Document:

Prepared by R.R. Donnelley Financial -- Officer's Certificate

 Exhibit 4(b) 
  
 Carolina Power & Light Company 
  
 OFFICER’S CERTIFICATE 

 
 Thomas R. Sullivan, the Treasurer of Carolina Power & Light Company (the “Company”), pursuant to the authority
granted in the Board Resolutions dated July 25, 2002 and the Indenture, as defined herein, does hereby certify to JPMorgan Chase Bank, formerly The Chase Manhattan Bank (the “Trustee”), as Trustee under the Indenture (for Debt Securities)
of the Company, dated as of October 28, 1999 (as supplemented by this Officer’s Certificate, the “Indenture”), that he has authorized the issue and sale of 61⁄2% Notes due 2012 (the “Notes”) by the Company, and, in
connection with such issuance, has determined, approved or appointed, as the case may be, the following: 
  

	1.
	 
	The notes of this series issued under the Indenture shall be designated “61⁄2% Notes due 2012.” The Form of Note is attached hereto as Exhibit A.
All capitalized terms used in this certificate which are not defined herein shall have the meanings (if any) set forth in Exhibit A hereto; all capitalized terms used in this certificate which are not defined herein or in Exhibit A hereto shall have
the meanings set forth in the Indenture. 
 

  

	2.
	 
	If not redeemed earlier pursuant to their terms, the Notes shall mature and the principal thereof shall be due and payable together with all accrued and unpaid
interest thereon on July 15, 2012. 
 

  

	3.
	 
	The Notes shall initially be issued as Global Securities registered in the name of a nominee of The Depository Trust Company. The Notes shall be issued in
denominations of $1,000 and integral multiples thereof. 
 

  

	4.
	 
	The Notes shall bear interest as provided in Exhibit A. 
 

  

	5.
	 
	The Notes may be redeemed at any time as provided in Exhibit A. 
 

  

	6.
	 
	The Notes shall not be subject to a sinking fund. 
 

  

	7.
	 
	Principal and interest will be payable initially at the Corporate Trust Office of JPMorgan Chase Bank, presently located at 450 West 33rd Street, New York, New
York 10001, or such other offices or agencies of the Trustee maintained for such purposes from time to time, or at other office or agency designated by the Company from time to time. 
 

  

	8.
	 
	The Notes will be subject to certain events of default and certain covenants as set forth in the Indenture and Exhibit A. 
 

 

	9.
	 
	The Trustee shall initially be JPMorgan Chase Bank, the principal corporate trust office of which presently is located at 450 West 33rd Street, New York, New
York, 10001. 
 

  

	10.
	 
	The Notes shall be senior unsecured obligations of the Company. 
 

  

	11.
	 
	Any further terms of the Notes shall be as provided for in Exhibit A hereto and in the Indenture.  
 

 

  
 IN WITNESS WHEREOF, the undersigned Treasurer of the Company has executed this
Certificate as of the 30th day of July, 2002. 
  
 /s/    THOMAS R. SULLIVAN         
 Thomas R. Sullivan, Treasurer 
  
 [Signature Page to Officer’s
Certificate Establishing the Note] 

 Exhibit A 
  
 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 
  
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO CAROLINA POWER
& LIGHT COMPANY (“THE COMPANY”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
  
 THIS 61⁄2% NOTE DUE 2012 MAY, AS PROVIDED IN THE
INDENTURE, BE EXCHANGED FOR 61⁄2% NOTES DUE 2012 IN THE FORM OF DEFINITIVE CERTIFICATES OF LIKE TENOR AND OF AN EQUAL AGGREGATE PRINCIPAL AMOUNT, IN AUTHORIZED DENOMINATIONS, REGISTERED IN THE NAMES OF SUCH PERSONS AS THE DEPOSITARY SHALL
INSTRUCT THE TRUSTEE, IF (I) THE DEPOSITARY GIVES NOTICE TO THE COMPANY OR TO THE TRUSTEE THAT IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY AND A SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS, (II) THE DEPOSITARY CEASES
TO BE ELIGIBLE UNDER THE INDENTURE AND A SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS, (III) THE COMPANY DECIDES TO DISCONTINUE USE OF THE SYSTEM OF BOOK-ENTRY TRANSFERS THROUGH THE DEPOSITARY OR ITS SUCCESSOR OR (IV) AN EVENT
OF DEFAULT HAS OCCURRED AND IS CONTINUING, AND THE HOLDERS OF MORE THAN FIFTY PERCENT OF THE 61⁄2% NOTES DUE 2012 DETERMINE THAT THE 61⁄2% NOTES DUE 2012 WILL NO LONGER BE REPRESENTED BY A GLOBAL SECURITY. ANY SUCH EXCHANGE SHALL BE MADE UPON
RECEIPT BY THE TRUSTEE OF AN OFFICER’S CERTIFICATE THEREFOR AND A WRITTEN INSTRUCTION FROM THE DEPOSITARY SETTING FORTH THE NAME OR NAMES IN WHICH THE TRUSTEE IS TO REGISTER SUCH 61⁄2% NOTES DUE 2012 IN THE FORM OF DEFINITIVE CERTIFICATES.

 

 1 

  
 CAROLINA POWER & LIGHT COMPANY 
  
 61⁄2% Note due 2012 
  
 
	 No.                     
 	  	 $
 	                     
 

 
  
 CUSIP No.
                         
  
 Carolina Power & Light Company, a corporation duly organized and existing under the laws of the State of North Carolina (herein called the “Company,” which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of
                                        
on July 15, 2012 and to pay interest thereon from July 30, 2002 or from the most recent Interest Payment Date with respect to which interest has been paid or duly provided for, semi-annually on January 15 and July 15 in each year (each an
“Interest Payment Date”), commencing January 15, 2003, at the rate of 6.50% per annum, until the principal hereof is paid or made available for payment, provided that any principal and premium, and any such installment of interest,
which is overdue shall bear interest at the rate of 6.50% per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such
interest shall be payable on demand. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be (i) for Notes of this series in the form of Global Securities, on the business day prior to each Interest Payment Date, or (ii) for Notes of
this series in the form of definitive certificates, on December 31 or June 30 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Notes of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. 
  
 Payment of the principal of (and premium if any) and such interest on this Note will be made at the Corporate Trust Office of the Trustee
or such other offices or agencies of the Trustee maintained for such purpose from time to time or at any other office or agency designated by the Company for such purpose, in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of such interest may be made by check mailed to the address of the Person entitled thereto as such address shall
appear in the Debt Security Register. 
 

 2 

  
 The amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. Interest will accrue from each prior Interest Payment Date to, but not including, the relevant payment date. In the event that any date on which interest is payable on the Notes of this series is not a Business
Day at any Place of Payment, then payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and
effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day. A “Business Day,” when used with respect to a Place of Payment or any other particular location specified in the Indenture, means any
day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location are generally authorized or required by law, regulation or executive order to remain closed.

  
 Reference is hereby made to the further provisions of this Note set forth below, which further provisions shall
for all purposes have the same effect as if set forth at this place. 
  
 Unless the certificate of authentication
hereon has been executed by the Trustee or its duly appointed co-authenticating agent referred to below by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 

 3 

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

 
  
 
	 CAROLINA POWER & LIGHT COMPANY
 
	 
	 BY:
 	 	 

	  	 	 Thomas R. Sullivan
Treasurer
 

 
  
 [SEAL] 
  
 Attest: 
  
 
	 
	 By:
 	 	 

	  	 	 Patricia Kornegay-Timmons
 Assistant Secretary
 

 
  
  
  
 [Signature Page of the Note] 
 

 4 

  
 TRUSTEE’S CERTIFICATE OF AUTHENTICATION 
  
 This is one of the Notes of the series designated herein referred to in the within-mentioned Indenture. 
  
 
	 
	 Dated:
 	 	 

 
  
 
	 JPMORGAN CHASE BANK
 as
Trustee
 
	 
	 By:
 	 	 

	 Name
 	 	 Patti Maner
 Authorized
Representative
 

 
 

 5 

  
 [Reverse of 61⁄2% Note due 2012] 
  
 This Note is one of the duly authorized issue of securities of the Company of the series designated on the face hereof (herein called the “Notes”), issued and to
be issued in one or more series under an Indenture (For Debt Securities), dated as of October 28, 1999 (herein, together with any amendments thereto, called the “Indenture,” which term shall have the meaning assigned to it in such
instrument), between the Company and JP Morgan Chase Bank, formerly known as The Chase Manhattan Bank, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to
the Indenture, including the Board Resolutions and Officer’s Certificate filed with the Trustee on July 30, 2002, creating the series designated on the face hereof, for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. 
  
 The Notes are senior unsecured obligations of the Company and rank equally with all of the Company’s other senior unsecured indebtedness from time to time outstanding.
Debt Securities may be issued under the Indenture from time to time as a single series or in two or more separate series up to the aggregate principal amount from time to time authorized for each series. The Company may, from time to time, without
the consent of the holder of this Note, provide for the issuance of Notes or other Debt Securities under the Indenture in addition to this Note. 
  
 The Notes will not be subject to a sinking fund. 
  
 Events of Default 

 
 If an Event of Default with respect to Notes of this series shall occur and be continuing, the principal of the Notes may be
declared due and payable in the manner and with the effect provided in the Indenture. 
  
 Restrictive Covenants 

 
 Limitation on Liens 
  
 So long as any Notes are outstanding, the Company may not issue, assume, guarantee (including any contingent obligation to purchase) or permit to exist any Debt that is secured by any mortgage,
security interest, pledge or lien (“Lien”) of or upon any Operating Property of the Company, without effectively securing the Notes (together with, if the Company shall so determine, any other indebtedness ranking equally with the Notes)
equally and ratably with the Debt (but only so long as the Debt is so secured). 
 

 6 

  
 The foregoing restriction will not apply to: 
  

	 	•
	 
	Liens on any Operating Property existing as of the date of issuance of the Notes, including the lien created by the Company’s Mortgage and Deed of Trust
dated as of May 1, 1940, as supplemented from time to time; 
 

  

	 	•
	 
	Liens on any Operating Property existing at the time of acquisition thereof and not created in contemplation of such acquisition; 

  

	 	•
	 
	Liens on Operating Property of a corporation existing at the time such corporation is merged into or consolidated with the Company, or at the time of a sale,
lease, or other disposition of the properties of such corporation or a division thereof as an entirety or substantially as an entirety to the Company, provided that such Lien as a result of such merger, consolidation, sale, lease, or other
disposition is not extended to property owned by the Company immediately prior thereto and is not created in contemplation of such merger, consolidation, sale, lease or other disposition; 
 

  

	 	•
	 
	Liens on Operating Property to secure all or part of the cost of acquiring, constructing, developing, or substantially repairing, altering, or improving such
property, or to secure indebtedness incurred to provide funds for any such purpose or for reimbursement of funds previously expended for any such purpose, provided such Liens are created or assumed contemporaneously with, or within eighteen (18)
months after, such acquisition or completion of construction, development, or substantial repair, alteration, or improvement or within six (6) months thereafter pursuant to a commitment for financing arranged with a lender or investor within such
eighteen (18) month period; 
 

  

	 	•
	 
	Liens in favor of the United States of America or any State thereof, or any department, agency, or instrumentality or political subdivision of the United States
of America or any State thereof, or for the benefit of holders of securities issued by any such entity, to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of constructing, developing, or
substantially repairing, altering, or improving the property subject to such Liens; or 
 

  

	 	•
	 
	Any extension, renewal or replacement (or successive extensions, renewals, or replacements), in whole or in part, of any Lien referred to in the foregoing
clauses, inclusive; provided, however, that the principal amount of Debt secured thereby and not otherwise authorized by the foregoing clauses, inclusive, shall not exceed the principal amount of Debt, plus any premium or fee payable in connection
with any such extensions, renewal, or replacement, so secured at the time of such extension, renewal, or replacement. 
 

 

 7 

  
 In addition, notwithstanding the foregoing restrictions, the Company may issue,
assume or guarantee Debt secured by a Lien which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with all other of its secured Debt (not including secured Debt permitted under any of the foregoing
exceptions) and the Value of Sale and Lease-Back Transactions existing at such time (other than Sale and Lease-Back Transactions the proceeds of which have been applied to the retirement of Notes or other Debt as described below in clause (c) of the
last sentence under “Limitation on Sale and Lease-Back Transactions,” Sale and Lease-Back Transactions in which the property involved would have been permitted to be subjected to a Lien under any of the foregoing exceptions and Sale and
Lease-Back Transactions that are permitted by the first sentence of “Limitation on Sale and Lease-Back Transactions” below), does not exceed the greater of 10% of the Company’s Net Tangible Assets or 10% of the Company’s
Capitalization. The foregoing restrictions do not limit the Company’s ability to place Liens on (i) the capital stock of any of its subsidiaries or (ii) the assets of any of its subsidiaries. 
  
 In this section and in the following section on “Limitation on Sale and Lease-Back Transactions,” the following terms have the
meanings indicated: 
  
 “Capitalization” means the total of all the following items appearing on, or
included in, the Company’s consolidated balance sheet: (i) liabilities for indebtedness maturing more than 12 months from the date of determination; and (ii) common stock, preferred stock, premium on capital stock, capital surplus, capital in
excess of par value, and retained earnings (however the foregoing may be designated), less, to the extent not otherwise deducted, the cost of shares of capital stock held in the Company’s treasury. Capitalization shall be determined in
accordance with generally accepted accounting principles and practices applicable to the type of business in which the Company is engaged and approved by the independent accountants regularly retained by it, and may be determined as of a date not
more than 60 days prior to the happening of the event for which the determination is being made. 
  
 “Debt” means any outstanding debt for money borrowed evidenced by notes, debentures, bonds or other securities, or guarantees of any debt. 
  
 “Net Tangible Assets” means the amount shown as total assets on the Company’s consolidated balance sheet, less (i) intangible assets including, but
without limitation, such items as goodwill, trademarks, trade names, patents, unamortized debt discount and expense and certain regulatory assets, and (ii) appropriate adjustments, if any, on account of minority interests. Net Tangible Assets shall
be determined in accordance with generally accepted accounting principles and practices applicable to the type of business in which the Company is engaged and approved by the independent accountants regularly retained by it, and may be determined as
of a date not more than 60 days prior to the happening of the event for which such determination is being made. 
  
 “Operating Property” means (i) any interest in real property the Company owns and (ii) any asset it owns that is depreciable in accordance with generally accepted accounting principles, excluding, in either case, any
interest it has as lessee under any
 
 

 8 

  
 lease (except for a lease that results from a Sale and Lease-Back Transaction) which has been or would
be capitalized on the books of the lessee in accordance with generally accepted accounting principles. 
  
 “Sale and Lease-Back Transaction” means any arrangement with any person providing for the leasing to the Company of any Operating Property (except for leases for a term, including any renewal or potential renewal, of
not more than 48 months), which Operating Property has been or is to be sold or transferred by it to the person; provided, however, Sale and Lease-Back Transaction shall not include any arrangement first entered into prior to the date of the
Indenture and shall not include any transaction pursuant to which the Company sells Operating Property to, and thereafter purchases energy or services from, any entity, which transaction is ordered or authorized by any regulatory authority having
jurisdiction over the Company or its operations or is entered into pursuant to any plan or program of industry restructuring ordered or authorized by any such regulatory authority. 
  
 “Value” means, with respect to a Sale and Lease-Back Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds from
the sale or transfer of the property leased pursuant to the Sale and Lease-Back Transaction or (ii) the net book value of the property, as determined by the Company in accordance with generally accepted accounting principles at the time it entered
into the Sale and Lease-Back Transaction, in either case multiplied by a fraction, the numerator of which shall be equal to the number of full years of the term of the lease that is part of the Sale and Lease-Back Transaction remaining at the time
of determination and the denominator of which shall be equal to the number of full years of the term, without regard, in any case, to any renewal or extension options contained in the lease. 
  
 Limitation on Sale and Lease-Back Transactions 
  
 So long as any Notes are outstanding, the Company may not enter into or permit to exist any Sale and Lease-Back Transaction with respect to any Operating Property (except for leases for a term, including any renewal or
potential renewal, of not more than 48 months), if the purchaser’s commitment is obtained more than 18 months after the later of the completion of the acquisition, construction or development of the Operating Property or the placing in
operation of the Operating Property or of the Operating Property as constructed or developed or substantially repaired, altered or improved. This restriction will not apply if (a) the Company would be entitled pursuant to any of the provisions
listed as exceptions to the restriction applicable to “Limitation on Liens” above to issue, assume, guarantee or permit to exist Debt secured by a Lien on the Operating Property without equally and ratably securing the Notes, (b) after
giving effect to the Sale and Lease-Back Transaction, the Company could incur pursuant to the provisions described in the last paragraph under “Limitation on Liens,” at least $1.00 of additional Debt secured by Liens (other than Liens
permitted by clause (a)), or (c) the Company applies within 180 days an amount equal to, in the case of a sale or transfer for cash, the net proceeds (not less than the fair value of the Operating Property so leased), and, otherwise, an amount equal
to the fair value (as determined by the Board of Directors) of the Operating Property so leased to the retirement of Notes or other Debt
 
 

 9 

  
 ranking equally with the Notes, provided, however, that the amount to be applied to such
retirement of Notes or other Debt shall be reduced by an amount equal to the sum of (a) an amount equal to the redemption price with respect to Notes delivered within such one hundred eighty (180)-day period to the Trustee for retirement and
cancellation and (b) the principal amount, plus any premium or fee paid in connection with any redemption in accordance with the terms of other Debt voluntarily retired by the Company within such one hundred eighty (180)-day period, excluding in
each case retirements pursuant to mandatory sinking fund or prepayment provisions and payments at maturity. 
  
 Form and Denomination

  
 The Notes will initially be represented by one or more global securities that will be deposited with, or on
behalf of, The Depository Trust Company (“DTC” or “the Depositary”) and registered in the name of a nominee of the Depositary. The Notes will be sold only in multiples of $1,000. See “The Depositary” below.

  
 Optional Redemption 
  
 The Notes of this series are subject to redemption by the Company, at its option, in whole, at any time, or in part, from time to time, upon notice as provided in the Indenture (not less than 30 nor
more than 60 days prior to a date fixed for redemption (the “Redemption Date”)) at a redemption price equal to the greater of (i) 100% of their principal amount or (ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon from the Redemption Date to the maturity date, computed by discounting such payments, in each case, to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Yield plus 37.5 basis points (0.375%), plus in each case accrued interest on the principal amount thereof to the Redemption Date (the “Redemption Price”), such Redemption Price to be set forth in an Officer’s Certificate
delivered to the Trustee on or before the Redemption Date and upon which the Trustee may conclusively rely. 
  
 If
notice has been given as provided in the Indenture and funds for the redemption of any Notes (or any portion thereof) called for redemption shall have been made available on the Redemption Date referred to in such notice, such Notes (or any portion
thereof) will cease to bear interest on the date fixed for such redemption specified in such notice and the only right of the Holders of such Notes will be to receive payment of the Redemption Price. 
  
 Notice of any optional redemption of Notes of this series (or any portion thereof) will be given to Holders at their addresses, as shown
in the Debt Security Register for such Notes, not more than 60 nor less than 30 days prior to the date fixed for redemption. The notice of redemption will specify, among other items, the method of calculation of the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed. If less than all of the Notes are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the portion of such Note
to be redeemed in whole or in part. 
 

 10 

  
 In the event of redemption of this Note in part only, a new Note or Notes of this
series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 
  
 As used in this subsection: 
  
 “Treasury Yield” means, with respect to any
Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming 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. 
  
 “Comparable Treasury Issue” means the United States
Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the Notes of this series 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 Notes of this series. 
  
 “Independent Investment Banker” means Merrill Lynch, Pierce, Fenner & Smith, Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking
institution of national standing selected by the Company and appointed by the Trustee. 
  
 “Comparable
Treasury Price” means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding
such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such
release (or any successor release) is not published or does not contain such prices on such Business Day, the average of the Reference Treasury Dealer Quotations for such Redemption Date. 
  
 “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. on the third Business Day
preceding such Redemption Date. The Company shall furnish the Trustee a notice in writing at least five Business Days and not more than ten Business Days prior to such Redemption Date of (a) the name of each Reference Treasury Dealer, (b) the
Redemption Date, and (c) the third Business Day preceding the Redemption Date. 
  
 “Reference Treasury
Dealer” means Merrill Lynch, Pierce, Fenner, & Smith, Incorporated, and its successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government Securities dealer in New York City (a “Primary Treasury
Dealer”), the Company shall substitute therefor another Primary Treasury Dealer. 
 

 11 

  
 Certain Indenture Provisions 
  
 The Indenture permits, in certain circumstances therein specified, the amendment thereof without the consent of the Holders of any of the Debt Securities. The Indenture
also permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations under the Indenture of the Company and the rights of Holders of the Debt Securities of each series to be affected
under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a specified percentage in aggregate principal amount of the Debt Securities at the time Outstanding of each series to be affected. The Indenture also
contains provisions permitting the Holders of a specified percentage in aggregate principal amount of the Debt Securities of each series at the time Outstanding, on behalf of the Holders of all the Debt Securities of such series, to waive compliance
by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 
  
 As provided in and subject to the provisions of the Indenture, a Holder of Debt Securities shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to
the Debt Securities of this series, the Holders of not less than a specified percentage in aggregate principal amount of the Debt Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be
continuing shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in
principal amount of Debt Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing a direction inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein. 
  
 No reference herein to the Indenture and no
provision of this Note, subject to the provisions for satisfaction and discharge in Article Seven 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 at the times, place and rate, and in the coin or currency, herein prescribed. 
  
 The Indenture permits the
Company, by irrevocably depositing, in amounts and maturities sufficient to pay and discharge at the Stated Maturity or Redemption Date, as the case may be, the entire indebtedness on all Outstanding Notes, cash or U.S. Government Obligations with
the Trustee in trust solely for the benefit of the Holders of
 
 

 12 

  
 all Outstanding Notes, to defease the Indenture with respect to such Notes, and upon such deposit the
Company shall be deemed to have paid and discharged its entire indebtedness on such Notes. Thereafter, Holders would be able to look only to such trust fund for payment of principal and interest at the Stated Maturity or Redemption Date, as the case
may be. 
  
 The Notes are issuable only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Notes is registrable in the Debt Security Register, upon surrender of a Note for registration of transfer at the Corporate
Trust Office of the Trustee or at such other offices or agencies of the Trustee from time to time designated for such purpose, or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of like tenor, of authorized denominations and
for the same aggregate principal amount, shall be issued to the designated transferee or transferees. 
  
 No service
charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 
  
 Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 

 
 All undefined terms used in this Note that are defined in the Indenture shall have the meanings assigned to them in the
Indenture. 
 

 13<PAGE> 1
Exhibit 4.01

AMERITYRE CORPORATION
2002 STOCK OPTION AND AWARD PLAN

AMERITYRE CORPORATION, a Nevada corporation (the "Company"), hereby adopts the
Amerityre Corporation 2002 Stock Option and Award Plan" (the "Plan"),
effective as of the  1st day of April, 2002, under which options to acquire
stock of the Company or bonus stock may be granted from time to time to
employees, including of officers and directors of the Company and/or its
subsidiaries. In addition, at the discretion of the board of directors or
other administrator of this Plan, options to acquire stock of the Company or
bonus stock may from time to time be granted under this Plan to other
individuals who contribute to the success of the Company or its subsidiaries
but who are not employees of the Company, all on the terms and conditions set
forth herein.

1. Purpose of the Plan. The Plan is intended to aid the Company in maintaining
and developing a management team, attracting qualified officers and employees
capable of assisting in the future success of the Company, and rewarding those
individuals who have contributed to the success of the Company. It is designed
to aid the Company in retaining the services of executives and employees and
in attracting new personnel when needed for future operations and growth and
to provide such personnel with an incentive to remain employees of the
Company, to use their best efforts to promote the success of the Company's
business, and to provide them with an opportunity to obtain or increase a
proprietary interest in the Company. It is also designed to permit the Company
to reward those individuals who are not employees of the Company but who are
perceived by management as having contributed to the success of the Company or
who are important to the continued business and operations of the Company. The
above aims will be effectuated through the granting of options ("Options") to
purchase shares of common stock of the Company, par value $0.001 per share
(the "Stock"), or the granting of awards of bonus stock ("Stock Awards"), all
subject to the terms and conditions of this Plan. It is intended that the
Options issued pursuant to this Plan include. when designated as such at the
time of grant, options which qualify as Incentive Stock Options ("Incentive
Options") within the meaning of section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or any amendment or successor provision of like
tenor. If the Company has a class of securities registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), it is
intended that Options or Stock Awards granted pursuant to this Plan qualify
for the exemption provided for in Rule 16b-3 ("Rule 16b-3") promulgated under
the Exchange Act or any amendment or successor rule of like tenor when granted
in accordance with the provisions of such rule.

2. Shareholder Approval. The Plan shall become effective immediately on
adoption by the board of directors of the Company (the "Board") and awards
under the Plan can be made at that time or at any subsequent time. The Plan
shall be submitted to the Company's shareholders in the manner set forth
below:

(a) Within twelve months after the Plan has been adopted by the Board, the
Plan shall be submitted for approval by those shareholders of the Company who
are entitled to vote on such matters at a duly held shareholders' meeting or
approved by the unanimous written consent of the holders of the issued and
outstanding Stock of the Company. If the Plan is presented at a shareholders'
meeting, it shall be approved by the affirmative vote of the holders of a
majority of the issued and outstanding Stock in attendance, in person or by
proxy, at such meeting. Notwithstanding the foregoing, the Plan may be
approved by the shareholders in any other manner not inconsistent with the
Company's articles of incorporation and bylaws, the applicable provisions of
state corporate laws, and the applicable provisions of the Code and
regulations adopted thereunder.

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<PAGE> 2

(b) In the event the Plan is so approved, the secretary of the Company shall,
as soon as practicable following the date of final approval, prepare and
attach to this Plan certified copies of all relevant resolutions adopted by
the shareholders and the Board.

(c)Failure to obtain shareholder approval on or before the date that is twelve
months subsequent to the adoption of this Plan by the Board shall not affect
awards previously granted under the Plan; provided that, none of the Options
issued under this Plan will qualify as Incentive Options.

3. Administration of the Plan. Administration of the Plan shall be determined
by the Board. Subject to compliance with applicable provisions of the
governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board as it deems proper. Any Option or Stock Award approved
by the Board shall be approved by a majority vote of those members of the
Board in attendance at a meeting at which a quorum is present. Any Option or
Stock Award approved by a committee designated by the Board shall be approved
as specified by the Board at the time of delegation. The interpretation and
construction of the terms of the Plan by the Board or a duly authorized
committee shall be final and binding on all participants in the Plan absent a
showing of demonstrable error. No member of the Board or duly authorized
committee shall be liable for any action taken or determination made in good
faith with respect to the Plan.

The Board's or duly authorized committee's determination under the Plan
(including without limitation determinations of the persons to receive Options
or Stock Awards, the form, amount, and timing of such Options or Stock Awards,
the terms and provisions of such Options or Stock Awards, and the agreements
evidencing same) need not be uniform and may be made by the Board or duly
authorized committee selectively among persons who receive, or are eligible to
receive, Options or Stock Awards under the Plan, whether or not such persons
are similarly situated.

4. Shares of Stock Subject to the Plan.  A total of 2,000,000 shares of Stock
may be subject to, or issued pursuant to, Options or Stock Awards granted
under the terms of this Plan. Any shares subject to an Option or Stock Award
under the Plan, which Option or Stock Award for any reason expires or is
forfeited terminated, or surrendered unexercised as to such shares, shall be
added back to the total number of shares reserved for issuance under the terms
of this Plan. If any right to acquire Stock granted under the Plan is
exercised by the delivery of shares of Stock or the relinquishment of rights
to shares of Stock, only the net shares of Stock issued (the shares of Stock
issued less the shares of Stock surrendered) shall count against the total
number of shares reserved for issuance under the terms of this Plan.  The
number of shares of Stock subject to the Plan is subject to adjustment as set
forth in Section 17 hereof.

5. Reservation of Stock on Granting of Option.  At the time of granting any
Option under the terms of this Plan, there will be reserved for issuance on
the exercise of the Option the number of shares of Stock of the Company
subject to such Option. The Company may reserve either authorized but unissued
shares or issued shares that have been reacquired by the Company.

6. Eligibility. Options or Stock Awards under the Plan may be granted to
employees, including officers and directors, of the Company or its
subsidiaries, as may be existing from time to time, and to other individuals
who are not employees of the Company as may be deemed in the best interest of
the Company by the Board or a duly authorized committee. Such Options or Stock
Awards shall be in the amounts, and shall have the rights and be subject to
the restrictions, as may be determined by the Board or a duly authorized
committee at the time of grant, all as may be within the general provisions of
this Plan.

<PAGE>
<PAGE> 3

7. Term of Options and Certain Limitations on Right to Exercise.

(a)Each Option shall have the term established by the Board or duly authorized
committee at the time the Option is granted but in no event may an Option have
a term in excess of ten years.

(b)The term of the Option, once it is granted, may be reduced only as provided
for in this Plan or under the written provisions of the Option.

(c)Unless otherwise specifically provided by the written provisions of the
Option, no holder or his or her legal representative, legatee, or distributee
will be, or shall be deemed to be, a holder of any shares subject to an Option
unless and until the holder exercises his or her right to acquire all or a
portion of the Stock subject to the Option and delivers the required
consideration to the Company in accordance with the terms of this Plan and the
Option and then only to the extent of the number of shares of Stock acquired.
Except as specifically provided in this Plan or as otherwise specifically
provided by the written provisions of the Option, no adjustment to the
exercise price or the number of shares of Stock subject to the Option shall be
made for dividends or other rights for which the record date is prior to the
date the Stock subject to the Option is acquired by the holder.

(d) Options under the Plan shall vest and become exercisable at such time or
times and on such terms as the Board or a duly authorized committee may
determine at the time of the grant of the Option.

(e)Options granted under the Plan shall contain such other provisions,
including, without limitation. further restrictions on the vesting and
exercise of the Option, as the Board or a duly authorized committee shall deem
advisable.

(f)In no event may an Option be exercised after the expiration of its term.

(g)Unless otherwise specifically provided by the written provisions of an
Option granted pursuant to this Plan, upon receipt of:

(i) any request that the exercise of the Option or the resale of any shares of
Stock issued or to be issued on exercise of such Option will be registered
under the Securities Act; or

(ii) any notice of exercise of such Option pursuant to its terms, in lieu of
any obligation to effect any registration with respect to the Options or
shares of Common Stock issuable on such Option or in lieu of delivering shares
of Common Stock on the exercise of the Option;

the Company may, within five business days of receipt of such request to
register or notice of exercise, purchase, in whole or in part, such Options
from the Optionee at an amount in cash equal to the difference between the
then current fair market value (as defined below) of the Common Stock on the
day of such repurchase and the exercise price in effect on such day.

In order to exercise such right, the Company must provide written notice to
the optionee at least five days prior to the date that the Company proposes to
repurchase such Options. For purposes of this section. the fair market value
of the Common Stock shall be determined by the Board or a duly authorized
committee based on the closing price for the Stock as quoted on a registered
national securities exchange or, if not listed on a national exchange, the
Nasdaq Stock Market ("Nasdaq"), on the trading day immediately preceding the
date that the Company's provides notice of its intent to repurchase the
Options, or, if not listed on such an exchange or included on Nasdaq, the
closing price for the Stock as determined by the Board or a duly authorized
committee through any other reliable means of determination available on the
close of business on the trading day last preceding the date of providing the
notice.

<PAGE>
<PAGE> 4

8. Exercise Price. The exercise price of each Option issued under the Plan
shall be determined by the Board or a duly authorized committee on the date of
grant.

9. Payment Exercise Price. The exercise of any Option shall be contingent on
receipt by the Company of cash, certified bank check to its order, or other
consideration acceptable to the Company; provided that, at the discretion of
the Board or a duly authorized committee, the written provisions of the Option
may provide that payment can be made in whole or in part in shares of Stock of
the Company that have been owned by the optionee for more than six months or
by the surrender of Options to acquire Stock from the Company that have been
held for more than six months, which Stock or Options shall be valued at their
then fair market value as determined by the Board or a duly authorized
committee. Any consideration approved by the Board or a duly authorized
committee that calls for the payment of the exercise price over a period of
more than one year shall provide for interest, which shall not be included as
part of the exercise price, that is equal to or exceeds the imputed interest
provided for in section 483 of the Code or any amendment or successor section
of like tenor.

10. Withholding. If the grant of a Stock Award or the grant or exercise of an
Option pursuant to this Plan, or any other event in connection with any such
grant or exercise, creates an obligation to withhold income and employment
taxes pursuant to the Code or applicable state or local laws, such obligation
may, at the discretion of the Board or a duly authorized committee at the time
of the grant of the Option or Stock Award and to the extent permitted by the
terms of the Option or Stock Award and the then governing provisions of the
Code and the Exchange Act, be satisfied (i) by the holder of the Option or
Stock Award delivering to the Company an amount of cash equal to such
withholding obligation; (ii) by the Company withholding from any compensation
or other amount owing to the holder of the Option or Stock Award the amount
(in cash, Stock, or other property as the Company may determine) of the
withholding obligation; (iii) by the Company withholding shares of Stock
subject to the Option or Stock Award with a fair market value equal to such
obligation; or (iv) by the holder of the Option or Stock Award either
delivering shares of Stock that have been owned by the holder for more than
six months or canceling Options or other rights to acquire Stock from the
Company that have been held for more than six months with a fair market value
equal to such requirements. In all events, delivery of shares of Stock
issuable on exercise of the Option or on grant of the Stock Award shall be
conditioned upon and subject to the satisfaction or making provision for the
satisfaction of the withholding obligation of the Company resulting from the
grant or exercise of the Option, grant of the Stock Award, or any other event.
The Company shall be further authorized to take such other action as may be
necessary, in the opinion of the Company, to satisfy all obligations for the
payment of such taxes.

11. Incentive Options - Additional Provisions. In addition to the other
restrictions and provisions of this Plan, any Option granted hereunder that is
intended to be an Incentive Option shall meet the following further
requirements:

(a)The exercise price of an Incentive Option shall not be less than the fair
market value of the Stock on the date of grant of the Incentive Option as
determined by the Board or a duly authorized committee based on the closing
price for the Stock as quoted on a registered national securities exchange or,
if not listed on a national exchange or Nasdaq, over the five-day trading
period immediately prior to the date of grant of such Incentive Option, or, if
not listed on such an exchange or included on Nasdaq, the closing price for
the Stock as determined by the Board or a duly authorized committee through
any other reliable means of determination available on the close of business
on the trading day last preceding the date of grant of such Incentive Option
and permitted by the applicable provisions of the Code.

<PAGE>
<PAGE> 5

(b)No Incentive Option may be granted under the Plan to any individual that
owns (either of record or beneficially) Stock possessing more than 10% of the
combined voting power of the Company or any parent or subsidiary corporation
unless both the exercise price is at least 110% of the fair market value of
the Stock on the date the Option is granted and the Incentive Option by its
terms is not exercisable more than five years after the date it is granted.

(c)Incentive Options may be granted only to employees of the Company or its
subsidiaries and only in connection with that employee's employment by the
Company or the subsidiary. Notwithstanding the above, directors and other
individuals who have contributed to the success of the Company or its
subsidiaries may be granted Incentive Options under the Plan, subject to, and
to the extent permitted by, applicable provisions of the Code and regulations
promulgated thereunder, as they may be amended from time to time.

(d)The aggregate fair market value (determined as of the date the Incentive
Option is granted) of the shares of Stock with respect to which Incentive
Options are exercisable for the first time by any individual during any
calendar year under the Plan (and all other plans of the Company and its
subsidiaries) may not exceed $100,000.

(e)No Incentive Option shall be transferable other than by will or the laws of
descent and distribution and shall be exercisable, during the lifetime of the
optionee, only by the optionee to whom the Incentive Option is granted.

(f)No individual acquiring shares of Stock pursuant to any Incentive Option
granted under this Plan shall sell, transfer, or otherwise convey the Stock
until after the date that is both two years after the date the Incentive
Option was granted and one year after the date the Stock was acquired pursuant
to the exercise of the Incentive Option. If any individual makes a
disqualifying disposition, he or she shall notify the Company within 30 days
of such transaction.

(g)No Incentive Option may be exercised unless the holder was, within three
months of such exercise, and had been since the date the Incentive Option was
granted, an eligible employee of the Company as specified in the applicable
provisions of the Code, unless the employment was terminated as a result of
the death or disability (as defined in the Code and the regulations
promulgated thereunder as they may be amended from time to time) of the
employee or the employee dies within three months of the termination. In the
event of termination as a result of disability, the holder shall have a one
year period following termination in which to exercise the Incentive Option.
In the event of death of the holder, the Incentive Option must be exercised
within six months after the issuance of letters testamentary or administration
or the appointment of an administrator, executor, or personal representative,
but not later than one year after the date of termination of employment. An
authorized absence or leave approved by the Board or a duly authorized
committee for a period of 90 days or less shall not be considered an
interruption of employment for any purpose under the Plan.

(h)All Incentive Options shall be deemed to contain such other limitations and
restrictions as are necessary to conform the Incentive Option to the
requirements for "incentive stock options" as defined in section 422 of the
Code, or any amendment or successor statute of like tenor.

All of the foregoing restrictions and limitations are based on the governing
provisions of the Code as of the date of adoption of this Plan. If at any time
the Code is amended to permit the qualification of an Option as an incentive
stock option without one or more of the foregoing restrictions or limitations
or the terms of such restrictions or limitations are modified, the Board or a
duly authorized committee may grant Incentive Options, and may modify
outstanding Incentive Options in accordance with such changes, all to the
extent that such action by the Board or duly authorized committee does not
disqualify the Options from treatment as incentive stock options under the
provisions of the Code as may be amended from time to time.

<PAGE>
<PAGE> 6

12. Awards to Directors and Officers. To the extent the Company has a class of
securities registered under the Exchange Act, Options or Stock Awards granted
under the Plan to directors and officers (as used in Rule 16b-3 promulgated
under the Exchange Act or any amendment or successor rule of like tenor)
intended to qualify for the exemption from section 16(b) of the Exchange Act
provided in Rule 16b-3 shall, in addition to being subject to the other
restrictions and limitations set forth in this Plan, be made as follows:

(a)A transaction whereby there is a grant of an Option or Stock Award pursuant
to this Plan must satisfy one of the following:

(i)The transaction must be approved by the Board or a duly authorized
committee composed solely of two or more non-employee directors of the Company
(as defined in Rule 16b-3);

(ii)The transaction must be approved or ratified, in compliance with section
14 of the Exchange Act, by either: the affirmative vote of the holders of a
majority of the securities of the Company present or represented and entitled
to vote at a meeting of the shareholders of the Company held in accordance
with the applicable laws of the state of incorporation of the Company; or, if
allowed by applicable state law, the written consent of the holders of a
majority, or such greater percentage as may be required by applicable laws of
the state of incorporation of the Company, of the securities of the Company
entitled to vote. If the transaction is ratified by the shareholders, such
ratification must occur no later than the date of the next annual meeting of
shareholders; or

(iii)The Stock acquired must be held by the officer or director for a period
of six months subsequent to the date of the grant; provided that, if the
transaction involves a derivative security (as defined in section 16 of the
Exchange Act), this condition shall be satisfied if at least six months elapse
from the date of acquisition of the derivative security to the date of
disposition of the derivative security (other than on exercise or conversion)
or its underlying equity security.

(b)Any transaction involving the disposition to the Company of its securities
in connection with Options or Stock Awards granted pursuant to this Plan
shall:

(i)be approved by the Board or a duly authorized committee composed solely of
two or more non-employee directors; or

(ii)be approved or ratified, in compliance with section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of the state of
incorporation of the Company or, if allowed by applicable state law, the
written consent of the holders of a majority, or such greater percentage as
may be required by applicable laws of the state of incorporation of the
Company, of the securities of the Company entitled to vote; provided that,
such ratification occurs no later than the date of the next annual meeting of
shareholders.

All of the foregoing restrictions and limitations are based on the governing
provisions of the Exchange Act and the rules and regulations promulgated
thereunder as of the date of adoption of this Plan. If at any time the
governing provisions are amended to permit an Option to be granted or
exercised or Stock Award to be granted pursuant to Rule 16b-3 or any amendment
or successor rule of like tenor without one or more of the foregoing
restrictions or limitations, or the terms of such restrictions or limitations
are modified, the Board or a duly authorized committee may award Options or

<PAGE>
<PAGE> 7

Stock Awards to directors and of dicers, and may modify outstanding Options or
Stock Awards, in accordance with such changes, all to the extent that such
action by the Board or a duly authorized committee does not disqualify the
Options or Stock Awards from exemption under the provisions of Rule 16b-3 or
any amendment or successor rule of similar tenor.

13. Stock Awards. The Board or a duly authorized committee may grant Stock
Awards to individuals eligible to participate in this Plan, in the amount, and
subject to the provisions determined by the Board or a duly authorized
committee. The Board or a duly authorized committee shall notify in writing
each person selected to receive a Stock Award hereunder as soon as practicable
after he or she has been so selected and shall inform such person of the
number of shares he or she is entitled to receive, the approximate date on
which such shares will be issued, and the Forfeiture Restrictions applicable
to such shares. (For purposes hereof, the term "Forfeiture Restrictions" shall
mean any prohibitions against sale or other transfer of shares of Stock
granted under the Plan and the obligation of the holder to forfeit his or her
ownership of or right to such shares and to surrender such shares to the
Company on the occurrence of certain conditions.) The Board or a duly
authorized committee may, at its discretion, require the payment in cash to
the Company by the award recipient of the par value of the Stock. The shares
of Stock issued pursuant to a Stock Award shall not be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of during such
period or periods of time which the Board or a duly authorized committee shall
establish at the time of the grant of the Stock Award. If a Stock Award is
made to an employee of the Company or its subsidiaries, the employee shall be
obligated for no consideration other than the amount, if any, of the par value
paid in cash for such shares, to forfeit and surrender such shares as he or
shall have received under the Plan which are then subject to Forfeiture
Restrictions to the Company if he or she is no longer an employee of the
Company or its subsidiaries for any reason; provided that, in the event of
termination of the employee's employment by reason of death or total and
permanent disability, the Board or duly authorized committee, in its sole
discretion, may cancel the Forfeiture Restrictions. Certificates representing
shares subject to Forfeiture Restrictions shall be appropriately legend as
determined by the Board or a duly authorized committee to reflect the
Forfeiture Restrictions, and the Forfeiture Restrictions shall be binding on
any transferee of the shares.

14. Assignment. At the time of grant of an Option or Stock Award, the Board or
duly authorized Committee. in its sole discretion, may impose restrictions on
the transferability of such Option or Stock Award and provide that such Option
shall not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code and that, except as permitted by the foregoing, such Options or Stock
Awards, granted under the Plan and the rights and privileges thereby conferred
shall not be transferred, assigned, pledged, or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment, or similar process. On any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of the Option or Stock Award, or of
any right or privilege conferred thereby, contrary to the provisions thereof,
or on the levy of any attachment or similar process on such rights and
privileges, the Option or Stock Award and such rights and privileges shall
immediately become null and void.

15.Additional Terms and Provisions of Awards. The Board or duly authorized
committee shall have the right to impose additional limitations on individual
awards under the Plan. For example, and without limiting the authority of the
Board or a duly authorized committee, an individual award may be conditioned
on continued employment for a specified period or may be voided based on the
award holder's gross negligence in the performance of his or her duties,

<PAGE>
<PAGE> 8

substantial failure to meet written standards established by the Company for
the performance of his or her duties, criminal misconduct, or willful or gross
misconduct in the performance of his or her duties. In addition, the Board or
a duly authorized committee may establish additional rights in the holders of
individual awards at the time of grant. For example, and without limiting the
authority of the Board or a duly authorized committee, an individual award may
include the right to immediate payment of the value inherent in the award on
the occurrence of certain events such as a change in control of the Company,
all on the terms and conditions set forth in the award at the time of grant.
The Board or a duly authorized committee may. at the time of the grant of the
Option or Stock Award, establish any other terms, restrictions, or provisions
on the exercise of an Option or the holding of Stock subject to the Stock
Award as it deems appropriate. All such terms, restrictions, and provisions
must be set forth in writing at the time of grant in order to be effective.

16. Dilution or Other Adjustment. In the event that the number of shares of
Stock of the Company from time to time issued and outstanding is increased
pursuant to a stock split or a stock dividend, the number of shares of Stock
then covered by each outstanding Option granted hereunder shall be increased
proportionately, with no increase in the total purchase price of the shares
then so covered, and the number of shares of Stock subject to the Plan shall
be increased by the same proportion. Shares awarded under the terms of a Stock
Award shall be entitled to the same rights as other issued and outstanding
shares of Stock, whether or not then subject to Forfeiture Restrictions,
although any additional shares of Stock issued to the holder of a Stock Award
shall be subject to the same Forfeiture Restrictions as the Stock Award. In
the event that the number of shares of Stock of the Company from time to time
issued and outstanding is reduced by a combination or consolidation of shares,
the number of shares of Stock then covered by each outstanding Option granted
hereunder shall be reduced proportionately, with no reduction in the total
purchase price of the shares then so covered, and the number of shares of
Stock subject to the Plan shall be reduced by the same proportion. Shares
awarded under a Stock Award shall be treated as other issued and outstanding
shares of Stock, whether or not then subject to Forfeiture Restrictions. In
the event that the Company should transfer assets to another corporation and
distribute the stock of such other corporation without the surrender of Stock
of the Company, and if such distribution is not taxable as a dividend and no
gain or loss is recognized by reason of section 355 of the Code or any
amendment or successor statute of like tenor, then the total purchase price of
the Stock then covered by each outstanding Option shall be reduced by an
amount that bears the same ratio to the total purchase price then in effect as
the market value of the stock distributed in respect of a share of the Stock
of the Company, immediately following the distribution, bears to the aggregate
of the market value at such time of a share of the Stock of the Company plus
the stock distributed in respect thereof. Shares issued under a Stock Award
shall be treated as issued and outstanding whether or not subject to
Forfeiture Restrictions, although any stock of the other corporation to be
distributed with respect to the shares awarded under the Stock Award shall be
subject to the Forfeiture Restrictions then applicable to such shares and may
be held by the Company or otherwise subject to restrictions on transfer until
the expiration of the Forfeiture Restrictions. In the event that the Company
distributes the stock of a subsidiary to its shareholders, makes a
distribution of a major portion of its assets, or otherwise distributes a
significant portion of the value of its issued and outstanding Stock to its
shareholders, the number of shares then subject to each outstanding Option and
the Plan, or the exercise price of each outstanding Option, may be adjusted in
the reasonable discretion of the Board or a duly authorized committee. Shares
awarded under a Stock Award shall be treated as issued and outstanding,
whether or not subject to Forfeiture Restrictions, although any Stock, assets,
or other rights distributed shall be subject to the Forfeiture Restrictions
governing the shares awarded under the Stock Award and, at the discretion of

<PAGE>
<PAGE> 9

the Board or a duly authorized committee, may be held by the Company or
otherwise subject to restrictions on transfer by the Company until the
expiration of such Forfeiture Restrictions. All such adjustments shall be made
by the Board or duly authorized committee, whose determination upon the same,
absent demonstrable error, shall be final and binding on all participants
under the Plan. No fractional shares shall be issued, and any fractional
shares resulting from the computations pursuant to this section shall be
eliminated from the respective Option or Stock Award. No adjustment shall be
made for cash dividends, for the issuance of additional shares of Stock for
consideration approved by the Board, or for the issuance to stockholders of
rights to subscribe for additional Stock or other securities.

17. Options or Stock Awards to Foreign Nationals. The Board or a duly
authorized committee may, in order to fulfill the purposes of this Plan and
without amending the Plan, grant Options or Stock Awards to foreign nationals
or individuals residing in foreign countries that contain provisions,
restrictions, and limitations different from those set forth in this Plan and
the Options or Stock Awards made to United States residents in order to
recognize differences among the countries in law, tax policy, and custom. Such
grants shall be made in an attempt to provide such individuals with
essentially the same benefits as contemplated by a grant to United States
residents under the terms of this Plan.

18. Listing and Registration of Shares. Unless otherwise expressly provided on
the granting of an award under this Plan, the Company shall have no obligation
to register any securities issued pursuant to this Plan or issuable on the
exercise of Options granted hereunder. Each award shall be subject to the
requirement that if at any time the Board or a duly authorized committee shall
determine, in its sole discretion, that it is necessary or desirable to list,
register, or qualify the shares covered thereby on any securities exchange or
under any state or federal law, or obtain the consent or approval of any
governmental agency or regulatory body as a condition of, or in connection
with, the granting of such award or the issuance or purchase of shares
thereunder, such award may not be made or exercised in whole or in part unless
and until such listing. registration, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board or a
duly authorized committee.

19. Expiration and Termination of the Plan. The Plan may be abandoned or
terminated at any time by the Board or a duly authorized committee except with
respect to any Options or Stock Awards then outstanding under the Plan. The
Plan shall otherwise terminate on the earlier of the date that is: (i) ten
years after the date the Plan is adopted by the Board; or (ii) ten years after
the date the Plan is approved by the shareholders of the Company.

20. Form of Awards. Awards granted under the Plan shall be represented by a
written agreement which shall be executed by the Company and which shall
contain such terms and conditions as may be determined by the Board or a duly
authorized committee and permitted under the terms of this Plan. Option
agreements evidencing Incentive Options shall contain such terms and
conditions, among others, as may be necessary in the opinion of the Board or a
duly authorized committee to qualify them as incentive stock options under
section 422 of the Code or any amendment or successor statute of like tenor.

21. No Right of Employment. Nothing contained in this Plan or any Option or
Stock Award shall be construed as conferring on a director, officer, or
employee any right to continue or remain as a director, officer, or employee
of the Company or its subsidiaries.

<PAGE>
<PAGE> 10

22. Leaves of Absence. The Board or duly authorized committee shall be
entitled to make such rules, regulations, and determinations as the Board or
duly authorized committee deems appropriate under the Plan in respect of any
leave of absence taken by the recipient of any Option or Stock Award. Without
limiting the generality of the foregoing, the Board or duly authorized
committee shall be entitled to determine (a) whether or not any such leave of
absence shall constitute a termination of employment within the meaning of the
Plan, and (b) the impact, if any, of any such leave of absence on any Option
or Stock Award under the Plan theretofore made to any recipient who takes such
leave of absence.

23. Amendment of the Plan. The Board or a duly authorized committee may modify
and amend the Plan in any respect; provided, however, that to the extent such
amendment or modification would cause the Plan to no longer comply with the
applicable provisions of the Code with respect to Incentive Options, such
amendment or modification shall also be approved by the shareholders of the
Company. Subject to the foregoing and, if the Company is subject to the
provisions of 16(b) of the Exchange Act, the limitations of Rule 16b-3
promulgated under the Exchange Act or any amendment or successor rule of like
tenor, the Plan shall be deemed to be automatically amended as is necessary
(i) with respect to the issuance of Incentive Options, to maintain the Plan in
compliance with the provisions of section 422 of the Code, and regulations
promulgated thereunder from time to time, or any amendment or successor
statute thereto, and (ii) with respect to Options or Stock Awards granted to
officers and directors of the Company, to maintain the awards made under the
Plan in compliance with the provisions of Rule 16b-3 promulgated under the
Exchange Act or any amendment or successor rule of like tenor.

DATED AS OF THE DATE FIRST ABOVE WRITTEN:

ATTEST:

By David K. Griffiths, Secretary/Treasurer

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