Exhibit 10.01


 


SECURITIES PURCHASE AGREEMENT


 


This
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of August 15,
2005 is made by and among Sonus Pharmaceuticals, Inc., a Delaware
corporation, with headquarters located at 22026 20th Avenue S.E., Bothell,
Washington 98021 (the “Company”), and the investors named on the
signature pages hereto, together with their permitted transferees (each,
an “Investor” and collectively, the “Investors”).


 


RECITALS:


 


A.                                   The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section 4(2) of
the Securities Act and Rule 506 under Regulation D.


 


B.                                     The
Investors desire, upon the terms and conditions stated in this Agreement, to purchase
shares of the Company’s Common Stock (the “Common Shares”) and warrants,
in the form of Exhibit A hereto, to purchase such number of shares
of the Company’s Common Stock equal to 50% of the Common Shares purchased by
the Investors, rounded up to the nearest whole share (the “Warrants,”
and collectively with the Common Shares, the “Securities”), for an
aggregate purchase price of at least Ten Million Dollars ($10,000,000) and not
to exceed Twenty-Five Million Dollars ($25,000,000).  The purchase price per share of the Common
Shares is $3.77, which is equal to the per share closing bid as reported on
Nasdaq for the trading day immediately preceding the date of this Agreement,
or, if this Agreement is entered into after 4:00 p.m. Eastern Standard
Time, the day of this Agreement.  The
purchase price for each Warrant is $.125 multiplied by the number of Shares of
Common Stock purchasable under each Warrant (the “Warrant Shares”).


 


C.                                     Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement under which the
Company has agreed to provide certain registration rights under the Securities
Act, the rules and regulations promulgated thereunder and applicable state
securities laws.


 


D.                                    The
capitalized terms used herein and not otherwise defined have the meanings given
them in Article IX hereof.


 


In
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investors hereby agree as follows:


 


ARTICLE I

PURCHASE AND SALE OF SECURITIES


 


1.1                                 Purchase
and Sale of Securities.  On the
Closing Date, subject to the terms of this Agreement and the satisfaction or
waiver of the conditions set forth in Articles VI and VII hereof, the Company
will issue and sell to each Investor, and each Investor will (on a several and
not a joint basis) purchase from the Company, the number of Securities set
forth beneath such Investor’s name on the signature pages hereof.


 


1.2                                 Payment.  At or prior to the Closing, each Investor
will pay the purchase price for the number of Securities set forth beneath its
name on the signature pages hereof, by wire transfer of


 





















 


immediately available funds in accordance with the
wire instructions set forth on Exhibit B hereto.  Such funds shall be held, without interest,
by the Company’s legal counsel in trust for the benefit of each such Investor
until the Closing Date and such time as the Company or the Company’s legal
counsel receives written confirmation from each Investor (which may be
transmitted by facsimile or email) that all closing conditions have been
satisfied, at which time such funds shall be immediately forwarded by wire transfer
to the Company.  The Company shall
deliver to each Investor certificates representing the Securities so purchased
by such Investor within two (2) business days following the Closing Date
against delivery of the purchase price as described above.


 


1.3                                 Closing
Date.  Subject to the satisfaction or
waiver of the conditions set forth in Articles VI and VII hereof, the Closing
will take place at 8 a.m. Pacific Standard Time on August 15, 2005 or
at such other date or time agreed upon by the parties to this Agreement (the “Closing
Date”).  The Closing will be held at
the offices of Stradling Yocca Carlson & Rauth or at such other place
as the parties agree.  In no event (i) will
the Closing occur unless and until the Company has received deposits for the purchase
of Securities in accordance with Section 1.2 of at least Ten Million
Dollars ($10,000,000) or (ii) will the Company sell Securities pursuant to
this Agreement for an aggregate purchase price in excess of Twenty-Five Million
Dollars ($25,000,000).


 


ARTICLE II

INVESTOR’S REPRESENTATIONS AND WARRANTIES


 


Each
Investor represents and warrants to the Company, severally and solely with
respect to itself and its purchase hereunder and not with respect to any other
Investor, that:


 


2.1                                 Investment
Purpose.  The Investor is purchasing
the Securities for its own account and not with a present view toward the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the Securities Act; provided, however,
that by making the representation herein, the Investor does not agree to hold
any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption from registration under the
Securities Act.


 


2.2                                 Qualified
Institutional Buyer.  The Investor is
a “qualified institutional buyer” as defined in Rule 144A(a)(1) promulgated
under the Securities Act, or a “large institutional accredited investor” as
such term is used in the SEC staff’s No-Action Letter dated February 28,
1992 to Squadron, Ellenoff, Pleasant & Lehrer; provided, that
no more than two (2) large institutional accredited investors may be
Investors under this Agreement.  The
Investor has delivered an Investor Questionnaire in the form of Exhibit C
to the Company and to Punk, Ziegel & Company.


 


2.3                                 Reliance
on Exemptions.  The Investor
understands that the Securities are being offered and sold to it in reliance
upon specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Investor’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Investor set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Securities.


 


2.4                                 Information.  The Investor has received and read the SEC
Documents.  The Investor and its
advisors, if any, have been furnished with all materials relating to the
business, finances and


 


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operations of the Company, and materials relating to
the offer and sale of the Securities, that have been requested by the Investor
or its advisors, if any.  The Investor
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company.  Neither such inquiries
nor any other due diligence investigation conducted by Investor or any of its
advisors or representatives modify, amend or affect the Investor’s right to
rely on the Company’s representations and warranties contained in Article III
below.  The Investor acknowledges and
understands that its investment in the Securities involves a significant degree
of risk, including the risks reflected in the SEC Documents.


 


2.5                                 Governmental
Review.  The Investor understands
that no United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement
of the Securities or an investment therein.


 


2.6                                 Transfer
or Resale.  The Investor understands
that:


 


(a)                                  except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any applicable state
securities laws and, consequently, the Investors will not be afforded the
protection of Section 11 of the Securities Act, and the Investor may have
to bear the risk of owning the Securities for an indefinite period of time
because the Securities may not be transferred unless (i) the resale of the
Securities is registered pursuant to an effective registration statement under
the Securities Act; (ii) the Investor has delivered to the Company an
opinion of counsel (in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration; (iii) the Securities are sold or transferred pursuant
to Rule 144; or (iv) the Securities are sold or transferred to an
affiliate (as defined in Rule 144) of the Investor;


 


(b)                                 any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require compliance
with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and


 


(c)                                  except
as set forth in the Registration Rights Agreement, neither the Company nor any
other person is under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.


 


2.7                                 Legends.  The Investor understands that until (a) the
Securities may be sold by the Investor under Rule 144(k) or (b) such
time as the resale of the Securities has been registered under the Securities
Act as contemplated by the Registration Rights Agreement, the certificates
representing the Securities will bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):


 


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.  THE SECURITIES MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.


 


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The
legend set forth above will be removed and the Company will issue a certificate
without the legend to the holder of any certificate upon which it is stamped,
in accordance with the terms of Article V hereof.


 


2.8                                 Authorization;
Enforcement.  This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Investor and are valid and binding agreements of
the Investor enforceable in accordance with their terms, subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and the application of general
principles of equity.


 


2.9                                 Residency.  The Investor is a resident of (or, if an
entity, has its principal place of business in) the jurisdiction set forth
immediately below such Investor’s name on the signature pages hereto.


 


2.10                           Acknowledgements
Regarding Placement Agent.  The
Investor acknowledges that Punk, Ziegel & Company is acting as
placement agent (the “Placement Agent”) for the Securities being offered
hereby and will be compensated by the Company for acting in such capacity.  The Investor further acknowledges that the
Placement Agent has acted solely as placement agent in connection with the
offering of the Securities by the Company, that the information and data
provided to the Investor in connection with the transactions contemplated hereby
have not been subjected to independent verification by the Placement Agent, and
that the Placement Agent makes no representation or warranty with respect to
the accuracy or completeness of such information, data or other related
disclosure material.  The Investor
further acknowledges that in making its decision to enter into this Agreement
and purchase the Securities it has relied on its own examination of the Company
and the terms of, and consequences, of holding the Securities.  The Investor further acknowledges that the
provisions of this Section 2.10 are for the benefit of, and may be
enforced by, the Placement Agent.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The
Company represents and warrants to the Investors that:


 


3.1                                 Organization
and Qualification.  The Company is
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted.  The Company is duly qualified
to do business and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect.


 


3.2                                 Authorization;
Enforcement.  (a) The Company
has all requisite corporate power and authority to enter into and to perform
its obligations under this Agreement, the Registration Rights


 


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Agreement and the Warrants, to consummate the
transactions contemplated hereby and thereby and to issue the Securities in
accordance with the terms hereof and thereof; (b) the execution, delivery
and performance of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance of
the Securities) have been duly authorized by the Company’s Board of Directors
and no further consent or authorization of the Company, its Board or Directors,
or its shareholders is required; (c) this Agreement, the Registration
Rights Agreement and the Warrants have been duly executed by the Company; and (d) each
of this Agreement, the Registration Rights Agreement and the Warrants
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or moratorium or similar
laws affecting the rights of creditors generally and the application of general
principles of equity.


 


3.3                                 Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of (a) 75,000,000 shares of Common Stock,
par value $.001 per share, of which 21,418,668 shares are issued and
outstanding, 2,917,317 shares are reserved for issuance upon exercise of stock
options outstanding under the Company’s employee and director stock option
plans, 1,341,677 shares are reserved for grants of rights to purchase under the
Company’s employee and director stock option plans, 45,255 shares are reserved
for issuance pursuant to the Company’s employee stock purchase plan and 401(k)
plan and 1,828,116 shares are reserved for issuance under warrants issued by the
Company on June 15, 2001, January 18, 2002 and July 28, 2003; and
(b) 5,000,000 shares of preferred stock, par value $.001 per share,
500,000 of which shares are designated Series A Junior Participating
Preferred Stock, par value $.001 per share, none of which is issued and
outstanding.  All of such outstanding
shares of capital stock are, or upon issuance will be, duly authorized, validly
issued, fully paid and nonassessable.  No
shares of capital stock of the Company, including the Securities issuable
pursuant to this Agreement, are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company.  Except as disclosed in this Section 3.3
and except for the transactions contemplated hereby, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal or preemptive or other similar rights, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights directly or indirectly
convertible into, exercisable for, or exchangeable for any shares of capital
stock of the Company, or arrangements by which the Company is or may become
bound to issue additional shares of capital stock of the Company; (ii) there
are no agreements or arrangements (other than the Registration Rights
Agreement, the separate Registration Rights Agreements entered into on June 15,
2001, January 18, 2002, July 28, 2003 and May 7, 2004 and the
Purchase Warrants dated June 15, 2001) under which the Company is
obligated to register the sale of any of its securities under the Securities
Act and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Securities (other than the exercise price adjustments pursuant to the warrants
to purchase an aggregate of 385,800 shares of Common Stock, issued by the
Company on January 18, 2002).  The
Company has furnished to the Investors true and correct copies of the Company’s
Certificate of Incorporation, as amended, as in effect on the date hereof, the
Company’s Bylaws as in effect on the date hereof and the terms of all
securities convertible into or exercisable for Common Stock of the Company and
the material rights of the holders thereof in respect thereto.


 


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3.4                                 Issuance
of Securities.  The Securities are
duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, free from all
taxes, liens, claims, encumbrances and charges with respect to the issue
thereof, will not be subject to preemptive rights or other similar rights of
stockholders of the Company, and will not impose personal liability on the
holders thereof.  The Company has
reserved a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants, and upon payment of the exercise price and exercise
of the Warrants in accordance with its terms, the Warrant Shares will be
validly issued, fully paid and non-assessable, free from all taxes, liens,
claims, encumbrances and charges with respect to the issue thereof, will not be
subject to preemptive rights or other similar rights of stockholders of the
Company and will not impose personal liability on the holders thereof.


 


3.5                                 No
Conflicts; No Violation.


 


(a)                                  The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Warrants by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Securities) will not (i) conflict with or
result in a violation of any provision of its Certificate of Incorporation or Bylaws
or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of
termination, amendment (including without limitation, the triggering of any
anti-dilution provision), acceleration or cancellation of, any agreement,
indenture, patent, patent license, or instrument to which the Company is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, breaches, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect).


 


(b)                                 The
Company is not in violation of its Certificate of Incorporation, Bylaws or
other organizational documents and the Company is not in default (and no event
has occurred which with notice or lapse of time or both could put the Company
in default) under any agreement, indenture or instrument to which the Company
is a party or by which any property or assets of the Company is bound or
affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect.


 


(c)                                  The
Company is not conducting its business in violation of any law, ordinance or
regulation of any governmental entity, the failure to comply with which would,
individually or in the aggregate, have a Material Adverse Effect.


 


(d)                                 Except
as specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws or any listing
agreement with any securities exchange or automated quotation system, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants, in each case in accordance with the terms hereof or
thereof, or to issue and sell the Securities in accordance with the terms
hereof.  All consents, authorizations,
orders, filings and registrations which the Company is required to obtain pursuant
to the preceding sentence have been obtained or effected on or prior to the
date hereof.  The Company is not in
violation of the listing requirements of Nasdaq.


 


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3.6                                 SEC
Documents, Financial Statements. 
Since June 30, 2002, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the “SEC Documents”). 
The Company has delivered to each Investor, or each Investor has had
access to, true and complete copies of the SEC Documents, except for such
exhibits and incorporated documents.  As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act or the Securities Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.  As
of their respective dates, the financial statements of the Company included in
the SEC Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or
the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).  Except as set forth in the financial
statements included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business subsequent to June 30, 2005, and liabilities of the type not
required under generally accepted accounting principles to be reflected in such
financial statements.  Such liabilities
incurred subsequent to June 30, 2005, are not, in the aggregate, material
to the financial condition or operating results of the Company.


 


3.7                                 Absence
of Certain Changes.  Except as
disclosed in the SEC Documents, since June 30, 2005, there has been no
material adverse change in the assets, liabilities, business, properties,
operations, financial condition, prospects or results of operations of the
Company, and the Company has not (i) varied its business plan or
practices, in any material respect, from past practices, (ii) entered into
any material financing, joint venture, license or similar arrangements or (iii) suffered
or permitted to be incurred any liability or obligation against any of its
properties or assets that would limit or restrict its ability to perform its obligations
hereunder.


 


3.8                                 Absence
of Litigation.  Except as disclosed
in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, (i) to the knowledge of the Company,
threatened against or affecting the Company or any of its officers or directors
acting as such that could, individually or in the aggregate, have a Material
Adverse Effect, or (ii) pending against or affecting the Company or any of
its officers or directors acting as such.


 


3.9                                 Intellectual
Property Rights.  The Company owns or
possesses the licenses or rights to use all patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and copyrights
necessary to enable it to conduct its business as now operated or as currently
proposed to be operated (the “Intellectual Property”).  Except as set forth in the SEC Documents, there
are no material outstanding


 


7





















 


options, licenses or agreements relating to the
Intellectual Property, nor is the Company bound by or a party to any material
options, licenses or agreements relating to the patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names or copyrights of any
other person or entity.  Except as
disclosed in the SEC Documents, there is no claim or action or proceeding
pending or, to the Company’s knowledge, threatened that challenges the right of
the Company with respect to any Intellectual Property.  Except as set forth in the SEC Documents, to
the knowledge of the Company, the Company’s Intellectual Property does not
infringe any intellectual property rights of any other person which, if the
subject of an unfavorable decision, ruling or finding would have a Material
Adverse Effect.


 


3.10                           Tax
Status.  The Company has timely made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has timely paid all taxes and other governmental assessments and
charges, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply.  To the knowledge of
the Company, there are no unpaid taxes claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax.  None of the Company’s tax returns is
presently being audited by any taxing authority.


 


3.11                           Environmental
Laws.  The Company (i) is in
compliance with all applicable foreign federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) has received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct its business and (iii) is in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing clauses, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.


 


3.12                           No
Integrated Offering.  Except for the
filing of a shelf registration statement on Form S-3 with the SEC on April 1,
2005, which registration statement has not been withdrawn or declared
effective, neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales in any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the issuance
of the Securities to the Investors. 
Based upon the policy position of the SEC, as described in the SEC staff’s
No-Action Letters dated June 26, 1990 to Black Box Incorporated and February 28,
1992 to Squadron, Ellenoff, Pleasant & Lehrer, and the Investors
representations in Article II, the issuance of the Securities to the
Investors will not be integrated with any other issuance of the Company’s
securities (past, current or future) for purposes of the Securities Act.  The issuance of the Securities to the
Investors will not be integrated with any other issuance of the Company’s
securities (past, current or future) for purposes of any applicable rules of
Nasdaq.


 


3.13                           No
Brokers.  The Company has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder’s fees or similar payments relating to this Agreement or
the transactions contemplated hereby, except for dealings with Punk, Ziegel &
Company, whose commissions and fees will be paid for by the Company.


 


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3.14                           Insurance.  The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged.


 


3.15                           Employment
Matters.  The Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not have a Material Adverse Effect. The Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Company’s knowledge, has
sought to represent any of the employees, representatives or agents of the
Company.  There is no strike or other
labor dispute involving the Company pending, or to the Company’s knowledge,
threatened nor is the Company aware of any labor organization activity
involving its employees.  The Company is
not aware that any officer or key employee, or that any group of officers or
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing.


 


3.16                           Employee
Benefit Plans.  Except as set forth
in the SEC Documents, the Company does not have any Employee Benefit Plans, as
such term is defined in the Employee Retirement Security Act of 1974.


 


3.17                           Investment
Company Status.  The Company is not
and upon consummation of the sale of the Securities will not be an “investment
company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as
amended.


 


3.18                           No
Subsidiaries.  Except for Sonus
Pharma, Limited, a wholly owned subsidiary of the Company organized under the
laws of the United Kingdom, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association,
joint venture, partnership or other business entity and the Company is not a
direct or indirect participant in any joint venture or partnership.


 


3.19                           No
Conflict of Interest.  The Company is
not indebted, directly or indirectly, to any of its officers or directors or to
their respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary
course of business or relocation expenses of employees.  None of the Company’s officers, directors or
employees, or any members of their immediate families, are directly, or
indirectly, indebted to the Company or, to the best of the Company’s knowledge,
have any direct or indirect ownership interest in any entity with which the
Company is affiliated or with which the Company has a business relationship, or
any entity which competes with the Company, except that officers, directors,
employees and/or stockholders of the Company may own stock in (but not
exceeding five percent (5%) of the outstanding capital stock of) any publicly traded
company that may compete with the Company. 
To the best of the Company’s knowledge, none of the Company’s officers,
directors or employees or any members of their immediate families are, directly
or indirectly, interested in any material contract with the Company.  The Company is not a guarantor or indemnitor
of any indebtedness of any other person or entity.


 


9





















 


3.20                           Nasdaq
Notification.  The Company has
notified Nasdaq of the issuance and listing of the Common Shares and Warrant
Shares on Nasdaq and the Common Shares and Warrant Shares have been approved
for quotation on Nasdaq, upon official notice of issuance.


 


3.21                           Reporting
Status; Eligibility to Use Form S-3. 
The Company’s Common Stock is registered under Section 12g of the
Exchange Act.  The Company currently
meets the “registrant eligibility” requirements set forth in the general
instructions to Form S-3 to enable the registration of the Registrable
Securities, as defined in the Registration Rights Agreement.


 


3.22                           No
Manipulation of Stock.  The Company
has not taken and will not, in violation of applicable law, take, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Common Shares.


 


3.23                           Representations
Complete.  The representations and
warranties made by the Company in this Agreement, the statements made in any
certificates furnished by the Company pursuant to this Agreement, and the
statements made by the Company in any documents mailed, delivered or furnished
to the Investors in connection with this Agreement, taken as a whole, do not
contain and will not contain, as of their respective dates and as of the Closing
Date, any untrue statement of a material fact, nor do they omit or will they
omit, as of their respective dates or as of the Closing Date, to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.


 


ARTICLE IV

COVENANTS


 


4.1                                 Best
Efforts.  Each party will use its
best efforts to satisfy in a timely fashion each of the conditions to be
satisfied by it under Articles VI and VII of this Agreement.  The Company shall use its best efforts to
comply with each of its covenants in this Agreement, the Registration Rights
Agreement and the Warrants, unless the use of best efforts conflicts with the
standard of conduct set forth in any such covenant, in which case such other
standard of conduct shall control.


 


4.2                                 Form D;
Blue Sky Laws.  The Company will
timely file a Notice of Sale of Securities on Form D with respect to the
Securities, as required under Regulation D. 
The Company will, on or before the Closing Date, take such action as it
reasonably determines to be necessary to qualify the Securities for sale to the
Investors under this Agreement under applicable securities (or “blue sky”) laws
of the states of the United States (or to obtain an exemption from such
qualification).


 


4.3                                 Continued
Eligibility to Use Form S-3. 
Throughout the Registration Period (as defined in the Registration
Rights Agreement), the Company will timely file all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC under
the reporting requirements of the Exchange Act, and the Company will not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.  The Company
will take all reasonably necessary action to continue to meet the “registrant
eligibility” requirements set forth in the general instructions to Form S-3
to enable the registration of the Registrable Securities as defined in the
Registration Rights Agreement.


 


10





















 


4.4                                 Expenses.  The Company and each Investor is liable for,
and will pay, its own expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, attorneys’
and consultants’ fees and expenses.


 


4.5                                 Financial
Information.  As long as an Investor
owns any of the Securities or Warrant Shares, the financial statements of the
Company will be prepared in accordance with United States generally accepted
accounting principles, consistently applied, and will fairly present in all
material respects the consolidated financial position of the Company and
results of its operations and cash flows as of, and for the periods covered by,
such financial statements (subject, in the case of unaudited statements, to
normal year-end audit adjustments).


 


4.6                                 Compliance
with Law.  As long as an Investor
owns any of the Securities or Warrant Shares, the Company will conduct its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, the failure to comply, individually or in the aggregate, with
which would have a Material Adverse Effect.


 


4.7                                 No
Integration.  The Company will not
make any offers or sales of any security or solicit offers to buy or otherwise
negotiate in respect of any offer or sale of any security (other than the
Securities) under circumstances that would cause the offering of the Securities
to be integrated with any other offering of securities by the Company (i) for
the purpose of any stockholder approval provision applicable to the Company or
its securities or (ii) for purposes of any registration requirement under
the Securities Act.


 


4.8                                 Sales
by Investors.  Each Investor will
sell any Securities sold by it in compliance with applicable prospectus
delivery requirements, if any, or otherwise in compliance with the requirements
for an exemption from registration under the Securities Act and the rules and
regulations promulgated thereunder.  No
Investor will make any sale, transfer or other disposition of the Securities in
violation of federal or state securities laws.


 


4.9                                 Contingent
Warrants.


 


(a)                                  In
the event the Company shall not have entered into a definitive collaboration
agreement between the Company and a third party with respect to the development
or marketing of TOCOSOL Paclitaxel, which includes present or future
consideration payable by such third party to the Company, whether in the form
of up front payments, future milestone payments, reimbursements of clinical
trial or other development expenses, royalties or investments, and which covers
a territory that includes the United States (a “Partnership”) on or prior to December 31,
2005 (the “Trigger Date”), the Company shall issue to each of the Investors an
additional warrant in the form of Exhibit A to purchase such number
of shares of the Company’s Common Stock equal to 15% of the Common Shares
purchased by each Investor on the Closing Date under this Agreement, rounded up
to the nearest whole share (the “Contingent Warrants”).


 


11





















 


(b)                                 The
purchase price for each Contingent Warrant is $.125 multiplied by the number of
Shares of Common Stock purchasable under each Contingent Warrant (the “Contingent
Warrant Shares”).  As a condition to the
issuance of a Contingent Warrant to each Investor, such Investor shall deliver
to the Company the purchase price for such Contingent Warrant.  By paying the purchase price for a Contingent
Warrant and accepting such Contingent Warrant, each Investor confirms the
representations and warranties of such Investor set forth in Article II of
this Agreement with respect to the purchase of such Contingent Warrant.


 


(c)                                  If
the Company has not entered into a Partnership on or prior to the Trigger Date,
within five (5) business days after the Trigger Date, the Company shall
provide notice to each Investor to that effect pursuant to the notice
provisions set forth in Section 10.7.  The notice shall include the number of Contingent
Warrant Shares that such investor is entitled to purchase under the Contingent
Warrant to be issued to such Investor, the aggregate purchase price for such
Contingent Warrant and payment instructions. 
Each Investor shall forward the purchase price set forth in the notice
within ten (10) business days following receipt of such notice.  The Company shall deliver to each Investor a
warrant certificate in the form of Exhibit A representing the
Contingent Warrant so purchased by each Investor within two (2) business
days following receipt of the purchase price for such Contingent Warrant.  Failure by any Investor to deliver the
purchase price for such Investor’s Contingent Warrant shall forfeit such
Investor’s right to receive a Contingent Warrant and the Company shall have no
further obligations under this Section 4.9 with respect to such Investor.


 


(d)                                 For
purposes of the Company’s and the Investors’ rights and obligations under this Section 4.9,
the terms Warrants and Securities as used in this Agreement shall include the
Contingent Warrants and the term Warrant Shares as used in this Agreement shall
include the Contingent Warrant Shares.


 


ARTICLE V

TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS


 


5.1                                 Issuance
of Certificates.  The Company will,
or will instruct its transfer agent to, issue certificates, registered in the
name of each Investor or its nominee, for the Securities and, promptly upon
exercise of any Warrants, the applicable Warrant Shares.  All such certificates will bear the
restrictive legend described in Section 2.7, except as otherwise specified
in this Article V.  The Company will
not give to its transfer agent any instruction other than as described in this Article V
and stop transfer instructions to give effect to Section 2.7 hereof (prior
to registration of the Securities under the Securities Act).  Nothing in this Section will affect in
any way the Investor’s obligations to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Common Shares and/or Warrant
Shares.


 


5.2                                 Unrestricted
Securities.  If, unless otherwise
required by applicable state securities laws, (a) the Securities or
Warrant Shares represented by a certificate have been registered under an
effective registration statement filed under the Securities Act, (b) a
holder of Securities or Warrant Shares provides the Company and its transfer
agent with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Securities or Warrant Shares may be made without
registration under the Securities Act and such sale either has occurred or may
occur without restriction on the manner of such sale or transfer, (c) such
holder provides the Company and its transfer agent with reasonable assurances
that such Securities or Warrant


 


12





















 


Shares can be sold under Rule 144, or (d) the
Securities or Warrant Shares represented by a certificate can be sold without
restriction as to the number of securities sold under Rule 144(k), the
Company will permit the transfer of the Securities or Warrant Shares, and the
Company’s transfer agent will issue one or more certificates, free from any
restrictive legend, in such name and in such denominations as specified by such
holder.  Notwithstanding anything herein
to the contrary, the Securities or Warrant Shares may be pledged as collateral
in connection with a bona fide margin account or other lending arrangement; provided,
that such pledge will not alter the provisions of this Article V with
respect to the removal of restrictive legends.


 


5.3                                 Enforcement
of Provision.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor by vitiating the intent and purpose of the
transaction contemplated hereby. 
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Article V will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section, that the Investor will be entitled, in addition to
all other available remedies, to an injunction restraining any breach and
requiring immediate transfer of the Securities and/or Warrant Shares, as
applicable, without the necessity of showing economic loss and without any bond
or other security being required.


 


ARTICLE VI

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL


 


The
obligation of the Company to issue and sell the Securities to each Investor at
the Closing is subject to the satisfaction by such Investor, on or before the
Closing Date, of each of the following conditions.  These conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion:


 


6.1                                 The
Investor will have executed this Agreement, the Investor Questionnaire and the
Registration Rights Agreement and will have delivered those agreements to the
Company.


 


6.2                                 The
Investor will have delivered the purchase price for the Securities to the
Company in accordance with this Agreement.


 


6.3                                 The
representations and warranties of the Investor must be true and correct in all
material respects as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date, which
representations and warranties must be correct as of such date), and the
Investor will have performed and complied in all material respects with the
covenants and conditions required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.


 


6.4                                 No
statute, rule, regulation, executive order, decree, ruling or injunction will
have been enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Warrants.


 


ARTICLE VII

CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE


 


The
obligation of each Investor hereunder to purchase the Securities from the
Company at the Closing is subject to the satisfaction, on or before the Closing
Date, of each of the following conditions. 
These conditions are for each Investor’s respective benefit and may be
waived by any Investor at any time in its sole discretion:


 


13





















 


7.1                                 The
Company will have executed this Agreement, the Registration Rights Agreement
and the Warrants and will have delivered those Agreements to the Investor.


 


7.2                                 The
Investors shall have received an opinion of counsel from Stradling Yocca
Carlson & Rauth, counsel to the Company, reasonably acceptable to
Investors and their counsel.


 


7.3                                 Each
of the representations and warranties of the Company qualified by materiality
must be true and correct in all respects as of the Closing as though made at
that time (except for representations and warranties that speak as of a
specific date, which representations and warranties must be true and correct as
of such date) and each of the representations and warranties of the Company not
qualified by materiality must be true and correct in all material respects as
of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be true and correct as of such date) and the Company must have
performed and complied in all material respects with the covenants and
conditions required by this Agreement to be performed or complied with by the
Company at or prior to the Closing.  The
Investor must have received a certificate or certificates dated as of the
Closing Date and executed by the Chief Executive Officer or the Chief Financial
Officer of the Company certifying as to the matters in contained in this Section 7.3
and as to such other matters as may be reasonably requested by such Investor,
including, but not limited to, the Company’s Certificate of Incorporation,
Bylaws, Board of Directors’ resolutions relating to the transactions
contemplated hereby and the incumbency and signatures of each of the officers
of the Company who may execute on behalf of the Company any document delivered
at the Closing.


 


7.4                                 No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction will have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement or the Registration Rights Agreement or the Warrants and
which could, individually or in the aggregate, have a Material Adverse Effect.


 


7.5                                 Trading
and listing of the Common Stock on Nasdaq must not have been suspended by the
SEC or Nasdaq.


 


7.6                                 Irrevocable
transfer agent instructions, in form and substance satisfactory to the
Investors, will have been delivered to the Company’s transfer agent.


 


ARTICLE VIII

INDEMNIFICATION


 


In
consideration of each Investor’s execution and delivery of this Agreement and
its acquisition of the Securities hereunder, and in addition to all of the
Company’s other obligations under this Agreement and the Registration Rights
Agreement and the Warrants, the Company will defend, protect, indemnify and
hold harmless each Investor and each other holder of the Securities and all of
their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person’s agents or other representatives
(including, without limitation, those retained in


 


14





















 


connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (regardless of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by an Indemnitee as a result of, or arising out of, or relating to (a) any
breach of any representation or warranty made by the Company herein or in any
other certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained herein
or in any other certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance, breach or enforcement of this Agreement or the Registration Rights
Agreement or Warrants by the Company.  To
the extent that the foregoing undertaking by the Company is unenforceable for
any reason, the Company will make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.


 


The
Indemnitees shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitees unless: (i) the
Company has agreed in writing to pay such fees and expenses; (ii) the
Company shall have failed to promptly assume the defense of such proceeding and
to employ counsel reasonably satisfactory to such Indemnitees in any such proceeding;
or (iii) the named parties to any such proceeding (including any impleaded
parties) include both such Indemnitees and the Company, and such Indemnitees
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnitees and the Company
(in which case, if such Indemnitees notify the Company in writing that they
elect to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense thereof and such counsel shall
be at the reasonable expense of the Company; provided, however, that in no
event shall the Company be responsible for the fees and expenses of more than
one separate counsel).  The Company shall
not be liable for any settlement of any such proceeding effected without its
written consent, which consent shall not be unreasonably withheld.  The Company shall not, without the prior
written consent of a majority of the Indemnitees, effect any settlement of any
pending proceeding in respect of which Indemnitees are a party, unless such
settlement includes an unconditional release of such Indemnitees from all
liabilities that are the subject matter of such proceeding.  Subject to the foregoing, all fees and
expenses (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend any such proceeding in a
manner inconsistent with this Article VIII) of the Indemnitees shall be
paid to the Indemnitees as incurred, within ten (10) business days of
written notice thereof to the Company, which notice shall be delivered no more
frequently than on a monthly basis; provided, that the Indemnitees shall
reimburse the Company for any and all such fees and expenses to the extent it
is finally judicially determined that such Indemnitees are not entitled to
indemnification hereunder.


 


ARTICLE IX

DEFINITIONS


 


9.1                                 “Closing”
means the closing of the purchase and sale of the Securities under this
Agreement.


 


9.2                                 “Closing
Date” has the meaning set forth in Section 1.3.


 


15





















 


9.3                                 “Common
Shares” has the meaning set forth in the Recitals.


 


9.4                                 “Common
Stock” means the common stock, par value $.001 per share, of the Company.


 


9.5                                 “Company”
means Sonus Pharmaceuticals, Inc.


 


9.6                                 “Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


9.7                                 “Indemnified
Liabilities” has the meaning set forth in Article VIII.


 


9.8                                 “Indemnitees”
has the meaning set forth in Article VIII.


 


9.9                                 “Investors”
means the investors whose names are set forth on the signature pages of
this Agreement, and their permitted transferees.


 


9.10                           “Material
Adverse Effect” means a material adverse effect on (a) the business,
operations, prospects, assets or financial condition of the Company or (b) the
ability of the Company to perform its obligations pursuant to the transactions
contemplated by this Agreement or under the agreements or instruments to be
entered into or filed in connection herewith, including the Registration Rights
Agreement and the Warrants.


 


9.11                           “Nasdaq”
means the Nasdaq National Market System.


 


9.12                           “Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the
date of this Agreement and among the parties to this Agreement, in the form
attached hereto as Exhibit D.


 


9.13                           “Regulation
D” means Regulation D as promulgated under by the SEC under the Securities
Act.


 


9.14                           “Rule 144”
and “Rule 144(k)” mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.


 


9.15                           “SEC”
means the United States Securities and Exchange Commission.


 


9.16                           “SEC
Documents” has the meaning set forth in Section 3.6.


 


9.17                           “Securities”
has the meaning set forth in the Recitals.


 


9.18                           “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute.


 


9.19                           “Warrants”
and “Warrant Shares” have the meanings set forth in the Recitals.


 


16





















 


ARTICLE X

GOVERNING LAW; MISCELLANEOUS


 


10.1                           Governing
Law; Jurisdiction; Jury Trial Waiver. 
This Agreement will be governed by and interpreted in accordance with
the laws of the State of New York without regard to the principles of conflict
of laws.  The parties hereto hereby
submit to the exclusive jurisdiction of the United States federal and state
courts located in the State of New York with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT THAT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR WITH ANY TRANSACTION CONTEMPLATED HEREBY.


 


10.2                           Counterparts;
Signatures by Facsimile.  This
Agreement may be executed in two or more counterparts, all of which are
considered one and the same agreement and will become effective when
counterparts have been signed by each party and delivered to the other
parties.  This Agreement, once executed
by a party, may be delivered to the other parties hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.


 


10.3                           Independent
Nature of Investors’ Obligations and Rights.  The obligations of each Investor under this
Agreement, the Registration Rights Agreement and the Warrants are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under such agreements.  Nothing
contained herein or in the Registration Rights Agreement or the Warrants, and
no action taken by any Investor pursuant hereto or thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Investors are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement. 
Each Investor confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors.  Each Investor shall
be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement, the Registration Rights
Agreement or the Warrants, and it shall not be necessary for any other Investor
to be joined as an additional party in any proceeding for such purpose.


 


10.4                           Headings.  The headings of this Agreement are for
convenience of reference only, are not part of this Agreement and do not affect
its interpretation.


 


10.5                           Severability.  If any provision of this Agreement is invalid
or unenforceable under any applicable statute or rule of law, then such
provision will be deemed modified in order to conform with such statute or rule of
law.  Any provision hereof that may prove
invalid or unenforceable under any law will not affect the validity or
enforceability of any other provision hereof.


 


10.6                           Entire
Agreement; Amendments.  This
Agreement and the Registration Rights Agreement (including all schedules and
exhibits thereto) and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein.  This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.  No provision
of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.


 


17





















 


10.7                           Notices.  Any notices required or permitted to be given
under the terms of this Agreement must be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and will be effective three
business days after being placed in the mail, if mailed by regular U.S. mail,
or upon receipt, if delivered personally, by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.  The addresses for such communications are:


 


If to the Company:                                                                                                                                             Chief
Financial Officer


Sonus
Pharmaceuticals, Inc.


22026
20th Avenue S.E.


Bothell,
Washington 98021


Fax:  (425) 489-0626


 


With copies to:                                                                                                                                                              K.C.
Schaaf, Esq.


Stradling
Yocca Carlson & Rauth


660 Newport
Center Drive, Suite 1600


Newport
Beach, California 92660


Fax:  (949) 725-4100


 


Edwin
H. Gordon


Punk
Ziegel & Company, L.P.


520
Madison Avenue


New
York, New York 10020


Fax:  (212) 308-2203


 


If to
an Investor:  To the address set forth
immediately below such Investor’s name on the signature pages hereto.


 


Each
party will provide written notice to the other parties of any change in its
address in accordance with the notice provisions hereof.


 


10.8                           Successors
and Assigns.  This Agreement is
binding upon and inures to the benefit of the parties and their successors and
assigns.  The Company will not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Investors, and no Investor may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Company.  Notwithstanding the foregoing,
an Investor may assign all or part of its rights and obligations hereunder to
any of its “affiliates,” as that term is defined under the Securities Act,
without the consent of the Company so long as the affiliate is an accredited
investor (within the meaning of Regulation D under the Securities Act) and
agrees in writing to be bound by this Agreement.  This provision does not limit the Investor’s
right to transfer the Securities pursuant to the terms of this Agreement or to
assign the Investor’s rights hereunder to any such transferee pursuant to the
terms of this Agreement.


 


10.9                           Third
Party Beneficiaries.  This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and, except as contemplated in Section 2.10,
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.


 


 


18





















 


10.10                     Survival.  The representations and warranties of the
Company and the agreements and covenants set forth herein will survive the
Closing hereunder for a period of twelve (12) months.  The Company makes no representations or
warranties in any oral or written information provided to Investors, other than
the representations and warranties included herein.


 


10.11                     Further
Assurances.  Each party will do and
perform, or cause to be done and performed, all such further acts and things,
and will execute and deliver all other agreements, certificates, instruments
and documents, as another party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.


 


10.12                     No Strict
Construction.  The language used in
this Agreement is deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.


 


10.13                     Equitable
Relief.  The Company recognizes that,
if it fails to perform or discharge any of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Investors.  The Company therefore agrees
that the Investors are entitled to seek temporary and permanent injunctive
relief in any such case.


 


19





















 


IN
WITNESS WHEREOF, the undersigned Investors and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first above
written.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  SONUS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Michael A. Martino

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael
  A. Martino

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President
  and CEO

  	
   

  
	
   

  	
   

  
	
  For purposes of Section 2.10
  hereof:

  	
   

  
	
   

  	
   

  
	
  PUNK ZIEGEL &
  COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Edwin H. Gordon

  	
   

  	
   

  
	
  Edwin
  H. Gordon

  	
   

  
	
  Managing
  Director

  	
   

  
								



 


20





















 


OMNIBUS SIGNATURE PAGE TO


SONUS PHARMACEUTICALS, INC.


SECURITIES PURCHASE AGREEMENT


 


The
undersigned hereby executes and delivers the Securities Purchase Agreement to
which this Signature Page is attached, which, together with all
counterparts of the Agreement and Signature Pages of the other parties
named in said Agreement, shall constitute one and the same document in
accordance with the terms of the Agreement.


 


 


	
   

  	
  Sign Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
  Facsimile:

  	
   

  
	
   

  	
   

  
	
   

  	
  Number of
  Securities Purchased:

  
	
   

  	
   

  
	
   

  	
  Common Shares:

  	
   

  
	
   

  	
  Warrants (Number
  of Warrant Shares):

  	
   

  
					



 


21





















 


SCHEDULE OF INVESTORS


 


22





















 


Exhibit A


Form of Warrant


 


A-1





















 


Exhibit B


Wire Transfer Instructions


 


Please remit payment to:


 


Wells
Fargo Bank


5
Corporate Plaza


Newport
Beach, CA  92660


 


Routing
#:


Account
#:


 


A/C
Name:                                      Stradling
Yocca Carlson & Rauth


Trust
Account


 


B-1





















 


Exhibit C


Investor Questionnaire


 


I certify
that I am a Qualified Institutional Buyer because I fall within one of the
following categories.


 


____  One of the following entities, acting for its
own account or the accounts of other qualified institutional buyers, that in
the aggregate owns and invests on a discretionary basis at least $100 million
in securities of issuers that are not affiliated with the entity:


 


____  An insurance company as defined in section 2(a)(13)
of the Securities Act;


 


____  An investment company registered under the
Investment Company Act or any business development company as defined in section 2(a)(48)
of that Securities Act;


 


____  A Small Business Investment Company licensed
by the U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958;


 


____  A plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees;


 


____  An employee benefit plan within the meaning
of title I of the Employee Retirement Income Security Act of 1974;


 


____  A trust fund whose trustee is a bank or trust
company and whose participants are exclusively plans of the types identified in
paragraph (a)(1)(i)(D) or (E) of this section, except trust funds
that include as participants individual retirement accounts or H.R. 10 plans;


 


____  A business development company as defined in section 202(a)(22)
of the Investment Advisers Act of 1940;


 


____  An organization described in section 501(c) (3) of
the Internal Revenue Code, corporation (other than a bank as defined in section 3(a)(2) of
the Act or a savings and loan association or other institution referenced in section 3(a)(5)(A) of
the Act or a foreign bank or savings and loan association or equivalent
institution), partnership, or Massachusetts or similar business trust; or


 


____  An investment adviser registered under the
Investment Advisers Act.


 


____  A dealer registered pursuant to section 15
of the Exchange Act, acting for its own account or the accounts of other
qualified institutional buyers, that in the aggregate owns and invests on a
discretionary basis at least $10 million of securities of issuers that are not
affiliated with the dealer; provided, that securities constituting the whole or
a part of an unsold allotment to or subscription by a dealer as a participant
in a public offering shall not be deemed to be owned by such dealer;


 


____  A dealer registered pursuant to section 15
of the Exchange Act acting in a riskless principal transaction on behalf of a
qualified institutional buyer;


 


C-1





















 


____  An investment company registered under the
Investment Company Act, acting for its own account or for the accounts of other
qualified institutional buyers, that is part of a family of investment companies
which own in the aggregate at least $100 million in securities of issuers,
other than issuers that are affiliated with the investment company or are part
of such family of investment companies.


 


____  An entity, all of the equity owners of which
are qualified institutional buyers, acting for its own account or the accounts
of other qualified institutional buyers; or


 


____  A bank as defined in section 3(a)(2) of
the Act, any savings and loan association or other institution as referenced in
section 3(a)(5)(A) of the Act, or any foreign bank or savings and
loan association or equivalent institution, acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate owns
and invests on a discretionary basis at least $100 million in securities of
issuers that are not affiliated with it and that has an audited net worth of at
least $25 million as demonstrated in its latest annual financial statements, as
of a date not more than 16 months preceding the date of sale under the Rule in
the case of a U.S. bank or savings and loan association, and not more than 18
months preceding such date of sale for a foreign bank or savings and loan
association or equivalent institution.


 


Family of
investment companies.  “Family
of investment companies” means any two
or more investment companies registered under the Investment Company Act,
except for a unit investment trust whose assets consist solely of shares of one
or more registered investment companies, that have the same investment adviser
(or, in the case of unit investment trusts, the same depositor); provided that,
for purposes of this definition:


 


a.                                       Each
series of a series company (as defined in Rule 18f-2 under the Investment
Company Act) shall be deemed to be a separate investment company; and


 


b.                                      Investment
companies shall be deemed to have the same adviser (or depositor) if their
advisers (or depositors) are majority-owned subsidiaries of the same parent, or
if one investment company’s adviser (or depositor) is a majority-owned
subsidiary of the other investment company’s adviser (or depositor).


 


Riskless
Principal Transaction. 
“Riskless principal transaction” means a transaction in which a dealer
buys a security from any person and makes a simultaneous offsetting sale of
such security to a qualified institutional buyer, including another dealer
acting as riskless principal for a qualified institutional buyer.


 


Aggregate
Amount of Securities.


 


a.                                       In
determining the aggregate amount of securities owned and invested on a
discretionary basis by an entity, the following instruments and interests shall
be excluded: bank deposit notes and certificates of deposit; loan
participations; repurchase agreements; securities owned but subject to a
repurchase agreement; and currency, interest rate and commodity swaps; and


 


b.                                      In
determining the aggregate amount of securities owned by an entity and invested
on a discretionary basis, securities owned by subsidiaries of the entity that
are consolidated with the entity in its financial statements prepared in
accordance with generally accepted accounting principles may be included if the
investments of such subsidiaries are managed under the direction of


 


C-2





















 


the entity, except that,
unless the entity is a reporting company under section 13 or 15(d) of
the Exchange Act, securities owned by such subsidiaries may not be included if
the entity itself is a majority-owned subsidiary that would be included in the
consolidated financial statements of another enterprise.


 


Aggregate
Value of Securities. 
The aggregate value of securities owned and invested on a discretionary
basis by an entity shall be the cost of such securities, except where the
entity reports its securities holdings in its financial statements on the basis
of their market value, and no current information with respect to the cost of
those securities has been published. In the latter event, the securities may be
valued at market for purposes of determining whether an entity falls within one
of the categories of qualified institutional buyer.


 


____  I certify that I am a
large institutional accredited investor as that term is used in the SEC staff’s
No-Action Letter dated February 28, 1992 to Squadron, Ellenoff, Pleasant &
Lehrer.


 


	
  Dated: August        ,
  2005

  	
   

  	
   

  



 


C-3





















 


Exhibit D


 


Registration Rights Agreement


 


D-1