<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
____________.
Commission file number 0-26866
SONUS PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4343413
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
22026 20TH AVE. SE, BOTHELL, WASHINGTON 98021
(Address of Principal Executive Offices)
(425) 487-9500
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No[ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1999
----------------------------- -----------------------------
<S> <C>
Common Stock, $.001 par value 8,639,659
</TABLE>
Page 1 of 14 Pages
Exhibit Index appears on Page 12
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<PAGE> 2
SONUS PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 3
Statements of Operations (unaudited) for the three months ended
March 31, 1999 and March 31, 1998 .............................. 4
Statements of Cash Flow (unaudited) for the three months ended
March 31, 1999 and March 31, 1998 .............................. 5
Notes to Financial Statements ....................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 8
Item 3. Market Risk ......................................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ................. 11
Item 6. Exhibits and Reports on Form 8-K .................................... 12
Items 2, 3 and 5 are not applicable and therefore have been omitted.
SIGNATURES ......................................................................... 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SONUS PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and marketable securities ....... $ 15,695,202 $ 16,954,842
Other current assets ................................... 280,129 419,018
------------ ------------
Total current assets ................................ 15,975,331 17,373,860
Equipment, furniture and leasehold improvements, net of
accumulated depreciation of $2,755,880 and $2,552,786 .. 1,266,459 1,444,090
------------ ------------
Total assets .............................................. $ 17,241,790 $ 18,817,950
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit .................................... $ 5,000,000 $ 5,000,000
Accounts payable and accrued expenses .................. 2,949,277 2,954,530
Accrued clinical trial expenses ........................ 990,393 1,226,335
Capital lease obligations .............................. 75,217 93,178
------------ ------------
Total current liabilities ........................... 9,014,887 9,274,043
Long-term debt ............................................ 2,089,925 2,049,221
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value;
5,000,000 authorized; no shares issued or outstanding -- --
Common stock; $.001 par value;
20,000,000 shares authorized; 8,638,657 and 8,632,225
shares issues and outstanding at March 31, 1999 and
December 31, 1998, respectively ..................... 35,039,972 35,009,368
Accumulated deficit .................................... (28,902,994) (27,514,682)
------------ ------------
Total stockholders' equity .......................... 6,136,978 7,494,686
------------ ------------
Total liabilities and stockholders' equity ................ $ 17,241,790 $ 18,817,950
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
SONUS PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Collaborative agreements .............................. $ 1,700,000 $ 1,700,000
Operating expenses:
Research and development .............................. 1,489,881 3,550,056
General and administrative ............................ 1,710,637 1,656,574
----------- -----------
Total operating expenses ................................. 3,200,518 5,206,630
----------- -----------
Operating loss ........................................... (1,500,518) (3,506,630)
Other income (expense):
Interest income ....................................... 168,516 294,051
Interest expense ...................................... (49,235) (54,113)
----------- -----------
Net loss ................................................. $(1,381,237) $(3,266,692)
=========== ===========
Basic and diluted net loss per share ..................... $ (0.16) $ (0.38)
Shares used in computation of basic and diluted
net loss per share .................................... 8,633,333 8,612,923
</TABLE>
See accompanying notes.
4
<PAGE> 5
SONUS PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ......................................................... $ (1,381,237) $ (3,266,692)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................. 203,094 204,072
Amortization of premium (discount) on marketable securities ... 954 (10,903)
Realized gain on marketable securities ........................ (2,578) (6,533)
Changes in operating assets and liabilities:
Other current assets ....................................... 138,890 54,554
Accounts payable and accrued expenses ...................... (5,253) (311,065)
Accrued clinical trial expenses ............................ (235,942) 58,880
------------ ------------
Net cash used in operating activities ............................ (1,282,072) (3,277,687)
INVESTING ACTIVITIES:
Purchases of equipment, furniture and leasehold improvements ..... (25,463) (213,979)
Purchases of marketable securities ............................... (6,416,425) (10,663,563)
Proceeds from sale of marketable securities ...................... 5,959,925 13,041,869
Proceeds from maturities of marketable securities ................ 1,249,968 486,048
------------ ------------
Net cash provided by investing activities ........................ 768,005 2,650,375
FINANCING ACTIVITIES:
Proceeds from bank line of credit ................................ 5,000,000 5,000,000
Repayment of bank line of credit ................................. (5,000,000) (5,000,000)
Increase in long-term debt ....................................... 40,704 482,872
Repayment of capitalized lease obligations ....................... (17,961) (34,240)
Proceeds from issuance of common stock and warrants .............. 30,603 79,647
------------ ------------
Net cash provided by financing activities ........................ 53,346 528,279
------------ ------------
Decrease in cash and cash equivalents for the period ............. (460,721) (99,033)
Cash and cash equivalents at beginning of period ................. 5,203,925 5,253,227
------------ ------------
Cash and cash equivalents at end of period ....................... 4,743,204 5,154,194
Marketable securities at end of period ........................... 10,951,998 18,466,433
------------ ------------
Total cash, cash equivalents and marketable securities ........... $ 15,695,202 $ 23,620,627
============ ============
Supplemental cash flow information:
Interest paid ................................................. $ 9,531 $ 17,097
Income taxes paid ............................................. $ -- $ 7,500
</TABLE>
See accompanying notes.
5
<PAGE> 6
SONUS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required to be presented for complete financial
statements. The accompanying financial statements reflect all adjustments
(consisting only of normal recurring items) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented.
The financial statements and related disclosures have been prepared with the
assumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto included in the Form
10-K for the year ended December 31, 1998 and filed with the SEC on March 25,
1999.
2. CONTINGENCIES
In May 1993, the Company entered into a manufacturing and supply agreement
with Abbott Laboratories ("Abbott"). In the event that EchoGen(R) (perflenapent
injectable emulsion) is approved by the U.S. Food and Drug Administration
("FDA"), the Company is obligated to purchase certain minimum quantities of
materials from Abbott or make cash payments for the shortages from the
predetermined purchase level over a five-year period.
In March 1998, the Company entered into a commercial supply agreement for
certain medical grade raw materials for the Company's initial product in the
U.S., EchoGen. In the event that EchoGen is approved by the FDA, the Company is
obligated to purchase certain minimum quantities of the material over a
five-year period.
The Company is also party to certain litigation related to its
business. While it is not feasible to predict the outcome of such pending
litigation, management believes that ultimate resolution of these
matters will not have a material adverse impact on the Company's future
financial position and results of operations, see "Part II. Other Information;
Item 1. Legal Proceedings."
3. SUBSEQUENT EVENT
In April 1999, the Company received an "approvable letter" from the FDA for
EchoGen. The FDA letter set forth the conditions that must be satisfied before
final approval. The Company is investigating the information needed to meet the
conditions. As part of the investigation process, the Company may have
discussions with the FDA to clarify certain aspects of the letter and the
information needed to meet the conditions. Based on information currently
available, the Company believes it can provide a complete response to the
conditions set forth in the FDA letter. The time that will be required to
respond to the FDA is dependent upon the timing of discussions with the FDA and
the time required to complete the Company's investigation. The Company currently
expects to file a response by the end of the third quarter. No assurance can be
given that the response can be filed by the Company in a timely manner or that
the filing will adequately satisfy the conditions or that the FDA will
ultimately approve the New Drug Application.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
SONUS Pharmaceuticals, Inc. (the "Company") is engaged in the research,
development and commercialization of proprietary ultrasound contrast agents and
drug delivery systems based on its proprietary technology. The Company's
products are being developed for use in the diagnosis and treatment of heart
disease, cancer and other debilitating conditions. The Company has financed its
research and development and clinical trials through payments received under
agreements with its collaborative partners, private equity and debt financings,
and an initial public offering ("IPO") of common stock completed in October
1995. Clinical trials of the Company's initial ultrasound contrast product under
development, EchoGen(R) (perflenapent injectable emulsion), began in January
1994. In 1996, the Company filed a New Drug Application ("NDA") with FDA for
EchoGen as well as a Marketing Authorization Application ("MAA") with the
European Medicines Evaluation Agency ("EMEA").
In April 1999, the Company received an "approvable letter" from the FDA
for EchoGen. The FDA letter set forth the conditions that must be satisfied
before final approval. The Company is investigating the information needed to
meet the conditions. As part of the investigation process, the Company may have
discussions with the FDA to clarify certain aspects of the letter and the
information needed to meet the conditions. Based on information currently
available, the Company believes it can provide a complete response to the
conditions set forth in the FDA letter. The time that will be required to
respond to the FDA is dependent upon the timing of discussions with the FDA and
the time required to complete the Company's investigation. The Company currently
expects to file a response by the end of the third quarter. No assurance can be
given that the response can be filed by the Company in a timely manner or that
the filing will adequately satisfy the conditions or that the FDA will
ultimately approve the NDA.
In March 1998, the EMEA's Committee for Proprietary Medicinal Products
("CPMP") issued a positive opinion on EchoGen for use as a transpulmonary
echocardiographic contrast agent in patients with suspected or established
cardiovascular disease who have had previous inconclusive non-contrast studies.
In July 1998, the EMEA ratified the CPMP recommendation and granted a marketing
authorization for EchoGen in the 15 countries of the European Union ("E.U.").
The Company and its marketing partner, Abbott Laboratories ("Abbott"), are
preparing for the commercialization of EchoGen in the E.U. The Company is
seeking approval of variances to its marketing license to bring the
manufacturing process and specifications for European product in line with the
process and specifications submitted for approval with the FDA in the U.S.
No assurance can be given that the variances to its marketing license will
ultimately be approved.
In 1996, the Company formed strategic alliances with Abbott for the
marketing and selling of ultrasound contrast agents, including EchoGen, in the
U.S. and certain international territories including Europe, Latin America,
Canada, Middle East, Africa and certain Asia/Pacific countries. Under the
agreements, Abbott agreed to make certain payments to the Company, primarily
conditioned upon the achievement of milestones, of which $37.3 million has been
paid as of March 31, 1999, including $6.3 million of milestone payments
creditable against future royalties. In addition, Abbott purchased in May 1996,
for $4.0 million, warrants to acquire 500,000 shares of common stock of the
Company. The warrants are exercisable over five years at $16.00 per share.
7
<PAGE> 8
In January 1999, the Company amended its strategic alliance agreements with
Abbott for both the U.S. and international territories. The amendments redefine
future milestone payments under the agreements. As of March 31, 1999, under the
amended agreements there are $28.3 million of potential milestone payments
remaining, of which $7.85 million are conditioned upon the approval and first
shipment of EchoGen echocardiography indications in the U.S. and Europe; $9.55
million for approval and first shipment of EchoGen radiology indications in the
U.S. and Europe; and $10.9 million conditioned upon achievement of annual sales
targets in Abbott's international territory. The amendments allow the Company to
request prepayment of radiology milestone payments in exchange for the issuance
of common stock of the Company at the then fair market value. The amendments
also reduced the royalty rates on sales of EchoGen by Abbott in its
international territory that range, based on a combination of factors, from 24%
to 42%. The U.S. royalty rate of 47% and the aggregate amount of U.S. and
international milestone payments were not changed.
The Company's results of operations have varied and will continue to vary
significantly from quarter to quarter and depend on, among other factors, the
timing of milestone payments made by Abbott, the timing of regulatory approvals,
the entering into additional product license agreements by the Company, and the
timing and costs of the clinical trials conducted by the Company. Abbott can
terminate the strategic alliance agreements on short notice, and there can be no
assurance that the Company will receive any additional funding or milestone
payments.
RESULTS OF OPERATIONS
To date, the Company's reported revenues have been derived from payments
received under collaborative agreements with third parties. Revenue received
under collaborative agreements was $1.7 million for the first quarters of 1999
and 1998. All revenue during the first quarters of 1999 and 1998 represented
payments under the Company's strategic alliance agreements with Abbott.
Research and development expenses were $1.5 million for the first quarter of
1999 compared with $3.6 million for the same period of the prior year. The
decrease was primarily due to a reduction in clinical trial activity when
compared to the prior year period. General and administrative expenses were $1.7
million for the first quarters of 1999 and 1998.
The Company anticipates total operating expenses will increase in future
quarters due to ongoing and planned clinical trials to study additional
indications for EchoGen and future products and due to higher marketing and
administrative expenses as the Company continues to prepare for
commercialization of EchoGen. The Company may also incur significant expenses
relating to legal matters - see "Legal Proceedings." In addition, revenues in
future quarters will be primarily dependent upon the timing of certain
regulatory and commercialization milestones and associated payments under
collaborative agreements.
Interest income, net of interest expense, was $119,000 for the first quarter
of 1999 compared to $240,000 for the same period of the prior year. The decrease
was primarily due to the lower levels of invested cash during the first quarter
of 1999 compared to the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with payments from
collaborative agreements, proceeds from equity financings and a bank line of
credit. At March 31, 1999, the Company had cash, cash equivalents and marketable
securities of $15.7 million, compared to $17.0 million at December 31, 1998. The
decrease was primarily due to cash used in operations in the first three months
of 1999.
8
<PAGE> 9
The Company has a bank loan agreement which provides for a $5.0 million
revolving line of credit facility and bears interest at the prime rate plus 1.0%
per annum. At March 31, 1999 there was $5.0 million outstanding under the line
of credit. The line of credit expires August 31, 1999 and is secured by the
tangible assets of the Company. The Company is required to maintain certain
minimum balances of cash with the bank in order to borrow under the line of
credit. There can be no assurance that the line of credit will be renewed upon
expiration or that the Company will be able to maintain the minimum balances
necessary to borrow under the line.
The Company expects that its cash needs will increase significantly in
future periods due to pending and planned clinical trials and higher
administrative and marketing expenses as the Company prepares for
commercialization of EchoGen. Based on its current operating plan, the Company
estimates that existing cash and marketable securities will be sufficient to
meet its cash requirements through 1999. The Company intends to seek additional
funding in 1999 through available means, which may include debt and/or equity
financing or the licensing or sale of proprietary or marketing rights. There can
be no assurance that financing will be available on acceptable terms, if at all.
The Company's future capital requirements depend on many factors including the
ability of the Company to obtain continued funding from third parties under
collaborative agreements, the ability to maintain the Company's bank line of
credit, the time and costs required to gain regulatory approvals, the progress
of the Company's research and development programs, clinical trials, the costs
of filing, prosecuting and enforcing patents, patent applications, patent claims
and trademarks, the costs of marketing and distribution, the status of competing
products, and the market acceptance and third-party reimbursement of the
Company's products, if and when approved. There can be no assurance that
regulatory approvals will be achieved or achieved in the near-term or that, in
any event, additional financing will be available on acceptable terms, if at
all. Any equity financing would likely result in substantial dilution to
existing stockholders. If the Company is unable to raise additional financing,
the Company would be required to curtail or delay the development of its
products and new product research and development.
MARKET RISK
The market risk inherent in the Company's short-term investment portfolio
and long-term debt represents the potential loss arising from adverse changes in
interest rates. If market rates hypothetically increase immediately and
uniformly by 100 basis points from levels at March 31, 1999, the decline in the
fair value of the investment portfolio and the increase in interest expense on
the long-term debt would not be material. Because the Company has the ability to
hold its fixed income investments until maturity, it does not expect its
operating results or cash flows to be affected to any significant degree by a
sudden change in market interest rates on its securities portfolio.
YEAR 2000 COMPLIANCE
Many computer systems may experience difficulty processing dates beyond the
year 1999 and will need to be modified prior to the year 2000. Failure to make
such modifications could result in systems failures or miscalculations, causing
a disruption of operations.
The Company has undertaken an initial comprehensive review of its
information technology computer systems and believes that the Year 2000 issue
does not pose significant operational problems. The majority of the Company's
software and computer equipment has been purchased within the last five years
from third-party vendors who have already provided upgrades intended to bring
their products into Year 2000 compliance. In addition, the Company is in the
process of surveying significant vendors to determine any possible Year 2000
risks. If Year 2000 problems exist with these third parties, it could
9
<PAGE> 10
affect the ability of vendors to satisfy their obligations to the Company or for
the Company to electronically communicate with such parties, which could have an
adverse effect on the Company's business, financial condition and results of
operations.
The Company intends to establish a contingency plan to address "high-risk"
issues, if any, that could affect day-to-day operations or delay its efforts to
bring products to market. The Company expects to complete its review of the Year
2000 issue by the end of the third quarter of 1999.
Based upon the Company's initial review of its computer systems, the Company
estimates that the cost to replace older, non-compliant computers and software
is not material. The full cost of correcting the Year 2000 issue will be known
after the Company completes its survey of its significant vendors; however,
based on currently available information, the Company believes that the total
costs will not exceed $100,000.
FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
Examples of these forward-looking statements include, but are not limited to,
(i) the submission of applications for and the timing or likelihood of marketing
approvals for one or more indications, (ii) market acceptance of the Company's
products, (iii) the Company's anticipated future capital requirements and the
terms of any capital financing, (iv) the progress and results of clinical
trials, (v) the timing and amount of future milestone payments, product revenues
and expenses; and (vi) the anticipated outcome or financial impact of
litigation. While these statement made by the Company are based on management's
current beliefs and judgement, they are subject to risks and uncertainties that
could cause actual results to vary.
In evaluating such statements, stockholders and investors should
specifically consider a number of factors and assumptions, including those
discussed in the text and the financial statements and their accompanying
footnotes in this Report and the risk factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission. As discussed in
the Company's annual report on Form 10-K for the year ended December 31, 1998,
actual results could differ materially from those projected in the
forward-looking statements as a result of the following factors, among others:
uncertainty of governmental regulatory requirements; lengthy approval process;
unproven safety and efficacy; uncertainty of clinical trials; history of
operating losses; uncertainty of future financial results; future capital
requirements and uncertainty of additional funding; dependence on third parties
for funding, clinical development and distribution; dependence on patents and
proprietary rights; competition and risk of technological obsolescence; limited
manufacturing experience; dependence on limited contract manufacturers and
suppliers; lack of marketing and sales experience; limitations on third-party
reimbursement; uncertainty of market acceptance; continued listing on the Nasdaq
National Market; dependence on key employees; and shares eligible for future
sale. There can be no assurance that the Company can meet the conditions set
forth by the FDA in its "approvable letter" or any subsequent conditions in a
timely manner, if at all, or that EchoGen will ultimately receive FDA approval.
ITEM 3. RESPONSE TO THIS ITEM IS INCLUDED IN "ITEM 3. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - MARKET
RISK."
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1998, the Company announced that it had filed a patent
infringement action in the U.S. District Court in Seattle, Washington, against
Molecular Biosystems Inc. ("MBI") and Mallinckrodt, Inc. The suit alleges that
one of MBI's ultrasound contrast agents infringes one or more of the Company's
patents. MBI has filed counterclaims alleging that the patents asserted by the
Company are invalid and not infringed, and that the Company has made false
public statements and engaged in other actions intended to damage MBI and one of
its ultrasound contrast agents. The Company does not believe there is any merit
to these counterclaims and intends to defend its position vigorously. In October
1998, the court granted the Company's motion to stay the litigation until the
PTO had completed its re-examination of the patents in this lawsuit (see below).
The stay was lifted in January 1999. A trial date has been set for this lawsuit
in February 2000.
Four separate re-examination proceedings directed to the two SONUS patents
at issue in the patent infringement lawsuit, U.S. 5,558,094 (`094) and U.S.
5,573,751 (`751) were initiated by the PTO beginning in July 1997 at the request
of MBI. In December 1998, the Company announced it received decisions from the
PTO indicating the patentability of claims in all four re-examination
proceedings. The PTO has determined that a number of the claims included in the
original `094 and `751 patents as well as some claims that were amended will be
confirmed. Certain claims, which included reference to fluorinated chemicals
other than perfluoropropane, perfluorobutane and perfluoropentane, were
cancelled during the re-examination process.
In August and September 1998, various class action complaints were filed in
the Superior Court of Washington (the "State Action") and in the U.S. District
Court for the Western District of Washington (the "Federal Action") against the
Company and certain of its officers and directors, alleging violations of
Washington State and U.S. securities laws. In October 1998, the Company and the
individual defendants moved to dismiss and stay the State Action. The parties
have agreed to stay the State Action pending a determination by the federal
district court as to whether the state law claims may be brought in the Federal
Action. In February 1999, plaintiffs filed a consolidated and amended complaint
in the Federal Action, alleging violations of Washington State and U.S.
securities laws. In March 1999, the Company and the individual defendants filed
a motion to dismiss the consolidated amended complaint in the Federal Action.
The Company does not believe there is any merit to the claims in these actions
and intends to defend its position vigorously.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on April 29, 1999. At
the Annual Meeting there were six matters submitted to a vote of security
holders. Proxies were solicited pursuant to Section 14(a) of the Securities and
Exchange Commission adopted pursuant thereto. There was no solicitation in
opposition to management's nominees as listed in the proxy statement. Each
director nominated and all other proposals submitted to a vote passed and the
voting outcome of each proposal is as follows:
1. Election of the following six (6) directors to serve until the next
annual meeting of stockholders or until their successors are elected and
have qualified:
<TABLE>
<CAPTION>
Nominee For Abstain
------- --- -------
<S> <C> <C>
Steven C. Quay, M.D., Ph.D. 7,508,084 164,694
Michael A. Martino 7,492,065 165,574
George W. Dunbar, Jr. 7,498,775 162,274
Christopher S. Henney, Ph.D., D. Sc. 7,491,116 166,423
Robert E. Ivy 7,498,625 161,924
Dwight Winstead 7,509,254 162,824
</TABLE>
2. Approval of an amendment to the Company's Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan -- 1991 to
increase the number of shares subject thereto by 300,000 to a total of
2,200,000:
<TABLE>
<S> <C> <C> <C> <C>
For: 3,295,195 Against: 1,266,261 Abstain: 50,077 Broker Non-votes: 3,061,245
</TABLE>
3. Approval of an amendment to the Company's Employee Stock Purchase Plan
to increase the number of shares subject thereto by 50,000 to a total of
100,000:
<TABLE>
<S> <C> <C> <C> <C>
For: 4,377,612 Against: 207,804 Abstain: 26,117 Broker Non-votes: 3,061,245
</TABLE>
4. Approval of an amendment to the Company's 1995 Stock Option Plan for
Directors to increase the number of shares subject thereto by 127,863 to
a total of 250,000:
<TABLE>
<S> <C> <C> <C> <C>
For: 4,257,570 Against: 321,239 Abstain: 32,724 Broker Non-votes: 3,061,245
</TABLE>
5. Approval of an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock of the
Company by 10,000,000 shares to a total of 30,000,000:
<TABLE>
<S> <C> <C> <C> <C>
For: 7,271,983 Against: 356,913 Abstain: 43,032 Broker Non-votes: 850
</TABLE>
6. Ratification of Ernst & Young LLP as independent auditors of the Company
for the fiscal year ending December 31, 1999:
<TABLE>
<S> <C> <C>
For: 7,601,905 Against: 55,595 Abstain: 15,278
</TABLE>
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
3.2 Amended and Restated Certificate of Incorporation of the
Company (Incorporated by reference to the referenced exhibit
number to the Company's Registration Statement on Form S-1,
Reg. No. 33-96112)
3.3 Certificate of Amendment of Certificate of Incorporation
10.25 Employment Agreement, effective February 11, 1999, by and
between the Company and Steven C. Quay, M.D., Ph.D.
10.7 1999 Nonqualified Stock Incentive Plan ("1999 Plan")
10.8 Form of Nonqualified Stock Option Agreement pertaining to the
1999 Plan
10.9 Form of Restricted Stock Purchase Agreement pertaining to the
1999 Plan
</TABLE>
(b) REPORTS ON FORM 8-K
The Company filed the following report on Form 8-K during the
quarter ended March 31, 1999:
1. The Registrant filed a report on Form 8-K on February 3,
1999 in connection with the announcement of the Company's
amendments to the marketing and distribution agreements
dated January 31, 1999 that were originally entered into
on May 14, 1996 and October 1, 1996 with Abbott
Laboratories and its affiliate, Abbott International, Ltd.
ITEMS 2, 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SONUS PHARMACEUTICALS, INC.
Date: May 12, 1999 By: /s/ Gregory Sessler
---------------------------------
Gregory Sessler
Chief Financial Officer and
Assistant Secretary
(Principal Financial and
Accounting Officer)
14
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SONUS PHARMACEUTICALS, INC
A DELAWARE CORPORATION
(pursuant to Section 242 of the Delaware General Corporation Law)
SONUS PHARMACEUTICALS, INC., a corporation organized and existing under
and by the virtue of the Delaware General Corporation Law (the "Corporation"),
through its duly authorized officers and by authority of its Board of Directors
does hereby certify:
FIRST: That in accordance with the provisions of Sections 242 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation duly adopted resolutions setting forth a proposed amendment to the
Amended and Restated Certificate of Incorporation of the Corporation, declaring
said amendment to be advisable and directing that said amendment be submitted to
the stockholders of the Corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the first two sentences of the text of Article IV of the
Corporation's Amended and Restated Certificate of Incorporation be amended to
read as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 35,000,000, of which
(i) 30,000,000 shares shall be designated "Common Stock" and
shall have a par value of $.001 per share; and (ii) 5,000,000
shares shall be designated "Preferred Stock" and shall have a par
value of $.001 per share."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, in accordance with Section 242 of the General Corporation Law of the
State of Delaware, the Corporation's stockholders approved and authorized the
foregoing amendment (the "Amendment").
THIRD: That the Amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
IN WITNESS THEREOF, this Corporation has caused this Certificate of
Amendment to be signed by Gregory Sessler, its duly authorized Chief Financial
Officer this 3rd day of May, 1999.
SONUS PHARMACEUTICALS, INC.
a Delaware Corporation
By: /s/ Gregory Sessler
----------------------------
Gregory Sessler,
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by
and between SONUS PHARMACEUTICALS, INC., a Delaware corporation (the "Company"),
and STEVEN C. QUAY, M.D., Ph.D., an individual (the "Executive") as of this 11TH
day of February, 1999.
WITNESSETH:
WHEREAS, Executive is the founder of the Company, and has served as its
Chief Executive Officer and a member of its Board of Directors since inception
in 1991; and
WHEREAS, Executive and the Company entered into an Employment Agreement
dated as of January 16, 1996 (the "Prior Employment Agreement") with a term
expiring January 16, 1999; and
WHEREAS, Executive and the Company desire to enter into this Employment
Agreement which will replace and supersede the Prior Employment Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the Company and the Executive,
intending to be legally bound, hereby agree as follows:
1. Employment. Executive shall serve as the Chairman of the Board and
Chief Executive Officer of the Company until such time as Executive's duties as
Chief Executive Officer are transitioned as provided below, at which time
Executive shall serve as Chairman of the Board and Chief Scientific Officer of
the Company on the terms and conditions set forth in this Agreement. Executive's
position as Chief Executive Officer shall be transitioned to the Company's
current President and Chief Operating Officer by June 30, 1999.
2. Term. The term of this Agreement shall commence on the date hereof
and shall continue until December 31, 2001, but shall be subject to earlier
termination as provided in Section 8 hereof. Thereafter, this Agreement may be
renewed should the parties so agree, upon such terms and conditions as the
parties may mutually agree. As set forth in Section 3.01 below, Executive shall
be a full-time employee until December 31, 1999. Commencing January 1, 2000 and
during the remaining term of this Agreement, Executive shall be a part-time
employee on the terms and conditions set forth in this Agreement.
<PAGE> 2
3. Position and Duties.
3.01 Service with the Company. During the Executive's full-time
employment under this Agreement, Executive agrees to devote his skills and
efforts to the performance of, and to perform diligently and on a timely basis,
such duties as shall be assigned to him from time to time by the Company's Board
of Directors; such duties, however, to be commensurate with the Executive's
position as Chairman and Chief Executive Officer or Chairman and Chief
Scientific Officer of the Company, as applicable. During the Executive's
part-time employment under this Agreement, Executive shall provide services to
the Company on an as available basis as reasonably requested by the Company
relating to scientific and intellectual property matters and such other matters
as may be reasonably requested by the Company.
3.02 No Conflicting Duties. During the Executive's full-time
employment hereunder, the Executive shall not serve as an officer, director,
employee, consultant or advisor to any other business; provided, however, that
Executive may serve as an advisor or a director of one or more corporations so
long as (i) such other corporation does not compete, directly or indirectly,
with the Company or any of its Affiliates (as defined in Section 12.07), (ii)
such service with such other corporations does not adversely affect Executive's
ability to perform his duties under this Agreement, and (iii) Executive obtains
the prior written consent of the Company's Board of Directors; and provided,
further, however, that Executive may be a member and executive officer of [*] so
long as (i) the LLC does not compete, directly or indirectly, with the Company
or any of its Affiliates, (ii) such ownership and activities do not adversely
affect Executive's ability to perform his duties under this Agreement, and (iii)
such ownership and activities and any inventions or developments created by
Executive shall be subject to the terms and provisions of Section 7 below.
During the Executive's part-time employment hereunder, there shall be no
restrictions on other activities of Executive; provided, however, that any
inventions or developments created by Executive during the term of Executive's
part-time employment shall be subject to the terms and provisions of Section 7
below. The Executive hereby confirms that except as otherwise disclosed above,
he is under no commitments (written or oral) that are inconsistent with his
obligations set forth in this Agreement, and agrees that during his employment
hereunder, he will not render or perform services, or enter into any contract to
do so, for any other corporation, firm, entity or person which are inconsistent
with the provisions of this Agreement.
4. Compensation.
4.01 Base Salary. During Executive's full-time employment
hereunder, as compensation for all services to be rendered by the Executive to
the Company or any of its Affiliates under this Agreement or otherwise, the
Company shall pay to the Executive a base annual salary of Three Hundred Eighty
Thousand Dollars ($380,000) (the "Annual Base Salary"). During Executive's
part-time employment hereunder, Executive shall be paid on a per diem basis at
the rate of $2,000 per day, less tax, social security and other withholdings.
The Annual Base Salary shall be paid in installments in accordance with the
Company's normal payroll procedures and policies.
2
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION
<PAGE> 3
4.02 Incentive Compensation; Option Grant. During Executive's
full-time employment hereunder, Executive shall be eligible to participate in
any management incentive or bonus compensation plan (hereinafter, "bonus plan")
that is approved by the Company's Board of Directors for the Company's executive
officers and Executive's participation therein shall be on terms substantially
comparable to those afforded to other executive officers of the Company,
provided that the Company's Board of Directors shall have the sole discretion to
determine the criteria upon which Executive's and the Company's performance will
be measured and on which the amount of Executive's bonus compensation shall be
based, and such criteria may also be tailored to reflect Executive's position
and responsibilities with the Company. Executive's participation in any such
bonus plan or plans shall be subject to the provisions, rules and regulations of
any such plan or plans and the provisions of this Agreement relating to
compensation payable to Executive in the event of termination of his employment;
provided that any such plan, if adopted, may provide for deferral of the receipt
of any bonus compensation that is awarded and may require Executive to remain in
the Company's employ for a specified period or periods of time as a condition to
receipt of any bonuses awarded under any such plan. Executive acknowledges and
agrees that adoption and implementation of any such bonus plans, and the terms
of his participation in any such plans, are not assured as this will require
affirmative action by the Board of Directors of the Company. Anything herein to
the contrary notwithstanding, Executive has elected during the term of this
Agreement to forego participation in the Company's annual bonus program for
executive officers in consideration of the grant of options to purchase shares
of Common Stock of the Company pursuant to the terms set forth on Schedule A
attached hereto and incorporated herein by this reference (the "Option").
Concurrently herewith, the Company and Executive shall enter into a nonqualified
option agreement for the Option which is consistent with the terms set forth on
Schedule A and the Company's 1999 Stock Incentive Plan.
4.03 Participation in Benefit Plans. The Executive shall be
entitled to participate in all employee benefit plans or programs (including
vacation time, sick leave and holidays) generally available to all employees of
the Company, to the extent that his position, title, tenure with the Company,
salary, age, health and other qualifications make him eligible to participate
therein. The Executive's participation in any such plans or programs shall be
subject to the provisions, rules and regulations thereof that are generally
applicable to all participants therein.
4.04 Expenses. In accordance with the Company's policies
established from time to time, the Company will pay or reimburse the Executive
for all reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the presentment of
appropriate vouchers and expense reports.
3
<PAGE> 4
5. Compensation upon the Termination of the Executive's Employment
by the Company.
5.01 Involuntary Terminations. In the event that the Executive
ceases to be employed by the Company by reason of the termination of Executive's
employment pursuant to Section 8.01, Section 8.02 or Section 8.03 below, then he
shall not be entitled to any compensation, nor shall the Company have any
obligation to pay any sum or have any liability to Executive whether as
compensation for his services or as a result or by reason of such termination of
employment, other than (i) any unpaid installment of his then current Annual
Base Salary which has accrued for services rendered by him through the date of
such termination, and (ii) only in the event of the termination of Executive's
employment pursuant to Section 8.01 or Section 8.02 hereof, any undistributed
bonus that had been awarded to Executive under any bonus plan for any years
prior to the year in which such termination occurred, provided that the payment
thereof is not contingent or conditional on Executive's continued employment
with the Company or the satisfaction of any other condition that is unsatisfied,
pursuant to the plan or plans under which such bonus or bonuses were awarded.
All payments required to be made by the Company to the Executive pursuant to
this Section 5.01 shall be paid in accordance with the Company's normal payroll
procedures and policies and shall be subject to the provisions of Section 12.03
hereof.
5.02 Termination Without Cause or For Good Reason. In the event
that the Executive ceases to be employed by the Company during Executive's
full-time employment hereunder by reason of the termination of Executive's
employment by the Company without Cause pursuant to Section 8.04 below in
circumstances that are not encompassed by the Change in Control Agreement dated
September 15, 1998 between the Company and Executive (the "Change in Control
Agreement"), or by reason of Executive's termination of his employment for Good
Reason pursuant to Section 8.05 in circumstances that are not encompassed by the
Change in Control Agreement, Executive shall not be entitled to any
compensation, nor shall the Company have any obligation to pay any sum or have
any liability to Executive whether as compensation for his services or as a
result or by reason of such termination of employment, other than:
(a) Any unpaid installment of his then current Annual Base Salary
which has accrued for services rendered by Executive through the date of
such termination;
(b) Executive confirms that it is not expected that he will
participate in any bonus program as referenced in Section 4.02 above.
However, in the event Executive should participate in any bonus program
of the Company, any undistributed bonus that had been awarded to
Executive under any bonus plan in which Executive participates for any
years prior to the year in which such termination occurred, provided the
payment thereof is not contingent or conditional on the satisfaction of
any condition which has not been satisfied other than a condition
requiring his continued employment with the Company to a date beyond the
date of such termination of employment;
(c) Executive confirms that it is not expected that he will
participate in any bonus program as referenced in Section 4.02 above.
However, in the event Executive should participate in any bonus program
of the Company, if bonuses are paid to other
4
<PAGE> 5
executive officers of the Company for services rendered in the calendar
year in which such termination of Executive's employment occurred under
any bonus plan for such year in which Executive was a participant at the
time of such termination of his employment, then, on the date such
bonuses for such year are paid to other executive officers, Executive
shall receive a pro-rated bonus in an amount which bears the same ratio
to the bonus he would otherwise have received for the year in which such
termination occurred, as the number of full calendar months he was
employed hereunder in such year bears to 12, but only if the payment of
a bonus for such year was not contingent or conditional on the
satisfaction of any condition in such plan which has not been satisfied
other than a condition requiring Executive's continued employment with
the Company beyond the date of such termination of employment; and
(d) A severance payment in the form of continuation of
Executive's then Annual Base Salary for a period equal to the greater of
(i) the remainder of the initial one year Term of this Agreement, or
(ii) twelve (12) consecutive months after the date of Executive's
termination.
In the event that Executive ceases to be employed by the Company during
Executive's part-time employment hereunder by reason of the termination of
Executive's employment by the Company without Cause pursuant to Section 8.04
below in circumstances that are not encompassed by the Change in Control
Agreement, or by reason of Executive's termination of his employment for Good
Reason pursuant to Section 8.05 in circumstances that are not encompassed by the
Change in Control Agreement, Executive should not be entitled to any
compensation, nor shall the Company have any obligation to pay any sum or have
any liability to Executive whether as compensation for his services or as a
result or by reason of such termination of employment.
All payments to be made to Executive under this Section 5 shall be paid net of
withholdings made in accordance with the Company's normal payroll procedures and
policies. In the event Executive's employment is terminated in circumstances
which are encompassed by the Change in Control Agreement, the terms of the
Change in Control Agreement shall supersede the terms and provisions of this
Agreement.
6. Confidential Information. Executive will hold in strict
confidence and not disclose to any person or entity, without the express prior
written authorization of the Board of Directors of the Company, any financial
statements or other financial information or data (historical or prospective) of
or relating to the Company or any Affiliate that has not been publicly disclosed
by the Company, any manufacturing or marketing data or any information relating
to any technique, process, formula, developmental or experimental work, work in
progress, business methods, trade secrets, any information relating to customers
or clients of the Company or any of its Affiliates (including, without
limitation, any customer or client list or lists of customer or client sources),
acquisition candidates or prospects, or any business or marketing plans, or any
other secret, proprietary or confidential information of or relating to the
Company or any of its Affiliates or any of their products, services, customers,
clients, sales or other business activities or affairs. Executive further agrees
that he will not make use of or disclose to any third party any of the above at
any time after termination of his employment. Upon termination of his full-time
employment, Executive shall deliver to the Company all documents, records,
notebooks, workpapers and all
5
<PAGE> 6
similar repositories containing any confidential information concerning the
Company or any Affiliate, whether prepared by Executive, the Company or anyone
else. The foregoing restrictions shall not apply to (i) information which is or
becomes, other than as a result of a breach of this Agreement, generally
available to the public or (ii) the disclosure of information required pursuant
to a subpoena or other legal process; provided that the Executive shall notify
the Company, in writing, of the receipt of any such subpoena or other legal
process requiring such disclosure immediately after receipt thereof and the
Company shall have a reasonable opportunity to quash such subpoena or other
legal process prior to any disclosure by the Executive.
7. Covenants Against Actions Damaging the Company. The Executive
agrees that, during the term of this Agreement or at any time thereafter, he
will not (i) make any claim that the Executive has any right, interest or title,
of any kind or nature whatsoever, in or to any products, methods, practices,
processes, discoveries, ideas, improvements, devices, creations, business plans
or systems, or, subject to applicable labor laws, inventions relating to the
business of the Company or any Affiliate, used, developed or discovered by the
Company, any Affiliate or by Executive while employed by the Company or any
Affiliate thereof on a full-time or part-time basis, or (ii) disclose any of
such matters to any third party; provided, however, that this Section shall not
apply to such matters which Executive has developed that (a) do not relate to
the business of the Company or any Affiliate or their actual or demonstrably
anticipated research and development, (b) did not result from any work performed
by Executive for the Company or any Affiliate, and (c) were developed by
Executive entirely on his own time or prior to his employment by the Company
without using any of the Company's employees, equipment, facilities, supplies,
or trade secrets. Executive agrees that during the term of this Agreement, he
shall promptly disclose to the Company any invention developed or discovered by
Executive for the purpose of determining Executive's and the Company's
respective rights in any such invention. Executive further agrees that during
the term of this Agreement and for a period of one (1) year following the
termination of his employment with the Company, whether for himself or on behalf
of or in conjunction with any third party, he shall not hire any employee of the
Company or any Affiliate or induce or entice any employee of the Company or any
Affiliate to leave his employment with the Company or any Affiliate.
8. Termination Prior to Expiration of the Term.
8.01 Disability. Executive's employment shall terminate
immediately, without notice, upon the Executive's becoming totally disabled. For
purposes of this Agreement, the term "totally disabled" or "total disability"
means an inability of Executive, due to a physical or mental illness, injury or
impairment, to perform the essential functions of his positions with or without
reasonable accommodation, for a period of 180 or more consecutive days, as
determined by the Company's Board of Directors.
8.02 Death of Executive. Executive's employment shall terminate
immediately, without notice, upon the death of Executive.
8.03 Termination for Cause. The Company may terminate Executive's
employment at any time for "Cause" (as hereinafter defined) immediately upon
written notice to Executive. As used herein, the term "Cause" shall mean
Executive (i) commits a material breach
6
<PAGE> 7
of his duty of loyalty to the Company; (ii) commits an act or fails to act,
where such act or failure to act constitutes intentional misconduct, a reckless
disregard of the consequences of such act or failure to act, or gross
carelessness; (iii) commits a felony, or a misdemeanor involving moral
turpitude, or subjects the Company or any Affiliate to civil liabilities or
civil or criminal penalties or fines; (iv) commits a material breach of any of
his covenants contained in Section 6, 7, or 9 hereof; or (vi) has refused or
failed to perform any of his material duties to the satisfaction of the Board of
Directors of the Company and such refusal or failure has continued after
Executive has received at least one (1) written warning specifically advising
the Executive of such failure or refusal and the remedial actions which are
necessary to be taken by him and he has been given a reasonable time period
after such warning to take such remedial actions.
8.04 Termination Without Cause. The Company also may terminate
Executive's employment in the absence of the occurrence of an event or
circumstance constituting Cause (as defined in Section 8.03 above), for any
reason or no reason, at any time effective upon written notice to Executive.
8.05 Termination by Executive for Good Reason. A breach by the
Company of any of its material obligations to Executive under this Agreement
which continues unremedied for thirty (30) days following receipt of a written
notice thereof from Executive that specifies in detail the nature of such breach
shall entitle Executive to terminate this Agreement and his employment with the
Company "for Good Reason." In the event of a termination of Executive's
employment hereunder by Executive for Good Reason, as hereinabove defined, the
Company's sole liability and obligation to Executive by reason thereof shall be
as set forth in Section 5.02 of this Agreement.
9. Non-Competition. Executive agrees that during his employment by
the Company (whether under this Agreement or otherwise), or by any Affiliate,
and for a period of two (2) years after the date on which his employment
terminates for any reason, he will not engage or participate (whether as
employee, employer, consultant, agent, principal, partner, stockholder, lender,
corporate officer, director or other representative capacity) in any business
that competes with the business of the Company either directly or indirectly
through its marketing partners in any city or county within the United States in
which the Company is then engaging and continues to engage in its business. In
the event any court shall refuse to enforce any portion of the covenant in this
Section 9, then such unenforceable portion shall be deemed eliminated and
severed from said covenant for the purpose of said court's proceedings to the
extent necessary to permit the remaining portions of this covenant to be
enforced.
10. Assignment. This Agreement shall not be assignable, in whole or
in part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to an Affiliate; or to any unaffiliated
corporation, firm or other business entity (i) with or into which the Company
may merge or consolidate, or (ii) to which the Company may sell or transfer all
or substantially all of its assets. After any such assignment by the Company,
the Company shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement including this Section 10.
7
<PAGE> 8
11. Notices. Any notice or other communication regarding this
Agreement required to be given pursuant to the terms hereof shall be in writing
and shall be deemed to be received by the party to whom its is addressed on the
actual date of delivery if personally delivered to such party or, if sent by
postage prepaid certified mail, return receipt requested, shall be deemed
received two business days following its deposit in the United States Mails. For
purposes hereof, a notice personally delivered to the Company shall not be
deemed delivered unless it has been personally delivered to the President and
Chief Operating Officer of the Company. The addresses of the parties hereto for
purposes of mailing notices hereunder are as follows:
The Company: Sonus Pharmaceuticals, Inc.
22026 20th Avenue S.E., Suite 102
Bothell, Washington 98021
Attention: Board of Directors and President
and Chief Operating Officer
The Executive: Steven C. Quay, M.D., Ph.D.
22026 20th Avenue S.E., Suite 102
Bothell, Washington 98021
12. Miscellaneous.
12.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of
Washington.
12.02 Prior Agreements. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
the Prior Employment Agreement and all prior agreements and understanding with
respect to such subject matter, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein.
12.03 Withholding Taxes. The Company may withhold from any salary
and benefits payable under this Agreement, including from any severance payment,
all federal, state, city or other taxes or amounts as shall be required to be
withheld pursuant to any law or governmental regulation or ruling.
12.04 Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing signed by the parties hereto.
12.05 No Waiver. No term or condition of this Agreement shall be
deemed to have been waived nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
8
<PAGE> 9
12.06 Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation of
the foregoing, should the duration or geographical extent of, or business
activities covered by any provision of this Agreement be in excess of that which
is valid and enforceable under applicable law, then such provision shall be
construed to cover only the maximum duration, extent or activities which may
validly and enforceably covered under applicable law. The Executive acknowledges
the uncertainty of the law in this respect and expressly stipulates that this
Agreement shall be given the construction which renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible
under applicable law.
12.07 Definitions. As used in this Agreement, the term
"Affiliate" (when used with reference to the Company) means any corporation,
partnership, joint venture, association or other business entity as to which the
Company has the right or power, either directly or indirectly through its
control of any other person or entity, either to select a majority of the
directors, managers or trustees thereof or to veto any major business decisions
of such other corporation, partnership, joint venture, association or other
business entity.
12.08 Counterpart Execution. This Agreement may be executed by
facsimile and in counterparts, each of which shall be deemed an original and all
of which when taken together shall constitute but one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
SONUS PHARMACEUTICALS, INC.
a Delaware corporation
By: /s/ Michael A. Martino
------------------------------------
Michael A. Martino, President and
Chief Operating Officer
/s/ Steven C. Quay
------------------------------------
Steven C. Quay, M.D., Ph.D.
10
<PAGE> 1
EXHIBIT 10.7
SONUS PHARMACEUTICALS, INC.
1999 NONQUALIFIED STOCK INCENTIVE PLAN
This 1999 NONQUALIFIED STOCK INCENTIVE PLAN (the "Plan") is hereby
established by SONUS PHARMACEUTICALS, INC., a Delaware corporation (the
"Company"), and adopted by its Board of Directors as of February 11, 1999 (the
"Effective Date").
ARTICLE 1.
PURPOSES OF THE PLAN
1.1 PURPOSES. The purposes of the Plan are (a) to enhance the Company's
ability to attract and retain the services of qualified employees, officers and
directors (including non-employee directors), and consultants and other service
providers upon whose judgment, initiative and efforts the successful conduct and
development of the Company's business largely depends, and (b) to provide
additional incentives to such persons or entities to devote their utmost effort
and skill to the advancement and betterment of the Company, by providing them an
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company. It is the intention
that this Plan shall be a broadly based plan including qualified employees of
the Company.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term Administrator
shall mean the Committee.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CHANGE IN CONTROL. "Change in Control" shall mean the occurrence of
any of the following: (i) any "person," as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, a Company subsidiary, or a Company employee
benefit plan, including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company (or a successor to the Company)
representing fifty percent (50%) or more of the combined voting power of the
then-outstanding securities of the Company or such successor; (ii) at least a
majority of the directors of the Company constitute persons who were not at the
time of their first election to the Board, candidates proposed by a majority of
the Board in office prior to the time of such first election; (iii) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction, the principal purpose of which is to change the state
<PAGE> 2
in which the Company is incorporated; (iv) a sale, transfer or other disposition
of assets involving fifty percent (50%) or more in value of the assets of the
Company; (v) the dissolution of the Company, or liquidation of more than fifty
percent (50%) in value of the Company; or (vi) any reverse merger in which the
Company is a surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such reverse merger.
2.5 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.6 COMMITTEE. "Committee" means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1 hereof.
2.7 COMMON STOCK. "Common Stock" means the Common Stock, $.001 par value
of the Company, subject to adjustment pursuant to Section 4.2 hereof.
2.8 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.9 EFFECTIVE DATE. "Effective Date" means the date on which the Plan is
adopted by the Board, as set forth on the first page hereof.
2.10 EXERCISE PRICE. "Exercise Price" means the purchase price per share
of Common Stock payable upon exercise of an Option.
2.11 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on
a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the closing sale price on the date of valuation
on such Nasdaq market system or principal stock exchange on which the Common
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted on such day, then the Fair Market Value shall be the closing sale price
of the Common Stock on such Nasdaq market system or such exchange on the next
preceding day for which a closing sale price is reported.
(b) If the Common Stock is not then listed or admitted to trading
on a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the average of the closing bid and asked prices
of the Common Stock in the over-the-counter market on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of evaluation, which determination
shall be conclusive and binding on all interested parties.
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2.12 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member
of the National Association of Securities Dealers, Inc.
2.13 OFFEREE. "Offeree" means a Participant to whom a Right to Purchase
has been offered or who has acquired Restricted Stock under the Plan.
2.14 OPTION. "Option" means any option to purchase Common Stock granted
pursuant to the Plan.
2.15 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.16 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.17 PARTICIPANT. "Participant" means an individual or entity who holds
an Option, a Right to Purchase or Restricted Stock under the Plan.
2.18 PURCHASE PRICE. "Purchase Price" means the purchase price per share
of Restricted Stock payable upon acceptance of a Right to Purchase.
2.19 RESTRICTED STOCK. "Restricted Stock" means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and conditions
as are established pursuant to such Article 6.
2.20 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.
2.21 SERVICE PROVIDER. "Service Provider" means a consultant or other
person or entity who provides services to the Company or an Affiliated Company
and who the Administrator authorizes to become a Participant in the Plan.
2.22 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with respect
to a Right to Purchase offered under the Plan.
ARTICLE 3.
ELIGIBILITY
3.1 OPTIONS AND RIGHTS TO PURCHASE. Officers and other key employees of
the Company or of an Affiliated Company, members of the Board (whether or not
employed by the Company or an Affiliated Company), and Service Providers are
eligible to receive Options or Rights to Purchase under the Plan.
3.2 LIMITATION ON SHARES. In no event shall any Participant be granted
Options or Rights to Purchase in any one calendar year pursuant to which the
aggregate number of shares of Common Stock that may be acquired thereunder
exceeds 300,000 shares.
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ARTICLE 4.
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 600,000 shares of Common
Stock may be issued under the Plan, subject to adjustment as to the number and
kind of shares pursuant to Section 4.2 hereof. For purposes of this limitation,
in the event that (a) all or any portion of any Option or Right to Purchase
granted or offered under the Plan can no longer under any circumstances be
exercised, or (b) any shares of Common Stock are reacquired by the Company
pursuant to a Stock Purchase Agreement, the shares of Common Stock allocable to
the unexercised portion of such Option or such Right to Purchase, or the shares
so reacquired, shall again be available for grant or issuance under the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator to
the aggregate number and kind of shares subject to this Plan, and the number and
kind of shares and the price per share subject to outstanding Option Agreements,
Rights to Purchase and Stock Purchase Agreements in order to preserve, as nearly
as practical, but not to increase, the benefits to Participants.
ARTICLE 5.
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the vesting provisions relating to such Option, and the
Exercise Price per share. As soon as is practical following the grant of an
Option, an Option Agreement shall be duly executed and delivered by or on behalf
of the Company to the Optionee to whom such Option was granted. Each Option
Agreement shall be in such form and contain such additional terms and
conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal and resale obligations
upon any shares of Common Stock acquired pursuant to an Option Agreement. Each
Option Agreement may be different from each other Option Agreement. Options
granted under the Plan shall not be incentive stock options within the meaning
of Section 424 of the Code.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, provided that the
Exercise Price shall not be less than 85% of Fair Market Value on the date the
Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Optionee that have been
held by the Optionee for at least six (6) months, which surrendered shares shall
be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory
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note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Optionee; (f) the waiver of
compensation due or accrued to the Optionee for services rendered; (g) provided
that a public market for the Common Stock exists, a "same day sale" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the shares so purchased to pay for
the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; (h)
provided that a public market for the Common Stock exists, a "margin" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to pledge the shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; or (i) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS. The term and provisions for
termination of each Option shall be as fixed by the Administrator, but no Option
may be exercisable more than ten (10) years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and become
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator.
5.6 NONTRANSFERABILITY OF OPTIONS. Options shall not be transferable by
an Optionee or a transferee of an Optionee except (i) by will or the laws of
descent and distribution; or (ii) with the prior written consent of the Company,
which consent may be withheld by the Company in the Company's sole discretion.
5.7 RIGHTS AS STOCKHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
5.8 RESTRICTIONS ON UNDERLYING SHARES OF COMMON STOCK. Shares of Common
Stock issued pursuant to the exercise of an Option may be sold, assigned,
transferred, pledged and otherwise encumbered or disposed of, except as
specifically provided in the Option Agreement.
ARTICLE 6.
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE AND PURCHASE PRICE. A Right to Purchase
granted to an Offeree entitles the Offeree to purchase, for a Purchase Price
determined by the Administrator, shares of Common Stock subject to such terms,
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Such conditions may include, but are not limited to,
continued employment or the achievement of specified performance goals or
objectives. The
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Purchase Price per share of Common Stock covered by each Right to Purchase shall
be determined by the Administrator.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights
with respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or such
longer or shorter period as the Administrator may specify) following the grant
of the Right to Purchase by making payment of the full Purchase Price to the
Company in the manner set forth in Section 6.3 hereof and by executing and
delivering to the Company a Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and such
other terms, conditions and restrictions of the Restricted Stock, not
inconsistent with the provisions of this Plan, as the Administrator shall, from
time to time, deem desirable. Each Stock Purchase Agreement may be different
from each other Stock Purchase Agreement.
6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions,
payment of the Purchase Price upon acceptance of a Right to Purchase Restricted
Stock may be made, in the discretion of the Administrator, by: (a) cash; (b)
check; (c) the surrender of shares of Common Stock owned by the Offeree that
have been held by the Offeree for at least six (6) months, which surrendered
shares shall be valued at Fair Market Value as of the date of such exercise; (d)
the Offeree's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Offeree; (f) the waiver of compensation due or accrued to the Offeree for
services rendered; or (g) any combination of the foregoing methods of payment or
any other consideration or method of payment as shall be permitted by applicable
corporate law.
6.4 RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of
Section 6.2 hereof, an Offeree shall have the rights of a stockholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
have vested in accordance with the terms of the Stock Purchase Agreement.
6.5 RESTRICTIONS AND REPURCHASE RIGHT. Vested Shares of Restricted Stock
may be sold, assigned, transferred, pledged and otherwise encumbered or disposed
of, except as specifically provided in the Stock Purchase Agreement. In the
event of termination of a Participant's employment, service as a director of the
Company or Service Provider status for any reason whatsoever (including death or
disability), the Stock Purchase Agreement may provide, in the discretion of the
Administrator, that the Company shall have the right, exercisable at the
discretion of the Administrator, to repurchase, at the original Purchase Price,
any shares of Restricted Stock which have not vested as of the date of
termination.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify, if applicable as determined by the Administrator in its discretion, the
date or dates, the performance goals or objectives which must be achieved, and
any other conditions on which the Restricted Stock may vest.
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6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.
6.8 NONASSIGNABILITY OF RIGHTS. Rights to Purchase shall not be
transferable by a Participant or a transferee of a Participant except (i) by
will or the laws of descent and distribution; or (ii) with the prior written
consent of the Company, which consent may be withheld by the Company in the
Company's sole discretion.
ARTICLE 7.
ADMINISTRATION OF THE PLAN
7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee.
7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Options shall be granted and Rights to
Purchase shall be offered, the number of shares to be represented by each Option
and Right to Purchase and the consideration to be received by the Company upon
the exercise thereof; (b) to interpret the Plan; (c) to create, amend or rescind
rules and regulations relating to the Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Option Agreements and
Stock Purchase Agreements; (e) to determine the identity or capacity of any
persons who may be entitled to exercise a Participant's rights under any Option
or Right to Purchase under the Plan; (f) to correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option Agreement
or Stock Purchase Agreement; (g) to accelerate the vesting of any Option or
release or waive any repurchase rights of the Company with respect to Restricted
Stock; (h) to extend the exercise date of any Option or acceptance date of any
Right to Purchase; (i) to provide for rights of first refusal and/or repurchase
rights; (j) to amend outstanding Option Agreements and Stock Purchase Agreements
to provide for, among other things, any change or modification which the
Administrator could have provided for upon the grant of an Option or Right to
Purchase or in furtherance of the powers provided for herein; and (k) to make
all other determinations necessary or advisable for the administration of the
Plan, but only to the extent not contrary to the express provisions of the Plan.
Any action, decision, interpretation or determination made in good faith by the
Administrator in the exercise of its authority conferred upon it under the Plan
shall be final and binding on the Company and all Participants.
7.3 LIMITATION ON LIABILITY. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan,
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<PAGE> 8
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
ARTICLE 8.
CHANGE IN CONTROL
8.1 CHANGE IN CONTROL. In order to preserve a Participant's rights in
the event of a Change in Control of the Company, (i) the time period relating to
the exercise or realization of all outstanding Options, Rights to Purchase and
Restricted Stock shall automatically accelerate immediately prior to the
consummation of such Change in Control, and (ii) with respect to Options and
Rights to Purchase, the Administrator in its discretion may, at any time an
Option or Right to Purchase is granted, or at any time thereafter, take one or
more of the following actions: (A) provide for the purchase or exchange of each
Option or Right to Purchase for an amount of cash or other property having a
value equal to the difference, or spread, between (x) the value of the cash or
other property that the Participant would have received pursuant to such Change
in Control transaction in exchange for the shares issuable upon exercise of the
Option or Right to Purchase had the Option or Right to Purchase been exercised
immediately prior to such Change in Control transaction and (y) the Exercise
Price of such Option or the Purchase Price under such Right to Purchase, plus,
in each case, any required tax withholdings, (B) adjust the terms of the Options
and Rights to Purchase in a manner determined by the Administrator to reflect
the Change in Control, (C) cause the Options and Rights to Purchase to be
assumed, or new rights substituted therefor, by another entity, through the
continuance of the Plan and the assumption of outstanding Options and Rights to
Purchase, or the substitution for such Options and Rights to Purchase of new
options and new rights to purchase of comparable value covering shares of a
successor corporation, with appropriate adjustments as to the number and kind of
shares and Exercise Prices, in which event the Plan and such Options and Rights
to Purchase, or the new options and rights to purchase substituted therefor,
shall continue in the manner and under the terms so provided, or (D) make such
other provision as the Administrator may consider equitable. If the
Administrator does not take any of the forgoing actions, all Options and Rights
to Purchase shall terminate upon the consummation of the Change in Control and
the Administrator shall cause written notice of the proposed transaction to be
given to all Participants not less than thirty (30) days prior to the
anticipated effective date of the proposed transaction.
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ARTICLE 9.
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the Plan to comply with
requirements under the Code relating to Options which give Optionees more
favorable tax treatment than that applicable to Options granted under this Plan
as of the date of its adoption, or to comply with provisions under applicable
securities laws, including without limitation, Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. Upon any such alteration or amendment, any
outstanding Option granted hereunder may, if the Administrator so determines and
if permitted by applicable law, be subject to the more favorable tax treatment
afforded to an Optionee pursuant to such terms and conditions.
9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Rights to Purchase may be granted under the
Plan thereafter, but Option Agreements, Stock Purchase Agreements and Rights to
Purchase then outstanding shall continue in effect in accordance with their
respective terms.
ARTICLE 10.
TAX WITHHOLDING
10.1 WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the Plan. To
the extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions as
it may deem appropriate, permit a Participant to satisfy his or her obligation
to pay any such tax, in whole or in part, up to an amount determined on the
basis of the highest marginal tax rate applicable to such Participant, by (a)
directing the Company to apply shares of Common Stock to which the Participant
is entitled as a result of the exercise of an Option or as a result of the
purchase of or lapse of restrictions on Restricted Stock or (b) delivering to
the Company shares of Common Stock owned by the Participant. The shares of
Common Stock so applied or delivered in satisfaction of the Participant's tax
withholding obligation shall be valued at their Fair Market Value as of the date
of measurement of the amount of income subject to withholding.
ARTICLE 11.
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other
disposition shall be without effect.
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11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the Plan shall be deemed to give the right to
any Participant to be retained as an employee of the Company or any Affiliated
Company or to limit the right of the Company or any Affiliated Company to
discharge any Participant at any time.
11.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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EXHIBIT 10.8
SONUS PHARMACEUTICALS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE
1999 STOCK INCENTIVE PLAN
This Stock Option Agreement (the "Agreement") is entered into as of
____________, by and between SONUS PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), and ________________ (the "Optionee") pursuant to the Company's
1999 Nonqualified Stock Incentive Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee an option (the
"Option") to purchase all or any portion of a total of __________ shares (the
"Shares") of the Common Stock of the Company at a purchase price of
_________________ per share (the "Exercise Price"), subject to the terms and
conditions set forth herein and the provisions of the Plan. This Option is not
intended to qualify as an "incentive stock option" as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. VESTING OF OPTION. The right to exercise this Option shall vest in
installments, and this Option shall be exercisable from time to time in whole or
in part as to any vested installment, as follows:
__% of the Shares will vest on _________. The remaining __% of the
Shares will vest monthly over the next __ months beginning on
____________; such that on ________ all of the Shares subject to the
Option will be fully vested.
No additional Shares shall vest after the date of termination of Optionee's
"Continuous Service" (as defined in Section 3 below), but this Option shall
continue to be exercisable in accordance with Section 3 hereof with respect to
that number of shares that have vested as of the date of termination of
Optionee's Continuous Service.
3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
(a) the expiration of ten (10) years from the date of this
Agreement;
(b) the expiration of three (3) months from the date of
termination of Optionee's Continuous Service if such termination occurs for any
reason other than permanent disability or death; provided, however, that if
Optionee dies during such three-month period the provisions of Section 3(d)
below shall apply;
(c) the expiration of one (1) year from the date of termination
of Optionee's Continuous Service if such termination is due to permanent
disability of the Optionee (as defined in Section 22(e)(3) of the Code);
<PAGE> 2
(d) the expiration of one (1) year from the date of termination
of Optionee's Continuous Service if such termination is due to Optionee's death
or if death occurs during the three-month period following termination of
Optionee's Continuous Service pursuant to Section 3(b) above; or
(e) upon the consummation of a "Change in Control" (as defined in
Section 2.4 of the Plan), unless otherwise provided pursuant to Section 11
below.
As used herein, the term "Continuous Service" means (i) employment by
either the Company or any parent or subsidiary corporation of the Company, or by
a corporation or a parent or subsidiary of a corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies, which
is uninterrupted except for vacations, illness (except for permanent disability,
as defined in Section 22(e)(3) of the Code), or leaves of absence which are
approved in writing by the Company or any of such other employer corporations,
if applicable, (ii) service as a member of the Board of Directors of the Company
until Optionee resigns, is removed from office, or Optionee's term of office
expires and he or she is not reelected, or (iii) so long as Optionee is engaged
as a consultant or service provider to the Company or other corporation referred
to in clause (i) above.
4. EXERCISE OF OPTION. On or after the vesting of any portion of this
Option in accordance with Sections 2 or 11 hereof, and until termination of the
right to exercise this Option in accordance with Section 3 above, the portion of
this Option which has vested may be exercised in whole or in part by the
Optionee (or, after his or her death, by the person designated in Section 5
below) upon delivery of the following to the Company at its principal executive
offices:
(a) a written notice of exercise which identifies this Agreement
and states the number of Shares then being purchased (but no fractional Shares
may be purchased);
(b) a check or cash in the amount of the Exercise Price (or
payment of the Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time under the provisions of Section 5.3
of the Plan);
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any, recognized
by the Optionee in connection with the exercise of this Option (unless the
Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other compensation payable to
Optionee, or by the withholding of Shares issuable upon exercise of this Option
or the delivery of Shares owned by the Optionee in accordance with Section 10.1
of the Plan, provided such arrangements satisfy the requirements of applicable
tax laws); and
(d) a letter, if requested by the Company, in such form and
substance as the Company may require, setting forth the investment intent of the
Optionee, or person designated in Section 5 below, as the case may be.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of Optionee under this
Agreement shall not be transferable by an Optionee or a transferee of an
Optionee except (i) by will or the laws of descent and distribution; or (ii)
with the prior written consent of the Company, which consent may be withheld by
the Company in the Company's sole discretion. Any attempt to sell, pledge,
assign,
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hypothecate, transfer or dispose of this Option in contravention of this
Agreement or the Plan shall be void and shall have no effect. If the Optionee's
Continuous Service terminates as a result of his or her death, and provided
Optionee's rights hereunder shall have vested pursuant to Section 2 hereof,
Optionee's legal representative, his or her legatee, or the person who acquired
the right to exercise this Option by reason of the death of the Optionee
(individually, a "Successor") shall succeed to the Optionee's rights and
obligations under this Agreement. After the death of the Optionee, only a
Successor may exercise this Option.
6. RECEIPT OF PLAN. Optionee acknowledges receipt of a copy of the Plan
and understands that all rights and obligations connected with this Option are
set forth in this Agreement and in the Plan.
7. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company agrees
to use its reasonable best efforts to obtain from any applicable regulatory
agency such authority or approval as may be required in order to issue and sell
the Shares to the Optionee pursuant to this Option. Inability of the Company to
obtain, from any such regulatory agency, authority or approval deemed by the
Company's counsel to be necessary for the lawful issuance and sale of the Shares
hereunder and under the Plan shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite
authority or approval shall not have been obtained.
8. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend or other change in the
capital structure of the Company, then appropriate adjustment shall be made by
the Administrator to the number of Shares subject to the unexercised portion of
this Option and to the Exercise Price per share, in order to preserve, as nearly
as practical, but not to increase, the benefits of the Optionee under this
Option, in accordance with the provisions of Section 4.2 of the Plan.
9. CHANGE IN CONTROL. In the event of a Change in Control (as defined in
Section 2.4 of the Plan) of the Company, (i) the vesting of this Option pursuant
to Section 2 above shall automatically accelerate immediately prior to the
consummation of such Change in Control, and (ii) the Administrator in its
discretion may take one or more of the following actions: (A) provide for the
purchase or exchange of this Option for an amount of cash or other property
having a value equal to the difference, or spread, between (x) the value of the
cash or other property that the Optionee would have received pursuant to such
Change in Control transaction in exchange for the shares issuable upon exercise
of this Option had this Option been exercised immediately prior to such Change
in Control transaction and (y) the Exercise Price plus any required withholding
taxes, (B) adjust the terms of this Option in a manner determined by the
Administrator to reflect the Change in Control, (C) cause this Option to be
assumed, or new rights substituted therefor, by another entity, through the
continuance of the Plan and the assumption of this Option, or the substitution
for this Option of a new option of comparable value covering shares of a
successor corporation, with appropriate adjustments as to the number and kind of
shares and Exercise Price, in which event the Plan and this Option, or the new
option substituted therefor, shall continue in the manner and under the terms so
provided, or (D) make such other provision as the Administrator may consider
equitable. If the Administrator does not take any of the forgoing actions, this
Option shall terminate upon the consummation of the Change in Control and the
Administrator shall cause written notice of the proposed transaction to be given
to the
3
<PAGE> 4
Optionee not less than thirty (30) days prior to the anticipated effective date
of the proposed transaction.
10. NO EMPLOYMENT CONTRACT CREATED. Neither the granting of this Option
nor the exercise hereof shall be construed as granting to the Optionee any right
with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Optionee's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved.
11. RIGHTS AS STOCKHOLDER. The Optionee (or transferee of this option by
bona fide gift, will or the laws of descent and distribution) shall have no
rights as a stockholder with respect to any Shares covered by this Option until
the date of the issuance of a stock certificate or certificates to him or her
for such Shares, notwithstanding the exercise of this Option.
12. "MARKET STAND-OFF" AGREEMENT. Optionee agrees that, if requested by
the Company or the managing underwriter of any proposed public offering of the
Company's securities, Optionee will not sell or otherwise transfer or dispose of
any Shares held by Optionee without the prior written consent of the Company or
such underwriter, as the case may be, during such period of time, not to exceed
90 days following the effective date of the registration statement filed by the
Company with respect to such offering, as the Company or the underwriter may
specify.
13. INTERPRETATION. This Option is granted pursuant to the terms of the
Plan, and shall in all respects be interpreted in accordance therewith. The
Administrator shall interpret and construe this Option and the Plan, and any
action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As
used in this Agreement, the term "Administrator" shall refer to the committee of
the Board of Directors of the Company appointed to administer the Plan, and if
no such committee has been appointed, the term Administrator shall mean the
Board of Directors.
14. NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid, and
addressed, if to the Company, at its principal place of business, Attention: the
Chief Financial Officer, and if to the Optionee, at his or her most recent
address as shown in the employment or stock records of the Company.
15. GOVERNING LAW. The validity, construction, interpretation, and
effect of this Option shall be governed by and determined in accordance with the
laws of the State of Washington.
16. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
SONUS PHARMACEUTICALS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
PURCHASER:
___________________________________
___________________________________
(Print Name)
5
<PAGE> 1
EXHIBIT 10.9
SONUS PHARMACEUTICALS, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
UNDER
1999 NONQUALIFIED STOCK INCENTIVE PLAN
THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of _______________, ______ by and between ______________________
(hereinafter referred to as "Purchaser"), and SONUS PHARMACEUTICALS, INC., a
Delaware corporation (hereinafter referred to as the "Company"), pursuant to the
Company's 1999 Stock Incentive Plan (the "Plan").
R E C I T A L S :
A. Purchaser is an employee, director, consultant or other person who
provides services to the Company or a parent or subsidiary of the Company, as
those terms are defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended (a "Service Provider"), and in connection therewith has
rendered services for and on behalf of the Company.
B. The Company desires to issue shares of common stock to Purchaser for
the consideration set forth herein to provide an incentive for Purchaser to
remain a Service Provider of the Company and to exert added effort towards its
growth and success.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the parties agree as
follows:
1. ISSUANCE OF SHARES. The Company hereby offers to issue to Purchaser
an aggregate of _____________ (_____ ) shares of the Common Stock of the Company
(the "Shares") on the terms and conditions herein set forth. Unless this offer
is earlier revoked in writing by the Company, Purchaser shall have ten (10) days
from the date of the delivery of this Agreement to Purchaser to accept the offer
of the Company by executing and delivering to the Company two copies of this
Agreement, without condition or reservation of any kind whatsoever, together
with the consideration to be delivered by Purchaser pursuant to Section 2 below.
2. CONSIDERATION. The purchase price for the Shares shall be $_____ per
share, or $________ in the aggregate, which shall be paid by the delivery of
Purchaser's check payable to the Company.
3. VESTING OF SHARES. The Shares acquired hereunder shall vest and
become "Vested Shares" as follows:
On or After: No. of Shares:
Shares which have not yet become vested are herein called "Unvested Shares." No
additional Shares shall vest after the date of termination of Purchaser's
"Continuous Service" (as defined below). As used herein, the term "Continuous
Service" means (i) employment by either the Company or any parent or subsidiary
corporation of the Company, which is uninterrupted except for vacations, illness
<PAGE> 2
(except for permanent disability, as defined in Section 22(e)(3) of the Code)
or leaves of absence which are approved in writing by the Company or any of such
other employer corporations, if applicable, (ii) service as a member of the
Board of Directors of the Company, or (iii) so long as Purchaser is engaged as a
consultant or service provider to the Company.
4. RECONVEYANCE UPON TERMINATION OF SERVICE.
(a) RECONVEYANCE OPTION. If, at any time prior to _____ (__)
years from the date of issuance of the Shares (the "Grant Date"), Purchaser
should cease to be a Service Provider of the Company or a parent or its
subsidiaries, for any reason (hereinafter referred to as the "Termination
Date"), the Company shall have the option to acquire (hereinafter referred to as
the "Reconveyance Option") from Purchaser all or part of the Unvested Shares.
(b) CONSIDERATION FOR RECONVEYANCE OPTION. The Company shall pay
Purchaser as consideration for the unvested Shares to be acquired upon exercise
of the Reconveyance Option the original purchase price paid by Purchaser.
(c) PROCEDURE FOR EXERCISE OF RECONVEYANCE OPTION. The Company
shall have the right to exercise the Reconveyance Option by acquiring all or any
part of the Shares subject to the Reconveyance Option by delivery to Purchaser
and/or any other person obligated to transfer the Shares written notice of
election to purchase the Shares or any portion thereof within sixty (60) days
following the Termination Date. Such written notice shall indicate the number of
Shares to be purchased by the Company. In the event that the Company does not
elect to exercise the Reconveyance Option as to all or part of the Shares under
the provisions of this Section 4 by written notice to Purchaser within the
period specified above, the Reconveyance Option shall expire as to all Shares
which the Company has not elected to acquire.
(d) NOTIFICATION AND SETTLEMENT. In the event that the Company
has elected to exercise the Reconveyance Option as to part or all of the Shares
within the period described above, Purchaser or such other person shall deliver
to the Company certificate(s) representing the Shares to be acquired by the
Company within thirty (30) days following the date of the notice from the
Company. The Company shall deliver to Purchaser against delivery of the Shares,
checks of the Company payable to Purchaser and/or any other person obligated to
transfer the Shares in the aggregate amount of the purchase price to be paid as
set forth in paragraph (b) above.
(e) NONTRANSFERABILITY AND DEPOSIT OF UNVESTED SHARES. Unvested
Shares may not be sold, assigned, transferred, pledged or otherwise encumbered
or disposed of without the prior written consent of the Company, which consent
may be given or withheld in its sole discretion. Purchaser shall deposit with
the Company certificates representing the Unvested Shares, together with a duly
executed stock assignment separate from certificate in blank, which shall be
held by the Secretary of the Company. Purchaser shall be entitled to vote and to
receive dividends and distributions on all such deposited Shares.
(f) TERMINATION. The provisions of this Section 4 shall
automatically terminate, and the Shares shall not be subject to the Reconveyance
Option, immediately prior to the consummation of a Change in Control (as defined
in Section 2.4 of the Plan), unless provision is made in writing in connection
with such transaction for the continuance or assumption of this
-2-
<PAGE> 3
Agreement or the substitution for this Agreement of a new agreement of
comparable value covering shares of a successor corporation, with appropriate
adjustments as to the number and kind of shares and the purchase price, in which
event this Agreement or the new agreement substituted therefor shall continue in
the manner and under the terms so provided. If such provision is not made in
such transaction, then the Administrator shall cause written notice of the
proposed transaction to be given to Purchaser not less than thirty (30) days
prior to the anticipated effective date of the proposed transaction, and the
Shares, if not already fully vested, shall concurrent with and conditioned upon
the effective date of the proposed transaction, be accelerated and become fully
vested at such time.
5. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding Shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend, or other change in the
capital structure of the Company, then Purchaser shall be entitled to new or
additional or different shares of stock or securities, in order to preserve, as
nearly as practical, but not to increase, the benefits of Purchaser under this
Agreement, in accordance with the provisions of Section 4.2 of the Plan. Such
new, additional or different shares shall be deemed "Shares" for purposes of
this Agreement and subject to all of the terms and conditions hereof.
6. SHARES FREE AND CLEAR. All Shares purchased by the Company pursuant
to this Agreement shall be delivered by Purchaser free and clear of all claims,
liens and encumbrances of every nature (except the provisions of this Agreement
and any conditions concerning the Shares relating to compliance with applicable
federal or state securities laws), and the purchaser thereof shall acquire full
and complete title and right to all of the shares, free and clear of any claims,
liens and encumbrances of every nature (again except for the provisions of this
Agreement and such securities laws).
7. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company agrees
to use its reasonable best efforts to obtain from any applicable regulatory
agency such authority or approval as may be required in order to issue and sell
the Shares to Purchaser pursuant to this Agreement. Inability of the Company to
obtain, from any such regulatory agency, authority or approval deemed by the
Company's counsel to be necessary for the lawful issuance and sale of the Shares
hereunder and under the Plan shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite
authority or approval shall not have been obtained.
8. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or three (3) days after being mailed, by United States
certified or registered mail, prepaid, to the parties or their assignees at the
addresses set forth opposite their signatures below (or such other address as
shall be given in writing by either party to the other).
9. BINDING OBLIGATIONS. All covenants and agreements herein contained by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the parties hereto and their permitted successors and assigns.
10. CAPTIONS AND SECTION HEADINGS. Captions and section headings used
herein are for convenience only, and are not part of this Agreement and shall
not be used in construing it.
-3-
<PAGE> 4
11. AMENDMENT. This Agreement may not be amended, waived, discharged, or
terminated other than by written agreement of the parties.
12. ENTIRE AGREEMENT. This Agreement and the Plan constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior or contemporaneous written or oral agreements and
understandings of the parties, either express or implied.
13. ASSIGNMENT. No party hereto shall have the right, without the prior
written consent of the other party, to sell, assign, mortgage, pledge or
otherwise transfer any interest or right created hereby. This Agreement is made
solely for the benefit of the parties hereto, and no other person, partnership,
association or corporation shall acquire or have any right under or by virtue of
this Agreement.
14. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one agreement and any
party hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be binding upon Purchaser and the Company at such time as the
Agreement, in counterpart or otherwise, is executed by Purchaser and the
Company.
16. APPLICABLE LAW. This Agreement shall be construed under, and
enforced in accordance with and governed by the laws of the State of California.
17. NO AGREEMENT TO EMPLOY. Nothing in this Agreement shall affect any
right with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Purchaser's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved, subject to any
other written employment agreement to which the Company and Purchaser may be a
party.
18. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Optionee will not sell or otherwise dispose of any Purchased Shares without the
prior written consent of the Company or such underwriters, as the case may be,
for a period of time (not to exceed 90 days) from the effective date of such
registration as the Company or the underwriters may specify.
19. TAX ELECTIONS. Purchaser acknowledges that Purchaser has considered
the advisability of all tax elections in connection with the purchase of the
Shares hereunder, including the making of an election under Section 83(b) under
the Internal Revenue Code of 1986, as amended, and that the Company has no
responsibility for the making of any such election.
-4-
<PAGE> 5
20. ATTORNEYS' FEES. If any party shall bring an action in law or equity
against another to enforce or interpret any of the terms, covenants and
provisions of this Agreement, the prevailing party in such action shall be
entitled to recover reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
SONUS PHARMACEUTICALS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
PURCHASER:
___________________________________
___________________________________
(Print Name)
-5-
<PAGE> 6
CONSENT AND RATIFICATION OF SPOUSE
The undersigned, the spouse of _____________________, a party to the
attached Restricted Stock Purchase Agreement (the "Agreement"), dated as of ,
_____ hereby consents to the execution of said Agreement by such party; and
ratifies, approves, confirms and adopts said Agreement, and agrees to be bound
by each and every term and condition thereof as if the undersigned had been a
signatory to said Agreement, with respect to the Shares (as defined in the
Agreement) made the subject of said Agreement in which the undersigned has an
interest, including any community property interest therein.
I also acknowledge that I have been advised to obtain independent
counsel to represent my interests with respect to this Agreement but that I have
declined to do so and I hereby expressly waive my right to such independent
counsel.
Date:______________________________ ___________________________________
(Signature)
___________________________________
(Print Name)
-6-
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,743,204
<SECURITIES> 10,951,998
<RECEIVABLES> 0
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<CURRENT-ASSETS> 15,975,331
<PP&E> 4,022,339
<DEPRECIATION> (2,755,880)
<TOTAL-ASSETS> 17,241,790
<CURRENT-LIABILITIES> 9,014,887
<BONDS> 0
0
0
<COMMON> 5,039,972
<OTHER-SE> (28,902,994)
<TOTAL-LIABILITY-AND-EQUITY> 17,241,790
<SALES> 0
<TOTAL-REVENUES> 1,700,000
<CGS> 0
<TOTAL-COSTS> 3,200,518
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<INTEREST-EXPENSE> 49,235
<INCOME-PRETAX> (1,381,237)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,381,237)
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