Exhibit 10.4


 


REGISTRATION RIGHTS AGREEMENT


 


by and between


 


ACUSPHERE, INC.,


 


and


 


CEPHALON, INC.


 


dated as of


 


                            ,
2008


 

















 


REGISTRATION
RIGHTS AGREEMENT, dated as of
                      
(this “Agreement”), by and between Acusphere, Inc., a Delaware
corporation (the “Company”), and Cephalon, Inc.,
a Delaware corporation (the “Purchaser”).


 


WHEREAS,
pursuant to the Note Purchase Agreement, dated as of October 24, 2008 (the
“Purchase Agreement”), by and between the
Company and the Purchaser, upon the terms and subject to the conditions
contained therein, the Company is issuing and selling to the Purchaser a
$15,000,000 Senior Secured Convertible Note of the Company (the “Convertible
Note”);


 


WHEREAS, to
induce the Purchaser to execute and deliver the Purchase Agreement and as a
condition to the Purchaser consummating the transactions contemplated thereby,
the Company has agreed to provide the Purchaser with the rights set forth in
this Agreement.


 


Accordingly,
the parties hereto agree as follows:


 


SECTION 1.  Definitions. 
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:


 


1.1.                            “Affiliate” means with respect to any Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.


 


1.2.                            “Agreement”
has the meaning set forth in the introduction.


 


1.3.                            “Assignee” has the meaning set forth in Section 4.2.


 


1.4.                            “Board of Directors” means the board of directors
of the Company.


 


1.5.                            “Common Stock” means any shares of common stock,
par value $0.01 per share, of the Company, now or hereafter authorized to be
issued, and any and all securities of any kind whatsoever of the Company or any
successor thereof which may be issued on or after the date hereof in respect
of, in exchange for, or upon conversion of shares of Common Stock pursuant to a
merger, consolidation, stock split, reverse split, stock dividend,
recapitalization of the Company or otherwise.


 


1.6.                            “Company” has the meaning set forth in the
introduction.


 


1.7.                            “Convertible Note” has the meaning set forth in
the recitals.


 


1.8.                            “Convertible Securities” shall mean (i) any
options or warrants to purchase or other rights to acquire Common Stock, (ii) any
securities by their terms convertible into or exchangeable for Common Stock,
and (iii) any options or warrants to purchase or other rights to acquire
any such convertible or exchangeable securities.


 


1.9.                            “Demand Exercise Notice” has the meaning set forth
in Section 2.1(a).


 


1.10.                     “Demand Registration” has the meaning set forth in
Section 2.1(g).


 

















 


1.11.                     “Exchange Act” means the Securities Exchange Act
of 1934, as amended, or any similar federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the
time.  Reference to a particular section
of the Exchange Act, shall include a reference to the comparable section, if
any, of any such similar federal statute.


 


1.12.                     “Holder” means the Purchaser and any Assignee.


 


1.13.                     “Holder Demand” has the meaning set forth in Section 2.1(a).


 


1.14.                     “Indemnified Party” means any Person seeking
indemnification pursuant to Section 2.6.


 


1.15.                     “Indemnifying Party” means any Person from whom
indemnification is sought pursuant to Section 2.6.


 


1.16.                     “Indemnitees” has the meaning set forth in Section 2.6(a).


 


1.17.                     “Initiating Holder” means the party or parties
delivering a Holder Demand as provided for under Section 2.1(a).


 


1.18.                     “Losses” has the meaning set forth in Section 2.6(a).


 


1.19.                     “Majority Participating Holders” means, at any
time, Participating Holders holding more than 50% of the Registrable Securities
proposed to be included in any offering of Registrable Securities by such
Participating Holders pursuant to Section 2.1 or Section 2.2.


 


1.20.                     “NASD” means National Association of Securities
Dealers, Inc.


 


1.21.                     “Nasdaq” means The Nasdaq Stock Market, Inc.


 


1.22.                     “Participating Holders” means any Holder
participating in any offering of Registrable Securities pursuant to Section 2.1
or Section 2.2.


 


1.23.                     “Person” means an individual, a corporation, a
partnership, a limited liability company, a business, an association, a trust,
an individual, or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.


 


1.24.                     “Postponement Period” has the meaning set forth in
Section 2.1(i).


 


1.25.                     “Purchase Agreement” has the meaning set forth in
the recitals.


 


1.26.                     “Purchaser” has the meaning set forth in the introduction
and includes any successor thereto by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.


 


1.27.                     “Qualified
Independent Underwriter” has the meaning set forth in NASD Rule 2720(b)(15).


 


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1.28.                     “Registrable Securities” means any of the
following when held by a Holder: (i) any shares of Common Stock issued
upon the conversion of the Convertible Note, and (ii) any shares of Common
Stock acquired by the Holders from the Company after the date hereof, including
shares of Common Stock acquired upon exercise or conversion of Convertible
Securities that are acquired by the Holders from the Company after the date
hereof.  For purposes of this Agreement,
a Person will be deemed to a Holder of Registrable Securities whenever such
Person has the right to acquire, directly or indirectly, such Registrable
Securities (upon conversion, exercise or exchange of the Convertible Note or
any other Convertible Securities but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Person shall not be required to convert,
exercise or exchange such Convertible Security (or otherwise acquire such
Registrable Security) to participate on any registered offering hereunder until
the closing of such offering.  As to any
particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to
the sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement or (b) when such securities shall have been sold
pursuant to Rule 144 under the Securities Act or similar rule then in
effect.


 


1.29.                     “Registration Expenses” means all fees and
expenses incurred in connection with the Company’s performance of or compliance
with Section 2 hereof, including, without limitation, (i) all
registration, filing and applicable SEC fees, NASD fees, national securities
exchange or inter-dealer quotation system fees, and fees and expenses of
complying with state securities or “blue sky” laws (including fees and
disbursements of counsel to the underwriters and the Participating Holders in
connection with “blue sky” qualification of the Registrable Securities and
determination of their eligibility for investment under the laws of the various
jurisdictions), (ii) all printing (including printing certificates for the
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and printing preliminary and final prospectuses), word processing,
duplicating, telephone and facsimile expenses, and messenger and delivery
expenses, (iii) all fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of “cold comfort”
letters or any special audits required by, or incident to, such registration, (iv) all
reasonable fees and expenses of one law firm or other counsel selected by the
Majority Participating Holders for the benefit of all of the Participating
Holders, (v) all reasonable fees and expenses of any special experts or
other Persons retained by the Company in connection with any registration, (vi) Securities
Act liability insurance or similar insurance if the Company so desires or the
underwriters so require in accordance with then-customary underwriting
practices, (vii) all applicable rating agency fees with respect to the
Registrable Securities, (viii) reasonable fees and expenses of a Qualified
Independent Underwriter and its counsel, (ix) all fees and disbursements
of the underwriters (other than underwriting discounts and commissions but,
including reasonable fees and disbursements of one counsel for such
underwriters), (x) all transfer taxes, and (xi) all expenses incurred in
connection with promotional efforts or “roadshows” (as negotiated by the
Company with the underwriters); provided, however, that Registration Expenses shall exclude,
and the Participating Holders shall pay ratably, underwriting discounts and
commissions in respect of the Registrable Securities being registered for such
Participating Holders.


 


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1.30.                     “SEC” means the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.


 


1.31.                     “Section 2.2 Sale Amount” has the meaning set
forth in Section 2.2(c).


 


1.32.                     “Securities Act” means the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.  References to a particular section of the
Securities Act shall include a reference to the comparable section, if any, of
any such similar federal statute.


 


SECTION 2.                      Registration Under the Securities Act.


 


2.1.                            Registration on Demand.


 


(a)                                  Demand.  At
any time or from time to time, a Holder or Holders holding a majority of
Registrable Securities then outstanding may require the Company to use its best
efforts to effect the registration under the Securities Act of all or part of
their respective Registrable Securities, by delivering a written request (a “Holder Demand”) therefor to the Company
specifying the number of shares of Registrable Securities to be registered and
the intended method of distribution thereof. 
As promptly as practicable, but no later than 20 days after receipt of a
Holder Demand, the Company shall give written notice (the “Demand Exercise Notice”) of the Holder Demand to
all Holders of Registrable Securities. 
Such Holders shall have the option, within 10 days after the receipt of
the Demand Exercise Notice, to request, in writing, that the Company include in
such registration any Registrable Securities held by such Holder (which request
shall specify the maximum number of Registrable Securities intended to be
disposed of by such Holder).  The Company
shall as expeditiously as possible use its best efforts to effect the
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register by the Initiating Holder and any
other Holders which have made such written request.  The Company shall use its best efforts (i) to
effect as soon as practicable (but, in any event, within 30 days of the receipt
of the Holder Demand or, in the event the SEC reviews and has written comments
to the registration statement, within 90 days of the receipt of the Holder
Demand) the registration of Registrable Securities for distribution in
accordance with the intended method of distribution set forth in a written
request delivered by the Majority Participating Holders and (ii) if
requested by the Majority Participating Holders, obtain acceleration of the
effective date of the registration statement relating to such registration.


 


(b)                                  Registration Statement Form.  Registrations under this Section 2.1
shall be on such appropriate form of the SEC 
which the Company is then eligible to use for such purpose (i) as
shall be selected by the Company and as shall be reasonably acceptable to the
Majority Participating Holders and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods
of disposition specified in such Participating Holders’ requests for such
registration, including, without limitation, a continuous or delayed basis
offering pursuant to Rule 415 under the Securities Act to the extent
available to the Company.  The Company
agrees to include in any such registration statement all information which, in
the opinion of counsel to the Participating Holders and counsel to the Company,
is necessary or desirable to be included therein.


 


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(c)                                  Expenses. 
The Company shall pay, and shall be responsible for, all Registration
Expenses in connection with any registration requested pursuant to this Section 2.1.


 


(d)                                  Effective Registration Statement.  A registration requested pursuant to this Section 2.1
shall not be deemed a Demand Registration (including for purposes of Section 2.1(g))
unless a registration statement with respect thereto has become effective and
unless the Participating Holders are able to sell at least 80% of the
Registrable Securities requested to be included in such registration; provided,
that a registration which is withdrawn at the sole request of the Majority
Participating Holders pursuant to Section 2.1(f) will count as a
Demand Registration unless (i) the Demand Registration does not become
effective because a material adverse change has occurred, or is reasonably
likely to occur, in the condition (financial or otherwise), prospects,
business, assets or results of operations of the Company and its subsidiaries
taken as a whole subsequent to the date of the delivery of the Demand Exercise
Notice, (ii) after the Demand Registration has become effective, such
registration is interfered with by any stop order, injunction, or other order
or requirement of the SEC or other governmental agency or court, (iii) the
Demand Registration is withdrawn at the request of the Majority Participating
Holders due to the advice of the managing underwriter(s) that the
Registrable Securities covered by the registration statement could not be sold
in such offering within a price range acceptable to the Majority Participating
Holders, (iv) the Demand Registration is withdrawn for any reason at any
time during a Postponement Period or within 10 days thereafter or (v) the
Participating Holders reimburse the Company for any and all Registration
Expenses incurred by the Company in connection with such request for a Demand
Registration that was withdrawn or not pursued, in which case the Demand
Registration shall not be deemed to have been effected and will not count as a
Demand Registration.


 


(e)                                  Selection of Underwriters.  The underwriters of each underwritten
offering of the Registrable Securities pursuant to this Section 2.1 shall
be selected by the Majority Participating Holders, which underwriters shall be
reasonably acceptable to the Company.


 


(f)                                    Right to Withdraw.  Any Participating Holder shall have the right
to withdraw its request for inclusion of Registrable Securities in any
registration statement pursuant to this Section 2.1 at any time prior to
the effective date of such registration statement by giving written notice to
the Company of its request to withdraw. 
Upon receipt of notices from the Majority Participating Holders to such
effect, the Company shall cease all efforts to obtain effectiveness of the
applicable registration statement, and whether the Initiating Holder’s request
for registration pursuant to this Section 2.1 shall be counted as a Demand
Registration for purposes of Section 2.1(g) shall be determined in
accordance with Section 2.1(d) above.


 


(g)                                 Limitations on Registration on Demand.  The Holders shall be entitled to require the
Company to effect, and the Company shall be required to effect, four (4) registrations
in the aggregate pursuant to this Section 2.1 (each, a “Demand Registration”): provided,
however, that the Company shall not be
required to have a registration statement declared effective pursuant to a
Demand Registration until at least 90 days after the effective date of any
other registration statement filed by the Company pursuant to a previous Demand
Registration.


 


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(h)                                 Priority in Registrations on Demand.  Whenever the Company effects a registration
pursuant to this Section 2.1 in connection with an underwritten offering
by Holders, no securities other than Registrable Securities shall be included
among the securities covered by such registration unless the Majority
Participating Holders consent in writing to the inclusion therein of such other
securities, which consent may be subject to terms and conditions determined by
the Majority Participating Holders in their sole discretion.  If any registration pursuant to a Holder
Demand involves an underwritten offering and the managing underwriter(s) of
such offering shall inform the Company in writing of its belief that the number
of Registrable Securities requested to be included in such registration
pursuant to this Section 2.1, when added to the number of any other
securities to be offered in such registration, would materially adversely
affect such offering, then the Participating Holders shall be entitled to
participate on a pro
rata basis based on the number of shares of Registrable Securities
requested to be included in the offering by each such Participating Holder
prior to the inclusion of any securities other than Registrable Securities.


 


(i)                                    Postponement. 
The Company shall be entitled once in any twelve month period to
postpone for a reasonable period of time (but not exceeding 90 days) (the “Postponement
Period”) the filing of any registration statement required to be prepared
and filed by it pursuant to this Section 2.1 if the Company determines, in
its reasonable judgment, upon advice of counsel, as authorized by a resolution
of the Board of Directors, that such registration and offering would require
premature disclosure of any material financing, material corporate
reorganization or other material transaction involving the Company, and
promptly gives the Participating Holders written notice of such determination,
containing, to the extent each such Participating Holder agrees to keep such
information confidential in accordance with Regulation FD, a specific statement
of the reasons for such postponement and an approximation of the anticipated
delay.


 


2.2.                            Incidental Registration.


 


(a)                                  Right to Include Registrable Securities.  If the Company at any time proposes to
register any of its equity securities under the Securities Act by registration
on Form S-l, S-2 or S-3, or any successor or similar form(s) (except
registrations (i) pursuant to Section 2.1, (ii) solely for
registration of equity securities in connection with an employee benefit plan
(as defined in Rule 405 under the Securities Act) or dividend reinvestment
plan on Form S-8 or any successor form thereto or (iii) in connection
with any acquisition or merger on Form S-4 or any successor form thereto),
whether or not for sale for its own account, it will at each such time give
prompt written notice (but in no event less than 20 days prior to the initial
filing of a registration statement with respect thereto) to each of the Holders
of its intention to do so and such notice shall offer the Holders of such
Registrable Securities the opportunity to register under such registration
statement such number of Registrable Securities as each such Holder may request
in writing.  Upon the written request of
any of the Holders (which request shall specify the maximum number of
Registrable Securities intended to be disposed of by such Holder), made as
promptly as practicable and in any event within 10 days after the receipt of
any such notice, the Company shall include in such registration under the
Securities Act all Registrable Securities which the Company has been so
requested to register by each Holder; provided,
however, that if, at any time after giving
written notice of its intention to register any equity securities and prior to
the effective date of the registration statement filed in connection with 


 


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such registration, the Company shall determine for any reason not to
register or to delay registration of such equity securities, the Company shall
give written notice of such determination and its reasons therefor to the
Holders and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith as provided for in Section 2.2(d)),
without prejudice, however, to the rights of the Holders to request that such
registration be effected as a registration under Section 2.1 and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities.  No
registration effected under this Section 2.2 shall relieve the Company of
its obligation to effect any registration upon request under Section 2.1.


 


(b)                                  Right to Withdraw; Option to Participate in Shelf Takedowns.  Any Holder shall have the right to withdraw
its request for inclusion of Registrable Securities in any registration
statement pursuant to this Section 2.2 at any time prior to the effective
date of such registration statement by giving written notice to the Company of
its request to withdraw.  In the event
that the Holder has requested inclusion of Registrable Securities in a shelf
registration, the Holder shall have the right, but not the obligation, to
participate in any offering of the Company’s equity securities under such shelf
registration.


 


(c)                                  Priority in Incidental Registrations.  If any registration pursuant to this Section 2.2
involves an underwritten offering and the managing underwriter(s) of such
offering shall inform the Company in writing of its belief that the number of
Registrable Securities requested to be included in such registration or
offering, when added to the number of other equity securities to be offered in
such registration or offering, would materially adversely affect such offering,
then the Company shall include in such registration or offering, to the extent
of the number and type which the Company is so advised can be sold in (or
during the time of) such registration or offering without so materially adversely
affecting such registration or offering (the “Section 2.2
Sale Amount”), (i) all of the securities proposed by the
Company to be sold for its own account; (ii) thereafter, if the
Participating Holders hold Registrable Securities that constitute, or upon
conversion thereof would constitute, a Qualifying Ownership Interest (as
defined in the Purchase Agreement), to the extent the Section 2.2 Sale
Amount is not exceeded, the Registrable Securities requested by the
Participating Holders (provided that if all of the Registrable Securities
requested by the Participating Holders may not be included, the Participating
Holders shall be entitled to participate on a pro rata basis based on the
aggregate number of shares of Registrable Securities requested by the Participating
Holders to be registered); and (iii) thereafter, to the extent the Section 2.2
Sale Amount is not exceeded, the Registrable Securities required by the
Participating Holders (if the Participating Holders did not have the right to
include Registrable Securities in the registration pursuant to clause (ii) above)
and any other securities of the Company requested to be included by Company
stockholders holding other such registration rights on a pro rata
basis based on the aggregate number of shares requested by the Participating
Holders and the other Company stockholders to be registered.


 


(d)                                  Expenses. 
The Company shall pay, and shall be responsible for, all Registration
Expenses in connection with any registration requested pursuant to this Section 2.2.


 


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(e)                                  Selection of Underwriters.  The underwriters of each underwritten
offering of the Registrable Securities pursuant to this Section 2.2 shall
be selected by the Company provided that the Majority Participating Holders
shall have the right to select a co-managing underwriter.


 


(f)                                    Right to Terminate Registration.  The Company shall have the right to terminate
or withdraw any registration initiated by it under this Section 2.2 prior
to the effectiveness of such registration, whether or not any Holder has
elected to include Registrable Securities in such registration.


 


2.3.                            Registration Procedures.


 


(a)                                  If
and whenever the Company is required to effect the registration of any
Registrable Securities under the Securities Act pursuant to either Section 2.1
or Section 2.2 hereof, the Company shall as expeditiously as possible:


 


(i)                                    prepare
and file with the SEC as soon as practicable (and in the case of a demand
pursuant to Section 2.1, within 30 days after receipt by the Company of a
Demand Exercise Notice) a registration statement on an appropriate registration
form of the SEC for the disposition of such Registrable Securities in
accordance with the intended method of disposition thereof which registration
statement shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and thereafter use its best efforts
to cause such registration statement to become and remain effective (A) with
respect to an underwritten offering, for a period of at least 90 days or until
all shares subject to such registration statement have been sold and (B) with
respect to a shelf registration, until the earlier of (1) the sale of all
Registrable Securities thereunder and (2) the third anniversary of the
effective date of such shelf registration;


 


(ii)                                use
its best efforts to prepare and file with the SEC any amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement in accordance with the intended methods of disposition by the
Participating Holders set forth in such registration statement for such period
as provided for in Section 2.3(a)(i) above;


 


(iii)                            furnish,
without charge, to each Participating Holder and each underwriter such number
of conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such registration statement (including
each preliminary prospectus and summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as the Majority
Participating Holders and such underwriters may request (it being understood
that the Company consents to the use of such prospectus or any amendment or
supplement thereto by each Participating Holder and the underwriters in
connection with the offering and sale of the Registrable Securities covered by
such prospectus or any amendment or 


 


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supplement thereto); provided, that the Company shall have no
obligation to provide any document pursuant to this clause that is available on
the SEC’s EDGAR system;


 


(iv)                               use
its best efforts (A) to register or qualify all Registrable Securities and
other securities covered by such registration statement under such state
securities or “blue sky” laws where an exemption is not available and as the
Majority Participating Holders or any managing underwriter shall reasonably
request, (B) to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and (C) to take any
and all other actions which may be necessary or advisable to enable the
Participating Holders or underwriters to consummate the disposition in such
jurisdictions of the securities to be sold by the Participating Holders or
underwriters, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not, but for the requirements of this Section 2.3(a)(iv),
be obligated to be so qualified or file a general consent to service of process
in any such jurisdiction;


 


(v)                                   cause
all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary in the opinion of counsel to the Company and counsel to the
Participating Holders to consummate the disposition of such Registrable
Securities;


 


(vi)                               to
the extent any Participating Holder could be deemed to be an “underwriter” for
purposes of Section 11 of the Securities Act in connection with such
registration of Registrable Securities, furnish to each Participating Holder
and each underwriter a signed counterpart of (A) an opinion of counsel for
the Company and (B) a “comfort” letter signed by the independent public
accountants who have certified the Company’s financial statements included or
incorporated by reference in such registration statement, in each case,
addressed to each Participating Holder and each underwriter covering matters
with respect to such registration statement (and the prospectus included
therein) as such Majority Participating Holders and managing underwriter(s) shall
request;


 


(vii)                           promptly
notify each Participating Holder and each managing underwriter (A) when
such registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to such
registration statement has been filed, and, with respect to such registration
statement or any post-effective amendment, when the same has become effective; (B) of
the receipt by the Company of any comments from the SEC or receipt of any
request by the SEC for additional information with respect to any registration
statement or the prospectus related thereto or any request by the SEC for
amending or supplementing the registration statement and the prospectus used in
connection therewith; (C) of the issuance by the SEC of any stop order
suspending the effectiveness of such registration statement or the initiation
of any proceedings for that purpose; (D) of the receipt by the Company of
any notification with respect to the suspension of the qualification of any of
the Registrable Securities for sale under the securities or “blue sky” laws of
any jurisdiction or the initiation of any proceeding for such purpose; and (E) at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not 


 


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misleading, in the light of the circumstances under which they were
made, and in the case of this clause (E), promptly prepare and furnish, at the
Company’s expense, to each Participating Holder and each managing underwriter a
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and (F) at any time when the
representations and warranties of the Company contemplated by Section 2.4(a) or
(b) hereof cease to be true and correct;


 


(viii)                       otherwise
comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as practicable, an earnings
statement covering the period of at least 12 consecutive months beginning with
the first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section 1l(a) of
the Securities Act and Rule 158 promulgated thereunder;


 


(ix)                              provide
and cause to be maintained a transfer agent and registrar for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration statement;


 


(x)                                  (A) use
its best efforts to cause all Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (B) if no similar securities are then so listed, upon
the request of the Majority Participating Holders use its best efforts to (1) cause
all such Registrable Securities to be listed on a national securities exchange
or (2) secure designation of all such Registrable Securities as a “Nasdaq
security” or “national market system security” within the meaning
Regulation NMS under the Exchange Act or (3) failing that, to secure
Nasdaq authorization for such shares and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register as such
with respect to such shares with the NASD;


 


(xi)                              deliver
promptly to counsel to the Participating Holders and each, underwriter, if any,
participating in the offering of the Registrable Securities, copies of all correspondence
between the SEC and the Company, its counsel or auditors and all memoranda
relating to discussions with the SEC or its staff with respect to such
registration statement;


 


(xii)                          use
its best efforts to obtain the withdrawal of any order suspending the
effectiveness of the registration statement;


 


(xiii)                      provide
a CUSIP number for all Registrable Securities, no later than the effective date
of the registration statement and provide the applicable transfer agents with
printed certificates for the Registrable Securities which are in a form
eligible for deposit with The Depository Trust Company;


 


10
















 


(xiv)                         cause
its officers and employees to participate in, and to otherwise facilitate and
cooperate with the preparation of the registration statement and prospectus and
any amendments or supplements thereto (including participating in meetings,
drafting sessions, due diligence sessions and the marketing of the Registrable
Securities covered by the registration statement (including, without
limitation, participation in “road shows”) taking into account the Company’s
business needs;


 


(xv)                             enter
into and perform its obligations under such customary agreements (including,
without limitation, if applicable, an underwriting agreement as provided for in
Section 2.4 herein) and take such other actions as the Majority
Participating Holders or managing underwriter(s) shall reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;


 


(xvi)                         promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter(s) or Majority Participating
Holders reasonably request to be included therein relating to the plan of
distribution with respect to such Registrable Securities; and make all required
filings of such prospectus supplement or post-effective amendment as soon as
practicable after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;


 


(xvii)                     cooperate
with each Participating Holder and each underwriter, and their respective
counsel in connection with any filings required to be made with Nasdaq, the
NASD or any other securities exchange on which such Registrable Securities are
traded or will be traded;


 


(xviii)                 cooperate
with the Participating Holders and the managing underwriter(s) to
facilitate the timely preparation and delivery of certificates not bearing any
restrictive legends representing the Registrable Securities to be sold, and
cause such Registrable Securities to be issued in such denominations and
registered in such names in accordance with the underwriting agreement prior to
any sale of Registrable Securities to the underwriters or, if not an
underwritten offering, in accordance with the instructions of the Participating
Holders at least five business days prior to any sale of Registrable Securities
and instruct any transfer agent or registrar of Registrable Securities to
release any stop transfer orders in respect thereof;


 


(xix)                        to the
extent required by the rules and regulations of the NASD, retain a
Qualified Independent Underwriter, which shall be reasonably acceptable to the
Majority Participating Holders; and


 


(xx)                            take
no direct or indirect action prohibited by Regulation M under the Exchange Act;
provided, however,
that to the extent that any prohibition is applicable to the Company, the
Company will take such action as is necessary to make any such prohibition
inapplicable.


 


(b)                                  If
the disposition by a Participating Holder of its securities is discontinued
because of the happening of any event of the kind described in Section 2.3(a)(vii)(C) or
(E), the Company shall extend the period of effectiveness of the registration
statement by the number of days during the period from and including the date
of the giving of 


 


11

















 


such notice to and including the date when the Participating Holder
shall have received copies of the supplemented or amended prospectus
contemplated by Section 2.3(a)(vii)(E); and, if the Company shall not so
extend such period, the Participating Holder’s request pursuant to which such
registration statement was filed shall not be counted for purposes of the
requests for registration to which the Participating Holder is entitled
pursuant to Section 2.1 hereof.  If
for any other reason the effectiveness of any registration statement filed
pursuant to Section 2.1 or Section 2.2 is suspended or interrupted
prior to the expiration of the time period regarding the maintenance of the
effectiveness of such registration statement required by Section 2.3(a)(i) so
that Registrable Securities may not be sold pursuant thereto, the applicable
time period shall be extended by the number of days equal to the number of days
during the period beginning with the date of such suspension or interruption to
and ending with the date when the sale of Registrable Securities pursuant to
such registration statement may be resumed.


 


(c)                                  If
any such registration statement or comparable statement under “blue sky” laws
refers to any Holder by name or otherwise as the Holder of any securities of
the Company, then such Holder shall have the right to require (i) the
insertion therein of language, in form and substance reasonably satisfactory to
such Holder and the Company, and subject to any comments made by the SEC staff,
to the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of the
Company’s securities covered thereby and that such holding does not imply that
such Holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such Holder by name
or otherwise is not in the judgment of the Company, as advised by counsel,
required by the Securities Act or any similar federal statute or any state “blue
sky” or securities law then in force, the deletion of the reference to such
Holder.


 


(d)                                  Holders
may seek to register different types of Registrable Securities simultaneously
and the Company shall use its reasonable best efforts to effect such
registration and sale in accordance with the intended method or methods of
disposition specified by such holders.


 


2.4.                            Underwritten Offerings.


 


(a)                                  Demanded Underwritten Offerings.  If requested by the underwriters for any
underwritten offering by the Participating Holders pursuant to a registration
requested under Section 2.1, the Company shall enter into a customary
underwriting agreement with the managing underwriter(s) selected by the
Majority Participating Holders (in accordance with Section 2.1(e) hereto).  Such underwriting agreement shall be
reasonably satisfactory in form and substance to the Majority Participating
Holders and shall contain such representations and warranties by, and such
other agreements on the part of, the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
customary provisions relating to indemnification and contribution which are no
less favorable to the recipient than those provided in Section 2.6
hereof.  Each Participating Holder shall
be a party to such underwriting agreement; provided, that no
Participating Holder shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Participating Holder,
its ownership of and title to the Registrable Securities and its intended
method of distribution; and any liability of any Participating Holder to any
underwriter or other person under such underwriting 


 


12

















 


agreement shall be limited to liability arising from breach of its
representations and warranties and shall be limited to an amount equal to the
proceeds (net of expenses and underwriting discounts and commissions) that it
derives from such registration.


 


(b)                                  Incidental Underwritten Offerings.  In the case of a registration pursuant to Section 2.2
hereof, if the Company shall have determined to enter into an underwriting
agreement in connection therewith, all of the Registrable Securities to be included
in such registration shall be subject to such underwriting agreement.  Each Participating Holder shall be a party to
such underwriting agreement; provided, that no Participating Holder
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Participating Holder, its ownership of and title to
the Registrable Securities and its intended method of distribution; and any
liability of any Participating Holder to any underwriter or other Person under
such underwriting agreement shall be limited to liability arising from breach
of its representations and warranties and shall be limited to an amount equal
to the proceeds (net of expenses and underwriting discounts and commissions)
that it derives from such registration.


 


2.5.                            Preparation; Reasonable Investigation.  In connection with the preparation and filing
of each registration statement under the Securities Act pursuant to this Agreement,
the Company will give the Participating Holders, the managing underwriter(s),
and their respective counsel, accountants and other representatives and agents
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the SEC, and each
amendment thereof or supplement thereto or comparable statements under
securities or “blue sky” laws of any jurisdiction, and give each of the
foregoing parties access to its books and records, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and such opportunities to discuss the business of the Company and
its subsidiaries with their respective directors, officers and employees and
the independent public accountants who have certified the Company and its
subsidiaries’ financial statements, and supply all other information and
respond to all inquiries requested by such Participating Holders, managing
underwriter(s), or their respective counsel, accountants or other
representatives or agents in connection with such registration statement, as
shall be necessary or appropriate, in the opinion of counsel to such
Participating Holder or managing underwriter(s), to conduct a reasonable
investigation within the meaning of the Securities Act, and the Company shall
not file any registration statement or amendment thereto or any prospectus or
supplement thereto to which the Majority Participating Holders or the managing
underwriter(s) shall object.


 


2.6.                            Indemnification.


 


(a)                                  Indemnification by the Company.  The Company agrees that in the event of any
registration of any Registrable Securities under the Securities Act, the
Company shall, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, (i) each of the Holders and their Affiliates, (ii) each
of the Holders’ and their Affiliates’ respective Affiliates, officers,
directors, successors, assigns, members, partners, shareholders, employees,
advisors, representatives, and agents, (iii) each other Person who
participates as an underwriter or Qualified Independent Underwriter in the
offering or sale of such securities, (iv) each Person who controls (within
the meaning of the Securities Act or the Exchange Act) any of the Persons
listed in clauses (i), (ii) or (iii) and (v) any representative
(legal or otherwise) of any of the 


 


13

















 


Persons listed in clauses (i), (ii), (iii) or (iv) (collectively,
the “Indemnitees”) from and against any
losses, penalties, fines, liens, judgments, suits, claims, damages,
liabilities, costs and expenses (including reasonable attorney’s fees and any
amounts paid in any settlement effected in compliance with Section 2.6(e))
or liabilities, joint or several (or actions or proceedings, whether commenced
or threatened, in respect thereof, and whether or not such Indemnitee is a
party thereto) (“Losses”), to which such
Indemnitee has become or may become subject under the Securities Act or
otherwise, insofar as such Losses arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under
the Securities Act, or any preliminary prospectus, final prospectus or summary
prospectus contained therein, any amendment or supplement thereto, or any
documents incorporated by reference therein, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any
violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company shall reimburse such Indemnitee for any reasonable legal or any other
fees or expenses incurred by it in connection with investigating or defending
any such Loss; provided that the Company
shall not be liable to an Indemnitee to the extent that any such Loss arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement, or document incorporated by reference, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Indemnitee, which specifically states that it is for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement.


 


(b)                                  Indemnification by Participating Holders.  As a condition to including any Registrable
Securities in any registration statement, the Company shall have received an
undertaking reasonably satisfactory to it from each Participating Holder so
including any Registrable Securities to, severally and not jointly, to the
fullest extent permitted by law, indemnify and hold harmless (i) the Company,
each director and officer of the Company (including each officer of the Company
that signed the registration statement), employees and agents and each other
Person, if any, who controls the Company within the meaning of the Securities
Act or Exchange Act and (ii) any underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters (within the meaning of the Securities Act or the Exchange Act),
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, but only to the extent such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished by such Participating Holder to the Company
specifically for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement and such Participating Holder shall reimburse such Indemnified Party
for any reasonable legal or any other fees or expenses reasonably incurred by
them in connection with investigating or defending any such Loss; provided, however,
that the liability of such Indemnifying Party under this Section 2.6(b) shall
be limited to the amount of proceeds (net of expenses and underwriting
discounts and commissions) received by such Indemnifying Party in 


 


14

















 


the offering giving rise to such liability.  Each Participating Holder shall also
indemnify and hold harmless all other prospective sellers and Participating
Holders, their respective Affiliates, officers, directors, successors, assigns,
members, partners, shareholders, employees, advisors, representatives, and
agents, and each Person who controls (within the meaning of the Securities Act
or the Exchange Act) any such seller or Participating Holder to the same extent
as provided above with respect to indemnification of the Company and
underwriters.


 


(c)                                  Notices of Claims.  Promptly after receipt by an Indemnified
Party of notice of the commencement of any action or proceeding involving a
claim referred to in Section 2.6(a) or Section 2.6(b), such
Indemnified Party shall, if a claim in respect thereof is to be made against an
Indemnifying Party, give written notice to such Indemnifying Party of the
commencement of such action or proceeding; provided,
however, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under Section 2.6(a) or Section 2.6(b),
except to the extent that the Indemnifying Party is actually and materially
prejudiced by such failure to give notice, and shall not relieve the
Indemnifying Party from any liability which it may have to the Indemnified
Party otherwise than under this Section 2.6.


 


(d)                                  Defense of Claims.  In case any such action or proceeding is
brought against an Indemnified Party, except as provided for in the next
sentence, the Indemnifying Party shall be entitled to participate therein and
assume the defense thereof, jointly with any other Indemnifying Party, with
counsel reasonably satisfactory to such Indemnified Party, and after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof and approval by the Indemnified Party of such
counsel, the Indemnifying Party shall not be liable to such Indemnified Party
for any legal expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than costs of investigation and the
Indemnified Party shall be entitled to participate in such defense at its own
expense.  If (i) the Indemnifying
Party fails to notify the Indemnified Party in writing, within 15 days after
the Indemnified Party has given notice of the action or proceeding, that the
Indemnifying Party will indemnify the Indemnified Party from and against all
Losses the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the claim, (ii) the
Indemnifying Party fails to provide the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the claim or proceeding and fulfill its
indemnification obligations hereunder, (iii) the Indemnifying Party fails
to defend diligently the action or proceeding within 15 days after receiving
notice of such failure from such Indemnified Party; (iv) such Indemnified
Party reasonably shall have concluded (upon advice of its counsel) that there
may be one or more legal defenses available to such Indemnified Party or other
indemnified parties which are not available to the Indemnifying Party; or (v) if
such Indemnified Party reasonably shall have concluded (upon advice of its
counsel) that, with respect to such claims, the Indemnified Party and the
Indemnifying Party may have different, conflicting, or adverse legal positions
or interests then, in any such case, the Indemnified Party shall have the right
to assume or continue its own defense and the Indemnifying Party shall be
liable for any fees and expenses therefor; provided, that the
Indemnifying Party shall not be liable for the fees and expenses of more than
one counsel (and such other local counsel as the Indemnified Parties shall
determine to be reasonably necessary) at any time for all Indemnified Parties.


 


15

















 


(e)                                  Consent to Entry of Judgment and Settlements.  No Indemnifying Party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld, provided,
that, in the case where the Indemnifying Party shall have failed to take any of
the actions listed in clauses (i), (ii) or (iii) of the last sentence
of Section 2.6(d), the Indemnified Party shall have the right to
compromise or settle such action on behalf of and for the account, expense, and
risk of the Indemnifying Party and the Indemnifying Party will remain
responsible for any Losses the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the action or
proceeding to the fullest extent provided in this Section 2.6.  No Indemnifying Party shall, without the
written consent of the Indemnified Party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnified Party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (A) includes an unconditional release of the Indemnified Party
from all liability arising out of such action or claim, (B) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any Indemnified Party and (C) does not require any
inaction or action other than the payment of money by the Indemnifying Party.


 


(f)                                    Contribution. 
If for any reason the indemnification provided for in Sections 2.6(a), (b) or
(g) is unavailable to an Indemnified Party or insufficient in respect of
any Losses referred to therein, then, in lieu of the amount paid or payable
under Sections 2.6(a), (b) or (g), the Indemnifying Party shall contribute
to the amount paid or payable by the Indemnified Party as a result of such Loss
(i) in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand, and the Indemnified Party on the other,
with respect to the statements or omissions which resulted in such Loss, as
well as any other relevant equitable considerations, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law
or if the allocation provided in this clause (ii) provides a greater
amount to the Indemnified Party than clause (i) above, in such proportion
as shall be appropriate to reflect not only the relative fault but also the
relative benefits received by the Indemnifying Party and the Indemnified Party
from the offering of the securities covered by such registration statement as
well as any other relevant equitable considerations.  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or the
Indemnified Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.  The parties hereto agree that
it would not be just and equitable if contributions pursuant to this Section 2.6(f) were
to be determined by pro
rata allocation or by any other method of allocation which does not
take into account the equitable considerations referred to in the preceding
sentence of this Section 2.6(f).  No
Person guilty of fraudulent misrepresentation (within the meaning of Section 1l(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.  The amount paid or payable by an Indemnified
Party as a result of the Losses referred to in Sections 2.6(a), (b) or (g) shall
be deemed to include, subject to the limitations set forth in Sections 2.6(a), (b) and
(g), any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.  Notwithstanding anything in this Section 2.6(f) to
the contrary, no Participating Holder shall be required to contribute any
amount in excess of the 


 


16

















 


proceeds (net of expenses and underwriting discounts and commissions)
received by such Participating Holder from the sale of the Registrable
Securities in the offering to which the Losses of the indemnified parties
relate.


 


(g)                                 Other Indemnification.  Indemnification and contribution similar to
that specified in the preceding subsections of this Section 2.6 (with
appropriate modifications) shall be given by the Company and the Participating
Holders with respect to any required registration or other qualification of
securities under state or “blue sky” law or regulation.  The indemnification agreements contained in
this Section 2.6 shall be in addition to any other rights to
indemnification or contribution which any Indemnified Party may have pursuant
to law or contract and shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee or other
Indemnified Party and shall survive the transfer of any of the Registrable
Securities by any such party.


 


(h)                                 Indemnification Payments.  The indemnification and contribution required
by this Section 2.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or a Loss is incurred.


 


2.7.                            Limitation on Sale of Securities.


 


(a)                                  For the Company and Others.  If the Company receives a request for
registration pursuant to an underwritten offering of Registrable Securities
pursuant to Section 2.1 or 2.2 hereof, and if such a request is being
implemented or has not been withdrawn or abandoned, the Company agrees that (i) the
Company shall not effect any public or private offer, sale, distribution or
other disposition of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company or effect any registration of any of such securities under the
Securities Act (in each case, other than (x) option grants to employees
pursuant to the Company’s option plan, (y) as part of such registration
and (z) as a registration using Form S-8 or any successor or similar
form which is then in effect), whether or not for sale for its own account,
during the period beginning on the date the Company receives such request until
90 days after the effective date of such registration (or such shorter period
as the managing underwriter(s) may require) and (ii) the Company
shall use its commercially reasonable efforts to obtain from each of its
officers, directors and beneficial owners of 5% or more of Common Stock, an
agreement not to effect any public or private offer, sale, distribution or
other disposition of Common Stock, or any securities that are convertible or
exchangeable or exercisable for Common Stock, during the period referred to in
clause (i) of this paragraph, including, without limitation, a sale
pursuant to Rule 144 under the Securities Act.


 


(b)                                  For the Holders. 
If the Company receives a request for registration pursuant to an
underwritten offering of Registrable Securities pursuant to Section 2.1 or
2.2 hereof, and if such a request is being implemented or has not been
withdrawn or abandoned, each Holder agrees that, to the extent requested in
writing by the managing underwriter(s); it will not effect any public or
private offer, sale, distribution or other disposition of any Registrable
Securities, or any securities convertible into or exchangeable or exercisable
for such Registrable Securities (other than the conversion of shares of the
Convertible Note), including, without limitation, any sale pursuant to Rule 144
under the Securities Act, during the 90-day period beginning on the effective
date of such registration statement (or such shorter period as the 


 


17

















 


managing underwriter(s) may require), provided,
that each Holder has received the written notice required by Sections 2.1(a) and
2.2(a); and further, provided,
that in connection with such underwritten offering each officer and director of
the Company is subject to restrictions substantially equivalent to those
imposed on the Holders.


 


2.8.                            No Required Sale. 
Nothing in this Agreement shall be deemed to create an independent
obligation on the part of any of the Holders to sell any Registrable Securities
pursuant to any effective registration statement.


 


2.9.                            Rule 144; Rule 144A; Regulation S.  The Company covenants that, at its own
expense, it will file the reports required to be filed by it under the
Securities Act and the Exchange Act, and it will take such further action as
any Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (i) Rules 144,
144A or Regulation S under the Securities Act or (ii) any similar rule or
regulation hereafter adopted by the SEC. 
Upon the request of a Holder, the Company, at its own expense, will
promptly deliver to such Holder (i) a written statement as to whether it
has complied with such requirements (and such Holder shall be entitled to rely
upon the accuracy of such written statement), (ii) a copy of the most
recent annual or quarterly report of the Company and (iii) such other
reports and documents as such Holder may reasonably request in order to avail
itself of any rule or regulation of the SEC allowing it to sell any
Registrable Securities without registration.


 


2.10.                     Adjustments. 
At the request of any Holder, in the event of any change in the
capitalization of the Company as a result of any stock split, stock dividend,
reverse split, combination, recapitalization, merger, consolidation, or
otherwise, the provisions of this Section 2 shall be appropriately
adjusted.  The Company agrees that it
shall not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the Holders to include any
Registrable Securities in any registration contemplated by this Agreement.


 


SECTION 3.                        Subsequent Registration Rights; No Inconsistent Agreements.


 


3.1.                            Limitations on Subsequent Registration Rights.  From and after the date of this Agreement and
during the Restricted Period (as defined in the Purchase Agreement), without
the prior written consent of the Purchaser, the Company shall not enter into an
agreement that grants a holder or prospective holder of any securities of the
Company demand or incidental registration rights that by their terms are not
subordinate to the registration rights granted to the Holders in this
Agreement; provided, that, between the date hereof and the earlier of
the date of conversion of the Convertible Note and the Conversion Deadline (as
defined in the Convertible Note), the Company may grant demand or incidental
registration rights that are equal to or subordinate to the registration rights
granted to the Holders in this Agreement in connection with any Permitted
Equity Offering (as defined in the Purchase Agreement) (it being understood
that, without limiting the rights of the Holders hereunder, the registration
rights granted to any Person pursuant to this sentence shall not restrict the
ability of the Holders to, and shall provide for the right of the Holders to,
participate on a pro rata basis with such Person in any demand or incidental
registration initiated by such Person pursuant to the rights granted under this
sentence).  Notwithstanding the
foregoing, so long as the Holders hold Registrable Securities, the Company
shall not enter into any agreement granting a holder or prospective holder of
securities 


 


18

















 


of the Company registration rights that are senior to the rights of the
Holders hereunder and if, after the date of this Agreement, the Company enters
into any other agreement with respect to the registration of any of its equity
securities, and the terms contained therein are more favorable to, or less
restrictive on, the other party thereto than the terms and conditions contained
in this Agreement (insofar as they are applicable) with respect to the Holders,
then the terms of this Agreement shall immediately be deemed to have been
amended without further action by the Company or the Holders so that the
Holders shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.


 


3.2.                            No Inconsistent Agreements.  The Company will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the Holders in Section 2 or
otherwise conflicts with the provisions of Section 2, other than any
customary lock-up agreement with the underwriters in connection with any
offering effected hereunder, pursuant to which the Company shall agree not to
register for sale, and the Company shall agree not to sell or otherwise dispose
of, Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a specified period (not to exceed 180 days)
following such offering.  The Company
warrants that the rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with any other agreements to which the
Company is a party or by which it is bound. 
The Company has not previously entered into any agreement with respect
to its securities granting any registration rights to any Person that is in
force or effect as of the date hereof or will become effective after the date
hereof.


 


SECTION 4.                        Miscellaneous.


 


4.1.                            Amendments and Waivers.  This Agreement and any of the provisions
hereof may be amended, waived (either generally or in a particular instance and
either retroactively or prospectively), modified or supplemented, in whole or
in part, only by written agreement of the Company and the Purchaser; provided, however,
that any amendment, waiver, modification or supplement of Section 2.6
shall require the written agreement of the Company and Holders holding at least
a majority of the Registrable Securities; and provided,
further, that the observance of any
provision of this Agreement may be waived in writing by the party that will
lose the benefit of such provision as a result of such waiver.  The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a further
or continuing waiver of such breach or as a waiver of any other or subsequent
breach, except as otherwise explicitly provided for in such waiver.  Except as otherwise expressly provided
herein, no failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder, or otherwise available in
respect hereof at law or in equity, shall operate as a waiver thereof, nor
shall any single or partial exercise of such right, power or remedy by such
party preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The
execution of a counterpart signature page to this Agreement after the date
hereof by any Person as provided for herein shall not require consent of any
party hereto and shall not be deemed an amendment to this Agreement.


 


4.2.                            Assignment; Third Party Beneficiaries.  This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and any of
their respective successors, personal representatives and permitted assigns who
agree in writing to be 


 


19

















 


bound by the terms hereof.  The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the Holders.  Any Holder may, at its election and at any
time or from time to time, assign its rights and delegate its duties under this
Agreement, in whole or in part, to an Affiliate or to any Person to whom the
Holder sells, assigns or otherwise transfers any of its Registrable Securities
(an “Assignee”); provided
that, no such assignment shall be binding upon or obligate the Company to any
such Assignee unless and until the Assignee delivers to the Company (i) a
written notice stating the name and address of the Assignee and identifying the
securities with respect to which such rights are being assigned, if any, and (ii) a
written instrument by which such Assignee agrees to be bound by the obligations
imposed upon Holders under this Agreement to the same extent as if such
Assignee were a party hereto (or executes and delivers to the Company a
counterpart to this Agreement and agrees to be treated as a “Holder” for all
purposes of this Agreement).


 


4.3.                            Notice. 
Unless otherwise provided herein, all notices, requests, demands, claims
and other communications provided for under the terms of this Agreement shall
be in writing and shall be delivered personally, by facsimile (with receipt
confirmed telephonically) or sent by certified, registered or express mail,
postage prepaid.  Any such notice shall
be deemed given if delivered personally or facsimile, on the date of such
delivery or such confirmation is received, or if sent by reputable overnight
courier, on the first business day following the date of such mailing, as follows:


 


	
  (a)

  	
   

  	
  If to any Holder, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cephalon, Inc.

  
	
   

  	
   

  	
  41 Moores Road

  
	
   

  	
   

  	
  Frazer, Pennsylvania 19355

  
	
   

  	
   

  	
  Facsimile:

  	
   (610)
  738-6258

  
	
   

  	
   

  	
  Attention:

  	
   General
  Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to (which shall not constitute
  notice):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sidley Austin LLP

  
	
   

  	
   

  	
  One South Dearborn Street

  
	
   

  	
   

  	
  Chicago, Illinois 60603

  
	
   

  	
   

  	
  Facsimile:

  	
   (312)
  853-7036

  
	
   

  	
   

  	
  Attention:

  	
   Pran
  Jha

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If to the Company, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Acusphere, Inc.

  
	
   

  	
   

  	
  500 Arsenal Street

  
	
   

  	
   

  	
  Watertown, Massachusetts 02472

  
	
   

  	
   

  	
  Facsimile:

  	
   (617)
  926-3605

  
	
   

  	
   

  	
  Attention:

  	
   Chief
  Executive Officer

  



 


20
















 


With a copy to (which shall not
constitute notice):


 


Goodwin & Proctor


Exchange Place


53 State Street


Boston, Massachusetts 02109


Facsimile:  (617) 523-1231


Attention:  Lawrence S. Wittenberg


 


Any party may by notice given
in accordance with this Section 4.3 designate another address or person
for receipt of notices hereunder.


 


4.4.                            Governing Law; Waiver of Jury Trial.


 


(a)                                  Governing Law. 
This Agreement shall be construed and enforced in accordance with, and
the rights and obligations of the parties hereto shall be governed by, the laws
of the State of Delaware, without giving effect to principles of conflicts of
laws.


 


(b)                                  Waiver of Jury Trial.  With respect to any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, each of the parties hereby irrevocably, to the extent not prohibited by
applicable law that cannot be waived, waives, and covenants that it will not
assert (whether as plaintiff, defendant or otherwise), any right to trial by
jury in any action arising in whole or in part under or in connection with this
Agreement or the transactions contemplated hereby, whether now existing or
hereafter arising, and whether sounding in contract, tort or otherwise, and
agrees that any of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained-for agreement among
the parties irrevocably to waive its right to trial by jury in any action or
proceeding whatsoever between them relating to this Agreement or the
transactions contemplated hereby.  Such
action or proceeding shall instead be tried by a judge sitting without a jury.


 


4.5.                            Remedies. 
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or was otherwise breached and further agree
that money damages or other remedy at law would not be a sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement by
them and that, in addition to all other remedies available to them, each of
them shall be entitled to an injunction restraining such breach, violation or
default or threatened breach, violation or default and to any other equitable
relief, including, without limitation, specific performance of the terms and
provisions of this Agreement.  Any
requirements for the securing or posting of any bond with respect to such
remedy are hereby waived by each of the parties hereto.  Each party further agrees that, in the event
of any action for an injunction or other equitable remedy in respect of such
breach or enforcement of specific performance, it will not assert the defense
that a remedy at law would be adequate. 
In any action or proceeding brought to enforce any provision of this
Agreement (including the indemnification provisions thereof), or where any
provision hereof is validly asserted as a defense, the successful party to such
action or proceeding shall be entitled to recover, to the extent permitted by applicable
law, attorneys’ fees in addition to its costs and expenses and any other
available remedy.


 


21

















 


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


 


4.7.                            Severability. 
If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired, unless the provisions held invalid, illegal
or unenforceable shall substantially impair the benefits of the remaining
provisions hereof.


 


4.8.                            Entire Agreement. 
This Agreement, the Purchase Agreement and the documents referred to
herein or therein or delivered pursuant hereto or thereto, are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein or
therein.  This Agreement, the Purchase
Agreement and the documents referred to herein or therein or delivered pursuant
hereto or thereto, supersede all prior agreements and understandings between
the parties with respect to such subject matter.


 


4.9.                            Counterparts. 
This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, all of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.


 


4.10.                     Defaults. 
A default by any party to this Agreement in such party’s compliance with
any of the conditions or covenants hereof or performance of any of the obligations
of such party hereunder shall not constitute a default by any other party.


 


4.11.                     General Interpretive Principles.  Whenever used in this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, any noun
or pronoun shall be deemed to include the plural as well as the singular and to
cover all genders.  The headings of the
sections, paragraphs, subparagraphs, clauses and subclauses of this Agreement
are for convenience of reference only and shall not in any way affect the
meaning or interpretation of any of the provisions hereof.  Unless otherwise specified, the terms “hereof,”
“herein” and similar terms refer to this Agreement as a whole, and references
herein to Sections refer to Sections of this Agreement.  Words of inclusion shall not be construed as
terms of limitation herein, so that references to “include,” “includes” and “including”
shall not be limiting and shall be regarded as references to non-exclusive and
non-characterizing illustrations.


 


22

















 


IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed and delivered by their
respective officers hereunto duly authorized as of the date first above
written.


 


 


	
   

  	
  ACUSPHERE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CEPHALON, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


23