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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
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Sonus Pharmaceuticals, Inc.
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(Name of Issuer)
Common Stock, par value $.001 per share
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(Title of Class of Securities)
835692104
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(CUSIP Number)
Jose M. de Lasa, Abbott Laboratories, AP6D D-364, 100
Abbott Park Road, Abbott Park, Illinois 60064-3500
Tel: (847) 937-8905
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 14, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with this statement /X/. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of Pages
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CUSIP No. 835692104 13D Page of Pages
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
Abbott Laboratories IRS Identification Number: 36-0698440
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
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(3) SEC Use Only
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(4) Source of Funds*
WC
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
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(6) Citizenship or Place of Organization
Illinois
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Number of Shares (7) Sole Voting
Beneficially Owned Power 500,000
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power
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(9) Sole Dispositive
Power 500,000
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(10) Shared Dispositive
Power
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
500,000
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
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(13) Percent of Class Represented by Amount in Row (11)
5.58%
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(14) Type of Reporting Person*
CO
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*SEE INSTRUCTION BEFORE FILLING OUT!
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ITEM 1. SECURITY AND ISSUER.
This statement relates to warrants (the "Warrants") for five hundred
thousand (500,000) shares of the common stock (the "Common Stock") of Sonus
Pharmaceuticals, Inc., a Delaware corporation (the "Issuer") whose principal
executive offices are located at 22026 20th Avenue, S.E., Suite 102, Bothell,
Washington 98021. The Warrants have an exercise price equal to sixteen dollars
($16.00) per share, subject to adjustments as set forth in the Warrant
Certificate, a copy of which is attached hereto and incorporated herein as
EXHIBIT 3. All rights to purchase shares of Common Stock under the Warrant
Certificate shall cease at 11:59 p.m. on May 14, 2001, subject to earlier
termination as provided in the Warrant Certificate. The Warrants are
evidenced by the Warrant Certificate.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c), and (f) The person filing this statement is Abbott
Laboratories ("Abbott"), an Illinois corporation. Abbott's principal business
is the discovery, development, manufacture, and sale of a broad and diversified
line of health care products and services. Abbott's principal office is located
at 100 Abbott Park Road, Abbott Park, Illinois 60064-3500.
The names, citizenship, business addresses, present principal
occupation or employment and the name, and the principal business and address of
any corporation or other organization in which such employment is conducted of
the directors and executive officers of Abbott are as set forth in Annex A
hereto and incorporated herein by this reference.
(d) and (e) Neither Abbott, nor to the best of its knowledge, any
person listed on Annex A has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The consideration used by Abbott for the acquisition reported in this
Schedule 13D came from the general assets of Abbott. Abbott acquired the
Warrants for $4,000,000 (i.e., eight dollars per share).
ITEM 4. PURPOSE OF THE TRANSACTION.
Abbott acquired the Warrants contemporaneously and in connection with
its entering into an agreement with the Issuer pursuant to which Abbott and the
Issuer will collaborate in the research, development, marketing, and sale of
EchoGen-Registered Trademark- Emulsion, an ultrasound contrast agent being
investigated for broad clinical utility in both cardiology and radiology
applications.
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Abbott acquired the Warrants as an investment and is bound by the
terms and conditions of the Agreement between Abbott Laboratories and Sonus
Pharmaceuticals, Inc. dated May 14, 1996 (the "Agreement") (a copy of which is
attached hereto as EXHIBIT 1), the Sonus Pharmaceuticals, Inc. Third Amended and
Restated Registration Rights Agreement entered into as of May 15, 1996 (the
"Registration Agreement") (a copy of which is attached hereto as EXHIBIT 2), and
a Warrant Certificate dated May 14, 1996 (the "Warrant Certificate") (a copy of
which is attached hereto as EXHIBIT 3). The Agreement, the Registration
Agreement, and the Warrant Certificate are incorporated herein by this reference
and are described in greater detail in Item 6.
The Agreement provides that Abbott, with the exception of the shares
it may acquire upon exercise of the Warrant, shall not, without the prior
written consent of the Issuer, acquire or agree to acquire, by purchase or
otherwise, any voting securities of the Issuer or any subsidiary of the Issuer.
Subject to the terms and conditions of the Agreement, the Registration
Agreement, and the Warrant Certificate; to a continuing review of the prospects
of the Issuer, market conditions, and economic conditions; and, to other
relevant factors, Abbott may purchase shares of Common Stock, or may dispose of
the shares it subsequently acquires.
(a) In addition to the Warrant, Section 4.1 of the Agreement
provides that Abbott may also receive a warrant to acquire an additional
125,000 shares of the Common Stock (the "Section 4.1 Warrant"). Section 4.1
of the Agreement, states that if the Issuer receives a bona fide offer from a
Third Party (as defined in the Agreement) for the right to market and sell
Product (as defined in the Agreement) in Canada and/or Latin America prior to
December 31, 1996, then within a reasonable time, not to exceed sixty (60)
days, the Issuer shall give written notice to Abbott of the details of the
offer and Abbott shall have the opportunity to meet, or offer terms more
favorable than, such Third Party offer within sixty (60) days of such notice.
If either (A) Abbott meets or offers terms more favorable than such Third
Party offer and the Issuer fails to enter into an agreement with Abbott with
respect to such marketing rights, or (B) whether or not there is a Third
Party offer, the parties do not enter into a binding commitment for Abbott to
acquire marketing rights in Canada and/or Latin America prior to December 31,
1996, then the payment in Appendix 2.3 to the Agreement due to Issuer upon
the First Shipment Date (as defined therein) shall be decreased. The Issuer
may, at its option, substitute for the decreased payment Section 4.1 Warrants
to purchase 125,000 shares of common stock of the Issuer, subject to
adjustment as set forth in a warrant certificate substantially in the form of
the Warrant Certificate, for shares of the Issuer's common stock, such
Section 4.1 Warrants based on the warrant exercise price equal to the volume
weighted average price for the ten (10) trading days prior to the date the
Issuer executes a definitive agreement with a Third Party for marketing
rights as set forth in Section 4.1 or December 31, 1996, whichever is
earlier. The Issuer shall notify Abbott of which option it chooses no later
than December 31, 1996. The Section 4.1 Warrant shall be issued as of the
date of the determination of the warrant price. Anything in the foregoing to
the contrary notwithstanding, in the event that prior to December 31, 1996,
the Issuer should receive a bona fide offer from a Third Party for marketing
rights in Canada and/or Latin America and Abbott shall have failed to meet or
offer more favorable terms as provided above, then the Issuer shall not be
subject to a reduced fee upon First Shipment or have an obligation to issue
any Section 4.1 Warrants.
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(b) - (j) Except to the extent that the license of intellectual
property rights by the Issuer to Abbott pursuant to the Agreement (and the
related agreements referenced in the Agreement) constitutes "a sale or transfer
of a material amount of assets of the issuer or any of its subsidiaries," Abbott
does not now have any plans or proposals which would relate to or result in
transactions of the kind described in paragraphs (b) through (j) of Item 4 of
Schedule 13d of the Securities and Exchange Commission. Abbott does, however,
reserve the right to adopt such plans or proposals, subject to compliance with
applicable regulatory requirements, if any.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Abbott is the beneficial owner of Warrants entitling it to
purchase 500,000 shares of the Issuer's Common Stock. This represents
approximately five and 58/100 percent (5.58%) of the outstanding shares of
the Common Stock. The calculation of the foregoing percentage is based on
the number of shares of Common Stock shown as being outstanding on the Form
10-Q Quarterly Report filed by the Issuer with the Securities and Exchange
Commission for the quarter ended March 31, 1996. In addition, under Section
4.1 of the Agreement, Abbott may receive a Section 4.1 Warrant entitling
Abbott to purchase an additional 125,000 shares of the Issuer's Common Stock.
The Section 4.1 Warrant is described in greater detail in Item 4(a).
(b) At such time, if ever, as Abbott exercises the Warrant (or the
Section 4.1 Warrant) it will have the sole power to vote or direct the vote
and the sole power to dispose or direct the disposition of the shares of
Common Stock acquired upon that exercise. Section 8.3 of the Agreement
provides that, with the exception of the shares acquired upon exercise of the
Warrant, Abbott and its "Affiliates" (as defined in the Agreement) shall not,
without the prior written consent of the Issuer, acquire or agree to acquire,
by purchase or otherwise any voting securities of the Issuer or any
subsidiary of the Issuer.
(c) Except as described herein, there have been no transactions by
Abbott or the persons whose names are listed on Annex A in securities of the
Issuer during the past sixty days.
(d) No one other than Abbott is known to have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the a
sale of, the Warrant or the shares of Common Stock that Abbott may acquire upon
exercise of the Warrant.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Abbott's rights with respect to the securities of the Issuer are
subject to the terms and conditions of the Agreement, the Registration
Agreement, and the Warrant Certificate. These terms and conditions are
described below.
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Section 8.1 of the Agreement provides that Abbott shall purchase and
the Issuer shall sell and issue the Warrant.
Section 8.3 of the Agreement provides that with the exception of
the shares acquired upon exercise of the Warrant, Abbott, shall not, without
the prior written consent of the Issuer acquire or agree to acquire, by
purchase or otherwise, any voting securities of the Issuer or any subsidiary
of the Issuer.
The Issuer has granted Abbott certain the registration rights under
the Registration Agreement and has amended the Registration Agreement to include
Abbott within that agreement's definition of the term "Holder."
Section 1 of the Registration Agreement defines the terms
"Registrable Securities", "Piggyback Registrable Securities", "register",
"registered", "registration", "Registration Statement", "Initiating Holders"
and "Piggyback Holders". The terms "Registrable Securities" and "Piggyback
Registrable Securities" are defined to include within their definition the
Common Stock issued or issuable upon exercise of either the Warrant or the
Section 4.1 Warrant. The terms "register", "registered", and "registration"
refer to a registration effected by filing with the Securities and Exchange
Commission a registration statement (the "Registration Statement") in
compliance with the Securities Act of 1933, as amended (the "1933 Act") and
the declaration or ordering by the Securities and Exchange Commission of
the effectiveness of such Registration Statement. The term "Initiating
Holders" means any Holder or Holders of not less than fifty percent (50%) of
the Registrable Securities held by all of the Holders then outstanding and
not registered at the time of any request for registration pursuant to
paragraph 1.2 of the Registration Agreement. The term "Piggyback Holders"
means the Holders of Piggyback Registrable Securities.
Paragraph 1.2(a) of the Registration Agreement provides that if the
Issuer receives from Initiating Holders a written demand (a "Demand
Registration") that the Issuer effect any registration under the 1933 Act of all
or part of the Registrable Securities (other than a registration on Form S-3 or
any related form of registration statement), the Issuer will:
(i) promptly (but in any event within 10 days) give written notice
of the proposed registration to all other Holders; and
(ii) use its best efforts to effect such registration as soon as
practicable as may be so demanded and as will permit or
facilitate the sale and distribution of all or such portion of
such Initiating Holders' Registrable Securities as are
specified in such demand, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in
such demand as are specified in a written demand received by
the Issuer within 30 days after such written notice is given,
provided that the Issuer shall not be obligated to take any
action to effect any such registration, pursuant to paragraph
1.2:
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(A) Within 120 days immediately following the effective date of
any registration statement pertaining to an underwritten
public offering of securities of the Issuer for its own
account (other than a registration on Form S-4 relating solely
to a Securities and Exchange Commission Rule 145 transaction,
or a registration relating solely to employee benefit plans);
(B) After the Issuer has effected an aggregate of two such
registrations pursuant to paragraph 1.2 and the sales of the
shares of Common Stock under such registrations have closed;
(C) If the Issuer shall furnish to such Holders a certificate
signed by the President of the Issuer, stating that in the
good faith judgment of the board of directors of the Issuer it
would be seriously detrimental to the Issuer and its
shareholders for such Registration Statement to be filed at
the date filing would be required, in which case the Issuer
shall have an additional period of not more than 90 days
within which to file such Registration Statement; provided,
however, that the Issuer shall not use this right more than
once in any twelve month period;
(D) If the Demand Registration covers less than 30 percent of
Registrable Securities held by all of the Holders and the
proposed aggregate offering price to the public of the
Registrable Securities to be included in the registration by
all Holders, is less than $5,000,000; or
(E) Prior to October 17, 1996.
Paragraph 1.2(b) of the Registration Agreement provides that if the
Initiating Holders intend to distribute the Registrable Securities covered by
their demand by means of an underwriting, they shall so advise the Issuer as
part of their demand made pursuant to paragraph 1.2; and the Issuer shall
include such information in the written notice referred to above. In such
event, the right of any Holder to registration pursuant to paragraph 1.2 is
conditioned upon that Holder's participation in the underwriting and the
inclusion of that Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and that Holder) to the extent provided in the Registration Agreement.
Paragraph 1.2(b) of the Registration Agreement also provides that the
Issuer, together with all Holders proposing to distribute their securities
through such underwriting, must enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by a majority in
interest of the Initiating Holders and reasonably satisfactory to the Issuer.
Notwithstanding any other provision of paragraph 1.2, if the underwriter advises
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the Issuer in writing that marketing factors (including an adverse effect on the
per share offering price) require a limitation of the number of shares to be
underwritten, then the Issuer must advise all Holders of Registrable Securities
that would otherwise be so registered and underwritten, and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated pro rata among the Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. For purposes of any underwriter cutback, all Registrable Securities
held by any Holder which is a partnership or corporation shall also include any
Registrable Securities held by the partners, retired partners, shareholders or
affiliated entities of such Holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of the
foregoing persons, and such Holder and other persons shall be deemed to be a
single "selling Holder", and any pro rata reduction with respect to such
"selling Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling Holder", as defined in this sentence. No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Issuer, the underwriter,
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Issuer may include securities for its own account (or for
the account of other shareholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
Paragraph 1.3(a) of the Registration Agreement provides that if at any time
or from time to time the Issuer shall determine to register any of its
securities, either for its own account or the account of security holders, other
than a registration relating solely to employee benefit plans, a registration on
Form S-4 relating solely to an Securities and Exchange Commission Rule 145
transaction, or a registration pursuant to paragraph 1.2 of the Registrant
Agreement, the Issuer will:
(i) promptly give to the Piggyback Holders written notice thereof
(which shall include a list of the jurisdictions in which the
Issuer intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting
involved therein, all the Piggyback Registrable Securities
specified in a written request or requests, made within 20 days
after receipt of such written notice from the Issuer, by the
Piggyback Holders, except as set forth in subparagraph 1.3(b)
of the Registration Agreement.
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Paragraph 1.3(b) of the Registration Agreement provides that if the
registration of which the Issuer gives notice is for a registered public
offering involving an underwriting, then the Issuer shall so advise the
Piggyback Holders as a part of the written notice given pursuant to
subparagraph 1.3(a)(i). In such event, the right of the Piggyback Holders to
registration of his or its Piggyback Registrable Securities pursuant to
paragraph 1.3 shall be conditioned upon the Piggyback Holder's participation
in such underwriting and the inclusion of the Piggyback Holder's Piggyback
Registrable Securities in the underwriting to the extent provided in the
Registration Agreement. The Piggyback Holders proposing to distribute their
securities through such underwriting shall, together with the Issuer and the
other parties distributing their securities through such underwriting, enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Issuer. Notwithstanding
any other provision of paragraph 1.3, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Piggyback Registrable
Securities to be included in the registration and underwriting, or may
exclude Piggyback Registrable Securities entirely from such registration and
underwriting subject to the terms of this paragraph; provided, however, for
any registration, the limitation shall not reduce the number of Piggyback
Registrable Securities to be included in the offering below thirty percent
(30%) of the total number of shares to be included in the offering unless the
holders of at least a majority of Piggyback Registrable Securities then
outstanding otherwise consent to or approve the limitation of the number of
shares to be underwritten. The Issuer shall so advise all holders of the
Issuer's securities that would otherwise be registered and underwritten
pursuant hereto, and the number of shares of such securities, including
Piggyback Registrable Securities, that may be included in the registration
and underwriting shall be allocated in the following manner: shares, other
than Piggyback Registrable Securities, requested to be included in such
registration by shareholders shall be excluded, and if a limitation on the
number of shares is still required, the number of Piggyback Registrable
Securities that may be included shall be allocated among the Piggyback
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Piggyback Registrable Securities held by the Piggyback Holders at
the time of filing the Registration Statement. For purposes of any
underwriter cutback, all Piggyback Registrable Securities held by any
Piggyback Holder which is a partnership or corporation shall also include any
Piggyback Registrable Securities held by the partners, retired partners,
shareholders or affiliated entities of such Piggyback Holder or the estates
and family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons, and such Piggyback Holder
and other persons shall be deemed to be a single "selling Holder", and any
pro rata reduction with respect to such "selling Piggyback Holder" shall be
based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "selling Piggyback Holder,"
as defined in this sentence. No securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Piggyback Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Issuer and the underwriter. The Piggyback Registrable Securities so
withdrawn shall also be withdrawn from registration.
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Paragraph 1.3(c) of the Registration Agreement provides that no Piggyback
Holder shall be entitled to exercise any right provided for in Section 1.3
after October 17, 1998.
Paragraph 1.4 of the Registration Agreement provides that all expenses
incurred in connection with the first two registrations effected pursuant to
paragraph 1.2 and all registrations effected pursuant to paragraphs 1.3 and 1.9,
including without limitation all registration, filing, and qualification fees
(including blue sky fees and expenses), printing expenses, escrow fees, fees and
disbursements of counsel for the Issuer and of one special counsel for the
participating Holders and the Common Holders (as defined in the Registration
Agreement), and expenses of any special audits incidental to or required by such
registration, shall be borne by the Issuer; provided, however, that the Issuer
shall not be required to pay stock transfer taxes or underwriters' discounts, or
commissions relating to Registrable Securities or Piggyback Registrable
Securities. Notwithstanding anything to the contrary above, the Issuer shall
not be required to pay for any expenses of any registration proceeding under
paragraph 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to have been
registered, unless such Holders agree to forfeit their right to a demand
registration pursuant to paragraph 1.2 (in which event such right shall be
forfeited by all Holders). In the absence of such an agreement to forfeit, the
Holders of Registrable Securities to have been registered shall bear all such
expenses pro rata on the basis of the Registrable Securities to have been
registered. Notwithstanding the preceding sentence, however, if at the time of
the withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Issuer from that known to the Holders
at the time of their request, of which the Issuer had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to paragraph 1.2.
Paragraph 1.5 of the Registration Agreement provides that whenever
required under Section 1 of the Registration Agreement to effect the
registration of any Registrable Securities or Piggyback Registrable Securities
the Issuer shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable
Securities or Piggyback Registrable Securities and use its
diligent best efforts to cause such registration statement to
become effective, and keep such registration statement effective
for up to ninety (90) days or until the Holders and the Common
Holders have completed the distribution relating thereto.
(b) Prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the 1933 Act with
respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders and the Common Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate
the disposition of Registrable Securities or Piggyback
Registrable Securities owned by them.
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(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and the Common Holders,
provided that the Issuer shall not be required in connection
therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such
offering. Each Holder and each Common Holder participating in
such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each holder of Registrable Securities or Piggyback
Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be
delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) Furnish, at the request of the Holder or any Common Holder
requesting registration of Registrable Securities or Piggyback
Registrable Securities pursuant to Section 1, on the date that
such Registrable Securities or Piggyback Registrable Securities
are delivered to the underwriters for sale in connection with a
registration pursuant to Section 1, if such securities are being
sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i)
an opinion, dated such date, of the counsel representing the
Issuer for the purposes of such registration, in form and
substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if
any, and to the Holders and/or the Common Holders requesting
registration of Registrable Securities or Piggyback Registrable
Securities, and (ii) a letter dated such date from the
independent accountants of the Issuer, in form and substance as
is customarily given by independent accountants to underwriters
in an underwritten public offering, addressed to the
underwriters, if any, and, if permissible, to the Holders and/or
the Common Holders requesting registration of Registrable
Securities or Piggyback Registrable Securities.
Paragraph 1.6(a) of the Registration Agreement provides that the Issuer
will indemnify and hold harmless each Holder of Registrable Securities and each
Piggyback Holder of Piggyback Registrable Securities, each of such Holder's or
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such Piggyback Holder's, officers, directors, partners and agents, and each
person controlling such Holder or such Piggyback Holders, with respect to any
registration, qualification, or compliance effected pursuant to Section 1 of
the Registration Agreement, and each underwriter, if any, and each person who
controls any underwriter, of the Registrable Securities held by or issuable to
such Holder or such Piggyback Holder, against all claims, losses, damages, and
liabilities (or actions in respect thereto) to which they may become subject
under the 1933 Act, the Securities Exchange Act of 1934, as amended, (the "1934
Act"), or other federal or state law arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular, or other similar document (including any related
Registration Statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any violation
or alleged violation by the Issuer of any federal, state or common law rule or
regulation applicable to the Issuer in connection with any such registration,
qualification, or compliance, and will reimburse, as incurred, each such Holder,
each such Piggyback Holder, each such underwriter, and each such director,
officer, partner, agent and controlling person, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action; provided that the Issuer will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense, arises out of or is based on any untrue statement or
omission based upon written information furnished to the Issuer by an instrument
duly executed by such Holder or such Piggyback Holder or underwriter and stated
to be specifically for use therein.
Paragraph 1.6(b) of the Registration Agreement provides that each Holder
and each Piggyback Holder will, if Registrable Securities or Piggyback
Registrable Securities held by or issuable to such Holder or such Piggyback
Holder are included in such registration, qualification, or compliance,
severally and not jointly, indemnify the Issuer, each of its directors, and each
officer who signs a Registration Statement in connection therewith, and each
person controlling the Issuer, each underwriter, if any, and, each person who
controls any underwriter, of the Issuer's securities covered by such a
Registration Statement, and each other Holder, each other Piggyback Holder, each
of such other Holder's or Piggyback Holder's officers, partners, directors and
agents and each person controlling such other Holder, or such other Piggyback
Holder against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, the Issuer, each such underwriter, each such other Holder, each
such other Piggyback Holder, and each such director, officer, partner, and
controlling person, for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in such Registration Statement, prospectus, offering
circular, or other document, in reliance upon and in conformity with written
information furnished to the Issuer by an instrument duly executed by such
Holder or such Piggyback Holder and stated to be specifically for use therein;
provided, however, that the liability of each Holder or each Piggyback Holder
hereunder shall be limited to the net proceeds received by such Holder or such
Piggyback Holder from the sale of securities under such Registration Statement.
In no event will any Holder or any Piggyback Holder be required to enter into
any agreement or undertaking in connection with any registration under Section
1 providing for any indemnification or contribution obligations on the part of
such Holder or such Piggyback Holder greater than such Holder's or such
Piggyback Holder's obligations under paragraph 1.6.
12
<PAGE>
Paragraph 1.6(c) of the Registration Agreement provides that each party
entitled to indemnification under paragraph 1.6 (the "Indemnified Party") shall
give notice to the party required to provide such indemnification (the
"Indemnifying Party") of any claim as to which indemnification may be sought
promptly after such Indemnified Party has actual knowledge thereof, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
subject to approval by the Indemnified Party (whose approval shall not be
unreasonably withheld) and the Indemnified Party may participate in such defense
with its separate counsel at the Indemnifying Party's expense if representation
of such Indemnified Party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under Section 1, except to
the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
Paragraph 1.7 of the Registration Agreement provides that if the
Holder or any Piggyback Holder of Registrable Securities or Piggyback
Registrable Securities include Registrable Securities or Piggyback Registrable
Securities in any registration, such Holder or Piggyback Holder, shall furnish
to the Issuer such information regarding such Holder or Piggyback Holder
respectively, and the distribution proposed by such Holder or such Piggyback
Holder, respectively, as the Issuer may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to in Section 1.
Paragraph 1.8 of the Registration Agreement provides that the rights
of the Holders and the Piggyback Holders contained in paragraphs 1.2, 1.3 and
1.9 of the Registration Agreement, to cause the Issuer to register the
Registrable Securities or Piggyback Registrable Securities, may be assigned
or otherwise conveyed to a transferee or assignee of Registrable Securities
or Piggyback Registrable Securities, who shall be considered a "Holder" or a
"Piggyback Holder", as applicable, for purposes of Section 1; provided that
such transferee or assignee, (a) receives such securities as a partner in
connection with partnership distributions of a Series A Purchaser (as defined
in the Registration Agreement) or a Piggyback Holder, or (b) acquires at
least 200,000 shares (as presently constituted), or 100% of the Registrable
Securities or Piggyback Registrable Securities held by the transferring
Holder or Piggyback Holder, whichever is less; and, provided further, that
the Issuer is given written notice by such Holder or Piggyback Holder at the
time of or within a reasonable time after said transfer stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned.
13
<PAGE>
Paragraph 1.9 of the Registration Agreement provides that the Issuer
shall use its best efforts to qualify for registration on Form S-3 and to that
end the Issuer shall register (whether or not required by law to do so) its
Common Stock under the 1934 Act within twelve (12) months following the
effective date of the first registration of any securities of the Issuer on Form
S-1. After the Issuer has qualified for the use of Form S-3, the Holders of
Registrable Securities shall have the right to request up to four (4)
registrations on Form S-3 under paragraph 1.9. The Issuer shall give notice to
all Holders of Registrable Securities of the receipt of a request for
registration pursuant to paragraph 1.9 and shall provide a reasonable
opportunity for other Holders to participate in the registration. Subject to
the foregoing, the Issuer will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3, as the case
may be, to the extent requested by the Holder or Holders thereof for purposes of
disposition; provided, however, that the Issuer shall not be obligated to effect
any such registration (i) if the Holders, together with the holders of any other
securities of the Issuer entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000, or (ii) more than once during any
twelve (12) month period; or (iii) in the event that the conditions set forth in
subparagraph 1.2(a)(ii)(C) obtain (but subject to the limitations set forth
therein).
Paragraph 1.10 of the Registration Agreement provides that no Holder,
nor any Piggyback Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of Section 1.
Paragraph 1.11 of the Registration Agreement provides that from and
after the date of the Registration Agreement, the Issuer shall not, without
the prior written consent of the holders of more than a majority of the
Piggyback Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Issuer which would allow such
holder or prospective holder to (a) require the Issuer to effect a
registration or (b) include any securities in any registration filed under
paragraph 1.2 or 1.3 of the Registration Agreement, unless, under the terms of
such agreement, such holder or prospective holder may include such securities
in any such registration only to the extent that the inclusion of such
securities will not diminish the amount of Registrable Securities or
Piggyback Registrable Securities which are included in such registration and
includes the equivalent of Section 1.13 as a term.
Paragraph 1.12 of the Registration Agreement provides that with a view
to making available to the Holders and the Piggyback Holders the benefits of
certain rules and regulations of the Securities and Exchange Commission which
may permit the sale of the Registrable Securities and the Piggyback Registrable
Securities to the public without registration, the Issuer agrees to use its best
efforts to:
14
<PAGE>
(a) Make and keep public information available, as those terms are
understood and defined in Securities and Exchange Commission Rule
144 or any similar or analogous rule promulgated under the 1933
Act, at all times commencing ninety (90) days after the effective
date of the first registration filed by the Issuer for an
offering of its securities to the general public;
(b) File with the Securities and Exchange Commission, in a timely
manner, all reports and other documents required of the Issuer
under the 1933 Act and 1934 Act;
(c) So long as any Holder or any Piggyback Holder owns any
Registrable Securities or Piggyback Registrable Securities,
furnish to such Holder or such Piggyback Holder forthwith upon
request: a written statement by the Issuer as to its compliance
with the reporting requirements of said Rule 144 of the 1933 Act,
and of the 1934 Act (at any time after it has become subject to
such reporting requirements); a copy of the most recent annual or
quarterly report of the Issuer; and such other reports and
documents as any Holder or any Piggyback Holder may reasonably
request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing it to sell any such
securities without registration.
Paragraph 1.13 of the Registration Agreement provides that each Holder
and each Piggyback Holder agrees that during the 120-day period following
the effective date of a registration statement of the Issuer filed under the
1933 Act, he or it shall not, to the extent requested by the Issuer and any
underwriter, sell or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any Common Stock of the Issuer held by him or it at
any time during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Issuer which covers Common Stock
(or other securities) to be sold on his or its behalf to the
public in an underwritten offering; and
(b) all officers and directors of the Issuer and all other persons
with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Issuer may impose
stop-transfer instructions with respect to the Registrable Securities and/or
Piggyback Registrable Securities of each Holder and each Piggyback Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
15
<PAGE>
Paragraph 1.14 of the Registration Agreement provides that any provision
of Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Issuer and the holders of not less than a
majority of the Piggyback Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder, each Piggyback Holder, each future holder of Registrable
Securities or Piggyback Registrable Securities, and the Issuer.
The Warrant Certificate provides that Abbott is the owner of
500,000 Warrants, each of which entitles the Abbott or registered assigns
(the "Holder") to purchase one fully paid and nonassessable share of Common
Stock of the Issuer (such number being subject to adjustment as provided in
Paragraph 5 of the Warrant Certificate) on the terms and conditions set forth
in the Warrant Certificate.
The purchase price of the shares of Common Stock covered by the
Warrants is $16.00 per share, subject to adjustment as provided in Paragraph 5
of the Warrant Certificate. The purchase price of the shares of Common Stock as
to which the Warrants are exercised must be paid in full at the time of exercise
and may be paid by cash, check or bank draft.
The term of the Warrants commenced on the May 14, 1996 and all
rights to purchase shares of Common Stock under the Warrant Certificate shall
cease at 11:59 P.M. on May 14, 2001, subject to earlier termination as
provided in the Warrant Certificate. The Warrants may be exercised at any
time from May 14, 1996 until their expiration. The Warrant Certificate also
provides that the Holder of the Warrants shall not have any of the rights of
a stockholder with respect to the shares covered by the Warrants as to any
shares of Common Stock that are not actually issued and delivered to it.
The Warrants are not transferable or assignable except to an
Affiliate of the Holder without the prior written consent of the Issuer,
which consent shall not be unreasonably withheld. The Holder may transfer or
assign the shares of Common Stock issuable upon exercise of the Warrants;
provided, however, that (i) a registration statement with respect thereto has
become effective under the 1933 Act; or (ii) in the opinion of counsel to the
Holder such registration is not necessary; or (iii) such transfer complies
with the provisions of Rule 144 under the 1933 Act. For purposes of the
Warrant Certificate, "Affiliate" means any wholly-owned subsidiary or parent
of, or any corporation, entity or other person which is, within the meaning
of the 1933 Act, controlling, controlled by or under common control with, the
Holder or the Issuer, as the case may be.
Section 5 of the Warrant Certificate describes the circumstances
under which there will be adjustments for stock splits, consolidations,
etcetera. It provides that the purchase price and number and class of shares
subject to the Warrant Certificate shall all be proportionately adjusted in
the event of any change or increase or decrease in the number of issued
shares of Common Stock in the Issuer, without receipt of consideration by the
Issuer, which result from a split-up or consolidation of shares, payment of a
share dividend, a recapitalization, combination of shares or other like
capital adjustment, so that, upon exercise of the Warrant Certificate, the
Holder shall receive the number and class of shares it would have received
had it been the holder of the number of shares of Common Stock in the Issuer,
for which the Warrant Certificate is being exercised, on the date of such
change or increase or decrease in the number of issued shares of Common Stock
in the Issuer. If the Issuer reorganizes, consolidates or merges with or
into any other corporation where the Issuer is not the surviving entity, then
each share of Common Stock shall be convertible into the consideration to
which the shares of Common Stock subject to the Warrant Certificate would
have been entitled to receive upon the effectiveness of such reorganization,
merger or consolidation. Adjustments under Section 5 shall be made by the
Board of Directors of the Issuer in its reasonable, good faith judgment,
whose determination with respect thereto shall be final and conclusive. No
fractional shares shall be issued under the Warrant Certificate or upon any
such adjustment.
16
<PAGE>
Section 6 of the Warrant Certificate describes the method by which
the Warrant may be exercised. Paragraph 6(a) provides that, subject to the
terms and conditions of the Warrant Certificate, the Warrants may be
exercised by surrender of the Warrant Certificate together with delivery to
the Issuer at its principal office of a signed Subscription Agreement (the
"Subscription Agreement") specifying the number of shares to be purchased.
The Subscription Agreement shall be accompanied by payment in cash, check or
bank draft, payable to the Issuer, equal to, in the aggregate, the full
purchase price of the shares. The Issuer shall deliver a certificate or
certificates representing the shares subject to such exercise as soon as
practicable after the Subscription Agreement and consideration for the shares
has been received by the Issuer, and the Holder shall be deemed a record
holder of Common Stock upon such receipt by the Issuer.
Paragraph 6(b) provides that the Holder shall have the right, upon
its written request delivered or transmitted to the Issuer together with the
Warrant Certificate, to exchange the Warrant Certificate, in whole or in part
at any time or from time to time on or prior to May 14, 2001, for the number
of shares of Common Stock having an aggregate Fair Market Value (determined
as set forth in Paragraph 6(c) below) on the date of such exchange equal to
the difference between (1) the aggregate Fair Market Value on the date of the
exchange of a number of shares designated by the Holder and (2) the aggregate
exercise price the Holder would have paid to the Issuer to purchase the
designated number of shares upon exercise of the Warrant Certificate. Upon
any such exchange, the number of shares purchasable upon exercise of the
Warrant Certificate shall be reduced by the designated number of shares, and,
if a balance of purchasable shares remains after that exchange, the Issuer
shall execute and deliver to the Holder a new Warrant Certificate evidencing
the right of the Holder to purchase such balance of shares. No payment of any
cash or other consideration shall be required. The exchange shall be
effective upon the date of receipt by the Issuer of the original Warrant
Certificate surrendered for cancellation and a written request from the
Holder that the exchange pursuant to this Section be made, or at such later
date as may be specified in such request.
Paragraph 6(c) provides that the fair market value of the Common Stock
("Fair Market Value") shall be determined as follows:
(i) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such an exchange,
or is listed on the Nasdaq National Market or Small Cap Market,
the current Fair Market Value shall be the volume-weighted
average price of the Common Stock on such exchange or Nasdaq for
the ten (10) business days prior to the date of exchange of the
Warrant; or
17
<PAGE>
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on Nasdaq, the current Fair Market
Value shall be the volume-weighted average of the mean of the
last bid and asked prices reported for the ten (10) business days
prior to the date of the exchange of the Warrant (1) by Nasdaq,
or (2) if reports are unavailable under clause (i) above, by the
National Quotation Bureau Incorporated; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so
reported, the current Fair Market Value shall be determined
in good faith as promptly as reasonably practicable by the
Board of Directors.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Annex A - Information Concerning Executive Officers and
Directors of Abbott Laboratories.
Exhibit 1 - Agreement between Abbott Laboratories and Sonus
Pharmaceuticals, Inc. dated May 14, 1996.
(Confidential Treatment requested for portions of this
Agreement.)
Exhibit 2 - Amended Registration Rights Agreement.
Exhibit 3 - Warrant Certificate.
*******************************
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Abbott Laboratories
DATED: May 23, 1996 By: Duane L. Burnham
-----------------------------------------
Duane L. Burnham, Chairman of the Board
and Chief Executive Officer
18
<PAGE>
Annex A
Information Concerning Executive Officers and
Directors of Abbott Laboratories
_______________________________
The current corporate officers and directors of Abbott Laboratories
are listed below. The address of Abbott Laboratories is: Abbott
Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-3500.
Abbott Laboratories does not consider all of its corporate officers to be
executive officers as defined by the Securities Exchange Act of 1934 or
Releases thereunder. Unless otherwise indicated, all positions set forth
below opposite an individual's name refer to positions within Abbott
Laboratories, and the business address listed for each individual not
principally employed by Abbott Laboratories is also the address of the
corporation or other organization which principally employs that
individual.
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
Corporate Officers
------------------
Duane L. Burnham (1) Chairman of the Board and U. S. A.
Chief Executive Officer
Thomas R. Hodgson (1) President and Chief Operating U. S. A.
Officer
Joy A. Amundson (1) Senior Vice President, U. S. A.
Chemical & Agricultural Products
Paul N. Clark (1) Senior Vice President, U. S. A.
Pharmaceutical Operations
Gary P. Coughlan (1) Senior Vice President, Finance U. S. A.
& Chief Financial Officer
Jose M. de Lasa (1) Senior Vice President, U. S. A.
Secretary and General Counsel
John G. Kringel (1) Senior Vice President, U. S. A.
Hospital Products
Thomas M. McNally (1) Senior Vice President, Ross Products U. S. A.
David V. Milligan, Senior Vice President, Chief U. S. A.
Ph.D. (1) Scientific Officer
Robert L. Parkinson, Senior Vice President, U. S. A.
Jr. (1) International Operations
Ellen M. Walvoord (1) Senior Vice President, Human U. S. A.
Resources
Miles D. White (1) Senior Vice President, U. S. A.
Diagnostic Operations
19
<PAGE>
Annex A
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
Catherine V. Vice President, Investor Relations U. S. A.
Babington (1) and Public Affairs
Mark E. Barmak Vice President, Litigation and U. S. A.
Government Affairs
Christopher B. Begley Vice President, Hospital U. S. A.
Products Business Sector
Thomas D. Brown Vice President, Diagnostic U. S. A.
Commercial Operations
Gary R. Byers (1) Vice President, Internal Audit U. S. A.
Kenneth W. Farmer (1) Vice President, Management U. S. A.
Information Services & Administration
Thomas C. Freyman (1) Vice President and Treasurer U. S. A.
David B. Goffredo Vice President, Pharmaceutical U. S. A.
Products Marketing & Sales
Rick A. Gonzalez (1) Vice President, HealthSystems U. S. A.
Jay B. Johnston Vice President, Diagnostic U. S. A.
Assays and Operations
James J. Koziarz, Ph.D. Vice President, Diagnostic U. S. A.
Products Research & Development
John F. Lussen (1) Vice President, Taxes U. S. A.
Richard H. Morehead (1) Vice President, Corporate U. S. A.
Planning and Development
Theodore A. Olson (1) Vice President and Controller U. S. A.
Andre G. Pernet Vice President, Pharmaceutical U. S. A.
Products Research & Development
Carl A. Spalding Vice President, Ross Pediatric U. S. A.
Products
William H. Stadtlander Vice President, Ross Medical U. S. A.
Nutritional Products
20
<PAGE>
Annex A
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
Josef Wendler Vice President, European Operations Germany
Don G. Wright (1) Vice President, Corporate Quality U. S. A.
Assurance & Regulatory Affairs
Lance B. Wyatt (1) Vice President, Corporate U. S. A.
Engineering
Directors
---------
K. Frank Austen, M.D. Professor of Medicine, U. S. A.
Harvard Medical School
The Seeley G. Mudd Building,
Room 604
250 Longwood Avenue
Boston, Massachusetts 02115
Duane L. Burnham Officer of Abbott U. S. A.
H. Laurance Fuller Chairman, President, and Chief U. S. A.
Executive Officer
Amoco Corporation
200 East Randolph Drive
Mail Code 3000
Chicago, Illinois 60601
(integrated petroleum and
chemicals company)
Thomas R. Hodgson Officer of Abbott U. S. A.
Allen F. Jacobson Retired Chairman and Chief Executive U. S. A.
Officer, Minnesota Mining &
Manufacturing Company
3050 Minnesota World Trade Center
30 E. 7th Street
St. Paul, Minnesota 55101-4901
(manufacturer of industrial imaging
and health care products)
21
<PAGE>
Annex A
Information Concerning Executive Officers and
Directors of Abbott Laboratories
_____________________________________
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
David A. Jones Chairman and Chief Executive U. S. A.
Officer
Humana Inc.
500 W. Main St.
Humana Building
Louisville, Kentucky 40201
(health plan business)
The Rt. Hon. the
Lord Owen CH British Member of Parliament United Kingdom
20 Queen Anne's Gate
Westminster, London
SW1H 9AA, England
Boone Powell, Jr. President and Chief Executive U. S. A.
Officer
Baylor Health Care System and
Baylor University Medical Center,
Vice President, Baylor University
3500 Gaston Avenue
Dallas, Texas 75246
Addison Barry Rand Executive Vice President U. S. A.
Xerox Corporation
800 Long Ridge Road
Stamford, Connecticut
06904-1600
(document processing, insurance
and financial services company)
Dr. W. Ann Reynolds Chancellor U. S. A.
The City University of New York
535 E. 80th Street
New York, New York 10021
William D. Smithburg Chairman, President and Chief U. S. A.
Executive Officer
The Quaker Oats Company
321 N. Clark Street
Chicago, Illinois 60610
(worldwide food manufacturer
and marketer of beverages
and grain-based products)
22
<PAGE>
Annex A
Information Concerning Executive Officers and
Directors of Abbott Laboratories
_____________________________________
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
John R. Walter Chairman and Chief Executive U. S. A.
Officer
R. R. Donnelley & Sons Company
R. R. Donnelley Building
77 West Wacker Drive
Chicago, Illinois 60601
(printing company)
William L. Weiss Chairman Emeritus, Ameritech U. S. A.
Corporation
One First National Plaza
Suite 2530C
Chicago, Illinois 60603-2006
(telecommunications company)
(1) Pursuant to Item 401(b) of Regulation S-K Abbott has identified these
persons as "executive officers" within the meaning of Item 401(b).
23
<PAGE>
AGREEMENT
BETWEEN
ABBOTT LABORATORIES
AND
SONUS PHARMACEUTICALS, INC.
[Confidential Treatment Requested]
<PAGE>
TABLE OF CONTENTS
ABBOTT LABORATORIES
AND
SONUS PHARMACEUTICALS, INC.
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . 6
3. ALLOCATION OF PRODUCT RIGHTS AND RESPONSIBILITIES . . . . . . . . . . . 9
4. CANADA AND LATIN AMERICA. . . . . . . . . . . . . . . . . . . . . . . . 24
5. LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6. LAUNCH BUDGET; REIMBURSEMENT PAYMENTS . . . . . . . . . . . . . . . . . .27
7. REVENUE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8. WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9. BUYOUT OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10. RIGHT OF FIRST REFUSAL FOR ADDITIONAL PRODUCTS . . . . . . . . . . . . 33
11. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 34
12. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 35
13. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . 42
15. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 42
16. NON-COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
19. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
20. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
21. ALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . 46
22. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
23. RELATIONSHIP OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . 47
24. APPENDICES AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 47
25. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
26. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
27. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
28. ENTIRE AGREEMENT; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 48
29. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
30. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
<PAGE>
APPENDICES
INDICATIONS Appendix 1.6
LICENSED PATENTS Appendix 1.13
RESEARCH AND DEVELOPMENT PLAN Appendix 2.2
R&D PAYMENT SCHEDULE Appendix 2.3
NET SALES FORECAST Appendix 3.2B
SPECIFICATIONS Appendix 3.4
TRADEMARKS Appendix 3.9
ALTERNATIVE DISPUTE RESOLUTION Appendix 21
EXHIBITS
WARRANT CERTIFICATE FORM Exhibit A
[THE APPENDICES LISTED ABOVE,
OTHER THAN APPENDIX 2.3,
ARE NOT INCLUDED HEREWITH
BUT WILL BE FURNISHED
SUPPLEMENTALLY TO THE COMMISSION
UPON REQUEST, SUBJECT
TO ABBOTT LABORATORIES' RIGHT
TO REQUEST CONFIDENTIAL
TREATMENT FOR THESE APPENDICES PURSUANT
TO THE RULES OF THE COMMISSION]
<PAGE>
AGREEMENT
THIS AGREEMENT dated May 14, 1996 ("Effective Date"), by and between Abbott
Laboratories, an Illinois corporation with principal offices at 100 Abbott Park
Road, Abbott Park, Illinois 60064-3500 ("ABBOTT") and SONUS Pharmaceuticals,
Inc., a Delaware corporation with principal offices at 22026 20th Avenue, S.E.,
Suite 102, Bothell, Washington 98021 ("SONUS").
RECITALS
WHEREAS, SONUS has developed and holds patents and patent applications on
an ultrasound contrast agent, trademarked "EchoGen;" and
WHEREAS, SONUS and ABBOTT have previously entered into a Development and
Supply Agreement, dated May 6, 1993 ("Supply Agreement"), whereby ABBOTT
assisted in the manufacturing scale-up of and agreed to manufacture the
ultrasound contrast agent for SONUS; and
WHEREAS, SONUS is currently conducting clinical studies for use in
obtaining Federal Food and Drug Administration approval of the ultrasound
contrast agent; and
WHEREAS, SONUS desires to grant, and ABBOTT desires to obtain, certain
exclusive marketing rights, subject to limited SONUS co-promotion rights, to the
ultrasound contrast agent in accordance with the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants set forth below, ABBOTT and SONUS mutually agree as follows:
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1. DEFINITIONS
In addition to the terms defined in the provisions of the Agreement, the
following terms shall have the meaning ascribed below:
1.1 "Affiliate" means any entity which controls, is controlled by or is
under common control with another entity. An entity is deemed to be in control
of another entity (controlled entity) if the former owns directly or indirectly
at least the lesser of (a) fifty percent (50%), or (b) the maximum percentage
allowed by law in the country of the controlled entity, of the outstanding
voting equity of the controlled entity.
1.2 "Agreement" means this Agreement, as may be amended, including all
Appendices and Exhibits attached hereto.
1.3 "Average Unit Selling Price" means Net Sales for a period divided by
the number of Units of Product shipped by ABBOTT and its Affiliates in the
Territory for the same period, less returned goods, inventory outdates, recalls
and/or withdrawals of Product.
1.4 "Confidential Information" means information disclosed in writing by
one party to the other pursuant to this Agreement and identified as
"CONFIDENTIAL" as well as information disclosed orally to the extent such oral
disclosure is reduced to writing and is identified as "CONFIDENTIAL" and which
is provided to the other party within thirty (30) days after oral disclosure.
"Confidential Information" does not include any of such information which:
(A) is known to the receiving party before receipt thereof under this
Agreement, or is independently developed by the receiving party without recourse
to
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the other party's Confidential Information, as evidenced by the receiving
party's written records;
(B) is disclosed to the receiving party without restriction after
full execution of this Agreement by a Third Party having a legal right to make
such disclosure; or
(C) is or becomes part of the public domain through no breach of this
Agreement.
1.5 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.
1.6 "Field" means diagnostic ultrasound pharmaceuticals for all current
and future markets for the indications set forth in Appendix 1.6, as such
indications are approved by the FDA.
1.7 "Finished Goods Inventory" means the Product inventory status whereby
the Product has completed production and testing procedures and is ready for
sale to Third Party customers.
1.8 "Finished Product" means Units of the Product tested and ready for
sale, either supplied to ABBOTT by SONUS, or manufactured by ABBOTT for SONUS.
1.9 "First Shipment Date" means the date of the first shipment of Product
by ABBOTT to a Third Party, as evidenced by an ABBOTT sales invoice generated
and sent to a Third Party, but in no event more than ninety (90) days after FDA
approval of the Product.
1.10 "GMP" means current good manufacturing practices as established by
the FDA and as practiced by the industry in which the parties operate.
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1.11 "Improvements" means any and all developments, inventions or
discoveries in the Field relating to the Licensed Patents or Know-How and
developed, or acquired with the right to sublicense, by SONUS during the term
of this Agreement and shall include, but not be limited to, developments
intended to enhance the safety and efficacy of the Product.
1.12 "Know-How" means that proprietary technology of SONUS relating to the
Product including, but not limited to, manufacture or product techniques,
formulations or production technology, methods of synthesis or other processes.
1.13 "Licensed Patents" means:
(A) the patents and patent applications set forth in Appendix 1.13 and
any patents or patent applications covering the Product now owned or hereafter
acquired by SONUS or under which SONUS has the right to grant sublicenses during
the term of this Agreement in the Territory including any covering Improvements;
(B) all patents arising from such applications identified in (A) and
any divisions, continuations, and continuations-in-part identified in (A);
(C) any extension, renewal, re-examination or reissue of a patent
identified in (A) or (B).
1.14 "NDA" means an application filed with the FDA for approval by the FDA
of the sale of the Product in the United States of America, whether such
application is characterized as a New Drug Application or otherwise.
1.15 "Net Sales" means the gross sales of the Product in all of its final
packaged forms shipped by ABBOTT and its Affiliates in the Territory, less:
(A) allowances and adjustments separately and actually credited or
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payable, including credit for damaged, outdated and returned products;
(B) trade discounts earned or granted;
(C) cash discounts actually allowed;
(D) transportation charges (including insurance costs), handling
charges, sales taxes, excise taxes and duties, and other similar charges
invoiced to customers;
(E) wholesaler chargebacks; and
(F) rebates and management fees earned or granted.
Net Sales shall be calculated in accordance with ABBOTT's standard internal
policies and procedures. Any discount, allowance, rebate, management fee or
wholesaler chargeback for the Product which is given to a customer due to the
purchase of a product other than the Product or due to the purchase of any
service, shall not be taken into consideration for the calculation of Net Sales.
1.16 "Product" means a colloidal dispersion ultrasound contrast agent
suitable for intravenous administration containing the active ingredient
dodecafluoropentane which is covered by one or more claims of the Licensed
Patents regardless of form, dose or package. Without limiting the generality of
the foregoing, "Product" shall include: (i) a complete product with kit,
including one or more vials of EchoGen-Registered Trademark- together with a kit
including a syringe, tubing and other accessories as may be included in the
final package; (ii) one or more vials of EchoGen-Registered Trademark- without
any kit; and (iii) a kit only, consisting of a syringe, tubing and other
accessories as are included in the final package, but not including any EchoGen-
Registered Trademark-.
1.17 "Supply Agreement" means the Contrast Agent Development and Supply
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Agreement between ABBOTT and SONUS dated May 6, 1993, as amended and as may be
amended by the parties.
1.18 "Territory" means the continental United States, Alaska, Hawaii and
Puerto Rico, but does not include its other territories, commonwealths or
possessions.
1.19 "Third Party" means any individual, corporation, partnership, trust
or other business organization or entity, and any other recognized organization
other than the parties hereto and their Affiliates.
1.20 "Unit" means a single vial of the Product or a combination of a single
vial with a kit which is in final salable form.
2. RESEARCH AND DEVELOPMENT
2.1 RESPONSIBILITIES. SONUS shall use reasonable commercial best efforts
to carry out and perform the research and development to obtain prompt FDA
approval of the Product for use in the Field. SONUS shall be solely
responsible for all research and development, for clinical research, and for
the securing of regulatory approval of the Product in the Territory. SONUS
shall use its reasonable commercial best efforts to achieve each milestone of
the Plan (as defined below) and complete each phase of the research and
development in order to obtain FDA approval of the Product for marketing in the
Territory.
2.2 RESEARCH AND DEVELOPMENT PLAN. SONUS shall be responsible for
preparing a research and development plan to include all the necessary
research, development, clinical research and regulatory filings to support an
NDA and obtain FDA approval of the Product in the Territory. The research and
development plan and milestone timetable shall be attached to this Agreement as
Appendix 2.2 ("Plan").
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Such Plan shall be updated quarterly by SONUS and SONUS shall submit to ABBOTT
a quarterly status report summarizing the completion or phase of completion of
each key milestone in the Plan. During the period of time covered by the
Plan, ABBOTT and SONUS shall meet at least quarterly at times and places
mutually agreed upon to discuss the status of the Plan.
2.3 RESEARCH AND DEVELOPMENT PAYMENTS. ABBOTT shall provide to SONUS (A)
thirty million dollars ($30,000,000) to support completion of the Plan,
including any related general needs by SONUS, and (B) one million dollars
($1,000,000) as payment for the grant of the licenses under the Licensed
Patents and Know-How in Article 5 and the trademark license in Section 3.9.
These payments shall be nonrefundable, shall be paid by ABBOTT to SONUS in the
amounts and at the times set forth on the schedule in Appendix 2.3. The
quarterly milestone payments set forth in Appendix 2.3 shall be paid to SONUS
within fifteen (15) days of receipt of the appropriate quarterly report
described above in Section 2.2.
2.4 ADDITIONAL CLINICAL RESEARCH. ABBOTT shall have no obligation to
provide financial support for research and development, including clinical
research, to be conducted by SONUS except for the amounts payable by ABBOTT
as set forth in Section 2.3 and Article 7. SONUS shall promptly notify
ABBOTT in writing if SONUS desires that ABBOTT fund expenditures for clinical
research in addition to that set forth in the Plan to support research and
development for ultrasound diagnostic applications for the following
indications for the Product:: [CONFIDENTIAL PORTION]. Such notice from
SONUS shall include a budget for clinical research and a preliminary
7
<PAGE>
clinical plan. ABBOTT shall communicate its decision whether or not to
financially participate in such clinical research within ninety (90) days of
receipt of the budget and clinical plan from SONUS. ABBOTT shall be under no
obligation to financially support such additional clinical research. If ABBOTT
desires to participate in such additional clinical research, ABBOTT shall
reimburse SONUS for its documented incremental costs and expenses incurred
associated with the additional clinical research which are costs and expenses in
excess of SONUS' budget for clinical research as described in Sections 2.2 and
3.6 and which are mutually agreed by the parties. In addition, the definition
of the "Field" set forth in Section 1.6 shall be expanded to include the
indication(s) funded by ABBOTT. SONUS shall reimburse ABBOTT fifty percent
(50%) of such costs and expenses funded by ABBOTT by either, at the option of
SONUS (i) reimbursing ABBOTT such costs and expenses with interest at the prime
rate of interest within five (5) years of the date such costs and expenses are
paid by ABBOTT, or (ii) reducing the percentage amounts payable by ABBOTT to
SONUS as provided in Article 7 at such dates and in such amounts as is mutually
agreed by the parties. If ABBOTT determines not to provide additional financial
support for such additional clinical research and SONUS proceeds with the
additional research and development, then the parties shall negotiate in good
faith to modify the percentage allocations of Revenue Payments allocable to such
additional indications under Section 7.1 below to reflect the amount of the
expenditures to be made by SONUS for such additional clinical research related
to such additional indications, together with such other factors as are
appropriate. If the parties agree to a reasonable modification of the
percentage allocation of Revenue Payments as set forth above, the definition of
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"Field" set forth in Section 1.6 shall be expanded to include such additional
indications. The provisions of this Section 2.4 shall apply only with respect
to the new indications for the Product specified above and shall not apply to
any new product which is subject to Section 10 below.
2.5 FDA APPROVAL. If SONUS does not receive FDA approval to market the
Product within four (4) years of the date of the NDA filing, then ABBOTT may,
but does not have any obligation to, pursue such FDA approval of the Product.
If ABBOTT determines to pursue FDA approval, then SONUS shall promptly, upon
written request from ABBOTT, deliver to ABBOTT all NDA documentation, clinical
study data and supplies. ABBOTT may conduct any necessary research or clinical
studies to obtain such FDA approval of the Product. All reasonable costs
incurred by ABBOTT in pursuing such FDA approval shall be deducted from any
payments due SONUS under this Agreement.
3. ALLOCATION OF PRODUCT RIGHTS AND RESPONSIBILITIES
3.1 PREMISE . Under this Article 3, ABBOTT and SONUS agree to a division
of responsibilities regarding the Product and, under Article 7, accordingly
agree to a division of revenue generated by sales of the Product. If there is a
material change in the division of such responsibilities, whether by the
agreement of the parties or by operation of this Agreement, then the parties
shall negotiate in good faith toward a corresponding change in the division of
revenue under Article 7.
3.2 MARKETING AND SALES.
(A) ABBOTT shall have the exclusive right and the associated
responsibilities for the marketing and sales of the Product in the Territory,
which shall
9
<PAGE>
include responsibility for distribution, order entry, invoicing and collection
regarding sales of the Product. ABBOTT shall use its reasonable commercial
best efforts to optimize sales, profitability, and market share in the
Territory. The efforts of ABBOTT shall be evidenced by carrying out those
specific tasks as mutually agreed to by the parties. ABBOTT shall prepare pre-
and post-launch marketing plans which shall be reviewed and approved by SONUS
prior to implementation, such approval not to be unreasonably withheld.
(B) SONUS shall have the right to co-promote (as defined herein) the
Product at its own expense in the Territory only under the following
circumstances:
(i) at any time after the first anniversary of the First Shipment
Date, if ABBOTT's Net Sales to Third Parties are below fifty percent (50%) of
the mutually agreed Net Sales forecast attached as Appendix 3.2B for any two
consecutive quarters. SONUS shall notify ABBOTT in writing within thirty (30)
days of receipt of the applicable second quarterly Net Sales report, as set
forth in Section 7.1, of its intention to co-promote the Product. SONUS' right
to co-promote would be effective thirty (30) days after the date of ABBOTT's
receipt of notice from SONUS. If SONUS does not so inform ABBOTT, then SONUS
shall have waived its right to co-promote the Product with regard to that
specific failure of ABBOTT to meet its Net Sales forecast for such two (2)
consecutive quarters. The Net Sales forecast shall be adjusted as mutually
agreed by the parties to reflect the actual time that FDA approval is obtained
and the actual indications approved.
(ii) at any time after the third anniversary of the First
Shipment Date, SONUS may, at its expense, co-promote and sell the Product in the
Territory in
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order to increase sales, profitability and market share above the existing Net
Sales forecast, for new indications, market segment customers, or customer
locations in a manner designed as complementary to ABBOTT's sales and marketing
efforts. All SONUS deployment and promotional plans and budgets must be
reviewed and approved by ABBOTT prior to implementation, such approval not to be
unreasonably withheld. SONUS shall notify ABBOTT in writing ninety (90) days
prior to commencing such co-promotion of the Product.
(iii) at any time for new indications or new market segments for
which ABBOTT has declined to support research, development or clinical research
after timely notice by SONUS as set forth in Section 2.4.
(C) SONUS' rights to co-promote the Product as set forth in
subsections 3.2(B) (i), (ii), and (iii) do not include the right of SONUS to
sublicense, transfer, or grant, directly or indirectly, such rights to a Third
Party except as set forth in Article 19. For purposes of this Agreement, "co-
promotion" means the detailing of the Product to a Third Party customer
including providing promotional materials and technical assistance but does not
include accepting sales orders. SONUS shall inform all such customers to place
all sales resulting from SONUS' co-promotion of the Product directly with ABBOTT
and provide the necessary sales processing information to the customer.
3.3 RAW MATERIALS, QUALITY CONTROL. SONUS shall be responsible for
procurement of all raw materials necessary for the manufacture of the Product as
well as quality control of the raw materials. SONUS shall handle raw materials
in accordance with the applicable provisions of the Supply Agreement.
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3.4 PRODUCT MANUFACTURE.
(A) ABBOTT and SONUS have previously entered into the Supply Agreement
under which ABBOTT has agreed to manufacture the Product for SONUS. SONUS may
purchase Product under the Supply Agreement to fulfill ABBOTT's purchase orders
under Section 3.5. All manufacturing of the Product by ABBOTT for sale in the
Territory by ABBOTT shall be in accordance with the terms of the Supply
Agreement and the specifications for the Product in effect under the Supply
Agreement ("Specifications") attached hereto as Appendix 3.4. The parties
agree to negotiate in good faith an amendment to the Supply Agreement to include
within the terms of the Supply Agreement the purchase and sale of the kits
consisting of syringes, tubing and other accessories as are included in the
final package of the complete Product, including the pricing and other terms and
conditions of sale which are consistent with the Supply Agreement and the
general custom and practice within the industry regarding such materials.
(B) The Supply Agreement shall govern ABBOTT's manufacture of all Product
provided to SONUS for sale by SONUS outside the Territory and SONUS' right to
manufacture or have manufactured the Product by a Third Party. SONUS shall
give ABBOTT reasonable prior notice in writing if SONUS decides to manufacture
or have manufactured by a Third Party the Product for purchase by ABBOTT under
this Agreement. Upon such notice, ABBOTT and SONUS shall enter into good faith
negotiations to reach agreement on the terms and conditions for a Third Party
manufacturer for the Product to be purchased by ABBOTT.
(C) All Product manufactured by SONUS or by a Third Party shall conform
with
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the Specifications. Any Third Party manufacturer appointed by SONUS to
manufacture the Product must be approved by the FDA and have a reasonable
history and record of conforming with current GMP.
(D) If any of the provisions of the Supply Agreement and this Agreement
are inconsistent, then the provisions of this Agreement shall control for
purposes of the manufacture and supply of Product subject to this Agreement.
3.5 PRODUCT FORECASTS, ORDERS AND REJECTED PRODUCT. (A) Not later than
one hundred twenty (120) days prior to the First Shipment Date, and thereafter,
at least thirty (30) days prior to the first day of each calendar quarter,
ABBOTT shall furnish to SONUS a rolling forecast of the quantities of the
Product ABBOTT intends to order for sale in the Territory during the twelve (12)
month period commencing with that calendar quarter. The first three (3) months
of such forecast shall constitute a firm order and a binding commitment of
ABBOTT to purchase such quantities as evidenced by purchase orders received from
ABBOTT in accordance with Section 3.5(B). The balance of each such forecast
shall merely represent reasonable estimates, not purchase commitments for the
Product.
(B) ABBOTT shall place each purchase order with SONUS for Product to be
delivered hereunder thirty (30) days prior to the delivery date specified in
each respective purchase order. SONUS may reject any purchase order which
exceeds one hundred fifty percent (150%) of the most current forecast underlying
such purchase order. No rejection shall be effective unless in writing and
delivered to ABBOTT within ten (10) days of SONUS' receipt of ABBOTT's purchase
order. ABBOTT shall be obligated to purchase all Product ordered and delivered
by the
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specified delivery date provided that, if Product is manufactured by a Third
Party manufacturer and not by ABBOTT, such Product meets the Specifications.
(C) If the Product is manufactured solely by SONUS or a Third Party and if
SONUS is unable to meet its supply obligations under any purchase order, then
SONUS shall give prompt written notice to ABBOTT. In such event, if SONUS
fails, or notifies ABBOTT that it will fail, to supply any amount of Product
for a ninety (90) day period, then ABBOTT may (i) set up a manufacturing source,
at the reasonable expense of SONUS, and manufacture or have the Product
manufactured by a Third Party at the reasonable expense of SONUS for the time
period of such failure or one hundred eighty (180) days, whichever is longer, or
(ii) terminate this Agreement in accordance with Section 12.2(D). The rights of
ABBOTT to terminate the Agreement pursuant to this Section 3.5(C) will not apply
if ABBOTT is in default of the Supply Agreement, unless ABBOTT's default or
inability to supply is directly or indirectly due to SONUS, including, but not
limited to, SONUS' failure to supply raw materials to ABBOTT as required under
the Supply Agreement and this Agreement.
(D) If the Product is manufactured solely by ABBOTT and if ABBOTT is
unable to meet its supply obligations under any purchase order, then ABBOTT
shall give prompt written notice to SONUS. In such event, if ABBOTT fails, or
notifies SONUS that it will fail, to supply any amount of Product for a ninety
(90) day period, then SONUS may (i) set up a manufacturing source, at the
reasonable expense of ABBOTT, and manufacture or have the Product manufactured,
by a Third Party at the reasonable expense of ABBOTT for the time period of such
failure or one hundred eighty (180) days, whichever is longer, or (ii) terminate
this Agreement in accordance
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with Section 12.2(D). Notwithstanding the foregoing, SONUS shall not have the
right to terminate this Agreement if the cause of ABBOTT's inability to supply
is directly or indirectly due to SONUS, including, but not limited to, SONUS'
failure to supply raw materials to ABBOTT as required under the Supply Agreement
and this Agreement.
(E) If SONUS and ABBOTT are both manufacturing or otherwise supplying
Finished Product to ABBOTT for sale in the Territory and either ABBOTT or SONUS
("Non-Performing Party") notifies the other party ("Other Party") that the Non-
Performing Party is unable to supply Product to the Other Party or either fails
to supply Product pursuant to this Section 3.5, and is unable to correct such
failure within ninety (90) days of written notice thereof from the Other Party,
then the right of Non-Performing Party to manufacture or otherwise supply
Product to the Other Party under the Supply Agreement shall cease until such
time as the Non-Performing Party notifies the other that it is again able to
supply Product.
(F) For Product provided by SONUS to ABBOTT which SONUS has sourced from a
party other than ABBOTT, ABBOTT shall notify SONUS in writing of any claim
relating to damaged, defective or nonconforming Product or any shortage in
quantity of any shipment of Product within thirty (30) days of receipt of such
Product by ABBOTT. In the event of such rejection or shortage, SONUS shall
replace the rejected Product or make up the shortage within thirty (30) days of
receiving such notice, at no additional cost to ABBOTT, and shall make
arrangements with ABBOTT for the return of any rejected Product at the expense
of SONUS. For Products provided by SONUS to ABBOTT which SONUS has sourced from
ABBOTT, ABBOTT shall accept such Products as conforming upon delivery to ABBOTT.
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(G) In the event that SONUS is unable to provide raw material under the
Supply Agreement for a period of ninety (90) days or longer, then ABBOTT shall
have the right to purchase the raw materials from a Third Party at SONUS'
expense or manufacture the raw materials or have a Third Party manufacture the
raw materials at SONUS' expense.
3.6 CLINICAL RESEARCH, REGULATORY AFFAIRS, TECHNICAL MARKETING/MEDICAL
SUPPORT.
(A) SONUS shall be responsible for all ongoing product development,
clinical research and regulatory filings and affairs beyond the responsibilities
set forth in Section 2.3 in support of expanded label indications in the Field.
SONUS shall also be responsible for all FDA communications, including review of
promotional materials, and all FDA requirements regarding the Product (except
those communications and requirements specifically associated with GMP
applicable to the manufacture of the Product by ABBOTT as addressed in the
Supply Agreement). ABBOTT will forward all adverse drug events to SONUS for
handling by SONUS, including any required reporting to the FDA. Each party
shall promptly notify the other party of all communications from and to the FDA
regarding the Product.
(B) SONUS shall be responsible for all medical and technical support in
the Field in the Territory, including those specific tasks mutually agreed to by
the parties. This support shall be designed to fit with the Product
positioning and ABBOTT's promotional plan.
3.7 PRODUCT RECALLS. In the event (A) any government authority issues a
request, directive or order that the Product be recalled, or (B) a court of
competent jurisdiction orders such a recall, or (C) ABBOTT and SONUS, after
consultation with
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each other, determine that the Product should be recalled, the parties shall
take all appropriate corrective actions, and shall cooperate in the
investigations surrounding the recall. ABBOTT shall handle notification of
customers and return of Product from customers. SONUS shall handle all FDA
communications and requests regarding any recalls. If such recall results from
any cause or event arising from a sole responsibility of SONUS as set forth in
this Agreement or in the Supply Agreement or is solely attributable to SONUS,
SONUS shall be responsible for all expenses of the recall and ABBOTT may deduct
any such expenses borne by ABBOTT from any payment due to SONUS under this
Agreement. If such recall results from a sole responsibility of ABBOTT as set
forth in this Agreement or in the Supply Agreement or is solely attributable to
ABBOTT, ABBOTT shall be responsible for the expenses of recall and shall
reimburse SONUS for expenses incurred by SONUS for such recall. In the event
that the recall results from any cause(s) or event(s) arising from a joint
responsibility of the parties or partially from a responsibility of SONUS and
partially from a responsibility of ABBOTT, SONUS and ABBOTT shall be jointly
responsible for expenses of the recall in proportion to each such party's
proximate fault with respect to the recall. For the purpose of this Agreement,
the expenses of recall shall include, without limitation, the expenses of
notification and destruction or return of the recalled Product, cost for the
Product recalled, legal expenses, inventory write-offs and penalties resulting
from third party contracts.
3.8 PATENTS
(A) SONUS shall be responsible for and shall diligently carry out and
shall bear all costs (including attorney fees) for the preparation, filing,
prosecution,
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maintenance, and extensions, if any, of all patents or patent applications
under the Licensed Patents. In addition, SONUS shall promptly advise ABBOTT of
all material correspondence, filings and notices of action between SONUS and
the United States Patent and Trademark Office ("PTO") concerning the Licensed
Patents. If SONUS elects not to prepare and file a patent application covering
an Improvement referenced under Section 3.8(B) or discontinues the prosecution
of any patent application or maintenance of any patent under the Licensed
Patents, then SONUS shall promptly notify ABBOTT and supply ABBOTT with copies
of all written communications with the PTO. In the event that ABBOTT reasonably
determines that the failure of SONUS to pursue the filing and prosecution of the
patent application would adversely affect the rights of ABBOTT under this
Agreement, ABBOTT may, but does not have the obligation to, file or continue
prosecution of such application or maintain such patent at its own expense.
If ABBOTT so elects, then SONUS shall be responsible for the reasonable costs
incurred by ABBOTT in connection with such filing or prosecution and shall
promptly reimburse ABBOTT for such costs upon notice by ABBOTT.
(B) SONUS shall promptly notify ABBOTT of any Improvements and of any
efforts by SONUS to patent Improvements in the Territory including, but not
limited to designation of the countries in which any patent application in
respect thereof is to be filed. Any patent application in respect of such
Improvement and any patent issued therefrom shall become part of the Licensed
Patents and Appendix 1.13 shall be modified to reflect the addition to Licensed
Patents. If any Improvement is not patented, it shall become part of the Know-
How.
(C) If either ABBOTT or SONUS has knowledge of any infringement or
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<PAGE>
likely infringement of a Licensed Patent or unauthorized use of Know-How in the
Territory, then the party having such knowledge shall promptly inform the other
party in writing, and the parties shall promptly consult with one another
regarding the action to be taken. Unless the parties otherwise mutually agree,
SONUS shall prosecute such suit, and each party shall cooperate with the other
party in the prosecution thereof and SONUS shall have the right to determine the
strategy of the prosecution of such suit. Notwithstanding the foregoing, if
ABBOTT is participating in the prosecution, ABBOTT shall be entitled to have
input in the strategy of prosecution. SONUS shall have the right to determine
the counsel to be retained by the parties in connection with such action or
claim, which counsel shall be reasonably satisfactory to ABBOTT. SONUS may seek
the assistance and participation of ABBOTT in the action or claim. If SONUS
requests ABBOTT's participation, (i) ABBOTT shall participate in the prosecution
if the action or claim involves an infringement by a Third Party's product, or
potential product, which substantially falls within the definition of Product in
Section 1.16, and (ii) ABBOTT may participate if ABBOTT determines that it would
be in ABBOTT's interests to participate if the action or claim does not directly
involve an infringement by a Third Party's product, or potential product, which
substantially falls within the definition of Product in Section 1.16.
Notwithstanding the foregoing, in the event that the action or claim involves an
infringement by a Third Party's product, or potential product, which
substantially falls within the definition of Product in Section 1.16, ABBOTT
shall have the right to participate, on an equal basis with SONUS, in the
prosecution of such action or claim. If SONUS prosecutes such claim without the
participation of ABBOTT, the costs and expenses incurred in connection with such
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action or claim shall be borne by SONUS. However, if Abbott participates in the
action or claim, the costs and expenses incurred in connection with such action
or claim shall be shared equally by SONUS and ABBOTT. If ABBOTT does not
participate in the prosecution of the action or claim, or unless otherwise
provided in this Section 3.8(C), any offer of settlement and any settlement
shall be in SONUS' discretion, provided that any offer of settlement or
settlement does not conflict with licenses granted under Article 5. If ABBOTT
participates in the prosecution of the action or claim and/or if the action or
claim involves an infringement by a Third Party's product, or potential product,
which substantially falls within the definition of Product in Section 1.16, any
offer of settlement and any settlement shall be subject to the prior approval of
both ABBOTT and SONUS. Each party agrees not to unreasonably withhold its
approval of any such settlement. If ABBOTT does not participate in the
prosecution of the action or claim, any recovery of damages or other payments
received in connection with such action or claim shall be realized by SONUS.
However, any recovery of damages or other payments received in connection with
such action for which ABBOTT participates in the prosecution shall be allocated
between and disbursed to ABBOTT and SONUS as follows: (i) first, to reimburse
ABBOTT and SONUS for their respective costs and expenses incurred in connection
with such action, and (ii) the balance of recovery or other payments to be
divided equally between ABBOTT and SONUS. In the event that the recovery of
damages is not sufficient to cover costs and expenses incurred by the parties in
connection with such action, each party shall be reimbursed on a pro rata basis
according to each party's percentage of the total costs and expenses incurred by
the parties together. ABBOTT may, but does not have the obligation to,
participate in
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the prosecution of any infringement action outside the Territory. However, if
ABBOTT does participate in any action and prosecution outside the Territory,
ABBOTT shall be entitled to share in the proceeds or recovery of damages or
other payments received in connection with such action outside the Territory.
Such amounts shall be allocated between and disbursed to ABBOTT and SONUS as
follows: (i) first, to reimburse ABBOTT for ABBOTT's costs and expenses
incurred in connection with such action, (ii) second, to reimburse SONUS for
SONUS' costs and expenses incurred in connection with such action, and (iii) the
balance of recovery or other payments to be divided equally between ABBOTT and
SONUS.
(D) If a claim or suit is brought against ABBOTT alleging: (i)
infringement of any patent or unauthorized use of any Know-How owned by a Third
Party by reason of ABBOTT's exercise of its licenses hereunder; or (ii) an
interest in any patent under the Licensed Patents, ABBOTT shall promptly give
written notice to SONUS. SONUS, within a reasonable time after such notice,
but not longer than sixty (60) days, shall advise ABBOTT of SONUS' decision on
the intended disposition of such claim or suit. If SONUS elects not to dispose
of the claim or defend the suit, ABBOTT may do so. The parties will furnish
each other with reasonable assistance regarding such claim or suit as may be
requested by the other party. Any offer of settlement or settlement of the
claim or suit by one party shall have the prior written approval of the other
party, such approval not to be unreasonably withheld. ABBOTT shall have the
right to settle such claim or suit by payment in any form. If any amounts are
paid or payable to a Third Party by ABBOTT or any damages and/or costs are
awarded against ABBOTT in such suit, then at the time of payment, such amounts,
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damages and costs may be offset against any Revenue Payment due in such year
or, if necessary, in succeeding years to SONUS.
3.9 TRADEMARKS
(A) GRANT OF LICENSE. SONUS hereby grants to ABBOTT a non-exclusive
license (the "Trademark License") in the Territory to use the SONUS trademark(s)
set forth in Appendix 3.9 on all labels, advertisements, promotional materials
and literature for the Product.
(B) RESERVATION OF RIGHTS. SONUS expressly reserves the right to use
and license Third Parties to use the SONUS trademark(s) in a manner not
inconsistent with this Agreement.
(C) ACKNOWLEDGEMENT. ABBOTT acknowledges that the SONUS trademark(s)
are owned exclusively by SONUS and that ABBOTT has no right, title or interest
in and to the SONUS trademark(s), except the rights conferred by this Agreement
and that all goodwill associated with the SONUS trademark(s) inures to the
benefit of SONUS.
(D) REGISTRATION. SONUS agrees to maintain the SONUS trademark(s) in
the United States at its own expense including the preparation and recordation
of registered user agreements and/or licenses necessary or reasonably deemed
necessary by ABBOTT in order to comply with local laws.
(E) USE OF TRADEMARK(S). The Products shall bear the trademark
EchoGen-Registered Trademark- or such other trademarks as mutually agreed to by
the parties. ABBOTT shall at all times properly use the SONUS trademark(s) to
indicate brand names by using the SONUS trademark(s) in conjunction with the
common name for the Product,
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e.g. "ECHOGEN-Registered Trademark- emulsion." However, in written copy or
package inserts ABBOTT may display, where appropriate, the symbol and common
name at the first or most prominent reference to the trademark. The trademark
registration symbol "-Registered Trademark-" or "-TM-" shall be used to indicate
registration status. Wherever the SONUS trademark(s) are used, attribution
shall be given to SONUS Pharmaceuticals, Inc. as the owner of the SONUS
trademark(s) at least once per publication as used in the public domain.
(F) INFRINGEMENTS. ABBOTT shall promptly call to the attention of
SONUS the use by any Third Party of the SONUS trademark(s) or any trademark
similar to the mark covered by this Agreement, of which it may become aware and
which it may consider to be an infringement or passing off of the SONUS
trademark(s) or unfair competition. SONUS shall have the right to decide
whether or not to bring proceedings against Third Parties. Such proceedings
shall be at the expense of SONUS. ABBOTT shall cooperate fully with SONUS to
whatever extent is deemed reasonably necessary by SONUS to prosecute such
action. In the event that SONUS recovers damages from prosecution of such
action, SONUS shall retain amounts received for such damages except that ABBOTT
shall be entitled to reimbursement of its costs, expenses, and attorneys' fees
attributable to such action. SONUS shall not settle or compromise any suit for
infringement without the express approval of ABBOTT, such approval not to be
unreasonably withheld. In the event SONUS decides not to prosecute, and ABBOTT
reasonably determines that the failure to prosecute would adversely affect the
rights of ABBOTT under this Agreement, ABBOTT shall have the right, but not the
obligation, to prosecute such action at its own expense. SONUS shall cooperate
fully with ABBOTT to whatever extent is deemed reasonably
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necessary by ABBOTT to prosecute such action. In the event that ABBOTT recovers
damages from prosecution of such action, ABBOTT shall retain amounts received
for such damages except that SONUS shall be entitled to reimbursement of its
costs, expenses, and attorneys' fees attributable to such action. ABBOTT shall
not settle or compromise any suit for infringement without the express approval
of SONUS.
(G) TERM. The initial term of this Trademark License shall be the
Term specified in Article 12 of this Agreement. Upon expiration of such Term,
ABBOTT shall have a right to renew the Trademark License at a mutually agreeable
reasonable royalty rate.
(H) TERMINATION. Upon termination of this Agreement, ABBOTT shall
discontinue all use of the SONUS trademark(s) and shall not thereafter adopt a
mark which is confusingly similar.
(I) COPIES. Within ten (10) days after the Effective Date, SONUS
shall provide ABBOTT photocopies of its applicable trademarks
applications/registrations in the Territory.
4. CANADA AND LATIN AMERICA AND OTHER TERRITORIES.
4.1 CANADA AND LATIN AMERICA. If SONUS receives a bona fide offer from a
Third Party for the right to market and sell the Product in Canada and/or Latin
America prior to December 31, 1996, then within a reasonable time, not to
exceed sixty (60) days, SONUS shall give written notice to ABBOTT of the details
of the offer and ABBOTT shall have the opportunity to meet, or offer terms more
favorable than, such Third Party offer within sixty (60) days of such notice.
If either (A) ABBOTT meets or offers terms more favorable than such Third Party
offer and SONUS fails to enter into an
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agreement with ABBOTT with respect to such marketing rights, or (B) whether
or not there is a Third Party offer, the parties do not enter into a binding
commitment for ABBOTT to acquire marketing rights in Canada and/or Latin
America prior to December 31, 1996, then the payment in Appendix 2.3 due
to SONUS upon First Shipment Date shall be decreased by [CONFIDENTIAL PORTION].
SONUS may, at its option, substitute for the decreased payment warrants to
purchase 125,000 shares of common stock of SONUS, subject to adjustment as
set forth in the Warrant evidenced by a warrant certificate substantially in
the form of Exhibit A ("Warrant") for shares of SONUS common stock, such
Warrant based on the warrant exercise price equal to the volume weighted
average price for the ten (10) trading days prior to the date SONUS executes
a definitive agreement with a Third Party for marketing rights as set forth
in this provision or December 31, 1996, whichever is earlier. SONUS shall
notify ABBOTT of which option it chooses no later than December 31, 1996.
The warrant shall be issued as of the date of the determination of the
warrant price as set forth above. Anything in the foregoing to the contrary
notwithstanding, in the event that prior to December 31, 1996, SONUS should
receive a bona fide offer from a Third Party for marketing rights in Canada
and/or Latin America and ABBOTT shall have failed to meet or offer more
favorable terms as provided above, then SONUS shall not be subject to a
reduced fee upon First Shipment or have an obligation to issue any warrants
as provided herein. For purposes of this Agreement, Latin America shall
include South America, Central America, Mexico, and the Caribbean (including
possessions or territories of the United States, France, the United Kingdom
and the Netherlands).
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4.2 OTHER TERRITORIES. If SONUS receives a bona fide offer from a Third
Party for the right to market and sell the Product in areas or countries other
than the Territory, Canada, Latin America or areas or countries which are
covered by the Agreement dated March 31, 1995 between SONUS and Daiichi
Pharmaceuticals, Ltd. or the Agreement dated October 27, 1994 between SONUS and
Guerbet S.A. (collectively, the "Prior Agreements"), then within a reasonable
time, not to exceed sixty (60) days, SONUS shall give written notice to ABBOTT
of the details of the offer and ABBOTT shall have the opportunity to meet, or
offer terms more favorable than, such Third Party offer within sixty (60) days
of such notice. If ABBOTT meets or offers terms more favorable to SONUS, ABBOTT
and SONUS shall negotiate and enter into an agreement on such terms together
with such other terms as are substantially the same terms of this Agreement for
such areas or countries. Furthermore, in the event that any areas or countries
covered under a Prior Agreement are no longer covered under a Prior Agreement,
SONUS shall within sixty (60) days notify ABBOTT and facilitate discussions with
ABBOTT regarding ABBOTT acquiring marketing rights for the Products in such
areas or countries.
4.3 CO-PROMOTION. ABBOTT and SONUS agree to consider and discuss, and if
requested by ABBOTT, SONUS shall introduce the concept with the parties
contracting with SONUS under the Prior Agreements to consider and discuss,
opportunities for ABBOTT to co-promote the Product in areas or countries covered
by the Prior Agreements.
5. LICENSES
(A) SONUS hereby grants to ABBOTT a royalty-free exclusive license,
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exclusive even as to SONUS, with the right to sublicense, under the Licensed
Patents and Know-How to use, offer to sell and sell the Product in the Field in
the Territory subject to SONUS' co-promotion rights pursuant to Section 3.2(B).
The right to sublicense to a Third Party shall be subject to the approval of
SONUS, such approval not to be unreasonably withheld.
(B) SONUS hereby grants to ABBOTT a royalty-free nonexclusive
license, with the right to sublicense, under the Licensed Patents and Know-How
to make, have made, and import the Product for the Field in the Territory,
subject to the limitations set forth in Section 3.5(B). The right to sublicense
to a Third Party shall be subject to the approval of SONUS, such approval not to
be unreasonably withheld.
(C) ABBOTT's licenses hereunder shall become paid-up upon ABBOTT
tendering to SONUS all payments due pursuant to Appendix 2.3.
6. LAUNCH BUDGETS; REIMBURSEMENT PAYMENTS
6.1 LAUNCH BUDGETS. ABBOTT and SONUS shall each prepare separate pro forma
launch budgets to cover their respective expenses associated with and incurred
after the launch of the Product which shall be mutually approved by the parties.
Within thirty (30) days of FDA Advisory Panel approval, ABBOTT and SONUS will
meet to review and, if appropriate and mutually agreeable, update such launch
budgets for the period for which Launch Budget Reimbursement Payments may be
required as set forth in Section 6.2. The parties will thereafter meet
quarterly during this period to review and, if appropriate and mutually
agreeable, update such budgets. Each party's launch budget shall include the
expense line items and allocation of the expense items between ABBOTT and SONUS.
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6.2 LAUNCH BUDGET REIMBURSEMENT PAYMENTS. Each quarter following the
First Shipment Date and until either the second anniversary of the First
Shipment Date or the achievement of Net Sales of Product in the Territory of
at least twenty-five million dollars ($25,000,000) in each of two consecutive
quarters, whichever comes first, one party shall pay to the other party an
amount equal to fifty percent (50%) of the excess of budget launch expenses
of one party over the budget launch expenses of the other party for the same
period (e.g. if ABBOTT has budget launch expenses of [Confidential Portion]
and SONUS has budget launch expenses of [Confidential Portion] in the first
twelve (12) months of Product sales, the amount to be paid by SONUS is
[Confidential Portion]. The payment will be made within sixty (60) days of
the end of each calendar quarter for the period the launch expenses are
incurred. In the case of payment to be made by SONUS, the amounts payable
shall be offset against payments to be made by ABBOTT to SONUS as set forth
in Article 7. In the case of payments to be made by ABBOTT, the payments
will be made by wire transfer. Each party shall supply to the other party
all wire transfer account information.
6.3 LOSS CARRY FORWARD. If a Launch Budget Reimbursement Payment as
calculated in Section 6.2 is to be made by SONUS to ABBOTT and such Launch
Budget Reimbursement Payment has not been fully paid by SONUS to ABBOTT by the
expiration of twenty-four (24) months following the First Shipment Date, or the
achievement of Net Sales of Product in the Territory of at least twenty-five
million dollars ($25,000,000) in each of two (2) consecutive quarters, whichever
should first occur, then the unpaid amount shall be carried forward and offset
against Revenue Payments for subsequent quarters until such time as the entire
Launch Budget
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Reimbursement Payment has been paid or credited to ABBOTT.
7. REVENUE PAYMENTS
7.1 CALCULATION OF REVENUE PAYMENTS. Following the First Shipment Date,
ABBOTT shall pay SONUS an amount as calculated in the following formula
("Revenue Payment").
<TABLE>
<S> <C> <C>
Revenue = 47% x Units of Finished Product x Average Unit Selling Price
Payment accepted by ABBOTT into from prior Quarter
Finished Goods Inventory
LESS: returned goods,
Inventory outdates, recalls
and/or withdrawals
</TABLE>
For the first quarter following the First Shipment date, the estimated
Average Unit Selling Price shall be communicated to SONUS on or before ninety
(90) days prior to the First Shipment Date. The Revenue Payment for any
quarter shall be paid within thirty (30) days after the end of each such
calendar quarter or ninety (90) days after the Finished Product is placed in
Finished Goods Inventory, whichever is earlier. The payment will be made by
wire transfer. SONUS shall supply to ABBOTT all wire transfer account
information. At the time of the wire transfer, ABBOTT shall send to SONUS by
electronic-mail, facsimile or overnight courier, a report to SONUS setting forth
the calculation used to determine the Revenue Payment, including launch budget
reimbursement payments.
7.2 SONUS CO-PROMOTION. If SONUS is co-promoting the Product in the
Territory pursuant to Section 3.2(B), all sales of Product by SONUS shall be
credited to ABBOTT and included in gross sales for purposes of the Revenue
Payment
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calculation. In the event that SONUS is co-promoting the Product under
3.2(B)(iii), the Revenue Payments due by ABBOTT to SONUS under Article 7 shall
be adjusted to reflect SONUS' additional contribution at such time and in such
amount as the parties mutually agree.
7.3 RECORDS AND AUDIT. ABBOTT and SONUS shall keep and maintain records of
sales made and expenses incurred pursuant to this Agreement. On a monthly
basis, ABBOTT shall provide SONUS with records of sales of Units by list numbers
consistent with ABBOTT's other products of a similar nature in the normal course
of business. On a quarterly basis, ABBOTT shall provide SONUS with reports
reconciling sales of Products with discounts and other deductions to support Net
Sales figures. Such records shall be kept for a period of four (4) years after
the sales period to which such records relate. During this period, such records
shall be open to inspection upon reasonable written notice by one party to the
other. Such inspection shall be performed by a nationally recognized
independent certified public accountant selected by the requesting party and
approved by the other party, which approval shall not be unreasonably withheld.
All expenses of such inspection shall be borne by the requesting party.
However, (i) if an inspection initiated by SONUS reveals that payments to SONUS
have been understated by five percent (5%) or more, and if such understatement
is greater than $25,000, ABBOTT shall pay the cost of inspection, the
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understated amount and interest at the prime rate of interest on the understated
amount, and (ii) if an inspection initiated by ABBOTT reveals that figures
reported by SONUS to ABBOTT have been understated by five percent (5%) or more
and if such understatement is greater than $25,000, SONUS shall pay the cost of
inspection, the understated amount and interest at the prime rate of interest on
the understated amount. Any independent certified public accountant engaged by
either party shall sign a confidentiality agreement prior to any audit and shall
then have the right to examine the records kept pursuant to this Agreement and
report findings (but not the underlying data) of the examination to the
requesting party as is necessary to evidence that records were or were not
maintained and used in accordance with this Agreement. A copy of any report
provided to the requesting party by the independent certified public accountant
shall be given concurrently to the other party.
8. WARRANT
8.1 PURCHASE. ABBOTT shall concurrently herewith purchase, and SONUS
agrees to sell and issue, at ABBOTT's request, warrants evidenced by a warrant
certificate substantially in the form of Exhibit A ("Warrant"), for five hundred
thousand (500,000) shares of SONUS' common stock at an exercise price equal to
sixteen dollars ($16.00) per share subject to adjustments as set forth in the
Warrant. The Warrant shall be priced at eight dollars ($8.00) per share, which
price per share will be paid concurrently with the issuance of the Warrant.
The Warrant shall be exercisable at any time after receipt by ABBOTT for a
period of five (5) years from the date of ABBOTT's receipt of the Warrant.
8.2 REGISTRATION RIGHTS. SONUS shall, prior to or on the Effective Date,
cause to be amended the Sonus Pharmaceuticals, Inc. Amended and Restated
Registration Rights Agreement dated November 23, 1994, as amended ("Registration
Rights Agreement"), to include ABBOTT as a "Holder" thereunder and include the
shares of common stock issuable upon exercise of the Warrant as "Registrable
Securities", as
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the terms "Holder" and "Registrable Securities" are defined in the Registration
Rights Agreement. In the event that SONUS is unable to cause such amendment
prior to the Effective Date, SONUS shall cause such amendment within thirty (30)
days of the Effective Date.
8.3 PROHIBITION. With the exception of the purchase under Section 8.1,
ABBOTT, and its Affiliates for the term of this Agreement, shall not, without
the prior written consent of SONUS, acquire or agree to acquire, by purchase or
otherwise, any voting securities of SONUS or any subsidiary of SONUS.
9. BUYOUT OPTION
It is the intent of the parties to provide for a buyout of this Agreement
by one party from the other subject to the mutual agreement of the parties. On
the sixth (6th), ninth (9th), and twelfth (12th) anniversary of the Effective
Date, either party may give written notice to the other party of its interest in
buying out the other party's rights and obligations under this Agreement. If
both parties agree, a process will be established whereby either party may buy
out the rights and obligations of the other party in the Territory at a price
equal to or greater than the net present value of the projected net profit
before tax, discounted at fifteen percent (15%) for the remaining term of the
Agreement ("Option Price"). If both parties desire to exercise the buyout and
ABBOTT and SONUS do agree on the Option Price, then the representatives of
ABBOTT and SONUS shall meet and simultaneously exchange closed bids, which bids
shall be opened in the presence of both representatives. If both parties
agree, the higher bid shall prevail. If the parties mutually agree that the
buyout is to take place, the parties shall enter into an agreement that sets
forth the timetable and process for the orderly
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transfer of such rights. If both parties do not agree on the calculation of the
buyout price or do not agree on the transfer of rights and terms of the buyout,
then the buyout shall not take place and notwithstanding anything else in this
Article, the buyout option will not be effective again during the remaining term
of this Agreement.
10. RIGHT OF FIRST REFUSAL FOR ADDITIONAL PRODUCTS
In the event SONUS desires to grant any license to market or distribute to
a Third Party, any ultrasound diagnostic imaging products for the Field and in
the Territory which are not covered by the license set forth in Section 5 or the
terms of Section 2.4 and which are the proprietary technology of SONUS
including, but not limited to those technologies commonly referred to as
PhaseShift-TM- and High-Q Factor-TM-, then ABBOTT shall have a right of first
refusal with respect to the license or sale of such product in the Field and in
the Territory. If SONUS desires to solicit offers from Third Parties to market
and sell such product for the Field in the Territory, then SONUS shall promptly
give written notice to ABBOTT. Within thirty (30) days of such notice, ABBOTT
shall indicate whether or not it is interested in such product. If ABBOTT is
interested, SONUS and ABBOTT shall negotiate in good faith for a maximum of
sixty (60) days to mutually determine the material terms of a definitive
agreement regarding such product. If ABBOTT and SONUS do not reach such
agreement, but during the negotiation period, ABBOTT offered in writing economic
terms which were rejected by SONUS, and during the term of this Agreement SONUS
subsequently solicits and receives a bona fide Third Party offer on the same or
less favorable economic terms considered as a whole than those offered by
ABBOTT, then SONUS shall promptly notify ABBOTT in writing. ABBOTT then may
offer to meet such
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<PAGE>
terms within forty-five (45) days from such notice. The parties will then
negotiate in good faith towards a definitive agreement for the product. If
ABBOTT does not offer to meet such terms within such forty-five (45) day period,
then ABBOTT shall have no further rights under this Section 9 with respect to
such product. Nothing herein shall restrict SONUS from itself marketing,
selling or distributing any such product.
11. REPRESENTATIONS AND WARRANTIES
11.1 SONUS hereby represents and warrants that:
(A) SONUS has the full right, power and corporate authority to enter
into this Agreement, and to make the promises and grant the licenses set forth
in this Agreement and that there are no outstanding agreements, assignments or
encumbrances in existence inconsistent with the provisions of this Agreement.
(B) To the best knowledge of SONUS, the Licensed Patents have not or
will not be obtained through any activity, omission or representation that
would limit or destroy the validity of the Licensed Patents and SONUS has no
knowledge or information that would materially adversely impact on or affect the
validity and/or enforceability of the Licensed Patents.
(C) There are no actions threatened or pending before any court or
governmental agency or other tribunal other than the PTO relating to the
Licensed Patents or Know-How.
(D) SONUS has not authorized and will not during the term of this
Agreement authorize Third Parties to practice the Licensed Patents or the Know-
How in the Field in the Territory or otherwise grant rights or licenses to
market and sell the Product in the Field in the Territory, other than as may be
granted in any patent
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<PAGE>
infringement settlement as permitted pursuant to the terms of Section 3.8(C).
(E) No Third Party has acquired, owns or possesses any right, title
or interest in or to the Licensed Patents or Know-How in the Field in the
Territory.
11.2 ABBOTT hereby represents and warrants that:
(A) ABBOTT has the full right, power and corporate authority to enter
into this Agreement and to make the promises set forth in this Agreement and
that there are no outstanding agreements, assignments or encumbrances in
existence inconsistent with the provisions of this Agreement.
(B) ABBOTT is an "accredited investor" within the meaning of Rule 501
under the Securities Act of 1933, as amended (the "Act") and hereby certifies
that all shares of common stock in SONUS purchased or to be purchased by it
pursuant to the exercise of the Warrants set forth in Articles 4 and 8 are
being, or are to be, acquired by it for investment, and not with a view to the
distribution thereof. Further, ABBOTT understands that the common stock to be
purchased pursuant to the exercise of such Warrants will be "restricted
securities" and may not be sold, transferred or otherwise disposed of without
registration under the Act, or an exemption therefrom, and that in the absence
of an effective registration statement, or an available exemption from
registration under the Act, the common stock must be held indefinitely.
12. TERM AND TERMINATION
12.1 TERM. The term of this Agreement shall commence on the Effective
Date, and unless sooner terminated pursuant to Section 12.2 or Article 9, and
shall continue in effect until the last to expire of the patents under the
Licensed Patents or end of the life of the branded Product, whichever is
longer. The "life of the branded Product"
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<PAGE>
shall be defined as the time period ending three (3) months after FDA approval
of the first generic form of the Product to be marketed by a Third Party in the
Territory. Upon expiration of the term of this Agreement pursuant to this
Section 12.1 ABBOTT shall have a fully paid up, irrevocable and non-exclusive
license under the Know-How.
12.2 EARLY TERMINATION. This Agreement may be terminated in accordance
with the following provisions:
(A) SURRENDER. In whole or in part by ABBOTT's surrender and
termination of the licenses and rights granted hereunder at any time upon one
(1) year prior written notice to SONUS.
(B) INSOLVENCY. By notice by either party to the other party upon
(i) the insolvency of the other party, or the appointment of a receiver by the
other party for all or any substantial part of its properties, provided that
such receiver is not discharged within sixty (60) days of his appointment; (ii)
the adjudication of the other party as a bankrupt; (iii) the admission by the
other party in writing of its inability to generally pay its debts as they
become due; (iv) the execution by the other party of an assignment for the
benefit of its creditors; or (v) the filing by the other party of a petition to
be adjudged a bankrupt, or a petition or answer admitting the material
allegations of a petition filed against the other party in any bankruptcy
proceeding, or the act of the other party in instituting or voluntarily being
or becoming a party to any other judicial proceeding intended to effect a
discharge of the debts of the other party, in whole or in substantial part.
(C) PRODUCT FAILURE. If the Product is found to be not safe or
efficacious by ABBOTT, then ABBOTT may terminate this Agreement upon thirty (30)
days written
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<PAGE>
notice to SONUS, subject to applicable indemnification as set forth in Section
13.1.
(D) SUPPLY FAILURE. In the event of failure to supply Product, the
provisions of Section 3.5 shall apply. Any termination under Section 3.5 shall
be subject to the provisions of Section 12.3(E).
(E) DEFAULT. Except as provided in Section 12.2 and Section 17.1,
the rights set forth in this Article 12 to terminate this Agreement and to
terminate the licenses granted hereunder are the only such rights of the parties
to take such actions under this Agreement. If either party believes that the
other party has committed a breach of any material provision of this Agreement,
the following shall apply:
(i) If the other party has failed to remedy such breach within
ninety (90) days after the receipt of notice in writing of such breach from the
nonbreaching party, then the nonbreaching party may submit the issue of whether
the other party has committed a breach of any material provision hereunder for
resolution in accordance with the procedure set forth in Article 21
(Alternative Dispute Resolution); and
(ii) If the neutral person (as set forth in Article 21) in
accordance with the procedures set forth in Article 21 renders a ruling that the
breaching party has materially breached the Agreement; and
(iii) If the breaching party has materially failed to comply
with the terms of such ruling within the time period specified therein for
compliance or, if no time period is stated, then the nonbreaching party has
served notice upon the breaching party to undertake the actions specified to
comply with the terms of the ruling and the breaching party has materially
failed, within thirty (30) days of such
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notice with regard to payment obligations and within ninety (90) days of such
notice with regard to other obligations, to undertake such action; then the
nonbreaching party shall have the right to terminate this Agreement by
delivering written notice to the breaching party within thirty (30) days after
expiration of the applicable period under Section 12.2(E)(iii).
(iv) In the event that ABBOTT is the non-breaching party, in
lieu of terminating the Agreement, ABBOTT may proceed under Section 12.4.
12.3 CONSEQUENCES OF EXPIRATION OR EARLY TERMINATION; SURVIVAL
(A) Upon expiration or early termination, including that set forth in
Section 12.2(A), SONUS shall retain ownership of all regulatory filings or
approvals, clinical data and all other data developed by SONUS in the
Territory; ABBOTT shall retain ownership of all data developed solely by ABBOTT
in the Territory. In the event of surrender or early termination, ABBOTT shall
make no further use of the Licensed Patents or Know-How within the Territory.
Upon expiration or termination, any sublicenses granted under such licenses
shall be terminated. Expiration or early termination of the Agreement shall
not effect the Supply Agreement, which shall remain effective as to its terms.
(B) If this Agreement is terminated in part or in whole by ABBOTT
under Section 12.2, then SONUS, at ABBOTT's option, shall repurchase all
remaining Product which is reasonably resalable from ABBOTT at ABBOTT's cost,
unless otherwise mutually agreed by the parties, within thirty (30) days of
termination.
(C) If the Agreement is terminated under Section 12.2(B), then the
parties shall have the rights as set forth in those bankruptcy statutes, as may
be
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amended at the time of such termination, governing intellectual property rights
of licensors and licensees, as appropriate, in a bankruptcy proceeding.
(D) If this Agreement is terminated by either party for any reason,
then ABBOTT's exclusive license hereunder shall terminate, SONUS shall
repurchase the remaining Product which is reasonably resalable from ABBOTT at
ABBOTT's cost, unless otherwise mutually agreed by the parties within thirty
(30) days of termination and neither party will have any further liability to
the other except as set forth in Section 12.3(E). If this Agreement is
terminated by either party under Section 12.2(D) or 12.2(E) due to breach of the
provisions of this Agreement, then the non-breaching party may seek damages for
breach from the breaching party. If the breach is a breach of a representation
or warranty set forth in Article 11, then the non-breaching party shall also
have the remedy set forth in Article 13. Neither party shall have any further
liability to the other except as set forth in Section 12.3(E) and this Section.
(E) Expiration or early termination of this Agreement shall not
relieve either party of its obligations incurred prior to expiration or early
termination. The obligations under Article 22 (Publicity); Article 21
(Alternative Dispute Resolution); Article 19 (Assignment); Article 15
(Confidential Information); Article 14 (Limitation of Liability); Article 13
(Indemnification); and Article 11 (Representations and Warranties) shall
survive expiration or early termination of this Agreement or of any extensions
thereof.
12.4 ABBOTT RIGHT TO CONTINUE. Notwithstanding the foregoing, in the
event of default by SONUS under Section 12.2(E), then ABBOTT may, at ABBOTT's
option (i) seek damages for breach by SONUS and continue to operate under the
Agreement
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and keep the Agreement in effect, in which case ABBOTT shall have the right, but
not the obligation, to assume any and all responsibilities of SONUS as set forth
under Article 3 and be entitled to adjustment in the division of revenue
reflecting ABBOTT's assumption of such responsibilities as reasonably determined
by ABBOTT, or (ii) seek damages for breach by SONUS and terminate the Agreement.
13. INDEMNIFICATION
13.1 BY SONUS. SONUS shall indemnify, defend and hold ABBOTT, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs, (including reasonable attorney fees
and expenses), losses or liabilities of any kind (A) which are asserted by a
Third Party and which (i) arise out of or are attributable to any negligent act
or omission or willful misconduct on the part of SONUS, its directors,
employees, agents or representatives, or (ii) involve the use of the Product as
a pharmaceutical product or the safety or efficacy of the Product, including any
theory of strict liability in tort or any other theory of product liability, and
which are not otherwise attributable to any negligent act or omission or
willful misconduct on the part of ABBOTT, its directors, employees, agents or
representatives; or (iii) arise from claims that the product or its manufacture,
use or sale infringes a patent, trademark or other proprietary right of a Third
Party provided that the infringement does not relate solely to the manufacturing
procedure of ABBOTT; or (B) arise from a breach of a representation or warranty
in Section 11.1; (C) arise out the negligent act or omission or willful
misconduct by SONUS in the manufacture of the Product by SONUS; or (D) arising,
from the supply by SONUS and use by ABBOTT of bulk raw materials which fail to
comply with Bulk Raw Materials
40
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Specifications, as defined in the Supply Agreement, where ABBOTT manufactures
the Product.
13.2 BY ABBOTT. ABBOTT shall indemnify, defend and hold SONUS, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind (A) which are asserted by a
Third Party and which arise out of or are attributable to any negligent act or
omission or willful misconduct on the part of ABBOTT, its employees, agents, or
representatives, or (B) which arise from a breach of a representation or
warranty in Section 11.2.
13.3 CONDITION OF INDEMNIFICATION. If either party expects to seek
indemnification under this Article, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any Third Party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after
receipt by the other party of such claim or suit (if to ABBOTT, notice to
Abbott Laboratories, Risk Management, D-317, 100 Abbott Park Road, Abbott Park,
IL 60064-3500; if to SONUS, notice as set forth in Article 18); provided,
however, that the failure to give notice within such time period shall not
relieve the indemnifying party of its obligation to indemnify unless it shall be
materially prejudiced by the failure. Each party shall cooperate fully with
the other party in the defense of all such claims or suits. No offer of
settlement, settlement or compromise shall be binding on a party hereto without
its prior written consent (which consent will not be unreasonably withheld)
unless such settlement fully releases the other party without any liability,
loss, cost or obligation to such party.
41
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14. LIMITATION OF LIABILITY
Except for Third Party liability arising under Article 13, in no event
shall either party be liable for loss of profits or other economic loss, or for
indirect, incidental, penal or consequential damages, or other similar damages
arising out of this Agreement.
15. CONFIDENTIAL INFORMATION
15.1 DUE CARE. It is recognized by the parties that during the term of
this Agreement, the parties will exchange Confidential Information pertaining to
their performance hereunder. Each party will exercise due care to prevent the
disclosure of Confidential Information of the other party.
15.2 PERMITTED DISCLOSURES
(A) Notwithstanding the above, nothing contained in this Agreement
shall preclude SONUS or ABBOTT from utilizing or disclosing to others its
Confidential Information or utilizing Confidential Information received from the
other party as may be required (i) for regulatory purposes, including obtaining
FDA approvals; (ii) for audit, tax or customs purposes; or (iii) by law
(including disclosure obligations under applicable securities laws), court or
other government order, provided that the party subject to such order notifies
the other party and uses reasonable efforts to obtain a protective order
covering such Confidential Information.
(B) In addition to the foregoing, ABBOTT and SONUS may disclose the
Confidential Information of the other party, only to such employees or Third
Parties who have a reasonable need for the Confidential Information in the
performance of their services in connection with the matters set forth in this
Agreement or otherwise within the scope of the licenses set forth in Article 5
and Section 3.9; who are informed
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of the confidential nature of the Confidential Information; and who are bound
not to disclose such Confidential Information.
15.3 OTHER AGREEMENTS. The parties have entered into a Confidential
Disclosure Agreement dated October 7, 1992 ("CDA"). The CDA shall remain in
full force and effect as to its confidentiality requirements for the terms
specified therein. However, on and after the Effective Date of this Agreement,
all subject matter conveyed or covered under this Agreement shall be governed in
all respects by the confidentiality provisions contained in this Article 15.
The obligations of the parties set forth in this Article 15 shall apply during
the term hereof and for a period of five (5) years after the date of early
termination or expiration of this Agreement or any extension thereof.
16. NON-COMPETE
For a period of five (5) years after the Effective Date each party and its
Affiliates shall undertake not to market or sell a competing product in the
Territory to an end user. However, nothing contained in this Article 16 shall
be construed as preventing (i) either party from conducting research and
development, manufacturing, formulation development, and/or distribution
activities relating to a competing product during such period or thereafter, or
(ii) the grant of any rights in any patent infringement settlement as permitted
pursuant to the terms of Section 3.8(C).
For purposes of this Article 16, a competing product shall mean a product
in the Field whose mode of action and/or mechanism is materially similar to the
Product.
17. FORCE MAJEURE
17.1 EVENTS OF FORCE MAJEURE. Delay or failure on the part of either
party in
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performing its obligations under this Agreement shall not subject such party to
any liability to the other if such delay or failure is caused by or results from
acts such as but not limited to acts of God, fire, explosion, flood, drought,
war, riot, sabotage, embargo, strikes or other labor trouble, or compliance with
any law, order or regulation of any government entity acting with color of
right.
17.2 CONSEQUENCES OF FORCE MAJEURE. Upon occurrence of an event of force
majeure, the party affected shall promptly notify the other in writing, setting
forth the details of the occurrence, and making every attempt to resume the
performance of its obligations as soon as practicable after the force majeure
event ceases. If such event prevents performance by one party for more than
six (6) months, then the other party may terminate this Agreement subject to
Section 12.3.
18. NOTICES
Any notices permitted or required by this Agreement shall be sent by (A)
facsimile, (B) registered mail or (C) a recognized private mail carrier service,
and such notice shall be effective on the date received as indicated by the
facsimile imprint date in the case of (A) and the carrier receipt in the case of
(B) and (C). If sent and addressed as follows or to such other address as may
be designated by a party in writing:
If to SONUS: SONUS PHARMACEUTICALS, INC.
22026 20th Avenue, S.E.
Suite 102
Bothell, Washington 98021
Telefax: (206) 489-0626
Attention: Steven Quay, M.D., Ph.D
44
<PAGE>
With a copy to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6441
Telefax: (714) 725-4100
Attention: K. C. Schaaf
If to ABBOTT: ABBOTT LABORATORIES
Hospital Products Division
200 Abbott Park Road
Abbott Park, IL 60064-3537
Telefax: (847) 937-0805
Attention: President, Hospital Products Division
With copy to: Division Vice President
Domestic Legal Operations
D-322, AP6D
Abbott Laboratories
100 Abbott Park Road
Abbott Park, IL 60064-3500
Telefax: (847) 938-1206
19. ASSIGNMENT
19.1 LIMITATION ON ASSIGNMENT. This Agreement may not be assigned or
transferred by either party, whether by operation of law or otherwise, except
that either party may assign this Agreement to any of its Affiliates, or to any
successor by merger or sale of substantially all of its business unit to which
this Agreement relates without the consent of the other party. Any attempted
delegation or assignment not in accordance with this Article 19 shall be of no
force or effect.
19.2 ASSUMPTION BY ABBOTT. In the event that SONUS sells, transfers or
otherwise assigns this Agreement to a third party ("Assignee") as permitted in
this Article 19, and ABBOTT, in ABBOTT's reasonable discretion, determines that
the Assignee is not at least as capable as SONUS of performing its (SONUS')
responsibilities under this Agreement, ABBOTT may, upon thirty (30) days prior
written
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notice to Assignee, assume any or all of Assignee's responsibilities under this
Agreement, including, but not limited to, responsibilities set forth in Section
3 and other responsibilities agreed to by the parties in accordance with
Section 6.1, and adjust, in ABBOTT's reasonable discretion, the Revenue Payment
set forth in Article 7 proportionately in accordance with the reduction in the
responsibilities of Assignee.
20. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors and permitted assigns.
21. ALTERNATIVE DISPUTE RESOLUTION
The parties agree that any dispute that arises in connection with this
Agreement shall first be presented to the respective presidents of the ABBOTT
Hospital Products Division, and of SONUS, or their designees, for resolution.
If no resolution is reached, then such dispute shall be resolved by binding
Alternative Dispute Resolution ("ADR") in the manner described in the Appendix
21. Anything herein to the contrary notwithstanding the neutral shall not have
the ability to change or alter any decision of ABBOTT to exercise its rights
under Section 12.4.
22. PUBLICITY
The parties agree that upon the execution of this Agreement, a press
release approved by both parties will be issued. Except for such press release
and periodic disclosures by SONUS required by law or regulation or in the
ordinary course of its SEC filings, neither party shall (A) originate any
publicity, news release or other public announcement, written or oral, whether
to the public press, stockholders or otherwise, relating to this Agreement, any
amendment hereto or performance hereunder, or (B)
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<PAGE>
use the name of the other in any publicity, news release or other public
announcement, except (i) with the prior written consent of the other party, or
(ii) as required by law, in which case the originating party will give to the
other party at least ten (10) days prior notice of such proposed disclosure to
complete a review in order to offer comments and modifications. Consistent with
applicable law, the other party will have the right to request reasonable
changes to the disclosure to protect its interests. In all other cases, the
originating party shall give the consenting party at least twenty-one (21) days
to complete a review in order to offer comments, modifications or to give such
consent. The party required to give consent shall endeavor to respond in less
than twenty-one (21) days if practicable.
23. RELATIONSHIP OF PARTIES
The relationship of the parties under this Agreement is that of independent
contractors. Nothing contained in this Agreement is intended or is to be
construed so as to constitute the parties as partners, joint venturers, or
either party as an agent or employee of the other. Neither party has any
express or implied right under this Agreement to assume or create any obligation
on behalf of or in the name of the other, or to bind the other party to any
contract, agreement or undertaking with any Third Party, and no conduct of the
parties shall be deemed to infer such right.
24. APPENDICES AND EXHIBITS
All Appendices and Exhibits referenced herein are hereby made a part of
this Agreement.
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25. HEADINGS
The headings used in this Agreement are for convenience only and are not a
part of this Agreement.
26. WAIVER
No waiver by either party of any default, right or remedy shall be
effective unless in writing, nor shall any such waiver operate as a waiver of
any other or of the same default, right or remedy respectively, on a future
occasion.
27. SEVERABILITY
If any term or provision of this Agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted and construed as if such term or provision, to
the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.
28. ENTIRE AGREEMENT; AMENDMENT
Except as specifically contemplated in this Agreement and except for the
CDA and the Supply Agreement, this Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements, written and oral, between the parties. No modification of
any of the terms of this Agreement shall be deemed to be valid unless it is in
writing and signed by both parties. No course of dealing or usage of trade
shall be used to modify the terms and conditions herein.
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29. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of Washington, excluding its conflict of laws principles.
30. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized representative as of the day and year first
above written.
ABBOTT LABORATORIES SONUS PHARMACEUTICALS, INC.
By: /s/ John G. Kringel By: /s/ Steven C. Quay, M.D., Ph.D
------------------------------- --------------------------------
John G. Kringel Steven C. Quay, M.D., Ph.D
President President and Chief Executive
Hospital Products Division Officer
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APPENDIX 2.3
RESEARCH AND DEVELOPMENT
PAYMENT SCHEDULE
Execution of definitive agreement $4 Million
(Includes $1,000,000 payment for grant of licenses)
Quarterly Milestone Payments*
Payment 1 $1 Million
Payment 2 $1 Million
Payment 3 $1 Million
Payment 4 $1 Million
Payment 5 $1 Million
Payment 6 $1 Million
Payment 7 $1 Million
Filing NDA** within 15 days $2 Million
within 105 days $1 Million
within 195 days $1 Million
NDA acceptance by FDA**
within 15 days $1 Million
within 105 days $1 Million
within 195 days $1 Million
within 285 days $1 Million
Advisory Panel Approval**
within 15 days $2 Million
within 105 days $2 Million
within 195 days $2 Million
NDA approval $2 Million
First Shipment of Product $4 Million
* Payments made on January 1, April 1, July 1, and October 1. Payments will
begin on the first quarter after the Effective Date.
** For indications substantially as listed in Appendix 1.6.
<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
Warrant Certificate No. _____
______________, 1996
___________ Warrants SONUS
PHARMACEUTICALS, INC.
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE (the "Warrant Certificate"), certifies that
_________________ or registered assigns (the "Holder"), is the owner of
_______ warrants ("Warrants"), each of which entitles the Holder hereof to
purchase, as and when described herein one fully paid and non-assessable
share of common stock, as such shares may be adjusted pursuant to Paragraph
5, ("Common Stock") of SONUS PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), at a purchase price of $________ per share during the term
of this Warrant Certificate.
1. WARRANT. Each Warrant entitles the Holder to purchase one fully
paid and nonassessable share of Common Stock of the Company (such number
being subject to adjustment as provided in Paragraph 5 hereof) on the terms
and conditions herein set forth.
2. PURCHASE PRICE. The purchase price of the shares of Common Stock
covered by the Warrants shall be $_______ per share, subject to adjustment as
provided in Paragraph 5 hereof. The purchase price of the shares of Common
Stock as to which the Warrants shall be exercised shall be paid in full at
the time of exercise and such consideration may consist of cash, check or
bank draft.
3. TERM OF WARRANT. The term of Warrants shall commence on the date
hereof and all rights to purchase shares of Common Stock hereunder shall
cease at 11:59 P.M. on ______________________, _________, subject to earlier
termination as provided herein. Warrants granted hereunder may be exercised
at any time from the date hereof until expiration hereof. The Holder of the
Warrants shall not have any of the rights of a stockholder with respect to
the shares covered by the Warrants as to any shares of Common Stock not
actually issued and delivered to it.
4. TRANSFERABILITY. The Warrants shall not be transferable or
assignable except to an Affiliate of the Holder without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
The Holder may transfer or assign the shares of Common Stock issuable upon
exercise of the Warrants; provided, however, that (i) a registration
statement with respect thereto has become effective under the Securities Act;
or (ii) in the opinion of counsel to the Holder such registration is not
necessary; or (iii) such transfer complies with the provisions of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"). The
legend imprinted on the certificates pursuant to Section 10 shall be removed,
and the Company shall issue a new certificate without such legend to the
Holder of such security if such security is registered under the Securities
<PAGE>
Act or, in the opinion of counsel to the Holder such legend is no longer
required under the Securities Act or the conditions for a permissible sale or
transfer under Rule 144(k) have been complied with. For purposes of this
Warrant Certificate, "Affiliate" shall mean any wholly-owned subsidiary or
parent of, or any corporation, entity or other person which is, within the
meaning of the 1933 Act, controlling, controlled by or under common control
with, the Holder or the Company, as the case may be.
5. ADJUSTMENTS FOR STOCK SPLITS, CONSOLIDATIONS, ETC. The purchase
price and number and class of shares subject to this Warrant Certificate
shall all be proportionately adjusted in the event of any change or increase
or decrease in the number of issued shares of Common Stock in the Company,
without receipt of consideration by the Company, which result from a split-up
or consolidation of shares, payment of a share dividend, a recapitalization,
combination of shares or other like capital adjustment, so that, upon
exercise of this Warrant Certificate, the Holder shall receive the number and
class of shares it would have received had it been the holder of the number
of shares of Common Stock in the Company, for which this Warrant Certificate
is being exercised, on the date of such change or increase or decrease in the
number of issued shares of Common Stock in the Company. If the Company shall
reorganize, consolidate or merge with or into any other corporation where the
Company is not the surviving entity, then each share of Common Stock shall be
convertible into the consideration to which the shares of Common Stock
subject to this Warrant Certificate would have been entitled to receive upon
the effectiveness of such reorganization, merger or consolidation.
"Affiliate" shall have the meaning set forth in Paragraph 4. Adjustments
under this paragraph shall be made by the Board of Directors in its
reasonable, good faith judgment, whose determination with respect thereto
shall be final and conclusive. No fractional shares shall be issued under
this Warrant Certificate or upon any such adjustment.
6. METHOD OF EXERCISING WARRANTS.
(a) Subject to the terms and conditions of this Warrant
Certificate, the Warrants may be exercised by surrender of the Warrant
Certificate together with delivery to the Company at its principal office of
a signed Subscription Agreement in the form attached hereto as Annex 1 (the
"Subscription Agreement") specifying the number of shares to be purchased.
Such Subscription Agreement shall be accompanied by payment in cash, check or
bank draft, payable to the Company, equal to, in the aggregate, the full
purchase price of such shares. The Company shall deliver a certificate or
certificates representing the shares subject to such exercise as soon as
practicable after the Subscription Agreement and consideration for the shares
shall have been received by the Company, and the Holder shall be deemed a
record holder of Common Stock upon such receipt by the Company. All shares
that shall be purchased upon the exercise of the Warrants as provided herein
shall be fully paid and nonassessable.
(b) In addition, the Holder shall have the right, upon its written
request delivered or transmitted to the Company together with this Warrant
Certificate, to exchange this Warrant Certificate, in whole or in part at any
time or from time to time on or prior to _______________, _______, for the
number of shares of Common Stock having an aggregate Fair Market Value
(determined as set forth in Paragraph 6(c) below) on the date of such
exchange equal to the difference between (1) the aggregate Fair Market Value
on the date of such exchange of a number of shares designated by the Holder
and (2) the aggregate exercise price the Holder would have paid to the
Company to purchase such designated number of shares upon exercise of this
Warrant Certificate. Upon any such exchange, the number of shares purchasable
upon exercise of this Warrant Certificate shall be
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reduced by such designated number of shares, and, if a balance of purchasable
shares remains after such exchange, the Company shall execute and deliver to
the Holder a new Warrant Certificate evidencing the right of the Holder to
purchase such balance of shares. No payment of any cash or other
consideration shall be required. Such exchange shall be effective upon the
date of receipt by the Company of the original Warrant Certificate
surrendered for cancellation and a written request from the Holder that the
exchange pursuant to this Section be made, or at such later date as may be
specified in such request.
(c) Fair market value of the Common Stock ("Fair Market Value") shall be
determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange; or
is listed on the Nasdaq National Market or Small Cap Market, the current Fair
Market Value shall be the volume-weighted average price of the Common Stock
on such exchange or Nasdaq for the ten (10) business days prior to the date
of exchange of this Warrant; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on Nasdaq, the current Fair Market Value shall
be the volume-weighted average of the mean of the last bid and asked prices
reported for the ten (10) business days prior to the date of the exchange of
this Warrant (1) by Nasdaq, or (2) if reports are unavailable under clause
(i) above, by the National Quotation Bureau Incorporated; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
Fair Market Value shall be determined in good faith as promptly as reasonably
practicable by the Board of Directors.
7. REGISTRATION RIGHTS. The Holder hereunder has been made a party to
the SONUS Pharmaceuticals, Inc. Amended and Restated Registration Rights
Agreement dated November 23, 1994, as amended ("Registration Rights
Agreement"). The shares of Common Stock issuable upon exercise of this
Warrant Certificate are included as "Registrable Securities" under the
Registration Rights Agreement (as that term is defined in the Registration
Rights Agreement) with all registration rights pertaining to such Registrable
Securities.
8. GENERAL. The Company shall at all times during the term of the
Warrants reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Warrant Certificate,
shall pay all original issue and transfer taxes with respect to the issue and
transfer of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Company in connection therewith, and will from
time to time use its best efforts to comply with all laws and regulations,
which, in the opinion of counsel for the Company, shall be applicable thereto.
9. LEGENDS. It is understood that the certificates evidencing the
Common Stock purchased upon exercise of this Warrant Certificate may bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY
THE HOLDER FOR INVESTMENT AND MAY NOT BE
3
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PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed by its officers thereunto duly authorized, all as of the day and
year first above written.
SONUS PHARMACEUTICALS, INC.
By:
------------------------------
Its:
------------------------------
4
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ANNEX I TO WARRANT CERTIFICATE
SUBSCRIPTION AGREEMENT
The undersigned holder of the Warrant Certificate to which this
Subscription Agreement is attached as Annex I hereby subscribes for ____________
shares of Common Stock which the undersigned is entitled to purchase pursuant to
the terms of such Warrant Certificate. Payment of the purchase price for the
Warrants is being made concurrently herewith.
I hereby certify that all of the shares of Common Stock, $0.001 par value,
of SONUS PHARMACEUTICALS, INC., purchased by the undersigned pursuant to the
exercise on this date of the Warrants granted to the undersigned by the Warrant
Certificate are being acquired by the undersigned for investment and not with a
view to the distribution thereof.
Date:
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___________________________________
Signature
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Type or Print Name
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Street Address
___________________________________
City State Zip Code
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Exhibit 99.2
SONUS PHARMACEUTICALS, INC.
THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Third Amended and Restated Registration Rights Agreement is entered
into as of May 15, 1996, by and among SONUS Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), Steven C. Quay, M.D., Ph.D. (the "Founder"),
Daiichi Pharmaceutical Co., Ltd. ("Daiichi"), Mallinckrodt Medical, Inc., a
Delaware corporation ("Mallinckrodt"), Abbott Laboratories, an Illinois
corporation ("Abbott"), Guerbet, S.A. ("Guerbet"), certain holders of shares
of Common Stock of the Company set forth on Exhibit 1 hereto (such persons,
together with Guerbet, are herein collectively referred to as the "Common
Holders"), and those Purchasers (the "Series A Purchasers") of the Company's
Series A Preferred Stock pursuant to that certain Series A Preferred Stock
Purchase Agreement dated as of November 1, 1991 (the "Series A Purchase
Agreement"). The Founder, Daiichi, Mallinckrodt, Abbott and such Series A
Purchasers shall be referred to collectively hereinafter as the "Holders" and
each individually as a "Holder."
R E C I T A L S :
A. The Company, the Founder and the Series A Purchasers entered into
that certain Registration Rights Agreement dated as of November 1, 1991 (the
"Registration Rights Agreement").
B. The Registration Rights Agreement was amended and restated pursuant
to that certain Amended and Restated Registration Rights Agreement dated as
of November 5, 1993 among the Series A Purchasers, the Founder and Daiichi
(the "First Restated Registration Rights Agreement").
C. The First Restated Registration Rights Agreement was amended by an
Amendment No. 1 dated February 11, 1994 (the "Amendment") to include the
shares of Common Stock held by the Common Holders as "Registrable Securities"
for certain purposes of the First Restated Registration Rights Agreement.
D. The First Registration Rights Agreement was amended and restated
pursuant to an Amended and Restated Registration Rights Agreement dated
November 23, 1994 to include certain additional securities as "Registrable
Securities" thereunder (the "Second Restated Registration Rights Agreement").
E. The Second Registration Rights Agreement was amended by Amendment
No. 1 thereto dated February 11, 1994, an Amendment dated January 3, 1995,
Amendment No. 2 dated March 20, 1995 and Amendment No. 3 dated October 17,
1995.
F. The Parties desire to amend and restate the Second Restated
Registration Rights Agreement to (i) include Abbott as a "Holder" thereunder
and up to 625,000 shares of Common Stock issuable upon exercise of Warrants
issued or which may be issued to Abbott (the "Abbott Warrants") as
"Registrable Securities" hereunder; (ii) include shares of Common Stock
issuable upon exercise of Warrants to purchase an aggregate of 69,471 shares
of Common Stock issued to the Series A Purchasers as of July 31, 1995 in
connection with the extension of the repayment of certain
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bridge financing loans issued in 1993 and 1994 as Registrable Securities
hereunder; and (iii) reflect the current facts and circumstances following
the completion of the Company's initial public offering completed on October
17, 1995.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions and releases contained herein, the Company, the Common Holders and
each of the Holders hereby agree as follows:
SECTION 1.
REGISTRATION RIGHTS
The Company hereby grants to each of the Holders and the Common Holders
the registration rights set forth in this Section 1, with respect to the
Registrable Securities and/or Piggyback Registrable Securities (as
hereinafter defined) owned by the Holders or the Common Holders, as
applicable. The Company, the Holders and the Common Holders agree that the
registration rights provided herein set forth the sole and entire agreement
on the subject matter between the Company, the Holders and the Common Holders.
1.1 DEFINITIONS. As used in this Section 1:
(a) The terms "register", "registered", and "registration" refer
to a registration effected by filing with the Securities and Exchange
Commission (the "SEC") a registration statement (the "Registration
Statement") in compliance with the Securities Act of 1933, as amended (the
"1933 Act") and the declaration or ordering by the SEC of the effectiveness
of such Registration Statement.
(b) The term "Registrable Securities" means (i) 1,410,295 shares
of Common Stock held by the Founder, (ii) 2,375,854 shares of Common Stock
held by Series A Purchasers in the respective amounts on the date hereof as
set forth in Exhibit 2 attached hereto; (iii) 462,857 shares of Common Stock
held by Daiichi issued upon conversion of the Debenture, (iv) 35,145 shares
of Common Stock held by Mallinckrodt issued upon conversion of shares of
Series C Preferred Stock; (v) Common Stock issued or issuable upon exercise
of the Abbott Warrants initially exercisable into an aggregate of up to
625,000 shares of Common Stock; (vi) Common Stock issued or issuable upon
exercise of those certain Warrants exercisable into an aggregate of 316,295
shares of Common Stock held by the Founder and certain of the Holders in the
respective amounts set forth in Exhibit 3 attached hereto; and (vii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right, or other security that is issued as) a
dividend or other distribution with respect to, or in exchange or in
replacement of, such Registrable Securities (as defined in clauses (i), (ii),
(iii), (iv), (v) and (vi). In the event of any recapitalization by the
Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of shares of Registrable Securities used throughout this
Agreement for various purposes shall be proportionately increased or
decreased.
(c) The term "Piggyback Registrable Securities" means (i)
Registrable Securities; (ii) 595,308 shares of Common Stock held by the
Common Holders as set forth on Exhibit 1; and (iii) the 549,410 shares of
Common Stock held by Guerbet. In the event of any recapitalization by the
Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of
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shares of Piggyback Registrable Securities used throughout this Agreement for
various purposes shall be proportionately increased or decreased.
(d) The term "Initiating Holders" means any Holder or Holders of
not less than fifty percent (50%) of the Registrable Securities held by all
of the Holders then outstanding and not registered at the time of any request
for registration pursuant to paragraph 1.2 of this Agreement.
(e) The term "Piggyback Holders" means the holders of Piggyback
Registrable Securities.
1.2 DEMAND REGISTRATION.
(a) DEMAND FOR REGISTRATION. If the Company shall receive from
Initiating Holders a written demand (a "Demand Registration") that the
Company effect any registration under the 1933 Act of all or part of the
Registrable Securities (other than a registration on Form S-3 or any related
form of registration statement, such a request being provided for under
paragraph 1.9 hereof) the Company will:
(i) promptly (but in any event within 10 days) give written
notice of the proposed registration to all other Holders; and
(ii) use its best efforts to effect such registration as soon
as practicable as may be so demanded and as will permit or facilitate the
sale and distribution of all or such portion of such Initiating Holders'
Registrable Securities as are specified in such demand, together with all or
such portion of the Registrable Securities of any Holder or Holders joining
in such demand as are specified in a written demand received by the Company
within 30 days after such written notice is given, provided that the Company
shall not be obligated to take any action to effect any such registration,
pursuant to this paragraph 1.2:
(A) Within 120 days immediately following the effective
date of any registration statement pertaining to an underwritten public
offering of securities of the Company for its own account (other than a
registration on Form S-4 relating solely to an SEC Rule 145 transaction,
or a registration relating solely to employee benefit plans);
(B) After the Company has effected an aggregate of two
such registrations pursuant to this paragraph 1.2 and the sales of the
shares of Common Stock under such registrations have closed;
(C) If the Company shall furnish to such Holders a
certificate signed by the President of the Company, stating that in the
good faith judgment of the board of directors of the Company it would be
seriously detrimental to the Company and its shareholders for such
Registration Statement to be filed at the date filing would be required,
in which case the Company shall have an additional period of not more than
90 days within which to file such Registration Statement; provided,
however, that the Company shall not use this right more than once in any
twelve month period;
(D) If the Demand Registration covers less than 30 percent
of Registrable Securities held by all of the Holders and the proposed
aggregate offering price
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to the public of the Registrable Securities to be included in the
registration by all Holders, is less than $5,000,000; or
(E) Prior to October 17, 1996.
(b) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Securities covered by their demand by means of an
underwriting, they shall so advise the Company as part of their demand made
pursuant to this paragraph 1.2; and the Company shall include such
information in the written notice referred to in subparagraph 1.2(a)(i). In
such event, the right of any Holder to registration pursuant to this
paragraph 1.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
The Company shall, together with all Holders proposing to distribute
their securities through such underwriting, enter into an underwriting
agreement in customary form with the underwriter or underwriters selected by
a majority in interest of the Initiating Holders and reasonably satisfactory
to the Company. Notwithstanding any other provision of this paragraph 1.2, if
the underwriter shall advise the Company in writing that marketing factors
(including, without limitation, an adverse effect on the per share offering
price) require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated pro rata among such Holders thereof in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. For purposes of any underwriter cutback, all
Registrable Securities held by any Holder which is a partnership or
corporation shall also include any Registrable Securities held by the
partners, retired partners, shareholders or affiliated entities of such
Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons, and
such Holder and other persons shall be deemed to be a single "selling
Holder", and any pro rata reduction with respect to such "selling Holder"
shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "selling
Holder", as defined in this sentence. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation
shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter, and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account
(or for the account of other shareholders) in such registration if the
underwriter so agrees and if the number of Registrable Securities that would
otherwise have been included in such registration and underwriting will not
thereby be limited.
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1.3 COMPANY REGISTRATION.
(a) If at any time or from time to time the Company shall
determine to register any of its securities, either for its own account or
the account of security holders, other than a registration relating solely to
employee benefit plans, a registration on Form S-4 relating solely to an SEC
Rule 145 transaction, or a registration pursuant to paragraph 1.2 hereof, the
Company will:
(i) promptly give to the Piggyback Holders written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Piggyback Registrable Securities
specified in a written request or requests, made within 20 days after receipt
of such written notice from the Company, by the Piggyback Holders, except as
set forth in subparagraph 1.3(b) below.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Piggyback Holders as a part of the written notice
given pursuant to subparagraph 1.3(a)(i). In such event, the right of the
Piggyback Holders to registration of his or its Piggyback Registrable
Securities pursuant to this paragraph 1.3 shall be conditioned upon the
Piggyback Holder's participation in such underwriting and the inclusion of
the Piggyback Holder's Piggyback Registrable Securities in the underwriting
to the extent provided herein. The Piggyback Holders proposing to distribute
their securities through such underwriting shall, together with the Company
and the other parties distributing their securities through such
underwriting, enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this paragraph 1.3, if the underwriter
determines that marketing factors require a limitation of the number of
shares to be underwritten, the underwriter may limit the number of Piggyback
Registrable Securities to be included in the registration and underwriting,
or may exclude Piggyback Registrable Securities entirely from such
registration and underwriting subject to the terms of this paragraph;
provided, however, for any registration, the limitation shall not reduce the
number of Piggyback Registrable Securities to be included in the offering
below thirty percent (30%) of the total number of shares to be included in
the offering unless the holders of at least a majority of Piggyback
Registrable Securities then outstanding otherwise consent to or approve the
limitation of the number of shares to be underwritten. The Company shall so
advise all holders of the Company's securities that would otherwise be
registered and underwritten pursuant hereto, and the number of shares of such
securities, including Piggyback Registrable Securities, that may be included
in the registration and underwriting shall be allocated in the following
manner: shares, other than Piggyback Registrable Securities, requested to be
included in such registration by shareholders shall be excluded, and if a
limitation on the number of shares is still required, the number of Piggyback
Registrable Securities that may be included shall be allocated among the
Piggyback Holders thereof in proportion, as nearly as practicable, to the
respective amounts of Piggyback Registrable Securities held by the Piggyback
Holders at the time of filing the Registration Statement. For purposes of
any underwriter cutback, all Piggyback Registrable Securities held by any
Piggyback Holder which is a partnership or corporation shall also include any
Piggyback Registrable Securities held by the partners, retired partners,
shareholders or affiliated entities of such Piggyback Holder or the estates
and family
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members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons, and such Piggyback Holder
and other persons shall be deemed to be a single "selling Holder", and any
pro rata reduction with respect to such "selling Piggyback Holder" shall be
based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "selling Piggyback Holder,"
as defined in this sentence. No securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Piggyback Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Piggyback Registrable Securities so
withdrawn shall also be withdrawn from registration.
(c) TERMINATION OF REGISTRATION RIGHTS. No Piggyback Holder shall
be entitled to exercise any right provided for in this Section 1.3 after
October 17, 1998.
1.4 EXPENSES OF REGISTRATION. All expenses incurred in connection with
the first two registrations effected pursuant to paragraph 1.2 and all
registrations effected pursuant to paragraphs 1.3 and 1.9, including without
limitation all registration, filing, and qualification fees (including blue
sky fees and expenses), printing expenses, escrow fees, fees and
disbursements of counsel for the Company and of one special counsel for the
participating Holders and the Common Holders, and expenses of any special
audits incidental to or required by such registration, shall be borne by the
Company; provided, however, that the Company shall not be required to pay
stock transfer taxes or underwriters' discounts, or commissions relating to
Registrable Securities or Piggyback Registrable Securities. Notwithstanding
anything to the contrary above, the Company shall not be required to pay for
any expenses of any registration proceeding under paragraph 1.2 if the
registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to have been registered, unless
such Holders agree to forfeit their right to a demand registration pursuant
to paragraph 1.2 (in which event such right shall be forfeited by all
Holders). In the absence of such an agreement to forfeit, the Holders of
Registrable Securities to have been registered shall bear all such expenses
pro rata on the basis of the Registrable Securities to have been registered.
Notwithstanding the preceding sentence, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the
Holders at the time of their request, of which the Company had knowledge at
the time of the request, then the Holders shall not be required to pay any of
said expenses and shall retain their rights pursuant to paragraph 1.2.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1
to effect the registration of any Registrable Securities or Piggyback
Registrable Securities the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities or Piggyback Registrable Securities
and use its diligent best efforts to cause such registration statement to
become effective, and keep such registration statement effective for up to
ninety (90) days or until the Holders and the Common Holders have completed
the distribution relating thereto.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the provisions
of the 1933 Act with respect to the disposition of all securities covered by
such registration statement.
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(c) Furnish to the Holders and the Common Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities or Piggyback Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders and the Common Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
and each Common Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.
(f) Notify each holder of Registrable Securities or Piggyback
Registrable Securities covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered under the 1933
Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) Furnish, at the request of the Holder or any Common Holder
requesting registration of Registrable Securities or Piggyback Registrable
Securities pursuant to this Section 1, on the date that such Registrable
Securities or Piggyback Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, if such securities are being sold through underwriters, on the
date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders and/or the Common
Holders requesting registration of Registrable Securities or Piggyback
Registrable Securities, and (ii) a letter dated such date from the
independent accountants of the Company, in form and substance as is
customarily given by independent accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and, if
permissible, to the Holders and/or the Common Holders requesting registration
of Registrable Securities or Piggyback Registrable Securities.
1.6 INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify and
hold harmless each Holder of Registrable Securities and each Piggyback Holder
of Piggyback Registrable Securities, each of such Holder's or such Piggyback
Holder's, officers, directors, partners and agents, and each person
controlling such Holder or such Piggyback Holders, with respect to any
registration, qualification, or compliance effected pursuant to this Section
1, and each underwriter, if any, and each person who controls any
underwriter, of the Registrable Securities held by or issuable to such Holder
or such Piggyback Holder, against all claims, losses, damages, and
liabilities (or actions in respect thereto) to which they may become subject
under the 1933 Act, the Securities
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Exchange Act of 1934, as amended, (the "1934 Act"), or other federal or state
law arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular,
or other similar document (including any related Registration Statement,
notification, or the like) incident to any such registration, qualification,
or compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) any violation or alleged
violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such
registration, qualification, or compliance, and will reimburse, as incurred,
each such Holder, each such Piggyback Holder, each such underwriter, and each
such director, officer, partner, agent and controlling person, for any legal
and any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action; provided
that the Company will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense, arises out of or is based on
any untrue statement or omission based upon written information furnished to
the Company by an instrument duly executed by such Holder or such Piggyback
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder and each Piggyback Holder will, if Registrable
Securities or Piggyback Registrable Securities held by or issuable to such
Holder or such Piggyback Holder are included in such registration,
qualification, or compliance, severally and not jointly, indemnify the
Company, each of its directors, and each officer who signs a Registration
Statement in connection therewith, and each person controlling the Company,
each underwriter, if any, and, each person who controls any underwriter, of
the Company's securities covered by such a Registration Statement, and each
other Holder, each other Piggyback Holder, each of such other Holder's or
Piggyback Holder's officers, partners, directors and agents and each person
controlling such other Holder, or such other Piggyback Holder against all
claims, losses, damages, and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such Registration Statement, prospectus,
offering circular, or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse, as
incurred, the Company, each such underwriter, each such other Holder, each
such other Piggyback Holder, and each such director, officer, partner, and
controlling person, for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) was made in such Registration Statement, prospectus,
offering circular, or other document, in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed
by such Holder or such Piggyback Holder and stated to be specifically for use
therein; provided, however, that the liability of each Holder or each
Piggyback Holder hereunder shall be limited to the net proceeds received by
such Holder or such Piggyback Holder from the sale of securities under such
Registration Statement. In no event will any Holder or any Piggyback Holder
be required to enter into any agreement or undertaking in connection with any
registration under this Section 1 providing for any indemnification or
contribution obligations on the part of such Holder or such Piggyback Holder
greater than such Holder's or such Piggyback Holder's obligations under this
paragraph 1.6.
(c) Each party entitled to indemnification under this paragraph
1.6 (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to
which indemnification may be sought promptly after such
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Indemnified Party has actual knowledge thereof, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be subject to
approval by the Indemnified Party (whose approval shall not be unreasonably
withheld) and the Indemnified Party may participate in such defense with its
separate counsel at the Indemnifying Party's expense if representation of
such Indemnified Party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 1,
except to the extent that such failure to give notice shall materially
adversely affect the Indemnifying Party in the defense of any such claim or
any such litigation. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff therein, to such Indemnified Party, of a release from all liability
in respect to such claim or litigation.
1.7 INFORMATION BY THE HOLDERS OR THE PIGGYBACK HOLDERS. If the Holder
or any Piggyback Holder of Registrable Securities or Piggyback Registrable
Securities include Registrable Securities or Piggyback Registrable Securities
in any registration, such Holder or Piggyback Holder, shall furnish to the
Company such information regarding such Holder or Piggyback Holder
respectively, and the distribution proposed by such Holder or such Piggyback
Holder, respectively, as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to in this Section 1.
1.8 TRANSFER OF REGISTRATION RIGHTS. The rights of the Holders and the
Piggyback Holders contained in paragraphs 1.2, 1.3 and 1.9 hereof, to cause
the Company to register the Registrable Securities or Piggyback Registrable
Securities, may be assigned or otherwise conveyed to a transferee or assignee
of Registrable Securities or Piggyback Registrable Securities, who shall be
considered a "Holder" or a "Piggyback Holder", as applicable, for purposes of
this Section 1; provided that such transferee or assignee, (a) receives such
securities as a partner in connection with partnership distributions of a
Series A Purchaser or a Piggyback Holder, or (b) acquires at least 200,000
shares (as presently constituted), or 100% of the Registrable Securities or
Piggyback Registrable Securities held by the transferring Holder or Piggyback
Holder, whichever is less; and, provided further, that the Company is given
written notice by such Holder or Piggyback Holder at the time of or within a
reasonable time after said transfer stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned.
1.9 FORM S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 and to that end the Company shall register (whether
or not required by law to do so) its Common Stock under the 1934 Act within
twelve (12) months following the effective date of the first registration of
any securities of the Company on Form S-1. After the Company has qualified
for the use of Form S-3, the Holders of Registrable Securities shall have the
right to request up to four (4) registrations on Form S-3 under this
paragraph 1.9. The Company shall give notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
paragraph 1.9 and shall provide a reasonable opportunity for other Holders to
participate in the registration. Subject to the foregoing, the Company will
use its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3, as the case may be, to the extent
requested by the Holder or
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Holders thereof for purposes of disposition; provided, however, that the
Company shall not be obligated to effect any such registration (i) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $1,000,000, or (ii) more than once during any twelve (12)
month period; or (iii) in the event that the conditions set forth in
subparagraph 1.2(a)(ii)(C) obtain (but subject to the limitations set forth
therein).
1.10 DELAY OF REGISTRATION. No Holder, nor any Piggyback Holder shall
have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 1.
1.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written
consent of the holders of more than a majority of the Piggyback Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to (a) require the Company to effect a registration or (b) include any
securities in any registration filed under paragraph 1.2 or 1.3 hereof,
unless, under the terms of such agreement, such holder or prospective holder
may include such securities in any such registration only to the extent that
the inclusion of such securities will not diminish the amount of Registrable
Securities or Piggyback Registrable Securities which are included in such
registration and includes the equivalent of Section 1.13 as a term.
1.12 RULE 144 REPORTING. With a view to making available to the Holders
and the Piggyback Holders the benefits of certain rules and regulations of
the SEC which may permit the sale of the Registrable Securities and the
Piggyback Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the 1933 Act, at all times commencing ninety (90) days
after the effective date of the first registration filed by the Company for
an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the 1933 Act and 1934 Act;
(c) So long as any Holder or any Piggyback Holder owns any
Registrable Securities or Piggyback Registrable Securities, furnish to such
Holder or such Piggyback Holder forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of said
Rule 144 of the 1933 Act, and of the 1934 Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and
documents as any Holder or any Piggyback Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
1.13 "MARKET STAND-OFF" AGREEMENT. Each Holder and each Piggyback
Holder hereby agrees that during the 120-day period following the effective
date of a registration statement of the
10
<PAGE>
Company filed under the 1933 Act, he or it shall not, to the extent requested
by the Company and any underwriter, sell or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any Common Stock of
the Company held by him or it at any time during such period except Common
Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on his or its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities and/or
Piggyback Registrable Securities of each Holder and each Piggyback Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
1.14 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 1
may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the holders of not less than a
majority of the Piggyback Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder, each Piggyback Holder, each future holder of
Registrable Securities or Piggyback Registrable Securities, and the Company.
SECTION 2.
COMPANY COVENANTS
The Company hereby covenants and agrees as follows:
2.1 BASIC FINANCIAL INFORMATION.
(a) So long as any Holder or any subsidiary, affiliate or partner
of such Holder shall own at least 200,000 Registrable Securities, to furnish
the following reports:
(i) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, audited consolidated balance
sheets of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and audited consolidated statements of income and cash flows of
the Company and its subsidiaries, if any, for such fiscal year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and accompanied by a report and opinion thereon, by
independent public accountants of national reputation selected by the
Company's board of directors and by a copy of such accountants' management
letter prepared in connection therewith.
(ii) As soon as practicable after the end of each of the first
three (3) quarters of the fiscal year, but in any event within forty-five
(45) days after the end of each such
11
<PAGE>
quarter, the Company's unaudited consolidated balance sheet as of the end of
such quarter, and its unaudited consolidated statements of income and cash
flows for such quarter, all in reasonable detail and prepared in accordance
with generally accepted accounting principles and certified by the principal
financial or accounting officer of the Company.
(b) The rights granted pursuant to this paragraph 2.1 may not be
assigned or otherwise conveyed by any Holder or by any subsequent transferee
of any such rights without the written consent of the Company, which consent
shall not be unreasonably withheld; provided that the Company may refuse such
written consent if the proposed transferee is a competitor of the Company;
and provided further, that no such written consent shall be required if the
transfer is in connection with the transfer of Common Stock to any partner or
retired partner of any Holder that is a general or limited partnership or to
any such partner's estate.
SECTION 3.
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Washington as applied to agreements among
Washington residents made and to be performed entirely with the State of
Washington.
3.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement shall supersede and
replace the Second Restated Registration Rights Agreement, as amended, which
shall be terminated concurrently upon the effectiveness of this Agreement.
This Agreement constitutes the full and entire understanding and agreement
between the parties with respect to the subject matter hereof. Except as
otherwise provided in paragraph 1.14 above, this Agreement may be amended,
waived, discharged or terminated only by written consent of the Company and
the holders of not less than a majority of the Piggyback Registrable
Securities.
3.3 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be given in writing and shall be deemed to have
been duly given if personally delivered or if telegraphed, or mailed by
registered or certified mail, postage prepaid, if to the Company, SONUS
Pharmaceuticals, Inc., 22026 20th Avenue, S.E., Suite 102, Bothell,
Washington 98021, and if to the other parties, at the respective addresses
of the parties as set forth on the Exhibits attached hereto and shall be
deemed to have been received when delivered. Any party hereto may by notice
so given change its address for future notices hereunder.
12
<PAGE>
3.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
4.6 CAPTIONS. The captions and headings to Sections of this Agreement
have been inserted for identification and reference purposes only and shall
not be used to construe the meaning or the interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties as of the date first above written.
SONUS PHARMACEUTICALS, INC.
By _____________________________________
Steven C. Quay, M.D., Ph.D, President
HOLDERS:
______________________________________
STEVEN C. QUAY, M.D., PH.D.
DAIICHI PHARMACEUTICAL CO., LTD.
By _____________________________________
ABBOTT LABORATORIES
By _____________________________________
MALLINCKRODT MEDICAL, INC.
By _____________________________________
13
<PAGE>
CROSSPOINT VENTURE PARTNERS, III
By _____________________________________
Donald B. Milder, General Partner
ENTERPRISE PARTNERS II, L.P.
By _____________________________________
Andrew E. Senyei, M.D., General Partner
ENTERPRISE PARTNERS II ASSOCIATES, L.P.
By _____________________________________
Andrew E. Senyei, M.D., General Partner
APERTURE ASSOCIATES, L.P.
By: Horsley Keogh Associates, Inc.,
Its General Partner
By _____________________________________
N. Dan Reeve, Managing Director
UTAH VENTURES
By: Utah Ventures Partners,
Its General Partner
By _____________________________________
James C. Dreyfous, General Partner
14
<PAGE>
COMMON HOLDERS:
GUERBET, S.A.
By _____________________________________
ABS EMPLOYEES VENTURE FUND
LIMITED PARTNERSHIP
By: Alex. Brown Investments Incorporated,
General Partner
By _____________________________________
Mayo A. Shattuck, III, President
STRADLING, YOCCA, CARLSON & RAUTH
INVESTMENT PARTNERSHIP OF 1982
By _____________________________________
C. Craig Carlson, Partner
STRADLING, YOCCA, CARLSON & RAUTH
PROFIT SHARING PLAN
By: California Central Trust Bank,
Trustee
By _____________________________________
15
<PAGE>
EXHIBIT 1
COMMON HOLDERS
Name and Address of No. of Shares of
Shareholder Common Stock
Guerbet, S.A. 549,410
Boite Postale 50400
95943 Roissy CDG
Cedex - France
WITH A COPY TO:
Olivier Lendowner - Manager, Legal Affairs
ABS Employees Venture Fund Limited Partnership 35,720
135 East Baltimore Street
Baltimore, Maryland 21202
Stradling, Yocca, Carlson & Rauth 2,595
Investment Partnership of 1982
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Stradling, Yocca, Carlson & Rauth 7,583
Profit Sharing Plan
c/o California Central Trust Bank, Trustee
3080 South Bristol Street, 2nd Floor
Costa Mesa, California 92626
TOTAL: 595,308
========
Exhibit 1-i
<PAGE>
EXHIBIT 2
HOLDERS
Name and Address No. of Shares of Common Stock
625,000
Abbott Laboratories (Abbott currently holds a
Department 0322, AP6D warrant exercisable into
100 Abbott Park Road 500,000 shares of Common
Abbott Park, Illinois 60064-3500 Stock. Pursuant to the terms
WITH A COPY TO: of that certain Agreement
Lynne T. Boehringer, Esq. dated May 14, 1996 between the
Company and Abbott, Abbott may
be issued an additional
warrant to purchase 125,000
shares of Common Stock)
Aperture Associates, L.P. 395,976
505 Montgomery Street
San Francisco, California
94111
WITH A COPY TO:
Alfred J. Giuffrida, Partner
Nixon, Hargrave, Devans &
Doyle
Clinton Square - P.O. Box 1051
Rochester, New York 14603
Crosspoint Venture Partners 841,448
III
18552 MacArthur Boulevard,
Suite 400
Irvine, California 92715
Daiichi Pharmaceutical Co., Ltd. 462,857
14-10, Nihonbashi 3-Chome
Chuo-Ku, Tokyo 103 Japan
Enterprise Partners II, L.P. 771,328
5000 Birch Street, Suite 6200
Newport Beach, California
92660
Enterprise Partners II Associates, L.P. 70,120
5000 Birch Street, Suite 6200
Newport Beach, California 92660
Mallinckrodt Medical, Inc. 35,145
675 McDonnell Boulevard - P.O.Box 5840
St. Louis, Missouri 63134
Steven C. Quay, M.D., Ph.D. 1,410,295
c/o SONUS Pharmaceuticals, Inc.
22026 20th Avenue, S.E., Suite 102
Bothell, Washington 98021
Utah Ventures 296,982
419 Wakara Way, Suite 206
Salt Lake City, Utah 84108
WITH A COPY TO:
Allan M. Wolfe, M.D.
VOXEL
26081 Merit Circle, Suite 117
Laguna Hills, California 92653
TOTAL: 2,375,854
=========
Exhibit 2-i
<PAGE>
EXHIBIT 3
WARRANT HOLDERS
No. of Warrants
Warrant to Purchase
Holder No. Common Stock
------ ------- ---------------
Crosspoint Venture Partners III 111,266
Enterprise Partners II, L.P. 101,996
Enterprise Partners II Associates, L.P. 9,268
Aperture Associates, L.P. 52,358
Utah Ventures 26,114
Steven C. Quay, M.D., Ph.D. 15,293
--------
TOTAL: 316,295
=======
Exhibit 3-i
<PAGE>
EXHIBIT 99.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
Warrant Certificate No. 1
May 14, 1996 500,000 Warrants
SONUS PHARMACEUTICALS, INC.
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE (the "Warrant Certificate"), certifies that
ABBOTT LABORATORIES or registered assigns (the "Holder"), is the owner of
500,000 warrants ("Warrants"), each of which entitles the Holder hereof to
purchase, as and when described herein one fully paid and non-assessable
share of common stock, as such shares may be adjusted pursuant to Paragraph
5, ("Common Stock") of SONUS PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), at a purchase price of $16.00 per share during the term of
this Warrant Certificate.
1. WARRANT. Each Warrant entitles the Holder to purchase one fully
paid and nonassessable share of Common Stock of the Company (such number
being subject to adjustment as provided in Paragraph 5 hereof) on the terms
and conditions herein set forth.
2. PURCHASE PRICE. The purchase price of the shares of Common Stock
covered by the Warrants shall be $16.00 per share, subject to adjustment as
provided in Paragraph 5 hereof. The purchase price of the shares of Common
Stock as to which the Warrants shall be exercised shall be paid in full at
the time of exercise and such consideration may consist of cash, check or
bank draft.
3. TERM OF WARRANT. The term of the Warrants shall commence on the
date hereof and all rights to purchase shares of Common Stock hereunder shall
cease at 11:59 P.M. on May 14, 2001, subject to earlier termination as
provided herein. Warrants granted hereunder may be exercised at any time
from the date hereof until expiration hereof. The Holder of the Warrants
shall not have any of the rights of a stockholder with respect to the shares
covered by the Warrants as to any shares of Common Stock not actually issued
and delivered to it.
4. TRANSFERABILITY. The Warrants shall not be transferable or
assignable except to an Affiliate of the Holder without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
The Holder may transfer or assign the shares of Common Stock issuable upon
exercise of the Warrants; provided, however, that (i) a registration
statement with respect thereto has become effective under the Securities Act;
or (ii) in the opinion of counsel to the Holder such registration is not
necessary; or (iii) such transfer complies with the provisions of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"). The
legend imprinted on the certificates pursuant to Section 10 shall be removed,
and the Company shall issue a new certificate without such legend to the
Holder of such security if such security is registered under the Securities
Act or, in the opinion of counsel to the Holder such legend is no longer
required under the Securities Act or the conditions for a permissible sale or
transfer under Rule 144(k) have been complied with. For purposes of this
Warrant Certificate, "Affiliate" shall mean any wholly-owned subsidiary or
parent of, or any corporation, entity or other person which is, within the
meaning of the 1933 Act, controlling, controlled by or under common control
with, the Holder or the Company, as the case may be.
<PAGE>
5. ADJUSTMENTS FOR STOCK SPLITS, CONSOLIDATIONS, ETC. The purchase
price and number and class of shares subject to this Warrant Certificate
shall all be proportionately adjusted in the event of any change or increase
or decrease in the number of issued shares of Common Stock in the Company,
without receipt of consideration by the Company, which result from a split-up
or consolidation of shares, payment of a share dividend, a recapitalization,
combination of shares or other like capital adjustment, so that, upon
exercise of this Warrant Certificate, the Holder shall receive the number and
class of shares it would have received had it been the holder of the number
of shares of Common Stock in the Company, for which this Warrant Certificate
is being exercised, on the date of such change or increase or decrease in the
number of issued shares of Common Stock in the Company. If the Company shall
reorganize, consolidate or merge with or into any other corporation where the
Company is not the surviving entity, then each share of Common Stock shall be
convertible into the consideration to which the shares of Common Stock
subject to this Warrant Certificate would have been entitled to receive upon
the effectiveness of such reorganization, merger or consolidation.
"Affiliate" shall have the meaning set forth in Paragraph 4. Adjustments
under this paragraph shall be made by the Board of Directors in its
reasonable, good faith judgment, whose determination with respect thereto
shall be final and conclusive. No fractional shares shall be issued under
this Warrant Certificate or upon any such adjustment.
6. METHOD OF EXERCISING WARRANTS.
(a) Subject to the terms and conditions of this Warrant
Certificate, the Warrants may be exercised by surrender of the Warrant
Certificate together with delivery to the Company at its principal office of
a signed Subscription Agreement in the form attached hereto as Annex 1 (the
"Subscription Agreement") specifying the number of shares to be purchased.
Such Subscription Agreement shall be accompanied by payment in cash, check or
bank draft, payable to the Company, equal to, in the aggregate, the full
purchase price of such shares. The Company shall deliver a certificate or
certificates representing the shares subject to such exercise as soon as
practicable after the Subscription Agreement and consideration for the shares
shall have been received by the Company, and the Holder shall be deemed a
record holder of Common Stock upon such receipt by the Company. All shares
that shall be purchased upon the exercise of the Warrants as provided herein
shall be fully paid and nonassessable.
(b) In addition, the Holder shall have the right, upon its written
request delivered or transmitted to the Company together with this Warrant
Certificate, to exchange this Warrant Certificate, in whole or in part at any
time or from time to time on or prior to May 14, 2001, for the number of
shares of Common Stock having an aggregate Fair Market Value (determined as
set forth in Paragraph 6(c) below) on the date of such exchange equal to the
difference between (1) the aggregate Fair Market Value on the date of such
exchange of a number of shares designated by the Holder and (2) the aggregate
exercise price the Holder would have paid to the Company to purchase such
designated number of shares upon exercise of this Warrant Certificate. Upon
any such exchange, the number of shares purchasable upon exercise of this
Warrant Certificate shall be reduced by such designated number of shares,
and, if a balance of purchasable shares remains after such exchange, the
Company shall execute and deliver to the Holder a new Warrant Certificate
evidencing the right of the Holder to purchase such balance of shares. No
payment of any cash or other consideration shall be required. Such exchange
shall be effective upon the date of receipt by the Company of the original
Warrant Certificate surrendered for cancellation and a written request from
the Holder that the exchange pursuant to this Section be made, or at such
later date as may be specified in such request.
2
<PAGE>
(c) Fair market value of the Common Stock ("Fair Market Value")
shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or
is listed on the Nasdaq National Market or Small Cap Market, the current Fair
Market Value shall be the volume-weighted average price of the Common Stock
on such exchange or Nasdaq for the ten (10) business days prior to the date
of exchange of this Warrant; or
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or quoted on Nasdaq, the current Fair Market
Value shall be the volume-weighted average of the mean of the last bid and
asked prices reported for the ten (10) business days prior to the date of the
exchange of this Warrant (1) by Nasdaq, or (2) if reports are unavailable
under clause (i) above, by the National Quotation Bureau Incorporated; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current Fair Market Value shall be determined in good faith as promptly as
reasonably practicable by the Board of Directors.
7. REGISTRATION RIGHTS. The Holder hereunder has been made a party to
the SONUS Pharmaceuticals, Inc. Amended and Restated Registration Rights
Agreement dated November 23, 1994, as amended ("Registration Rights
Agreement"). The shares of Common Stock issuable upon exercise of this
Warrant Certificate are included as "Registrable Securities" under the
Registration Rights Agreement (as that term is defined in the Registration
Rights Agreement) with all registration rights pertaining to such Registrable
Securities.
8. GENERAL. The Company shall at all times during the term of the
Warrants reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Warrant Certificate,
shall pay all original issue and transfer taxes with respect to the issue and
transfer of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Company in connection therewith, and will from
time to time use its best efforts to comply with all laws and regulations,
which, in the opinion of counsel for the Company, shall be applicable thereto.
9. LEGENDS. It is understood that the certificates evidencing the
Common Stock purchased upon exercise of this Warrant Certificate may bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized, all as of the day
and year first above written.
SONUS PHARMACEUTICALS, INC.
By: _______________________________
Its: _______________________________
4
<PAGE>
ANNEX I TO WARRANT CERTIFICATE
SUBSCRIPTION AGREEMENT
The undersigned holder of the Warrant Certificate to which this
Subscription Agreement is attached as Annex I hereby subscribes for ________
shares of Common Stock which the undersigned is entitled to purchase
pursuant to the terms of such Warrant Certificate. Payment of the purchase
price for the Warrants is being made concurrently herewith.
I hereby certify that all of the shares of Common Stock, $0.001 par
value, of SONUS PHARMACEUTICALS, INC., purchased by the undersigned pursuant
to the exercise on this date of the Warrants granted to the undersigned by
the Warrant Certificate are being acquired by the undersigned for investment
and not with a view to the distribution thereof.
Date: __________________________
_________________________________________
Signature
_________________________________________
Type or Print Name
_________________________________________
Street Address
_________________________________________
City State Zip Code
