**Exhibit 10.4**

 

**FORM OF 2003 STOCK OPTION ANDINCENTIVE PLAN INCENTIVE STOCK OPTION AGREEMENT**

**(4 YEAR VESTING SCHEDULE)**

 

ACUSPHERE, INC.

INCENTIVE STOCK OPTION AGREEMENT

 

Acusphere,Inc. (the “Company”) hereby grants the following stock option pursuantto its 2003 Stock Option and Incentive Plan. The terms and conditions attachedhereto are also a part hereof.

 
| Name of optionee  (the “Optionee”):                                                     |   |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   |
| Date of this  option grant:                                                                       |   |
|                                                                                              |   |
| Number of shares of the Company’s Common Stock  subject to this option (“Shares”): |   |
|                                                                                              |   |
| Option exercise  price per share:                                                                 |   |
|                                                                                              |   |
| Shares that are  subject to vesting schedule:                                                     |   |
|                                                                                              |   |
| Vesting Start  Date:                                                                              |   |

 

VestingSchedule:

 
| Vesting Start  Date:                                                                                            | 0%                                           |
|-----------------------------------------------------------------------------------------------------------------|----------------------------------------------|
|                                                                                                            |                                         |
| On or after [ ]  but prior to [ ]:                                                                              | 2.083% per month                             |
|                                                                                                            |                                         |
| On or after [ ]:                                                                                                | 100% *[four years after Vesting Start Date]* |
|                                                                                                            |                                         |
| All vesting is  dependent on the continuation of a Business Relationship with the Company, as  provided herein. |
|                                                                                                            |                                         |
| Payment  alternatives:                                                                                          | Section 7(a)  (i) through (iii)         |

 

Thisoption satisfies in full all commitments that the Company has to the Optioneewith respect to the issuance of stock, stock options or other equitysecurities.

 
|                   |   | Acusphere, Inc. |
|------------------------|--------|-----------------|
|                   |   |            |   |
| Signature of  Optionee |   | By:             |   |
|                   |   |            | Name of Officer: |
| Street Address         |   |            | Title: |
|                   |   |            |   |
| City/State/Zip  Code   |   |            |   |

 

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ACUSPHERE, INC.

 

INCENTIVE STOCK OPTION AGREEMENT — INCORPORATED TERMSAND CONDITIONS

 

1.             GrantUnder Plan.  This option is grantedpursuant to and is governed by the Company’s 2003 Stock Option and IncentivePlan (the “Plan”) and, unless the context otherwise requires, terms usedherein shall have the same meaning as in the Plan.

 

2.             Grantas Incentive Stock Option.  Thisoption is intended to qualify as an incentive stock option under Section 422of the Internal Revenue Code of 1986, as amended, and the regulations thereunder(the “Code”).

 

3.             Vestingof Option.

 

(a)           Vestingif Business Relationship Continues. The Optionee may exercise this optionon or after the date of this option grant for the number of shares of CommonStock, if any, set forth on the cover page hereof. If the Optionee hascontinuously maintained a Business Relationship (as defined below) with theCompany through the dates listed on the vesting schedule set forth on thecover page hereof, the Optionee may exercise this option for the additionalnumber of shares of Common Stock set opposite the applicable vesting date. Notwithstandingthe foregoing, the Board may, in its discretion, accelerate the date that anyinstallment of this option becomes exercisable. The foregoing rights arecumulative and may be exercised only before the date which is ten years fromthe date of this option grant.

 

(b)           Definitions.The following definitions shall apply:

 

“Business Relationship” means service to theCompany or its successor in the capacity of an employee, officer, director orconsultant.

 

“Cause” means: (i) gross negligence or willfulmalfeasance in the performance of the Optionee’s work or a breach of fiduciaryduty or confidentiality obligations to the Company by the Optionee; (ii)failure to follow the proper directions of the Optionee’s direct or indirectsupervisor after written notice of such failure; (iii) the commission by theOptionee of illegal conduct relating to the Company; (iv) disregard by theOptionee of the material rules or material policies of the Company which hasnot been cured within 15 days after notice thereof from the Company; or (v)intentional acts on the part of the Optionee that have generated materialadverse publicity toward or about the Company.

 

4.             Terminationof Business Relationship.

 

(a)           Termination.  If the Optionee’s Business Relationship withthe Company ceases, voluntarily or involuntarily, with or without cause, nofurther installments of this

 

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optionshall become exercisable, and this option shall expire (may no longer beexercised) after the passage of sixty days from the date of termination, but inno event later than the scheduled expiration date. Any determination under thisagreement as to the status of a Business Relationship or other matters referredto above shall be made in good faith by the Board of Directors of the Company.

 

(b)           EmploymentStatus. For purposes hereof, with respect to employees of the Company,employment shall not be considered as having terminated during any**leave of absence if such leave of absence has been approvedin writing by the Company and if such written approval contractually obligatesthe Company to continue the employment of the Optionee after the approvedperiod of absence; in the event of such an approved leave of absence, vestingof this option shall be suspended (and the period of the leave of absence shallbe added to all vesting dates) unless otherwise provided in the Company’swritten approval of the leave of absence. For purposes hereof, a termination ofemployment followed by another Business Relationship shall be deemed atermination of the Business Relationship with all vesting to cease unless theCompany enters into a written agreement related to such other BusinessRelationship in which it is specifically stated that there is no termination ofthe Business Relationship under this agreement. This option shall not beaffected by any change of employment within or among the Company and itsSubsidiaries so long as the Optionee continuously remains an employee of theCompany or any Subsidiary.

 

(c)           Terminationfor Cause.  If the BusinessRelationship of the Optionee is terminated for Cause (as defined above), thisoption may no longer be exercised from and after the Optionee’s receipt ofwritten notice of such termination.

 

5.             Death;Disability.

 

(a)           Death.  Upon the death of the Optionee while theOptionee is maintaining a Business Relationship with the Company, this optionmay be exercised, to the extent otherwise exercisable on the date of theOptionee’s death, by the Optionee’s estate, personal representative orbeneficiary to whom this option has been transferred pursuant to Section 10,only at any time within 180 days after the date of death, but not laterthan the scheduled expiration date.

 

(b)           Disability.  If the Optionee ceases to maintain a BusinessRelationship with the Company by reason of his or her disability, this optionmay be exercised, to the extent otherwise exercisable on the date of cessationof the Business Relationship, only at any time within 180 days after suchcessation of the Business Relationship, but not later than the scheduledexpiration date. For purposes hereof, “disability” means “permanentand total disability” as defined in Section 22(e)(3) of the Code.

 

6.             PartialExercise.  This option may beexercised in part at any time and from time to time within the above limits,except that this option may not be exercised for a fraction of a share.

 

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7.             Paymentof Exercise Price.

 

(a)           PaymentOptions.  The exercise price shall bepaid by one or any combination of the following forms of payment that areapplicable to this option, as indicated on the cover page hereof:

 

(i)            by checkpayable to the order of the Company; or

 

(ii)           deliveryof an irrevocable and unconditional undertaking, satisfactory in form andsubstance to the Company, by a creditworthy broker to deliver promptly to theCompany sufficient funds to pay the exercise price, or delivery by the Optioneeto the Company of a copy of irrevocable and unconditional instructions,satisfactory in form and substance to the Company, to a creditworthy broker todeliver promptly to the Company cash or a check sufficient to pay the exerciseprice; or

 

(iii)          subjectto Section 7(b) below, if the Common Stock is then traded on a nationalsecurities exchange or on the Nasdaq National Market (or successor tradingsystem), by delivery of shares of Common Stock having a fair market value equalas of the date of exercise to the option price.

 

In the case of (iii) above, fair market value as ofthe date of exercise shall be determined as of the last business day for whichsuch prices or quotes are available prior to the date of exercise and shallmean (i) the last reported sale price (on that date) of the Common Stockon the principal national securities exchange on which the Common Stock istraded, if the Common Stock is then traded on a national securities exchange;or (ii) the last reported sale price (on that date) of the Common Stock onthe Nasdaq National Market (or successor trading system), if the Common Stockis not then traded on a national securities exchange.

 

(b)           Limitationson Payment by Delivery of Common Stock. If Section 7(a)(iii) is applicable, and if the Optionee deliversCommon Stock held by the Optionee (“Old Stock”) to the Company in fullor partial payment of the exercise price and the Old Stock so delivered issubject to restrictions or limitations imposed by agreement between theOptionee and the Company, an equivalent number of Shares shall be subject toall restrictions and limitations applicable to the Old Stock to the extent thatthe Optionee paid for the Shares by delivery of Old Stock, in addition to anyrestrictions or limitations imposed by this agreement. Notwithstanding theforegoing, the Optionee may not pay any part of the exercise price hereof bytransferring Common Stock to the Company unless such Common Stock has beenowned by the Optionee free of any substantial risk of forfeiture for at least six months.

 

8.             SecuritiesLaws Restrictions on Resale. Until registered under the Securities Act of1933, as amended, or any successor statute (the “Securities Act”), theShares will be illiquid

 

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and will be deemed to be “restrictedsecurities” for purposes of the Securities Act. Accordingly, such shares mustbe sold in compliance with the registration requirements of the Securities Actor an exemption therefrom and may need to be held indefinitely. Unless theShares have been registered under the Securities Act, each certificateevidencing any of the Shares shall bear a restrictive legend specified by theCompany.

 

9.             Methodof Exercising Option.  Subject to theterms and conditions of this agreement, this option may be exercised by writtennotice to the Company at its principal executive office, or to such transferagent as the Company shall designate. Such notice shall state the election toexercise this option and the number of Shares for which it is being exercisedand shall be signed by the person or persons so exercising this option. Suchnotice shall be accompanied by payment of the full purchase price of suchshares, and the Company shall deliver a certificate or certificatesrepresenting such shares as soon as practicable after the notice shall bereceived. Such certificate or certificates shall be registered in the name ofthe person or persons so exercising this option (or, if this option shall beexercised by the Optionee and if the Optionee shall so request in the noticeexercising this option, shall be registered in the name of the Optionee andanother person jointly, with right of survivorship). In the event this optionshall be exercised, pursuant to Section 5 hereof, by any person or personsother than the Optionee, such notice shall be accompanied by appropriate proofof the right of such person or persons to exercise this option.

 

10.           OptionNot Transferable.  This option is nottransferable or assignable except by will or by the laws of descent anddistribution. During the Optionee’s lifetime only the Optionee can exercisethis option.

 

11.           NoObligation to Exercise Option.  Thegrant and acceptance of this option imposes no obligation on the Optionee toexercise it.

 

12.           NoObligation to Continue Business Relationship.  Neither the Plan, this agreement, nor thegrant of this option imposes any obligation on the Company to continue theOptionee in employment or other Business Relationship.

 

13.           Adjustments.  Except as is expressly provided in the Planwith respect to certain changes in the capitalization of the Company, noadjustment shall be made for dividends or similar rights for which the recorddate is prior to such date of exercise.

 

14.           WithholdingTaxes.  If the Company in itsdiscretion determines that it is obligated to withhold any tax in connectionwith the exercise of this option, or in connection with the transfer of, or thelapse of restrictions on, any Common Stock or other property acquired pursuantto this option, the Optionee hereby agrees that the Company may withhold fromthe Optionee’s wages or other remuneration the appropriate amount of tax. Atthe discretion of the Company, the amount required to be withheld may bewithheld in cash from such wages or other remuneration or in kind from theCommon Stock or other property otherwise deliverable to the Optionee onexercise of this option. The Optionee further agrees that, if the Company doesnot withhold an amount from the Optionee’s wages or other remunerationsufficient to satisfy the

 

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withholding obligation ofthe Company, the Optionee will make reimbursement on demand, in cash, for theamount underwithheld.

 

15.           EarlyDisposition.  The Optionee agrees tonotify the Company in writing immediately after the Optionee transfers anyShares, if such transfer occurs on or before the later of (a) the datethat is two years after the date of this agreement or (b) the date that isone year after the date on which the Optionee acquired such Shares. TheOptionee also agrees to provide the Company with any information concerning anysuch transfer required by the Company for tax purposes.

 

16.           Lock-upAgreement. The Optionee agrees that in the event that the Company effectsan underwritten public offering of Common Stock registered under the SecuritiesAct, the Shares may not be sold, offered for sale or otherwise disposed of,directly or indirectly, without the prior written consent of the managingunderwriter(s) of the offering, for such period of time after the execution ofan underwriting agreement in connection with such offering that all of theCompany’s then directors and executive officers agree to be similarly bound. Anysuch sale or disposition shall be made in accordance with the Company’s insidertrading policy, as amended and in effect from time to time.

 

17.           Arbitration.  Any dispute, controversy, or claim arisingout of, in connection with, or relating to the performance of this agreement orits termination shall be settled by arbitration in the Commonwealth ofMassachusetts, pursuant to the rules then obtaining of the American ArbitrationAssociation. Any award shall be final, binding and conclusive upon the partiesand a judgment rendered thereon may be entered in any court having jurisdictionthereof.

 

18.           Provisionof Documentation to Optionee.  Bysigning this agreement the Optionee acknowledges receipt of a copy of thisagreement and a copy of the Plan.

 

19            Miscellaneous.

 

(a)           Notices.  All notices hereunder shall be in writing andshall be deemed given when sent by mail, if to the Optionee, to the address setforth below or at the address shown on the records of the Company, and if tothe Company, to the Company’s principal executive offices, attention of theCorporate Secretary.

 

(b)           EntireAgreement; Modification.  Thisagreement constitutes the entire agreement between the parties relative to thesubject matter hereof, and supersedes all proposals, written or oral, and allother communications between the parties relating to the subject matter of thisagreement. This agreement may be modified, amended or rescinded only by awritten agreement executed by both parties.

 

(c)           FractionalShares. If this option becomes exercisable for a fraction of a sharebecause of the adjustment provisions contained in the Plan, such fraction shallbe rounded down.

 

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(d)           Issuancesof Securities; Changes in Capital Structure. Except as expressly providedherein or in the Plan, no issuance by the Company of shares of stock of anyclass, or securities convertible into shares of stock of any class, shallaffect, and no adjustment by reason thereof shall be made with respect to, thenumber or price of shares subject to this option. No adjustments need be madefor dividends paid in cash or in property other than securities of the Company.If there shall be any change in the Common Stock of the Company through merger,consolidation, reorganization, recapitalization, stock dividend, stock split,combination or exchange of shares, spin-off, split-up or other similar changein capitalization or event, the restrictions contained in this agreement shallapply with equal force to additional and/or substitute securities, if any,received by the Optionee in exchange for, or by virtue of his or her ownershipof, Shares, except as otherwise determined by the Board.

 

(e)           Severability.  The invalidity, illegality orunenforceability of any provision of this agreement shall in no way affect thevalidity, legality or enforceability of any other provision.

 

(f)            Successorsand Assigns.  This agreement shall bebinding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns, subject to the limitations set forth in Section 10hereof.

 

(g)           GoverningLaw.  This agreement shall begoverned by and interpreted in accordance with the laws of the State ofDelaware without giving effect to the principles of the conflicts of lawsthereof.

 

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