) of the Exchange Act, of beneficial ownership of twenty-five (25%) percent or more of the outstanding Common Stock;

(b)

If the individuals who serve on the Board as of the date of stockholder approval of the Plan, no longer constitute a majority of the members of the Board; provided, however, any person who becomes a director subsequent to the date of the stockholder approval of the Plan, who was elected to fill a vacancy by a majority of the individuals then serving on the Board, shall be considered as if a member prior to stockholder approval of the Plan;

(c)

Approval by a majority of the voting stock of the Company of a merger, reorganization or consolidation whereby the stockholders of the Company immediately prior to such approval do not, immediately after consummation of such reorganization merger or consolidation own more than 50% of the voting stock of the surviving entity; or

(d)

A liquidation or dissolution of the Company, or the sale of all or substantially all of the Company’s assets.

2.3

“Committee” shall mean a duly appointed standing committee of the Board.

2.4

“Common Stock” shall mean the common stock, $.01 par value of the Company.

2.5

“Company” shall mean IMPERIAL INDUSTRIES, INC. and any subsidiaries.

2.6

“Director” shall mean any person who is a member of the Board of Directors of the Company.

2.7

“Eligible Director” shall be any Director who is not a full or part-time employee of the Company.

2.8

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

2.9

“Exercise Price” shall mean the price per share at which an Option may be exercised.

2.10

“Fair Market Value” shall mean the closing price of a share of Common Stock on the principal securities exchange on which such Common Stock is traded on the last preceding business day prior to the date as to which Fair Market Value is being determined, or on the next preceding business day on which such Common Stock is traded, if no shares of Common Stock were traded on such date. If the Common Stock is not traded on a securities exchange, Fair Market Value shall be the closing sales price of the Common Stock as reported on the NASDAQ-National Market System for the last preceding business day prior to the date on which Fair Market Value is to be determined or on the next preceding business day if the Common Stock was not traded on such date. If the Common Stock is not quoted on the NASDAQ-National Market System, Fair Market Value shall be the average of the high bid and low asked prices of the Common Stock in the over-the-counter market on the last preceding business day prior to the day as of which Fair Market Value is being deter­mined, or on the next preceding day on which such high bid and low asked prices were recorded. If the Common Stock is not pub­licly traded, Fair Market Value shall be determined by the Board, in good faith, but only during any period in which no equity security of the Company’s is registered pursuant to ‘12 of the Exchange Act. In no case shall Fair Market Value be less than the par value per share of the Common Stock. Fair market value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse.

2.11

“Grant Date” shall mean such date an Option is granted pursuant to the Plan.

2.12

“Option” shall mean an Option, including a Reload Option, to purchase shares of Common Stock granted pursuant to the Plan.

2.13

“Option Agreement” shall mean the written agree­ment described in Article VI herein.

2.14

“Permanent Disability” shall mean the condition of an Eligible Director who is unable to participate as a member of the Board by reason of any medically determined physical or mental impairment which can be expected to result in death or which can be expected to last for a continuous period of not less than twelve (12) months.

2.15

“Purchase Price” shall be the Exercise Price multiplied by the number of whole shares of Common Stock with respect to which an Option may be exercised.

2.16

“Plan” shall mean this IMPERIAL INDUSTRIES, INC. Directors’ Stock Option Plan.

2.17

“Reload Option” means an option granted to an Eligible Director equal to the number of shares of Common Stock delivered by the Eligible Director to pay for the exercise of an option as more fully described in Article XIII - RELOAD OPTIONS.

ARTICLE III

Administration

3.1

General. This Plan shall be administered by the Board in accordance with the express provisions of this Plan, subject to the restrictions contained in ‘16 of the Exchange Act.

3.2

Powers of the Board. The Board shall have full and complete authority to adopt such rules and regulations and to make all such other determinations not inconsistent with the Plan or ‘16 of the Exchange Act (once the Common Stock is registered pursuant to ‘12 of the Exchange Act), as may be necessary for the administration of the Plan.

3.3

Section 16 Compliance. It is the intention of the Company that the Plan, and the administration of the Plan (once the Company’s Common Stock is registered pursuant to ‘12 of the Exchange Act) comply in all respects with ‘16 of the Exchange Act and the rules and regulations promulgated thereunder. If any Plan provision, or any aspect of the administration of the Plan, is found not to be in compliance with ‘16 of the Exchange Act, the provision or administration shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3 promulgated under the Exchange Act.

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ARTICLE IV

Shares Subject to Plan

Subject to adjustment in accordance with Articles IX and XII an aggregate of 200,000 shares of Common Stock are reserved for issuance under the Plan. Shares of Common Stock reserved under this Plan may be either authorized, but unissued shares of Common Stock or reacquired shares of Common Stock. If an Option, or any portion thereof, shall expire or terminate for any reason without having been exercised in full, the unpurchased shares of Common Stock covered by such Option shall be available for future grants of Options. Any shares of Common Stock used to pay the purchase price of any options in connection with Article XIII shall be added to the shares of Common Stock reserved for issuance under the Plan.

ARTICLE V

Discretionary Grants

Each Eligible Director shall receive the grant of options to pur­chase such number of shares of Common Stock on such dates in such amounts as determined in the discretion of the Board.

ARTICLE VI

Terms of Option

Each Option shall be evidenced by a written Option Agreement executed by the Company and the Eligible Director which shall specify the Grant Date, the number of shares of Common Stock subject to the Option, the Exercise Price and shall also include or incorporate by reference the substance of all of the following provisions and such other provisions consistent with this Plan as the Board may determine:

6.1

Term. The term of the Option shall be ten (10) years from the Grant Date of each Option, subject to earlier termination in accordance with Articles VI and X of the Plan.

6.2

Restriction on Exercise. No Option shall be exercisable until six (6) months after the Grant Date, except in the case of the Eligible Director’s death or permanent disability, upon which events the Option will become immediately exercisable. Thereafter, an Option, or any portion thereof, may be exercised until the earlier of the expiration of the option’s term or termination of the Option in accordance with this Article VI.

6.3

Exercise Price. The Exercise Price for each share of Common Stock subject to an Option shall be the Fair Market Value of the Common Stock as determined in Section 2.10 herein.

6.4

Manner of Exercise. An option shall be exer­cised in accordance with its terms, by delivery of a written notice of exercise to the Company and payment of the full pur­chase price of the shares of Common Stock being purchased. An Eligible Director may exercise an Option with respect to all or less than all of the shares of Common Stock for which the Option may then be exercised, but an eligible Director must exercise the Option in full shares of Common Stock.

6.5

Payment. The Purchase Price pursuant to an Option or portion thereof may be paid:

(a)

in United States dollars, in cash or by check, bank draft or money order payable to the Company; or

(b)

by delivery of shares of Common Stock owned by an Eligible Director which has an aggregate Fair Market Value on the date of exercise equal to the purchase price, subject to the provi­sions of ‘16(b) of the Exchange Act and the rules and regulations promulgated thereunder; or

(c)

to the extent authorized by the Board, or if specified in the Option being exercised, by a promissory note from the Optionee to the Company, upon such terms and conditions determined by the Board and secured by the Common Stock issuable upon exercise of the Option; or

(d)

by any combination of the above methods of payment.

6.6

Transferability. No Option shall be transferable otherwise than by will or the laws of descent and distribution, and an Option shall be exercisable during the Eligible Director’s lifetime only by the Eligible Director, his guardian or legal representative.

3

6.7

Termination of Membership on the Board. If an Eligible Director’s membership on the Board terminates for any reason, including as a result of a Change of Control, an Option held on the date of termination may be exercised in whole or in part at any time within one (1) year after the date of such termination (but in no event after the actual expiration of the term of the Option) and shall thereafter terminate.

ARTICLE VII

Government and Other Regulations

7.1

Delivery of Common Stock. The obligation of the Company to issue or transfer and deliver shares of Common Stock for exercised Options under the Plan shall be subject to all applicable laws, regulations, rules, orders and approvals which shall then be in effect.

7.2

Holding of Stock After Exercise of Option. The Option Agreement shall provide that the Eligible Director, by accepting such option, represents and agrees, for the Eligible Director and his permitted transferees that none of the shares of Common Stock purchased upon exercise of the Option shall be acquired with a view to any sale, transfer or distribution of the Common Stock in violation of the Securities Act of 1933, as amended (the “Act”) and the person exercising an Option shall furnish evidence satisfactory to that Company to that effect, including an indemnification of the Company in the event of any violation of the Act by such person.

ARTICLE VIII

Withholding Tax

The Company may, in its discretion, require an Eligible Director to pay to the Company, at the time of exercise of an Option an amount that the Company deems necessary to satisfy its obligations, if any, to withhold federal, state or local income or other taxes (which for purposes of this Article VIII includes an Eligible Director’s FICA obligation) incurred by reason of such exercise. When the exercise of an Option does not give rise to the obligation to withhold federal income taxes on the date of exercise, the Company may, in its discretion, require an Eligible Director to place shares of Common Stock received upon exercise of the Option in escrow for the benefit of the Company until such time as federal income tax withholding is required on amounts included in the Eligible Director’s gross income as a result of the exercise of an Option. At such time, the Company, in its discretion, may require an Eligible Director to pay to the Company an amount that the Company deems necessary to satisfy its obligation to withhold federal, state or local taxes incurred by reason of the exercise of the Option, in which case the shares of Common Stock will be released from escrow upon such payment by an Eligible Director.

ARTICLE IX

Adjustments

9.1

Proportionate Adjustments. If the outstanding shares of Common Stock are increased, decreased, changed into or exchanged into a different number or kind of shares of Common Stock or securities of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, an appropriate and proportionate adjustment shall be made to the maximum number and kind of shares of Common Stock as to which Options may be granted under this Plan. A corresponding adjustment changing the number or kind of shares of Common Stock allocated to unexercised Options or portions thereof, which shall have been granted prior to any such change, shall likewise be made. Any such adjustment in the outstanding Options shall be made without change in the Purchase Price applicable to the unexercised portion of the Option with a corresponding adjustment in the Exercise Price of the shares of Common Stock covered by the Option. Notwithstanding the foregoing, there shall be no adjustment for the issuance of shares of Common Stock on conversion of notes, preferred stock or exercise of warrants or shares of Common Stock issued by the Board for such consideration as the Board deems appropriate.

9.2

Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, or upon a sale of substantially all of the property or more than 50% of the then outstanding shares of Common Stock of the Company to another corporation, the Company shall give to each Eligible Director at the time of adoption of the plan for liquidation, dissolution, merger or sale either (1) a reasonable time thereafter within which to exercise the Option prior to the effective date of such liquidation or dissolution, merger or sale, or (2) the right to exercise the Option as to an equivalent number of shares of Common 

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Stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, merger, consolidation or reorganization.

ARTICLE X

Amendment or Termination of Plan

10.1

Amendments. The Board may at any time amend or revise the terms of the Plan, provided no such amendment or revision shall, unless appropriate stockholder approval of such amendment or revision is obtained:

(a)

materially increase the maximum number of shares of Common Stock which may be sold pursuant to Options granted under the Plan;

(b)

materially increase the benefits accruing to participants under the Plan;

(c)

materially modify the requirements as to eligibility for participants in the Plan.

10.2

Termination. The Board may suspend or terminate this Plan at any time. This Plan, unless sooner terminated, shall terminate on the tenth (10th) anniversary of its adoption by the Board. No Option may be granted under this Plan, while this Plan is suspended or after it is terminated.

10.3

Holder Consent. No amendment, suspension or termination of the Plan shall, without the consent of the holder of Options, alter or impair any rights or obligations under any Option theretofore granted under the Plan.

ARTICLE XI

Miscellaneous Provisions

11.1

Privilege of Stock Ownership. No Eligible Director entitled to exercise any Option granted under the Plan shall have any of the rights or privileges of a stockholder of the Company with respect to any shares of Common Stock issuable upon exercise of an Option until certificates representing the shares of Common Stock shall have been issued and delivered.

11.2

Plan Expenses. Any expenses incurred in the administration of the Plan shall be borne by the Company.

11.3

Use of Proceeds. Payments received from an Eligible Director upon the exercise of Options shall be used for general corporate purposes of the Company.

11.4

Governing Law. The Plan has been adopted under the laws of the State of Delaware. The Plan and all Options which may be granted hereunder and all matters related thereto, shall be governed by and construed and enforceable in accordance with the laws of the State of Delaware as it then exists.

11.5

Gender and Number. Except as otherwise indicated by the context, reference to the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural.

11.6

Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE XII

Stockholder Approval and Effective Date

The Plan shall be submitted for approval by the holders of the outstanding voting stock of the Company within twelve (12) months from the date the Plan is adopted by the Board; provided, however, that if such vote was not solicited substantially in accordance with the rules and regulations, if any, in effect under ‘14(a) of the Exchange Act, at the time of such vote, the Company will furnish in writing to the holders of record of the securities entitled to vote for the Plan substantially the same information concerning the Plan which would be required by the 

5

rules and regulations in effect under ‘14(a) of the Exchange Act, as if proxies to be voted with respect to the approval or disapproval of the Plan were then being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of (i) the first registration of an equity security under ‘12 of the Exchange Act; or (ii) the acquisition of an equity security for which an exemption is claimed. The Plan shall be deemed approved by the holders of the outstanding voting stock of the Company by the affirmative vote of the holders of a majority of the voting shares of the Company represented and voting at a duly held meeting at which a quorum is present. Any Options granted under the Plan prior to obtaining such stockholder approval shall be granted under the conditions that the Options so granted (i) shall not be exercisable prior to such approval, and (ii) shall become null and void if such stockholder approval is not obtained.

ARTICLE XIII

Reload Options

13.1

Reload Option. Whenever the Optionee holding any Option outstanding under the Plan (including Reload Options granted under this Article XIII) exercises the Option and makes payment of the Exercise Price pursuant to Section 6.5(b) by ten­dering Common Stock previously held by the Optionee, then the Company shall automatically grant a Reload Option for the number of shares of Common Stock that is equal to the number of shares tendered by the Optionee on payment of the Exercise Price of the Option being exercised.

13.2

Reload Option Exercise Price. The Reload Option Exercise Price per share shall be an amount equal to the Fair Market Value per share of the Company’s Common Stock determined as of the date of receipt by the Company of the notice by Optionee to exercise the option.

13.3

Term of Reload Option. The exercise period of the Reload Option shall expire, and the Reload Option shall no longer be exercisable, on the later of (i) expiration date of the original surrendered Option, or (ii) one year from the date of grant.

13.4

Restriction on Exercise. Any Reload Option granted under this Article XIII shall vest immediately, but shall not be exercisable until the end of six months after the date of its issuance, except in the case of the death or permanent disability of the Optionee, upon which event the Reload Option will become immediately exercisable.

13.5

Other Terms of Reload Options. All other terms of the Reload Options granted hereunder shall be identical to the terms and conditions of the original Option, the exercise of which gives rise to the grant of the Reload Option.

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