Document:

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EXHIBIT 10.2

                                 PROMISSORY NOTE

$500,000.00                                              Date:  November 7, 2005

For value received the undersigned SUPERIOR GALLERIES, INC. (the "Promisor")
promises to pay to the order of KEVIN LIPTON RARE COINS, INC. (the "Payee"),

At Beverly Hills, California or such other place as the Payee may designate in
writing, the sum of $ 500,000.00 with interest from November 7, 2005, on the
unpaid principal at the rate of 12.00% percent annually.

The unpaid principal shall be payable on December 7, 2005. Interest for 30 days
shall be paid in advance. All payments on this Note shall be applied first in
payment of any accrued interest and any remainder in payment of principal.

This Note shall be secured by specific coins "Coin Collateral" from Superior's
rare coin inventory as listed in Exhibit A. The Coin Collateral may be held by
the Payee or another third party designated by the Payee.

If any one or more of the provisions of this Note is determined to be
unenforceable, in whole or in part, or any reason, the remaining provisions
shall remain fully operative.

All payments of principal and interest on this Note shall be paid in the legal
currency of the United States. Promisor waives presentment for payment, protest
and notice of protest and nonpayment of this Note.

No renewal or extension of this Note, delay in enforcing any right of the Payee
under this Note, or assignment by Payee of this Note shall affect the liability
of the Promisor. All rights for the Payee under this Note are cumulative and may
be excised concurrently or consecutively at the Payee's option.

This note shall be construed in accordance with the laws of the State of
California.

Signed this 7th day of November 7, 2005 at Beverly Hills, California.

By:      /s/ Paul Biberkraut
     ----------------------------------
         Paul Biberkraut,
         Chief Financial Officer

                                    Page 39TRAFFIC.COM, INC.

2005 LONG-TERM INCENTIVE PLAN

As
Adopted by the Board of Directors

on
October 31, 2005

 

 

TRAFFIC.COM, INC.

2005 LONG-TERM INCENTIVE PLAN

 

	
  ARTICLE
  1. Background and Purpose of the Plan

  	
   

  
	
  1.1.

  	
  Background

  	
   

  
	
  1.2.

  	
  Purpose

  	
   

  
	
  1.3.

  	
  Prior Plans

  	
   

  
	
  1.4.

  	
  Eligibility

  	
   

  
	
  1.5.

  	
  Definitions

  	
   

  
	
  ARTICLE
  2. Shares Subject to the Plan

  	
   

  
	
  2.1.

  	
  Shares
  Subject to the Plan

  	
   

  
	
  2.2.

  	
  Shares
  Counted Against Limitation

  	
   

  
	
  2.3.

  	
  Lapsed
  Awards

  	
   

  
	
  2.4.

  	
  Individual
  Share Limit

  	
   

  
	
  2.5.

  	
  Adjustments

  	
   

  
	
  ARTICLE
  3. Administration of the Plan

  	
   

  
	
  3.1.

  	
  Administrator

  	
   

  
	
  3.2.

  	
  Powers of
  the Administrator

  	
   

  
	
  3.3.

  	
  Compliance
  with Applicable Law

  	
   

  
	
  3.4.

  	
  Effect of
  Administrator’s Decision and Administrator’s Liability

  	
   

  
	
  3.5.

  	
  Delegation
  to Executive Officers

  	
   

  
	
  ARTICLE
  4. Vesting and Performance Objectives

  	
   

  
	
  4.1.

  	
  General

  	
   

  
	
  4.2.

  	
  Period of
  Absence from Providing Services

  	
   

  
	
  4.3.

  	
  Performance
  Objectives

  	
   

  
	
  ARTICLE
  5. Stock Options

  	
   

  
	
  5.1.

  	
  Terms of
  Option

  	
   

  
	
  5.2.

  	
  Type of
  Option

  	
   

  
	
  5.3.

  	
  Limitations

  	
   

  
	
  5.4.

  	
  Form of
  Consideration

  	
   

  
	
  5.5.

  	
  Exercise of
  Option

  	
   

  
	
  5.6.

  	
  Repurchase
  Rights

  	
   

  
	
  5.7.

  	
  Substitute
  Awards

  	
   

  
	
  ARTICLE
  6. Stock Appreciation Rights

  	
   

  
	
  6.1.

  	
  Terms of
  Stock Appreciation Right

  	
   

  
	
  6.2.

  	
  Exercise of
  Stock Appreciation Right

  	
   

  
	
  ARTICLE
  7. Restricted Stock

  	
   

  
	
  7.1.

  	
  Terms of
  Restricted Stock

  	
   

  
	
  7.2.

  	
  Transferability

  	
   

  
	
  7.3.

  	
  Other
  Restrictions

  	
   

  
	
  7.4.

  	
  Removal of
  Restrictions

  	
   

  

 

i

 

	
  7.5.

  	
  Voting
  Rights

  	
   

  
	
  7.6.

  	
  Dividends
  and Other Distributions

  	
   

  
	
  7.7.

  	
  Right of
  Repurchase of Restricted Stock

  	
   

  
	
  ARTICLE
  8. Restricted Stock Units

  	
   

  
	
  8.1.

  	
  Terms of
  Restricted Stock Units

  	
   

  
	
  8.2.

  	
  Settlement
  of Restricted Stock Units

  	
   

  
	
  8.3.

  	
  Dividend and
  Other Distribution Equivalents

  	
   

  
	
  8.4.

  	
  Forfeiture

  	
   

  
	
  ARTICLE
  9. Other Equity-Based Awards

  	
   

  
	
  9.1.

  	
  Other
  Equity-Based Awards

  	
   

  
	
  ARTICLE
  10. Additional Terms of Awards

  	
   

  
	
  10.1.

  	
  No Rights to
  Awards

  	
   

  
	
  10.2.

  	
  No Effect on
  Employment or Service

  	
   

  
	
  10.3.

  	
  No
  Fractional Shares

  	
   

  
	
  10.4.

  	
  Transferability
  of Awards

  	
   

  
	
  10.5.

  	
  Date of
  Grant

  	
   

  
	
  10.6.

  	
  Conditions
  On Delivery of Shares and Lapsing of Restrictions

  	
   

  
	
  10.7.

  	
  Inability to
  Obtain Authority

  	
   

  
	
  10.8.

  	
  Withholding

  	
   

  
	
  10.9.

  	
  Other
  Provisions in Award Agreements

  	
   

  
	
  10.10.

  	
  Section 16
  of the Exchange Act

  	
   

  
	
  10.11.

  	
  Not Benefit
  Plan Compensation

  	
   

  
	
  ARTICLE
  11. Dissolution or Liquidation or Other Events

  	
   

  
	
  11.1.

  	
  Dissolution
  or Liquidation

  	
   

  
	
  11.2.

  	
  Reorganization

  	
   

  
	
  ARTICLE
  12. Term, Amendment, and Termination of Plan

  	
   

  
	
  12.1.

  	
  Term of Plan

  	
   

  
	
  12.2.

  	
  Termination
  of the Plan

  	
   

  
	
  12.3.

  	
  Amendment of
  the Plan

  	
   

  
	
  12.4.

  	
  Effect of
  Amendment or Termination

  	
   

  
	
  12.5.

  	
  Adjustments
  of Awards Upon the Occurrence of Unusual or Nonrecurring Events

  	
   

  
	
  ARTICLE
  13. Miscellaneous

  	
   

  
	
  13.1.

  	
  Authorization
  of Sub-Plans

  	
   

  
	
  13.2.

  	
  Governing
  Law

  	
   

  
	
  13.3.

  	
  Administrator’s
  Manner of Action

  	
   

  
	
  13.4.

  	
  Expenses

  	
   

  
	
  13.5.

  	
  Severability

  	
   

  
	
  13.6.

  	
  Construction

  	
   

  
	
  13.7.

  	
  No Trust or
  Fund Created

  	
   

  
	
  13.8.

  	
  Headings

  	
   

  
	
  13.9.

  	
  Complete
  Statement of Plan

  	
   

  

 

ii

 

TRAFFIC.COM, INC.

2005 LONG-TERM INCENTIVE PLAN

 

ARTICLE 1. 

BACKGROUND AND PURPOSE OF THE PLAN

1.1.          Background.  This 2005 Long-Term Incentive Plan (the “Plan”) permits the grant of Incentive Stock Options,
Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, and other equity-based awards.

1.2.          Purpose.  The purposes of the Plan are (a) to attract
and retain highly competent persons as Employees, Directors, and Consultants of
the Company; (b) to provide additional incentives to such Employees, Directors,
and Consultants; and (c) to promote the success of the business of the Company.

1.3.          Prior
Plans.  The Plan shall serve as the
successor to the Company’s 1999 Long-Term Incentive Plan and 1999 Non-Employee’s
Stock Plan (the “Prior Plans”), and no further option grants or stock issuances
shall be made under the Prior Plans after the Effective Date.  The adoption of the Plan as of the Effective
Date shall not affect the terms of any option, stock appreciation right,
restricted stock, deferred stock, bonus stock, award in lieu of cash
obligations or any other award that was outstanding prior to the Effective Date
and all such awards shall continue to be governed by the terms of the Prior
Plans as in effect immediately prior to the Effective Date.

1.4.          Eligibility.  All of the Company’s Service Providers, as
determined by the Administrator, are eligible to be granted Awards under the
Plan.  Incentive Stock Options may be
granted only to Employees.

1.5.          Definitions.  Capitalized terms used in the Plan and not
otherwise defined herein shall have the meanings assigned to such terms in the
attached Appendix.

ARTICLE 2. 

SHARES SUBJECT TO THE PLAN

2.1.       Shares
Subject to the Plan.  Subject to
adjustment under Section 2.5 of the Plan, the number of Shares initially
reserved for issuance pursuant to Awards made under the Plan shall not exceed 4,262,484
Shares.  Such reserve shall consist of:

(a)   not
more than 72,093 remaining Shares authorized for issuance under the Prior Plans
but not reserved for outstanding options and awards;

(b)   not
more than 2,440,391 additional Shares which are subject to awards granted or
issued under the Prior Plans on or before the Effective Date and which are
surrendered before exercise, lapse, are terminated without being exercised, or
are forfeited, in whole or in part, for any reason after the Effective Date;
and

 

 

(c)   1,750,000
additional Shares reserved for issuance under the Plan.

The total
number of Shares available for issuance under the Plan, including Shares
subject to then outstanding Awards, shall automatically increase on January 1
of each year during the term of the Plan, beginning January 1, 2007, by an
amount equal to the lesser of (i) 350,000 shares, (ii) 1% of the outstanding
shares of the Company’s common stock on that date, or (iii) an amount
determined by the Board.  Shares issued
under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.

2.2.          Shares
Counted Against Limitation.  If an
Award is exercised, in whole or in part, by delivery or attestation of Shares
under Section 5.4(b), or if the tax withholding obligation is satisfied by
withholding Shares under Section 10.8(b), the number of Shares deemed to have
been issued under the Plan (for purposes of the limitation set forth in Section
2.1) shall be the number of Shares that were subject to the Award or portion
thereof so exercised and not the net number of Shares actually issued upon such
exercise.

2.3.          Lapsed
Awards.  If an Award: (i) expires;
(ii) is terminated, surrendered, or canceled without having been exercised
in full; or (iii) is surrendered pursuant to an Exchange Program; or (iv) is
otherwise forfeited in whole or in part, including as a result of Shares
constituting or subject to an Award being repurchased by the Company pursuant
to a contractual repurchase right, then the unissued Shares that were subject
to such Award and/or such surrendered, canceled, or forfeited Shares (as the
case may be) shall become available for future grant or sale under the Plan
(unless the Plan has terminated), subject however, in the case of Incentive
Stock Options, to any limitations under the Code.

2.4.          Individual
Share Limit.  In any Tax Year, no Service
Provider shall be granted Awards with respect to more than 500,000 Shares.  The limit described in this Section 2.4 shall
be construed and applied consistently with Section 162(m) of the Code, except
that the limit shall apply to all Service Providers.

(a)           Awards not Settled in Shares.  If an Award is to be settled in cash or any
medium other than Shares, the number of Shares on which the Award is based shall
count toward the individual share limit set forth in this Section 2.4.

(b)           Canceled Awards.  Any Awards
that are canceled shall continue to count toward the individual share limit set
forth in this Section 2.4.

2.5.          Adjustments.

(a)           References
to numbers of Shares set forth in this Article 2 and in other provisions of the
Plan are based on the shares of the Company’s common stock outstanding on the
date of adoption of this Plan by the Board. 
In the event that there is any dividend or distribution payable in
Shares, or any stock split, reverse stock split, combination or reclassification
of Shares, or any other similar change in the number of outstanding Shares
without receipt of consideration by the Company after the date of adoption of
the Plan by the Board, then the maximum aggregate number of Shares available
for Awards under Section 2.1 of the Plan, the maximum number of Shares issuable
to a Service Provider under Section 2.4 of the Plan, and any other limitation
under this Plan on the maximum number and class of Shares issuable to an
individual or in the aggregate and the number of Shares and the price of Shares

 

 

2

 

covered by each outstanding Option shall be proportionately adjusted by
the Administrator as it deems equitable in its absolute discretion to prevent
dilution or enlargement of the rights of the Participants; provided that any
fractional Shares resulting from such adjustments shall be eliminated. The Administrator’s
determination with respect to any such adjustments shall be conclusive.

(b)           In
the event that there is any extraordinary dividend or other distribution in
respect of the Shares, recapitalization, reclassification, merger,
reorganization, consolidation, combination, sale of assets, split-up, exchange,
or spin-off after the date of adoption of the Plan by the Board, then the Administrator
may make provision for a cash payment or for the substitution or exchange of
any or all outstanding Awards, based upon the distribution or consideration payable
to holders of the Shares in respect of such event or as the Administrator
otherwise deems appropriate.

ARTICLE 3. 

ADMINISTRATION OF THE PLAN

3.1.          Administrator.  The Plan shall be administered by (i) the
Board or (ii) one or more Committees each of which, in the discretion of the
Board, may be constituted to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act and/or Section 162(m) of the Code and shall
otherwise comply with Applicable Laws. 
Different Committees with respect to different groups of Service
Providers may administer the Plan.

3.2.          Powers
of the Administrator.  Subject to the
provisions of the Plan, Applicable Law, and in case of a Committee subject to the
specific duties delegated by the Board to the Committee, the Administrator
shall have the authority in its discretion: (a) to determine the Fair Market
Value; (b) to select the Service Providers to whom Awards may be granted
hereunder and the types of Awards to be granted to each; (c) to determine the
number of Shares to be covered by each Award granted hereunder; (d) to
determine whether, to what extent, and under what circumstances an Award may be
settled in cash, Shares, other securities, other Awards, or other property; (e)
to approve forms of Award Agreements for use under the Plan; (f) to determine,
in a manner consistent with the terms of the Plan, the terms and conditions of
any Award granted hereunder including, without limitation, the exercise price,
the time or times when Awards may be exercised (which may be based on
performance criteria), any vesting, acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the
Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine; (g) to institute an
Exchange Program (h) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan; (i) to correct any defect, supply any omission,
or reconcile any inconsistency in the Plan or any Award Agreement in the manner
and to the extent it shall deem desirable to carry out the purposes of the Plan;
(j) to prescribe, amend, and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established pursuant
to Section 13.1 of the Plan; (j) to modify or amend each Award (subject to
Section 12.4 of the Plan), including the discretionary authority to extend or
reduce the post-termination exercisability period of Awards longer than is
otherwise provided for in the Plan; (k) to allow Participants to satisfy
withholding tax obligations pursuant to Section 10.8(b) of the Plan by electing
to have the Company withhold from the Shares to be issued upon exercise of an
Award that number of Shares having a Fair Market Value equal to the

 

 

3

 

minimum amount required to be withheld (the Fair Market Value of the
Shares to be withheld shall be determined as of the date that the amount of tax
to be withheld is to be determined and all elections by a Participant to have
Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable); (l) to
authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the Administrator;
and (m) to make all other determinations and take all other action described in
the Plan or as the Administrator deems necessary or advisable for administering
the Plan and effectuating its purposes.

3.3.          Compliance
with Applicable Law.  The Administrator
shall administer, construe, interpret, and exercise discretion under the Plan and
each Award Agreement in a manner that is consistent and in compliance with a
reasonable, good faith interpretation of all Applicable Laws, and that avoids
(to the extent practicable) the classification of any Award as “deferred
compensation” for purposes of Section 409A of the Code, as determined by the Administrator.

3.4.          Effect
of Administrator’s Decision and Administrator’s Liability.  The Administrator has full authority to make decisions,
determinations and interpretations with respect to the Plan and Awards made
under the Plan and such decisions shall be final and binding.  Neither the Administrator nor any of its
members shall be liable for any act, omission, interpretation, construction, or
determination made in good faith in connection with the Plan or any Award Agreement.

3.5.          Delegation
to Executive Officers.  To the extent
permitted by Applicable Law, the Board may delegate to one or more Executive Officers
of the Company the power to grant Awards to Employees and to exercise such
other powers under the Plan as the Board may determine, provided that the
Administrator shall fix the terms of the Awards to be granted by such executive
officers (including the exercise price of such Awards, which may include a
formula by which the exercise price will be determined) and the maximum number
of Shares subject to Awards that the Executive Officers may grant; provided, however, that
no Executive Officer shall be authorized to grant Awards to any “executive
officer” of the Company (as defined by Rule 3b-7 under the Exchange Act or to
any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act).

ARTICLE 4. 

VESTING AND PERFORMANCE OBJECTIVES

4.1.          General.  The vesting schedule or Period of Restriction
for any Award shall be specified in the Award Agreement.  The criteria for vesting and for removing
restrictions on any Award may include (i) performance of services for the
Company for a specified period; (ii) achievement of one or more
Performance Objectives; or (iii) a combination of (i) and (ii), as
determined by the Administrator.

4.2.          Period
of Absence from Providing Services. 
To the extent that vesting or removal of restrictions is contingent on
performance of services for a specified period, a leave of absence shall not
count toward the required period of service unless the Award Agreement provides
otherwise.

 

 

4

 

4.3.          Performance
Objectives.

(a)           Possible Performance Objectives.  Any Performance Objective shall relate to the
Service Provider’s performance for the Company or to the Company’s business
activities or organizational goals, and shall be sufficiently specific that a
third party having knowledge of the relevant facts could determine whether the
Performance Objective is achieved.  The
Performance Objectives with respect to any Award may be one or more of the General
Financial and/or Operational Objectives set forth on Schedule A of this
Plan.

(b)           Stockholder Approval of Performance Objectives.  The list of possible Performance Objectives
set forth in Schedule A and the other material terms of Awards of Restricted
Stock or Restricted Stock Units that are intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, shall be subject to reapproval
by the Company’s stockholders at the first stockholder meeting that occurs in ____.  No Award of Restricted Stock or Restricted
Stock Units that is intended to qualify as “performance-based compensation”
under Section 162(m) of the Code shall be made after that meeting unless
stockholders have reapproved the list of Performance Objectives and other
material terms of such Awards, or unless the vesting of the Award is made
contingent on stockholder approval of the Performance Objectives and other
material terms of such Awards.

(c)           Documentation of Performance Objectives.  The Administrator shall, at the time it
establishes the Performance Objectives, specify the period over which the Performance
Objectives relate.  The establishment of
the actual Performance Objectives and, if an Award of Restricted Stock is based
on more than one Performance Objective, the relative weighting of such
criteria, shall be at the sole discretion of the Administrator; provided, however, that with
respect to any Award, the Performance Objectives shall be set forth in writing no
later than 90 days after commencement of the period to which the Performance
Objective(s) relate(s) (or, if sooner, before 25% of such period has elapsed)
and at a time when achievement of the Performance Objectives is substantially
uncertain.  Such writing shall also
include the period for measuring achievement of the Performance Objectives,
which shall be no greater than five consecutive years, as established by the Administrator.  Once established by the Administrator, the
Performance Objective(s) may not be changed to accelerate the settlement of an
Award or to accelerate the lapse or removal of restrictions on Restricted Stock
that otherwise would be due upon the attainment of the Performance
Objective(s).

(d)           Administrator Certification. 
Prior to settlement of any Award that is contingent on achievement of
one or more Performance Objectives, the Administrator shall certify in writing
that the applicable Performance Objective(s) and any other material terms of
the Award were in fact satisfied.  For
purposes of this Section 4.3(d), approved minutes of the Administrator shall be
adequate written certification.

(e)           Negative Discretion. 
The Administrator may reduce, but may not increase, the number of Shares
deliverable or the amount payable under any Award after the applicable
Performance Objectives are satisfied.

* The first meeting of stockholders
at which directors are to be elected that occurs after the close of the third    calendar
year following the calendar year in which the IPO occurs. 

 

 

5

 

ARTICLE 5. 

STOCK OPTIONS

5.1.          Terms
of Option. Subject to the provisions of the Plan, the type of Option, term,
exercise price, vesting schedule, and other conditions and limitations
applicable to each Option shall be as determined by the Administrator and shall
be stated in the Award Agreement.

5.2.          Type of Option.

(a)   Each
Option shall be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option.

(b)           Neither
the Company nor the Administrator shall have liability to a Participant or any
other party if an Option (or any part thereof) which is intended to be an
Incentive Stock Option does not qualify as an Incentive Stock Option.  In addition, the Administrator may make an
adjustment or substitution described in Section 2.5 of the Plan that causes the
Option to cease to qualify as an Incentive Stock Option without the consent of
the affected Participant or any other party.

5.3.          Limitations.

(a)           Maximum Term.  No
Option shall have a term in excess of 10 years measured from the date the
Option is granted; provided, however,
that in the case of any Incentive Stock Option granted to a 10% Stockholder (as
defined in Section 5.3(d), below), the term of such Incentive Stock Option
shall not exceed five years measured from the date the Option is granted.

(b)           Minimum Exercise Price. 
Subject to Section 2.5(b) of the Plan, the exercise price per share of
an Option shall not be less than 100% of the Fair Market Value per Share on the
date the Option is granted; provided, however, that in the case of any Incentive Stock Option granted
to a 10% Stockholder (as defined in Section 5.3(d), below), subject to Section 2.5(b)
of the Plan, the exercise price per share of such Incentive Stock Option shall
not be less than 110% of the Fair Market Value per Share on the date the Option
is granted.

(c)           $100,000 Limit for Incentive Stock Options.  Notwithstanding an Option’s designation, to
the extent that Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year with respect to Shares whose aggregate
Fair Market Value exceeds $100,000 (under all plans of the Company and any Affiliate),
such Options (to the extent in excess of such $100,000) shall be treated as
Nonstatutory Stock Options.  For purposes
of this Section 5.3(c), Fair Market Value shall be measured as of the date the
Option was granted and Incentive Stock Options shall be taken into account in
the order in which they were granted.

(d)           10% Stockholder.  For
purposes of this Section 5.3, a “10%
Stockholder” is an individual who, immediately before the date an Award
is granted, owns (or is treated as owning) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company (or an
Affiliate), determined under Section 424(d) of the Code.

5.4.          Form
of Consideration.  The Administrator
shall determine the acceptable form of consideration for exercising an Option,
including the method of payment.  In the
case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration

 

 

6

 

at the time of grant.  To the
extent approved by the Administrator, the consideration for exercise of an
Option may be paid in any one, or any combination, of the forms of
consideration set forth in subsections (a), (b), and (c), below.

(a)           Cash Equivalent. 
Consideration may be paid by cash, check, or other cash equivalent
approved by the Administrator.

(b)           Tender or Attestation of Shares. 
Consideration may be paid by the tendering of other Shares to
the Company or the attestation to the ownership of the Shares that otherwise
would be tendered to the Company in exchange for the Company’s reducing the
number of Shares issuable upon the exercise of the Option.  Shares tendered or attested to in exchange
for Shares issued under the Plan must be held by the Service Provider for at
least six months prior to their tender or their attestation to the Company and
may not be shares of Restricted Stock at the time they are tendered or attested
to.  The Administrator shall determine
acceptable methods for tendering or attesting to Shares to exercise an Option
under the Plan and may impose such limitations and prohibitions on the use of
Shares to exercise Options as it deems appropriate.  For purposes of determining the amount of the
Option price satisfied by tendering or attesting to Shares, such Shares shall
be valued at their Fair Market Value on the date of tender or attestation, as
applicable.  Except as provided in this
paragraph, the date of exercise shall be deemed to be the date that the notice
of exercise and payment of the Option price are received by the Administrator.

(c)           Broker-Assisted Cashless Exercise.  Unless the Administrator expressly notifies
the Participant otherwise, and except to the extent that the Option is an
Option to purchase Restricted Stock, consideration may be paid by the
Participant’s (i) irrevocable instructions to the Company to deliver the Shares
issuable upon exercise of the Option promptly to a broker (acceptable to the
Company) for the Participant’s account, and (ii) an irrevocable instructions letter
to such broker to sell Shares sufficient to pay the exercise price and upon
such sale to deliver the exercise price to the Company, provided  that at the time of such exercise, this form of
exercise would not subject the Participant to liability under Section 16(b) of
the Exchange Act or would be exempt pursuant to Rule 16b-3 promulgated under
the Exchange Act or any other exemption from such liability.  The Company shall deliver an acknowledgement
to the broker upon receipt of instructions to deliver the Shares, and the
Company shall deliver the Shares to such broker upon the settlement date.  Upon receipt of the Shares from the Company,
the broker shall deliver to the Company cash sale proceeds sufficient to cover
the exercise price.  Shares acquired by a
cashless exercise shall be deemed to have a Fair Market Value on the Option exercise
date equal to the gross sales price at which the broker sold the Shares to pay
the exercise price.

5.5.          Exercise of Option.

(a)           Procedure for Exercise. 
Any Option granted hereunder shall be exercisable according to the terms
of the Plan and at such times and under such conditions and terms as determined
by the Administrator and set forth in the Award Agreement.  An Option may not be exercised for a fraction
of a Share. An Option shall be deemed exercised when the Administrator
receives: (i) written or electronic notice of exercise (in accordance with the
Award Agreement) from the person entitled to exercise the Option and (ii) full
payment for the Shares (in a form permitted under Section 5.4 of the Plan and in
accordance with the Award Agreement) with respect to which the Option is
exercised.

 

 

7

 

(b)           Termination of Relationship as a Service Provider.  Following a Participant’s Termination of
Service, other than upon the Participant’s death or disability, the Participant
(or the Participant’s Beneficiary, in the case of Termination of Service due to
death) may exercise his or her Option within such period of time as is
specified in the Award Agreement, subject to the following conditions:

(i)            An Option may be
exercised after the Participant’s Termination of Service only to the extent
that the Option was vested as of the Termination of Service;

(ii)           An Option may not
be exercised after the expiration of the term of such Option as set forth in
the Award Agreement;

(iii)          Unless a
Participant’s Termination of Service is the result of the Participant’s
Disability or death, the Participant may not exercise an Incentive Stock Option
more than three months after such Termination of Service;

(iv)          If a Participant’s
Termination of Service is the result of the Participant’s Disability, the Participant
may exercise an Incentive Stock Option up to 12 months after Termination of
Service; and

(v)           After the Participant’s death, his designated Beneficiary
may exercise an Incentive Stock Option only to the extent that the deceased
Participant was entitled to exercise such Incentive Stock Option as of the date
of his death and provided such Beneficiary has been designated prior to
Participant’s death in a form acceptable to the Administrator.

 

If no such beneficiary has been designated by the Participant, then
such Option may be exercised by the personal representative of the Participant’s
estate or by the person(s) to whom the Option is transferred pursuant to the
Participant’s will or in accordance with the laws of descent and distribution.

In
the absence of a specified time in the Award Agreement, the Option shall remain
exercisable for three months after the Participant’s Termination of Service for
any reason other than Disability or death, and for 12 months after the
Participant’s Termination of Service on account of Disability or death.

(c)           Rights as a Stockholder. 
Shares issued upon exercise of an Option shall be issued in the name of
the Participant. Shares subject to an Option shall be deemed issued, and the Participant
shall be deemed the record holder of such Shares, on the Option exercise date.  Until such Option exercise date, no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Shares subject to the Option, notwithstanding the exercise of
the Option.  In the event that the
Company effects a split of the Shares by means of a stock dividend and the
exercise price of, and number of shares subject to, an Option are adjusted as
of the date of distribution of the dividend (rather than as of the record date
for such dividend), then a Participant who exercises such Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the Shares
subject to the Option.  No other adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the Shares are issued.

5.6.          Repurchase
Rights.  The Administrator shall have
the discretion to grant Options which are exercisable for unvested Shares.  If the Participant exercises such Options and
ceases

 

 

8

 

to be a Service Provider while holding such unvested Shares, the
Company shall have the right to repurchase any or all of those unvested Shares
at a price per share equal to the lower of (i) the exercise price paid per
Share, or (ii) the Fair Market Value per Share at the time of repurchase.  The terms upon which such repurchase right
shall be exercisable by the Administrator (including the period and procedure
for exercise and the appropriate vesting schedule for the repurchased Shares)
shall be established by the Administrator and set forth in the document
evidencing such repurchase right.

5.7.          Substitute
Awards.  In connection with a merger
or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Administrator may grant Awards
in substitution for any options or other stock or stock-based awards granted by
such entity or an affiliate thereof.  Such
substitute Awards may be granted on such terms as the Administrator deems
appropriate, in its sole discretion, in the circumstances, notwithstanding any
limitations on Awards contained in the Plan.

ARTICLE 6. 

STOCK APPRECIATION RIGHTS

6.1.          Terms
of Stock Appreciation Right.  The
term, base amount, vesting schedule, and other conditions and limitations
applicable to each Stock Appreciation Right, except the medium of settlement,
shall be as determined by the Administrator and shall be stated in the Award
Agreement.  All
Awards of Stock Appreciation Rights shall be settled in Shares issuable upon
the exercise of the Stock Appreciation Right.

6.2.          Exercise of Stock Appreciation Right.

(a)           Procedure for Exercise. 
Any Stock Appreciation Right granted hereunder shall be exercisable
according to the terms of the Plan and at such times and under such conditions
as set forth in the Award Agreement.  A
Stock Appreciation Right shall be deemed exercised when the Administrator
receives written or electronic notice of exercise (in accordance with the Award
Agreement) from the person entitled to exercise the Stock Appreciation Right.

(b)           Termination of Relationship as a Service Provider.  Following a Participant’s Termination of
Service, the Participant (or the Participant’s Beneficiary, in the case of Termination
of Service due to death) may exercise his or her Stock Appreciation Right
within such period of time as is specified in the Award Agreement to the extent
that the Stock Appreciation right is vested as of the Termination of Service.  In the absence of a specified time in the
Award Agreement, the Stock Appreciation Right shall remain exercisable for
three months following the Participant’s Termination of Service for any reason
other than Disability or death, and for 12 months after the Participant’s
Termination of Service on account of Disability or death.

(c)           Rights as a Stockholder. 
Shares subject to a Stock Appreciation Right shall be deemed issued, and
the Participant shall be deemed the record holder of such Shares, on the date
the Stock Appreciation Right is exercised. 
Until such date, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Shares subject to the
Stock Appreciation Right.  If the Company
effects a split of the Shares by means of a stock dividend and the exercise
price of, and number of shares subject to, a Stock Appreciation Right

 

 

9

 

are adjusted as of the date of distribution of the dividend (rather
than as of the record date for such dividend), then a Participant who exercises
such Stock Appreciation Right between the record date and the distribution date
for such stock dividend shall be entitled to receive, on the distribution date,
the stock dividend with respect to the Shares subject to the Stock Appreciation
Right.  No other adjustment shall be made
for a dividend or other right for which the record date is prior to the date
the Shares are issued.

ARTICLE 7. 

RESTRICTED STOCK

7.1.          Terms
of Restricted Stock.  Subject to the terms
and provisions of the Plan, the Period of Restriction, the number of Shares
granted, and such other terms, conditions and limitations applicable to each
Award of Restricted Stock shall be as determined by the Administrator, in its
sole discretion, and shall be stated in the Award Agreement.  Unless the Administrator determines
otherwise, Shares of Restricted Stock shall be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

7.2.          Transferability.  Except as provided in this Article 7, Shares
of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

7.3.          Other
Restrictions.  The Administrator, in
its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate.

7.4.          Removal
of Restrictions.  Except as otherwise
provided in this Article 7, and subject to Section 10.5 of the Plan, Shares of
Restricted Stock covered by an Award of Restricted Stock made under the Plan
shall be released from escrow, and shall become fully transferable, as soon as
practicable after the last day of the Period of Restriction ends, and in any
event no later than 21⁄2 months after the end of the Tax Year in which the Period
of Restriction ends. The Administrator, in its discretion, may accelerate the
time at which any restrictions shall lapse or be removed.  Subject to Section 10.6, after the restrictions
have lapsed, the Service Provider shall be entitled to have any legend or
legends relating to restrictions provided pursuant to this Article 7 removed
from his or her Share certificate, and the Shares shall be freely transferable
by the Service Provider.

7.5.          Voting
Rights.  During the Period of
Restriction, Service Providers holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those Shares, unless
otherwise provided in the Award Agreement.

7.6.          Dividends
and Other Distributions.  During the
Period of Restriction, Service Providers holding Shares of Restricted Stock
shall be entitled to receive all dividends and other distributions paid with
respect to such Shares unless otherwise provided in the Award Agreement.

(a)           If
any such dividends or distributions are paid in Shares, the Shares shall be
subject to the same restrictions (and shall therefore be forfeitable to the
same extent) as the Shares of Restricted Stock with respect to which they were
paid.

 

 

10

 

(b)           If
any such dividends or distributions are paid in cash, the Award Agreement may
specify that the cash payments shall be subject to the same restrictions as the
related Restricted Stock, in which case they shall be accumulated during the
Period of Restriction and paid or forfeited when the related Shares of
Restricted Stock vest or are forfeited. 
Alternatively, the Award Agreement may specify that the dividend equivalents
or other payments shall be unrestricted, in which case they shall be paid as
soon as practicable after the dividend or distribution date.  In no event shall any cash dividend or
distribution be paid later than 21⁄2 months after the Tax Year in which the
dividend or distribution becomes nonforfeitable.

7.7.          Right
of Repurchase of Restricted Stock.  The
Company shall have the right to repurchase forfeitable Shares of Restricted
Stock from the Participant at their original issuance price or other stated or
formula price (or to require forfeiture of such Shares if issued at no cost) in
the event that conditions specified in the applicable Award with respect to
such Shares are not satisfied prior to the end of the applicable Period of
Restriction.

ARTICLE 8. 

RESTRICTED STOCK UNITS

8.1.          Terms
of Restricted Stock Units.  Subject
to the provisions of the Plan, the Period of Restriction, number of underlying
Shares, and other conditions and limitations applicable to each Award of
Restricted Stock Units shall be as determined by the Administrator and shall be
stated in the Award Agreement.

8.2.          Settlement
of Restricted Stock Units.  Subject
to Section 10.5 of the Plan, the number of Shares specified in the Award
Agreement, or cash equal to the Fair Market Value of the underlying Shares specified
in the Award Agreement, shall be delivered to the Participant as soon as
practicable after the end of the applicable Period of Restriction, and in any
event no later than 21⁄2 months after the end of the Tax Year in which the Period
of Restriction ends.

8.3.          Dividend
and Other Distribution Equivalents.  The
Administrator is authorized to grant to holders of Restricted Stock Units the
right to receive payments equivalent to dividends or other distributions with
respect to Shares underlying Awards of Restricted Stock Units.  The Award Agreement may specify that the dividend
equivalents or other distributions shall be subject to the same restrictions as
the related Restricted Stock Units, in which case they shall be accumulated
during the Period of Restriction and paid or forfeited when the related
Restricted Stock Units are paid or forfeited. 
Alternatively, the Award Agreement may specify that the dividend
equivalents or other distributions shall be unrestricted, in which case they shall
be paid on the dividend or distribution payment date for the underlying Shares,
or as soon as practicable thereafter.  In
no event shall any unrestricted dividend equivalent or other distribution be
paid later than 21⁄2 months after the Tax Year in which the record date for the
dividend or distribution occurs.

8.4.          Forfeiture.  If, with respect to any Award, (a) a
Participant’s Termination of Service occurs before the end of the Period of
Restriction, or (b) any Performance Objectives are not achieved by the end
of the period for measuring such Performance Objectives, then the Restricted
Stock Units granted pursuant to such Award shall be forfeited and the Company (and
any Affiliate) shall have no further obligation thereunder.

 

 

11

 

ARTICLE 9. 

OTHER EQUITY-BASED AWARDS

9.1.          Other
Equity-Based Awards.  The Administrator
shall have the right to grant other Awards based upon or payable in Shares
having such terms and conditions as the Administrator may determine, including without
limitation the grant of Shares upon the achievement of a Performance Objective and
the grant of securities convertible into Shares.

ARTICLE 10. 

ADDITIONAL TERMS OF AWARDS

10.1.        No
Rights to Awards.  No Service
Provider shall have any claim to be granted any Award under the Plan, and the
Company is not obligated to extend uniform treatment to Participants or Beneficiaries
under the Plan.  The terms and conditions
of Awards need not be the same with respect to each Participant.

10.2.        No
Effect on Employment or Service.  Neither
the Plan nor any Award shall confer upon a Participant any right with respect
to continuing the Participant’s relationship as a Service Provider with the
Company; nor shall they interfere in any way with the Participant’s right or
the Company’s right to terminate such relationship at any time, with or without
cause, to the extent permitted by Applicable Laws and any enforceable agreement
between the Service Provider and the Company.

10.3.        No
Fractional Shares.  No fractional
Shares shall be issued or delivered pursuant to the Plan or any Award, and the Administrator
shall determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares, or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.

10.4.        Transferability
of Awards.  Unless otherwise
determined by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.  Notwithstanding the foregoing, subject to the
approval of the Administrator, in its sole discretion, Awards other than Incentive
Stock Options, may be transferable to members of the immediate family of the
Participant and to one or more trusts for the benefit of such family members,
partnerships in which such family members are the only partners, or
corporations in which such family members are the only stockholders.  “Members of the immediate family” means the
Participant’s spouse, children, stepchildren, grandchildren, parents,
grandparents, siblings (including half brothers and sisters), and individuals
who are family members by adoption.  To
the extent that any Award is transferable, such Award shall contain such
additional terms and conditions as the Administrator deems appropriate.

10.5.        Date
of Grant.  The date of grant of an
Award shall be, for all purposes, the date on which the Administrator grants
such Award, or such later date as is specified by the Administrator as the date
of grant.  Notice of any grant shall be
provided to each Participant within a reasonable time after the date of such
grant.

 

 

12

 

10.6.        Conditions
On Delivery of Shares and Lapsing of Restrictions.  The Company shall not be obligated to deliver
any Shares pursuant to the Plan or to remove restrictions from Shares
previously delivered under the Plan until (a) all conditions of the Award have
been met or removed to the satisfaction of the Administrator, (b) subject
to approval of the Company’s counsel, all other legal matters (including any
Applicable Laws) in connection with the issuance and delivery of such Shares
have been satisfied, and (c) the Participant has executed and delivered to the
Company such representations or agreements as the Administrator may consider
appropriate to satisfy the requirements of Applicable Laws.

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

10.8.        Withholding.

(a)           Withholding Requirements. 
Prior to the delivery of any Shares or cash pursuant to the grant, exercise,
vesting, or settlement of an Award, the Company shall have the power and the
right to deduct or withhold, or to require a Participant or Beneficiary to
remit to the Company, an amount sufficient to satisfy any federal, state, and
local taxes (including the Participant’s FICA obligation) that the Company determines
is required to be withheld to comply with Applicable Laws.  The Participant or Beneficiary shall remain
responsible at all times for paying any federal, state, and local income or
employment tax due with respect to any Award, and the Company shall not be
liable for any interest or penalty that a Participant or Beneficiary incurs by
failing to make timely payments of tax.

(b)           Withholding Arrangements. 
The Administrator, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may permit a Participant or
Beneficiary to satisfy such tax withholding obligation, in whole or in part, by
(i) electing to have the Company withhold otherwise deliverable Shares, or (ii)
delivering to the Company already-owned Shares having a Fair Market Value equal
to the amount required by Applicable Law to be withheld.  The Fair Market Value of the Shares to be
withheld or delivered shall be determined as of the date that the taxes are
required to be withheld. The Fair Market Value of the Shares to be withheld or
delivered, or with respect to which restrictions are removed, shall be
determined as of the date that the taxes are required to be withheld.

10.9.        Other
Provisions in Award Agreements.  In
addition to the provisions described in the Plan, any Award Agreement may
include such other provisions (whether or not applicable to the Award of any
other Participant) as the Administrator determines appropriate, including
restrictions on resale or other disposition, provisions for the acceleration of
exercisability of Options and Stock Appreciation Rights in the event of a
change in control of the Company, provisions for the cancellation of Awards in
the event of a change in control of the Company, and provisions to comply with Applicable
Laws.

10.10.      Section
16 of the Exchange Act.  It is the
intent of the Administrator that Awards and transactions permitted by Awards be
interpreted in a manner that, in the case of Participants who are or may be
subject to Section 16 of the Exchange Act, qualify, to the maximum extent

 

 

13

 

compatible with the express terms of the Awards, for exemption from
matching liability under Rule 16b-3 promulgated under the Exchange Act.  The Company shall have no liability to any Participant
or other person for Section 16 consequences of Awards or events in connection
with Awards if an Award or related event does not so qualify.

10.11.      Not
Benefit Plan Compensation.  Payments
and other benefits received by a Participant under an Award made pursuant to
the Plan shall not be deemed a part of a Participant’s compensation for
purposes of determining the Participant’s benefits under any other employee benefit
arrangements provided by the Company or an Affiliate, except where the Administrator
expressly provides otherwise in writing.

ARTICLE 11. 

DISSOLUTION OR LIQUIDATION OR OTHER EVENTS

11.1.        Dissolution
or Liquidation.  In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
provide written notice to each Participant at least 20 days prior to the
effective date of such proposed transaction. 
To the extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed action.  The Administrator may specify the effect of a
liquidation or dissolution on any Award at the time of grant of such Award in
the Award Agreement.

11.2.        Reorganization.

(a)   Upon
the occurrence of a Reorganization Event, subject to subsection (b) below, each
outstanding Award shall be assumed or an equivalent Award substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.

(b)   In
the event that the successor corporation does not assume an Award or an
equivalent Award is not substituted, then the Administrator shall have the authority
to provide in its discretion, upon written or electronic notice to each
Participant, that one of the following will occur with respect to the Awards
not so assumed: (i) any such unvested Awards, and any such vested Awards that
are not exercised, shall terminate and be canceled upon such Reorganization
Event; or (ii) all such Awards will become exercisable in full or in part, as determined
by the Administrator, as of a specified time prior to the Reorganization Event
and will terminate immediately prior to the consummation of such Reorganization
Event, except to the extent exercised by the Participants prior to the
consummation of the Reorganization Event; or (iii) all such outstanding Awards
will terminate upon consummation of such Reorganization Event and each
Participant will receive, in exchange for all or any portion of such Award as
is designated by the Administrator, a cash payment equal to the amount (if any)
by which (x) the Acquisition Price multiplied by the number of Shares subject
to such outstanding Award so designated, exceeds (y) the aggregate exercise
price of such Shares.

(c)   For
the purposes of this Section 11.2, the Option shall be considered assumed if,
following consummation of the Reorganization Event, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the Reorganization Event, the consideration
(whether stock, cash, or other securities or property) received in the
Reorganization Event by holders of Share(s) for each Share held immediately
prior to the consummation of the Reorganization Event (and if holders were
offered a choice of

 

 

14

 

consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares, unless the Administrator otherwise
determines).  If such consideration
received in the Reorganization Event is not solely common stock of the
successor corporation or a Parent or Subsidiary thereof, then the Administrator
may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option for each Share of
Optioned Stock subject to the Option to be solely common stock of the successor
corporation or a Parent or Subsidiary thereof equal in fair market value to the
per share consideration received by holders of Shares in the Reorganization
Event, and in such case such Options shall be considered assumed for the
purposes of this Section 11.2.

ARTICLE 12. 

TERM, AMENDMENT, AND TERMINATION OF PLAN

12.1.        Term
of Plan.  The Plan shall become
effective on the Effective Date.

12.2.        Termination
of the Plan.  The Plan shall terminate
upon the earliest to occur of (i) the date that is 10 years after the Plan
is approved by the Company’s stockholders; (ii) the date on which all Shares
available for issuance under the Plan have been issued as fully vested Shares;
or (iii) the date determined by the Board pursuant to its authority under
Section 12.3 of the Plan.

12.3.        Amendment
of the Plan.  The Board may at any
time amend, alter, suspend, or terminate the Plan, without the consent of the
Participants or Beneficiaries.  The
Company shall obtain stockholder approval of any Plan amendment to the extent
necessary to comply with Applicable Laws.

12.4.        Effect
of Amendment or Termination.  Except
as provided in Section 12.5 of the Plan, no amendment, alteration, suspension,
or termination of the Plan shall impair the rights of any Participant or
Beneficiary under an outstanding Award, unless required to comply with an
Applicable Law or mutually agreed otherwise between the Participant and the Administrator;
any such agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan shall
not affect the Administrator’s ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of
such termination.

12.5.        Adjustments
of Awards Upon the Occurrence of Unusual or Nonrecurring Events.  The Administrator may, in its sole discretion
(but subject to the limitations and conditions expressly stated in the Plan,
such as the limitations on adjustment of Performance Objectives), adjust the
terms and conditions of Awards during the pendency or in recognition of
(a) unusual or nonrecurring events affecting the Company or an
Affiliate (such as a capital adjustment, reorganization, or merger) or the
financial statements of the Company or an Affiliate, or (b) any changes in
Applicable Laws or accounting principles. 
By way of example, the power to adjust Awards shall include the power to
suspend the exercise of any Option or Stock Appreciation Right or to reduce the
exercise price to a price not less than then current Fair Market Value.

 

 

15

 

ARTICLE 13. 

MISCELLANEOUS

13.1.        Authorization
of Sub-Plans.  The Board may from
time to time establish one or more sub-plans under the Plan for purposes of
satisfying applicable blue sky, securities, and/or tax laws of various
jurisdictions.  The Board shall establish
such sub-plans by adopting supplements to this Plan containing (i) such
limitations on the Board’s discretion under the Plan as the Board deems
necessary or desirable, and (ii) such additional terms and conditions not
otherwise inconsistent with the Plan as the Board shall deem necessary or
desirable.  All sub-plans adopted by the
Board shall be deemed to be part of the Plan, but each sub-plan shall apply
only to Participants within the affected jurisdiction and the Company shall not
be required to provide copies of any sub-plans to Participants in any
jurisdiction which is not the subject of such sub-plan.

13.2.        Governing
Law.  The provisions of the Plan and
all Awards made hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.

13.3.        Administrator’s
Manner of Action.  In case of a
Committee subject to the specific duties delegated by the Board to the
Committee, unless otherwise provided in the bylaws of the Company or the
charter of the Committee: (a) a majority of the members of a Committee shall
constitute a quorum, and (b) either the vote of a majority of the members
present who are qualified to act on a question assuming the presence of a
quorum or the unanimous written consent of the members of the Committee shall
constitute action by the Committee.  The
Committee may delegate the performance of ministerial functions in connection
with the Plan to such person or persons as the Committee may select.

13.4.        Expenses.  The costs of administering the Plan shall be
paid by the Company.

13.5.        Severability.  If any provision of the Plan or any Award
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any jurisdiction, or as to any person or Award,
such provision shall be construed or deemed to be amended to resolve the
applicable infirmity, unless the Administrator determines that it cannot be so
construed or deemed amended without materially altering the Plan or the Award,
in which case such provision shall be stricken as to such jurisdiction, person,
or Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.

13.6.        Construction.  Unless the contrary is clearly indicated by
the context, (1) the use of the masculine gender shall also include within
its meaning the feminine and vice versa; (2) the use of the singular shall
also include within its meaning the plural and vice versa; and (3) the
word “include” shall mean to include, but not to be limited to.

13.7.        No
Trust or Fund Created.  Neither the
Plan nor any Award Agreement shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company (or an
Affiliate) and a Participant or any other person.  To the extent that any person acquires a right
to receive payments from the Company (or an Affiliate) pursuant to

 

 

16

 

an Award, such right shall be no more secure than the right of any
unsecured general creditor of the Company (or the Affiliate, as applicable).

13.8.        Headings.  Headings are given to the sections and
subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Plan or any
provision thereof.

13.9.        Complete Statement of Plan.  This
document is a complete statement of the Plan.

 

 

17

 

APPENDIX

 

As used in the
Plan, the following terms shall have the following meanings:

(a)           “Acquisition Price” means, in a Reorganization Event in which
the consideration received by holders of Shares consists solely of cash, the
amount of cash to which a holder of one Share is entitled pursuant to such
Reorganization Event.

(b)           “Administrator” means the Board or any of its Committees as
shall be administering the Plan, in accordance with Article 3 of the Plan.

(c)           “Affiliate” means an entity that is a “parent corporation”
(as defined in Section 424(e) of the Code) or a “subsidiary corporation” (as
defined in Section 424(f) of the Code) with respect to the Company, whether now
or hereafter existing.

(d)           “Applicable Laws” means the requirements relating to,
connected with, or otherwise implicated by the administration of long-term
incentive plans under applicable state corporation laws, United States federal
and state securities laws, the Code, any stock exchange or quotation system on
which the Shares are listed or quoted, and the applicable laws of any foreign
country or jurisdiction where Awards are, or will be, granted under the Plan.

(e)           “Award” means, individually or collectively, a grant under
the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, or other equity-based awards.

(f)            “Award Agreement” means a written agreement setting forth the
terms and provisions applicable to an Award granted under the Plan.  Each Award Agreement shall be subject to the
terms and conditions of the Plan.

(g)           “Beneficiary” means the personal representative of the
Participant’s estate or the person(s) to whom an Award is transferred pursuant
to the Participant’s will or in accordance with the laws of descent or
distribution.

(h)           “Board” means the board of directors of the Company.

(i)            “Code” means the Internal Revenue Code of 1986, as
amended.  Any reference to a section of
the Code herein shall be a reference to any regulations or other guidance of
general applicability promulgated under such section, and shall further be a reference
to any successor or amended section of such section of the Code that is so
referred to and any regulations thereunder.

(j)            “Committee” means a committee of the Board appointed by the
Board in accordance with Article 3 of the Plan.

(k)           “Company” means Traffic.com, Inc., a Delaware corporation, or
any successor thereto.

(l)            “Consultant” means any natural person, including an advisor,
engaged by the Company or an Affiliate to render services to such entity.

(m)          “Director” means a member of the Board.

 

 

(n)           “Disability” means total and permanent disability as defined
in Section 22(e)(3) of the Code.

(o)           “Effective Date” means the date on which
the Underwriting Agreement between the Company and the managing underwriters of
the Company’s initial public offering of its Shares is executed and delivered.

(p)           “Employee” means any person who is an employee, as defined in
Section 3401(c) of the Code, of the Company or any Affiliate or any other
entity the employees of which are permitted to receive Incentive Stock Options
under the Code.  Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.

(q)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

(r)            “Exchange Program” means a program under which, with the consent
of the affected Participants, (i) outstanding Awards are surrendered or
cancelled in exchange for Awards of the same type (which may have lower
exercise prices and different terms), Awards of a different type, and/or cash,
and/or (ii) the exercise price of an outstanding Award is reduced or
increased.  The terms and conditions of
any Exchange Program shall be determined by the Administrator in its sole
discretion.

(s)           “Executive Officer” means an individual who is an “executive
officer” of the Company (as defined by Rule 3b-7 under the Exchange Act) or a “covered
employee” under Section 162(m) of the Code.

(t)    “Fair Market Value” means, as of any date, the value of a Share
determined as follows:

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

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

(iii)          If an Option is exercised in a broker-assisted cashless
exercise pursuant to Section 5.4(c) of the Plan, the Fair Market Value of the Share
for which the Option is exercised shall be the actual sale price (before tax or
expenses) realized in the sale of Shares by the broker; or

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

 

 

(u)           “Incentive Stock Option” means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

(v)           “Nonstatutory Stock Option” means an Option not intended to
qualify as an Incentive Stock Option.

(w)          “Option” means an option to purchase Shares that is granted
pursuant to Article 5 of the Plan.  An
Option may be an Incentive Stock Option or a Nonstatutory Stock Option.

(x)            “Optioned Stock” means the Common Stock subject to an Option.

(y)           “Participant” means the holder of an outstanding Award
granted under the Plan.

(z)            “Performance Objective” means a performance objective or goal
that must be achieved before an Award, or a feature of an Award, becomes nonforfeitable,
as described in Section 4.3 of the Plan.

(aa)         “Period of Restriction” means the period during which
Restricted Stock, the remuneration underlying Restricted Stock Units, or any
other feature of an Award is subject to a substantial risk of forfeiture.  A Period of Restriction shall be deemed to
end when the applicable Award ceases to be subject to a substantial risk of
forfeiture.

(bb) “Reorganization Event” means:

(i)            any merger or consolidation of the Company with or into
another entity as a result of which all of the Shares are converted into or
exchanged for the right to receive cash, securities or other property; or

(ii)           any exchange of all of the Shares for cash, securities or
other property pursuant to a share exchange transaction.

(cc)         “Restricted Stock” means Shares that, during a Period of
Restriction, are subject to restrictions as described in Article 7 of the Plan.

(dd)         “Restricted Stock Unit” means an Award that entitles the
recipient to receive Shares or cash after a Period of Restriction, as described
in Article 8 of the Plan.

(ee)         “Service Provider” means an Employee, Director, or
Consultant.

(ff)           “Share” means a share of the Company’s common stock, $0.01
per value per share.

(gg)         “Stock Appreciation Right” means an Award that entitles the
recipient to receive, upon exercise, the excess of (i) the Fair Market Value of
a Share on the date the Award is exercised, over (ii) a base amount
specified by the Administrator which shall not be less than the Fair Market
Value of a Share on the date the Award is granted, as described in Article 6 of
the Plan

(hh)         “Tax Year” means the Company’s taxable year.  If an Award is granted by an Affiliate, such Affiliate’s
taxable year shall apply instead of the Company’s taxable year.

 

 

(ii)           “Termination of Service” means the date an individual ceases
to be a Service Provider.  Unless the Administrator
or a Company policy provides otherwise, a leave of absence authorized by the
Company or the Administrator (including sick leave or military leave) from
which return to service is not guaranteed by statute or contract shall be characterized
as a Termination of Service if the individual does not return to service within
three months; such Termination of Service shall be effective as of the first
day that is more than three months after the beginning of the period of
leave.  If the ability to return to
service upon the expiration of such leave is guaranteed by statute or contract,
but the individual does not return, the leave shall be characterized as a
Termination of Service as of a date established by the Administrator or Company
policy.

(jj)   “10% Stockholder” means the owner of stock
(as determined under Code Section 424(d) possessing more than 10% of the total
combined voting power of all classes of stock of the Company (or any Parent or
Subsidiary).

 

 

SCHEDULE
A

 

I.  General Financial Criteria

 

•                  Increasing the revenue
of the Company, an Affiliate or a business unit;

•                  Achieving a
target level of earnings (including gross earnings; earnings before certain
deductions, such as interest, taxes, depreciation, or amortization; or earnings
per Share);

•                  Achieving a
target level of income (including net income or income before consideration of
certain factors, such as overhead) or a target level of gross profits for the
Company, an Affiliate, or a business unit;

•                  Achieving a
target return on the Company’s (or an Affiliate’s) capital, assets, or stockholders’
equity;

•                  Increasing the market
share of the Company, an Affiliate or a business unit to a specified target
level;

•                  Maintaining or
achieving a target level of appreciation in the price of the Shares;

•                  Achieving or
maintaining a Share price that meets or exceeds the performance of specified
stock market indices or other benchmarks over a specified period;

•                  Achieving a
level of Share price, earnings, or income performance that meets or exceeds
performance in comparable areas of peer companies over a specified period;

•                  Achieving
specified reductions in costs;

•                  Achieving
specified improvements in collection of outstanding accounts or specified
reductions in non-performing debts;

 

II.  Operational Criteria

 

•                  Expanding one or
more products into one or more new markets;

•                  Acquiring a
prescribed number of new customers in a line of business;

•                  Achieving a
prescribed level of productivity within a business unit;

•                  Completing
specified projects within or below the applicable budget;

•                  Issuance of
patents in U.S. and foreign countries;

•                  Completion of a
financing or collaboration transaction;

•                  Key hires;

•                  Other strategic
business criteria including goals relating to acquisitions or divestitures.

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