Contract

EXHIBIT 10.4 IMARX THERAPEUTICS, INC. 2006 PERFORMANCE INCENTIVE PLAN . . . TABLE OF CONTENTS

Page —- 1. Establishment, Purpose and Term of Plan………………………… 1 1.1 Establishment………………………………………….. 1 1.2 Purpose……………………………………………….. 1 1.3 Term of Plan…………………………………………… 12. Definitions and Construction………………………………….. 1 2.1 Definitions……………………………………………. 1 2.2 Construction…………………………………………… 83. Administration………………………………………………. 8 3.1 Administration by the Committee………………………….. 8 3.2 Authority of Officers…………………………………… 9 3.3 Powers of the Committee…………………………………. 9 3.4 Compliance with Section 162(m)…………………………… 10 3.5 Administration with Respect to Insiders…………………… 10 3.6 Indemnification………………………………………… 104. Shares Subject to Plan……………………………………….. 11 4.1 Maximum Number of Shares Issuable………………………… 11 4.2 Share Accounting……………………………………….. 11 4.3 Adjustment for Unissued Prior Plan Shares…………………. 11 4.4 Maximum Number of Shares Issuable Pursuant to Incentive Stock Options……………………………………………….. 12 4.5 Adjustments for Changes in Capital Structure………………. 125. Eligibility, Participation and Award Limitations………………… 13 5.1 Persons Eligible for Awards……………………………… 13 5.2 Participation in Plan…………………………………… 13 5.3 Award Limitations………………………………………. 136. Stock Options……………………………………………….. 14 6.1 Exercise Price…………………………………………. 14 6.2 Exercisability and Term of Options……………………….. 14 6.3 Payment of Exercise Price……………………………….. 15 6.4 Effect of Termination of Service…………………………. 15 6.5 Transferability of Options………………………………. 177. Stock Appreciation Rights…………………………………….. 17 7.1 Types of SARs Authorized………………………………… 17 7.2 Exercise Price…………………………………………. 17 7.3 Exercisability and Term of SARs………………………….. 17

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Page —- 7.4 Exercise of SARs……………………………………….. 18 7.5 Deemed Exercise of SARs…………………………………. 18 7.6 Effect of Termination of Service…………………………. 18 7.7 Transferability of SARs…………………………………. 188. Restricted Stock Awards………………………………………. 19 8.1 Types of Restricted Stock Awards Authorized……………….. 19 8.2 Purchase Price…………………………………………. 19 8.3 Purchase Period………………………………………… 19 8.4 Payment of Purchase Price……………………………….. 19 8.5 Vesting and Restrictions on Transfer……………………… 19 8.6 Voting Rights; Dividends and Distributions………………… 20 8.7 Effect of Termination of Service…………………………. 20 8.8 Nontransferability of Restricted Stock Award Rights………… 209. Restricted Stock Unit Awards………………………………….. 21 9.1 Grant of Restricted Stock Unit Awards…………………….. 21 9.2 Purchase Price…………………………………………. 21 9.3 Vesting……………………………………………….. 21 9.4 Voting Rights, Dividend Equivalent Rights and Distributions…. 21 9.5 Effect of Termination of Service…………………………. 22 9.6 Settlement of Restricted Stock Unit Awards………………… 22 9.7 Nontransferability of Restricted Stock Unit Awards…………. 2210. Performance Awards…………………………………………… 23 10.1 Types of Performance Awards Authorized……………………. 23 10.2 Initial Value of Performance Shares and Performance Units…… 23 10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula……………………………….. 23 10.4 Measurement of Performance Goals…………………………. 24 10.5 Settlement of Performance Awards…………………………. 25 10.6 Voting Rights; Dividend Equivalent Rights and Distributions…. 27 10.7 Effect of Termination of Service…………………………. 27 10.8 Nontransferability of Performance Awards………………….. 2811. Deferred Compensation Awards………………………………….. 28 11.1 Establishment of Deferred Compensation Award Programs………. 28 11.2 Terms and Conditions of Deferred Compensation Awards……….. 2812. Cash-Based Awards and Other Stock-Based Awards………………….. 29 12.1 Grant of Cash-Based Awards………………………………. 30

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Page —- 12.2 Grant of Other Stock-Based Awards………………………… 30 12.3 Value of Cash-Based and Other Stock-Based Awards…………… 30 12.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards……………………………………… 30 12.5 Voting Rights; Dividend Equivalent Rights and Distributions…. 30 12.6 Effect of Termination of Service…………………………. 31 12.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards………………………………………………… 3113. Nonemployee Director Awards…………………………………… 3114. Standard Forms of Award Agreement……………………………… 32 14.1 Award Agreements……………………………………….. 32 14.2 Authority to Vary Terms…………………………………. 3215. Change in Control……………………………………………. 32 15.1 Effect of Change in Control on Options and SARs……………. 32 15.2 Effect of Change in Control on Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards, Cash-Based Awards, Other Stock-Based Awards and Deferred Compensation Awards………………………………………………… 33 15.3 Effect of Change in Control on Nonemployee Director Awards….. 3316. Compliance with Securities Law………………………………… 3317. Tax Withholding……………………………………………… 33 17.1 Tax Withholding in General………………………………. 33 17.2 Withholding in Shares…………………………………… 3418. Amendment or Termination of Plan………………………………. 3419. Compliance with Section 409A………………………………….. 34 19.1 Awards Subject to Section 409A…………………………… 34 19.2 Deferral and/or Distribution Elections……………………. 35 19.3 Subsequent Elections……………………………………. 35 19.4 Distributions Pursuant to Deferral Elections………………. 36 19.5 Unforeseeable Emergency…………………………………. 36 19.6 Disabled………………………………………………. 37 19.7 Death…………………………………………………. 37 19.8 No Acceleration of Distributions…………………………. 3720. Miscellaneous Provisions……………………………………… 37 20.1 Repurchase Rights………………………………………. 37 20.2 Forfeiture Events………………………………………. 38

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Page —- 20.3 Provision of Information………………………………… 38 20.4 Rights as Employee, Consultant or Director………………… 38 20.5 Rights as a Shareholder…………………………………. 38 20.6 Delivery of Title to Shares……………………………… 38 20.7 Fractional Shares………………………………………. 39 20.8 Retirement and Welfare Plans…………………………….. 39 20.9 Beneficiary Designation…………………………………. 39 20.10 Severability…………………………………………… 39 20.11 No Constraint on Corporate Action………………………… 39 20.12 Unfunded Obligation…………………………………….. 39 20.13 Choice of Law………………………………………….. 40

iv IMARX THERAPEUTICS, INC. 2006 PERFORMANCE INCENTIVE PLAN 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN. 1.1 ESTABLISHMENT. The ImaRx Therapeutics, Inc. 2006 PerformanceIncentive Plan (the “PLAN”) is hereby established effective as of the date ofits approval by the shareholders of the Company (the “EFFECTIVE DATE”). 1.2 PURPOSE. The purpose of the Plan is to advance the interests ofthe Participating Company Group and its shareholders by providing an incentiveto attract, retain and reward persons performing services for the ParticipatingCompany Group and by motivating such persons to contribute to the growth andprofitability of the Participating Company Group. The Plan seeks to achieve thispurpose by providing for Awards in the form of Options, Stock AppreciationRights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, RestrictedStock Units, Performance Shares, Performance Units, Deferred CompensationAwards, Cash-Based and Other Stock-Based Awards and Nonemployee Director Awards. 1.3 TERM OF PLAN. The Plan shall continue in effect until itstermination by the Committee; provided, however, that all Awards shall begranted, if at all, within ten (10) years from the Effective Date. 2. DEFINITIONS AND CONSTRUCTION. 2.1 DEFINITIONS. Whenever used herein, the following terms shall havetheir respective meanings set forth below: (a) “AFFILIATE” means (i) an entity, other than a ParentCorporation, that directly, or indirectly through one or more intermediaryentities, controls the Company or (ii) an entity, other than a SubsidiaryCorporation, that is controlled by the Company directly or indirectly throughone or more intermediary entities. For this purpose, the term “control”(including the term “controlled by”) means the possession, direct or indirect,of the power to direct or cause the direction of the management and policies ofthe relevant entity, whether through the ownership of voting securities, bycontract or otherwise; or shall have such other meaning assigned such term forthe purposes of registration on Form S-8 under the Securities Act. (b) “AWARD” means any Option, Stock Appreciation Right,Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit,Performance Share, Performance Unit, Deferred Compensation Award, Cash-BasedAward, Other Stock-Based Award or Nonemployee Director Award granted under thePlan. (c) “AWARD AGREEMENT” means a written or electronic agreementbetween the Company and a Participant setting forth the terms, conditions andrestrictions of the Award granted to the Participant. (d) “BOARD” means the Board of Directors of the Company. (e) “CASH-BASED AWARD” means an Award denominated in cash andgranted pursuant to Section 12. (f) “CAUSE” means, unless such term or an equivalent term isotherwise defined with respect to an Award by the Participant’s Award Agreementor by a written contract of employment or service, any of the following: (i) theParticipant’s theft, dishonesty, willful misconduct, breach of fiduciary dutyfor personal profit, or falsification of any Participating Company documents orrecords; (ii) the Participant’s material failure to abide by a ParticipatingCompany’s code of conduct or other policies (including, without limitation,policies relating to confidentiality and reasonable workplace conduct); (iii)the Participant’s unauthorized use, misappropriation, destruction or diversionof any tangible or intangible asset or corporate opportunity of a ParticipatingCompany (including, without limitation, the Participant’s improper use ordisclosure of a Participating Company’s confidential or proprietaryinformation); (iv) any intentional act by the Participant which has a materialdetrimental effect on a Participating Company’s reputation or business; (v) theParticipant’s repeated failure or inability to perform any reasonable assignedduties after written notice from a Participating Company of, and a reasonableopportunity to cure, such failure or inability; (vi) any material breach by theParticipant of any employment, service, non-disclosure, non-competition,non-solicitation or other similar agreement between the Participant and aParticipating Company, which breach is not cured pursuant to the terms of suchagreement; or (vii) the Participant’s conviction (including any plea of guiltyor nolo contendere) of any criminal act involving fraud, dishonesty,misappropriation or moral turpitude, or which impairs the Participant’s abilityto perform his or her duties with a Participating Company. (g) “CHANGE IN CONTROL” means, unless such term or an equivalentterm is otherwise defined with respect to an Award by the Participant’s AwardAgreement or by a written contract of employment or service, the occurrence ofany of the following: (i) any “person” (as such term is used in Sections 13(d) and14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule13d-3 promulgated under the Exchange Act), directly or indirectly, of securitiesof the Company representing more than fifty percent (50%) of the total combinedvoting power of the Company’s then-outstanding securities entitled to votegenerally in the election of Directors; provided, however, that the followingacquisitions shall not constitute a Change in Control: (1) an acquisition by anysuch person who on the Effective Date is the beneficial owner of more than fiftypercent (50%) of such voting power; (2) any acquisition directly from theCompany, including, without limitation, a public offering of securities; (3) anyacquisition by the Company; (4) any acquisition by a trustee or other fiduciaryunder an employee benefit plan of a Participating Company; or (5) anyacquisition by an entity owned directly or indirectly by the shareholders of theCompany in substantially the same proportions as their ownership of the votingsecurities of the Company; or (ii) an Ownership Change Event or series of relatedOwnership Change Events (collectively, a “TRANSACTION”) in which theshareholders of the Company immediately before the Transaction do not retainimmediately after the Transactiondirect or indirect beneficial ownership of more than fifty percent (50%) of thetotal combined voting power of the outstanding securities entitled to votegenerally in the election of Directors or, in the case of an Ownership ChangeEvent described in Section 2.1(g)(iii), the entity to which the assets of theCompany were transferred (the “TRANSFEREE”), as the case may be; or (iii) a liquidation or dissolution of the Company;provided, however, that a Change in Control shall be deemed not to include atransaction described in subsections (i) or (ii) of this Section 2.1(g) in whicha majority of the members of the board of directors of the continuing, survivingor successor entity, or parent thereof, immediately after such transaction iscomprised of Incumbent Directors. For purposes of the preceding sentence, indirect beneficial ownership shallinclude, without limitation, an interest resulting from ownership of the votingsecurities of one or more corporations or other business entities which own theCompany or the Transferee, as the case may be, either directly or through one ormore subsidiary corporations or other business entities. The Committee shallhave the right to determine whether multiple sales or exchanges of the votingsecurities of the Company or multiple Ownership Change Events are related, andits determination shall be final, binding and conclusive. (h) “CODE” means the Internal Revenue Code of 1986, as amended,and any applicable regulations promulgated thereunder. (i) “COMMITTEE” means the Compensation Committee and such othercommittee or subcommittee of the Board, if any, duly appointed to administer thePlan and having such powers in each instance as shall be specified by the Board.If, at any time, there is no committee of the Board then authorized or properlyconstituted to administer the Plan, the Board shall exercise all of the powersof the Committee granted herein, and, in any event, the Board may in itsdiscretion exercise any or all of such powers. (j) “COMPANY” means ImaRx Therapeutics, Inc., a Delawarecorporation, or any successor corporation thereto. (k) “CONSULTANT” means a person engaged to provide consulting oradvisory services (other than as an Employee or Director) to a ParticipatingCompany, provided that the identity of such person, the nature of such servicesor the entity to which such services are provided would not preclude the Companyfrom offering or selling securities to such person pursuant to the Plan inreliance on registration on a Form S-8 Registration Statement under theSecurities Act. (l) “COVERED EMPLOYEE” means, at any time the Plan is subject toSection 162(m), any Employee who is or may become a “covered employee” asdefined in Section 162(m), or any successor statute, and who is designated,either as an individual Employee or a member of a class of Employees, by theCommittee no later than (i) the date ninety (90) days after the beginning of thePerformance Period, or (ii) the date on which twenty-five percent (25%) of thePerformance Period has elapsed, as a “Covered Employee” under this Plan for suchapplicable Performance Period. (m) “DEFERRED COMPENSATION AWARD” means an award granted to aParticipant pursuant to Section 11. (n) “DIRECTOR” means a member of the Board. (o) “DISABILITY” means the permanent and total disability of theParticipant, within the meaning of Section 22(e)(3) of the Code. (p) “DIVIDEND EQUIVALENT RIGHT” means the right of a Participant,granted at the discretion of the Committee or as otherwise provided by the Plan,to receive a credit for the account of such Participant in an amount equal tothe cash dividends paid on one share of Stock for each share of Stockrepresented by an Award held by such Participant. (q) “EMPLOYEE” means any person treated as an employee (includingan Officer or Director who is also treated as an employee) in the records of aParticipating Company and, with respect to any Incentive Stock Option granted tosuch person, who is an employee for purposes of Section 422 of the Code;provided, however, that neither service as a Director nor payment of adirector’s fee shall be sufficient to constitute employment for purposes of thePlan. The Company shall determine in good faith and in the exercise of itsdiscretion whether an individual has become or has ceased to be an Employee andthe effective date of such individual’s employment or termination of employment,as the case may be. For purposes of an individual’s rights, if any, under theterms of the Plan as of the time of the Company’s determination of whether ornot the individual is an Employee, all such determinations by the Company shallbe final, binding and conclusive as to such rights, if any, notwithstanding thatthe Company or any court of law or governmental agency subsequently makes acontrary determination as to such individual’s status as an Employee. (r) “EXCHANGE ACT” means the Securities Exchange Act of 1934, asamended. (s) “FAIR MARKET VALUE” means, as of any date, the value of ashare of Stock or other property as determined by the Committee, in itsdiscretion, or by the Company, in its discretion, if such determination isexpressly allocated to the Company herein, subject to the following: (i) Except as otherwise determined by the Committee, if, onsuch date, the Stock is listed on a national or regional securities exchange ormarket system, the Fair Market Value of a share of Stock shall be the closingprice of a share of Stock (or the mean of the closing bid and asked prices of ashare of Stock if the Stock is so quoted instead) as quoted on the NasdaqNational Market, The Nasdaq SmallCap Market or such other national or regionalsecurities exchange or market system constituting the primary market for theStock, as reported in The Wall Street Journal or such other source as theCompany deems reliable. If the relevant date does not fall on a day on which theStock has traded on such securities exchange or market system, the date on whichthe Fair Market Value shall be established shall be the last day on which theStock was so traded prior to the relevant date, or such other appropriate day asshall be determined by the Committee, in its discretion. (ii) Notwithstanding the foregoing, the Committee may, inits discretion, determine the Fair Market Value on the basis of the opening,closing, or average of the high and low sale prices of a share of Stock on suchdate, the preceding trading day or the next succeeding trading day; and, forpurposes other than determining the exercise price or purchase price of sharespursuant to an Award, the high or low sale price of a share of Stock on suchdate, the preceding trading day or the next succeeding trading day, the averageof any such prices determined over a period of trading days or the actual saleprice of a share of Stock received by a Participant. The Committee may vary itsmethod of determination of the Fair Market Value as provided in this Section fordifferent purposes under the Plan. (iii) If, on such date, the Stock is not listed on anational or regional securities exchange or market system, the Fair Market Valueof a share of Stock shall be as determined by the Committee in good faithwithout regard to any restriction other than a restriction which, by its terms,will never lapse. (t) “INCENTIVE STOCK OPTION” means an Option intended to be (asset forth in the Award Agreement) and which qualifies as an incentive stockoption within the meaning of Section 422(b) of the Code. (u) “INCUMBENT DIRECTOR” means a director who either (i) is amember of the Board as of the Effective Date or (ii) is elected to the Boardwith the affirmative votes of at least a majority of the Directors who were notelected in connection with an actual or threatened proxy contest relating to theelection of directors of the Company. (v) “INSIDER” means an Officer, Director or any other personwhose transactions in Stock are subject to Section 16 of the Exchange Act. (w) “INSIDER TRADING POLICY” means the written policy of theCompany pertaining to the purchase, sale, transfer or other disposition of theCompany’s equity securities by Directors, Officers, Employees or other serviceproviders who may possess material, nonpublic information regarding the Companyor its securities. (x) “NET-EXERCISE” means a procedure by which the Participantwill be issued a number of shares of Stock determined in accordance with thefollowing formula: N = X(A-B)/A, where “N” = the number of shares of Stock to be issued to the Participant upon exercise of the Option; “X” = the total number of shares with respect to which the Participant has elected to exercise the Option; “A” = the Fair Market Value of one (1) share of Stock determined on the exercise date; and “B” = the exercise price per share (as defined in the Participant’s Award Agreement) (y) “NONEMPLOYEE DIRECTOR” means a Director who is not anEmployee. (z) “NONEMPLOYEE DIRECTOR AWARD” means a Nonstatutory StockOption, Stock Appreciation Right, Restricted Stock Award or Restricted StockUnit Award granted to a Nonemployee Director pursuant to Section 13 of the Plan. (aa) “NONSTATUTORY STOCK OPTION” means an Option not intended tobe (as set forth in the Award Agreement) an incentive stock option within themeaning of Section 422(b) of the Code. (bb) “OFFICER” means any person designated by the Board as anofficer of the Company. (cc) “OPTION” means an Incentive Stock Option or a NonstatutoryStock Option. (dd) “OTHER STOCK-BASED AWARD” means an Award denominated inshares of Stock and granted pursuant to Section 12. (ee) “OWNERSHIP CHANGE EVENT” means the occurrence of any of thefollowing with respect to the Company: (i) the direct or indirect sale orexchange in a single or series of related transactions by the shareholders ofthe Company of more than fifty percent (50%) of the voting stock of the Company;(ii) a merger or consolidation or share exchange in which the Company is aparty; or (iii) the sale, exchange, or transfer of all or substantially all ofthe assets of the Company (other than a sale, exchange or transfer to one ormore subsidiaries of the Company). (ff) “PARENT CORPORATION” means any present or future “parentcorporation” of the Company, as defined in Section 424(e) of the Code. (gg) “PARTICIPANT” means any eligible person who has been grantedone or more Awards. (hh) “PARTICIPATING COMPANY” means the Company or any ParentCorporation, Subsidiary Corporation or Affiliate. (ii) “PARTICIPATING COMPANY GROUP” means, at any point in time,all entities collectively which are then Participating Companies. (jj) “PERFORMANCE AWARD” means an Award of Performance Shares orPerformance Units. (kk) “PERFORMANCE AWARD FORMULA” means, for any PerformanceAward, a formula or table established by the Committee pursuant to Section 10.3which provides the basis for computing the value of a Performance Award at oneor more threshold levels of attainment of the applicable Performance Goal(s)measured as of the end of the applicable Performance Period. (ll) “PERFORMANCE-BASED COMPENSATION” means compensation under anAward that satisfies the requirements of Section 162(m) for certainperformance-based compensation paid to Covered Employees. (mm) “PERFORMANCE GOAL” means a performance goal established bythe Committee pursuant to Section 10.3. (nn) “PERFORMANCE PERIOD” means a period established by theCommittee pursuant to Section 10.3 at the end of which one or more PerformanceGoals are to be measured. (oo) “PERFORMANCE SHARE” means a right granted to a Participantpursuant to Section 10 to receive a payment equal to the value of a PerformanceShare, as determined by the Committee, based on performance. (pp) “PERFORMANCE UNIT” means a right granted to a Participantpursuant to Section 10 to receive a payment equal to the value of a PerformanceUnit, as determined by the Committee, based upon performance. (qq) “PRIOR PLAN” means the Company’s 2000 Stock Option Plan. (rr) “RESTRICTED STOCK AWARD” means an Award of a RestrictedStock Bonus or a Restricted Stock Purchase Right. (ss) “RESTRICTED STOCK BONUS” means Stock granted to aParticipant pursuant to Section 8. (tt) “RESTRICTED STOCK PURCHASE RIGHT” means a right to purchaseStock granted to a Participant pursuant to Section 8. (uu) “RESTRICTED STOCK UNIT” or “STOCK UNIT” means a rightgranted to a Participant pursuant to Section 9 or Section 11, respectively, toreceive a share of Stock on a date determined in accordance with the provisionsof such Sections, as applicable, and the Participant’s Award Agreement. (vv) “RULE 16B-3” means Rule 16b-3 under the Exchange Act, asamended from time to time, or any successor rule or regulation. (ww) “SAR” or “STOCK APPRECIATION RIGHT” means a right granted toa Participant pursuant to Section 7 to receive payment, for each share of Stocksubject to such SAR, of an amount equal to the excess, if any, of the FairMarket Value of a share of Stock on the date of exercise of the SAR over theexercise price. (xx) “SECTION 162(M)” means Section 162(m) of the Code. (yy) “SECTION 409A” means Section 409A of the Code (includingregulations or administrative guidelines thereunder). (zz) “SECURITIES ACT” means the Securities Act of 1933, asamended. (aaa) “SERVICE” means a Participant’s employment or service withthe Participating Company Group, whether in the capacity of an Employee, aDirector or a Consultant. Unless otherwise provided by the Committee, aParticipant’s Service shall not be deemed to have terminated merely because of achange in the capacity in which the Participant renders such Service or a changein the Participating Company for which the Participant renders such Service,provided that there is no interruption or termination of the Participant’sService. Furthermore, a Participant’s Service shall not be deemed to haveterminated if the Participant takes any military leave, sick leave, or otherbona fide leave of absence approved by the Company. However, if any such leavetaken by a Participant exceeds ninety (90) days, then on the ninety-first (91st)day following the commencement of such leave the Participant’s Service shall bedeemed to have terminated, unless the Participant’s right to return to Serviceis guaranteed by statute or contract. Notwithstanding the foregoing, unlessotherwise designated by the Company or required by law, a leave of absence shallnot be treated as Service for purposes of determining vesting under theParticipant’s Award Agreement. A Participant’s Service shall be deemed to haveterminated either upon an actual termination of Service or upon the entity forwhich the Participant performs Service ceasing to be a Participating Company.Subject to the foregoing, the Company, in its discretion, shall determinewhether the Participant’s Service has terminated and the effective date of suchtermination. (bbb) “STOCK” means the common stock of the Company, as adjustedfrom time to time in accordance with Section 4.5. (ccc) “SUBSIDIARY CORPORATION” means any present or future”subsidiary corporation” of the Company, as defined in Section 424(f) of theCode. (ddd) “TEN PERCENT OWNER” means a Participant who, at the time anOption is granted to the Participant, owns stock possessing more than tenpercent (10%) of the total combined voting power of all classes of stock of aParticipating Company (other than an Affiliate) within the meaning of Section422(b)(6) of the Code. (eee) “VESTING CONDITIONS” mean those conditions established inaccordance with the Plan prior to the satisfaction of which shares subject to anAward remain subject to forfeiture or a repurchase option in favor of theCompany exercisable for the Participant’s purchase price for such shares uponthe Participant’s termination of Service. 2.2 CONSTRUCTION. Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of the Plan. Except when otherwise indicated by the context, thesingular shall include the plural and the plural shall include the singular. Useof the term “or” is not intended to be exclusive, unless the context clearlyrequires otherwise. 3. ADMINISTRATION. 3.1 ADMINISTRATION BY THE COMMITTEE. The Plan shall be administered bythe Committee. All questions of interpretation of the Plan, of any AwardAgreement or of any other form of agreement or other document employed by theCompany in the administration ofthe Plan or of any Award shall be determined by the Committee, and suchdeterminations shall be final, binding and conclusive upon all persons having aninterest in the Plan or such Award, unless fraudulent or made in bad faith. Anyand all actions, decisions and determinations taken or made by the Committee inthe exercise of its discretion pursuant to the Plan or Award Agreement or otheragreement thereunder (other than determining questions of interpretationpursuant to the preceding sentence) shall be final, binding and conclusive uponall persons having an interest therein. 3.2 AUTHORITY OF OFFICERS. Any Officer shall have the authority to acton behalf of the Company with respect to any matter, right, obligation,determination or election which is the responsibility of or which is allocatedto the Company herein, provided the Officer has apparent authority with respectto such matter, right, obligation, determination or election. The Board orCommittee may, in its discretion, delegate to a committee comprised of one ormore Officers the authority to grant one or more Awards, without furtherapproval of the Board or the Committee, to any Employee, other than a personwho, at the time of such grant, is an Insider or a Covered Person; provided,however, that (a) such Awards shall not be granted for shares in excess of themaximum aggregate number of shares of Stock authorized for issuance pursuant toSection 4.1, (b) each such Award shall be subject to the terms and conditions ofthe appropriate standard form of Award Agreement approved by the Board or theCommittee and shall conform to the provisions of the Plan, and (c) each suchAward shall conform to such limits and guidelines as shall be established fromtime to time by resolution of the Board or the Committee. 3.3 POWERS OF THE COMMITTEE. In addition to any other powers set forthin the Plan and subject to the provisions of the Plan, the Committee shall havethe full and final power and authority, in its discretion: (a) to determine the persons to whom, and the time or times atwhich, Awards shall be granted and the number of shares of Stock, units ormonetary value to be subject to each Award; (b) to determine the type of Award granted; (c) to determine the Fair Market Value of shares of Stock orother property; (d) to determine the terms, conditions and restrictionsapplicable to each Award (which need not be identical) and any shares acquiredpursuant thereto, including, without limitation, (i) the exercise or purchaseprice of shares pursuant to any Award, (ii) the method of payment for sharespurchased pursuant to any Award, (iii) the method for satisfaction of any taxwithholding obligation arising in connection with Award, including by thewithholding or delivery of shares of Stock, (iv) the timing, terms andconditions of the exercisability or vesting of any Award or any shares acquiredpursuant thereto, (v) the Performance Measures, Performance Period, PerformanceAward Formula and Performance Goals applicable to any Award and the extent towhich such Performance Goals have been attained, (vi) the time of the expirationof any Award, (vii) the effect of the Participant’s termination of Service onany of the foregoing, and (viii) all other terms, conditions andrestrictions applicable to any Award or shares acquired pursuant thereto notinconsistent with the terms of the Plan; (e) to determine whether an Award will be settled in shares ofStock, cash, or in any combination thereof; (f) to approve one or more forms of Award Agreement; (g) to amend, modify, extend, cancel or renew any Award or towaive any restrictions or conditions applicable to any Award or any sharesacquired pursuant thereto; (h) to accelerate, continue, extend or defer the exercisabilityor vesting of any Award or any shares acquired pursuant thereto, including withrespect to the period following a Participant’s termination of Service; (i) without the consent of the affected Participant andnotwithstanding the provisions of any Award Agreement to the contrary, tounilaterally substitute at any time a Stock Appreciation Right providing forsettlement solely in shares of Stock in place of any outstanding Option,provided that such Stock Appreciation Right covers the same number of shares ofStock and provides for the same exercise price (subject in each case toadjustment in accordance with Section 4.5) as the replaced Option and otherwiseprovides substantially equivalent terms and conditions as the replaced Option,as determined by the Committee; (j) to prescribe, amend or rescind rules, guidelines and policiesrelating to the Plan, or to adopt sub-plans or supplements to, or alternativeversions of, the Plan, including, without limitation, as the Committee deemsnecessary or desirable to comply with the laws or regulations of or toaccommodate the tax policy, accounting principles or custom of, foreignjurisdictions whose citizens may be granted Awards; and (k) to correct any defect, supply any omission or reconcile anyinconsistency in the Plan or any Award Agreement and to make all otherdeterminations and take such other actions with respect to the Plan or any Awardas the Committee may deem advisable to the extent not inconsistent with theprovisions of the Plan or applicable law. 3.4 COMPLIANCE WITH SECTION 162(M). If the Company is a “publicly heldcorporation” within the meaning of Section 162(m), the Board may establish aCommittee of “outside directors” within the meaning of Section 162(m) to approvethe grant of any Award intended to result in the payment of Performance-BasedCompensation. 3.5 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect toparticipation by Insiders in the Plan, at any time that any class of equitysecurity of the Company is registered pursuant to Section 12 of the ExchangeAct, the Plan shall be administered in compliance with the requirements, if any,of Rule 16b-3. 3.6 INDEMNIFICATION. In addition to such other rights ofindemnification as they may have as members of the Board or the Committee or asofficers or employees of the Participating Company Group, members of the Boardor the Committee and any officers or employees of the Participating CompanyGroup to whom authority to act for the Board, theCommittee or the Company is delegated shall be indemnified by the Companyagainst all reasonable expenses, including attorneys’ fees, actually andnecessarily incurred in connection with the defense of any action, suit orproceeding, or in connection with any appeal therein, to which they or any ofthem may be a party by reason of any action taken or failure to act under or inconnection with the Plan, or any right granted hereunder, and against allamounts paid by them in settlement thereof (provided such settlement is approvedby independent legal counsel selected by the Company) or paid by them insatisfaction of a judgment in any such action, suit or proceeding, except inrelation to matters as to which it shall be adjudged in such action, suit orproceeding that such person is liable for gross negligence, bad faith orintentional misconduct in duties; provided, however, that within sixty (60) daysafter the institution of such action, suit or proceeding, such person shalloffer to the Company, in writing, the opportunity at its own expense to handleand defend the same. 4. SHARES SUBJECT TO PLAN. 4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment asprovided in Sections 4.2, 4.3 and 4.5, the maximum aggregate number of shares ofStock that may be issued under the Plan after the Effective Date shall be equalto One Million Eight Hundred Thousand (1,800,000) shares, and shall consist ofauthorized but unissued or reacquired shares of Stock or any combinationthereof. 4.2 SHARE ACCOUNTING. If an outstanding Award for any reason expiresor is terminated or cancelled without having been exercised or settled in full,or if shares of Stock acquired pursuant to an Award subject to forfeiture orrepurchase are forfeited or repurchased by the Company for an amount not greaterthan the Participant’s purchase price, the shares of Stock allocable to theterminated portion of such Award or such forfeited or repurchased shares ofStock shall again be available for issuance under the Plan. Shares of Stockshall not be deemed to have been issued pursuant to the Plan (a) with respect toany portion of an Award that is settled in cash or (b) to the extent such sharesare withheld or reacquired by the Company in satisfaction of tax withholdingobligations pursuant to Section 17.2. Upon payment in shares of Stock pursuantto the exercise of a SAR, the number of shares available for issuance under thePlan shall be reduced only by the number of shares actually issued in suchpayment. If the exercise price of an Option is paid by tender to the Company, orattestation to the ownership, of shares of Stock owned by the Participant, or bymeans of a Net-Exercise, the number of shares available for issuance under thePlan shall be reduced by the net number of shares for which the Option isexercised. 4.3 ADJUSTMENT FOR UNISSUED PRIOR PLAN SHARES. The maximum aggregatenumber of shares of Stock that may be issued under the Plan as set forth inSection 4.1 shall be cumulatively increased from time to time by: (a) the number of shares of Stock subject to that portion of anyoption outstanding pursuant to the Prior Plan as of the Effective Date which, onor after the Effective Date, expires or is terminated or cancelled withouthaving been exercised; and (b) the number of shares of Stock acquired pursuant to the PriorPlan subject to forfeiture or repurchase by the Company at the Participant’spurchase price which, on or after the date of termination of the Prior Plan, isso forfeited or repurchased;provided, however, that the aggregate number of shares of Stock authorized forissuance under the Prior Plan that may become authorized for issuance under thePlan pursuant to this Section 4.3 shall not exceed [insert number of outstandingoptions under Prior Plan on date this Plan is adopted] subject to adjustment asprovided in Section 4.5. 4.4 MAXIMUM NUMBER OF SHARES ISSUABLE PURSUANT TO INCENTIVE STOCKOPTIONS. Subject to adjustment as provided in Section 4.5, the maximum aggregatenumber of shares of Stock that may be issued under the Plan pursuant to theexercise of Incentive Stock Options shall not exceed One Million Eight HundredThousand (1,800,000). The maximum aggregate number of shares of Stock that maybe issued under the Plan pursuant to all Awards other than Incentive StockOptions shall be the number of shares determined in accordance with Section 4.1,subject to adjustment as provided in Sections 4.2, 4.3 and 4.5. 4.5 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. Subject to anyrequired action by the shareholders of the Company, in the event of any changein the Stock effected without receipt of consideration by the Company after theEffective Date, whether through merger, consolidation, share exchange,reorganization, reincorporation, recapitalization, reclassification, stockdividend, stock split, reverse stock split, split-up, split-off, spin-off,combination of shares, exchange of shares, or similar change in the capitalstructure of the Company, or in the event of payment of a dividend ordistribution to the shareholders of the Company in a form other than Stock(excepting normal cash dividends) that has a material effect on the Fair MarketValue of shares of Stock, appropriate adjustments shall be made in the numberand kind of shares subject to the Plan and to any outstanding Awards, in theAward limits set forth in Section 5.3 and in the exercise or purchase price pershare under any outstanding Award in order to prevent dilution or enlargement ofParticipants’ rights under the Plan. For purposes of the foregoing, conversionof any convertible securities of the Company shall not be treated as “effectedwithout receipt of consideration by the Company.” If a majority of the shareswhich are of the same class as the shares that are subject to outstanding Awardsare exchanged for, converted into, or otherwise become (whether or not pursuantto an Ownership Change Event) shares of another corporation (the “NEW SHARES”),the Committee may unilaterally amend the outstanding Awards to provide that suchAwards are for New Shares. In the event of any such amendment, the number ofshares subject to, and the exercise or purchase price per share of, theoutstanding Awards shall be adjusted in a fair and equitable manner asdetermined by the Committee, in its discretion. Any fractional share resultingfrom an adjustment pursuant to this Section 4.5 shall be rounded down to thenearest whole number, and in no event may the exercise or purchase price underany Award be decreased to an amount less than the par value, if any, of thestock subject to such Award. The Committee in its sole discretion, may also makesuch adjustments in the terms of any Award to reflect, or related to, suchchanges in the capital structure of the Company or distributions as it deemsappropriate, including modification of Performance Goals, Performance AwardFormulas and Performance Periods. The adjustments determined by the Committeepursuant to this Section shall be final, binding and conclusive. The Committee may, without affecting the number of Shares reserved oravailable hereunder, authorize the issuance or assumption of benefits under thisPlan in connection with any merger, consolidation, acquisition of property orstock, or reorganization upon such terms and conditions as it may deemappropriate, subject to compliance with Sections 409A and 422 and any relatedguidance issued by the U.S. Treasury Department, where applicable. 5. ELIGIBILITY, PARTICIPATION AND AWARD LIMITATIONS. 5.1 PERSONS ELIGIBLE FOR AWARDS. Awards, other than DeferredCompensation Award or Nonemployee Director Awards, may be granted only toEmployees and Consultants. Deferred Compensation Awards may be granted only toOfficers, Directors and individuals who are among a select group of managementor highly compensated Employees. Nonemployee Director Awards may be granted onlyto persons who, at the time of grant, are Nonemployee Directors. 5.2 PARTICIPATION IN PLAN. Awards are granted solely at the discretionof the Committee. Eligible persons may be granted more than one Award. However,eligibility in accordance with this Section shall not entitle any person to begranted an Award, or, having been granted an Award, to be granted an additionalAward. 5.3 AWARD LIMITATIONS. (a) INCENTIVE STOCK OPTION LIMITATIONS. (i) PERSONS ELIGIBLE. An Incentive Stock Option may begranted only to a person who, on the effective date of grant, is an Employee ofthe Company, a Parent Corporation or a Subsidiary Corporation (each being an”ISO-QUALIFYING CORPORATION”). Any person who is not an Employee of anISO-Qualifying Corporation on the effective date of the grant of an Option tosuch person may be granted only a Nonstatutory Stock Option. An Incentive StockOption granted to a prospective Employee upon the condition that such personbecome an Employee of an ISO-Qualifying Corporation shall be deemed grantedeffective on the date such person commences Service with an ISO-QualifyingCorporation, with an exercise price determined as of such date in accordancewith Section 6.1. (ii) FAIR MARKET VALUE LIMITATION. To the extent thatoptions designated as Incentive Stock Options (granted under all stock optionplans of the Participating Company Group, including the Plan) become exercisableby a Participant for the first time during any calendar year for stock having aFair Market Value greater than One Hundred Thousand Dollars ($100,000), theportion of such options which exceeds such amount shall be treated asNonstatutory Stock Options. For purposes of this Section, options designated asIncentive Stock Options shall be taken into account in the order in which theywere granted, and the Fair Market Value of stock shall be determined as of thetime the option with respect to such stock is granted. If the Code is amended toprovide for a limitation different from that set forth in this Section, suchdifferent limitation shall be deemed incorporated herein effective as of thedate and with respect to such Options as required or permitted by such amendmentto the Code. If an Option is treated as an Incentive Stock Option in part and asa Nonstatutory Stock Option in part by reason of the limitation set forth inthis Section, the Participant may designatewhich portion of such Option the Participant is exercising. In the absence ofsuch designation, the Participant shall be deemed to have exercised theIncentive Stock Option portion of the Option first. Upon exercise, shares issuedpursuant to each such portion shall be separately identified. (b) NONEMPLOYEE DIRECTOR AWARD LIMITS. Subject to adjustment asprovided in Section 4.5, no Nonemployee Director may be granted within anyfiscal year of the Company one or more Nonemployee Director Awards for more thanSeventy Five Thousand (75,000) shares; provided, however, that the foregoingannual limit shall be increased by one or more of the following additions, asapplicable: (i) an additional Fifty Thousand (50,000) in the fiscal year inwhich the Nonemployee Director is first appointed or elected to the Board as aNonemployee Director, (ii) an additional Thirty Thousand (30,000) shares in anyfiscal year in which the Nonemployee Director is serving as the Chairman or LeadDirector of the Board, (iii) an additional Fifteen Thousand (15,000) shares inany fiscal year for each committee of the Board on which the NonemployeeDirector is then serving other than as chairman of the committee, and (iv) anadditional Twenty Thousand (20,000) shares in any fiscal year for each committeeof the Board on which the Nonemployee Director is then serving as chairman ofthe committee. 6. STOCK OPTIONS. Options shall be evidenced by Award Agreements specifying the numberof shares of Stock covered thereby, in such form as the Committee shall fromtime to time establish. No Option or purported Option shall be a valid andbinding obligation of the Company unless evidenced by a fully executed AwardAgreement. Award Agreements evidencing Options may incorporate all or any of theterms of the Plan by reference and shall comply with and be subject to thefollowing terms and conditions: 6.1 EXERCISE PRICE. The exercise price for each Option shall beestablished in the discretion of the Committee; provided, however, that (a) theexercise price per share shall be not less than the Fair Market Value of a shareof Stock on the effective date of grant of the Option and (b) no Incentive StockOption granted to a Ten Percent Owner shall have an exercise price per shareless than one hundred ten percent (110%) of the Fair Market Value of a share ofStock on the effective date of grant of the Option. Notwithstanding theforegoing, an Option (whether an Incentive Stock Option or a Nonstatutory StockOption) may be granted with an exercise price lower than the minimum exerciseprice set forth above if such Option is granted pursuant to an assumption orsubstitution for another option in a manner qualifying under the provisions ofSection 424(a) of the Code. 6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be exercisableat such time or times, or upon such event or events, and subject to such terms,conditions, performance criteria and restrictions as shall be determined by theCommittee and set forth in the Award Agreement evidencing such Option; provided,however, that (a) no Option shall be exercisable after the expiration of ten(10) years after the effective date of grant of such Option and (b) no IncentiveStock Option granted to a Ten Percent Owner shall be exercisable after theexpiration of five (5) years after the effective date of grant of such Option.Subject to the foregoing, unless otherwise specified by the Committee in thegrant of an Option, each Optionshall terminate ten (10) years after the effective date of grant of the Option,unless earlier terminated in accordance with its provisions. 6.3 PAYMENT OF EXERCISE PRICE. (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwiseprovided below, payment of the exercise price for the number of shares of Stockbeing purchased pursuant to any Option shall be made (i) in cash or by check orcash equivalent, (ii) to the extent permitted by the Company at the time ofexercise, by tender to the Company, or attestation to the ownership, of sharesof Stock owned by the Participant having a Fair Market Value not less than theexercise price, (iii) to the extent permitted by the Company at the time ofexercise, by delivery of a properly executed notice of exercise together withirrevocable instructions to a broker providing for the assignment to the Companyof the proceeds of a sale or loan with respect to some or all of the sharesbeing acquired upon the exercise of the Option (including, without limitation,through an exercise complying with the provisions of Regulation T as promulgatedfrom time to time by the Board of Governors of the Federal Reserve System) (a”CASHLESS EXERCISE”), (iv) to the extent permitted by the Company at the time ofexercise, by delivery of a properly executed notice electing a Net-Exercise, (v)by such other consideration as may be approved by the Committee from time totime to the extent permitted by applicable law, or (vi) by any combinationthereof. The Committee may at any time or from time to time grant Options whichdo not permit all of the foregoing forms of consideration to be used in paymentof the exercise price or which otherwise restrict one or more forms ofconsideration. (b) LIMITATIONS ON FORMS OF CONSIDERATION. (i) TENDER OF STOCK. Notwithstanding the foregoing, anOption may not be exercised by tender to the Company, or attestation to theownership, of shares of Stock to the extent such tender or attestation wouldconstitute a violation of the provisions of any law, regulation or agreementrestricting the redemption of the Company’s stock. Unless otherwise provided bythe Committee, an Option may not be exercised by tender to the Company, orattestation to the ownership, of shares of Stock unless such shares either havebeen owned by the Participant for more than six (6) months (or such otherperiod, if any, as the Committee may permit) and not used for another Optionexercise by attestation during such period, or were not acquired, directly orindirectly, from the Company. (ii) CASHLESS EXERCISE. The Company reserves, at any and alltimes, the right, in the Company’s sole and absolute discretion, to establish,decline to approve or terminate any program or procedures for the exercise ofOptions by means of a Cashless Exercise, including with respect to one or moreParticipants specified by the Company notwithstanding that such program orprocedures may be available to other Participants. 6.4 EFFECT OF TERMINATION OF SERVICE. (a) OPTION EXERCISABILITY. Subject to earlier termination of theOption as otherwise provided herein and unless otherwise provided by theCommittee in the grant of an Option and set forth in the Award Agreement, anOption shall terminate immediately upon the Participant’s termination of Serviceto the extent that it is then unvested and shall be exercisableafter the Participant’s termination of Service to the extent it is then vestedonly during the applicable time period determined in accordance with thisSection and thereafter shall terminate: (i) DISABILITY. If the Participant’s Service terminatesbecause of the Disability of the Participant, the Option, to the extentunexercised and exercisable for vested shares on the date on which theParticipant’s Service terminated, may be exercised by the Participant (or theParticipant’s guardian or legal representative) at any time prior to theexpiration of twelve (12) months after the date on which the Participant’sService terminated, but in any event no later than the date of expiration of theOption’s term as set forth in the Award Agreement evidencing such Option (the”OPTION EXPIRATION DATE”). (ii) DEATH. If the Participant’s Service terminates becauseof the death of the Participant, the Option, to the extent unexercised andexercisable for vested shares on the date on which the Participant’s Serviceterminated, may be exercised by the Participant’s legal representative or otherperson who acquired the right to exercise the Option by reason of theParticipant’s death at any time prior to the expiration of twelve (12) monthsafter the date on which the Participant’s Service terminated, but in any eventno later than the Option Expiration Date. The Participant’s Service shall bedeemed to have terminated on account of death if the Participant dies withinthree (3) months after the Participant’s termination of Service. (iii) TERMINATION FOR CAUSE. Notwithstanding any otherprovision of the Plan to the contrary, if the Participant’s Service isterminated for Cause or if, following the Participant’s termination of Serviceand during any period in which the Option otherwise would remain exercisable,the Participant engages in any act that would constitute Cause, the Option shallterminate in its entirety and cease to be exercisable immediately upon suchtermination of Service or act. (iv) OTHER TERMINATION OF SERVICE. If the Participant’sService terminates for any reason, except Disability, death or Cause, theOption, to the extent unexercised and exercisable for vested shares on the dateon which the Participant’s Service terminated, may be exercised by theParticipant at any time prior to the expiration of three (3) months after thedate on which the Participant’s Service terminated, but in any event no laterthan the Option Expiration Date. (b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding theforegoing, other than termination of Service for Cause, if the exercise of anOption within the applicable time periods set forth in Section 6.4(a) isprevented by the provisions of Section 16 below, the Option shall remainexercisable until three (3) months (or such longer period of time as determinedby the Committee, in its discretion) after the date the Participant is notifiedby the Company that the Option is exercisable, but in any event no later thanthe Option Expiration Date. (c) EXTENSION IF PARTICIPANT SUBJECT TO SECTION 16(B).Notwithstanding the foregoing, other than termination of Service for Cause, if asale within the applicable time periods set forth in Section 6.4(a) of sharesacquired upon the exercise of the Option would subject the Participant to suitunder Section 16(b) of the Exchange Act, the Option shall remain exercisableuntil the earliest to occur of (i) the tenth (10th) day following the dateon which a sale of such shares by the Participant would no longer be subject tosuch suit, (ii) the one hundred and ninetieth (190th) day after theParticipant’s termination of Service, or (iii) the Option Expiration Date. 6.5 TRANSFERABILITY OF OPTIONS. During the lifetime of theParticipant, an Option shall be exercisable only by the Participant or theParticipant’s guardian or legal representative. An Option shall not be subjectin any manner to anticipation, alienation, sale, exchange, transfer, assignment,pledge, encumbrance, or garnishment by creditors of the Participant or theParticipant’s beneficiary, except transfer by will or by the laws of descent anddistribution. Notwithstanding the foregoing, to the extent permitted by theCommittee, in its discretion, and set forth in the Award Agreement evidencingsuch Option, a Nonstatutory Stock Option shall be assignable or transferablesubject to the applicable limitations, if any, described in the GeneralInstructions to Form S-8 Registration Statement under the Securities Act. 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be evidenced by Award Agreementsspecifying the number of shares of Stock subject to the Award, in such form asthe Committee shall from time to time establish. No SAR or purported SAR shallbe a valid and binding obligation of the Company unless evidenced by a fullyexecuted Award Agreement. Award Agreements evidencing SARs may incorporate allor any of the terms of the Plan by reference and shall comply with and besubject to the following terms and conditions: 7.1 TYPES OF SARS AUTHORIZED. SARs may be granted in tandem with allor any portion of a related Option (a “TANDEM SAR”) or may be grantedindependently of any Option (a “FREESTANDING SAR”). A Tandem SAR may only begranted concurrently with the grant of the related Option. 7.2 EXERCISE PRICE. The exercise price for each SAR shall beestablished in the discretion of the Committee; provided, however, that (a) theexercise price per share subject to a Tandem SAR shall be the exercise price pershare under the related Option and (b) the exercise price per share subject to aFreestanding SAR shall be not less than the Fair Market Value of a share ofStock on the effective date of grant of the SAR. 7.3 EXERCISABILITY AND TERM OF SARS. (a) TANDEM SARS. Tandem SARs shall be exercisable only at thetime and to the extent, and only to the extent, that the related Option isexercisable, subject to such provisions as the Committee may specify where theTandem SAR is granted with respect to less than the full number of shares ofStock subject to the related Option. The Committee may, in its discretion,provide in any Award Agreement evidencing a Tandem SAR that such SAR may not beexercised without the advance approval of the Company and, if such approval isnot given, then the Option shall nevertheless remain exercisable in accordancewith its terms. A Tandem SAR shall terminate and cease to be exercisable nolater than the date on which the related Option expires or is terminated orcanceled. Upon the exercise of a Tandem SAR with respect to some or all of theshares subject to such SAR, the related Option shall be canceled automaticallyas to the number of shares with respect to which the Tandem SAR was exercised.Upon the exercise of an Option related to a Tandem SAR as to some or all of theshares subject to such Option, the related Tandem SAR shall be canceledautomatically as to the number of shares with respect to which the relatedOption was exercised. (b) FREESTANDING SARS. Freestanding SARs shall be exercisable atsuch time or times, or upon such event or events, and subject to such terms,conditions, performance criteria and restrictions as shall be determined by theCommittee and set forth in the Award Agreement evidencing such SAR; provided,however, that no Freestanding SAR shall be exercisable after the expiration often (10) years after the effective date of grant of such SAR. 7.4 EXERCISE OF SARS. Upon the exercise (or deemed exercise pursuantto Section 7.5) of a SAR, the Participant (or the Participant’s legalrepresentative or other person who acquired the right to exercise the SAR byreason of the Participant’s death) shall be entitled to receive payment of anamount for each share with respect to which the SAR is exercised equal to theexcess, if any, of the Fair Market Value of a share of Stock on the date ofexercise of the SAR over the exercise price. Payment of such amount shall bemade (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum assoon as practicable following the date of exercise of the SAR and (b) in thecase of a Freestanding SAR, in cash, shares of Stock, or any combination thereofas determined by the Committee in compliance with Section 409A. Unless otherwiseprovided in the Award Agreement evidencing a Freestanding SAR, payment shall bemade in a lump sum as soon as practicable following the date of exercise of theSAR. The Award Agreement evidencing any Freestanding SAR may provide fordeferred payment in a lump sum or in installments in compliance with Section409A. When payment is to be made in shares of Stock, the number of shares to beissued shall be determined on the basis of the Fair Market Value of a share ofStock on the date of exercise of the SAR. For purposes of Section 7, a SAR shallbe deemed exercised on the date on which the Company receives notice of exercisefrom the Participant or as otherwise provided in Section 7.5. 7.5 DEEMED EXERCISE OF SARS. If, on the date on which a SAR wouldotherwise terminate or expire, the SAR by its terms remains exercisableimmediately prior to such termination or expiration and, if so exercised, wouldresult in a payment to the holder of such SAR, then any portion of such SARwhich has not previously been exercised shall automatically be deemed to beexercised as of such date with respect to such portion. 7.6 EFFECT OF TERMINATION OF SERVICE. Subject to earlier terminationof the SAR as otherwise provided herein and unless otherwise provided by theCommittee in the grant of a SAR and set forth in the Award Agreement, a SARshall be exercisable after a Participant’s termination of Service only to theextent and during the applicable time period determined in accordance withSection 6.4 (treating the SAR as if it were an Option) and thereafter shallterminate. 7.7 TRANSFERABILITY OF SARS. During the lifetime of the Participant, aSAR shall be exercisable only by the Participant or the Participant’s guardianor legal representative. An SAR shall not be subject in any manner toanticipation, alienation, sale, exchange, transfer, assignment, pledge,encumbrance, or garnishment by creditors of the Participant or the Participant’sbeneficiary, except transfer by will or by the laws of descent and distribution.Notwithstanding the foregoing, to the extent permitted by the Committee, in itsdiscretion, andset forth in the Award Agreement evidencing such Award, a Tandem SAR related toa Nonstatutory Stock Option or a Freestanding SAR shall be assignable ortransferable subject to the applicable limitations, if any, described in theGeneral Instructions to Form S-8 Registration Statement under the SecuritiesAct. 8. RESTRICTED STOCK AWARDS. Restricted Stock Awards shall be evidenced by Award Agreementsspecifying whether the Award is a Restricted Stock Bonus or a Restricted StockPurchase Right and the number of shares of Stock subject to the Award, in suchform as the Committee shall from time to time establish. No Restricted StockAward or purported Restricted Stock Award shall be a valid and bindingobligation of the Company unless evidenced by a fully executed Award Agreement.Award Agreements evidencing Restricted Stock Awards may incorporate all or anyof the terms of the Plan by reference and shall comply with and be subject tothe following terms and conditions: 8.1 TYPES OF RESTRICTED STOCK AWARDS AUTHORIZED. Restricted StockAwards may be granted in the form of either a Restricted Stock Bonus or aRestricted Stock Purchase Right. Restricted Stock Awards may be granted uponsuch conditions as the Committee shall determine, including, without limitation,upon the attainment of one or more Performance Goals described in Section 10.4.If either the grant of or satisfaction of Vesting Conditions applicable to aRestricted Stock Award is to be contingent upon the attainment of one or morePerformance Goals, the Committee shall follow procedures substantiallyequivalent to those set forth in Sections 10.3 through 10.5(a). 8.2 PURCHASE PRICE. The purchase price for shares of Stock issuableunder each Restricted Stock Purchase Right shall be established by the Committeein its discretion. No monetary payment (other than applicable tax withholding)shall be required as a condition of receiving shares of Stock pursuant to aRestricted Stock Bonus, the consideration for which shall be services actuallyrendered to a Participating Company or for its benefit. Notwithstanding theforegoing, if required by applicable state corporate law, the Participant shallfurnish consideration in the form of cash or past services rendered to aParticipating Company or for its benefit having a value not less than the parvalue of the shares of Stock subject to a Restricted Stock Award. 8.3 PURCHASE PERIOD. A Restricted Stock Purchase Right shall beexercisable within a period established by the Committee, which shall in noevent exceed thirty (30) days from the effective date of the grant of theRestricted Stock Purchase Right. 8.4 PAYMENT OF PURCHASE PRICE. Except as otherwise provided below,payment of the purchase price for the number of shares of Stock being purchasedpursuant to any Restricted Stock Purchase Right shall be made (a) in cash or bycheck or cash equivalent, (b) by such other consideration as may be approved bythe Committee from time to time to the extent permitted by applicable law, or(c) by any combination thereof. 8.5 VESTING AND RESTRICTIONS ON TRANSFER. Shares issued pursuant toany Restricted Stock Award may (but need not) be made subject to VestingConditions based uponthe satisfaction of such Service requirements, conditions, restrictions orperformance criteria, including, without limitation, Performance Goals asdescribed in Section 10.4, as shall be established by the Committee and setforth in the Award Agreement evidencing such Award. During any period in whichshares acquired pursuant to a Restricted Stock Award remain subject to VestingConditions, such shares may not be sold, exchanged, transferred, pledged,assigned or otherwise disposed of other than pursuant to an Ownership ChangeEvent or as provided in Section 8.8. The Committee, in its discretion, mayprovide in any Award Agreement evidencing a Restricted Stock Award that, if thesatisfaction of Vesting Conditions with respect to any shares subject to suchRestricted Stock Award would otherwise occur on a day on which the sale of suchshares would violate the Company’s Insider Trading Policy, then the satisfactionof the Vesting Conditions automatically be deemed to occur on the next day onwhich the sale of such shares would not violate the Insider Trading Policy. Uponrequest by the Company, each Participant shall execute any agreement evidencingsuch transfer restrictions prior to the receipt of shares of Stock hereunder andshall promptly present to the Company any and all certificates representingshares of Stock acquired hereunder for the placement on such certificates ofappropriate legends evidencing any such transfer restrictions. 8.6 VOTING RIGHTS; DIVIDENDS AND DISTRIBUTIONS. Except as provided inthis Section, Section 8.5 and any Award Agreement, during any period in whichshares acquired pursuant to a Restricted Stock Award remain subject to VestingConditions, the Participant shall have all of the rights of a shareholder of theCompany holding shares of Stock, including the right to vote such shares and toreceive all dividends and other distributions paid with respect to such shares.However, in the event of a dividend or distribution paid in shares of Stock orother property or any other adjustment made upon a change in the capitalstructure of the Company as described in Section 4.5, any and all new,substituted or additional securities or other property (other than normal cashdividends) to which the Participant is entitled by reason of the Participant’sRestricted Stock Award shall be immediately subject to the same VestingConditions as the shares subject to the Restricted Stock Award with respect towhich such dividends or distributions were paid or adjustments were made. 8.7 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by theCommittee in the Award Agreement evidencing a Restricted Stock Award, if aParticipant’s Service terminates for any reason, whether voluntary orinvoluntary (including the Participant’s death or disability), then (a) theCompany shall have the option to repurchase for the purchase price paid by theParticipant any shares acquired by the Participant pursuant to a RestrictedStock Purchase Right which remain subject to Vesting Conditions as of the dateof the Participant’s termination of Service and (b) the Participant shallforfeit to the Company any shares acquired by the Participant pursuant to aRestricted Stock Bonus which remain subject to Vesting Conditions as of the dateof the Participant’s termination of Service. The Company shall have the right toassign at any time any repurchase right it may have, whether or not such rightis then exercisable, to one or more persons as may be selected by the Company. 8.8 NONTRANSFERABILITY OF RESTRICTED STOCK AWARD RIGHTS. Rights toacquire shares of Stock pursuant to a Restricted Stock Award shall not besubject in any manner to anticipation, alienation, sale, exchange, transfer,assignment, pledge, encumbrance or garnishment by creditors of the Participantor the Participant’s beneficiary, except transfer by will or the laws of descentand distribution. All rights with respect to a Restricted Stock Awardgranted to a Participant hereunder shall be exercisable during his or herlifetime only by such Participant or the Participant’s guardian or legalrepresentative. 9. RESTRICTED STOCK UNIT AWARDS. Restricted Stock Unit Awards shall be evidenced by Award Agreementsspecifying the number of Restricted Stock Units subject to the Award, in suchform as the Committee shall from time to time establish. No Restricted StockUnit Award or purported Restricted Stock Unit Award shall be a valid and bindingobligation of the Company unless evidenced by a fully executed Award Agreement.Award Agreements evidencing Restricted Stock Units may incorporate all or any ofthe terms of the Plan by reference and shall comply with and be subject to thefollowing terms and conditions: 9.1 GRANT OF RESTRICTED STOCK UNIT AWARDS. Restricted Stock UnitAwards may be granted upon such conditions as the Committee shall determine,including, without limitation, upon the attainment of one or more PerformanceGoals described in Section 10.4. If either the grant of a Restricted Stock UnitAward or the Vesting Conditions with respect to such Award is to be contingentupon the attainment of one or more Performance Goals, the Committee shall followprocedures substantially equivalent to those set forth in Sections 10.3 through10.5(a). 9.2 PURCHASE PRICE. No monetary payment (other than applicable taxwithholding, if any) shall be required as a condition of receiving a RestrictedStock Unit Award, the consideration for which shall be services actuallyrendered to a Participating Company or for its benefit. Notwithstanding theforegoing, if required by applicable state corporate law, the Participant shallfurnish consideration in the form of cash or past services rendered to aParticipating Company or for its benefit having a value not less than the parvalue of the shares of Stock issued upon settlement of the Restricted Stock UnitAward. 9.3 VESTING. Restricted Stock Unit Awards may (but need not) be madesubject to Vesting Conditions based upon the satisfaction of such Servicerequirements, conditions, restrictions or performance criteria, including,without limitation, Performance Goals as described in Section 10.4, as shall beestablished by the Committee and set forth in the Award Agreement evidencingsuch Award. 9.4 VOTING RIGHTS, DIVIDEND EQUIVALENT RIGHTS AND DISTRIBUTIONS.Participants shall have no voting rights with respect to shares of Stockrepresented by Restricted Stock Units until the date of the issuance of suchshares (as evidenced by the appropriate entry on the books of the Company or ofa duly authorized transfer agent of the Company). However, the Committee, in itsdiscretion, may provide in the Award Agreement evidencing any Restricted StockUnit Award that the Participant shall be entitled to Dividend Equivalent Rightswith respect to the payment of cash dividends on Stock during the periodbeginning on the date such Award is granted and ending, with respect to theparticular shares subject to the Award, on the earlier of the date the Award issettled or the date on which it is terminated. Such Dividend Equivalents Rights,if any, shall be paid by crediting the Participant with additional wholeRestricted Stock Units as of the date of payment of such cash dividends onStock. The number of additional Restricted Stock Units (rounded to the nearestwhole number) to be so creditedshall be determined by dividing (a) the amount of cash dividends paid on suchdate with respect to the number of shares of Stock represented by the RestrictedStock Units previously credited to the Participant by (b) the Fair Market Valueper share of Stock on such date. Such additional Restricted Stock Units shall besubject to the same terms and conditions and shall be settled in the same mannerand at the same time as the Restricted Stock Units originally subject to theRestricted Stock Unit Award. In the event of a dividend or distribution paid inshares of Stock or other property or any other adjustment made upon a change inthe capital structure of the Company as described in Section 4.5, appropriateadjustments shall be made in the Participant’s Restricted Stock Unit Award sothat it represents the right to receive upon settlement any and all new,substituted or additional securities or other property (other than normal cashdividends) to which the Participant would be entitled by reason of the shares ofStock issuable upon settlement of the Award, and all such new, substituted oradditional securities or other property shall be immediately subject to the sameVesting Conditions as are applicable to the Award. 9.5 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by theCommittee and set forth in the Award Agreement evidencing a Restricted StockUnit Award, if a Participant’s Service terminates for any reason, whethervoluntary or involuntary (including the Participant’s death or disability), thenthe Participant shall forfeit to the Company any Restricted Stock Units pursuantto the Award which remain subject to Vesting Conditions as of the date of theParticipant’s termination of Service. 9.6 SETTLEMENT OF RESTRICTED STOCK UNIT AWARDS. The Company shallissue to a Participant on the date on which Restricted Stock Units subject tothe Participant’s Restricted Stock Unit Award vest or on such other datedetermined by the Committee, in its discretion, and set forth in the AwardAgreement one (1) share of Stock (and/or any other new, substituted oradditional securities or other property pursuant to an adjustment described inSection 9.4) for each Restricted Stock Unit then becoming vested or otherwise tobe settled on such date, subject to the withholding of applicable taxes, if any.If permitted by the Committee, subject to the provisions of Section 19 withrespect to Section 409A, the Participant may elect in accordance with termsspecified in the Award Agreement to defer receipt of all or any portion of theshares of Stock or other property otherwise issuable to the Participant pursuantto this Section, and such deferred issuance date(s) elected by the Participantshall be set forth in the Award Agreement. Notwithstanding the foregoing, theCommittee, in its discretion, may provide for settlement of any Restricted StockUnit Award by payment to the Participant in cash of an amount equal to the FairMarket Value on the payment date of the shares of Stock or other propertyotherwise issuable to the Participant pursuant to this Section. The Committee,in its discretion, may provide in any Award Agreement evidencing a RestrictedStock Unit Award that, if the settlement of the Award with respect to any shareswould otherwise occur on a day on which the sale of such shares would violatethe Company’s Insider Trading Policy, then the settlement with respect to suchshares shall occur on the next day on which the sale of such shares would notviolate the Insider Trading Policy. 9.7 NONTRANSFERABILITY OF RESTRICTED STOCK UNIT AWARDS. The right toreceive shares pursuant to a Restricted Stock Unit Award shall not be subject inany manner to anticipation, alienation, sale, exchange, transfer, assignment,pledge, encumbrance, or garnishment by creditors of the Participant or theParticipant’s beneficiary, except transfer by will or by the laws of descent anddistribution. All rights with respect to a Restricted Stock UnitAward granted to a Participant hereunder shall be exercisable during his or herlifetime only by such Participant or the Participant’s guardian or legalrepresentative. 10. PERFORMANCE AWARDS. Performance Awards shall be evidenced by Award Agreements in such formas the Committee shall from time to time establish. No Performance Award orpurported Performance Award shall be a valid and binding obligation of theCompany unless evidenced by a fully executed Award Agreement. Award Agreementsevidencing Performance Awards may incorporate all or any of the terms of thePlan by reference and shall comply with and be subject to the following termsand conditions: 10.1 TYPES OF PERFORMANCE AWARDS AUTHORIZED. Performance Awards may begranted in the form of either Performance Shares or Performance Units. EachAward Agreement evidencing a Performance Award shall specify the number ofPerformance Shares or Performance Units subject thereto, the Performance AwardFormula, the Performance Goal(s) and Performance Period applicable to the Award,and the other terms, conditions and restrictions of the Award. 10.2 INITIAL VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Unlessotherwise provided by the Committee in granting a Performance Award, eachPerformance Share shall have an initial monetary value equal to the Fair MarketValue of one (1) share of Stock, subject to adjustment as provided in Section4.5, on the effective date of grant of the Performance Share, and eachPerformance Unit shall have an initial monetary value established by theCommittee at the time of grant. The final value payable to the Participant insettlement of a Performance Award determined on the basis of the applicablePerformance Award Formula will depend on the extent to which Performance Goalsestablished by the Committee are attained within the applicable PerformancePeriod established by the Committee. 10.3 ESTABLISHMENT OF PERFORMANCE PERIOD, PERFORMANCE GOALS ANDPERFORMANCE AWARD FORMULA. In granting each Performance Award, the Committeeshall establish in writing the applicable Performance Period, Performance AwardFormula and one or more Performance Goals which, when measured at the end of thePerformance Period, shall determine on the basis of the Performance AwardFormula the final value of the Performance Award to be paid to the Participant.Unless otherwise permitted in compliance with the requirements under Section162(m) with respect to each Performance Award intended to result in the paymentof Performance-Based Compensation, the Committee shall establish the PerformanceGoal(s) and Performance Award Formula applicable to each Performance Award nolater than the earlier of (a) the date ninety (90) days after the commencementof the applicable Performance Period or (b) the date on which 25% of thePerformance Period has elapsed, and, in any event, at a time when the outcome ofthe Performance Goals remains substantially uncertain. Once established, thePerformance Goals and Performance Award Formula applicable to a Covered Employeeshall not be changed during the Performance Period. The Company shall notifyeach Participant granted a Performance Award of the terms of such Award,including the Performance Period, Performance Goal(s) and Performance AwardFormula. 10.4 MEASUREMENT OF PERFORMANCE GOALS. Performance Goals shall beestablished by the Committee on the basis of targets to be attained(“PERFORMANCE TARGETS”) with respect to one or more measures of business orfinancial performance (each, a “PERFORMANCE MEASURE”), subject to the following: (a) PERFORMANCE MEASURES. Performance Measures shall have thesame meanings as used in the Company’s financial statements, or, if such termsare not used in the Company’s financial statements, they shall have the meaningapplied pursuant to generally accepted accounting principles, or as usedgenerally in the Company’s industry. Performance Measures shall be calculatedwith respect to the Company and each Subsidiary Corporation consolidatedtherewith for financial reporting purposes or such division or other businessunit as may be selected by the Committee. For purposes of the Plan, thePerformance Measures applicable to a Performance Award shall be calculated inaccordance with generally accepted accounting principles, but prior to theaccrual or payment of any Performance Award for the same Performance Period andexcluding the effect (whether positive or negative) of any change in accountingstandards or any extraordinary, unusual or nonrecurring item, as determined bythe Committee, occurring after the establishment of the Performance Goalsapplicable to the Performance Award. Each such adjustment, if any, shall be madesolely for the purpose of providing a consistent basis from period to period forthe calculation of Performance Measures in order to prevent the dilution orenlargement of the Participant’s rights with respect to a Performance Award.Performance Measures may be one or more of the following, as determined by theCommittee: (i) revenue; (ii) sales; (iii) expenses; (iv) operating income; (v) gross margin; (vi) operating margin; (vii) earnings before any one or more of: stock-basedcompensation expense, interest, taxes, depreciation and amortization; (viii) pre-tax profit; (ix) net operating income; (x) net income; (xi) economic value added; (xii) free cash flow; (xiii) operating cash flow; (xiv) balance of cash, cash equivalents and marketablesecurities; (xv) stock price; (xvi) earnings per share; (xvii) return on shareholder equity; (xviii) return on capital; (xix) return on assets; (xx) return on investment; (xxi) employee satisfaction; (xxii) employee retention; (xxiii) market share; (xxiv) customer satisfaction; (xxv) product development; (xxvi) research and development expenses; (xxvii) completion of an identified special project; and (xxviii) completion of a joint venture or other corporatetransaction. (b) PERFORMANCE TARGETS. Performance Targets may include aminimum, maximum, target level and intermediate levels of performance, with thefinal value of a Performance Award determined under the applicable PerformanceAward Formula by the level attained during the applicable Performance Period. APerformance Target may be stated as an absolute value or as a value determinedrelative to an index, budget or other standard selected by the Committee. 10.5 SETTLEMENT OF PERFORMANCE AWARDS. (a) DETERMINATION OF FINAL VALUE. As soon as practicablefollowing the completion of the Performance Period applicable to a PerformanceAward, the Committee shall certify in writing the extent to which the applicablePerformance Goals have been attained and the resulting final value of the Awardearned by the Participant and to be paid upon its settlement in accordance withthe applicable Performance Award Formula. (b) DISCRETIONARY ADJUSTMENT OF AWARD FORMULA. In its discretion,the Committee may, either at the time it grants a Performance Award or at anytime thereafter, provide for the positive or negative adjustment of thePerformance Award Formula applicable to a Performance Award granted to anyParticipant who is not a Covered Employee to reflect such Participant’sindividual performance in his or her position with the Company or such otherfactors as the Committee may determine. If permitted under a Covered Employee’sAward Agreement, the Committee shall have the discretion, on the basis of suchcriteria as may be established by the Committee, to reduce some or all of thevalue of the Performance Award that would otherwise be paid to the CoveredEmployee upon its settlement notwithstanding the attainment of any PerformanceGoal and the resulting value of the Performance Award determined in accordancewith the Performance Award Formula. No such reduction may result in an increasein the amount payable upon settlement of another Participant’s Performance Awardthat is intended to result in Performance-Based Compensation. (c) EFFECT OF LEAVES OF ABSENCE. Unless otherwise required by lawor a Participant’s Award Agreement, payment of the final value, if any, of aPerformance Award held by a Participant who has taken in excess of thirty (30)days in leaves of absence during a Performance Period shall be prorated on thebasis of the number of days of the Participant’s Service during the PerformancePeriod during which the Participant was not on a leave of absence. (d) NOTICE TO PARTICIPANTS. As soon as practicable following theCommittee’s determination and certification in accordance with Sections 10.5(a)and (b), the Company shall notify each Participant of the determination of theCommittee. (e) PAYMENT IN SETTLEMENT OF PERFORMANCE AWARDS. Subject to theprovisions of Section 19 with respect to Section 409A, as soon as practicablefollowing the Committee’s determination and certification in accordance withSections 10.5(a) and (b), payment shall be made to each eligible Participant (orsuch Participant’s legal representative or other person who acquired the rightto receive such payment by reason of the Participant’s death) of the final valueof the Participant’s Performance Award. Payment of such amount shall be made incash, shares of Stock, or a combination thereof as determined by the Committee.Unless otherwise provided in the Award Agreement evidencing a Performance Award,payment shall be made in a lump sum. If permitted by the Committee, and subjectto the provisions of Section 19 with respect to Section 409A, the Participantmay elect to defer receipt of all or any portion of the payment to be made toParticipant pursuant to this Section, and such deferred payment date(s) electedby the Participant shall be set forth in the Award Agreement. If any payment isto be made on a deferred basis, the Committee may, but shall not be obligatedto, provide for the payment during the deferral period of Dividend EquivalentRights or interest. (f) PROVISIONS APPLICABLE TO PAYMENT IN SHARES. If payment is tobe made in shares of Stock, the number of such shares shall be determined bydividing the final value of the Performance Award by the value of a share ofStock determined by the method specified in the Award Agreement. Such methodsmay include, without limitation, the closing market price on a specified date(such as the settlement date) or an average of market prices over a series oftrading days. Shares of Stock issued in payment of any Performance Award may befully vested and freely transferable shares or may be shares of Stock subject toVestingConditions as provided in Section 8.5. Any shares subject to Vesting Conditionsshall be evidenced by an appropriate Award Agreement and shall be subject to theprovisions of Sections 8.5 through 8.8 above. 10.6 VOTING RIGHTS; DIVIDEND EQUIVALENT RIGHTS AND DISTRIBUTIONS.Participants shall have no voting rights with respect to shares of Stockrepresented by Performance Share Awards until the date of the issuance of suchshares, if any (as evidenced by the appropriate entry on the books of theCompany or of a duly authorized transfer agent of the Company). However, theCommittee, in its discretion, may provide in the Award Agreement evidencing anyPerformance Share Award that the Participant shall be entitled to DividendEquivalent Rights with respect to the payment of cash dividends on Stock duringthe period beginning on the date the Award is granted and ending, with respectto the particular shares subject to the Award, on the earlier of the date onwhich the Performance Shares are settled or the date on which they areforfeited. Such Dividend Equivalent Rights, if any, shall be credited to theParticipant in the form of additional whole Performance Shares as of the date ofpayment of such cash dividends on Stock. The number of additional PerformanceShares (rounded to the nearest whole number) to be so credited shall bedetermined by dividing (a) the amount of cash dividends paid on the dividendpayment date with respect to the number of shares of Stock represented by thePerformance Shares previously credited to the Participant by (b) the Fair MarketValue per share of Stock on such date. Dividend Equivalent Rights may be paidcurrently or may be accumulated and paid to the extent that Performance Sharesbecome nonforfeitable, as determined by the Committee. Settlement of DividendEquivalent Rights may be made in cash, shares of Stock, or a combination thereofas determined by the Committee, and may be paid on the same basis as settlementof the related Performance Share as provided in Section 10.5. DividendEquivalent Rights shall not be paid with respect to Performance Units. In theevent of a dividend or distribution paid in shares of Stock or other property orany other adjustment made upon a change in the capital structure of the Companyas described in Section 4.5, appropriate adjustments shall be made in theParticipant’s Performance Share Award so that it represents the right to receiveupon settlement any and all new, substituted or additional securities or otherproperty (other than normal cash dividends) to which the Participant wouldentitled by reason of the shares of Stock issuable upon settlement of thePerformance Share Award, and all such new, substituted or additional securitiesor other property shall be immediately subject to the same Performance Goals asare applicable to the Award. 10.7 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided bythe Committee and set forth in the Award Agreement evidencing a PerformanceAward, the effect of a Participant’s termination of Service on the PerformanceAward shall be as follows: (a) DEATH OR DISABILITY. If the Participant’s Service terminatesbecause of the death or Disability of the Participant before the completion ofthe Performance Period applicable to the Performance Award, the final value ofthe Participant’s Performance Award shall be determined by the extent to whichthe applicable Performance Goals have been attained with respect to the entirePerformance Period and shall be prorated based on the number of months of theParticipant’s Service during the Performance Period. Payment shall be madefollowing the end of the Performance Period in any manner permitted by Section10.5. (b) OTHER TERMINATION OF SERVICE. If the Participant’s Serviceterminates for any reason except death or Disability before the completion ofthe Performance Period applicable to the Performance Award, such Award shall beforfeited in its entirety. 10.8 NONTRANSFERABILITY OF PERFORMANCE AWARDS. Prior to settlement inaccordance with the provisions of the Plan, no Performance Award shall besubject in any manner to anticipation, alienation, sale, exchange, transfer,assignment, pledge, encumbrance, or garnishment by creditors of the Participantor the Participant’s beneficiary, except transfer by will or by the laws ofdescent and distribution. All rights with respect to a Performance Award grantedto a Participant hereunder shall be exercisable during his or her lifetime onlyby such Participant or the Participant’s guardian or legal representative. 11. DEFERRED COMPENSATION AWARDS. 11.1 ESTABLISHMENT OF DEFERRED COMPENSATION AWARD PROGRAMS. ThisSection 11 shall not be effective unless and until the Committee determines toestablish a program pursuant to this Section. The Committee, in its discretionand upon such terms and conditions as it may determine, subject to theprovisions of Section 19 with respect to Section 409A, may establish one or moreprograms pursuant to the Plan under which: (a) ELECTIVE CASH COMPENSATION REDUCTION AWARDS. Participantsdesignated by the Committee who are Officers, Directors or otherwise among aselect group of management or highly compensated Employees may irrevocablyelect, prior to a date specified by the Committee in compliance with Section409A, to reduce such Participant’s compensation otherwise payable in cash(subject to any minimum or maximum reductions imposed by the Committee) and tobe granted automatically at such time or times as specified by the Committee oneor more Awards of Stock Units with respect to such numbers of shares of Stock asdetermined in accordance with the rules of the program established by theCommittee and having such other terms and conditions as established by theCommittee. (b) STOCK ISSUANCE DEFERRAL AWARDS. Participants designated bythe Committee who are Officers, Directors or otherwise among a select group ofmanagement or highly compensated Employees may irrevocably elect, prior to adate specified by the Committee in compliance with Section 409A, to be grantedautomatically an Award of Stock Units with respect to such number of shares ofStock and upon such other terms and conditions as established by the Committeein lieu of: (i) shares of Stock otherwise issuable to such Participantupon the exercise of an Option; (ii) cash or shares of Stock otherwise issuable to suchParticipant upon the exercise of a SAR; or (iii) cash or shares of Stock otherwise issuable to suchParticipant upon the settlement of a Performance Award. 11.2 TERMS AND CONDITIONS OF DEFERRED COMPENSATION AWARDS. DeferredCompensation Awards granted pursuant to this Section 11 shall be evidenced byAwardAgreements in such form as the Committee shall from time to time establish. Nosuch Deferred Compensation Award or purported Deferred Compensation Award shallbe a valid and binding obligation of the Company unless evidenced by a fullyexecuted Award Agreement. Award Agreements evidencing Deferred CompensationAwards may incorporate all or any of the terms of the Plan by reference,including the provisions of Section 19 with respect to Section 409A, and, exceptas provided below, shall comply with and be subject to the terms and conditionsof Section 9. (a) VOTING RIGHTS; DIVIDEND EQUIVALENT RIGHTS AND DISTRIBUTIONS.Participants shall have no voting rights with respect to shares of Stockrepresented by Stock Units until the date of the issuance of such shares (asevidenced by the appropriate entry on the books of the Company or of a dulyauthorized transfer agent of the Company). However, a Participant shall beentitled to Dividend Equivalent Rights with respect to the payment of cashdividends on Stock during the period beginning on the date the Stock Units aregranted automatically to the Participant and ending on the earlier of the dateon which such Stock Units are settled or the date on which they are forfeited.Such Dividend Equivalent Rights shall be paid by crediting the Participant withadditional whole Stock Units as of the date of payment of such cash dividends onStock. The number of additional Stock Units (rounded to the nearest wholenumber) to be so credited shall be determined by dividing (A) the amount of cashdividends paid on the dividend payment date with respect to the number of sharesof Stock represented by the Stock Units previously credited to the Participantby (B) the Fair Market Value per share of Stock on such date. Such additionalStock Units shall be subject to the same terms and conditions and shall besettled in the same manner and at the same time (or as soon thereafter aspracticable) as the Stock Units originally subject to the Stock Unit Award. Inthe event of a dividend or distribution paid in shares of Stock or otherproperty or any other adjustment made upon a change in the capital structure ofthe Company as described in Section 4.5, appropriate adjustments shall be madein the Participant’s Stock Unit Award so that it represents the right to receiveupon settlement any and all new, substituted or additional securities or otherproperty (other than normal cash dividends) to which the Participant wouldentitled by reason of the shares of Stock issuable upon settlement of the Award. (b) SETTLEMENT OF DEFERRED COMPENSATION AWARDS. A Participantelecting to receive an Award of Stock Units pursuant to this Section 11 shallspecify at the time of such election a settlement date with respect to suchAward in compliance with Section 409A. The Company shall issue to theParticipant on the settlement date elected by the Participant, or as soonthereafter as practicable, a number of whole shares of Stock equal to the numberof vested Stock Units subject to the Stock Unit Award. Such shares of Stockshall be fully vested, and the Participant shall not be required to pay anyadditional consideration (other than applicable tax withholding) to acquire suchshares. 12. CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS. Cash-Based Awards and Other Stock-Based Awards shall be evidenced byAward Agreements in such form as the Committee shall from time to timeestablish. No such Award or purported Award shall be a valid and bindingobligation of the Company unless evidenced by a fully executed Award Agreement.Award Agreements evidencing Cash-Based Awards andOther Stock-Based Awards may incorporate all or any of the terms of the Plan byreference and shall comply with and be subject to the following terms andconditions: 12.1 GRANT OF CASH-BASED AWARDS. Subject to the provisions of thePlan, the Committee, at any time and from time to time, may grant Cash-BasedAwards to Participants in such amounts and upon such terms and conditions,including the achievement of performance criteria, as the Committee maydetermine. 12.2 GRANT OF OTHER STOCK-BASED AWARDS. The Committee may grant othertypes of equity-based or equity-related Awards not otherwise described by theterms of this Plan (including the grant or offer for sale of unrestrictedsecurities, stock-equivalent units, stock appreciation units, securities ordebentures convertible into common stock or other forms determined by theCommittee) in such amounts and subject to such terms and conditions as theCommittee shall determine. Such Awards may involve the transfer of actual sharesof Stock to Participants, or payment in cash or otherwise of amounts based onthe value of Stock and may include, without limitation, Awards designed tocomply with or take advantage of the applicable local laws of jurisdictionsother than the United States. 12.3 VALUE OF CASH-BASED AND OTHER STOCK-BASED AWARDS. Each Cash-BasedAward shall specify a monetary payment amount or payment range as determined bythe Committee. Each Other Stock-Based Award shall be expressed in terms ofshares of Stock or units based on such shares of Stock, as determined by theCommittee. The Committee may require the satisfaction of such Servicerequirements, conditions, restrictions or performance criteria, including,without limitation, Performance Goals as described in Section 10.4, as shall beestablished by the Committee and set forth in the Award Agreement evidencingsuch Award. If the Committee exercises its discretion to establish performancecriteria, the final value of Cash-Based Awards or Other Stock-Based Awards thatwill be paid to the Participant will depend on the extent to which theperformance criteria are met. The establishment of performance criteria withrespect to the grant or vesting of any Cash-Based Award or Other Stock-BasedAward intended to result in Performance-Based Compensation shall followprocedures substantially equivalent to those applicable to Performance Awardsset forth in Section 10. 12.4 PAYMENT OR SETTLEMENT OF CASH-BASED AWARDS AND OTHER STOCK-BASEDAWARDS. Payment or settlement, if any, with respect to a Cash-Based Award or anOther Stock-Based Award shall be made in accordance with the terms of the Award,in cash, shares of Stock or other securities or any combination thereof as theCommittee determines. The determination and certification of the final valuewith respect to any Cash-Based Award or Other Stock-Based Award intended toresult in Performance-Based Compensation shall comply with the requirementsapplicable to Performance Awards set forth in Section 10. To the extentapplicable, payment or settlement with respect to each Cash-Based Award andOther Stock-Based Award shall be made in compliance with Section 409A. 12.5 VOTING RIGHTS; DIVIDEND EQUIVALENT RIGHTS AND DISTRIBUTIONS.Participants shall have no voting rights with respect to shares of Stockrepresented by Other Stock-Based Awards until the date of the issuance of suchshares of Stock (as evidenced by the appropriate entry on the books of theCompany or of a duly authorized transfer agent of theCompany), if any, in settlement of such Award. However, the Committee, in itsdiscretion, may provide in the Award Agreement evidencing any Other Stock-BasedAward that the Participant shall be entitled to Dividend Equivalent Rights withrespect to the payment of cash dividends on Stock during the period beginning onthe date such Award is granted and ending, with respect to the particular sharessubject to the Award, on the earlier of the date the Award is settled or thedate on which it is terminated. Such Dividend Equivalent Rights, if any, shallbe paid in accordance with the provisions set forth in Section 9.4. DividendEquivalent Rights shall not be granted with respect to Cash-Based Awards. 12.6 EFFECT OF TERMINATION OF SERVICE. Each Award Agreement evidencinga Cash-Based Award or Other Stock-Based Award shall set forth the extent towhich the Participant shall have the right to retain such Award followingtermination of the Participant’s Service. Such provisions shall be determined inthe sole discretion of the Committee, need not be uniform among all Cash-BasedAwards or Other Stock-Based Awards, and may reflect distinctions based on thereasons for termination. 12.7 NONTRANSFERABILITY OF CASH-BASED AWARDS AND OTHER STOCK-BASEDAWARDS. Prior to the payment or settlement of a Cash-Based Award or OtherStock-Based Award, the Award shall not be subject in any manner to anticipation,alienation, sale, exchange, transfer, assignment, pledge, encumbrance, orgarnishment by creditors of the Participant or the Participant’s beneficiary,except transfer by will or by the laws of descent and distribution. TheCommittee may impose such additional restrictions on any shares of Stock issuedin settlement of Cash-Based Awards and Other Stock-Based Awards as it may deemadvisable, including, without limitation, minimum holding period requirements,restrictions under applicable federal securities laws, under the requirements ofany stock exchange or market upon which such shares of Stock are then listedand/or traded, or under any state securities laws applicable to such shares ofStock. 13. NONEMPLOYEE DIRECTOR AWARDS. From time to time, the Board or the Committee shall set the amount(s)and type(s) of Nonemployee Director Awards that shall be granted to allNonemployee Directors on a periodic, nondiscriminatory basis pursuant to thePlan, as well as the additional amount(s) and type(s) of Nonemployee DirectorAwards, if any, to be awarded, also on a periodic, nondiscriminatory basis, inconsideration of one or more of the following: (a) the initial election orappointment of an individual to the Board as a Nonemployee Director, (b) aNonemployee Director’s service as Chairman or Lead Director of the Board, (c) aNonemployee Director’s service on one or more of the committees of the Boardother than as the chairman of the committee, and (d) a Nonemployee Director’sservice as the chairman of a committee of the Board. The terms and conditions ofeach Nonemployee Director Award shall comply with the applicable provisions ofthe Plan. Subject to the limits set forth in Section 5.3(b) and the foregoing,the Board or the Committee shall grant Nonemployee Director Awards having suchterms and conditions as it shall from time to time determine. 14. STANDARD FORMS OF AWARD AGREEMENT. 14.1 AWARD AGREEMENTS. Each Award shall comply with and be subject tothe terms and conditions set forth in the appropriate form of Award Agreementapproved by the Committee and as amended from time to time. Any Award Agreementmay consist of an appropriate form of Notice of Grant and a form of AwardAgreement incorporated therein by reference, or such other form or forms,including electronic media, as the Committee may approve from time to time. 14.2 AUTHORITY TO VARY TERMS. The Committee shall have the authorityfrom time to time to vary the terms of any standard form of Award Agreementeither in connection with the grant or amendment of an individual Award or inconnection with the authorization of a new standard form or forms; provided,however, that the terms and conditions of any such new, revised or amendedstandard form or forms of Award Agreement are not inconsistent with the terms ofthe Plan. 15. CHANGE IN CONTROL. 15.1 EFFECT OF CHANGE IN CONTROL ON OPTIONS AND SARS. (a) ACCELERATED VESTING. The Committee may, in its solediscretion, provide in any Award Agreement, or in the event of a Change inControl, may take such actions as it deems appropriate to provide for theacceleration of the exercisability and vesting in connection with such Change inControl of any or all outstanding Options and SARs or shares acquired upon theexercise thereof upon such conditions, including termination of theParticipant’s Service prior to, upon or following such Change in Control, and tosuch extent as the Committee shall determine. (b) ASSUMPTION OR SUBSTITUTION. In the event of a Change inControl, the surviving, continuing, successor, or purchasing entity or parentthereof, as the case may be (the “ACQUIROR”), may, without the consent of anyParticipant, either assume or continue the Company’s rights and obligationsunder any or all outstanding Options and SARs or substitute for any or alloutstanding Options and SARs substantially equivalent options and stockappreciation rights (as the case may be) for the Acquiror’s stock. Any Optionsor SARs which are neither assumed or continued by the Acquiror in connectionwith the Change in Control nor exercised as of the time of consummation of theChange in Control shall terminate and cease to be outstanding effective as ofthe time of consummation of the Change in Control. (c) CASH-OUT. The Committee may, in its sole discretion andwithout the consent of any Participant, determine that, upon the occurrence of aChange in Control, each or any Option or SAR outstanding immediately prior tothe Change in Control shall be canceled in exchange for a payment with respectto each share of Stock subject to such canceled Option or SAR in (i) cash, (ii)stock of the Company or of a corporation or other business entity a party to theChange in Control, or (iii) other property which, in any such case, shall be inan amount having a Fair Market Value equal to the excess of the Fair MarketValue of the consideration to be paid per share of Stock in the Change inControl over the exercise price per share under such Option or SAR (the”SPREAD”). In the event such determination is made by the Committee, theSpread (reduced by applicable withholding taxes, if any) shall be paid toParticipants in respect of their canceled Options and SARs as soon aspracticable following the date of the Change in Control. 15.2 EFFECT OF CHANGE IN CONTROL ON RESTRICTED STOCK AWARDS,RESTRICTED STOCK UNIT AWARDS, PERFORMANCE AWARDS, CASH-BASED AWARDS, OTHERSTOCK-BASED AWARDS AND DEFERRED COMPENSATION AWARDS. Subject to compliance withSection 409A, if applicable, unless otherwise set forth in the Award Agreement,in the event of a Change in Control, each outstanding Restricted Stock Award,Restricted Stock Unit Award, Performance Award, Cash-Based Award, OtherStock-Based Award and Deferred Compensation Award held by a Participant whoseService has not terminated prior to the date of the Change in Control shallbecome vested in full and shall be settled effective as of the date of theChange in Control. In addition, subject to compliance with Section 409A, ifapplicable, the Committee, in its sole discretion, may take such actions as itdeems appropriate to provide for the acceleration of vesting and/or settlementof any or all such outstanding Awards in connection with and upon termination ofthe Participant’s Service prior to a Change in Control upon such conditions andto such extent as the Committee shall determine. 15.3 EFFECT OF CHANGE IN CONTROL ON NONEMPLOYEE DIRECTOR AWARDS.Subject to compliance with Section 409A, if applicable, in the event of a Changein Control, each outstanding Nonemployee Director Award shall become immediatelyexercisable and vested in full and shall be settled effective as of the date ofthe Change in Control. 16. COMPLIANCE WITH SECURITIES LAW. The grant of Awards and the issuance of shares of Stock pursuant toany Award shall be subject to compliance with all applicable requirements offederal, state and foreign law with respect to such securities and therequirements of any stock exchange or market system upon which the Stock maythen be listed. In addition, no Award may be exercised or shares issued pursuantto an Award unless (a) a registration statement under the Securities Act shallat the time of such exercise or issuance be in effect with respect to the sharesissuable pursuant to the Award or (b) in the opinion of legal counsel to theCompany, the shares issuable pursuant to the Award may be issued in accordancewith the terms of an applicable exemption from the registration requirements ofthe Securities Act. The inability of the Company to obtain from any regulatorybody having jurisdiction the authority, if any, deemed by the Company’s legalcounsel to be necessary to the lawful issuance and sale of any shares hereundershall relieve the Company of any liability in respect of the failure to issue orsell such shares as to which such requisite authority shall not have beenobtained. As a condition to issuance of any Stock, the Company may require theParticipant to satisfy any qualifications that may be necessary or appropriate,to evidence compliance with any applicable law or regulation and to make anyrepresentation or warranty with respect thereto as may be requested by theCompany. 17. TAX WITHHOLDING. 17.1 TAX WITHHOLDING IN GENERAL. The Company shall have the right todeduct from any and all payments made under the Plan, or to require theParticipant, through payroll withholding, cash payment or otherwise, to makeadequate provision for, the federal,state, local and foreign taxes, if any, required by law to be withheld by theParticipating Company Group with respect to an Award or the shares acquiredpursuant thereto. The Company shall have no obligation to deliver shares ofStock, to release shares of Stock from an escrow established pursuant to anAward Agreement, or to make any payment in cash under the Plan until theParticipating Company Group’s tax withholding obligations have been satisfied bythe Participant. 17.2 WITHHOLDING IN SHARES. The Company shall have the right, but notthe obligation, to deduct from the shares of Stock issuable to a Participantupon the exercise or settlement of an Award, or to accept from the Participantthe tender of, a number of whole shares of Stock having a Fair Market Value, asdetermined by the Company, equal to all or any part of the tax withholdingobligations of the Participating Company Group. The Fair Market Value of anyshares of Stock withheld or tendered to satisfy any such tax withholdingobligations shall not exceed the amount determined by the applicable minimumstatutory withholding rates. 18. AMENDMENT OR TERMINATION OF PLAN. The Committee may amend, suspend or terminate the Plan at any time.However, without the approval of the Company’s shareholders, there shall be (a)no increase in the maximum aggregate number of shares of Stock that may beissued under the Plan (except by operation of the provisions of Section 4.5),(b) no change in the class of persons eligible to receive Incentive StockOptions, and (c) no other amendment of the Plan that would require approval ofthe Company’s shareholders under any applicable law, regulation or rule,including the rules of any stock exchange or market system upon which the Stockmay then be listed. No amendment, suspension or termination of the Plan shallaffect any then outstanding Award unless expressly provided by the Committee.Except as provided by the next sentence, no amendment, suspension or terminationof the Plan may adversely affect any then outstanding Award without the consentof the Participant. Notwithstanding any other provision of the Plan to thecontrary, the Committee may, in its sole and absolute discretion and without theconsent of any Participant, amend the Plan or any Award Agreement, to takeeffect retroactively or otherwise, as it deems necessary or advisable for thepurpose of conforming the Plan or such Award Agreement to any present or futurelaw, regulation or rule applicable to the Plan, including, but not limited to,Section 409A. 19. COMPLIANCE WITH SECTION 409A. 19.1 AWARDS SUBJECT TO SECTION 409A. The provisions of this Section 19shall apply to any Award or portion thereof that is or becomes subject toSection 409A, notwithstanding any provision to the contrary contained in thePlan or the Award Agreement applicable to such Award. Awards subject to Section409A include, without limitation: (a) Any Nonstatutory Stock Option that permits the deferral ofcompensation other than the deferral of recognition of income until the exerciseof the Award. (b) Each Deferred Compensation Award. (c) Any Restricted Stock Unit Award, Performance Award,Cash-Based Award or Other Stock-Based Award that either (i) provides by itsterms for settlement ofall or any portion of the Award on one or more dates following the Short-TermDeferral Period (as defined below) or (ii) permits or requires the Participantto elect one or more dates on which the Award will be settled. Subject to any applicable U.S. Treasury Regulations promulgated pursuant toSection 409A or other applicable guidance, the term “SHORT-TERM DEFERRAL PERIOD”means the period ending on the later of (i) the date that is two and one-halfmonths from the end of the Company’s fiscal year in which the applicable portionof the Award is no longer subject to a substantial risk of forfeiture or (ii)the date that is two and one-half months from the end of the Participant’staxable year in which the applicable portion of the Award is no longer subjectto a substantial risk of forfeiture. For this purpose, the term “substantialrisk of forfeiture” shall have the meaning set forth in any applicable U.S.Treasury Regulations promulgated pursuant to Section 409A or other applicableguidance. 19.2 DEFERRAL AND/OR DISTRIBUTION ELECTIONS. Except as otherwisepermitted or required by Section 409A or any applicable U.S. TreasuryRegulations promulgated pursuant to Section 409A or other applicable guidance,the following rules shall apply to any deferral and/or distribution elections(each, an “ELECTION”) that may be permitted or required by the Committeepursuant to an Award subject to Section 409A: (a) All Elections must be in writing and specify the amount ofthe distribution in settlement of an Award being deferred, as well as the timeand form of distribution as permitted by this Plan. (b) All Elections shall be made by the end of the Participant’staxable year prior to the year in which services commence for which an Award maybe granted to such Participant; provided, however, that if the Award qualifiesas “performance-based compensation” for purposes of Section 409A and is based onservices performed over a period of at least twelve (12) months, then theElection may be made no later than six (6) months prior to the end of suchperiod. (c) Elections shall continue in effect until a written electionto revoke or change such Election is received by the Company, except that awritten election to revoke or change such Election must be made prior to thelast day for making an Election determined in accordance with paragraph (b)above or as permitted by Section 19.3. 19.3 SUBSEQUENT ELECTIONS. Any Award subject to Section 409A whichpermits a subsequent Election to delay the distribution or change the form ofdistribution in settlement of such Award shall comply with the followingrequirements: (a) No subsequent Election may take effect until at least twelve(12) months after the date on which the subsequent Election is made; (b) Each subsequent Election related to a distribution insettlement of an Award not described in Section 19.3(b), 19.4(b), or 19.4(f)must result in a delay of the distribution for a period of not less than five(5) years from the date such distribution would otherwise have been made; and (c) No subsequent Election related to a distribution pursuant toSection 19.4(d) shall be made less than twelve (12) months prior to the date ofthe first scheduled payment under such distribution. 19.4 DISTRIBUTIONS PURSUANT TO DEFERRAL ELECTIONS. No distribution insettlement of an Award subject to Section 409A may commence earlier than: (a) Separation from service (as determined by the Secretary ofthe United States Treasury); (b) The date the Participant becomes Disabled (as defined below); (c) Death; (d) A specified time (or pursuant to a fixed schedule) that iseither (i) specified by the Committee upon the grant of an Award and set forthin the Award Agreement evidencing such Award or (ii) specified by theParticipant in an Election complying with the requirements of Section 19.2and/or 19.3, as applicable; (e) To the extent provided by the Secretary of the U.S. Treasury,a change in the ownership or effective control or the Company or in theownership of a substantial portion of the assets of the Company; or (f) The occurrence of an Unforeseeable Emergency (as definedbelow). Notwithstanding anything else herein to the contrary, to the extent that aParticipant is a “Specified Employee” (as defined in Section 409A(a)(2)(B)(i))of the Company, no distribution pursuant to Section 19.4(a) in settlement of anAward subject to Section 409A may be made before the date which is six (6)months after such Participant’s date of separation from service, or, if earlier,the date of the Participant’s death. 19.5 UNFORESEEABLE EMERGENCY. The Committee shall have the authorityto provide in the Award Agreement evidencing any Award subject to Section 409Afor distribution in settlement of all or a portion of such Award in the eventthat a Participant establishes, to the satisfaction of the Committee, theoccurrence of an Unforeseeable Emergency. In such event, the amount(s)distributed with respect to such Unforeseeable Emergency cannot exceed theamounts necessary to satisfy such Unforeseeable Emergency plus amounts necessaryto pay taxes reasonably anticipated as a result of such distribution(s), aftertaking into account the extent to which such hardship is or may be relievedthrough reimbursement or compensation by insurance or otherwise or byliquidation of the Participant’s assets (to the extent the liquidation of suchassets would not itself cause severe financial hardship). All distributions withrespect to an Unforeseeable Emergency shall be made in a lump sum as soon aspracticable following the Committee’s determination that an UnforeseeableEmergency has occurred. The occurrence of an Unforeseeable Emergency shall be judged and determinedby the Committee. The Committee’s decision with respect to whether anUnforeseeable Emergency hasoccurred and the manner in which, if at all, the distribution in settlement ofan Award shall be altered or modified, shall be final, conclusive, and notsubject to approval or appeal. 19.6 DISABLED. The Committee shall have the authority to provide inany Award subject to Section 409A for distribution in settlement of such Awardin the event that the Participant becomes Disabled. A Participant shall beconsidered “Disabled” if either: (a) the Participant is unable to engage in any substantialgainful activity by reason of any medically determinable physical or mentalimpairment which can be expected to result in death or can be expected to lastfor a continuous period of not less than twelve (12) months, or (b) the Participant is, by reason of any medically determinablephysical or mental impairment which can be expected to result in death or can beexpected to last for a continuous period of not less than twelve (12) months,receiving income replacement benefits for a period of not less than three (3)months under an accident and health plan covering employees of the Participant’semployer. All distributions payable by reason of a Participant becoming Disabledshall be paid in a lump sum or in periodic installments as established by theParticipant’s Election, commencing as soon as practicable following the date theParticipant becomes Disabled. If the Participant has made no Election withrespect to distributions upon becoming Disabled, all such distributions shall bepaid in a lump sum as soon as practicable following the date the Participantbecomes Disabled. 19.7 DEATH. If a Participant dies before complete distribution ofamounts payable upon settlement of an Award subject to Section 409A, suchundistributed amounts shall be distributed to his or her beneficiary under thedistribution method for death established by the Participant’s Election as soonas administratively possible following receipt by the Committee of satisfactorynotice and confirmation of the Participant’s death. If the Participant has madeno Election with respect to distributions upon death, all such distributionsshall be paid in a lump sum as soon as practicable following the date of theParticipant’s death. 19.8 NO ACCELERATION OF DISTRIBUTIONS. Notwithstanding anything to thecontrary herein, this Plan does not permit the acceleration of the time orschedule of any distribution under this Plan, except as provided by Section 409Aand/or the Secretary of the U.S. Treasury. 20. MISCELLANEOUS PROVISIONS. 20.1 REPURCHASE RIGHTS. Shares issued under the Plan may be subject toone or more repurchase options, or other conditions and restrictions asdetermined by the Committee in its discretion at the time the Award is granted.The Company shall have the right to assign at any time any repurchase right itmay have, whether or not such right is then exercisable, to one or more personsas may be selected by the Company. Upon request by the Company, each Participantshall execute any agreement evidencing such transfer restrictions prior to thereceipt of shares of Stock hereunder and shall promptly present to the Companyany and all certificatesrepresenting shares of Stock acquired hereunder for the placement on suchcertificates of appropriate legends evidencing any such transfer restrictions. 20.2 FORFEITURE EVENTS. (a) The Committee may specify in an Award Agreement that theParticipant’s rights, payments, and benefits with respect to an Award shall besubject to reduction, cancellation, forfeiture, or recoupment upon theoccurrence of specified events, in addition to any otherwise applicable vestingor performance conditions of an Award. Such events may include, but shall not belimited to, termination of Service for Cause or any act by a Participant,whether before or after termination of Service, that would constitute Cause fortermination of Service. (b) If the Company is required to prepare an accountingrestatement due to the material noncompliance of the Company, as a result ofmisconduct, with any financial reporting requirement under the securities laws,any Participant who knowingly or through gross negligence engaged in themisconduct, or who knowingly or through gross negligence failed to prevent themisconduct, and any Participant who is one of the individuals subject toautomatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shallreimburse the Company the amount of any payment in settlement of an Award earnedor accrued during the twelve- (12-) month period following the first publicissuance or filing with the United States Securities and Exchange Commission(whichever first occurred) of the financial document embodying such financialreporting requirement. 20.3 PROVISION OF INFORMATION. Each Participant shall be given accessto information concerning the Company equivalent to that information generallymade available to the Company’s common shareholders. 20.4 RIGHTS AS EMPLOYEE, CONSULTANT OR DIRECTOR. No person, eventhough eligible pursuant to Section 5, shall have a right to be selected as aParticipant, or, having been so selected, to be selected again as a Participant.Nothing in the Plan or any Award granted under the Plan shall confer on anyParticipant a right to remain an Employee, Consultant or Director or interferewith or limit in any way any right of a Participating Company to terminate theParticipant’s Service at any time. To the extent that an Employee of aParticipating Company other than the Company receives an Award under the Plan,that Award shall in no event be understood or interpreted to mean that theCompany is the Employee’s employer or that the Employee has an employmentrelationship with the Company. 20.5 RIGHTS AS A SHAREHOLDER. A Participant shall have no rights as ashareholder with respect to any shares covered by an Award until the date of theissuance of such shares (as evidenced by the appropriate entry on the books ofthe Company or of a duly authorized transfer agent of the Company). Noadjustment shall be made for dividends, distributions or other rights for whichthe record date is prior to the date such shares are issued, except as providedin Section 4.5 or another provision of the Plan. 20.6 DELIVERY OF TITLE TO SHARES. Subject to any governing rules orregulations, the Company shall issue or cause to be issued the shares of Stockacquired pursuantto an Award and shall deliver such shares to or for the benefit of theParticipant by means of one or more of the following: (a) by delivering to theParticipant evidence of book entry shares of Stock credited to the account ofthe Participant; (b) by depositing such shares of Stock for the benefit of theParticipant with any broker with which the Participant has an accountrelationship; or (c) by delivering such shares of Stock to the Participant incertificate form. 20.7 FRACTIONAL SHARES. The Company shall not be required to issuefractional shares upon the exercise or settlement of any Award. 20.8 RETIREMENT AND WELFARE PLANS. Neither Awards made under this Plannor shares of Stock or cash paid pursuant to such Awards may be included as”compensation” for purposes of computing the benefits payable to any Participantunder any Participating Company’s retirement plans (both qualified andnon-qualified) or welfare benefit plans unless such other plan expresslyprovides that such compensation shall be taken into account in computing aParticipant’s benefit. 20.9 BENEFICIARY DESIGNATION. Subject to local laws and procedures,each Participant may file with the Company a written designation of abeneficiary who is to receive any benefit under the Plan to which theParticipant is entitled in the event of such Participant’s death before he orshe receives any or all of such benefit. Each designation will revoke all priordesignations by the same Participant, shall be in a form prescribed by theCompany, and will be effective only when filed by the Participant in writingwith the Company during the Participant’s lifetime. If a married Participantdesignates a beneficiary other than the Participant’s spouse, the effectivenessof such designation may be subject to the consent of the Participant’s spouse.If a Participant dies without an effective designation of a beneficiary who isliving at the time of the Participant’s death, the Company will pay anyremaining unpaid benefits to the Participant’s legal representative. 20.10 SEVERABILITY. If any one or more of the provisions (or any partthereof) of this Plan shall be held invalid, illegal or unenforceable in anyrespect, such provision shall be modified so as to make it valid, legal andenforceable, and the validity, legality and enforceability of the remainingprovisions (or any part thereof) of the Plan shall not in any way be affected orimpaired thereby. 20.11 NO CONSTRAINT ON CORPORATE ACTION. Nothing in this Plan shall beconstrued to: (a) limit, impair, or otherwise affect the Company’s or anotherParticipating Company’s right or power to make adjustments, reclassifications,reorganizations, or changes of its capital or business structure, or to merge orconsolidate, or dissolve, liquidate, sell, or transfer all or any part of itsbusiness or assets; or (b) limit the right or power of the Company or anotherParticipating Company to take any action which such entity deems to be necessaryor appropriate. 20.12 UNFUNDED OBLIGATION. Participants shall have the status ofgeneral unsecured creditors of the Company. Any amounts payable to Participantspursuant to the Plan shall be unfunded and unsecured obligations for allpurposes, including, without limitation, Title I of the Employee RetirementIncome Security Act of 1974. No Participating Company shall be required tosegregate any monies from its general funds, or to create any trusts, orestablish any special accounts with respect to such obligations. The Companyshall retain at all times beneficial ownership of any investments, includingtrust investments, which the Company may make to fulfill its payment obligationshereunder. Any investments or the creation or maintenance of any trust or anyParticipant account shall not create or constitute a trust or fiduciaryrelationship between the Committee or any Participating Company and aParticipant, or otherwise create any vested or beneficial interest in anyParticipant or the Participant’s creditors in any assets of any ParticipatingCompany. The Participants shall have no claim against any Participating Companyfor any changes in the value of any assets which may be invested or reinvestedby the Company with respect to the Plan. 20.13 CHOICE OF LAW. Except to the extent governed by applicablefederal law, the validity, interpretation, construction and performance of thePlan and each Award Agreement shall be governed by the laws of the State ofDelaware, without regard to its conflict of law rules. IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies thatthe foregoing sets forth the ImaRx Therapeutics, Inc. 2006 Performance IncentivePlan as duly adopted by the Board on May 16, 2006. —————————————- Secretary IMARX THERAPEUTICS, INC. NOTICE OF GRANT OF STOCK OPTION _______________________________________ (the “OPTIONEE”) has been grantedan option (the “OPTION”) to purchase certain shares of Stock of ImaRxTherapeutics, Inc. pursuant to the ImaRx Therapeutics, Inc. 2006 PerformanceIncentive Plan (the “PLAN”), as follows: GRANT NUMBER: _____________________ DATE OF OPTION GRANT: _____________________ NUMBER OF OPTION SHARES: _____________________ EXERCISE PRICE: $____________________ per share INITIAL VESTING DATE: _____________________ (i.e., the date on which you first vest in some portion of your Option Shares) OPTION EXPIRATION DATE: The date ten (10) years after the Date of Option Grant. TAX STATUS OF OPTION: ______________________ Stock Option. (Enter “Incentive” or “Nonstatutory”. If blank, this Option will be a Nonstatutory Stock Option.) VESTED SHARES: Except as provided in the Stock Option Agreement, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Number of Option Shares by the “VESTED RATIO” determined as of such date as follows: Vested Ratio ———— Prior to Initial Vesting Date 0 On Initial Vesting Date, provided the Optionee’s Service has not terminated prior to such date 1/4 Plus: For each full month of the Optionee’s continuous Service from Initial Vesting Date until the Vested Ratio equals 1/1, an additional 1/48 By their signatures below, the Company and the Optionee agree that theOption is governed by this Notice and by the provisions of the Plan and theStock Option Agreement. The Optionee acknowledges that the Optionee has read andis familiar with their provisions, and hereby accepts the Option subject to allof their terms and conditions.IMARX THERAPEUTICS, INC. OPTIONEEBy: ——————————— —————————————- SignatureIts: ——————————– —————————————- DateAddress: —————————- —————————————- Address —————————————-ATTACHMENTS: Stock Option Agreement and Exercise Notice IMARX THERAPEUTICS, INC. STOCK OPTION AGREEMENT (IMMEDIATELY EXERCISABLE) ImaRx Therapeutics, Inc. has granted to the individual (the “OPTIONEE”)named in the Notice of Grant of Stock Option (the “NOTICE”) to which this StockOption Agreement (the “OPTION AGREEMENT”) is attached an option (the “OPTION”)to purchase certain shares of Stock upon the terms and conditions set forth inthe Notice and this Option Agreement. The Option has been granted pursuant toand shall in all respects be subject to the terms and conditions of the ImaRxTherapeutics, Inc. 2006 Performance Incentive Plan (the “PLAN”), as amended tothe Date of Option Grant, the provisions of which are incorporated herein byreference. By signing the Notice, the Optionee: (a) represents that the Optioneehas received copies of, and has read and is familiar with the terms andconditions of, the Notice, the Plan and this Option Agreement, (b) accepts theOption subject to all of the terms and conditions of the Notice, the Plan andthis Option Agreement, and (c) agrees to accept as binding, conclusive and finalall decisions or interpretations of the Board or Committee upon any questionsarising under the Notice, the Plan or this Option Agreement. 1. DEFINITIONS AND CONSTRUCTION. 1.1 DEFINITIONS. Unless otherwise defined herein, capitalized termsshall have the meanings assigned to such terms in the Notice or the Plan. 1.2 CONSTRUCTION. Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of this Option Agreement. Except when otherwise indicated by thecontext, the singular shall include the plural and the plural shall include thesingular. Use of the term “or” is not intended to be exclusive, unless thecontext clearly requires otherwise. 2. TAX CONSEQUENCES. 2.1 TAX STATUS OF OPTION. This Option is intended to have the taxstatus designated in the Notice. (a) INCENTIVE STOCK OPTION. If the Notice so designates, thisOption is intended to be an Incentive Stock Option within the meaning of Section422(b) of the Code, but the Company does not represent or warrant that thisOption qualifies as such. The Optionee should consult with the Optionee’s owntax advisor regarding the tax effects of this Option and the requirementsnecessary to obtain favorable income tax treatment under Section 422 of theCode, including, but not limited to, holding period requirements. (NOTE TOOPTIONEE: If the Option is exercised more than three (3) months after the dateon which you cease to be an Employee (other than by reason of your death orpermanent and total disability as defined in Section 22(e)(3) of the Code), theOption will be treated as a Nonstatutory Stock Option and not as an IncentiveStock Option to the extent required by Section 422 of the Code.) 1 (b) NONSTATUTORY STOCK OPTION. If the Notice so designates, thisOption is intended to be a Nonstatutory Stock Option and shall not be treated asan Incentive Stock Option within the meaning of Section 422(b) of the Code. 2.2 ISO FAIR MARKET VALUE LIMITATION. If the Notice designates thisOption as an Incentive Stock Option, then to the extent that the Option(together with all Incentive Stock Options granted to the Optionee under allstock option plans of the Participating Company Group, including the Plan)becomes exercisable for the first time during any calendar year for shareshaving a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),the portion of such options which exceeds such amount will be treated asNonstatutory Stock Options. For purposes of this Section 2.2, options designatedas Incentive Stock Options are taken into account in the order in which theywere granted, and the Fair Market Value of stock is determined as of the timethe option with respect to such stock is granted. If the Code is amended toprovide for a different limitation from that set forth in this Section 2.2, suchdifferent limitation shall be deemed incorporated herein effective as of thedate required or permitted by such amendment to the Code. If the Option istreated as an Incentive Stock Option in part and as a Nonstatutory Stock Optionin part by reason of the limitation set forth in this Section 2.2, the Optioneemay designate which portion of such Option the Optionee is exercising. In theabsence of such designation, the Optionee shall be deemed to have exercised theIncentive Stock Option portion of the Option first. Separate certificatesrepresenting each such portion shall be issued upon the exercise of the Option.(NOTE TO OPTIONEE: If the aggregate Exercise Price (as defined in the Notice) ofthe Option (that is, the Exercise Price multiplied by the Number of OptionShares) plus the aggregate exercise price of any other Incentive Stock Optionsyou hold (whether granted pursuant to the Plan or any other stock option plan ofthe Participating Company Group) is greater than $100,000, you should contactthe Chief Financial Officer of the Company to ascertain whether the entireOption qualifies as an Incentive Stock Option.) 2.3 ELECTION UNDER SECTION 83(B) OF THE CODE. If the Optioneeexercises this Option to purchase shares of Stock that are both nontransferableand subject to a substantial risk of forfeiture, the Optionee understands thatthe Optionee should consult with the Optionee’s tax advisor regarding theadvisability of filing with the Internal Revenue Service an election underSection 83(b) of the Code, which must be filed no later than thirty (30) daysafter the date on which the Optionee exercises the Option. Shares acquired uponexercise of the Option are nontransferable and subject to a substantial risk offorfeiture if, for example, (a) they are unvested and are subject to a right ofthe Company to repurchase such shares at the Optionee’s original purchase priceif the Optionee’s Service terminates, or (b) the Optionee is an Insider and,under certain circumstances, exercises the Option within six (6) months of theDate of Option Grant (if a class of equity security of the Company is registeredunder Section 12 of the Exchange Act). Failure to file an election under Section83(b), if appropriate, may result in adverse tax consequences to the Optionee.The Optionee acknowledges that the Optionee has been advised to consult with atax advisor prior to the exercise of the Option regarding the tax consequencesto the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b)MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASESSHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THATTIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE’S SOLE RESPONSIBILITY,EVEN IF THE OPTIONEE REQUESTS 2THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF. 3. ADMINISTRATION. All questions of interpretation concerning this Option Agreement shallbe determined by the Board or Committee. All determinations by the Board orCommittee shall be final and binding upon all persons having an interest in theOption. Any Officer shall have the authority to act on behalf of the Companywith respect to any matter, right, obligation, or election which is theresponsibility of or which is allocated to the Company herein, provided theOfficer has apparent authority with respect to such matter, right, obligation,or election. 4. EXERCISE OF THE OPTION. 4.1 RIGHT TO EXERCISE. (a) IN GENERAL. Except as otherwise provided herein, the Optionshall be exercisable on and after the Initial Exercise Date (as defined in theNotice) and prior to the termination of the Option (as provided in Section 6) inan amount not to exceed the Number of Option Shares (as defined in the Notice)less the number of shares previously acquired upon exercise of the Option,subject to the Company’s repurchase rights set forth in Section 11. (b) ISO EXERCISE LIMITATION. If this Option is designated as anIncentive Stock Option in the Notice, then notwithstanding the provisions ofSection 4.1(a) and except as provided in Section 4.1(c), the aggregate FairMarket Value of the shares of Stock with respect to which the Optionee mayexercise the Option for the first time during any calendar year, when added tothe aggregate Fair Market Value of the shares subject to any other optionsdesignated as Incentive Stock Options granted to the Optionee under all stockoption plans of the Participating Company Group prior to the Date of OptionGrant with respect to which such options are exercisable for the first timeduring the same calendar year, shall not exceed One Hundred Thousand Dollars($100,000). For purposes of the preceding sentence, options designated asIncentive Stock Options shall be taken into account in the order in which theywere granted, and the Fair Market Value of shares of stock shall be determinedas of the time the option with respect to such shares is granted. Suchlimitation on exercise shall be referred to in this Option Agreement as the “ISOEXERCISE LIMITATION.” If Section 422 of the Code is amended to provide for adifferent limitation from that set forth in this Section 4.1(b), the ISOExercise Limitation shall be deemed amended effective as of the date required orpermitted by such amendment to the Code. The ISO Exercise Limitation shallterminate upon the earlier of (i) the Optionee’s termination of Service, (ii)the day immediately prior to the effective date of a Change in Control in whichthe Option is not assumed or substituted for by the Acquiring Corporation asprovided in Section 8, or (iii) the day ten (10) days prior to the OptionExpiration Date. Upon such termination of the ISO Exercise Limitation, theOption shall be deemed a Nonstatutory Stock Option to the extent of the numberof shares subject to the Option which would otherwise exceed the ISO ExerciseLimitation. (c) EXCEPTION TO ISO EXERCISE LIMITATION. Notwithstanding anyother provision of this Option Agreement, if compliance with the ISO ExerciseLimitation as set forth 3in Section 4.1(b) will result in the exercisability of any Vested Shares beingdelayed more than thirty (30) days beyond the date such shares become VestedShares (the “VESTING DATE”), the Option shall be deemed to be two (2) options.The first option shall be for the maximum portion of the Number of Option Sharesthat can comply with the ISO Exercise Limitation without causing the Option tobe unexercisable in the aggregate as to Vested Shares on the Vesting Date forsuch shares. The second option, which shall not be treated as an Incentive StockOption as described in section 422(b) of the Code, shall be for the balance ofthe Number of Option Shares; that is, those such shares which, on the respectiveVesting Date for such shares, would be unexercisable if included in the firstoption and thereby made subject to the ISO Exercise Limitation. Shares treatedas subject to the second option shall be exercisable on the same terms and atthe same time as set forth in this Option Agreement; provided, however, that (i)Section 4.1(b) shall not apply to the second option and (ii) each such shareshall become a Vested Share on the Vesting Date such share must first beallocated to the second option pursuant to the preceding sentence. Unless theOptionee specifically elects to the contrary in the Optionee’s written notice ofexercise, the first option shall be deemed to be exercised first to the maximumpossible extent and then the second option shall be deemed to be exercised. 4.2 METHOD OF EXERCISE. Exercise of the Option shall be by writtennotice to the Company which must state the election to exercise the Option, thenumber of whole shares of Stock for which the Option is being exercised and suchother representations and agreements as to the Optionee’s investment intent withrespect to such shares as may be required pursuant to the provisions of thisOption Agreement. The written notice must be signed by the Optionee and must bedelivered in person, by certified or registered mail, return receipt requested,by confirmed facsimile transmission, or by such other means as the Company maypermit, to the Chief Financial Officer of the Company, or other authorizedrepresentative of the Participating Company Group, prior to the termination ofthe Option as set forth in Section 6, accompanied by (i) full payment of theaggregate Exercise Price for the number of shares of Stock being purchased and(ii) an executed copy, if required herein, of the then current form of escrowagreement referenced below. The Option shall be deemed to be exercised uponreceipt by the Company of such written notice, the aggregate Exercise Price,and, if required by the Company, such executed agreement. 4.3 PAYMENT OF EXERCISE PRICE. (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwiseprovided below, payment of the aggregate Exercise Price for the number of sharesof Stock for which the Option is being exercised shall be made (i) in cash, bycheck, or cash equivalent, (ii) by tender to the Company, or attestation to theownership, of whole shares of Stock owned by the Optionee having a Fair MarketValue not less than the aggregate Exercise Price, to the extent permitted by theCompany at the time of exercise, (iii) by means of a Cashless Exercise, asdefined in Section 4.3(b), to the extent permitted by the Company at the time ofexercise, (iv) by delivery of a properly executed notice electing aNet-Exercise, to the extent permitted by the Company at the time of exercise, or(v) by any combination of the foregoing. 4 (b) LIMITATIONS ON FORMS OF CONSIDERATION. (i) TENDER OF STOCK. Notwithstanding the foregoing, theOption may not be exercised by tender to the Company, or attestation to theownership, of shares of Stock to the extent such tender or attestation wouldconstitute a violation of the provisions of any law, regulation or agreementrestricting the redemption of the Company’s stock. The Option may not beexercised by tender to the Company, or attestation to the ownership, of sharesof Stock unless such shares either have been owned by the Optionee for more thansix (6) months (and not used for another option exercise by attestation duringsuch period) or were not acquired, directly or indirectly, from the Company. (ii) CASHLESS EXERCISE. A “CASHLESS EXERCISE” means thedelivery of a properly executed notice together with irrevocable instructions toa broker in a form acceptable to the Company providing for the assignment to theCompany of the proceeds of a sale or loan with respect to some or all of theshares of Stock acquired upon the exercise of the Option pursuant to a programor procedure approved by the Company (including, without limitation, through anexercise complying with the provisions of Regulation T as promulgated from timeto time by the Board of Governors of the Federal Reserve System).Notwithstanding anything in the Plan or this Option Agreement to the contrary, aCashless Exercise shall only be permitted, if at all, provided (A) the Companyhas completed an underwritten public offering of its Stock pursuant to aneffective registration statement filed under the Securities Act, and (B) theCompany’s Stock is listed on a “national securities exchange” (as such term isdefined in the Exchange Act) or the Nasdaq National Market at the time of suchproposed Cashless Exercise. In addition, the Company reserves, at any and alltimes, the right, in the Company’s sole and absolute discretion, to decline toapprove or terminate any such program or procedure. 4.4 TAX WITHHOLDING. At the time the Option is exercised, in whole orin part, or at any time thereafter as requested by the Company, the Optioneehereby authorizes withholding from payroll and any other amounts payable to theOptionee, and otherwise agrees to make adequate provision for (including bymeans of a Cashless Exercise to the extent permitted by the Company), any sumsrequired to satisfy the federal, state, local and foreign tax withholdingobligations of the Participating Company Group, if any, which arise inconnection with the Option, including, without limitation, obligations arisingupon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, inwhole or in part, of any shares acquired upon exercise of the Option, (iii) theoperation of any law or regulation providing for the imputation of interest, or(iv) the lapsing of any restriction with respect to any shares acquired uponexercise of the Option. The Option is not exercisable unless the tax withholdingobligations of the Participating Company Group are satisfied. Accordingly, theCompany shall have no obligation to deliver shares of Stock or to release sharesof Stock from an escrow established pursuant to this Option Agreement until thetax withholding obligations of the Participating Company Group have beensatisfied by the Optionee. 4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Priceis paid by means of a Cashless Exercise, the certificate for the shares as towhich the Option is exercised shall be registered in the name of the Optionee,or, if applicable, in the names of the heirs of the Optionee. 5 4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. Thegrant of the Option and the issuance of shares of Stock upon exercise of theOption shall be subject to compliance with all applicable requirements offederal, state or foreign law with respect to such securities. The Option maynot be exercised if the issuance of shares of Stock upon exercise wouldconstitute a violation of any applicable federal, state or foreign securitieslaws or other law or regulations or the requirements of any stock exchange ormarket system upon which the Stock may then be listed. In addition, the Optionmay not be exercised unless (i) a registration statement under the SecuritiesAct shall at the time of exercise of the Option be in effect with respect to theshares issuable upon exercise of the Option or (ii) in the opinion of legalcounsel to the Company, the shares issuable upon exercise of the Option may beissued in accordance with the terms of an applicable exemption from theregistration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THATTHE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIREDEVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain fromany regulatory body having jurisdiction the authority, if any, deemed by theCompany’s legal counsel to be necessary to the lawful issuance and sale of anyshares subject to the Option shall relieve the Company of any liability inrespect of the failure to issue or sell such shares as to which such requisiteauthority shall not have been obtained. As a condition to the exercise of theOption, the Company may require the Optionee to satisfy any qualifications thatmay be necessary or appropriate, to evidence compliance with any applicable lawor regulation and to make any representation or warranty with respect thereto asmay be requested by the Company. 4.7 FRACTIONAL SHARES. The Company shall not be required to issuefractional shares upon the exercise of the Option. 5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during the lifetime of the Optionee onlyby the Optionee or the Optionee’s guardian or legal representative and may notbe assigned or transferred in any manner except by will or by the laws ofdescent and distribution. Following the death of the Optionee, the Option, tothe extent provided in Section 7, may be exercised by the Optionee’s legalrepresentative or by any person empowered to do so under the deceased Optionee’swill or under the then applicable laws of descent and distribution. 6. TERMINATION OF THE OPTION. The Option shall terminate and may no longer be exercised after thefirst to occur of (a) the Option Expiration Date, (b) the termination of theOptionee’s Service to the extent that the Option is unvested on such date, (c)the last date for exercising the Option following termination of the Optionee’sService as described in Section 7, or (d) a Change in Control to the extentprovided in Section 8. 6 7. EFFECT OF TERMINATION OF SERVICE. 7.1 OPTION EXERCISABILITY. (a) DISABILITY. If the Optionee’s Service terminates because ofthe Disability of the Optionee, the Option, to the extent vested and exercisableon the date on which the Optionee’s Service terminated, may be exercised by theOptionee (or the Optionee’s guardian or legal representative) at any time priorto the expiration of twelve (12) months after the date on which the Optionee’sService terminated, but in any event no later than the Option Expiration Date. (b) DEATH. If the Optionee’s Service terminates because of thedeath of the Optionee, the Option, to the extent vested and exercisable on thedate on which the Optionee’s Service terminated, may be exercised by theOptionee’s legal representative or other person who acquired the right toexercise the Option by reason of the Optionee’s death at any time prior to theexpiration of twelve (12) months after the date on which the Optionee’s Serviceterminated, but in any event no later than the Option Expiration Date. TheOptionee’s Service shall be deemed to have terminated on account of death if theOptionee dies within three (3) months after the Optionee’s termination ofService (other than a termination for Cause). (c) TERMINATION FOR CAUSE. Notwithstanding any other provision ofthe Plan or this Option Agreement to the contrary, if the Optionee’s Service isterminated for Cause, the Option shall terminate and cease to be exercisableimmediately upon such termination of Service. (d) OTHER TERMINATION OF SERVICE. If the Optionee’s Serviceterminates for any reason, except Disability, death or Cause, the Option, to theextent vested and exercisable by the Optionee on the date on which theOptionee’s Service terminated, may be exercised by the Optionee at any timeprior to the expiration of three (3) months (or such other longer period of timeas determined by the Board or Committee, in its discretion) after the date onwhich the Optionee’s Service terminated, but in any event no later than theOption Expiration Date. 7.2 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Notwithstanding theprovisions of Section 7.1, the Option may not be exercised after the Optionee’stermination of Service to the extent that the shares to be acquired uponexercise of the Option would be subject to the Unvested Share Repurchase Optionas provided in Section 11. 7.3 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding theforegoing, except termination for Cause, if the exercise of the Option withinthe applicable time periods set forth in Section 7.1 is prevented by theprovisions of Section 4.6, the Option shall remain exercisable until three (3)months after the date the Optionee is notified by the Company that the Option isexercisable, but in any event no later than the Option Expiration Date. 7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B). Notwithstandingthe foregoing, except termination for Cause, if a sale within the applicabletime periods set forth in Section 7.1 of shares acquired upon the exercise ofthe Option would subject the Optionee to suit under Section 16(b) of theExchange Act, the Option shall remain exerciseable until the 7earliest to occur of (i) the tenth (10th) day following the date on which a saleof such shares by the Optionee would no longer be subject to such suit, (ii) theone hundred and ninetieth (190th) day after the Optionee’s termination ofService, or (iii) the Option Expiration Date. 8. CHANGE IN CONTROL. In the event of a Change in Control, the surviving, continuing,successor, or purchasing corporation or other business entity or parent thereof,as the case may be (the “ACQUIRING CORPORATION”), may, without the consent ofthe Optionee, either assume the Company’s rights and obligations under theOption or substitute for the Option a substantially equivalent option for theAcquiring Corporation’s stock. The Option shall terminate and cease to beoutstanding effective as of the date of the Change in Control to the extent thatthe Option is neither assumed or substituted for by the Acquiring Corporation inconnection with the Change in Control nor exercised as of the date of the Changein Control. Notwithstanding the foregoing, shares acquired upon exercise of theOption prior to the Change in Control and any consideration received pursuant tothe Change in Control with respect to such shares shall continue to be subjectto all applicable provisions of the Option Agreement except as otherwiseprovided herein. Furthermore, notwithstanding the foregoing, if the corporationthe stock of which is subject to the Option immediately prior to an OwnershipChange Event described in Section 2.1(ee)(i) of the Plan constituting a Changein Control is the surviving or continuing corporation and immediately after suchOwnership Change Event less than fifty percent (50%) of the total combinedvoting power of its voting stock is held by another corporation or by othercorporations that are members of an affiliated group within the meaning ofSection 1504(a) of the Code without regard to the provisions of Section 1504(b)of the Code, the Option shall not terminate unless the Board or Committeeotherwise provides in its discretion. 9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. Subject to any required action by the shareholders of the Company, inthe event of any change in the Stock effected without receipt of considerationby the Company, whether through merger, consolidation, reorganization,reincorporation, recapitalization, reclassification, stock dividend, stocksplit, reverse stock split, split-up, split-off, spin-off, combination ofshares, exchange of shares, or similar change in the capital structure of theCompany, or in the event of payment of a dividend or distribution to theshareholders of the Company in a form other than Stock (excepting normal cashdividends) that has a material effect on the Fair Market Value of shares ofStock, appropriate and proportionate adjustments shall be made in the number,Exercise Price and class of shares subject to the Option, in order to preventdilution or enlargement of the Optionee’s rights under the Option. For purposesof the foregoing, conversion of any convertible securities of the Company shallnot be treated as “effected without receipt of consideration by the Company.” Ifa majority of the shares which are of the same class as the shares that aresubject to the Option are exchanged for, converted into, or otherwise become(whether or not pursuant to an Ownership Change Event) shares of anothercorporation (the “NEW SHARES”), the Board or Committee may unilaterally amendthe Option to provide that the Option is exercisable for New Shares. In theevent of any such amendment, the Number of Option Shares and the Exercise Priceshall be adjusted in a fair and equitable manner as determined by the Board orCommittee, in its discretion. Notwithstanding the foregoing, any fractionalshare resulting from an adjustment pursuant to this Section 9 shall be roundeddown to 8the nearest whole number, and in no event may the Exercise Price of the Optionbe decreased to an amount less than the par value, if any, of the stock subjectto the Option. Such adjustments shall be determined by the Board or Committee,and its determination shall be final, binding and conclusive. 10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall have no rights as a shareholder with respect to anyshares covered by the Option until the date of the issuance of a certificate forthe shares for which the Option has been exercised (as evidenced by theappropriate entry on the books of the Company or of a duly authorized transferagent of the Company). No adjustment shall be made for dividends, distributionsor other rights for which the record date is prior to the date such certificateis issued, except as provided in Section 9. If the Optionee is an Employee, theOptionee understands and acknowledges that, except as otherwise provided in aseparate, written employment agreement between a Participating Company and theOptionee, the Optionee’s employment is “at will” and is for no specified term.Nothing in this Option Agreement shall confer upon the Optionee any right tocontinue in the Service of a Participating Company or interfere in any way withany right of the Participating Company Group to terminate the Optionee’s Serviceas an Employee or Consultant, as the case may be, at any time. 11. UNVESTED SHARE REPURCHASE OPTION. 11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event theOptionee’s Service with the Participating Company Group is terminated for anyreason or no reason, with or without cause, or, if the Optionee, the Optionee’slegal representative, or other holder of shares acquired upon exercise of theOption attempts to sell, exchange, transfer, pledge, or otherwise dispose of(other than pursuant to an Ownership Change Event) any Unvested Shares, asdefined in Section 11.2 below (the “UNVESTED SHARES”), the Company shall havethe right to repurchase the Unvested Shares under the terms and subject to theconditions set forth in this Section 11 (the “UNVESTED SHARE REPURCHASEOPTION”). 11.2 UNVESTED SHARES DEFINED. The “UNVESTED SHARES” shall mean, on anygiven date, the number of shares of Stock acquired upon exercise of the Optionwhich exceed the Vested Shares determined as of such date. 11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company mayexercise the Unvested Share Repurchase Option by written notice to the Optioneewithin two hundred seventy (270) days after (a) termination of the Optionee’sService (or exercise of the Option, if later) or (b) the Company has receivednotice of the attempted disposition of Unvested Shares. If the Company fails togive notice within such two hundred seventy (270) day period, the Unvested ShareRepurchase Option shall terminate unless the Company and the Optionee haveextended the time for the exercise of the Unvested Share Repurchase Option. TheUnvested Share Repurchase Option must be exercised, if at all, for all of theUnvested Shares, except as the Company and the Optionee otherwise agree. 11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The purchaseprice per share being repurchased by the Company shall be an amount equal to theOptionee’s 9original cost per share, as adjusted pursuant to Section 9 (the “REPURCHASEPRICE”). The Company shall pay the aggregate Repurchase Price to the Optionee incash within thirty (30) days after the date of the written notice to theOptionee of the Company’s exercise of the Unvested Share Repurchase Option. Forpurposes of the foregoing, cancellation of any purchase money indebtedness ofthe Optionee to any Participating Company for the shares shall be treated aspayment to the Optionee in cash to the extent of the unpaid principal and anyaccrued interest canceled. The shares being repurchased shall be delivered tothe Company by the Optionee at the same time as the delivery of the RepurchasePrice to the Optionee. 11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The Company shallhave the right to assign the Unvested Share Repurchase Option at any time,whether or not such option is then exercisable, to one or more persons as may beselected by the Company. 11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an OwnershipChange Event, any and all new, substituted or additional securities or otherproperty to which the Optionee is entitled by reason of the Optionee’s ownershipof Unvested Shares shall be immediately subject to the Unvested Share RepurchaseOption and included in the terms “Stock” and “Unvested Shares” for all purposesof the Unvested Share Repurchase Option with the same force and effect as theUnvested Shares immediately prior to the Ownership Change Event. While theaggregate Repurchase Price shall remain the same after such Ownership ChangeEvent, the Repurchase Price per Unvested Share upon exercise of the UnvestedShare Repurchase Option following such Ownership Change Event shall be adjustedas appropriate. For purposes of determining the Vested Shares following anOwnership Change Event, credited Service shall include all Service with anycorporation which is a Participating Company at the time the Service isrendered, whether or not such corporation is a Participating Company both beforeand after the Ownership Change Event. 12. ESCROW. 12.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to theUnvested Share Repurchase Option will be available for repurchase, the Companymay require the Optionee to deposit the certificate evidencing the shares whichthe Optionee purchases upon exercise of the Option with an agent designated bythe Company under the terms and conditions of an escrow agreement approved bythe Company. If the Company does not require such deposit as a condition ofexercise of the Option, the Company reserves the right at any time to requirethe Optionee to so deposit the certificate in escrow. Upon the occurrence of anOwnership Change Event or a change, as described in Section 9, in the characteror amount of any of the outstanding stock of the corporation the stock of whichis subject to the provisions of this Option Agreement, any and all new,substituted or additional securities or other property to which the Optionee isentitled by reason of the Optionee’s ownership of shares of Stock acquired uponexercise of the Option that remain, following such Ownership Change Event orchange described in Section 9, subject to the Unvested Share Repurchase Optionshall be immediately subject to the escrow to the same extent as such shares ofStock immediately before such event. The Company shall bear the expenses of theescrow. 12.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after theexpiration of the Unvested Share Repurchase Option, but not more frequently thantwice each 10calendar year, the escrow agent shall deliver to the Optionee the shares and anyother property no longer subject to such restriction. 12.3 NOTICES AND PAYMENTS. In the event the shares and any otherproperty held in escrow are subject to the Company’s exercise of the UnvestedShare Repurchase Option, the notices required to be given to the Optionee shallbe given to the escrow agent, and any payment required to be given to theOptionee shall be given to the escrow agent. Within thirty (30) days afterpayment by the Company, the escrow agent shall deliver the shares and any otherproperty which the Company has purchased to the Company and shall deliver thepayment received from the Company to the Optionee. 13. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to time, there is any stock dividend, stock split orother change, as described in Section 9, in the character or amount of any ofthe outstanding stock of the corporation the stock of which is subject to theprovisions of this Option Agreement, then in such event any and all new,substituted or additional securities to which the Optionee is entitled by reasonof the Optionee’s ownership of the shares acquired upon exercise of the Optionshall be immediately subject to the Unvested Share Repurchase Option with thesame force and effect as the shares subject to the Unvested Share RepurchaseOption immediately before such event. 14. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall dispose of the shares acquired pursuant to theOption only in accordance with the provisions of the Plan and this OptionAgreement. In addition, if the Notice designates this Option as an IncentiveStock Option, the Optionee shall (a) promptly notify the Chief Financial Officerof the Company if the Optionee disposes of any of the shares acquired pursuantto the Option within one (1) year after the date the Optionee exercises all orpart of the Option or within two (2) years after the Date of Option Grant and(b) provide the Company with a description of the circumstances of suchdisposition. Until such time as the Optionee disposes of such shares in a mannerconsistent with the provisions of this Option Agreement, unless otherwiseexpressly authorized by the Company, the Optionee shall hold all shares acquiredpursuant to the Option in the Optionee’s name (and not in the name of anynominee) for the one-year period immediately after the exercise of the Optionand the two-year period immediately after Date of Option Grant. At any timeduring the one-year or two-year periods set forth above, the Company may place alegend on any certificate representing shares acquired pursuant to the Optionrequesting the transfer agent for the Company’s stock to notify the Company ofany such transfers. The obligation of the Optionee to notify the Company of anysuch transfer shall continue notwithstanding that a legend has been placed onthe certificate pursuant to the preceding sentence. 11 15. LEGENDS. The Company may at any time place legends referencing the UnvestedShare Repurchase Option and any applicable federal, state or foreign securitieslaw restrictions on all certificates representing shares of stock subject to theprovisions of this Option Agreement. The Optionee shall, at the request of theCompany, promptly present to the Company any and all certificates representingshares acquired pursuant to the Option in the possession of the Optionee inorder to carry out the provisions of this Section. Unless otherwise specified bythe Company, legends placed on such certificates may include, but shall not belimited to, the following: 15.1 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THECORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTIONAS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED(“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THESHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATEHERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TOTHIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALLNOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARESPURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (ANDNOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED ASDESCRIBED ABOVE.” 15.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ANUNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SETFORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCHHOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPALOFFICE OF THIS CORPORATION.” 16. MISCELLANEOUS PROVISIONS. 16.1 BINDING EFFECT. Subject to the restrictions on transfer set forthherein, this Option Agreement shall inure to the benefit of and be binding uponthe parties hereto and their respective heirs, executors, administrators,successors and assigns. 16.2 TERMINATION OR AMENDMENT. The Board or Committee may terminate oramend the Plan or the Option at any time; provided, however, that except asprovided in Section 8 in connection with a Change in Control, no suchtermination or amendment may adversely affect the Option or any unexercisedportion hereof without the consent of the Optionee unless such termination oramendment is necessary to comply with any applicable law or governmentregulation or is required to enable the Option, if designated an Incentive StockOption in the Notice, to qualify as an Incentive Stock Option. No amendment oraddition to this Option Agreement shall be effective unless in writing. 12 16.3 NOTICES. Any notice required or permitted hereunder shall begiven in writing and shall be deemed effectively given (except to the extentthat this Option Agreement provides for effectiveness only upon actual receiptof such notice) upon personal delivery or upon deposit in the United States PostOffice, by registered or certified mail, with postage and fees prepaid,addressed to the other party at the address shown below that party’s signatureor at such other address as such party may designate in writing from time totime to the other party. 16.4 INTEGRATED AGREEMENT. The Notice, this Option Agreement and thePlan constitute the entire understanding and agreement of the Optionee and theParticipating Company Group with respect to the subject matter contained hereinor therein and supersedes any prior agreements, understandings, restrictions,representations, or warranties among the Optionee and the Participating CompanyGroup with respect to such subject matter other than those as set forth orprovided for herein or therein. To the extent contemplated herein or therein,the provisions of the Notice and the Option Agreement shall survive any exerciseof the Option and shall remain in full force and effect. 16.5 APPLICABLE LAW. This Option Agreement shall be governed by thelaws of the State of Delaware as such laws are applied to agreements betweenDelaware residents entered into and to be performed entirely within the State ofDelaware. 16.6 COUNTERPARTS. The Notice may be executed in counterparts, each ofwhich shall be deemed an original, but all of which together shall constituteone and the same instrument. 13[ ] Incentive Stock Option Optionee: ______________________________[ ] Nonstatutory Stock Option Date: __________________________________ STOCK OPTION EXERCISE NOTICE (IMMEDIATELY EXERCISABLE)ImaRx Therapeutics, Inc.Attention: Chief Financial Officer1635 East 18th St.Tucson, AZ 85719Ladies and Gentlemen: 1. OPTION. I was granted an option (the “OPTION”) to purchase shares of thecommon stock (the “SHARES”) of ImaRx Therapeutics, Inc. (the “COMPANY”) pursuantto the Company’s 2006 Performance Incentive Plan (the “PLAN”), my Notice ofGrant of Stock Option (the “NOTICE”) and my Stock Option Agreement (the “OPTIONAGREEMENT”) as follows:

Grant Number: _____________Date of Option Grant: _____________Number of Option Shares: _____________Exercise Price per Share: $____________

2. EXERCISE OF OPTION. I hereby elect to exercise the Option to purchasethe following number of Shares:

Vested Shares: _____________Unvested Shares: _____________Total Shares Purchased: _____________Total Exercise Price (Total Shares X Price per Share) $____________

3. PAYMENTS. I enclose payment in full of the total exercise price for theShares in the following form(s), as authorized by my Option Agreement:

[ ] Cash: $____________[ ] Check: $____________[ ] Tender of Company Stock: Contact Plan Administrator[ ] Cashless Exercise: Contact Plan Administrator

1

[ ] Net-Exercise: Contact Plan Administrator

4. TAX WITHHOLDING. I authorize payroll withholding and otherwise will makeadequate provision for the federal, state, local and foreign tax withholdingobligations of the Company, if any, in connection with the Option. If I amexercising a Nonstatutory Stock Option, I enclose payment in full of mywithholding taxes, if any, as follows: (CONTACT PLAN ADMINISTRATOR FOR AMOUNT OF TAX DUE.)

[ ] Cash: $____________[ ] Check: $____________

5. OPTIONEE INFORMATION. My address is: ______________________________________________________ ______________________________________________________ My Social Security Number is: _______________________________________ 6. NOTICE OF DISQUALIFYING DISPOSITION. If the Option is an Incentive StockOption, I agree that I will promptly notify the Chief Financial Officer of theCompany if I transfer any of the Shares within one (1) year from the date Iexercise all or part of the Option or within two (2) years of the Date of OptionGrant. 7. BINDING EFFECT. I agree that the Shares are being acquired in accordancewith and subject to the terms, provisions and conditions of the OptionAgreement, including the Unvested Share Repurchase Option, to all of which Ihereby expressly assent. This Agreement shall inure to the benefit of and bebinding upon my heirs, executors, administrators, successors and assigns. 8. ELECTION UNDER SECTION 83(B) OF THE CODE. I understand and acknowledgethat if I am exercising the Option to purchase Unvested Shares (i.e., sharesthat remain subject to the Company’s Unvested Share Repurchase Option), that Ishould consult with my tax advisor regarding the advisability of filing with theInternal Revenue Service an election under Section 83(b) of the Code, which mustbe filed no later than thirty (30) days after the date on which I exercise theOption. I acknowledge that I have been advised to consult with a tax advisorprior to the exercise of the Option regarding the tax consequences to me ofexercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30DAYS AFTER THE DATE ON WHICH I PURCHASE THE SHARES. THIS TIME PERIOD CANNOT BEEXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MYSOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVE TO FILESUCH ELECTION ON MY BEHALF. 2 I understand that I am purchasing the Shares pursuant to the terms of thePlan, the Notice and my Option Agreement, copies of which I have received andcarefully read and understand. Very truly yours, —————————————- (Signature)Receipt of the above is hereby acknowledged.ImaRx Therapeutics, Inc.By: ———————————Title: ——————————Dated: —————————— 3 IMARX THERAPEUTICS, INC. STOCK OPTION AGREEMENT ImaRx Therapeutics, Inc. has granted to the individual (the “OPTIONEE”)named in the Notice of Grant of Stock Option (the “NOTICE”) to which this StockOption Agreement (the “OPTION AGREEMENT”) is attached an option (the “OPTION”)to purchase certain shares of Stock upon the terms and conditions set forth inthe Notice and this Option Agreement. The Option has been granted pursuant toand shall in all respects be subject to the terms and conditions of the ImaRxTherapeutics, Inc. 2006 Performance Incentive Plan (the “PLAN”), as amended tothe Date of Option Grant, the provisions of which are incorporated herein byreference. By signing the Notice, the Optionee: (a) represents that the Optioneehas received copies of, and has read and is familiar with the terms andconditions of, the Notice, the Plan and this Option Agreement, (b) accepts theOption subject to all of the terms and conditions of the Notice, the Plan andthis Option Agreement, and (c) agrees to accept as binding, conclusive and finalall decisions or interpretations of the Board or Committee upon any questionsarising under the Notice, the Plan or this Option Agreement. 1. DEFINITIONS AND CONSTRUCTION. 1.1 DEFINITIONS. Unless otherwise defined herein, capitalized termsshall have the meanings assigned to such terms in the Notice or the Plan. 1.2 CONSTRUCTION. Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of this Option Agreement. Except when otherwise indicated by thecontext, the singular shall include the plural and the plural shall include thesingular. Use of the term “or” is not intended to be exclusive, unless thecontext clearly requires otherwise. 2. TAX CONSEQUENCES. 2.1 TAX STATUS OF OPTION. This Option is intended to have the taxstatus designated in the Notice. (a) INCENTIVE STOCK OPTION. If the Notice so designates, thisOption is intended to be an Incentive Stock Option within the meaning of Section422(b) of the Code, but the Company does not represent or warrant that thisOption qualifies as such. The Optionee should consult with the Optionee’s owntax advisor regarding the tax effects of this Option and the requirementsnecessary to obtain favorable income tax treatment under Section 422 of theCode, including, but not limited to, holding period requirements. (NOTE TOOPTIONEE: If the Option is exercised more than three (3) months after the dateon which you cease to be an Employee (other than by reason of your death orpermanent and total disability as defined in Section 22(e)(3) of the Code), theOption will be treated as a Nonstatutory Stock Option and not as an IncentiveStock Option to the extent required by Section 422 of the Code.) 1 (b) NONSTATUTORY STOCK OPTION. If the Notice so designates, thisOption is intended to be a Nonstatutory Stock Option and shall not be treated asan Incentive Stock Option within the meaning of Section 422(b) of the Code. 2.2 ISO FAIR MARKET VALUE LIMITATION. If the Notice designates thisOption as an Incentive Stock Option, then to the extent that the Option(together with all Incentive Stock Options granted to the Optionee under allstock option plans of the Participating Company Group, including the Plan)becomes exercisable for the first time during any calendar year for shareshaving a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),the portion of such options which exceeds such amount will be treated asNonstatutory Stock Options. For purposes of this Section 2.2, options designatedas Incentive Stock Options are taken into account in the order in which theywere granted, and the Fair Market Value of stock is determined as of the timethe option with respect to such stock is granted. If the Code is amended toprovide for a different limitation from that set forth in this Section 2.2, suchdifferent limitation shall be deemed incorporated herein effective as of thedate required or permitted by such amendment to the Code. If the Option istreated as an Incentive Stock Option in part and as a Nonstatutory Stock Optionin part by reason of the limitation set forth in this Section 2.2, the Optioneemay designate which portion of such Option the Optionee is exercising. In theabsence of such designation, the Optionee shall be deemed to have exercised theIncentive Stock Option portion of the Option first. Separate certificatesrepresenting each such portion shall be issued upon the exercise of the Option.(NOTE TO OPTIONEE: If the aggregate Exercise Price (as defined in the Notice) ofthe Option (that is, the Exercise Price multiplied by the Number of OptionShares) plus the aggregate exercise price of any other Incentive Stock Optionsyou hold (whether granted pursuant to the Plan or any other stock option plan ofthe Participating Company Group) is greater than $100,000, you should contactthe Chief Financial Officer of the Company to ascertain whether the entireOption qualifies as an Incentive Stock Option.) 3. ADMINISTRATION. All questions of interpretation concerning this Option Agreement shallbe determined by the Board or Committee. All determinations by the Board orCommittee shall be final and binding upon all persons having an interest in theOption. Any Officer shall have the authority to act on behalf of the Companywith respect to any matter, right, obligation, or election which is theresponsibility of or which is allocated to the Company herein, provided theOfficer has apparent authority with respect to such matter, right, obligation,or election. 4. EXERCISE OF THE OPTION. 4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the Optionshall be exercisable on and after the Initial Vesting Date (as defined in theNotice) and prior to the termination of the Option (as provided in Section 6) inan amount not to exceed the number of Vested Shares (as defined in the Notice)less the number of shares previously acquired upon exercise of the Option. In noevent shall the Option be exercisable for more shares than the Number of OptionShares (as defined in the Notice). 4.2 METHOD OF EXERCISE. Exercise of the Option shall be by writtennotice to the Company which must state the election to exercise the Option, thenumber of whole shares of 2Stock for which the Option is being exercised and such other representations andagreements as to the Optionee’s investment intent with respect to such shares asmay be required pursuant to the provisions of this Option Agreement. The writtennotice must be signed by the Optionee and must be delivered in person, bycertified or registered mail, return receipt requested, by confirmed facsimiletransmission, or by such other means as the Company may permit, to the ChiefFinancial Officer of the Company, or other authorized representative of theParticipating Company Group, prior to the termination of the Option as set forthin Section 6, accompanied by full payment of the aggregate Exercise Price forthe number of shares of Stock being purchased. The Option shall be deemed to beexercised upon receipt by the Company of such written notice and the aggregateExercise Price. 4.3 PAYMENT OF EXERCISE PRICE. (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwiseprovided below, payment of the aggregate Exercise Price for the number of sharesof Stock for which the Option is being exercised shall be made (i) in cash, bycheck, or cash equivalent, (ii) by tender to the Company, or attestation to theownership, of whole shares of Stock owned by the Optionee having a Fair MarketValue not less than the aggregate Exercise Price, to the extent permitted by theCompany at the time of exercise, (iii) by means of a Cashless Exercise, to theextent permitted by the Company at the time of exercise, (iv) by delivery of aproperly executed notice electing a Net-Exercise, to the extent permitted by theCompany at the time of exercise, or (v) by any combination of the foregoing. (b) LIMITATIONS ON FORMS OF CONSIDERATION. (i) TENDER OF STOCK. Notwithstanding the foregoing, theOption may not be exercised by tender to the Company, or attestation to theownership, of shares of Stock to the extent such tender or attestation wouldconstitute a violation of the provisions of any law, regulation or agreementrestricting the redemption of the Company’s stock. The Option may not beexercised by tender to the Company, or attestation to the ownership, of sharesof Stock unless such shares either have been owned by the Optionee for more thansix (6) months (and not used for another option exercise by attestation duringsuch period) or were not acquired, directly or indirectly, from the Company. (ii) CASHLESS EXERCISE. A “CASHLESS EXERCISE” means thedelivery of a properly executed notice together with irrevocable instructions toa broker in a form acceptable to the Company providing for the assignment to theCompany of the proceeds of a sale or loan with respect to some or all of theshares of Stock acquired upon the exercise of the Option pursuant to a programor procedure approved by the Company (including, without limitation, through anexercise complying with the provisions of Regulation T as promulgated from timeto time by the Board of Governors of the Federal Reserve System).Notwithstanding anything in the Plan or this Option Agreement to the contrary, aCashless Exercise shall only be permitted, if at all, provided (A) the Companyhas completed an underwritten public offering of its Stock pursuant to aneffective registration statement filed under the Securities Act, and (B) theCompany’s Stock is listed on a “national securities exchange” (as such term isdefined in the Exchange Act) or the Nasdaq National Market at the time of suchproposed Cashless Exercise. 3In addition, the Company reserves, at any and all times, the right, in theCompany’s sole and absolute discretion, to decline to approve or terminate anysuch program or procedure. 4.4 TAX WITHHOLDING. At the time the Option is exercised, in whole orin part, or at any time thereafter as requested by the Company, the Optioneehereby authorizes withholding from payroll and any other amounts payable to theOptionee, and otherwise agrees to make adequate provision for (including bymeans of a Cashless Exercise to the extent permitted by the Company), any sumsrequired to satisfy the federal, state, local and foreign tax withholdingobligations of the Participating Company Group, if any, which arise inconnection with the Option, including, without limitation, obligations arisingupon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, inwhole or in part, of any shares acquired upon exercise of the Option, (iii) theoperation of any law or regulation providing for the imputation of interest, or(iv) the lapsing of any restriction with respect to any shares acquired uponexercise of the Option. The Option is not exercisable unless the tax withholdingobligations of the Participating Company Group are satisfied. Accordingly, theCompany shall have no obligation to deliver shares of Stock until the taxwithholding obligations of the Participating Company Group have been satisfiedby the Optionee. 4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Priceis paid by means of a Cashless Exercise, the certificate for the shares as towhich the Option is exercised shall be registered in the name of the Optionee,or, if applicable, in the names of the heirs of the Optionee. 4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. Thegrant of the Option and the issuance of shares of Stock upon exercise of theOption shall be subject to compliance with all applicable requirements offederal, state or foreign law with respect to such securities. The Option maynot be exercised if the issuance of shares of Stock upon exercise wouldconstitute a violation of any applicable federal, state or foreign securitieslaws or other law or regulations or the requirements of any stock exchange ormarket system upon which the Stock may then be listed. In addition, the Optionmay not be exercised unless (i) a registration statement under the SecuritiesAct shall at the time of exercise of the Option be in effect with respect to theshares issuable upon exercise of the Option or (ii) in the opinion of legalcounsel to the Company, the shares issuable upon exercise of the Option may beissued in accordance with the terms of an applicable exemption from theregistration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THATTHE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIREDEVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain fromany regulatory body having jurisdiction the authority, if any, deemed by theCompany’s legal counsel to be necessary to the lawful issuance and sale of anyshares subject to the Option shall relieve the Company of any liability inrespect of the failure to issue or sell such shares as to which such requisiteauthority shall not have been obtained. As a condition to the exercise of theOption, the Company may require the Optionee to satisfy any qualifications thatmay be necessary or appropriate, to evidence compliance with any applicable lawor regulation and to make any representation or warranty with respect thereto asmay be requested by the Company. 4 4.7 FRACTIONAL SHARES. The Company shall not be required to issuefractional shares upon the exercise of the Option. 5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during the lifetime of the Optionee onlyby the Optionee or the Optionee’s guardian or legal representative and may notbe assigned or transferred in any manner except by will or by the laws ofdescent and distribution. Following the death of the Optionee, the Option, tothe extent provided in Section 7, may be exercised by the Optionee’s legalrepresentative or by any person empowered to do so under the deceased Optionee’swill or under the then applicable laws of descent and distribution. 6. TERMINATION OF THE OPTION. The Option shall terminate and may no longer be exercised after thefirst to occur of (a) the Option Expiration Date, (b) the termination of theOptionee’s Service to the extent that the Option is unvested on such date, (c)the last date for exercising the Option following termination of the Optionee’sService as described in Section 7, or (d) a Change in Control to the extentprovided in Section 8. 7. EFFECT OF TERMINATION OF SERVICE. 7.1 OPTION EXERCISABILITY. (a) DISABILITY. If the Optionee’s Service terminates because ofthe Disability of the Optionee, the Option, to the extent vested and exercisableon the date on which the Optionee’s Service terminated, may be exercised by theOptionee (or the Optionee’s guardian or legal representative) at any time priorto the expiration of twelve (12) months after the date on which the Optionee’sService terminated, but in any event no later than the Option Expiration Date. (b) DEATH. If the Optionee’s Service terminates because of thedeath of the Optionee, the Option, to the extent vested and exercisable on thedate on which the Optionee’s Service terminated, may be exercised by theOptionee’s legal representative or other person who acquired the right toexercise the Option by reason of the Optionee’s death at any time prior to theexpiration of twelve (12) months after the date on which the Optionee’s Serviceterminated, but in any event no later than the Option Expiration Date. TheOptionee’s Service shall be deemed to have terminated on account of death if theOptionee dies within three (3) months after the Optionee’s termination ofService (other than a termination for Cause). (c) TERMINATION FOR CAUSE. Notwithstanding any other provision ofthe Plan or this Option Agreement to the contrary, if the Optionee’s Service isterminated for Cause, the Option shall terminate and cease to be exercisableimmediately upon such termination of Service. (d) OTHER TERMINATION OF SERVICE. If the Optionee’s Serviceterminates for any reason, except Disability, death or Cause, the Option, to theextent vested and exercisable by the Optionee on the date on which theOptionee’s Service terminated, may be 5exercised by the Optionee at any time prior to the expiration of three (3)months (or such other longer period of time as determined by the Board orCommittee, in its discretion) after the date on which the Optionee’s Serviceterminated, but in any event no later than the Option Expiration Date. 7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding theforegoing, except termination for Cause, if the exercise of the Option withinthe applicable time periods set forth in Section 7.1 is prevented by theprovisions of Section 4.6, the Option shall remain exercisable until three (3)months after the date the Optionee is notified by the Company that the Option isexercisable, but in any event no later than the Option Expiration Date. 7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B). Notwithstandingthe foregoing, except termination for Cause, if a sale within the applicabletime periods set forth in Section 7.1 of shares acquired upon the exercise ofthe Option would subject the Optionee to suit under Section 16(b) of theExchange Act, the Option shall remain exerciseable until the earliest to occurof (i) the tenth (10th) day following the date on which a sale of such shares bythe Optionee would no longer be subject to such suit, (ii) the one hundred andninetieth (190th) day after the Optionee’s termination of Service, or (iii) theOption Expiration Date. 8. CHANGE IN CONTROL. In the event of a Change in Control, the surviving, continuing,successor, or purchasing corporation or other business entity or parent thereof,as the case may be (the “ACQUIRING CORPORATION”), may, without the consent ofthe Optionee, either assume the Company’s rights and obligations under theOption or substitute for the Option a substantially equivalent option for theAcquiring Corporation’s stock. The Option shall terminate and cease to beoutstanding effective as of the date of the Change in Control to the extent thatthe Option is neither assumed or substituted for by the Acquiring Corporation inconnection with the Change in Control nor exercised as of the date of the Changein Control. Notwithstanding the foregoing, shares acquired upon exercise of theOption prior to the Change in Control and any consideration received pursuant tothe Change in Control with respect to such shares shall continue to be subjectto all applicable provisions of the Option Agreement except as otherwiseprovided herein. Furthermore, notwithstanding the foregoing, if the corporationthe stock of which is subject to the Option immediately prior to an OwnershipChange Event described in Section 2.1(ee)(i) of the Plan constituting a Changein Control is the surviving or continuing corporation and immediately after suchOwnership Change Event less than fifty percent (50%) of the total combinedvoting power of its voting stock is held by another corporation or by othercorporations that are members of an affiliated group within the meaning ofSection 1504(a) of the Code without regard to the provisions of Section 1504(b)of the Code, the Option shall not terminate unless the Board or Committeeotherwise provides in its discretion. 9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. Subject to any required action by the shareholders of the Company, inthe event of any change in the Stock effected without receipt of considerationby the Company, whether through merger, consolidation, reorganization,reincorporation, recapitalization, reclassification, stock dividend, stocksplit, reverse stock split, split-up, split-off, spin-off, combination ofshares, 6exchange of shares, or similar change in the capital structure of the Company,or in the event of payment of a dividend or distribution to the shareholders ofthe Company in a form other than Stock (excepting normal cash dividends) thathas a material effect on the Fair Market Value of shares of Stock, appropriateand proportionate adjustments shall be made in the number, Exercise Price andclass of shares subject to the Option, in order to prevent dilution orenlargement of the Optionee’s rights under the Option. For purposes of theforegoing, conversion of any convertible securities of the Company shall not betreated as “effected without receipt of consideration by the Company.” If amajority of the shares which are of the same class as the shares that aresubject to the Option are exchanged for, converted into, or otherwise become(whether or not pursuant to an Ownership Change Event) shares of anothercorporation (the “NEW SHARES”), the Board or Committee may unilaterally amendthe Option to provide that the Option is exercisable for New Shares. In theevent of any such amendment, the Number of Option Shares and the Exercise Priceshall be adjusted in a fair and equitable manner as determined by the Board orCommittee, in its discretion. Notwithstanding the foregoing, any fractionalshare resulting from an adjustment pursuant to this Section 9 shall be roundeddown to the nearest whole number, and in no event may the Exercise Price of theOption be decreased to an amount less than the par value, if any, of the stocksubject to the Option. Such adjustments shall be determined by the Board orCommittee, and its determination shall be final, binding and conclusive. 10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall have no rights as a shareholder with respect to anyshares covered by the Option until the date of the issuance of a certificate forthe shares for which the Option has been exercised (as evidenced by theappropriate entry on the books of the Company or of a duly authorized transferagent of the Company). No adjustment shall be made for dividends, distributionsor other rights for which the record date is prior to the date such certificateis issued, except as provided in Section 9. If the Optionee is an Employee, theOptionee understands and acknowledges that, except as otherwise provided in aseparate, written employment agreement between a Participating Company and theOptionee, the Optionee’s employment is “at will” and is for no specified term.Nothing in this Option Agreement shall confer upon the Optionee any right tocontinue in the Service of a Participating Company or interfere in any way withany right of the Participating Company Group to terminate the Optionee’s Serviceas an Employee or Consultant, as the case may be, at any time. 11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall dispose of the shares acquired pursuant to theOption only in accordance with the provisions of the Plan and this OptionAgreement. In addition, if the Notice designates this Option as an IncentiveStock Option, the Optionee shall (a) promptly notify the Chief Financial Officerof the Company if the Optionee disposes of any of the shares acquired pursuantto the Option within one (1) year after the date the Optionee exercises all orpart of the Option or within two (2) years after the Date of Option Grant and(b) provide the Company with a description of the circumstances of suchdisposition. Until such time as the Optionee disposes of such shares in a mannerconsistent with the provisions of this Option Agreement, unless otherwiseexpressly authorized by the Company, the Optionee shall hold all shares acquiredpursuant to the Option in the Optionee’s name (and not in the name of anynominee) for the one- 7year period immediately after the exercise of the Option and the two-year periodimmediately after Date of Option Grant. At any time during the one-year ortwo-year periods set forth above, the Company may place a legend on anycertificate representing shares acquired pursuant to the Option requesting thetransfer agent for the Company’s stock to notify the Company of any suchtransfers. The obligation of the Optionee to notify the Company of any suchtransfer shall continue notwithstanding that a legend has been placed on thecertificate pursuant to the preceding sentence. 12. LEGENDS. The Company may at any time place legends referencing any applicablefederal, state or foreign securities law restrictions on all certificatesrepresenting shares of stock subject to the provisions of this Option Agreement.The Optionee shall, at the request of the Company, promptly present to theCompany any and all certificates representing shares acquired pursuant to theOption in the possession of the Optionee in order to carry out the provisions ofthis Section. Unless otherwise specified by the Company, legends placed on suchcertificates may include, but shall not be limited to, the following: 12.1 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THECORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTIONAS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED(“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THESHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATEHERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TOTHIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALLNOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARESPURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (ANDNOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED ASDESCRIBED ABOVE.” 13. MISCELLANEOUS PROVISIONS. 13.1 BINDING EFFECT. Subject to the restrictions on transfer set forthherein, this Option Agreement shall inure to the benefit of and be binding uponthe parties hereto and their respective heirs, executors, administrators,successors and assigns. 13.2 TERMINATION OR AMENDMENT. The Board or Committee may terminate oramend the Plan or the Option at any time; provided, however, that except asprovided in Section 8 in connection with a Change in Control, no suchtermination or amendment may adversely affect the Option or any unexercisedportion hereof without the consent of the Optionee unless such termination oramendment is necessary to comply with any applicable law or governmentregulation or is required to enable the Option, if designated an Incentive StockOption in the Notice, to qualify as an Incentive Stock Option. No amendment oraddition to this Option Agreement shall be effective unless in writing. 8 13.3 NOTICES. Any notice required or permitted hereunder shall begiven in writing and shall be deemed effectively given (except to the extentthat this Option Agreement provides for effectiveness only upon actual receiptof such notice) upon personal delivery or upon deposit in the United States PostOffice, by registered or certified mail, with postage and fees prepaid,addressed to the other party at the address shown below that party’s signatureor at such other address as such party may designate in writing from time totime to the other party. 13.4 INTEGRATED AGREEMENT. The Notice, this Option Agreement and thePlan constitute the entire understanding and agreement of the Optionee and theParticipating Company Group with respect to the subject matter contained hereinor therein and supersedes any prior agreements, understandings, restrictions,representations, or warranties among the Optionee and the Participating CompanyGroup with respect to such subject matter other than those as set forth orprovided for herein or therein. To the extent contemplated herein or therein,the provisions of the Notice and the Option Agreement shall survive any exerciseof the Option and shall remain in full force and effect. 13.5 APPLICABLE LAW. This Option Agreement shall be governed by thelaws of the State of Delaware as such laws are applied to agreements betweenDelaware residents entered into and to be performed entirely within the State ofDelaware. 13.6 COUNTERPARTS. The Notice may be executed in counterparts, each ofwhich shall be deemed an original, but all of which together shall constituteone and the same instrument. 9[ ] Incentive Stock Option Optionee: ______________________________[ ] Nonstatutory Stock Option Date: __________________________________ STOCK OPTION EXERCISE NOTICEImaRx Therapeutics, Inc.Attention: Chief Financial Officer1635 East 18th StreetTucson, AZ 85719Ladies and Gentlemen: 1. OPTION. I was granted an option (the “OPTION”) to purchase shares of thecommon stock (the “SHARES”) of ImaRx Therapeutics, Inc. (the “COMPANY”) pursuantto the Company’s 2006 Performance Incentive Plan (the “PLAN”), my Notice ofGrant of Stock Option (the “NOTICE”) and my Stock Option Agreement (the “OPTIONAGREEMENT”) as follows:

Grant Number: ____________Date of Option Grant: ____________Number of Option Shares: ____________Exercise Price per Share: $___________

2. EXERCISE OF OPTION. I hereby elect to exercise the Option to purchasethe following number of Shares, all of which are Vested Shares in accordancewith the Notice and the Option Agreement:

Total Shares Purchased: ____________Total Exercise Price (Total Shares X Price per Share) $___________

3. PAYMENTS. I enclose payment in full of the total exercise price for theShares in the following form(s), as authorized by my Option Agreement:

[ ] Cash: $___________[ ] Check: $___________[ ] Tender of Company Stock: Contact Plan Administrator[ ] Cashless Exercise: Contact Plan Administrator[ ] Net-Exercise: Contact Plan Administrator

1 4. TAX WITHHOLDING. I authorize payroll withholding and otherwise will makeadequate provision for the federal, state, local and foreign tax withholdingobligations of the Company, if any, in connection with the Option. If I amexercising a Nonstatutory Stock Option, I enclose payment in full of mywithholding taxes, if any, as follows: (CONTACT PLAN ADMINISTRATOR FOR AMOUNT OF TAX DUE.)

[ ] Cash: $___________[ ] Check: $___________

5. OPTIONEE INFORMATION. My address is: _______________________________________________________ _______________________________________________________ My Social Security Number is: ________________________________________ 6. NOTICE OF DISQUALIFYING DISPOSITION. If the Option is an Incentive StockOption, I agree that I will promptly notify the Chief Financial Officer of theCompany if I transfer any of the Shares within one (1) year from the date Iexercise all or part of the Option or within two (2) years of the Date of OptionGrant. 7. BINDING EFFECT. I agree that the Shares are being acquired in accordancewith and subject to the terms, provisions and conditions of the OptionAgreement, to all of which I hereby expressly assent. This Agreement shall inureto the benefit of and be binding upon my heirs, executors, administrators,successors and assigns. I understand that I am purchasing the Shares pursuant to the terms of thePlan, the Notice and my Option Agreement, copies of which I have received andcarefully read and understand. Very truly yours, —————————————- (Signature)Receipt of the above is hereby acknowledged.ImaRx Therapeutics, Inc.By: ———————————Title: ——————————Dated: —————————— 2