Document:

exv10w4

 

EXHIBIT 10.4

IMARX THERAPEUTICS, INC.

2007 PERFORMANCE INCENTIVE PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	1.	 	Establishment, Purpose and Term of Plan	 	 	1	 
	 
	 

	 	 	1.1	 	 	Establishment
	 	 	1	 
	 

	 	 	1.2	 	 	Purpose
	 	 	1	 
	 

	 	 	1.3	 	 	Term of Plan
	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	Definitions and Construction	 	 	1	 
	 
	 

	 	 	2.1	 	 	Definitions
	 	 	1	 
	 

	 	 	2.2	 	 	Construction
	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Administration	 	 	8	 
	 
	 

	 	 	3.1	 	 	Administration by the Committee
	 	 	8	 
	 

	 	 	3.2	 	 	Authority of Officers
	 	 	9	 
	 

	 	 	3.3	 	 	Powers of the Committee
	 	 	9	 
	 

	 	 	3.4	 	 	Compliance with Section 162(m)
	 	 	10	 
	 

	 	 	3.5	 	 	Administration with Respect to Insiders
	 	 	10	 
	 

	 	 	3.6	 	 	Indemnification
	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	Shares Subject to Plan	 	 	11	 
	 
	 

	 	 	4.1	 	 	Maximum Number of Shares Issuable
	 	 	11	 
	 

	 	 	4.2	 	 	Share Accounting
	 	 	11	 
	 

	 	 	4.3	 	 	Adjustment for Unissued Prior Plan Shares
	 	 	11	 
	 

	 	 	4.4	 	 	Maximum Number of Shares Issuable Pursuant to Incentive Stock Options
	 	 	12	 
	 

	 	 	4.5	 	 	Adjustments for Changes in Capital Structure
	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	Eligibility, Participation and Award Limitations	 	 	13	 
	 
	 

	 	 	5.1	 	 	Persons Eligible for Awards
	 	 	13	 
	 

	 	 	5.2	 	 	Participation in Plan
	 	 	13	 
	 

	 	 	5.3	 	 	Award Limitations
	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	Stock Options	 	 	14	 
	 
	 

	 	 	6.1	 	 	Exercise Price
	 	 	14	 
	 

	 	 	6.2	 	 	Exercisability and Term of Options
	 	 	14	 
	 

	 	 	6.3	 	 	Payment of Exercise Price
	 	 	15	 
	 

	 	 	6.4	 	 	Effect of Termination of Service
	 	 	15	 
	 

	 	 	6.5	 	 	Transferability of Options
	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	Stock Appreciation Rights	 	 	17	 
	 
	 

	 	 	7.1	 	 	Types of SARs Authorized
	 	 	17	 
	 

	 	 	7.2	 	 	Exercise Price
	 	 	17	 
	 

	 	 	7.3	 	 	Exercisability and Term of SARs
	 	 	17	 

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	 	 	7.4	 	 	Exercise of SARs
	 	 	18	 
	 

	 	 	7.5	 	 	Deemed Exercise of SARs
	 	 	18	 
	 

	 	 	7.6	 	 	Effect of Termination of Service
	 	 	18	 
	 

	 	 	7.7	 	 	Transferability of SARs
	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	Restricted Stock Awards	 	 	19	 
	 
	 

	 	 	8.1	 	 	Types of Restricted Stock Awards Authorized
	 	 	19	 
	 

	 	 	8.2	 	 	Purchase Price
	 	 	19	 
	 

	 	 	8.3	 	 	Purchase Period
	 	 	19	 
	 

	 	 	8.4	 	 	Payment of Purchase Price
	 	 	19	 
	 

	 	 	8.5	 	 	Vesting and Restrictions on Transfer
	 	 	19	 
	 

	 	 	8.6	 	 	Voting Rights; Dividends and Distributions
	 	 	20	 
	 

	 	 	8.7	 	 	Effect of Termination of Service
	 	 	20	 
	 

	 	 	8.8	 	 	Nontransferability of Restricted Stock Award Rights
	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	Restricted Stock Unit Awards	 	 	21	 
	 
	 

	 	 	9.1	 	 	Grant of Restricted Stock Unit Awards
	 	 	21	 
	 

	 	 	9.2	 	 	Purchase Price
	 	 	21	 
	 

	 	 	9.3	 	 	Vesting
	 	 	21	 
	 

	 	 	9.4	 	 	Voting Rights, Dividend Equivalent Rights and Distributions
	 	 	21	 
	 

	 	 	9.5	 	 	Effect of Termination of Service
	 	 	22	 
	 

	 	 	9.6	 	 	Settlement of Restricted Stock Unit Awards
	 	 	22	 
	 

	 	 	9.7	 	 	Nontransferability of Restricted Stock Unit Awards
	 	 	22	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	Performance Awards	 	 	23	 
	 
	 

	 	 	10.1	 	 	Types of Performance Awards Authorized
	 	 	23	 
	 

	 	 	10.2	 	 	Initial Value of Performance Shares and Performance Units
	 	 	23	 
	 

	 	 	10.3	 	 	Establishment of Performance Period, Performance Goals and Performance
Award Formula	 	 	23	 
	 

	 	 	10.4	 	 	Measurement of Performance Goals
	 	 	24	 
	 

	 	 	10.5	 	 	Settlement of Performance Awards
	 	 	25	 
	 

	 	 	10.6	 	 	Voting Rights; Dividend Equivalent Rights and Distributions
	 	 	27	 
	 

	 	 	10.7	 	 	Effect of Termination of Service
	 	 	27	 
	 

	 	 	10.8	 	 	Nontransferability of Performance Awards
	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	Deferred Compensation Awards	 	 	28	 
	 
	 

	 	 	11.1	 	 	Establishment of Deferred Compensation Award Programs
	 	 	28	 
	 

	 	 	11.2	 	 	Terms and Conditions of Deferred Compensation Awards
	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	Cash-Based Awards and Other Stock-Based Awards	 	 	29	 
	 
	 

	 	 	12.1	 	 	Grant of Cash-Based Awards
	 	 	30	 

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	 	 	12.2	 	 	Grant of Other Stock-Based Awards
	 	 	30	 
	 

	 	 	12.3	 	 	Value of Cash-Based and Other Stock-Based Awards
	 	 	30	 
	 

	 	 	12.4	 	 	Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards	 	 	30	 
	 

	 	 	12.5	 	 	Voting Rights; Dividend Equivalent Rights and Distributions
	 	 	30	 
	 

	 	 	12.6	 	 	Effect of Termination of Service
	 	 	31	 
	 

	 	 	12.7	 	 	Nontransferability of Cash-Based Awards and Other Stock-Based Awards
	 	 	31	 
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	Nonemployee Director Awards	 	 	31	 
	 
	 	 	 	 	 	 	 	 	 	 
	14.	 	Standard Forms of Award Agreement	 	 	32	 
	 
	 

	 	 	14.1	 	 	Award Agreements
	 	 	32	 
	 

	 	 	14.2	 	 	Authority to Vary Terms
	 	 	32	 
	 
	 	 	 	 	 	 	 	 	 	 
	15.	 	Change in Control	 	 	32	 
	 
	 

	 	 	15.1	 	 	Effect of Change in Control on Options and SARs
	 	 	32	 
	 

	 	 	15.2	 	 	Effect of Change in Control on
Restricted Stock Awards, Restricted Stock Unit Awards, Performance
Awards, Cash-Based Awards, Other Stock-Based Awards and Deferred Compensation Awards	 	 	33	 
	 

	 	 	15.3	 	 	Effect of Change in Control on Nonemployee Director Awards	 	 	33	 
	 
	 	 	 	 	 	 	 	 	 	 
	16.	 	Compliance with Securities Law	 	 	33	 
	 
	 	 	 	 	 	 	 	 	 	 
	17.	 	Tax Withholding 	 	 	33	 
	 
	 

	 	 	17.1	 	 	Tax Withholding in General	 	 	33	 
	 

	 	 	17.2	 	 	Withholding in Shares 	 	 	34	 
	 
	 	 	 	 	 	 	 	 	 	 
	18.	 	Amendment or Termination of Plan 	 	 	34	 
	 
	 	 	 	 	 	 	 	 	 	 
	19.	 	Compliance with Section 409A 	 	 	34	 
	 
	 

	 	 	19.1	 	 	Awards Subject to Section 409A 	 	 	34	 
	 

	 	 	19.2	 	 	Deferral and/or Distribution Elections	 	 	35	 
	 

	 	 	19.3	 	 	Subsequent Elections 	 	 	35	 
	 

	 	 	19.4	 	 	Distributions Pursuant to Deferral Elections	 	 	36	 
	 

	 	 	19.5	 	 	Unforeseeable Emergency 	 	 	36	 
	 

	 	 	19.6	 	 	Disabled 	 	 	37	 
	 

	 	 	19.7	 	 	Death 	 	 	37	 
	 

	 	 	19.8	 	 	No Acceleration of Distributions 	 	 	37	 
	 
	 	 	 	 	 	 	 	 	 	 
	20.	 	Miscellaneous Provisions 	 	 	37	 
	 
	 

	 	 	20.1	 	 	Repurchase Rights 	 	 	37	 
	 

	 	 	20.2	 	 	Forfeiture Events 	 	 	38	 

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	 	 	20.3	 	 	Provision of Information 	38
	 

	 	 	20.4	 	 	Rights as Employee, Consultant or Director 	38
	 

	 	 	20.5	 	 	Rights as a Shareholder 	38
	 

	 	 	20.6	 	 	Delivery of Title to Shares 	38
	 

	 	 	20.7	 	 	Fractional Shares 	39
	 

	 	 	20.8	 	 	Retirement and Welfare Plans 	39
	 

	 	 	20.9	 	 	Beneficiary Designation 	39
	 

	 	 	20.10	 	 	Severability	39
	 

	 	 	20.11	 	 	No Constraint on Corporate Action 	39
	 

	 	 	20.12	 	 	Unfunded Obligation 	39
	 

	 	 	20.13	 	 	Choice of Law 	40

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IMARX THERAPEUTICS, INC.

2007 PERFORMANCE INCENTIVE PLAN

     1. Establishment, Purpose and Term of Plan.

          1.1 Establishment. The ImaRx Therapeutics, Inc. 2007 Performance Incentive Plan (the “Plan”)
is hereby established effective as of the date of its approval by the shareholders of the Company
(the “Effective Date”).

          1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating Company Group. The Plan seeks to
achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights,
Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance
Shares, Performance Units, Deferred Compensation Awards, Cash-Based and Other Stock-Based Awards
and Nonemployee Director Awards.

          1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee;
provided, however, that all Awards shall be granted, if at all, within ten (10) years from the
Effective Date.

     2. Definitions and Construction.

          2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

               (a) “Affiliate” means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one
or more intermediary entities. For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.

               (b) “Award” means any Option, Stock Appreciation Right, Restricted Stock Purchase Right,
Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Deferred
Compensation Award, Cash-Based Award, Other Stock-Based Award or Nonemployee Director Award granted
under the Plan.

               (c) “Award Agreement” means a written or electronic agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Award granted to the
Participant.

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               (d) “Board” means the Board of Directors of the Company.

               (e) “Cash-Based Award” means an Award denominated in cash and granted pursuant to Section 12.

               (f) “Cause” means, unless such term or an equivalent term is otherwise defined with respect to
an Award by the Participant’s Award Agreement or by a written contract of employment or service,
any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of
fiduciary duty for personal profit, or falsification of any Participating Company documents or
records; (ii) the Participant’s material failure to abide by a Participating Company’s code of
conduct or other policies (including, without limitation, policies relating to confidentiality and
reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation,
destruction or diversion of any tangible or intangible asset or corporate opportunity of a
Participating Company (including, without limitation, the Participant’s improper use or disclosure
of a Participating Company’s confidential or proprietary information); (iv) any intentional act by
the Participant which has a material detrimental effect on a Participating Company’s reputation or
business; (v) the Participant’s repeated failure or inability to perform any reasonable assigned
duties after written notice from a Participating Company of, and a reasonable opportunity to cure,
such failure or inability; (vi) any material breach by the Participant of any employment, service,
non-disclosure, non-competition, non-solicitation or other similar agreement between the
Participant and a Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere)
of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which
impairs the Participant’s ability to perform his or her duties with a Participating Company.

               (g) “Change in Control” means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participant’s Award Agreement or by a written contract of
employment or service, the occurrence of any of the following:

                    (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of
the total combined voting power of the Company’s then-outstanding securities entitled to vote
generally in the election of Directors; provided, however, that the following acquisitions shall
not constitute a Change in Control: (1) an acquisition by any such person who on the Effective Date
is the beneficial owner of more than fifty percent (50%) of such voting power; (2) any acquisition
directly from the Company, including, without limitation, a public offering of securities; (3) any
acquisition by the Company; (4) any acquisition by a trustee or other fiduciary under an employee
benefit plan of a Participating Company; or (5) any acquisition by an entity owned directly or
indirectly by the shareholders of the Company in substantially the same proportions as their
ownership of the voting securities of the Company; or

                    (ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a
“Transaction”) in which the shareholders of the Company immediately before the Transaction do not
retain immediately after the Transaction

2

 

direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined
voting power of the outstanding securities entitled to vote generally in the election of Directors
or, in the case of an Ownership Change Event described in Section 2.1(g)(iii), the entity to which
the assets of the Company were transferred (the “Transferee”), as the case may be; or

                    (iii) a liquidation or dissolution of the Company;

provided, however, that a Change in Control shall be deemed not to include a transaction described
in subsections (i) or (ii) of this Section 2.1(g) in which a majority of the members of the board
of directors of the continuing, surviving or successor entity, or parent thereof, immediately after
such transaction is comprised of Incumbent Directors.

     For purposes of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other business entities. The
Committee shall have the right to determine whether multiple sales or exchanges of the voting
securities of the Company or multiple Ownership Change Events are related, and its determination
shall be final, binding and conclusive.

               (h) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

               (i) “Committee” means the Compensation Committee and such other committee or subcommittee of
the Board, if any, duly appointed to administer the Plan and having such powers in each instance as
shall be specified by the Board. If, at any time, there is no committee of the Board then
authorized or properly constituted to administer the Plan, the Board shall exercise all of the
powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise
any or all of such powers.

               (j) “Company” means ImaRx Therapeutics, Inc., a Delaware corporation, or any successor
corporation thereto.

               (k) “Consultant” means a person engaged to provide consulting or advisory services (other than
as an Employee or Director) to a Participating Company, provided that the identity of such person,
the nature of such services or the entity to which such services are provided would not preclude
the Company from offering or selling securities to such person pursuant to the Plan in reliance on
registration on a Form S-8 Registration Statement under the Securities Act.

               (l) “Covered Employee” means, at any time the Plan is subject to Section 162(m), any Employee
who is or may become a “covered employee” as defined in Section 162(m), or any successor statute,
and who is designated, either as an individual Employee or a member of a class of Employees, by the
Committee no later than (i) the date ninety (90) days after the beginning of the Performance
Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed,
as a “Covered Employee” under this Plan for such applicable Performance Period.

3

 

               (m) “Deferred Compensation Award” means an award granted to a Participant pursuant to Section
11.

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

               (o) “Disability” means the permanent and total disability of the Participant, within the
meaning of Section 22(e)(3) of the Code.

               (p) “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of
the Committee or as otherwise provided by the Plan, to receive a credit for the account of such
Participant in an amount equal to the cash dividends paid on one share of Stock for each share of
Stock represented by an Award held by such Participant.

               (q) “Employee” means any person treated as an employee (including an Officer or Director who
is also treated as an employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine
in good faith and in the exercise of its discretion whether an individual has become or has ceased
to be an Employee and the effective date of such individual’s employment or termination of
employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of
the Plan as of the time of the Company’s determination of whether or not the individual is an
Employee, all such determinations by the Company shall be final, binding and conclusive as to such
rights, if any, notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination as to such individual’s status as an Employee.

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

               (s) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:

                    (i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market Value of a share of
Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the American Stock
Exchange or such other national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded
on such securities exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Committee, in its discretion.

4

 

                    (ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair
Market Value on the basis of the opening, closing, or average of the high and low sale prices of a
share of Stock on such date, the preceding trading day or the next succeeding trading day; and, for
purposes other than determining the exercise price or purchase price of shares pursuant to an
Award, the high or low sale price of a share of Stock on such date, the preceding trading day or
the next succeeding trading day, the average of any such prices determined over a period of trading
days or the actual sale price of a share of Stock received by a Participant. The Committee may
vary its method of determination of the Fair Market Value as provided in this Section for different
purposes under the Plan.

                    (iii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee
in good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.

               (t) “Incentive Stock Option” means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.

               (u) “Incumbent Director” means a director who either (i) is a member of the Board as of the
Effective Date or (ii) is elected to the Board with the affirmative votes of at least a majority of
the Directors who were not elected in connection with an actual or threatened proxy contest
relating to the election of directors of the Company.

               (v) “Insider” means an Officer, Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.

               (w) “Insider Trading Policy” means the written policy of the Company pertaining to the
purchase, sale, transfer or other disposition of the Company’s equity securities by Directors,
Officers, Employees or other service providers who may possess material, nonpublic information
regarding the Company or its securities.

               (x) “Net-Exercise” means a procedure by which the Participant will be issued a number of
shares of Stock determined in accordance with the following formula:

N = X(A-B)/A, where

     “N” = the number of shares of Stock to be issued to the
Participant upon exercise of the Option;

     “X” = the total number of shares with respect to which the
Participant has elected to exercise the Option;

     “A” = the Fair Market Value of one (1) share of Stock determined
on the exercise date; and

     “B” = the exercise price per
share (as defined in the Participant’s Award Agreement)

               (y) “ Nonemployee Director ” means a Director who is not an Employee.

5

 

               (z) “Nonemployee Director Award” means a Nonstatutory Stock Option, Stock Appreciation Right,
Restricted Stock Award or Restricted Stock Unit Award granted to a Nonemployee Director pursuant to
Section 13 of the Plan.

               (aa) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award
Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.

               (bb) “Officer” means any person designated by the Board as an officer of the Company.

               (cc) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option.

               (dd) “Other Stock-Based Award” means an Award denominated in shares of Stock and granted
pursuant to Section 12.

               (ee) “Ownership Change Event” means the occurrence of any of the following with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions
by the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation or share exchange in which the Company is a party; or (iii)
the sale, exchange, or transfer of all or substantially all of the assets of the Company (other
than a sale, exchange or transfer to one or more subsidiaries of the Company).

               (ff) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

               (gg) “Participant” means any eligible person who has been granted one or more Awards.

               (hh) “Participating Company” means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.

               (ii) “Participating Company Group” means, at any point in time, all entities collectively
which are then Participating Companies.

               (jj) “Performance Award” means an Award of Performance Shares or Performance Units.

               (kk) “Performance Award Formula” means, for any Performance Award, a formula or table
established by the Committee pursuant to Section 10.3 which provides the basis for computing the
value of a Performance Award at one or more threshold levels of attainment of the applicable
Performance Goal(s) measured as of the end of the applicable Performance Period.

6

 

               (ll) “Performance-Based Compensation” means compensation under an Award that satisfies the
requirements of Section 162(m) for certain performance-based compensation paid to Covered
Employees.

               (mm) “Performance Goal” means a performance goal established by the Committee pursuant to
Section 10.3.

               (nn) “Performance Period” means a period established by the Committee pursuant to Section 10.3
at the end of which one or more Performance Goals are to be measured.

               (oo) “Performance Share” means a right granted to a Participant pursuant to Section 10 to
receive a payment equal to the value of a Performance Share, as determined by the Committee, based
on performance.

               (pp) “Performance Unit” means a right granted to a Participant pursuant to Section 10 to
receive a payment equal to the value of a Performance Unit, as determined by the Committee, based
upon performance.

               (qq) “Prior Plan” means the Company’s 2000 Stock Option Plan.

               (rr) “Restricted Stock Award” means an Award of a Restricted Stock Bonus or a Restricted Stock
Purchase Right.

               (ss) “Restricted Stock Bonus” means Stock granted to a Participant pursuant to Section 8.

               (tt) “Restricted Stock Purchase Right” means a right to purchase Stock granted to a
Participant pursuant to Section 8.

               (uu) “Restricted Stock Unit” or “Stock Unit” means a right granted to a Participant pursuant
to Section 9 or Section 11, respectively, to receive a share of Stock on a date determined in
accordance with the provisions of such Sections, as applicable, and the Participant’s Award
Agreement.

               (vv) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.

               (ww) “SAR” or “Stock Appreciation Right” means a right granted to a Participant pursuant to
Section 7 to receive payment, for each share of Stock subject to such SAR, of an amount equal to
the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.

               (xx) “Section 162(m)” means Section 162(m) of the Code.

               (yy) “Section 409A” means Section 409A of the Code (including regulations or administrative
guidelines thereunder).

7

 

               (zz) “Securities Act” means the Securities Act of 1933, as amended.

               (aaa) “Service” means a Participant’s employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise
provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders such Service or a change in
the Participating Company for which the Participant renders such Service, provided that there is no
interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service
shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company. However, if any such leave taken by a
Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the
commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the
Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the Participant’s Award
Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the entity for which the Participant performs Service ceasing to be
a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine
whether the Participant’s Service has terminated and the effective date of such termination.

               (bbb) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.5.

               (ccc) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

               (ddd) “Ten Percent Owner” means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.

               (eee) “Vesting Conditions” mean those conditions established in accordance with the Plan prior
to the satisfaction of which shares subject to an Award remain subject to forfeiture or a
repurchase option in favor of the Company exercisable for the Participant’s purchase price for such
shares upon the Participant’s termination of Service.

          2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

     3. Administration.

          3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement
or other document employed by the Company in the administration of

8

 

the Plan or of any Award shall be determined by the Committee, and such determinations shall
be final, binding and conclusive upon all persons having an interest in the Plan or such Award,
unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or
made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or
other agreement thereunder (other than determining questions of interpretation pursuant to the
preceding sentence) shall be final, binding and conclusive upon all persons having an interest
therein.

          3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election. The Board or
Committee may, in its discretion, delegate to a committee comprised of one or more Officers the
authority to grant one or more Awards, without further approval of the Board or the Committee, to
any Employee, other than a person who, at the time of such grant, is an Insider or a Covered
Person; provided, however, that (a) such Awards shall not be granted for shares in excess of the
maximum aggregate number of shares of Stock authorized for issuance pursuant to Section 4.1, (b)
each such Award shall be subject to the terms and conditions of the appropriate standard form of
Award Agreement approved by the Board or the Committee and shall conform to the provisions of the
Plan, and (c) each such Award shall conform to such limits and guidelines as shall be established
from time to time by resolution of the Board or the Committee.

          3.3 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:

               (a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock, units or monetary value to be subject to each Award;

               (b) to determine the type of Award granted;

               (c) to determine the Fair Market Value of shares of Stock or other property;

               (d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with Award, including by the withholding or delivery of shares of
Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any
shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance
Award Formula and Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the
effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other
terms, conditions and

9

 

restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with
the terms of the Plan;

               (e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;

               (f) to approve one or more forms of Award Agreement;

               (g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;

               (h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any
shares acquired pursuant thereto, including with respect to the period following a Participant’s
termination of Service;

               (i) without the consent of the affected Participant and notwithstanding the provisions of any
Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding Option, provided
that such Stock Appreciation Right covers the same number of shares of Stock and provides for the
same exercise price (subject in each case to adjustment in accordance with Section 4.5) as the
replaced Option and otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Committee;

               (j) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards; and

               (k) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law.

          3.4 Compliance with Section 162(m). If the Company is a “publicly held corporation” within
the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within
the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment
of Performance-Based Compensation.

          3.5 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.

          3.6 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the

10

 

Committee or the Company is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or failure to act under or
in connection with the Plan, or any right granted hereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal counsel selected
by the Company) or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the opportunity at its own
expense to handle and defend the same.

     4. Shares Subject to Plan.

          4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2, 4.3
and 4.5, the maximum aggregate number of shares of Stock that may be issued under the Plan after
the Effective Date shall be equal to Eight Hundred Fifty Thousand (850,000) shares, and shall
consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

          4.2 Share Accounting. If an outstanding Award for any reason expires or is terminated or
cancelled without having been exercised or settled in full, or if shares of Stock acquired pursuant
to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an
amount not greater than the Participant’s purchase price, the shares of Stock allocable to the
terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be
available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued
pursuant to the Plan (a) with respect to any portion of an Award that is settled in cash or (b) to
the extent such shares are withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to Section 17.2. Upon payment in shares of Stock pursuant to the exercise of
a SAR, the number of shares available for issuance under the Plan shall be reduced only by the
number of shares actually issued in such payment. If the exercise price of an Option is paid by
tender to the Company, or attestation to the ownership, of shares of Stock owned by the
Participant, or by means of a Net-Exercise, the number of shares available for issuance under the
Plan shall be reduced by the net number of shares for which the Option is exercised.

          4.3 Adjustment for Unissued Prior Plan Shares. The maximum aggregate number of shares of
Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased
from time to time by:

               (a) the number of shares of Stock subject to that portion of any option outstanding pursuant
to the Prior Plan as of the Effective Date which, on or after the Effective Date, expires or is
terminated or cancelled without having been exercised; and

11

 

               (b) the number of shares of Stock acquired pursuant to the Prior Plan subject to forfeiture or
repurchase by the Company at the Participant’s purchase price which, on or after the date of
termination of the Prior Plan, is so forfeited or repurchased;

provided, however, that the aggregate number of shares of Stock authorized for issuance under the
Prior Plan that may become authorized for issuance under the Plan pursuant to this Section 4.3
shall not exceed (____) subject to adjustment as provided in Section 4.5.

          4.4 Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to
adjustment as provided in Section 4.5, the maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed
[___] (___) shares. The maximum aggregate number of shares of Stock that may be issued under
the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares
determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3
and 4.5.

          4.5 Adjustments for Changes in Capital Structure. Subject to any required action by the
shareholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company after the Effective Date, whether through merger, consolidation, share
exchange, reorganization, reincorporation, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the shareholders of the Company in a form other than Stock (excepting
normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock,
appropriate adjustments shall be made in the number and kind of shares subject to the Plan and to
any outstanding Awards, in the Award limits set forth in Section 5.3 and in the exercise or
purchase price per share under any outstanding Award in order to prevent dilution or enlargement of
Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible
securities of the Company shall not be treated as “effected without receipt of consideration by the
Company.” If a majority of the shares which are of the same class as the shares that are subject
to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the
Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New
Shares. In the event of any such amendment, the number of shares subject to, and the exercise or
purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable
manner as determined by the Committee, in its discretion. Any fractional share resulting from an
adjustment pursuant to this Section 4.5 shall be rounded down to the nearest whole number, and in
no event may the exercise or purchase price under any Award be decreased to an amount less than the
par value, if any, of the stock subject to such Award. The Committee in its sole discretion, may
also make such adjustments in the terms of any Award to reflect, or related to, such changes in the
capital structure of the Company or distributions as it deems appropriate, including modification
of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments
determined by the Committee pursuant to this Section shall be final, binding and conclusive.

12

 

     The Committee may, without affecting the number of Shares reserved or available hereunder,
authorize the issuance or assumption of benefits under this Plan in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such terms and conditions
as it may deem appropriate, subject to compliance with Sections 409A and 422 and any related
guidance issued by the U.S. Treasury Department, where applicable.

     5. Eligibility, Participation and Award Limitations.

          5.1 Persons Eligible for Awards. Awards, other than Deferred Compensation Award or
Nonemployee Director Awards, may be granted only to Employees and Consultants. Deferred
Compensation Awards may be granted only to Officers, Directors and individuals who are among a
select group of management or highly compensated Employees. Nonemployee Director Awards may be
granted only to persons who, at the time of grant, are Nonemployee Directors.

          5.2 Participation in Plan. Awards are granted solely at the discretion of the Committee.
Eligible persons may be granted more than one Award. However, eligibility in accordance with this
Section shall not entitle any person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.

          5.3 Award Limitations.

               (a) Incentive Stock Option Limitations.

                    (i) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary
Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation
shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying
Corporation, with an exercise price determined as of such date in accordance with Section 6.1.

                    (ii) Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by a Participant for the first time during any calendar year for stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of
such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section, options designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of stock shall be determined as
of the time the option with respect to such stock is granted. If the Code is amended to provide
for a limitation different from that set forth in this Section, such different limitation shall be
deemed incorporated herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate

13

 

which portion of such Option the Participant is exercising. In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion
of the Option first. Upon exercise, shares issued pursuant to each such portion shall be
separately identified.

               (b) Nonemployee Director Award Limits. Subject to adjustment as provided in Section 4.5, no
Nonemployee Director may be granted within any fiscal year of the Company one or more Nonemployee
Director Awards for more than Fifty Thousand (50,000) shares.

     6. Stock Options.

          Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions:

          6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no
Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum
exercise price set forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

          6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise
specified by the Committee in the grant of an Option, each Option
shall terminate ten (10) years after the effective date of grant of the Option, unless earlier
terminated in accordance with its provisions.

          6.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash or by check or cash equivalent, (ii) to the extent permitted by the Company at the
time of exercise, by tender to the Company, or attestation to the

14

 

ownership, of shares of Stock
owned by the Participant having a Fair Market Value not less than the exercise price, (iii) to the
extent permitted by the Company at the time of exercise, by delivery of a properly executed notice
of exercise together with irrevocable instructions to a broker providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired
upon the exercise of the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a “Cashless Exercise”), (iv) to the extent permitted by the Company at the
time of exercise, by delivery of a properly executed notice electing a Net-Exercise, (v) by such
other consideration as may be approved by the Committee from time to time to the extent permitted
by applicable law, or (vi) by any combination thereof. The Committee may at any time or from time
to time grant Options which do not permit all of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict one or more forms of consideration.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. Unless otherwise provided by the Committee, an
Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of
Stock unless such shares either have been owned by the Participant for more than six (6) months (or
such other period, if any, as the Committee may permit) and not used for another Option exercise by
attestation during such period, or were not acquired, directly or indirectly, from the Company.

                    (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Company’s sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise, including with respect
to one or more Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.

          6.4 Effect of Termination of Service.

               (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee in the grant of an Option and set forth in
the Award Agreement, an Option shall terminate immediately upon the Participant’s termination of
Service to the extent that it is then unvested and shall be exercisable
after the Participant’s termination of Service to the extent it is then vested only during the
applicable time period determined in accordance with this Section and thereafter shall terminate:

                    (i) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on
which the Participant’s Service terminated, may be exercised by the Participant (or the
Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service terminated, but

15

 

in any event no later than
the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such
Option (the “Option Expiration Date”).

                    (ii) Death. If the Participant’s Service terminates because of the death of the Participant,
the Option, to the extent unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant’s legal representative or
other person who acquired the right to exercise the Option by reason of the Participant’s death at
any time prior to the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date. The Participant’s
Service shall be deemed to have terminated on account of death if the Participant dies within three
(3) months after the Participant’s termination of Service.

                    (iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary,
if the Participant’s Service is terminated for Cause or if, following the Participant’s termination
of Service and during any period in which the Option otherwise would remain exercisable, the
Participant engages in any act that would constitute Cause, the Option shall terminate in its
entirety and cease to be exercisable immediately upon such termination of Service or act.

                    (iv) Other Termination of Service. If the Participant’s Service terminates for any reason,
except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested
shares on the date on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months after the date on which the
Participant’s Service terminated, but in any event no later than the Option Expiration Date.

               (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than
termination of Service for Cause, if the exercise of an Option within the applicable time periods
set forth in Section 6.4(a) is prevented by the provisions of Section 16 below, the Option shall
remain exercisable until three (3) months (or such longer period of time as determined by the
Committee, in its discretion) after the date the Participant is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration Date.

               (c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, other
than termination of Service for Cause, if a sale within the applicable time periods set forth in
Section 6.4(a) of shares acquired upon the exercise of the Option would subject the Participant to
suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date
on which a sale of such shares by the Participant would no longer be subject to such suit,
(ii) the one hundred and ninetieth (190th) day after the Participant’s termination of Service, or
(iii) the Option Expiration Date.

          6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. An
Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the

16

 

Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set
forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option shall be
assignable or transferable subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 Registration Statement under the Securities Act.

     7. Stock Appreciation Rights.

          Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No SAR or purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs may incorporate
all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

          7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a
related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding
SAR”). A Tandem SAR may only be granted concurrently with the grant of the related Option.

          7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of
the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR
shall be the exercise price per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the SAR.

          7.3 Exercisability and Term of SARs.

               (a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and
only to the extent, that the related Option is exercisable, subject to such provisions as the
Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option. The Committee may, in its discretion, provide in
any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance
approval of the Company and, if such approval is not given, then the Option shall nevertheless
remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be
exercisable no later than the date on which the related Option expires or is terminated or
canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to
such SAR, the related Option shall be canceled automatically as to the number of shares with
respect to which the Tandem SAR was exercised.
Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject
to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares
with respect to which the related Option was exercised.

               (b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the

17

 

Award Agreement evidencing such SAR;
provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.

          7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of a
SAR, the Participant (or the Participant’s legal representative or other person who acquired the
right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive
payment of an amount for each share with respect to which the SAR is exercised equal to the excess,
if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in
shares of Stock in a lump sum as soon as practicable following the date of exercise of the SAR and
(b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as
determined by the Committee in compliance with Section 409A. Unless otherwise provided in the
Award Agreement evidencing a Freestanding SAR, payment shall be made in a lump sum as soon as
practicable following the date of exercise of the SAR. The Award Agreement evidencing any
Freestanding SAR may provide for deferred payment in a lump sum or in installments in compliance
with Section 409A. When payment is to be made in shares of Stock, the number of shares to be
issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of
exercise of the SAR. For purposes of Section 7, a SAR shall be deemed exercised on the date on
which the Company receives notice of exercise from the Participant or as otherwise provided in
Section 7.5.

          7.5 Deemed Exercise of SARs. If, on the date on which a SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.

          7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise
provided herein and unless otherwise provided by the Committee in the grant of a SAR and set forth
in the Award Agreement, a SAR shall be exercisable after a Participant’s termination of Service
only to the extent and during the applicable time period determined in accordance with Section 6.4
(treating the SAR as if it were an Option) and thereafter shall terminate.

          7.7 Transferability of SARs. During the lifetime of the Participant, a SAR shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. An SAR
shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and
set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory
Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8 Registration Statement under
the Securities Act.

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     8. Restricted Stock Awards.

          Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is
a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock
subject to the Award, in such form as the Committee shall from time to time establish. No
Restricted Stock Award or purported Restricted Stock Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award Agreements evidencing
Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:

          8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in
the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock
Awards may be granted upon such conditions as the Committee shall determine, including, without
limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If
either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is
to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

          8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted
Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment
(other than applicable tax withholding) shall be required as a condition of receiving shares of
Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required
by applicable state corporate law, the Participant shall furnish consideration in the form of cash
or past services rendered to a Participating Company or for its benefit having a value not less
than the par value of the shares of Stock subject to a Restricted Stock Award.

          8.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period
established by the Committee, which shall in no event exceed thirty (30) days from the effective
date of the grant of the Restricted Stock Purchase Right.

          8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase
price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase
Right shall be made (a) in cash or by check or cash equivalent, (b) by such other consideration as
may be approved by the Committee from time to time to the extent permitted by applicable law, or
(c) by any combination thereof.

          8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock
Award may (but need not) be made subject to Vesting Conditions based upon
the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall
be established by the Committee and set forth in the Award Agreement evidencing such Award. During
any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise
disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The
Committee, in its discretion, may provide in any Award Agreement evidencing

19

 

a Restricted Stock
Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such
Restricted Stock Award would otherwise occur on a day on which the sale of such shares would
violate the Company’s Insider Trading Policy, then the satisfaction of the Vesting Conditions
automatically be deemed to occur on the next day on which the sale of such shares would not violate
the Insider Trading Policy. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.

          8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section
8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted
Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a
shareholder of the Company holding shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to such shares. However, in the
event of a dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as described in Section 4.5,
any and all new, substituted or additional securities or other property (other than normal cash
dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock
Award shall be immediately subject to the same Vesting Conditions as the shares subject to the
Restricted Stock Award with respect to which such dividends or distributions were paid or
adjustments were made.

          8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award
Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any
reason, whether voluntary or involuntary (including the Participant’s death or disability), then
(a) the Company shall have the option to repurchase for the purchase price paid by the Participant
any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain
subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b)
the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.

          8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock
pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

     9. Restricted Stock Unit Awards.

          Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the

20

 

Committee shall from time to time
establish. No Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms and conditions:

          9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 10.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

          9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall
be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which
shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating Company or for its
benefit having a value not less than the par value of the shares of Stock issued upon settlement of
the Restricted Stock Unit Award.

          9.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as described in Section
10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such
Award.

          9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on
Stock during the period beginning on the date such Award is granted and ending, with respect to the
particular shares subject to the Award, on the earlier of the date the Award is settled or the date
on which it is terminated. Such Dividend Equivalents Rights, if any, shall be paid by crediting
the Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the number of shares of Stock represented by the Restricted Stock Units previously
credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such
additional Restricted Stock Units shall be subject to the same terms and conditions and shall be
settled in the same manner and at the same time as the Restricted Stock Units originally subject to
the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of
Stock or other property or any other adjustment made upon a change in the capital structure of the

21

 

Company as described in Section 4.5, appropriate adjustments shall be made in the Participant’s
Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all
new, substituted or additional securities or other property (other than normal cash dividends) to
which the Participant would be entitled by reason of the shares of Stock issuable upon settlement
of the Award, and all such new, substituted or additional securities or other property shall be
immediately subject to the same Vesting Conditions as are applicable to the Award.

          9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set
forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the Participant’s death or
disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant
to the Award which remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service.

          9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock
Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes, if any. If permitted by the Committee, subject to the provisions of Section 19
with respect to Section 409A, the Participant may elect in accordance with terms specified in the
Award Agreement to defer receipt of all or any portion of the shares of Stock or other property
otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s)
elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the
foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock
Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the
payment date of the shares of Stock or other property otherwise issuable to the Participant
pursuant to this Section. The Committee, in its discretion, may provide in any Award Agreement
evidencing a Restricted Stock Unit Award that, if the settlement of the Award with respect to any
shares would otherwise occur on a day on which the sale of such shares would violate the Company’s
Insider Trading Policy, then the settlement with respect to such shares shall occur on the next day
on which the sale of such shares would not violate the Insider Trading Policy.

          9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant
to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit
Award granted to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.

     10. Performance Awards.

          Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall
from time to time establish. No Performance Award or purported

22

 

Performance Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:

          10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of
either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance
Award shall specify the number of Performance Shares or Performance Units subject thereto, the
Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award,
and the other terms, conditions and restrictions of the Award.

          10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial
monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as
provided in Section 4.5, on the effective date of grant of the Performance Share, and each
Performance Unit shall have an initial monetary value established by the Committee at the time of
grant. The final value payable to the Participant in settlement of a Performance Award determined
on the basis of the applicable Performance Award Formula will depend on the extent to which
Performance Goals established by the Committee are attained within the applicable Performance
Period established by the Committee.

          10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In
granting each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of the Performance
Award Formula the final value of the Performance Award to be paid to the Participant. Unless
otherwise permitted in compliance with the requirements under Section 162(m) with respect to each
Performance Award intended to result in the payment of Performance-Based Compensation, the
Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each
Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement
of the applicable Performance Period or (b) the date on which 25% of the Performance Period has
elapsed, and, in any event, at a time when the outcome of the Performance Goals remains
substantially uncertain. Once established, the Performance Goals and Performance Award Formula
applicable to a Covered Employee shall not be changed during the Performance Period. The Company
shall notify each Participant granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award Formula.

          10.4 Measurement of Performance Goals. Performance Goals shall be established by the
Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or
more measures of business or financial performance (each, a “Performance Measure”), subject to the
following:

               (a) Performance Measures. Performance Measures shall have the same meanings as used in the
Company’s financial statements, or, if such terms are not used in the Company’s financial
statements, they shall have the meaning applied pursuant to generally

23

 

accepted accounting
principles, or as used generally in the Company’s industry. Performance Measures shall be
calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for
financial reporting purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award
shall be calculated in accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and excluding the
effect (whether positive or negative) of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of
the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be
made solely for the purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participant’s rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Committee:

                    (i) revenue;

                    (ii) sales;

                    (iii) expenses;

                    (iv) operating income;

                    (v) gross margin;

                    (vi) operating margin;

                    (vii) earnings before any one or more of: stock-based compensation expense, interest, taxes,
depreciation and amortization;

                    (viii) pre-tax profit;

                    (ix) net operating income;

                    (x) net income;

                    (xi) economic value added;

                    (xii) free cash flow;

                    (xiii) operating cash flow;

                    (xiv) balance of cash, cash equivalents and marketable securities;

                    (xv) stock price;

                    (xvi) earnings per share;

24

 

                    (xvii) return on shareholder equity;

                    (xviii) return on capital;

                    (xix) return on assets;

                    (xx) return on investment;

                    (xxi) employee satisfaction;

                    (xxii) employee retention;

                    (xxiii) market share;

                    (xxiv) customer satisfaction;

                    (xxv) product development;

                    (xxvi) research and development expenses;

                    (xxvii) completion of an identified special project; and

                    (xxviii) completion of a joint venture or other corporate transaction.

               (b) Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to an index, budget or other standard selected by the Committee.

          10.5 Settlement of Performance Awards.

               (a) Determination of Final Value. As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall certify in writing the
extent to which the applicable Performance Goals have been attained and the resulting final value
of the Award earned by the Participant and to be paid upon its settlement in accordance with the
applicable Performance Award Formula.

               (b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for the positive or
negative adjustment of the Performance Award Formula applicable to a Performance Award granted to
any Participant who is not a Covered Employee to reflect such Participant’s individual performance
in his or her position with the Company or such other factors as the Committee may determine. If
permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on
the basis of such criteria as may be established by the Committee, to reduce some or all of the
value of the Performance Award that

25

 

would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the resulting value of the
Performance Award determined in accordance with the Performance Award Formula. No such reduction
may result in an increase in the amount payable upon settlement of another Participant’s
Performance Award that is intended to result in Performance-Based Compensation.

               (c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award
Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has
taken in excess of thirty (30) days in leaves of absence during a Performance Period shall be
prorated on the basis of the number of days of the Participant’s Service during the Performance
Period during which the Participant was not on a leave of absence.

               (d) Notice to Participants. As soon as practicable following the Committee’s determination
and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each
Participant of the determination of the Committee.

               (e) Payment in Settlement of Performance Awards. Subject to the provisions of Section 19 with
respect to Section 409A, as soon as practicable following the Committee’s determination and
certification in accordance with Sections 10.5(a) and (b), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who acquired the right to
receive such payment by reason of the Participant’s death) of the final value of the Participant’s
Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination
thereof as determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the
Committee, and subject to the provisions of Section 19 with respect to Section 409A, the
Participant may elect to defer receipt of all or any portion of the payment to be made to
Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant
shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the
Committee may, but shall not be obligated to, provide for the payment during the deferral period of
Dividend Equivalent Rights or interest.

               (f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock,
the number of such shares shall be determined by dividing the final value of the Performance Award
by the value of a share of Stock determined by the method specified in the Award Agreement. Such
methods may include, without limitation, the closing market price on a specified date (such as the
settlement date) or an average of market prices over a series of trading days. Shares of Stock
issued in payment of any Performance Award may be fully vested and freely transferable shares or
may be shares of Stock subject to Vesting
Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be
evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5
through 8.8 above.

          10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the

26

 

Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash
dividends on Stock during the period beginning on the date the Award is granted and ending, with
respect to the particular shares subject to the Award, on the earlier of the date on which the
Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent
Rights, if any, shall be credited to the Participant in the form of additional whole Performance
Shares as of the date of payment of such cash dividends on Stock. The number of additional
Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by
dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the
number of shares of Stock represented by the Performance Shares previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent
Rights may be paid currently or may be accumulated and paid to the extent that Performance Shares
become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights
may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and
may be paid on the same basis as settlement of the related Performance Share as provided in Section
10.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the
event of a dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as described in Section 4.5,
appropriate adjustments shall be made in the Participant’s Performance Share Award so that it
represents the right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award,
and all such new, substituted or additional securities or other property shall be immediately
subject to the same Performance Goals as are applicable to the Award.

          10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set
forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s
termination of Service on the Performance Award shall be as follows:

               (a) Death or Disability. If the Participant’s Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period applicable to the
Performance Award, the final value of the Participant’s Performance Award shall be determined by
the extent to which the applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the Participant’s Service
during the Performance Period. Payment shall be made following the end of the Performance Period
in any manner permitted by Section 10.5.

               (b) Other Termination of Service. If the Participant’s Service terminates for any reason
except death or Disability before the completion of the Performance Period applicable to the
Performance Award, such Award shall be forfeited in its entirety.

          10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award

27

 

granted to a Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

     11. Deferred Compensation Awards.

          11.1 Establishment of Deferred Compensation Award Programs. This Section 11 shall not be
effective unless and until the Committee determines to establish a program pursuant to this
Section. The Committee, in its discretion and upon such terms and conditions as it may determine,
subject to the provisions of Section 19 with respect to Section 409A, may establish one or more
programs pursuant to the Plan under which:

                    (a) Elective Cash Compensation Reduction Awards. Participants designated by the Committee who
are Officers, Directors or otherwise among a select group of management or highly compensated
Employees may irrevocably elect, prior to a date specified by the Committee in compliance with
Section 409A, to reduce such Participant’s compensation otherwise payable in cash (subject to any
minimum or maximum reductions imposed by the Committee) and to be granted automatically at such
time or times as specified by the Committee one or more Awards of Stock Units with respect to such
numbers of shares of Stock as determined in accordance with the rules of the program established by
the Committee and having such other terms and conditions as established by the Committee.

                    (b) Stock Issuance Deferral Awards. Participants designated by the Committee who are
Officers, Directors or otherwise among a select group of management or highly compensated Employees
may irrevocably elect, prior to a date specified by the Committee in compliance with Section 409A,
to be granted automatically an Award of Stock Units with respect to such number of shares of Stock
and upon such other terms and conditions as established by the Committee in lieu of:

                         (i) shares of Stock otherwise issuable to such Participant upon the exercise of an Option;

                         (ii) cash or shares of Stock otherwise issuable to such Participant upon the exercise of a
SAR; or

                         (iii) cash or shares of Stock otherwise issuable to such Participant upon the settlement of a
Performance Award.

          11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation Awards
granted pursuant to this Section 11 shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. No such Deferred Compensation Award or purported
Deferred Compensation Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Deferred Compensation Awards may
incorporate all or any of the terms of the Plan by reference, including the provisions of Section
19 with respect to Section 409A, and, except as provided below, shall comply with and be subject to
the terms and conditions of Section 9.

28

 

                    (a) Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company). However, a Participant shall be entitled to
Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period
beginning on the date the Stock Units are granted automatically to the Participant and ending on
the earlier of the date on which such Stock Units are settled or the date on which they are
forfeited. Such Dividend Equivalent Rights shall be paid by crediting the Participant with
additional whole Stock Units as of the date of payment of such cash dividends on Stock. The number
of additional Stock Units (rounded to the nearest whole number) to be so credited shall be
determined by dividing (A) the amount of cash dividends paid on the dividend payment date with
respect to the number of shares of Stock represented by the Stock Units previously credited to the
Participant by (B) the Fair Market Value per share of Stock on such date. Such additional Stock
Units shall be subject to the same terms and conditions and shall be settled in the same manner and
at the same time (or as soon thereafter as practicable) as the Stock Units originally subject to
the Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of the Company as
described in Section 4.5, appropriate adjustments shall be made in the Participant’s Stock Unit
Award so that it represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which the Participant
would entitled by reason of the shares of Stock issuable upon settlement of the Award.

                    (b) Settlement of Deferred Compensation Awards. A Participant electing to receive an Award of
Stock Units pursuant to this Section 11 shall specify at the time of such election a settlement
date with respect to such Award in compliance with Section 409A. The Company shall issue to the
Participant on the settlement date elected by the Participant, or as soon thereafter as
practicable, a number of whole shares of Stock equal to the number of vested Stock Units subject to
the Stock Unit Award. Such shares of Stock shall be fully vested, and the Participant shall not be
required to pay any additional consideration (other than applicable tax withholding) to acquire
such shares.

     12. Cash-Based Awards and Other Stock-Based Awards.

          Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such
form as the Committee shall from time to time establish. No such Award or purported Award shall be
a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:

          12.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any
time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon
such terms and conditions, including the achievement of performance criteria, as the Committee may
determine.

29

 

          12.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or
equity-related Awards not otherwise described by the terms of this Plan (including the grant or
offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units,
securities or debentures convertible into common stock or other forms determined by the Committee)
in such amounts and subject to such terms and conditions as the Committee shall determine. Such
Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or
otherwise of amounts based on the value of Stock and may include, without limitation, Awards
designed to comply with or take advantage of the applicable local laws of jurisdictions other than
the United States.

          12.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a
monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based
Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as
determined by the Committee. The Committee may require the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to
establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards
that will be paid to the Participant will depend on the extent to which the performance criteria
are met. The establishment of performance criteria with respect to the grant or vesting of any
Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation
shall follow procedures substantially equivalent to those applicable to Performance Awards set
forth in Section 10.

          12.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or
settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made
in accordance with the terms of the Award, in cash, shares of Stock or other securities or any
combination thereof as the Committee determines. The determination and certification of the final
value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in
Performance-Based Compensation shall comply with the requirements applicable to Performance Awards
set forth in Section 10. To the extent applicable, payment or settlement with respect to each
Cash-Based Award and Other Stock-Based Award shall be made in compliance with Section 409A.

          12.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the
date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such
Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing
any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights
with respect to the payment of cash dividends on Stock during the period beginning on the date such
Award is granted and ending, with respect to the particular shares subject to the Award, on the
earlier of the date the Award is settled or the date on which it is terminated. Such Dividend
Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section
9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards.

30

 

          12.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or
Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to
retain such Award following termination of the Participant’s Service. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards
or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination.

          12.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the
payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution. The Committee may impose such
additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other
Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period
requirements, restrictions under applicable federal securities laws, under the requirements of any
stock exchange or market upon which such shares of Stock are then listed and/or traded, or under
any state securities laws applicable to such shares of Stock.

     13. Nonemployee Director Awards.

          From time to time, the Board or the Committee shall set the amount(s) and type(s) of
Nonemployee Director Awards that shall be granted to all Nonemployee Directors on a periodic,
nondiscriminatory basis pursuant to the Plan, as well as the additional amount(s) and type(s) of
Nonemployee Director Awards, if any, to be awarded, also on a periodic, nondiscriminatory basis, in
consideration of one or more of the following: (a) the initial election or appointment of an
individual to the Board as a Nonemployee Director, (b) a Nonemployee Director’s service as Chairman
or Lead Director of the Board, (c) a Nonemployee Director’s service on one or more of the
committees of the Board other than as the chairman of the committee, and (d) a Nonemployee
Director’s service as the chairman of a committee of the Board. The terms and conditions of each
Nonemployee Director Award shall comply with the applicable provisions of the Plan. Subject to the
limits set forth in Section 5.3(b) and the foregoing, the Board or the Committee shall grant
Nonemployee Director Awards having such terms and conditions as it shall from time to time
determine.

     14. Standard Forms of Award Agreement.

          14.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions
set forth in the appropriate form of Award Agreement approved by the Committee and as amended from
time to time. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form
of Award Agreement incorporated therein by reference, or such other form or forms, including
electronic media, as the Committee may approve from time to time.

          14.2 Authority to Vary Terms. The Committee shall have the authority from time to time to vary
the terms of any standard form of Award Agreement either in connection with the grant or amendment
of an individual Award or in connection with the authorization of a

31

 

new standard form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of
the Plan.

     15. Change in Control.

          15.1 Effect of Change in Control on Options and SARs.

                    (a) Accelerated Vesting. The Committee may, in its sole discretion, provide in any Award
Agreement, or in the event of a Change in Control, may take such actions as it deems appropriate to
provide for the acceleration of the exercisability and vesting in connection with such Change in
Control of any or all outstanding Options and SARs or shares acquired upon the exercise thereof
upon such conditions, including termination of the Participant’s Service prior to, upon or
following such Change in Control, and to such extent as the Committee shall determine.

                    (b) Assumption or Substitution. In the event of a Change in Control, the surviving,
continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”),
may, without the consent of any Participant, either assume or continue the Company’s rights and
obligations under any or all outstanding Options and SARs or substitute for any or all outstanding
Options and SARs substantially equivalent options and stock appreciation rights (as the case may
be) for the Acquiror’s stock. Any Options or SARs which are neither assumed or continued by the
Acquiror in connection with the Change in Control nor exercised as of the time of consummation of
the Change in Control shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control.

                    (c) Cash-Out. The Committee may, in its sole discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in Control, each or any Option or SAR
outstanding immediately prior to the Change in Control shall be canceled in exchange for a payment
with respect to each share of Stock subject to such canceled Option or SAR in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the Change in Control, or
(iii) other property which, in any such case, shall be in an amount having a Fair Market Value
equal to the excess of the Fair Market Value of the consideration to be paid per share of Stock in
the Change in Control over the exercise price per share under such Option or SAR (the “Spread”).
In the event such determination is made by the Committee, the Spread (reduced by applicable
withholding taxes, if any) shall be paid to Participants in respect of their canceled Options and
SARs as soon as practicable following the date of the Change in Control.

          15.2 Effect of Change in Control on Restricted Stock Awards, Restricted Stock Unit Awards,
Performance Awards, Cash-Based Awards, Other Stock-Based Awards and Deferred Compensation Awards.
Subject to compliance with Section 409A, if applicable, unless otherwise set forth in the Award
Agreement, in the event of a Change in Control, each outstanding Restricted Stock Award, Restricted
Stock Unit Award, Performance Award, Cash-Based Award, Other Stock-Based Award and Deferred
Compensation Award held by a Participant whose Service has not terminated prior to the date of the
Change in Control shall become vested in full and shall be settled effective as of the date of the
Change in Control. In

32

 

addition, subject to compliance with Section 409A, if applicable, the Committee, in its sole
discretion, may take such actions as it deems appropriate to provide for the acceleration of
vesting and/or settlement of any or all such outstanding Awards in connection with and upon
termination of the Participant’s Service prior to a Change in Control upon such conditions and to
such extent as the Committee shall determine.

          15.3 Effect of Change in Control on Nonemployee Director Awards. Subject to compliance with
Section 409A, if applicable, in the event of a Change in Control, each outstanding Nonemployee
Director Award shall become immediately exercisable and vested in full and shall be settled
effective as of the date of the Change in Control.

     16. Compliance with Securities Law.

          The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

     17. Tax Withholding.

          17.1 Tax Withholding in General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll withholding, cash
payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes,
if any, required by law to be withheld by the Participating Company Group with respect to an Award
or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of
Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to
make any payment in cash under the Plan until the Participating Company Group’s tax withholding
obligations have been satisfied by the Participant.

          17.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of

33

 

any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall
not exceed the amount determined by the applicable minimum statutory withholding rates.

     18. Amendment or Termination of Plan.

          The Committee may amend, suspend or terminate the Plan at any time. However, without the
approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.5), (b) no change in the class of persons eligible to receive Incentive Stock Options,
and (c) no other amendment of the Plan that would require approval of the Company’s shareholders
under any applicable law, regulation or rule, including the rules of any stock exchange or market
system upon which the Stock may then be listed. No amendment, suspension or termination of the
Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as
provided by the next sentence, no amendment, suspension or termination of the Plan may adversely
affect any then outstanding Award without the consent of the Participant. Notwithstanding any
other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion
and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the
Plan or such Award Agreement to any present or future law, regulation or rule applicable to the
Plan, including, but not limited to, Section 409A.

     19. Compliance with Section 409A.

          19.1 Awards Subject to Section 409A. The provisions of this Section 19 shall apply to any
Award or portion thereof that is or becomes subject to Section 409A, notwithstanding any provision
to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards
subject to Section 409A include, without limitation:

                    (a) Any Nonstatutory Stock Option that permits the deferral of compensation other than the
deferral of recognition of income until the exercise of the Award.

                    (b) Each Deferred Compensation Award.

                    (c) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based
Award that either (i) provides by its terms for settlement of all or any portion of the Award on
one or more dates following the Short-Term Deferral Period (as defined below) or (ii) permits or
requires the Participant to elect one or more dates on which the Award will be settled.

     Subject to any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the
later of (i) the date that is two and one-half months from the end of the Company’s fiscal year in
which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture
or (ii) the date that is two and one-half months from the end of the Participant’s taxable year in
which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture.
For this purpose, the term “substantial risk of forfeiture” shall have

34

 

the meaning set forth in any applicable U.S. Treasury Regulations promulgated pursuant to
Section 409A or other applicable guidance.

          19.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by
Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance, the following rules shall apply to any deferral and/or distribution
elections (each, an “Election”) that may be permitted or required by the Committee pursuant to an
Award subject to Section 409A:

                    (a) All Elections must be in writing and specify the amount of the distribution in settlement
of an Award being deferred, as well as the time and form of distribution as permitted by this Plan.

                    (b) All Elections shall be made by the end of the Participant’s taxable year prior to the year
in which services commence for which an Award may be granted to such Participant; provided,
however, that if the Award qualifies as “performance-based compensation” for purposes of Section
409A and is based on services performed over a period of at least twelve (12) months, then the
Election may be made no later than six (6) months prior to the end of such period.

                    (c) Elections shall continue in effect until a written election to revoke or change such
Election is received by the Company, except that a written election to revoke or change such
Election must be made prior to the last day for making an Election determined in accordance with
paragraph (b) above or as permitted by Section 19.3.

          19.3 Subsequent Elections. Any Award subject to Section 409A which permits a subsequent
Election to delay the distribution or change the form of distribution in settlement of such Award
shall comply with the following requirements:

                    (a) No subsequent Election may take effect until at least twelve (12) months after the date on
which the subsequent Election is made;

                    (b) Each subsequent Election related to a distribution in settlement of an Award not described
in Section 19.3(b), 19.4(b), or 19.4(f) must result in a delay of the distribution for a period of
not less than five (5) years from the date such distribution would otherwise have been made; and

                    (c) No subsequent Election related to a distribution pursuant to Section 19.4(d) shall be made
less than twelve (12) months prior to the date of the first scheduled payment under such
distribution.

          19.4 Distributions Pursuant to Deferral Elections. No distribution in settlement of an Award
subject to Section 409A may commence earlier than:

                    (a) Separation from service (as determined by the Secretary of the United States Treasury);

                    (b) The date the Participant becomes Disabled (as defined below);

35

 

                    (c) Death;

                    (d) A specified time (or pursuant to a fixed schedule) that is either (i) specified by the
Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or
(ii) specified by the Participant in an Election complying with the requirements of Section 19.2
and/or 19.3, as applicable;

                    (e) To the extent provided by the Secretary of the U.S. Treasury, a change in the ownership or
effective control or the Company or in the ownership of a substantial portion of the assets of the
Company; or

                    (f) The occurrence of an Unforeseeable Emergency (as defined below).

     Notwithstanding anything else herein to the contrary, to the extent that a Participant is a
“Specified Employee” (as defined in Section 409A(a)(2)(B)(i)) of the Company, no distribution
pursuant to Section 19.4(a) in settlement of an Award subject to Section 409A may be made before
the date which is six (6) months after such Participant’s date of separation from service, or, if
earlier, the date of the Participant’s death.

          19.5 Unforeseeable Emergency. The Committee shall have the authority to provide in the Award
Agreement evidencing any Award subject to Section 409A for distribution in settlement of all or a
portion of such Award in the event that a Participant establishes, to the satisfaction of the
Committee, the occurrence of an Unforeseeable Emergency. In such event, the amount(s) distributed
with respect to such Unforeseeable Emergency cannot exceed the amounts necessary to satisfy such
Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of
such distribution(s), after taking into account the extent to which such hardship is or may be
relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not itself cause severe
financial hardship). All distributions with respect to an Unforeseeable Emergency shall be made in
a lump sum as soon as practicable following the Committee’s determination that an Unforeseeable
Emergency has occurred.

     The occurrence of an Unforeseeable Emergency shall be judged and determined by the Committee.
The Committee’s decision with respect to whether an Unforeseeable Emergency has occurred and the
manner in which, if at all, the distribution in settlement of an Award shall be altered or
modified, shall be final, conclusive, and not subject to approval or appeal.

          19.6 Disabled. The Committee shall have the authority to provide in any Award subject to
Section 409A for distribution in settlement of such Award in the event that the Participant becomes
Disabled. A Participant shall be considered “Disabled” if either:

                    (a) the Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than twelve (12) months, or

36

 

                    (b) the Participant is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering employees of the Participant’s
employer.

     All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump
sum or in periodic installments as established by the Participant’s Election, commencing as soon as
practicable following the date the Participant becomes Disabled. If the Participant has made no
Election with respect to distributions upon becoming Disabled, all such distributions shall be paid
in a lump sum as soon as practicable following the date the Participant becomes Disabled.

          19.7 Death. If a Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to
his or her beneficiary under the distribution method for death established by the Participant’s
Election as soon as administratively possible following receipt by the Committee of satisfactory
notice and confirmation of the Participant’s death. If the Participant has made no Election with
respect to distributions upon death, all such distributions shall be paid in a lump sum as soon as
practicable following the date of the Participant’s death.

          19.8 No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this
Plan does not permit the acceleration of the time or schedule of any distribution under this Plan,
except as provided by Section 409A and/or the Secretary of the U.S. Treasury.

     20. Miscellaneous Provisions.

          20.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.

          20.2 Forfeiture Events.

                    (a) The Committee may specify in an Award Agreement that the Participant’s rights, payments,
and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting
or performance conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or after termination
of Service, that would constitute Cause for termination of Service.

37

 

                    (b) If the Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial reporting requirement
under the securities laws, any Participant who knowingly or through gross negligence engaged in the
misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002, shall reimburse the Company the amount of any payment in settlement of
an Award earned or accrued during the twelve- (12-) month period following the first public
issuance or filing with the United States Securities and Exchange Commission (whichever first
occurred) of the financial document embodying such financial reporting requirement.

          20.3 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Company’s
common shareholders.

          20.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director or interfere with
or limit in any way any right of a Participating Company to terminate the Participant’s Service at
any time. To the extent that an Employee of a Participating Company other than the Company
receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean
that the Company is the Employee’s employer or that the Employee has an employment relationship
with the Company.

          20.5 Rights as a Shareholder. A Participant shall have no rights as a shareholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.5 or another provision of the Plan.

          20.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company
shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall
deliver such shares to or for the benefit of the Participant by means of one or more of the
following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant; (b) by depositing such shares of Stock for the benefit of the
Participant with any broker with which the Participant has an account relationship; or (c) by
delivering such shares of Stock to the Participant in certificate form.

          20.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.

          20.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or
cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the
benefits payable to any Participant under any Participating Company’s retirement plans (both
qualified and non-qualified) or welfare benefit plans unless

38

 

such other plan expressly provides that such compensation shall be taken into account in
computing a Participant’s benefit.

          20.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participant’s death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participant’s lifetime. If a
married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness
of such designation may be subject to the consent of the Participant’s spouse. If a Participant
dies without an effective designation of a beneficiary who is living at the time of the
Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal
representative.

          20.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.

          20.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a)
limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power
to make adjustments, reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of
its business or assets; or (b) limit the right or power of the Company or another Participating
Company to take any action which such entity deems to be necessary or appropriate.

          20.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors
of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and
unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan.

          20.13 Choice of Law. Except to the extent governed by applicable federal law, the validity,
interpretation, construction and performance of the Plan and each Award Agreement shall be governed
by the laws of the State of Delaware, without regard to its conflict of law rules.

39

 

     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets
forth the ImaRx Therapeutics, Inc. 2007 Performance Incentive Plan as duly adopted by the Board on
                    , 2007.

	 	 	 	 	 
	 

	 	 

Secretary
	 	 

40

 

PLAN HISTORY AND NOTES TO COMPANY

	 	 	 
	                    , 2007

	 	Board adopts Plan with a reserve of
[                    ] shares, and increased by up to
                    
shares outstanding or
subject to options outstanding under
the Prior Plan which are forfeited or
which terminate unexercised.
	 
	 	 
	                    , 2007

	 	Shareholders approve Plan.
	 
	 	 
	IMPORTANT
NOTE: At first annual stockholders meeting following
close of 3rd calendar year
following the calendar year of
IPO (unless plan is materially
amended at an earlier date),
obtain public company stockholder
approval of amendment to plan to
add Section 162(m) grant limits
as described in sample Section
5.3(c) and to approve the
material terms of the performance
goals as required by Treas. Reg.
1.162-27(e)(4). See Treas. Reg.
1.162-27(f) (private to public
company transition rule).

	 	5.3(c) Section 162(m) Award Limits.
The following limits shall apply to the
grant of any Award intended to qualify
for treatment as Performance-Based
Compensation:

     (i) Options and SARs. Subject to
adjustment as provided in Section 4.5,
no Employee shall be granted within any
fiscal year of the Company one or more
Options or Freestanding SARs which in
the aggregate are for more than
                     (                    ) shares.

     (ii) Restricted Stock Awards and
Restricted Stock Unit Awards. Subject
to adjustment as provided in Section
4.5, no Employee shall be granted
within any fiscal year of the Company
one or more Restricted Stock Awards or
Restricted Stock Unit Awards for more
than                      (                    ) shares.

     (iii) Performance Awards. Subject to
adjustment as provided in Section 4.5,
no Employee shall be granted (1)
Performance Shares which could result
in such Employee receiving more than
                     (                    ) shares for each
full fiscal year of the Company
contained in the Performance Period for
such Award, or (2) Performance Units
which could result in such Employee
receiving more than                      dollars
($                    ) for each full fiscal year of
the Company contained in the
Performance Period for such Award. No
Participant may be granted more than
one Performance Award for the same
Performance Period.

     (iv) Cash-Based Awards and Other
l Stock-Based Awards. Subject to
adjustment as provided in Section 4.5,
no Employee shall be granted (1)
Cash-Based Awards in any fiscal year of
the Company which could result in such
Employee receiving more than                     
dollars ($                    ) for each full fiscal
o year of the Company contained in the
 Performance Period for such Award, or
(2) Other Stock-Based Awards in any
fiscal year of the Company which could
ce result in such Employee receiving more than
                     (                    ) shares for each full fiscal
year of the Company contained
in the Performance Period

 

 

	 	 	 
	 

	 	for such Award.
	 
	 	 
	IMPORTANT NOTE: Implementation
of Section 11—Deferred
Compensation Awards or deferral
of settlement of any Award

	 	Upon establishment of a Deferred
Compensation Award program pursuant to
Section 11 or provision for deferral of
settlement of any Award, determine
whether such program will constitute a
“top-hat” pension plan under ERISA. If
so, file notice with Dept. of Labor
under ERISA Reg. 2520.104-23 within 120
days of adoption of resolutions by the
Committee to establish the program to
 obtain exemption from reporting and
disclosure requirements of ERISA.
 Include claims procedure in award
agreements evidencing such awards.
	 
	 	 
	IMPORTANT NOTE: IRC 162(m) 5
year reapproval of performance
goals

	 	Because the Committee may change the
targets under performance goals,
Section 162(m) requires shareholder
reapproval of the material terms of
performance goals no later than the
annual meeting in the 5th year
following the year in which the public
company shareholders initially approved
such material terms. See Treas. Reg.
1.162-27(e)(4)(vi).

 

 

IMARX THERAPEUTICS, INC.

STOCK OPTION AGREEMENT

     ImaRx Therapeutics, Inc. has granted to the individual (the “Optionee”) named in the
Notice of Grant of Stock Option (the “Notice”) to which this Stock Option Agreement (the “Option
Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms
and conditions set forth in the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and conditions of the ImaRx
Therapeutics, Inc. 2007 Performance Incentive Plan (the “Plan”), as amended to the Date of Option
Grant, the provisions of which are incorporated herein by reference. By signing the Notice, the
Optionee: (a) represents that the Optionee has received copies of, and has read and is familiar
with the terms and conditions of, the Notice, the Plan and this Option Agreement, (b) accepts the
Option subject to all of the terms and conditions of the Notice, the Plan and this Option
Agreement, and (c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board or Committee upon any questions arising under the Notice, the Plan or
this Option Agreement.

     1. Definitions and Construction.

          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Notice or the Plan.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.

     2. Tax Consequences.

          2.1 Tax Status of Option. This Option is intended to have the tax status designated in the
Notice.

               (a) Incentive Stock Option. If the Notice so designates, this Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should consult with the
Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3)
months after the date on which you cease to be an Employee (other than by reason of your death or
permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required
by Section 422 of the Code.)

1

 

               (b) Nonstatutory Stock Option. If the Notice so designates, this Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning
of Section 422(b) of the Code.

          2.2 ISO Fair Market Value Limitation. If the Notice designates this Option as an Incentive
Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted
to the Optionee under all stock option plans of the Participating Company Group, including the
Plan) becomes exercisable for the first time during any calendar year for shares having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options
which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this
Section 2.2, options designated as Incentive Stock Options are taken into account in the order in
which they were granted, and the Fair Market Value of stock is determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a different
limitation from that set forth in this Section 2.2, such different limitation shall be deemed
incorporated herein effective as of the date required or permitted by such amendment to the Code.
If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in
part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such designation, the
Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first.
Separate certificates representing each such portion shall be issued upon the exercise of the
Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price (as defined in the Notice) of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan
or any other stock option plan of the Participating Company Group) is greater than $100,000, you
should contact the Chief Financial Officer of the Company to ascertain whether the entire Option
qualifies as an Incentive Stock Option.)

     3. Administration.

          All questions of interpretation concerning this Option Agreement shall be determined by the
Board or Committee. All determinations by the Board or Committee shall be final and binding upon
all persons having an interest in the Option. Any Officer shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Vesting Date (as defined in the Notice) and prior to the termination of
the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares (as
defined in the Notice) less the number of shares previously acquired upon exercise of the Option.
In no event shall the Option be exercisable for more shares than the Number of Option Shares (as
defined in the Notice).

          4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of

2

 

Stock for which the Option is being exercised and such other representations and agreements as
to the Optionee’s investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested, by confirmed
facsimile transmission, or by such other means as the Company may permit, to the Chief Financial
Officer of the Company, or other authorized representative of the Participating Company Group,
prior to the termination of the Option as set forth in Section 6, accompanied by full payment of
the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall
be deemed to be exercised upon receipt by the Company of such written notice and the aggregate
Exercise Price.

          4.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value not less than the aggregate Exercise Price, to the extent permitted by the Company at the
time of exercise, (iii) by means of a Cashless Exercise, to the extent permitted by the Company at
the time of exercise, (iv) by delivery of a properly executed notice electing a Net-Exercise, to
the extent permitted by the Company at the time of exercise, or (v) by any combination of the
foregoing.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. The Option may not be exercised by tender to
the Company, or attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months (and not used for another option exercise
by attestation during such period) or were not acquired, directly or indirectly, from the Company.

                    (ii) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed
notice together with irrevocable instructions to a broker in a form acceptable to the Company
providing for the assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or
procedure approved by the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System). Notwithstanding anything in the Plan or this Option Agreement to the
contrary, a Cashless Exercise shall only be permitted, if at all, provided (A) the Company has
completed an underwritten public offering of its Stock pursuant to an effective registration
statement filed under the Securities Act, and (B) the Company’s Stock is listed on a “national
securities exchange” (as such term is defined in the Exchange Act) or the Nasdaq National Market at
the time of such proposed Cashless Exercise.

3

 

In addition, the Company reserves, at any and all times, the right, in the Company’s sole and
absolute discretion, to decline to approve or terminate any such program or procedure.

          4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and
any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of
any restriction with respect to any shares acquired upon exercise of the Option. The Option is not
exercisable unless the tax withholding obligations of the Participating Company Group are
satisfied. Accordingly, the Company shall have no obligation to deliver shares of Stock until the
tax withholding obligations of the Participating Company Group have been satisfied by the Optionee.

          4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the heirs of the
Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock may then be listed.
In addition, the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

4

 

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option.

          The Option may be exercised during the lifetime of the Optionee only by the Optionee or the
Optionee’s guardian or legal representative and may not be assigned or transferred in any manner
except by will or by the laws of descent and distribution. Following the death of the Optionee,
the Option, to the extent provided in Section 7, may be exercised by the Optionee’s legal
representative or by any person empowered to do so under the deceased Optionee’s will or under the
then applicable laws of descent and distribution.

     6. Termination of the Option.

          The Option shall terminate and may no longer be exercised after the first to occur of (a) the
Option Expiration Date, (b) the termination of the Optionee’s Service to the extent that the Option
is unvested on such date, (c) the last date for exercising the Option following termination of the
Optionee’s Service as described in Section 7, or (d) a Change in Control to the extent provided in
Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability.

               (a) Disability. If the Optionee’s Service terminates because of the Disability of the
Optionee, the Option, to the extent vested and exercisable on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal
representative) at any time prior to the expiration of twelve (12) months after the date on which
the Optionee’s Service terminated, but in any event no later than the Option Expiration Date.

               (b) Death. If the Optionee’s Service terminates because of the death of the Optionee, the
Option, to the extent vested and exercisable on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee’s legal representative or other person who acquired
the right to exercise the Option by reason of the Optionee’s death at any time prior to the
expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in
any event no later than the Option Expiration Date. The Optionee’s Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months after the Optionee’s
termination of Service (other than a termination for Cause).

               (c) Termination for Cause. Notwithstanding any other provision of the Plan or this Option
Agreement to the contrary, if the Optionee’s Service is terminated for Cause, the Option shall
terminate and cease to be exercisable immediately upon such termination of Service.

               (d) Other Termination of Service. If the Optionee’s Service terminates for any reason, except
Disability, death or Cause, the Option, to the extent vested and exercisable by the Optionee on the
date on which the Optionee’s Service terminated, may be

5

 

exercised by the Optionee at any time prior to the expiration of three (3) months (or such
other longer period of time as determined by the Board or Committee, in its discretion) after the
date on which the Optionee’s Service terminated, but in any event no later than the Option
Expiration Date.

          7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, except termination
for Cause, if the exercise of the Option within the applicable time periods set forth in Section
7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three
(3) months after the date the Optionee is notified by the Company that the Option is exercisable,
but in any event no later than the Option Expiration Date.

          7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, except
termination for Cause, if a sale within the applicable time periods set forth in Section 7.1 of
shares acquired upon the exercise of the Option would subject the Optionee to suit under Section
16(b) of the Exchange Act, the Option shall remain exerciseable until the earliest to occur of (i)
the tenth (10th) day following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s
termination of Service, or (iii) the Option Expiration Date.

     8. Change in Control.

          In the event of a Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the “Acquiring
Corporation”), may, without the consent of the Optionee, either assume the Company’s rights and
obligations under the Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation’s stock. The Option shall terminate and cease to be outstanding effective as
of the date of the Change in Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon
exercise of the Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject to all applicable
provisions of the Option Agreement except as otherwise provided herein. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 2.1(ee)(i) of the Plan
constituting a Change in Control is the surviving or continuing corporation and immediately after
such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions
of Section 1504(b) of the Code, the Option shall not terminate unless the Board or Committee
otherwise provides in its discretion.

     9. Adjustments for Changes in Capital Structure.

          Subject to any required action by the shareholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, split-up, split-off, spin-off, combination of shares,

6

 

exchange of shares, or similar change in the capital structure of the Company, or in the event
of payment of a dividend or distribution to the shareholders of the Company in a form other than
Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of
shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise
Price and class of shares subject to the Option, in order to prevent dilution or enlargement of the
Optionee’s rights under the Option. For purposes of the foregoing, conversion of any convertible
securities of the Company shall not be treated as “effected without receipt of consideration by the
Company.” If a majority of the shares which are of the same class as the shares that are subject
to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event) shares of another corporation (the “New Shares”), the Board or Committee
may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the
event of any such amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner as determined by the Board or Committee, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this
Section 9 shall be rounded down to the nearest whole number, and in no event may the Exercise Price
of the Option be decreased to an amount less than the par value, if any, of the stock subject to
the Option. Such adjustments shall be determined by the Board or Committee, and its determination
shall be final, binding and conclusive.

     10. Rights as a Shareholder, Employee or Consultant.

          The Optionee shall have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9. If the Optionee is an Employee, the Optionee understands
and acknowledges that, except as otherwise provided in a separate, written employment agreement
between a Participating Company and the Optionee, the Optionee’s employment is “at will” and is for
no specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee or Consultant, as
the case may be, at any time.

     11. Notice of Sales Upon Disqualifying Disposition.

          The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance
with the provisions of the Plan and this Option Agreement. In addition, if the Notice designates
this Option as an Incentive Stock Option, the Optionee shall (a) promptly notify the Chief
Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to
the Option within one (1) year after the date the Optionee exercises all or part of the Option or
within two (2) years after the Date of Option Grant and (b) provide the Company with a description
of the circumstances of such disposition. Until such time as the Optionee disposes of such shares
in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly
authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in
the Optionee’s name (and not in the name of any nominee) for the

7

 

one-year period immediately after the exercise of the Option and the two-year period immediately
after Date of Option Grant. At any time during the one-year or two-year periods set forth above,
the Company may place a legend on any certificate representing shares acquired pursuant to the
Option requesting the transfer agent for the Company’s stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such transfer shall
continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding
sentence.

     12. Legends.

          The Company may at any time place legends referencing any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired pursuant to the Option
in the possession of the Optionee in order to carry out the provisions of this Section. Unless
otherwise specified by the Company, legends placed on such certificates may include, but shall not
be limited to, the following:

          12.1 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING
DISPOSITION DATE HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO
THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE
STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

     13. Miscellaneous Provisions.

          13.1 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.

          13.2 Termination or Amendment. The Board or Committee may terminate or amend the Plan or the
Option at any time; provided, however, that except as provided in Section 8 in connection with a
Change in Control, no such termination or amendment may adversely affect the Option or any
unexercised portion hereof without the consent of the Optionee unless such termination or amendment
is necessary to comply with any applicable law or government regulation or is required to enable
the Option, if designated an Incentive Stock Option in the Notice, to qualify as an Incentive Stock
Option. No amendment or addition to this Option Agreement shall be effective unless in writing.

8

 

          13.3 Notices. Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given (except to the extent that this Option Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party’s signature or at such other
address as such party may designate in writing from time to time to the other party.

          13.4 Integrated Agreement. The Notice, this Option Agreement and the Plan constitute the
entire understanding and agreement of the Optionee and the Participating Company Group with respect
to the subject matter contained herein or therein and supersedes any prior agreements,
understandings, restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein, the provisions of
the Notice and the Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.

          13.5 Applicable Law. This Option Agreement shall be governed by the laws of the State of
Delaware as such laws are applied to agreements between Delaware residents entered into and to be
performed entirely within the State of Delaware.

          13.6 Counterparts. The Notice may be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.

9

 

IMARX THERAPEUTICS, INC.

NOTICE OF GRANT OF STOCK OPTION

                                              (the “Optionee”) has been granted an option (the “Option”) to
purchase certain shares of Stock of ImaRx Therapeutics, Inc. pursuant to the ImaRx Therapeutics,
Inc. 2007 Performance Incentive Plan (the “Plan”), as follows:

	 	 	 	 	 
	 

	 	Grant Number:
	 	                    
	 
	 	 	 	 
	 

	 	Date of Option Grant:	 	                    
	 
	 	 	 	 
	 

	 	Number of Option Shares:	 	                    
	 
	 	 	 	 
	 

	 	Exercise Price:
	 	$                      per share
	 
	 	 	 	 
	 

	 	Initial Vesting Date:
	 	                     (i.e., the date on which you first vest in some portion of your Option Shares)
	 
	 	 	 	 
	 

	 	Option Expiration Date:
	 	The date ten (10) years after the Date of Option Grant.
	 
	 	 	 	 
	 

	 	Tax Status of Option:
	 	                     Stock Option. (Enter “Incentive” or “Nonstatutory.” If
blank, this Option will be a Nonstatutory Stock Option.)

Vested Shares: Except as provided in the Stock Option Agreement, the number of Vested
Shares (disregarding any resulting fractional share) as of any date is determined by
multiplying the Number of Option Shares by the “Vested Ratio” determined as of such date as
follows:

	 	 	 	 	 	 	 
	 	 	 	 	Vested Ratio
	 

	 	Prior to Initial Vesting Date
	 	 	0	 
	 
	 	 	 	 	 	 
	 

	 	On Initial Vesting Date, provided the Optionee’s Service has
not terminated prior to such date
	 	 	1/4	 
	 
	 	 	 	 	 	 
	 

	 	Plus:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	For each full month of the Optionee’s continuous Service from
Initial Vesting Date until the Vested Ratio equals 1/1, an
additional
	 	 	1/48	 

     By their signatures below, the Company and the Optionee agree that the Option is governed by
this Notice and by the provisions of the Plan and the Stock Option Agreement. The Optionee
acknowledges that the Optionee has read and is familiar with their provisions, and hereby accepts
the Option subject to all of their terms and conditions.

	 	 	 	 	 	 	 	 	 
	IMARX THERAPEUTICS, INC.	 	 	 	OPTIONEE
	 	 	 	 	 	 	 	 	 
	By:	 	 	 	 	 	 	 	 
	 	 	 

	 	 	 	 

Signature
	 	 
	 	 	 	 	 	 	 	 	 
	Its:	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 	Date	 	 
	 	 	 	 	 	 	 	 	 
	Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Address	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

	 	 

	ATTACHMENTS: Stock Option Agreement and Exercise Notice

 

 

	 	 	 
	TM    Incentive Stock Option

	 	Optionee:                                        
	TM   Nonstatutory Stock Option
	 	 
	 

	 	Date:                                         

STOCK OPTION EXERCISE NOTICE

ImaRx Therapeutics, Inc.

Attention: Chief Financial Officer

1635 East 18th St.

Tucson, AZ 85719

Ladies and Gentlemen:

     1. Option. I was granted an option (the “Option”) to purchase shares of the common
stock (the “Shares”) of ImaRx Therapeutics, Inc. (the “Company”) pursuant to the Company’s 2007
Performance Incentive Plan (the “Plan”), my Notice of Grant of Stock Option (the “Notice”) and my
Stock Option Agreement (the “Option Agreement”) as follows:

	 	 	 	 	 
	 

	 	Grant Number:
	 	                                        
	 
	 	 	 	 
	 

	 	Date of Option Grant:
	 	                                        
	 
	 	 	 	 
	 

	 	Number of Option Shares:
	 	                                        
	 
	 	 	 	 
	 

	 	Exercise Price per Share:
	 	$                                        

     2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares, all of which are Vested Shares in accordance with the Notice and the
Option Agreement:

	 	 	 	 	 
	 

	 	Total Shares Purchased:
	 	                                        
	 
	 	 	 	 
	 

	 	Total Exercise Price (Total Shares X Price per Share)
	 	$                                        

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

	 	 	 	 	 
	 

	 	TM Cash:
	 	$                                        
	 
	 	 	 	 
	 

	 	TM Check:
	 	$                                        
	 
	 	 	 	 
	 

	 	TM Tender of Company Stock:
	 	Contact Plan Administrator
	 
	 	 	 	 
	 

	 	TM Cashless Exercise:
	 	Contact Plan Administrator
	 
	 	 	 	 
	 

	 	TM Net-Exercise:
	 	Contact Plan Administrator

1

 

     4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate
provision for the federal, state, local and foreign tax withholding obligations of the Company, if
any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose
payment in full of my withholding taxes, if any, as follows:

(Contact Plan Administrator for amount of tax due.)

	 	 	 	 	 
	 

	 	TM Cash:
	 	$                                        
	 
	 	 	 	 
	 

	 	TM Check:
	 	$                                        

     5. Optionee Information.

	 	 	 	 	 	 	 
	 

	 	My address is: 	 	 	 	 
	 	 	   

	 
	 	 	 	 	 	 
	 	 	   

	 
	 	 	 	 	 	 
	 	 	My Social Security Number is: 	 	 
	 

	 	 	 	 	 

     6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I
agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of
the Shares within one (1) year from the date I exercise all or part of the Option or within two (2)
years of the Date of Option Grant.

     7. Binding Effect. I agree that the Shares are being acquired in accordance with and
subject to the terms, provisions and conditions of the Option Agreement, to all of which I hereby
expressly assent. This Agreement shall inure to the benefit of and be binding upon my heirs,
executors, administrators, successors and assigns.

     I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Notice and
my Option Agreement, copies of which I have received and carefully read and understand.

	 	 	 	 	 
	 

	 	Very truly yours,	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

(Signature)
	 	 

Receipt of the above is hereby acknowledged.

ImaRx Therapeutics, Inc.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 

2exv10w5

 

EXHIBIT 10.5

ImaRx Therapeutics, Inc.

BONUS PLAN

	 	 	 
	Plan Term

	 	Nine months beginning April 1, 2007, subject to annual
renewals in the discretion of the independent members
of the Board of Directors (such independent members of
the Board of Directors are herein referred to as the
“Board”).
	 
	 	 
	Plan Effective Date

	 	April 1, 2007
	 
	 	 
	Quarterly Plan Period

	 	“Quarterly Plan Period” is the 3 months ending March
31, June 30, September 30, and December 31.
	 
	 	 
	Purpose

	 	The purpose of the Plan is to increase shareholder
value by providing an incentive for the achievement of
goals that support ImaRx’s strategic plan.
	 
	 	 
	Eligibility

	 	All ImaRx employees as designated by the Compensation
Committee of the Board of Directors (“Compensation
Committee”), (“Participants”) are eligible to
participate in the Plan.
	 
	 	 
	 

	 	The CEO has the authority to recommend Participants.
The Compensation Committee has the sole authority to
designate Participants.
	 
	 	 
	 

	 	Eligibility will cease upon termination of the
Participant’s employment, withdrawal of designation by
the Compensation Committee, transfer to a position
compensated otherwise than as provided in the Plan,
termination of the Plan by ImaRx, or if the
Participant engages, directly or indirectly, in any
activity which is competitive with any ImaRx activity.
	 
	 	 
	 

	 	If a Participant changes from an eligible position to
an ineligible position during a Quarterly Plan Period,
eligibility to participate will be at the discretion
of the Compensation Committee.
	 
	 	 
	Bonus Tier

	 	The CEO has the authority to recommend and the
Compensation Committee has the authority to assign
each Participant to one of four bonus tiers: Tier 1,
Tier 2, Tier 3 or Tier 4 (“Bonus Tiers”).
	 
	 	 
	Available Bonus

	 	Each Participant shall have the opportunity to earn a
bonus based upon a percentage of the Participant’s
Base Pay for each Quarterly Plan Period (“Quarterly
Bonus”). The maximum Quarterly Bonus for each
Participant shall be based upon their Bonus Tier as
follows:
	 

	 	- Tier 1 up to 5%,
	 

	 	- Tier 2 up to 7.5%,
	 

	 	- Tier 3 up to 10%,
	 

	 	- Tier 4 up to 12.5%.
	 
	 	 
	 

	 	For any participant to be eligible for a Quarterly
Bonus: (i) all of the Company Goals must have been
achieved and (ii) the Company’s cash balance at the
end of the quarter must be greater than $5M. If both
of these thresholds are met, then the Quarterly Bonus
for each participant is calculated as follows:
	 
	 	 

	 	1)	 	For all Tier 1, Tier 2 and Tier 3 Participants:

	 	a.	 	If a Participant’s department achieves all of its
Departmental Goals: (i) if all other departments
achieve all of their Departmental Goals, 100% of the
Participant’s Quarterly Bonus is earned; otherwise
(ii) if one or more

 

 

	 		 	other departments do not achieve
all of their Departmental Goals, 80% of the
Participant’s Quarterly Bonus is earned;
	 
	 	b.	 	If a Participant’s department achieves all but one
of its Departmental Goals: (i) if all other
departments achieve all of their Departmental Goals,
50% the Participant’s Quarterly Bonus is earned;
otherwise (ii) if one or more other departments do not
achieve all of their Departmental Goals, 40% of the
Participant’s Quarterly Bonus is earned;
	 
	 	c.	 	If a Participant’s department fails to achieve more
than one of its Departmental Goals, no Quarterly Bonus
is earned.

	 	2)	 	For all Tier 4 Participants:

	 	a.	 	If all departments achieve all of their
Departmental Goals, 100% of the Participant’s
Quarterly Bonus is earned;
	 
	 	b.	 	If all departments but one achieve all of their
Departmental Goals, 75% of the Participant’s Quarterly
Bonus is earned;
	 
	 	c.	 	If all departments but two achieve all of their
Departmental Goals, 50% of the Participant’s Quarterly
Bonus is earned;
	 
	 	d.	 	If all departments but three achieve all of their
Departmental Goals, 25% of the Participant’s Quarterly
Bonus is earned;;
	 
	 	e.	 	If more than three departments do not achieve all
of their Departmental Goals, no Quarterly Bonus is
earned.

	 	 	 	“Base Pay” means the annual pay rate established for
the Participant by ImaRx and in effect on the last day
of the relevant Quarterly Plan Period or, in the case
of a deceased or disabled Participant, on the last day
of participation in the Plan. ImaRx, with Committee
approval, may at any time, in its sole discretion,
prospectively revise the Participant’s Base Pay.

	 	 	 
	Goals
	 	 
	 
	 	 
	Ø Company Goals

	 	The executive committee of the management team
(“Executive Committee”) shall recommend while the
outcome is substantially uncertain, and the
Compensation Committee shall evaluate and approve, one
or more objective company-wide performance goal
measures that align with ImaRx’s strategic plan for
each Quarterly Plan Period (“Company Goals”).
	 
	 	 
	ØDepartment Goals

	 	The Executive Committee shall recommend while the
outcome is substantially uncertain, and the
Compensation Committee shall evaluate and approve,
three or more objective performance goal measures for
each department that align with ImaRx’s strategic plan
and are the responsibility of that department for each
Quarterly Plan Period (“Department Goals”).
	 
	 	 
	Quarterly Goal 

Achievement 

Determination

	 	Within 30 days after the completion of each Quarterly
Plan Period, the Executive Committee shall report the
level of achievement of the Company Goals and the
Department Goals to the Committee, and the Committee
shall determine and certify the achievement of the
Company Goals and the Department Goals.
	 
	 	 
	Bonus Payout

	 	A Quarterly Bonus under this Plan is earned as of the
end of the applicable Quarterly Plan Period and will
be paid according to the Plan (“Bonus Payout”), if the
Participant:

	 	1.	 	remains a ImaRx employee through the end of the
Quarterly Plan Period, unless employment is terminated
prior to the end of the Quarterly Plan Period due to
death or disability, and
	 
	 	2.	 	refrains from engaging during the Quarterly Plan
Period, directly or indirectly, in any activity that
is competitive with any ImaRx activity.

 

 

	 	 	 
	Bonus Payout 

Prorations

	 	For any employee who meets eligibility criteria and
becomes a Participant after the start of the Quarterly
Plan Period or whose employment with ImaRx is
terminated prior to the end of the Quarterly Plan
Period because of disability or death, the
Compensation Committee in its discretion, may prorate
the Bonus Payout. If the Participant is on a leave of
absence for a portion of the Quarterly Plan Period,
the Compensation Committee in its discretion may
reduce the Participant’s Bonus Payout on a pro-rata
basis. If a Participant changes Bonus Tiers during
the Quarterly Plan Period, the Compensation Committee
in its discretion, may prorate the Participant’s Bonus
by the number of months in each Bonus Tier.
	 
	 	 
	Administration

	 	Board Responsibilities: Approve the Plan design.
	 
	 	 
	 

	 	Compensation Committee Responsibilities: Review and
recommend to the Board the Plan design. Designate
Participants. Assign Participants to a Bonus Tier.
Approve Corporate Goals and Department Goals for the
current Quarterly Plan Period. Determine and certify
the achievement of the Corporate Goals and Department
Goals for the most recently completed Quarterly Plan
Period.
	 
	 	 
	 

	 	Executive Committee Responsibilities: Review and
recommend to the Compensation Committee the Corporate
Goals and Department Goals for the current Quarterly
Plan Period. Evaluate and recommend to the
Compensation Committee the achievement of the
Corporate Goals and Department Goals for the most
recently completed Quarterly Plan Period. Approve the
Bonus Payout calculation and Bonus Payout for each
Participant.
	 
	 	 
	 

	 	CEO Responsibilities: . Recommend Participants
designation and Participants Bonus Tier assignment to
the Compensation Committee.
	 
	 	 
	 

	 	In the event of a dispute regarding the Plan, the
Participant may seek resolution through the Executive
Committee and the Compensation Committee. All
determinations by the Compensation Committee shall be
final and conclusive.
	 
	 	 
	Bonus Payout 

Administration

	 	Quarterly Bonus payments will be made as soon as
administratively feasible. The Company shall have the
right to deduct from all Quarterly Bonus and Annual
Bonus payments under the Plan any federal, state,
local or other taxes required by law to be withheld
respect to such payments. Other normal payroll
deductions will also apply to Quarterly Bonus and
Annual Bonus payment amounts, based on each
Participant’s elections relating to such deductions
then in effect.
	 
	 	 
	Employment at
Will; No Right to
Continued Employment

	 	Unless otherwise expressly provided in writing by
ImaRx and a Participant, such Participant’s employment
with ImaRx is of indefinite duration and either ImaRx
or the Participant will be free to terminate the
employment relationship at will and at any time with
or without cause. Nothing in the Plan shall confer
upon a Participant any right to be employed by ImaRx,
nor to be entitled to any remuneration or benefits not
set forth in the Plan, including the right to receive
any future bonuses, nor to interfere with or limit the
right of ImaRx to modify the terms of or terminate the
Participant’s employment at any time.
	 
	 	 
	Revisions to the Plan

	 	The Plan will be reviewed by the Compensation
Committee and the Board on a periodic basis for
revisions. ImaRx reserves the right at its discretion
with or without notice, to review, change, amend or
cancel the Plan, at any time upon Board approval.

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