Document:

Prepared by R.R. Donnelley Financial -- SONOSITE 1998 AMENDED STOCK OPTION PLAN

  
 EXHIBIT 10.1 
  
 SONOSITE, INC. 
  
 1998 Nonofficer Employee
Stock Option Plan 
 (as amended and restated on July 25, 2002) 
  
 1.    Purpose 
  
 The purpose of the Plan is to enhance the
long-term shareholder value of the Corporation by offering opportunities to selected employees to participate in the Corporation’s growth and success, and to encourage them to remain in the service of the Corporation and its subsidiaries and to
acquire and maintain stock ownership in the Corporation. 
  
 2.    Definitions 
  
 The following terms have the corresponding meanings for purposes of the Plan: 
  
 “Change in Control” means 
  
 (a)  a “Board Change.” For purposes of the Plan, a Board Change shall have occurred if a majority of the seats (other than vacant seats) on the Corporation’s Board of Directors (the “Board”) were to
be occupied by individuals who were neither (i) nominated by a majority of the Incumbent Directors nor (ii) appointed by directors so nominated. An “Incumbent Director” is a member of the Board who has been either (i) nominated by a
majority of the directors of the Corporation then in office or (ii) appointed by directors so nominated, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person (as defined in Section 2(b)) other than the Board; or 
  
 (b)  The acquisition by any
individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a “Person”) of “Beneficial Ownership” (within the meaning of Rule 13d3 promulgated under the Exchange Act) of (i) 20% or more
of either (A) the then outstanding shares of common stock (the “Outstanding Corporation Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election
of directors (the “Outstanding Corporation Voting Securities”), in the case of either (A) or (B) of this clause (i), which acquisition is not approved in advance by a majority of the Incumbent Directors or (ii) 33% or more of either (A)
the Outstanding Corporation Common Stock or (B) the Outstanding Corporation Voting Securities, in the case of either (A) or (B) of this clause (ii), which acquisition is approved in advance by a majority of the Incumbent Directors; provided,
however, that the following acquisitions shall not constitute a Change in Control: (x) any acquisition by the Corporation, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation, or (z) any acquisition by any corporation pursuant to
 

 
a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of the following subsection (c) are
satisfied; or 
  
 (c)  Approval by the shareholders of the Corporation of a reorganization, merger or
consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding the
Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election
of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were Incumbent Directors at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or 
  
 (d)  Approval by the shareholders of the
Corporation of (i) a complete liquidation or dissolution of the Corporation or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with respect to which following such sale or
other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of,
respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation 
 

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entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were approved by a majority of the Incumbent
Directors at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Corporation. 
  
 “Committee” means the Committee provided for in Section 5, which shall administer the Plan. 
  
 “Common Stock” means common stock, par value $0.01 per share, of the Corporation. 
  
 “Corporation” means SonoSite, Inc., a Washington corporation. 
  
 “Designated Beneficiary” means any person designated in writing by a Participant as a legal recipient of payments due under an award in the event of the Participant’s death, or in the absence of such designation, the
Participant’s estate. Such designation must be on file with the Corporation in order to be effective but, unless the Participant has made an irrevocable designation, may be changed from time to time by the Participant. 
  
 “Disability,” unless otherwise defined by the Committee, means a mental or physical impairment of the Participant that is
expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable, in the opinion of the Corporation, to perform his or her duties for the Corporation or
its subsidiaries and to be engaged in any substantial gainful activity. 
  
 “Early Retirement” means early
retirement as that term is defined by the Plan Administrator from time to time for purposes of the Plan. 
  
 “Fair Market Value” of the Common Stock as of any trading day means the average (rounded to the next highest cent in the case of fractions of a cent) of the high and low sales prices of the Common Stock as reported on such
trading day by the Nasdaq National Market. If no sales price is reported for the Common Stock on such trading day, then “Fair Market Value” shall mean the highest bid price reported for the Common Stock on such trading day by the National
Quotation Bureau Incorporated or any similar nationally recognized organization. If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be
determinative of Fair Market Value. The Committee, in its sole discretion, shall make all determinations required by this definition. 
  
 “Participant” means a person who has received an award under the Plan. 
  
 “Plan” means this SonoSite, Inc. 1998 Nonofficer Employee Stock Option Plan. 
  
 “Retirement” means retirement as of the Participant’s normal retirement date under the Corporation’s 401(k) Plan or other similar successor plan applicable to salaried employees, unless otherwise defined by the
Committee from time to time for purposes of the Plan. 
 

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 “Withholding Tax” means any tax, including any federal, state or local income tax, required by any governmental
entity to be withheld or otherwise deducted and paid with respect to the transfer of shares of Common Stock as a result of the exercise of an option. 
  
 3.    Stock Subject to the Plan 
  
 There are reserved for issuance upon
the exercise of options under the Plan 1,750,000 shares of Common Stock. Such shares may be authorized and unissued shares of Common Stock or shares now held or subsequently acquired by the Corporation. If any option granted under the Plan shall
expire or terminate for any reason (including, without limitation, by reason of its surrender, pursuant to the provisions of the third paragraph of Section 7(b) or otherwise, or cancellation, in whole or in part, pursuant to the provisions of
Section 7(c) or otherwise, or the substitution in place thereof of a new option) without having been exercised in full, the shares subject thereto shall again be available for the purposes of issuance under the Plan. 
  
 4.    Administration 
  
 The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to determine the individuals to whom, and the time or times at
which, options shall be granted and the number of shares to be covered by each such grant. In making such determinations, the Committee may take into account the nature of the services rendered by the respective Participants, their present and
potential contributions to the Corporation’s success and such other factors as the Committee in its discretion may deem relevant. Subject to the express provisions of the Plan, the Committee shall have plenary authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of option agreements (which need not be identical) and to make all other determinations necessary or advisable for the administration of the
Plan. The Committee’s determinations of the matters referred to in this Section 4 shall be conclusive. 
  
 To
the extent consistent with applicable law, the Board may authorize a senior executive officer of the Corporation to grant options under the Plan, within the limits specifically prescribed by the Board. 
  
 5.    The Committee 
  
 The Board shall designate a Committee of members of the Board. Currently, the Committee shall consist solely of two or more members of the Board. The Committee shall be appointed by the Board, which may from time to time
appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and
places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all the
members shall be fully as effective as if it had been made by a majority vote at a meeting duly
 
 

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called and held. The Committee may appoint a secretary, shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

  
 6.    Eligibility 
  
 The Committee may grant options only to employees of the Corporation and of its present and future subsidiary corporations (“subsidiaries”) who are not “executive officers,” within
the meaning prescribed by Rule 16a-1(f) promulgated under the Exchange Act, or directors of the Corporation. Any person eligible under the Plan may receive one or more grants of options as the Committee shall from time to time determine, and such
determinations may be different as to different Participants and may vary as to different grants. 
  
 7.    Option
Grants 
  
 (a)  The Committee is authorized under the Plan, in its discretion, to issue options as
“nonqualified stock options” that are not intended to qualify as “incentive stock options” under Section 422 of the United States Internal Revenue Code of 1986, as amended (the “Code”) and the options shall be
designated as nonqualified stock options in the applicable option agreement. Unless approved by the holders of a majority of the shares of the Corporation present in person or by proxy and entitled to vote thereon at a duly convened meeting of
shareholders, the Committee shall not (a) grant any options under the terms of the Plan with a purchase price that is less than 100% of the Fair Market Value of the Common Stock on the date of grant or (b) reduce the purchase price of any option
outstanding or to be granted in the future under the terms of the Plan; any amendment or repeal of the provisions of this sentence requires the affirmative vote of the holders of a majority of shares of the Corporation present at a duly convened
shareholders’ meeting in person or by proxy and entitled to vote thereon. Notwithstanding the previous sentence, any option may provide that the purchase price be equal to the average Fair Market Value of the Common Stock over any continuous
period of trading days beginning and ending no more than 30 business days before or after the date such option is granted. 
  
 (b)  The Committee shall be authorized in its discretion to prescribe in the option grant the installments, if any, in which an option granted under the Plan shall become exercisable, provided that no option shall be
exercisable prior to the six months prior to the date of grant thereof except as provided in Sections 7(c), (d), (g), (h) and (i) or except as the Committee otherwise determines, and provided further that options granted to employees of the
Corporation’s subsidiary in Spain, SonoSite Iberica, S.L., who are residents of Spain shall be subject to the vesting schedule set forth in Addendum 1 attached hereto. In no case may an option be exercised as to less than 50 shares at any one
time (or the remaining shares covered by the option if less than 50) during the term of the option. The Committee shall also be authorized to establish the manner of the exercise of an option. The term of each option shall be not more than 10 years
from the date of grant thereof. 
  
 In general, upon exercise, the option price is to be paid in full in cash;
however, the Committee can determine at any time prior to exercise of an option, that additional forms of payment will be permitted. To the extent permitted by the Committee and applicable laws and regulations (including, but not limited to, federal
tax and securities laws and regulations and state 
 

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corporate law), an option may be exercised (i) in Common Stock owned by the option holder having a Fair Market Value on the date of exercise equal to the aggregate option price, or in a
combination of cash and stock; provided, however, that payment in stock shall not be made unless such stock shall have been owned by the option holder for a period of at least six months prior thereto (or any shorter period necessary to avoid
a charge to the Corporation’s earnings for financial reporting purposes); or (ii) by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker designated by the Corporation, all in accordance with the
regulations of the Federal Reserve Board, to deliver promptly to the Corporation the amount of sale or loan proceeds to pay the exercise price and any federal, state or local withholding tax obligations that may arise in connection with the
exercise. 
  
 In lieu of requiring an option holder to pay cash or stock and to receive in turn certificates for
shares of Common Stock upon the exercise of an option, if the option so provides, the Committee may elect to require the option holder to surrender the option to the Corporation for cancellation as to all or any portion of the number of shares
covered by the intended exercise and receive in exchange for such surrender a payment, at the election of the Committee, in cash, in shares of Common Stock or in a combination of cash and shares of Common Stock, equivalent to the appreciated value
of the shares covered by the option surrendered for cancellation. Such appreciated value shall be the difference between the option price of such shares (as adjusted pursuant to Section 10) and the Fair Market Value of such shares, which shall for
this purpose be determined by the Committee taking into consideration all relevant factors, but which shall not be less than the Fair Market Value of such shares on the date on which the option holder’s notice of exercise is received by the
Corporation. Upon delivery to the Corporation of a notice of exercise of option, the Committee may avail itself of its right to require the option holder to surrender the option to the Corporation for cancellation as to shares covered by such
intended exercise. The Committee’s right of election shall expire, if not exercised, at the close of business on the fifth business day following the delivery to the Corporation of such notice. Should the Committee not exercise such right of
election, the delivery of the aforesaid notice of exercise shall constitute an exercise by the option holder of the option to the extent therein set forth, and payment for the shares covered by such exercise shall become due immediately.

  
 (c)  In the event that a Participant’s services for the Corporation or one of its subsidiaries
shall cease and the termination of such individual’s service is for cause, the option shall automatically terminate upon first notification to the option holder of such termination of services, unless the Committee determines otherwise, and
such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. For purposes of this Section 7(c), “cause” is defined as a determination by the Committee
that the option holder (i) has committed a felony, (ii) has engaged in an act or acts of deliberate and intentional dishonesty resulting or intended to result directly or indirectly in improper material gain to or personal enrichment of the
individual at the Corporation’s expense, or (iii) has willfully disobeyed the Corporation’s appropriate rules, instructions or orders, and such willful disobeyance has continued for a period of 10 days following notice thereof from the
Corporation. 
 

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 In the event of the termination of the services of the holder of an option
because of Retirement, Early Retirement at the Corporation’s request or Disability, he may (unless such option shall have been previously terminated pursuant to the provisions of the preceding paragraph or unless otherwise provided in his
option grant) exercise such option at any time prior to the expiration of the option, (i) in the event of Disability or Retirement, to the extent of the number of shares covered by such option, whether or not such shares had become purchasable by
him at the date of the termination of his services and (ii) in the event of Early Retirement at the Corporation’s request, to the extent of the number of shares covered by such option at such time or times as such option becomes purchasable by
him in accordance with its terms. 
  
 In the event of the death of an individual to whom an option has been granted
under the Plan, while he is performing services for the Corporation or a subsidiary, the option theretofore granted to him (unless his option shall have been previously terminated pursuant to the provisions of this Section 7(c) or unless otherwise
provided in his option grant) may, subject to the limitations described in Section 7(f), be exercised by his Designated Beneficiary, by his legatee or legatees of the option under his last will, or by his personal representatives or distributees, at
any time within a period of one year after his death, but not after the expiration of the option, to the extent of the remaining shares covered by his option whether or not such shares had become purchasable by such an individual at the date of his
death. In the event of the death of an individual (i) during the 30-day period, or the 90-day period, as applicable, following termination of his services or (ii) following termination of his services by reason of Retirement, Early Retirement at the
Corporation’s request or Disability, then the option (if not previously terminated pursuant to the provisions of this Section 7(c)) may be exercised during the one-year period following termination of his services or during the remaining term
of the option, respectively, but not after the expiration of the option, by his Designated Beneficiary, by his legatee under his last will, or by his personal representative or distributee, but only to the extent of the number of shares purchasable
by such Participant pursuant to the provisions of Section 7(d) at the date of termination of his services. 
  
 In the
event of the termination of the services of the holder of an option, other than by reason of Retirement, Early Retirement at the Corporation’s request, Disability or death, he may (unless his option shall have been previously terminated
pursuant to the provisions of this Section 7(c) or unless otherwise provided in his option grant) exercise his option at any time within 30 days after such termination, if such option was granted prior to February 8, 2001, or within 90 days after
such termination, if such option was granted on or after February 8, 2001, or such longer period as determined by the Committee, but not after the expiration of the option, to the extent of the number of shares covered by his option which were
purchasable by him at the date of the termination of his services, and such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. 
  
 (d)  Notwithstanding the foregoing provisions, the Committee may determine, in its sole discretion, in the case of any
termination of services, that the holder of an option may exercise such option to the extent of some or all of the remaining shares covered thereby whether or not such shares had become purchasable by such an individual at the date of the

 

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termination of his services and may exercise such option at any time prior to the expiration of the original term of the option. Options granted under the Plan shall not be affected by any change
of relationship with the Corporation so long as the holder continues to be an employee, consultant or independent contractor of the Corporation or of a subsidiary. The Committee, in its absolute discretion, may determine all questions of whether
particular leaves of absence constitute a termination of services. Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any individual any right to continue in the employ or other service of the Corporation or any other
person or interfere in any way with the right of the Corporation or any other person to terminate his employment or other services at any time. 
  
 (e)  The date of grant of an option pursuant to the Plan shall be the date specified by the Committee at the time it grants such option, provided that such date shall not be prior to the date
of such action by the Committee and that the price shall be determined in accordance with Section 7(a) on such date. The Committee shall promptly notify a grantee of an award and a written option grant shall promptly be duly executed and delivered
by or on behalf of the Corporation. 
  
 (f)  Notwithstanding any contrary waiting period, installment
period or other limitation or restriction in any option agreement or in the Plan, in the event of a Change in Control, each option outstanding under the Plan shall thereupon become exercisable at any time during the remaining term of the option, but
not after the term of the option, to the extent of the number of shares covered by the option, whether or not such shares had become purchasable by the Participant thereunder immediately prior to such Change in Control, by the holder of the option.

  
 (g)  Anything in the Plan to the contrary notwithstanding, during the 90-day period from and after a
Change in Control (x) an optionee (other than an optionee who initiated a Change in Control in a capacity other than as an officer or a director of the Corporation) who is an executive officer or a director of the Corporation (within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) with respect to an option that was granted at least six months prior to the date of exercise pursuant to this sentence and is unaccompanied by a stock appreciation
right and (y) any other optionee who is not an executive officer or a director with respect to an option that is unaccompanied by a stock appreciation right shall, unless the Committee shall determine otherwise at the time of grant, have the right,
in lieu of the payment of the full purchase price of the shares of Common Stock being purchased under the option and by giving written notice to the Corporation, to elect (within such 90-day period) to surrender all or part of the option to the
Corporation and to receive in cash an amount equal to the amount by which the amount determined pursuant to Section 7(h) hereof on the date of exercise (determined as if the optionee had exercised a limited stock appreciation right on such date)
shall exceed the purchase price per share under the option multiplied by the number of shares of Common Stock granted under the stock option as to which the right granted by this sentence shall have been exercised. Such written notice shall specify
the optionee’s election to purchase shares granted under the option or to receive the cash payment referred to in the immediately preceding sentence. 
 

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 (h)  For the purpose of determining the amount payable under Section
7(g) hereof, the fair market value of the Common Stock will be equal to the higher of (a) the highest Fair Market Value of the Common Stock during the 90-day period ending on the date the limited stock appreciation right is exercised and (b)
whichever of the following is applicable: 
  
 (1)  the highest per share price paid in any
tender or exchange offer which is in effect at any time during the 90 calendar days preceding the exercise of the limited right; 
  
 (2)  the fixed or formula price for the acquisition of shares of Common Stock in a merger or similar agreement approved by the Corporation’s shareholders or Board, if such price is
determinable on the date of exercise; and 
  
 (3)  the highest price per share paid to any
shareholder of the Corporation in a transaction or group of transactions giving rise to the exercisability of the limited right. 
  
 (i)  Notwithstanding the foregoing provisions, the optionee’s employment or other contract with the Corporation may provide that upon termination of his employment or other services for other than cause or for
“good reason” (as defined in his contract), all stock options shall become immediately exercisable. 
  
 8.    Withholding Taxes 
  
 In connection with the transfer of shares of
Common Stock as a result of the exercise of an option, the Corporation (a) shall not issue a certificate for such shares until it has received payment from the Participant of any Withholding Tax in cash or by the retention or acceptance upon
delivery thereof by the Participant of shares of Common Stock sufficient in Fair Market Value to cover the amount of such Withholding Tax and (b) shall have the right to retain or sell without notice, or to demand surrender of, shares of Common
Stock in value sufficient to cover any Withholding Tax. The Corporation shall have the right to withhold from any cash amounts due from the Corporation to the award recipient pursuant to the Plan an amount equal to the Withholding Tax. In either
case, the Corporation shall make payment (or reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the Participant. For purposes of this
Section 8, the value of shares of Common Stock so retained or surrendered shall be equal to the Fair Market Value of such shares on the date that the amount of the Withholding Tax is to be determined (the “Tax Date”), and the value of
shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the Corporation. 
  
 Notwithstanding the foregoing, the Participant may elect, subject to approval by the Committee, to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Corporation with funds sufficient to
enable the Corporation to pay such Withholding Tax or by having the Corporation retain or accept upon delivery thereof by the Participant shares of Common Stock sufficient in Fair Market Value to cover the amount of
 
 

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such Withholding Tax. Each election by a Participant to have shares retained or to deliver shares for this purpose must be in writing and made on or prior to the Tax Date. 

 
 9.    Transferability and Ownership Rights of Options 
  
 No option granted under the Plan shall be transferable otherwise than pursuant to the designation of a Designated Beneficiary or by will, descent or distribution, and an
option may be exercised, during the lifetime of the holder thereof, only by him. The holder of an option shall have none of the rights of a shareholder until the shares subject thereto shall have been registered in the name of such holder on the
transfer books of the Corporation. 
  
 10.    Adjustments Upon Changes in Capitalization 
  
 Except as otherwise provided in Section 7(f), in the event of any changes in the outstanding stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution to shareholders other than cash
dividends, the Committee shall make such adjustments, if any, in light of the change or distribution as the Committee in its sole discretion shall determine to be appropriate, in the number and class of shares or rights subject to options and the
exercise prices of the options. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan and the maximum number of shares as to which options may be granted
shall be appropriately adjusted by the Committee. 
  
 11.    Amendment and Termination 
  
 Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no grants of options
shall be made after, December 11, 2008; provided, however, that such termination shall have no effect on grants of options made prior thereto. The Board of Directors of the Corporation may terminate the Plan, or modify or amend the Plan in
such respects as it shall deem advisable in order to conform to any change in any law or regulation applicable thereto, or in other respects; provided, however, that as specified in Section 7(a) of the Plan, any amendment or repeal of the applicable
provisions of such Section requires the affirmative vote of the holders of a majority of shares of the Corporation present at a duly convened shareholders’ meeting in person or by proxy and entitled to vote thereon. The amendment or termination
of the Plan shall not, without the consent of the recipient of any award under the Plan, alter or impair any rights or obligations under any award theretofore granted under the Plan. 
  
 12.    Effectiveness of the Plan 
  
 The
Plan shall become effective on December 11, 1998. The Committee may in its discretion authorize the granting of options, the issuance or exercise of which shall be expressly subject to the condition that a registration statement under the Securities
Act of 1933, as amended, with respect to such shares shall have become effective. 
 

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 Adopted by the Board on December 11, 1998. Plan amended and restated by the Board on May 6, 1999, July 27, 2000,
February 8, 2001, April 24, 2001, September 6, 2001, February 13, 2002, and on July 25, 2002. 
 

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 ADDENDUM TO THE SONOSITE, INC. 
 1998 Nonofficer Employee Stock Option Plan 
  
 FOR RESIDENTS OF SPAIN 
  
 This Addendum to the SonoSite, Inc. 1998 Nonofficer Employee Stock Option Plan (the “Addendum”) shall have application only to
Participants who are employees of SonoSite Iberica, S.L. and residents of Spain. Capitalized terms contained herein shall have the meanings given to them in the Plan, unless otherwise provided in this Addendum. Notwithstanding any provision to the
contrary in the Plan and to the extent required by applicable law, the following terms and conditions shall apply to all awards granted to residents of Spain, who are employees of SonoSite Iberica, S.L., until such time as the Board determines
otherwise. 
  
 Exercise of Options: Vesting 
  

	 	(a)
	 
	Except as otherwise determined by the Committee, options will vest and become exercisable in connection with the following schedule: 

  
 
	 Date on and After Which Option Is
Exercisable
 
	  	 Portion of Total Option Which Is Exercisable
 

	 Two years and one day after the Grant
 	  	 50%
 
	  	  	 

	 Each One-Year Anniversary of Date of Grant thereafter
 	  	 An additional 25%
 
	  	  	 

 
  

	 	(b)
	 
	Notwithstanding the preceding sentence, an option shall become one hundred percent (100%) vested upon termination of services due to Disability or Retirement.
If a Participant terminates services due to Early Retirement at the Company’s request, the Participant may exercise, at any time before the Expiration Date, the portion of his option that was vested on the date of termination. If the
Participant dies within 90 days after terminating services with the Company or after terminating services due to Retirement, Early Retirement at the Company’s request or Disability, the option may be exercised in accordance with the terms and
provisions contained in the Plan. 
 

 

 12SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

                              --------------------

     SECOND  AMENDED AND  RESTATED  EMPLOYMENT  AGREEMENT,  dated as of June 25,
2002,  between  Wellsford Real  Properties,  Inc., a Maryland  corporation  with
offices at 535 Madison  Avenue,  New York, New York 10022 (the  "Company"),  and
David M. Strong, an individual residing at 700 Franklin Street, Denver, Colorado
80128 ("Executive").

     WHEREAS, the Company and the Executive are party to an Amended and Restated
Employment  Agreement,  dated as of January 1, 2000 (the  "Amended  and Restated
Agreement");

     WHEREAS,  the  Company  and the  Executive  desire to amend and restate the
Amended and Restated Agreement (the "Second Amended and Restated Agreement");

     NOW, THEREFORE for good and valuable  consideration received by the parties
hereto.

     IT IS AGREED:

     1. Duties. (a) During the term of the Executive's  employment hereunder the
Executive  shall  serve and the  Company  shall  employ  the  Executive  as Vice
President for Development to perform such executive or  administrative  services
for the Company  consistent with those of a Vice President as may be assigned to
the  Executive  by the  directors,  Chairman  of the Board or  President  of the
Company. The Executive hereby accepts such employment and agrees to perform such
services.

     (b) The Executive shall devote substantially all of his time, attention and
energies during business hours to the performance of his duties  hereunder.  The
Executive  shall give  advance  written  notice to the Chairman of the Board and
President of any intended active involvement in any other business enterprise.

     (c) The Executive shall cooperate with the Company,  including  taking such
medical  examinations as the Company  reasonably  shall deem  necessary,  if the
Company  shall  desire to obtain  medical,  disability  or life  insurance  with
respect to the Executive.

     (d) Except as hereinafter set forth, the Executive shall not be required to
relocate or conduct the Company's business outside the Denver,  Colorado area in
order to perform his duties under this Second Amended and Restated Agreement but
shall undertake such  reasonable  business travel as may be necessary to perform
said duties (for which the Executive  shall be reimbursed  pursuant to Section 4
below for costs and expenses  incurred in connection  therewith).  If, after the
disposition by the Company of its entire  interest in the Palomino  Project,  as
defined in Section 3(f),  the Company  notifies the Executive in writing that it
desires  Executive  to relocate,  Executive  will have 90 days from such written
notification  by the Company to Executive to relocate within which to notify the
Company  as to  whether  he agrees  to  relocate.  If  Executive  elects  not to
relocate, Executive's employment by the Company will be deemed terminated on the
90th day after  such  written  notice is given by the  Company.  The  failure of
Executive  to  respond  in  writing  to the  Company's  notification  for him to
relocate within the aforesaid 90-day period shall be deemed to be an election by
him not to  relocate  in which  case his  employment  shall  be  deemed  to have
terminated  automatically upon expiration of the aforesaid 90 day period. In the
event that Executive's  employment is terminated  pursuant to this Section 1(d),
the Executive will then have 180 days from such termination date within which to
exercise all non-incentive  options vested prior to any termination  pursuant to
this Section  1(d) and  Executive's  "rollover  options"  existing  prior to any
termination  pursuant to this Section 1(d) shall be  exercisable  in  accordance
with their terms.

<PAGE>

     2. Employment Term. The term of employment shall continue in effect through
December  31,  2004;  provided,  however,  that,  on January 1, 2005 and on each
January 1  thereafter,  the term of this Second  Amended and Restated  Agreement
shall  automatically  be extended for one additional  year beyond such January 1
unless,  not later  than the  immediately  preceding  September  30,  either the
Executive or the Company shall have given notice to the other not to extend this
Second Amended and Restated Agreement.

     3.  Compensation.  For all services  rendered by the Executive  pursuant to
this Second Amended and Restated Agreement:

     (a) The  Company  shall pay to the  Executive  an annual base salary at the
following rates:

     (i) for the  period  from  January  1,  2002  through  December  31,  2002-
$185,658; and

     (ii) for each  additional year  thereafter,  the annual base salary for the
immediately preceding year plus three percent (3%) of such annual base salary.

All  such  compensation  shall  be  paid  bi-weekly  or at  such  other  regular
intervals,  not less frequently than monthly,  as the Company may establish from
time to time for executive officers of the Company.

     (b) In addition to the compensation set forth in Section 3(a) above, during
the term of this Second  Amended and Restated  Agreement,  the  Executive may be
entitled  to a cash  bonus  after the end of each  calendar  year based upon the
Executive's and the Company's  performance  during such calendar year, as may be
determined by the Company's Compensation  Committee.  The Company shall announce
to the Executive  the amount of his bonus for each year during  December of such
year (or during the month in which this Second  Amended and  Restated  Agreement
shall expire, if applicable) and pay such bonus during the following January (or
during the month  following  expiration  of this  Second  Amended  and  Restated
Agreement,  as the case may be), unless otherwise agreed to by the Executive and
the Company.

<PAGE>

     (c) (i) In  addition  to the base  salary  set forth in 3(a)  above and any
bonus to which he may be entitled  pursuant to Section 3(b) above, the Executive
shall  also be  entitled  to receive a one-time  bonus  (the  "Special  Bonus"),
subject to the  provisions  of this  Section  3(c) and (d),  in the event of and
subject to the disposition by the Company of at least 90% of its entire interest
in the Palomino  Project.  Such disposition  shall be deemed to have occurred at
such time as the Company and any of its  Affiliates,  as defined in Section 3(f)
hereof,  collectively,  have  an  ownership  interest  of less  than  10% in the
Palomino  Project either by the ownership of assets or an equity interest in any
entity now existing or hereinafter organized, which has an ownership interest in
the Palomino Project.  Executive  acknowledges that the Company has not made any
representation  or warranty to him regarding the possibility or timing of a sale
of the Palomino Project. The Special Bonus will be determined for the first time
immediately  after the  disposition  of the  interest  in the  Palomino  Project
resulting  in the  Company  disposing  of at least  90% of its  interest  in the
Palomino Project and calculated as the sum of the following:

     (A)  $250,000 if the Company has  received the return of 100% of all monies
it has  invested or  expended in  connection  with the  Palomino  Project and an
Internal  Rate of Return (as  defined in Section  3(f)) of at least 10% and less
than 11%;

     (B) An additional $50,000 if the Company has received the return of 100% of
all monies it has invested or expended in connection  with the Palomino  Project
and an Internal Rate of Return of at least 11%;

     (C) An additional $50,000 if the Company has received the return of 100% of
all monies it has invested or expended in connection  with the Palomino  Project
and an Internal Rate of Return of at least 12%;

     (D) An additional $50,000 if the Company has received the return of 100% of
all monies it has invested or expended in connection  with the Palomino  Project
and an Internal Rate of Return of at least 13%;

     (E) An additional $50,000 if the Company has received the return of 100% of
all monies it has invested or expended in connection  with the Palomino  Project
and an Internal Rate of Return of at least 14%; and

     (F) An additional $50,000 if the Company has received the return of 100% of
all monies it has  invested  in or  expended  in  connection  with the  Palomino
Project and a 15% Internal Rate of Return.

     An additional amount, not to exceed $500,000 if the Internal Rate of Return
is greater  than 15%,  which  shall be equal to the  product of  $500,000  and a
fraction,  the  numerator of which is the amount by which the  Internal  Rate of
Return exceeds 15% and the denominator of which is 15%.

     Any Special  Bonus  vested and earned will be paid within 60 days after the
Company has disposed of 90% of its entire interest in the Palomino Project;

<PAGE>

(ii) If after  disposition by the Company of 90% of its interest in the Palomino
     Project, Executive has not received a Special Bonus of $1,000,000, then the
     Internal Rate of Return,  as defined in Section 3(f), shall be recalculated
     immediately  after such time as the Company has disposed of at least 95% of
     its entire  interest in the Palomino  Project.  After the Internal  Rate of
     Return,  as defined in Section  3(f),  is  recalculated,  the Special Bonus
     shall be recalculated  and there shall be paid to Executive an amount equal
     to the amount by which the  recalculated  Special Bonus exceeds any Special
     Bonus previously paid to Executive. Any additional Special Bonus vested and
     earned by  Executive  at such time  will be paid  within 60 days  after the
     Company has disposed of 95% of its entire interest in the Palomino Project;

(iii)If after  disposition  by the Company of 95% of its entire  interest in the
     Palomino Project  Executive has not received a Special Bonus of $1,000,000,
     then the  Internal  Rate of Return,  as defined in Section  3(f),  shall be
     recalculated immediately after such time as the Company has disposed of its
     entire interest in the Palomino Project. After the Internal Rate of Return,
     as defined in Section  3(f),  is  recalculated,  the Special Bonus shall be
     recalculated  and there shall be paid to  Executive  an amount equal to the
     amount by which the  recalculated  Special  Bonus exceeds any Special Bonus
     previously  paid to  Executive.  Any  additional  Special  Bonus vested and
     earned by  Executive  at such time  will be paid  within 60 days  after the
     Company has disposed of its entire interest in the Palomino Project.

     (d) Executive's  right to receive the Special Bonus will vest on the sooner
of the  disposition by the Company of 90% of its entire interest in the Palomino
Project and January 1, 2005.  In the event of the death of Executive  during the
term of this  Second  Amended  and  Restated  Agreement  or if the  Company  has
determined  that  the  Executive  is  disabled   pursuant  to  Section  6(b)  (a
"Termination  Event") at the time of such death or  determination of disability,
as the case may be, 20% of the Special Bonus shall be deemed to have vested with
respect to each full calendar year of the term hereof  expiring  after  December
31,  1999 and prior to such  Termination  Event up to a  maximum  of 60% of such
Special Bonus.

     (e) If a Change of Control of the Company,  as defined in  paragraph  6(f),
occurs prior to the  expiration of the term of this Second  Amended and Restated
Agreement and prior to the  disposition by the Company of its entire interest in
the  Palomino  Project,  the  entire  Special  Bonus  will  vest if  Executive's
employment  is  terminated  by the  Company  other  than for  Cause and prior to
January 1, 2005.  Notwithstanding  any vesting of the Special Bonus  pursuant to
Sections  3(c) and (d),  payment of such  Special  Bonus shall be subject to the
Company's  disposition  of 90% and 95% of its entire  interest  in the  Palomino
Project as provided for in Sections  3(c)(i) and 3(c)(ii) and such Special Bonus
will not be paid until 60 days after each said disposition.

<PAGE>

     (f) For  purposes  of this  Second  Amended  and  Restated  Agreement,  the
following terms shall have the meanings set forth in this Section 3(f):

(i)  An "Affiliate" of, or a person  "Affiliated" with, a specified person, is a
     person that  directly,  or indirectly  through one or more  intermediaries,
     controls,  or is controlled by, or is under common control with, the person
     specified.  Notwithstanding  the foregoing,  the term  Affiliate  shall not
     include Equity Residential Properties Trust and its Affiliates.

(ii) The term "control" (including the terms "controlling,"  "controlled by" and
     "under common control with") means the possession,  direct or indirect,  of
     the power to direct or cause the direction of the  management  and policies
     of a  person,  whether  through  the  ownership  of voting  securities,  by
     contract, or otherwise.

(iii)"Internal  Rate of Return"  shall mean,  that the  Company has  achieved an
     internal rate of return of a specified  percentage per annum for the period
     commencing on May 30, 1997 and ending on the date the  calculation is made,
     which  shall  occur  when an  amount  equal to the  total  amount of monies
     directly  or  indirectly  expended or invested by the Company or any of its
     Affiliates,  including, without limitation,  monies expended or invested by
     the Company or its predecessor-in-interest or any of their Affiliates (e.g.
     Wellsford  Residential  Property  Trust  and  its  Affiliates   ("Wellsford
     Residential"))  (other  than any  portion  thereof  provided  by any  other
     partner, shareholder,  member or venturer), as the case may be, (who is not
     otherwise  Affiliated  with the Company) of any entity  Affiliated with the
     Company) from time to time with respect to the Palomino Project  (including
     any Special Bonus  payable  pursuant to Section 3 hereof as a result of the
     calculation  of the  Internal  Rate of Return at such time) are returned to
     the Company and its Affiliates  (other than any portion thereof returned to
     any other  partner,  shareholder,  member or venturer,  as the case may be,
     (who is not otherwise Affiliated with the Company) of any entity Affiliated
     with the  Company)  as a result of the  disposition  by the  Company of any
     portion of its interest in the  Palomino  Project  together  with an annual
     return equal to such specified percentage calculated commencing on the date
     each of such  expenditures are or were made,  compounded  annually,  taking
     into account the timing and amounts of all  expenditures by the Company and
     its  Affiliates  (other  than any  portion  thereof  provided  by any other
     partner,  shareholder,  member or venturer, as the case may be, (who is not
     otherwise  Affiliated  with the Company) of any entity  Affiliated with the
     Company) and all previous cash receipts  (regardless of how these expenses,
     investments and receipts are  characterized  by the Company) of the Company
     and its Affiliates  (other than any portion  thereof  returned to any other
     partner,  shareholder,  member or venturer, as the case may be, (who is not
     otherwise  Affiliated  with the Company) of any entity  Affiliated with the
     Company)  as a result of the  operation  and  disposition  of the  Palomino
     Project.  For  purposes of  computing  such  Internal  Rate of Return,  any
     expenditures made by the Company and its Affiliates (other than any portion
     thereof provided by any other partner, shareholder,  member or venturer, as
     the case may be, (who is not otherwise  Affiliated with the Company) of any
     entity  Affiliated  with the Company) and any funds received by the Company
     and its Affiliates  (other than any portion  thereof  returned to any other
     partner,  shareholder,  member or venturer, as the case may be, (who is not
     otherwise  Affiliated  with the Company) of any entity  Affiliated with the
     Company)  at any time during a month shall be deemed to be made or received
     on the first day of such month and there shall be included in  expenditures
     by the Company or an Affiliate  (other than any portion thereof provided by
     any other  partner,  shareholder,  member or venturer,  as the case may be,
     (who is not otherwise Affiliated with the Company) of any entity Affiliated
     with the Company)  with  respect to the Palomino  Project any portion of an
     expenditure  made for any  purpose  attributable  to the  Palomino  Project
     except that the only portion of the general and administrative  expenses of
     the Company  that shall be included in  calculating  expenditures  shall be
     that portion  related to the staff,  rent,  supplies and other costs of the
     Denver,  Colorado  office of the Company as  reasonably  determined  by the
     Company's Chief Accounting Officer to relate to the Palomino Project.

<PAGE>

(iv) "Palomino Project" shall mean the Company's residential development located
     in Highlands  Ranch,  Colorado  known as Palomino Park at Highlands  Ranch,
     including  without  limitation,   all  land  (whether  or  not  developed),
     buildings  and  improvements  comprising  each of the five  phases  of such
     development  known as Blue Ridge, Red Canyon,  Silver Mesa, Green River and
     Gold Peak and all common and recreational  facilities  contiguous to all or
     any part of, or related to or used in connection  with, the foregoing,  and
     any non-cash  assets,  including,  without  limitation,  other  properties,
     promissory notes, debt instruments and interests in any entity, received in
     connection with the sale, transfer, exchange or other disposition of any of
     the foregoing.

     4.  Expenses.  (a)  The  Company  shall  reimburse  the  Executive  for all
out-of-pocket  expenses actually and necessarily  incurred by him in the conduct
of the business of the Company or in connection  with a relocation  requested by
the Company pursuant to Section 1(d) against reasonable substantiation submitted
with respect thereto.

     (b) Unless the provisions of subsection 4(c) below shall apply, the Company
shall reimburse the Executive for all legal fees and related expenses (including
the costs of experts, evidence and counsel) paid by the Executive as a result of
(i) the  termination  of  Executive's  employment  (including  all such fees and
expenses,  if any,  incurred in contesting or disputing any such  termination of
employment),  (ii) the  Executive  seeking  to  obtain or  enforce  any right or
benefit  provided by this Second Amended and Restated  Agreement or by any other
plan or  arrangement  maintained  by the Company under which the Executive is or
may be  entitled to receive  benefits  or (iii) any action  taken by the Company
against the Executive;  provided,  however, that the Company shall reimburse the
legal fees and related  expenses  described in this  subsection 4(b) only if and
when a final  judgment  has been  rendered  in favor  of the  Executive  and all
appeals related to any such action have been exhausted.

     (c) The Company  shall pay all legal fees and related  expenses  (including
the costs of experts,  evidence and counsel)  incurred by the  Executive as they
become  due as a  result  of  (i)  the  termination  of  Executive's  employment
(including  all such  fees and  expenses,  if any,  incurred  in  contesting  or
disputing any such  termination of  employment),  (ii) the Executive  seeking to
obtain or enforce  any right or benefit  provided  by this  Second  Amended  and
Restated Agreement or by any other plan or arrangement maintained by the Company
under which the Executive is or may be entitled to receive benefits or (iii) any
action taken by the Company  against the  Executive,  unless and until such time
that a final judgement has been rendered in favor of the Company and all appeals
related to any such  action have been  exhausted;  provided,  however,  that the
circumstances  set forth  above  occurred on or after a Change in Control of the
Company, as defined in Section 6(f).

     5.  Benefits.  The  Executive  shall be entitled to such paid vacation time
each year and such other  medical  benefits as are afforded from time to time to
all executive  officers of the Company (other than the Chairman of the Board and
the President).  The Company shall indemnify the Executive in the performance of
his duties  pursuant  to the bylaws of the  Company  and to the  fullest  extent
allowed by applicable law, including, without limitation, legal fees.

<PAGE>

     6. Earlier  Termination.  (a) If the Executive shall die during the term of
this Second  Amended and Restated  Agreement,  this Second  Amended and Restated
Agreement  shall  be  deemed  to  have  been  terminated  as of the  date of the
Executive's death, and the Company shall pay to the legal  representative of the
Executive's estate all monies due hereunder prorated through the last day of the
month during which the  Executive  shall have died,  as well as a bonus equal to
the  product  of (x) the  base  salary  payable  to the  Executive  pursuant  to
subsection  3(a) from  January 1 of the year in which the  Executive  shall have
died  through the last day of the month during  which the  Executive  shall have
died and (y) the greater of (i) 1/2 or (ii) the  percentage  of the  Executive's
base  salary  for the  immediately  preceding  fiscal  year that was paid to the
Executive or into the Wellsford Real Properties, Inc. Deferred Compensation Plan
as a bonus on his behalf for the immediately preceding fiscal year, expressed as
a fraction (the greater of clauses (i) and (ii) being herein  referred to as the
"Deemed Bonus Fraction");

     (b) If the  Executive  shall  fail,  because of illness or  incapacity,  to
render the services  contemplated by this Second Amended and Restated  Agreement
for six consecutive months or for shorter periods aggregating nine months in any
calendar  year, the Company may determine (as set forth in subsection (d) below)
that the  Executive  has become  disabled.  If within thirty (30) days after the
date on which written  notice of such  determination  is given to the Executive,
the Executive shall not have returned to the continuing full-time performance of
his duties  hereunder,  this  Second  Amended  and  Restated  Agreement  and the
employment of the Executive hereunder shall be deemed terminated and the Company
shall pay to the Executive all monies due  hereunder  prorated  through the last
day of the month during which such  termination  shall occur, as well as a bonus
equal to the product of (x) the base salary payable to the Executive pursuant to
subsection  3(a) from  January 1 of the year in which this  Second  Amended  and
Restated  Agreement is terminated through the last day of the month during which
this Second  Amended and  Restated  Agreement is  terminated  and (y) the Deemed
Bonus Fraction.

     (c) The Company,  by written notice to the Executive  specifying the reason
therefor,  may terminate this Second Amended and Restated Agreement for Cause as
determined  pursuant to subsection (d) below.  As used herein,  "Cause" shall be
defined as actions by the Executive which  constitute  malfeasance.  Malfeasance
includes,  but is not limited  to, the  Executive  engaging in fraud,  dishonest
conduct or other criminal conduct.

     (d) A determination  of disability or Cause shall be made in the reasonable
and sole discretion of the Company's  Chairman of the Board of the Company.  The
Company's Board of Directors  shall,  upon request of the Executive,  review the
decision of whether the  Executive has become  disabled or has been  discharged,
released  or  terminated  for Cause and the Board of  Directors  shall  confirm,
modify or reverse such determination in its sole discretion.

     (e) The Executive shall have the right to terminate this Second Amended and
Restated Agreement if any Change in Control of the Company occurs upon notice to
the Company within 90 days after the Change of Control of the Company.

     (f) For purposes of this Second Amended and Restated  Agreement,  a "Change
in Control of the Company" shall be deemed to occur if:

     A. (i) there shall have occurred a change in control of a nature that would
be  required  to be  reported  in  response  to  Item  6(e) of  Schedule  14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the  "Exchange  Act"),  as in effect  on the date  hereof,  whether  or not the
Company is then subject to such reporting requirement,  provided,  however, that
there  shall not be  deemed  to be a  "Change  in  Control"  of the  Company  if
immediately  prior to the  occurrence  of what would  otherwise  be a "Change in
Control" of the Company (a) the Executive is the other party to the  transaction
(a "Control  Event") that would otherwise result in a "Change in Control" of the
Company or (b) the Executive is an executive officer,  trustee, director or more
than 5% equity  holder of the other party to the Control Event or of any entity,
directly or indirectly, controlling such other party,

<PAGE>

     (ii) the Company merges or consolidates with, or sells all or substantially
all of its  assets  to,  another  company  (each,  a  "Transaction"),  provided,
however,  that a  Transaction  shall not be  deemed  to  result in a "Change  in
Control" of the Company if (a) immediately  prior thereto the  circumstances  in
(i)(a)  or (i)(b)  above  exist,  or (b) (1) the  shareholders  of the  Company,
immediately  before such  Transaction own,  directly or indirectly,  immediately
following  such  Transaction  in excess of fifty  percent  (50%) of the combined
voting power of the  outstanding  voting  securities of the corporation or other
entity  resulting  from  such  Transaction  (the  "Surviving   Corporation")  in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Trustees immediately prior to the execution of
the agreement  providing for such Transaction  constitute at least a majority of
the members of the board of directors or the board of trustees,  as the case may
be,  of  the  Surviving  Corporation,  or  of  a  corporation  or  other  entity
beneficially  directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation, or

     (iii) the Company acquires assets of another company or a subsidiary of the
Company  merges  or   consolidates   with  another   company  (each,  an  "Other
Transaction") and (a) the shareholders of the Company,  immediately  before such
Other Transaction own, directly or indirectly,  immediately following such Other
Transaction 50% or less of the combined  voting power of the outstanding  voting
securities  of the  corporation  or  other  entity  resulting  from  such  Other
Transaction  (the  "Other  Surviving  Corporation")  in  substantially  the same
proportion  as  their  ownership  of  the  voting   securities  of  the  Company
immediately  before  such  Other  Transaction  or (b) the  individuals  who were
members of the Company's Board of Trustees immediately prior to the execution of
the  agreement  providing  for such  Other  Transaction  constitute  less than a
majority of the members of the board of directors  or the board of trustees,  as
the case may be, of the Other  Surviving  Corporation,  or of a  corporation  or
other  entity  beneficially  directly  or  indirectly  owning a majority  of the
outstanding  voting  securities of the Other  Surviving  Corporation,  provided,
however,  that any Other  Transaction shall not be deemed to result in a "Change
in Control" of the Company if  immediately  prior thereto the  circumstances  in
(i)(a) or (i)(b) above exist; and

     B. If Jeffrey H.  Lynford is the  Chairman of the Board,  President,  Chief
Executive  Officer or Chief  Operating  Officer of the  Company,  the  Surviving
Corporation or the Other Surviving Corporation,  immediately following a Control
Event,   Transaction   or  Other   Transaction,   as  the  case  may  be,   then
notwithstanding  A.(i),  A.(ii) and A.(iii)  above,  no Change in Control of the
Company will be deemed to have occurred.

<PAGE>

     7.  Compensation  Upon Termination Upon a Change in Control of the Company.
(a) If after a Change in Control of the Company the Executive's employment shall
be  terminated  (I) by the Company other than for Cause or (II) by the Executive
pursuant to Section 6(e),  then the Executive  shall be entitled to receive from
the Company,  as severance pay, not later than the date of termination an amount
equal to the greater of:

(i)  an amount equal to his full base salary through the then expiration date of
     the term of this Second Amended and Restated  Agreement,  compensation  for
     accrued  vacation  time as well as a bonus  equal to the product of (a) the
     aggregate base salary payable to the Executive  pursuant to subsection 3(a)
     from  January 1 of the year in which the Change in Control  occurs  through
     the then  expiration  date of the term of this Second  Amended and Restated
     Agreement  and (b) the  greater  of  (A)1/2or  (B)  the  percentage  of the
     Executive's base salary for the immediately  preceding fiscal year that was
     paid to the Executive or into the Wellsford Real Properties,  Inc. Deferred
     Compensation  Plan as a bonus on his behalf for the  immediately  preceding
     fiscal year, expressed as a fraction; or

(ii) an amount (the  "Severance  Payment") equal to two times the average of the
     Executive's  annual  compensation  during the three  calendar  year  period
     preceding the calendar year in which the date of  termination  occurs.  For
     purposes of  determining  annual  compensation  in the preceding  sentence,
     compensation  payable to the Executive by the Company (including  Wellsford
     Residential)  shall include every type and form of compensation  includible
     in the Executive's gross income in respect of his employment by the Company
     (including  Wellsford  Residential)  (including,  without  limitation,  all
     income  reported on an Internal  Revenue  Service  Form W-2),  compensation
     income recognized as a result of the Executive's  exercise of stock options
     and including,  without  limitation,  any annual bonus payments  previously
     paid to such  Executive or deferred  under the Wellsford  Real  Properties,
     Inc. Deferred  Compensation Plan, on his behalf and specifically  excluding
     (a) any  Special  Bonus  paid to  Executive,  and  (b)  any  income  of the
     Executive  that  constitutes  a "parachute  payment"  within the meaning of
     Section 280G(b)(2) of the Code; and

     (b) The  Executive  shall not be  required  to  mitigate  the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 7 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination,  or otherwise,
except as specifically provided in this Section 7.

<PAGE>

     8. Protection of Confidential Information; Non-Competition.

     (a) The Executive acknowledges that (i) the Company will suffer substantial
damage which will be difficult to compute if the  Executive  violates any of the
provisions of this Section 9, and (ii) the provisions of this Second Amended and
Restated  Agreement  are  reasonable  and  necessary  for the  protection of the
business of the Company.

     (b) The  Executive  agrees that he will not at any time,  either during the
term of this Second Amended and Restated Agreement or thereafter, divulge to any
person, firm or corporation any material  information obtained or learned by him
during  the  course  of his  employment  with the  Company,  with  regard to the
operational,  financial,  business or other affairs of the Company, its officers
or directors,  except (i) in the course of performing his duties hereunder, (ii)
with the Chairman of the Board's or President's  express written consent;  (iii)
to the extent that any such  information is in the public domain other than as a
result of the Executive's  breach of any of his obligations  hereunder;  or (iv)
where  required to be  disclosed by court  order,  subpoena or other  government
process.

     (c) Upon  termination of his employment  with the Company,  or any time the
Company may so request,  the Executive will promptly  deliver to the Company all
memoranda, notes, records, reports, manuals, drawings, blueprints,  software and
other documents (and all copies thereof) relating to the business of the Company
and all property associated  therewith,  which he may then possess or have under
his control.

     (d) During the term of this Second  Amended and Restated  Agreement and any
renewal  hereof  (including  any  remaining  portion of the stated  term of this
Second Amended and Restated  Agreement or any renewal term hereof  following the
termination  of  the  Executive's   employment  by  the  Executive  unless  such
termination  occurs after a Change in Control of the Company),  and provided the
Executive's  employment  has not been  terminated by the Company with or without
Cause, the Executive without the prior written permission of the Chairman of the
Board  or  President  shall  not  in  the  United  States,  its  territories  or
possessions,  directly or indirectly, (i) enter into the employ of or render any
services to any person, firm or corporation engaged in any competitive business;
(ii)  engage in any  competitive  business  for his own  account;  (iii)  become
associated  with or interested  in any  competitive  business as an  individual,
partner,  shareholder,  creditor, director, officer, principal, agent, employee,
director,  consultant,  advisor or in any other  relationship or capacity;  (iv)
employ  or  retain,  or have or cause  any  other  person or entity to employ or
retain,  any  person who was  employed  or  retained  by the  Company  while the
Executive  was  employed by the  Company;  or (v) solicit,  interfere  with,  or
endeavor  to entice away from the  Company  any of its  customers  or sources of
supply.  However,  nothing in this Second Amended and Restated  Agreement  shall
preclude the Executive from  investing his personal  assets in the securities of
any  corporation  or other  business  entity  which is engaged in a  competitive
business if such  securities  are traded on a national  stock exchange or in the
over-the-counter   market  and  if  such  investment  does  not  result  in  his
beneficially  owning,  at any time, more than 1% of the  publicly-traded  equity
securities of such competitor.  A competitive business shall not include (i) any
privately owned enterprise or (ii) any publicly owned enterprise engaged in such
a business  outside of the  geographic  regions  and states in which the Company
operates  at the time of the  termination  of this Second  Amended and  Restated
Agreement.

<PAGE>

     (e) If the  Executive  commits  a  breach  of  any  of  the  provisions  of
subsection (b) or (d) above, the Company shall have the right and remedy to have
the  provisions  of this Second  Amended  and  Restated  Agreement  specifically
enforced by any court having  equity  jurisdiction,  it being  acknowledged  and
agreed by the  Executive  that the  services  being  rendered  hereunder  to the
Company are of a special,  unique and extraordinary  character and that any such
breach or  threatened  breach will cause  irreparable  injury to the Company and
that money damages will not provide an adequate  remedy to the Company.  Each of
the rights and remedies  enumerated in this  subsection (e) shall be independent
of the other, and shall be severally  enforceable,  and such rights and remedies
shall be in  addition  to,  and not in lieu of, any other  rights  and  remedies
available to the Company under law or equity.

     (f) If any provision of subsection  (b) or (d) is held to be  unenforceable
because of the scope, duration or area of its applicability, the tribunal making
such determination shall have the power to modify such scope, duration, or area,
or all of them,  and such  provision or  provisions  shall then be applicable in
such modified form.

     9. Governing Law;  Arbitration.  This Second Amended and Restated Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New York, without regard to New York's conflicts of law principles. Any
dispute or controversy arising under this Second Amended and Restated Agreement,
or out of the interpretation  hereof, or based upon the breach hereof,  shall be
resolved  by  arbitration  held  at  the  offices  of the  American  Arbitration
Association in the City of New York in accordance with the rules and regulations
of such  association  prevailing  at the time of the demand for  arbitration  by
either party hereto,  and the decision of the arbitrator or arbitrators shall be
final  and  binding  upon  both  parties  hereto,  provided,  however,  that the
arbitrator or arbitrators  shall only have the power and authority to interpret,
and not to modify or amend,  the terms and provisions  hereof.  Judgment upon an
award  rendered by the  arbitrator  or  arbitrators  may be entered in any court
having jurisdiction thereof.  Notwithstanding anything contained in this Section
10, either party shall have the right to seek preliminary  injunctive  relief in
any court in the City of New York in aid of, and pending the final  decision in,
the arbitration proceeding.

     10. Entire Agreement. This Second Amended and Restated Agreement sets forth
the entire  agreement  of the parties and is  intended  to  supersede  all prior
employment  negotiations,  understandings  and agreements.  No provision of this
Second  Amended and  Restated  Agreement  may be waived or changed,  except by a
writing signed by the party to be charged with such waiver or change.

     11.  Successors;  Binding  Agreement.  This  Second  Amended  and  Restated
Agreement  shall inure to the benefit of and be enforceable  by the  Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

     12. Notices.  All notices  provided for in this Second Amended and Restated
Agreement shall be in writing,  and shall be deemed to have been duly given when
delivered  personally  to the party to  receive  the same,  when given by telex,
telegram or mailgram,  or when mailed first class postage prepaid, by registered
or certified mail, return receipt  requested,  addressed to the party to receive
the same at his or its  address  above set forth,  or such other  address as the
party to receive the same shall have  specified  by written  notice given in the
manner provided for in this Section 13. All notices shall be deemed to have been
given as of the date of personal delivery, transmittal or mailing thereof.

<PAGE>

     13.  Severability.  If any  provision  in this Second  Amended and Restated
Agreement  is  determined  to be  invalid,  it shall not affect the  validity or
enforceability of any of the other remaining provisions hereof.

     IN WITNESS  WHEREOF,  the parties  hereto have executed this Second Amended
and Restated Agreement as of the date first above written.

                          WELLSFORD REAL PROPERTIES, INC.

                          By:    /s/ Jeffrey H. Lynford
                                 -------------------------------
                                 Jeffrey H. Lynford
                                 President

EXECUTIVE:

/s/ David M. Strong
-----------------------------
David M. Strong

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