Document:

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.

 

3

 

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.

 

6

 

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.

 

8

 

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-1Exhibit 10.02

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT, dated as of August 15,
2005 (this “Agreement”), 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 (the “Initial
Investors”).

 

RECITALS:

 

A.                                   In
connection with the Securities Purchase Agreement dated August 15, 2005
between the Initial Investors and the Company (the “Purchase Agreement”),
the Company has agreed, upon the terms and subject to the conditions of the
Purchase Agreement, to issue and sell to the Initial Investors 4,651,869 shares
of the Company’s Common Stock (the “Common Shares”) and warrants to
purchase up to 3,023,719 shares of the Company’s Common Stock, subject to
adjustment (the “Warrants” and, collectively with the Common Shares, the
“Securities”).

 

B.                                     In
order to induce the Initial Investors to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act and applicable state securities laws with respect to the
Securities.

 

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
Initial Investors hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Capitalized terms used and not otherwise defined
herein have the respective meanings given them set forth in the Purchase
Agreement.  In addition, as used in this
Agreement, the following terms have the following meanings:

 

1.1                                 “Closing
Date” means the date on which the purchase of the Securities is consummated
pursuant to the Purchase Agreement.

 

1.2                                 “Common
Shares” means the shares of Common Stock sold pursuant to the Purchase
Agreement.

 

1.3                                 “Investors”
means the Initial Investors and any of their transferees or assignees who agree
to become bound by the provisions of this Agreement in accordance with Article IX
hereof.

 

1.4                                 “Registrable
Securities” means the Common Shares and the Warrant Shares, and any shares
of capital stock issued or issuable from time to time (with any adjustments) in
exchange for or otherwise with respect to the Common Shares or Warrant Shares
(including shares issued pursuant to Section 2.2 hereof).

 

1.5                                 “Registration
Period” means the period between the date of this Agreement and the earlier
of (i) the date on which (x) all of the Registrable Securities have been
sold by the Investors pursuant to the Registration Statement and (y) are freely
tradable under the Securities Act (except

 

 

that this clause (y) shall not apply with respect to
Shares sold to affiliates) and no further Registrable Securities may be issued
in the future, (ii) the second anniversary of the last date on which
Warrant Shares are purchased under any then-outstanding Warrants, or (iii) the
date on which all the Registrable Securities may be immediately sold by the
Investors without registration and without restriction as to the number of
Registrable Securities to be sold, pursuant to Rule 144 or otherwise.

 

1.6                                 “Registration
Statement” means a Registration Statement of the Company filed under the
Securities Act.

 

1.7                                 The
terms “register,” “registered,” and “registration” refer
to a registration effected by preparing and filing a Registration Statement or
statements in compliance with the Securities Act and pursuant to Rule 415
and the declaration or ordering of effectiveness of such Registration Statement
by the SEC.

 

1.8                                 “Rule 415”
means Rule 415 under the Securities Act, or any successor Rule providing
for offering securities on a continuous basis, and applicable rules and
regulations thereunder.

 

1.9                                 “Securities”
means the Common Shares and the Warrants sold pursuant to the Purchase
Agreement.

 

1.10                           “Warrants”
means the warrants to purchase shares of the Company’s Common Stock, including
the Contingent Warrants, sold pursuant to the Purchase Agreement.

 

1.11                           “Warrant
Shares” means the shares of the Company’s Common Stock, including the
Contingent Warrant Shares, that may be purchased upon exercise of the Warrants.

 

ARTICLE II

REGISTRATION

 

2.1                                 Mandatory
Registration.  The Company will use
best efforts to file with the SEC a Registration Statement on Form S-3
registering all of the Registrable Securities, other than the Contingent
Warrant Shares, for resale within 20 days after the Closing Date under the
Purchase Agreement.  If Form S-3 is
not available at that time, then the Company will file a Registration Statement
on such form as is then available to effect a registration of all of the
Registrable Securities, other than the Contingent Warrant Shares, subject to
the consent of the Investors, which consent will not be unreasonably withheld.  In the event Contingent Warrants are issued
under the Purchase Agreement, the Company will use best efforts to file with
the SEC a Registration Statement on Form S-3 registering all of the
Contingent Warrant Shares for resale within 20 days after the Trigger Date.  If Form S-3 is not available at that
time, then the Company will file a Registration Statement on such form as is
then available to effect a registration of all of the Contingent Warrant
Shares, subject to the consent of the Investors, which consent will not be
unreasonably withheld.

 

2.2                                 Effectiveness
of the Registration Statement.  The
Company will use its best efforts to cause each Registration Statement to be
declared effective by the SEC as soon as practicable after filing, and in any
event no later than the 90th day after (i) the Closing Date, or (ii) with
respect to the Registration Statement for the Contingent Warrant Shares, the
Trigger Date (as applicable, the “Required Effective Date”).  However, so long as the Company filed the applicable
Registration Statement within 20 days after (i) the Closing Date, or (ii) with
respect to the Registration Statement

 

2

 

for the Contingent Warrant Shares, the Trigger Date, (a) if
the SEC takes the position that registration of the resale of the Registrable
Securities by the Investors is not available under applicable laws, rules and
regulation and that the Company must register the offering of the Registrable
Securities as a primary offering by the Company, or (b) if a Registration
Statement receives SEC review, then the Required Effective Date will be the
120th day after the (i) Closing Date, or (ii) with respect to the
Registration Statement for the Contingent Warrant Shares, the Trigger Date.  In the case of an SEC response described in
clause (a), the Company will, within 40 business days after the date the
Company receives such SEC response, file a Registration Statement as a primary
offering.  The Company’s best efforts
will include, but not be limited to, promptly responding to all comments
received from the staff of the SEC.  If
the Company receives notification from the SEC that any Registration Statement
will receive no action or review from the SEC, then the Company will file with
the SEC a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act and cause such Registration Statement to become
effective within five business days after such SEC notification.  Once a Registration Statement is declared
effective by the SEC, the Company will cause such Registration Statement to
remain effective throughout the Registration Period, except as permitted under Section 3.  On the date of each monthly anniversary of
the date on which any breach of Section 2.1 or this Section 2.2 first
occurs (including failure to file a Registration Statement or to cause a
Registration Statement to be declared effective within the time periods set
forth herein) until the applicable default is cured (each a “Payment Date”),
the Company shall pay to each Investor as damages 1.5% of the purchase price
paid by such Investor pursuant to the Purchase Agreement.  Such payment shall be the sole remedy to the
Investors for the Company’s default of Section 2.1 or this Section 2.2
and shall be paid in cash on the applicable Payment Date in accordance with
payment instructions provided by each Investor. 
If the Company fails to pay any liquidated damages pursuant to this Section 2.2
in full within seven days after the date payable, the Company will pay interest
thereon at a rate of 10% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to each Investor, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.

 

2.3                                 Piggyback
Registrations.

 

(a)                                  If,
at any time prior to the expiration of the Registration Period, a Registration
Statement contemplated in Section 2.1 above is not declared effective with
respect to all of the Registrable Securities to which it applies and the
Company decides to register any of its securities for its own account or for
the account of others, then the Company will promptly give the Investors
written notice thereof and will use its best efforts to include in such
registration all or any part of the Registrable Securities requested by such
Investors to be included therein (excluding any Registrable Securities
previously included in a Registration Statement which has been declared
effective and has not been withdrawn). 
This requirement does not apply to Company registrations on Form S-4
or S-8 or their equivalents relating to equity securities to be issued solely
in connection with an acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans.  Each Investor must give its
request for registration under this paragraph to the Company in writing within
15 days after receipt from the Company of notice of such pending registration.  If the registration for which the Company
gives notice is a public offering involving an underwriting, the Company will
so advise the Investors as part of the above-described written notice.  In that event, if the managing underwriter(s)
of the public offering impose a limitation on the number of shares of Common
Stock that may be included in the Registration Statement because, in such
underwriter(s)’ judgment, such limitation would be necessary to effect an
orderly public distribution, then the Company will be obligated to include only
such limited portion, if any, of the Registrable

 

3

 

Securities with respect to which such Investors have
requested inclusion hereunder.  Any
exclusion of Registrable Securities will be made pro rata among all holders of
the Company’s securities seeking to include shares of Common Stock in
proportion to the number of shares of Common Stock sought to be included by
those holders.  However, the Company will
not exclude any Registrable Securities unless the Company has first excluded
all outstanding securities the holders of which are not entitled by right to
inclusion of such securities in such Registration Statement or are not entitled
pro rata inclusion with the Registrable Securities.  No registration rights that limit or
subordinate the rights of the Investors to register the Registrable Securities
will be granted by the Company until one or more registration statements
covering all of the Registrable Securities have become effective.

 

(b)                                 No
right to registration of Registrable Securities under this Section 2.3
limits in any way the registration required under Section 2.1 above.  The obligations of the Company under this Section 2.3
expire upon the earlier of (i) the effectiveness of the Registration
Statements filed pursuant to Section 2.1 above, (ii) after the
Company has afforded the opportunity for the Investors to exercise registration
rights under this Section 2.3 for two registrations (provided, however,
that any Investor that has had any Registrable Securities excluded from any
Registration Statement in accordance with this Section 2.3 may include in
any additional Registration Statement filed by the Company the Registrable
Securities so excluded), (iii) when all of the Registrable Securities held
by any Investor may be sold by such Investor under Rule 144 without being
subject to any volume restrictions, or (iv) the second anniversary of the
last date on which Warrant Shares are purchased under any then outstanding
Warrants.

 

2.4                                 Eligibility
to use Form S-3.  The Company
represents and warrants that it meets the requirements for the use of Form S-3
for registration of the sale by the Investors of the Registrable
Securities.  The Company will file all
reports required to be filed by the Company with the SEC in a timely manner so
as to preserve its eligibility for the use of Form S-3.

 

2.5                                 Sales
by the Company.  In no event will the
Company sell shares of Common Stock for its own account pursuant to a
Registration Statement declared effective by the SEC prior to the date that the
Registration Statement registering all of the Registrable Securities, other
than the Contingent Warrant Shares, has been declared effective by the SEC.

 

ARTICLE III

ADDITIONAL OBLIGATIONS OF THE COMPANY

 

3.1                                 Continued
Effectiveness of Registration Statement. 
Subject to the limitations set forth in Section 3.6, the Company
will keep each Registration Statement covering the Registrable Securities
effective under Rule 415 at all times during the Registration Period.  In the event that the number of shares
available under a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities issued, the Company
will (if permitted) amend the Registration Statement or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover all of the Registrable Securities. 
The Company will file such amendment or new Registration Statement as
soon as practicable, but in no event later than 20 business days after the
necessity therefor arises (based upon the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely).  The Company will use its best efforts to
cause such amendment or new Registration Statement to become effective as soon
as is practicable after the filing thereof, but in no event later than 90 days
after the date on which the Company reasonably first determines the need
therefor.

 

4

 

3.2                                 Accuracy
of Registration Statement.  Any
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) filed by the Company covering Registrable
Securities will not contain any 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, in light of the circumstances in which they were made, not
misleading.  The Company will prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to permit sales pursuant to
the Registration Statement at all times during the Registration Period, and, during
such period, will comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement until the termination of the Registration Period, or if
earlier, until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in the Registration Statement.

 

3.3                                 Furnishing
Documentation.  The Company will
furnish to each Investor whose Registrable Securities are included in a
Registration Statement, or to its legal counsel, (a) promptly after such
document is filed with the SEC, one copy of any Registration Statement filed
pursuant to this Agreement and any amendments thereto, each preliminary
prospectus and final prospectus and each amendment or supplement thereto; and (b) a
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto, and such other documents as the Investor
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by the Investor. 
The Company will promptly notify by facsimile or email each Investor
whose Registrable Securities are included in any Registration Statement of the
effectiveness of the Registration Statement and any post-effective amendment.

 

3.4                                 Additional
Obligations.  The Company will use
its best efforts to (a) register and qualify the Registrable Securities
covered by a Registration Statement under such other securities or blue sky
laws of such jurisdictions as each Investor who holds (or has the right to
hold) Registrable Securities being offered reasonably requests, (b) prepare
and file in those jurisdictions any amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain their effectiveness during the Registration Period, (c) take
any other actions necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (d) take any
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions. 
Notwithstanding the foregoing, the Company is not required, in connection
with such obligations, to (i) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3.4,
(ii) subject itself to general taxation in any such jurisdiction, (iii) file
a general consent to service of process in any such jurisdiction, (iv) provide
any undertakings that cause material expense or material burden to the Company,
or (v) make any change in its charter or bylaws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.

 

3.5                                 Underwritten
Offerings.  If the Investors who hold
a majority in interest of the Registrable Securities being offered in an
offering pursuant to a Registration Statement or any amendment or supplement
thereto under this Agreement select underwriters reasonably acceptable to the
Company for such offering, the Company will enter into and perform its
obligations under an underwriting agreement in usual and customary form
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering.

 

5

 

3.6                                 Suspension
of Registration.

 

(a)                                  The
Company will notify (by telephone and also by facsimile and reputable overnight
courier) each Investor who holds Registrable Securities being sold pursuant to
a Registration Statement of the happening of any event of which the Company has
knowledge as a result of which the prospectus included in the Registration
Statement as then in effect includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  The Company
will make such notification as promptly as practicable (but in no event more
than two business days) after the Company becomes aware of the event, will
promptly (but in no event more than ten business days) prepare and file a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and will deliver a number of copies of such supplement
or amendment to each Investor as such Investor may reasonably request.

 

(b)                                 Notwithstanding
the obligations under Section 3.6(a), if in the good faith judgment of the
Company, following consultation with legal counsel, it would be detrimental to
the Company and its stockholders for resales of Registrable Securities to be
made pursuant to the Registration Statement due to the existence of a material
development or potential material development involving the Company which the
Company would be obligated to disclose in the Registration Statement, but which
disclosure would be premature or otherwise inadvisable at such time or would
reasonably be expected to have a material adverse effect upon the Company and
its stockholders, the Company will have the right to suspend the use of the
Registration Statement for a period of not more than thirty (30) days, provided,
however, that the Company may so defer or suspend the use of the Registration
Statement no more than one time in any twelve-month period.

 

(c)                                  Subject
to the Company’s rights under this Section 3, the Company will use its
best efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement and, if such an order is issued, will
use its best efforts to obtain the withdrawal of such order at the earliest
possible time and to notify each Investor that holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.

 

(d)                                 Notwithstanding
anything to the contrary contained herein or in the Purchase Agreement, if the
use of the Registration Statement is suspended by the Company, the Company will
promptly (but in no event more than two business days) give notice of the
suspension to all Investors whose securities are covered by the Registration
Statement, and will promptly (but in no event more than two business days)
notify each such Investor as soon as the use of the Registration Statement may
be resumed.  Notwithstanding anything to
the contrary contained herein or in the Purchase Agreement, the Company will
cause the Transfer Agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Purchase
Agreement in connection with any sale of Registrable Securities with respect to
which such Investor has entered into a contract for sale prior to receipt of
notice of such suspension and for which such Investor has not yet settled,
unless otherwise prohibited by law.

 

3.7                                 Review
by the Investors.  The Company will
permit a single firm of legal counsel, designated by the Investors who hold a
majority in interest of the Registrable Securities being sold pursuant to a
Registration Statement (“Investor’s Counsel”), to review the
Registration Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof) a reasonable amount of
time (not to exceed three (3) days) prior to their filing with the SEC,

 

6

 

and will not file any document in a form to which such
counsel reasonably objects, unless otherwise required by law in the opinion of
the Company’s counsel.  The sections of
any such Registration Statement including information with respect to the
Investors, the Investors’ beneficial ownership of securities of the Company or
the Investors’ intended method of disposition of Registrable Securities must
conform to the information provided to the Company by each of the Investors or
Investors Counsel.

 

3.8                                 Comfort
Letter; Legal Opinion.  At the
request of the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to a Registration Statement, and on the date
that Registrable Securities are delivered to an underwriter for sale in
connection with the Registration Statement, the Company will furnish to the
Investors and the underwriters (i) a letter, dated such date, from the
Company’s independent certified public accountants, in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
the Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and Investors.

 

3.9                                 Due
Diligence; Confidentiality.

 

(a)                                  The
Company will make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to a Registration Statement, any underwriter
participating in any disposition pursuant to the Registration Statement, and
any attorney, accountant or other agent retained by any such Investor or
underwriter (collectively, the “Inspectors”), all pertinent financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the “Records”), as each Inspector reasonably deems
necessary to enable the Inspector to exercise its due diligence
responsibility.  The Company will cause
its officers, directors and employees to supply all information that any
Inspector may reasonably request for purposes of performing such due diligence.

 

(b)                                 Each
Inspector will hold in confidence, and will not make any disclosure (except to
an Investor) of, any Records or other information that the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, (iii) the information
in such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement (to the knowledge of the
relevant Inspector), (iv) the Records or other information was developed
independently by an Inspector without breach of this Agreement, (v) the
information was known to the Inspector before receipt of such information from
the Company, or (vi) the information was disclosed to the Inspector by a
third party without restriction.  The
Company is not required to disclose any confidential information in the Records
to any Inspector unless and until such Inspector has entered into a
confidentiality agreement (in form and substance reasonably satisfactory to the
Company) with the Company with respect thereto, substantially in the substance
of this Section 3.9(b).  Each
Investor will, upon learning that disclosure of Records containing confidential
information is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at the Company’s expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.  Nothing herein will be
deemed to limit the Investor’s ability to sell Registrable Securities in a
manner that is otherwise consistent with applicable laws and regulations.

 

7

 

(c)                                  The
Company will hold in confidence, and will not make any disclosure of,
information concerning an Investor provided to the Company under this Agreement
unless (i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, (iv) such information has been made generally available to
the public other than by disclosure in violation of this Agreement or any other
agreement, (v) the information was disclosed to the Company by a third
party without restriction or (vi) such Investor consents to the form and
content of any such disclosure.  If the
Company learns that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, the Company will give prompt notice to such Investor prior
to making such disclosure and allow such Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

 

3.10                           Listing.  The Company will (i) cause all of the
Registrable Securities covered by each Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series 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 (ii) to the extent the securities of the same class or series are not
then listed on a national securities exchange, secure the designation and
quotation of all of the Registrable Securities covered by each Registration
Statement on Nasdaq.

 

3.11                           Transfer
Agent; Registrar.  The Company will
provide a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement.

 

3.12                           Share
Certificates.  The Company will
cooperate with the Investors who hold Registrable Securities being sold and
with the managing underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to a Registration Statement and
will enable such certificates to be in such denominations or amounts as the
case may be, and registered in such names as the Investors or the managing
underwriter(s), if any, may reasonably request, all in accordance with Article V
of the Purchase Agreement.

 

3.13                           Plan
of Distribution.  At the request of
the Investors holding a majority in interest of the Registrable Securities
registered pursuant to a Registration Statement, the Company will promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement, and the prospectus
used in connection with the Registration Statement, as may be necessary in
order to change the plan of distribution set forth in such Registration
Statement.

 

3.14                           Securities
Laws Compliance.  The Company will
comply with all applicable laws related to any Registration Statement relating
to the offer and sale of Registrable Securities and with all applicable rules and
regulations of governmental authorities in connection therewith (including,
without limitation, the Securities Act, the Exchange Act and the rules and
regulations promulgated by the SEC).

 

8

 

3.15                           Further
Assurances.  The Company will take
all other reasonable actions as any Investor or the underwriters, if any, may
reasonably request to expedite and facilitate disposition by such Investor of
the Registrable Securities pursuant to the Registration Statement.

 

ARTICLE IV

OBLIGATIONS OF THE INVESTORS

 

4.1                                 Investor
Information.  As a condition to the
obligations of the Company to complete any registration pursuant to this
Agreement with respect to the Registrable Securities of each Investor, such
Investor will furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as is reasonably required by the Company to
effect the registration of the Registrable Securities.  At least 10 business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Investor of the information the
Company requires from that Investor if the Investor elects to have any of its
Registrable Securities included in the Registration Statement other than
information contained in the Investor Questionnaire attached hereto as Annex A,
which shall be completed and delivered to the Company no later than five (5) days
after the Closing Date.  If, within three
business days prior to the filing date, the Company has not received the
requested information from an Investor, then the Company shall call the
Investor to notify the Investor orally that the Company may exclude such
Investor’s Registrable Securities and the Company may file the Registration
Statement without including Registrable Securities of that Investor.

 

4.2                                 Further
Assurances.  Each Investor will
cooperate with the Company, as reasonably requested by the Company, in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor’s election to exclude all of such Investor’s Registrable Securities
from the Registration Statement.

 

4.3                                 Suspension
of Sales.  Upon receipt of any notice
from the Company of the happening of any event of the kind described in Section 3.6,
each Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until it receives copies of the supplemented or amended prospectus
contemplated by Section 3.6.  If so
directed by the Company, each Investor will deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in the Investor’s possession (other than a limited
number of file copies) of the prospectus covering such Registrable Securities
that is current at the time of receipt of such notice.

 

4.4                                 Underwritten
Offerings.

 

(a)                                  If
Investors holding a majority in interest of the Registrable Securities being
registered (with the approval of the Initial Investors) determine to engage the
services of an underwriter, each Investor will enter into and perform such
Investor’s obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering, and will take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of its
Registrable Securities from such Registration Statement.

 

9

 

(b)                                 Without
limiting any Investor’s rights under Section 2.1 hereof, no Investor may
participate in any underwritten distribution hereunder unless such Investor (a) agrees
to sell such Investor’s Registrable Securities on the basis provided in any
underwriting arrangements approved by the Investors entitled hereunder to
approve such arrangements, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (c) agrees
to pay its pro rata share of all underwriting discounts and commissions
applicable with respect to its Registrable Securities.

 

ARTICLE V

EXPENSES OF REGISTRATION

 

The Company will bear all expenses, other than
underwriting discounts and commissions, and transfer taxes, if any, incurred in
connection with registrations, filings or qualifications pursuant to Articles
II and III of this Agreement, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one firm of legal counsel selected by the Initial Investors
pursuant to Section 3.7 hereof.

 

ARTICLE VI

INDEMNIFICATION

 

In the event that any Registrable Securities are
included in a Registration Statement under this Agreement:

 

6.1                                 To
the extent permitted by law, the Company will indemnify, defend and hold
harmless each Investor that holds such Registrable Securities, and agents,
employees, attorneys, accountants, underwriters (as defined in the Securities
Act) for such Investors and any directors or officers of such Investor or such
underwriter and any person who controls such Investor or such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an “Investor
Indemnified Person”) against any losses, claims, damages, expenses or
liabilities (collectively, and together with actions, proceedings or inquiries
by any regulatory or self-regulatory organization, whether commenced or
threatened in respect thereof, “Claims”) to which any of them become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such Claims arise out of or are based upon any of the following statements,
omissions or violations in a Registration Statement filed pursuant to this
Agreement, any post-effective amendment thereof or any prospectus included
therein:  (a) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (b) any untrue
statement or alleged untrue statement of a material fact contained in the
prospectus or any preliminary prospectus (as it may be amended or supplemented)
or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, or (c) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act or any other law, including without limitation any state
securities law or any rule or regulation thereunder (the matters in the
foregoing clauses (a) through (c) being, collectively, “Violations”).  Subject to the restrictions set forth in Section 6.4
with respect to the number of legal counsel, the Company will reimburse the
Investors and each such attorney, accountant, underwriter or controlling person
and each such other Investor Indemnified Person, promptly as such expenses

 

10

 

are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any Claim. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.1 (i) does not
apply to a Claim by an Investor Indemnified Person arising out of or based upon
a Violation that occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Investor Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus or supplement thereto was timely made
available by the Company pursuant to Section 3.3 hereof; and (ii) does
not apply to amounts paid in settlement of any Claim if such settlement is made
without the prior written consent of the Company, which consent will not be
unreasonably withheld. This indemnity obligation will remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Persons and will survive the transfer of the Registrable Securities by the
Investors under Article IX of this Agreement.

 

6.2                                 In
connection with any Registration Statement in which an Investor is
participating, absent any negligence or intentional misconduct of the Company, each
such Investor will indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 6.1 above, the Company, each of its
directors, each of its officers who signs the Registration Statement, each person,
if any, who controls the Company within the meaning of the Securities Act or
the Exchange Act, and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder within the meaning of the Securities Act or the
Exchange Act (each a “Company Indemnified Person”) against any Claim to
which any of them may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in such Registration
Statement.  Subject to the restrictions
set forth in Section 6.4 with respect to the number of legal counsel, such
Investor will promptly reimburse each Company Indemnified Person for any legal
or other expenses (promptly as such expenses are incurred and due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim.   However, the indemnity
agreement contained in this Section 6.2 does not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent will not be unreasonably
withheld, and no Investor will be liable under this Agreement (including this Section 6.2
and Article VII) for the amount of any Claim that exceeds the net proceeds
actually received by such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement.  This indemnity will remain in full force and
effect regardless of any investigation made by or on behalf of a Company Indemnified
Party and will survive the transfer of the Registrable Securities by the
Investors under Article IX of this Agreement.

 

6.3                                 If
any proceeding shall be brought or asserted against any person entitled to
indemnity under Sections 6.1 or 6.2 hereof (an “Indemnified Party”),
such Indemnified Party promptly shall notify the person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, however, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.

 

11

 

6.4                                 An
Indemnified Party 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 Indemnified Party or
Indemnified Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (ii) the Indemnifying Party shall
have failed promptly to assume the defense of such proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
proceeding; or (iii) the named parties to any such proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the reasonable expense of the Indemnifying Party;
provided, however, that in no event shall the Indemnifying Party be responsible
for the fees and expenses of more than one separate counsel).  The Indemnifying Party shall not be liable
for any settlement of any such proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on Claims that are the subject matter of such proceeding.

 

6.5                                 Subject
to the foregoing, all reasonable fees and expenses of the Indemnified Party
(including fees and expenses to the extent incurred in connection with
investigating or preparing to defend such proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on
a monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

 

ARTICLE VII

CONTRIBUTION

 

To the extent that any indemnification provided for
herein is prohibited or limited by law, the indemnifying party will make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under Article VI to the fullest extent permitted by law.  However, (a) no contribution will be
made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Article VI (without
giving effect to any prohibition or limitation or indemnification under
applicable law), (b) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation, and (c) contribution (together with any indemnification
or other obligations under this Agreement) by any seller of Registrable
Securities will be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.

 

12

 

ARTICLE VIII

EXCHANGE ACT REPORTING

 

In order to make available to the Investors the
benefits of Rule 144 or any similar rule or regulation of the SEC
that may at any time permit the Investors to sell securities of the Company to
the public without registration, the Company will:

 

(a)                                  File
with the SEC in a timely manner, and make and keep available, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act so long as the Company remains subject to such requirements (it
being understood that nothing herein limits the Company’s obligations under Section 4.3
of the Purchase Agreement) and file and make available of such reports and
other documents as required for the applicable provisions of Rule 144; and

 

(b)                                 Furnish
to each Investor, so long as such Investor holds Registrable Securities,
promptly upon the Investor’s request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
filed by the Company with the SEC and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.

 

ARTICLE IX

ASSIGNMENT OF REGISTRATION RIGHTS

 

The rights of the Initial Investors hereunder,
including the right to have the Company register Registrable Securities
pursuant to this Agreement, may be assigned by the Initial Investors to
transferees or assignees of all or any portion of the Registrable Securities,
but only if (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned, (c) after such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (d) at
or before the time the Company received the written notice contemplated by
clause (b) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (e) such
transfer is made in accordance with the applicable requirements of the Purchase
Agreement, and (f) the transferee is an “accredited investor” as that term
is defined in Rule 501 of Regulation D.

 

ARTICLE X

AMENDMENT OF REGISTRATION RIGHTS

 

This Agreement may be amended and the obligations
hereunder may be waived (either generally or in a particular instance, and
either retroactively or prospectively) only with the written consent of the
Company and of the Investors who then hold a majority interest of the
Registrable Securities.  Any amendment or
waiver effected in accordance with this Article X is binding upon each
Investor and the Company.

 

13

 

ARTICLE XI

MISCELLANEOUS

 

11.1                           Conflicting
Instructions.  A person or entity is
deemed to be a holder of Registrable Securities whenever such person or entity
owns of record such Registrable Securities. 
If the Company receives conflicting instructions, notices or elections
from two or more persons or entities with respect to the same Registrable
Securities, the Company will act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.

 

11.2                           Notices.  Any notices required or permitted to be given
under the terms of this Agreement will be given as set forth in the Purchase
Agreement.

 

11.3                           Waiver.  Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, does not operate as a waiver thereof.

 

11.4                           Governing
Law.  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.

 

11.5                           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.

 

11.6                           Entire
Agreement.  This Agreement and the
Purchase Agreement (including all schedules and exhibits thereto) 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.

 

11.7                           Successors
and Assigns.  Subject to the
requirements of Article IX hereof, this Agreement inures to the benefit of
and is binding upon the successors and assigns of each of the parties
hereto.  Notwithstanding anything to the
contrary herein, including, without limitation, Article IX, the rights of
an Investor hereunder are assignable to and exercisable by a bona fide pledgee
of the Registrable Securities in connection with an Investor’s margin or
brokerage accounts.

 

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

 

14

 

11.9                           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which constitute
one and the same agreement.  This Agreement,
once executed by a party, may be delivered to the other party hereto by
facsimile transmission, and facsimile signatures are binding on the parties
hereto.

 

11.10                     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.

 

11.11                     Consents.  Unless otherwise provided in this Agreement,
all consents and other determinations to be made by the Investors pursuant to
this Agreement will be made by the Investors holding a majority in interest of
the Registrable Securities.

 

11.12                     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.

 

15

 

IN WITNESS WHEREOF, the undersigned Investors and the
Company have caused this Registration Rights 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

  	
   

  
							

 

16

 

OMNIBUS SIGNATURE PAGE TO

SONUS PHARMACEUTICALS, INC.

REGISTRATION RIGHTS AGREEMENT

 

 

The undersigned hereby executes and delivers the
Registration Rights 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 Common Shares:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of Warrant Shares:

  	
   

  
				

 

17

 

ANNEX A

 

Sonus Pharmaceuticals, Inc.

 

Selling Securityholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock,
$.001 par value per share (the “Common Stock”), of Sonus Pharmaceuticals, Inc.
(the “Company”), (the “Registrable Securities”) understands that
the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a registration statement on Form S-3
(the “Registration Statement”) for the registration and resale under Rule 415
of the Securities Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the Registration Rights
Agreement, dated as of August       , 2005
(the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a
selling securityholder in the Registration Statement and the related
prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the
Registrable Securities owned by it and listed below in Item 3 (unless otherwise
specified under such Item 3) in the Registration Statement.

 

18

 

The undersigned hereby
provides the following information to the Company and represents and warrants
that such information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

	
  (a)

  	
   

  	
  Full Legal Name of Selling Securityholder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Full Legal Name of Registered Holder (if not the
  same as (a) above) through which Registrable Securities Listed in Item 3
  below are held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Full Legal Name of Natural Control Person (which
  means a natural person who directly or indirectly alone or with others has power
  to vote or dispose of the securities covered by the questionnaire):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2. Address for Notices to Selling
  Securityholder:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    Telephone:

  	
   

  	
   

  
	
    Fax:

  	
   

  	
   

  
	
    Contact Person:

  	
   

  	
   

  
								

 

3. 
Beneficial Ownership of Registrable Securities:

 

	
  (a)

  	
   

  	
  Type and Amount of Registrable Securities
  beneficially owned:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

19

 

4. 
Broker-Dealer Status:

 

(a)                                  Are
you a broker-dealer?

 

Yes   o              No   o

 

Note:                   If yes, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

(b)                                 Are
you an affiliate of a broker-dealer?

 

Yes   o              No   o

 

(c)                                  If
you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

Yes   o              No   o

 

Note:                   If no, the
Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 

5. 
Beneficial Ownership of Other Securities of the Company Owned by the
Selling Securityholder.

 

Except as set forth below in this
Item 5, the undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities listed above in
Item 3.

 

	
  (a)

  	
  Type and Amount of Other Securities beneficially
  owned by the Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

20

 

6. 
Relationships with the Company:

 

Except as set forth below, neither
the undersigned nor any of its affiliates, officers, directors or principal
equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during the
past three years.

 

	
   

  	
  State any exceptions here:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

The undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the Registration
Statement remains effective.

 

By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus.  The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

21

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}]]