EXECUTION COPY ALTUS PHARMACEUTICALS INC. AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

<PAGE>

                                                                     Exhibit 4.3

 

                                                                  EXECUTION COPY

 

                           ALTUS PHARMACEUTICALS INC.

 

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

     This Amended and Restated Investor Rights Agreement (this "Agreement")

dated as of May 21, 2004 is entered into by and among Altus Pharmaceuticals

Inc., a Delaware corporation (the "Company") (f/k/a "Altus Biologics Inc."),

Vertex Pharmaceuticals Incorporated, a Massachusetts corporation ("Vertex"),

Cystic Fibrosis Foundation Therapeutics, Inc., a Maryland corporation ("CFF"),

Joshua S. Boger, Richard H. Aldrich, and Thomas G. Auchincloss, Jr.

(collectively, the "Vertex Officers") and the individuals and entities listed on

Exhibit A attached hereto (the "Purchasers"), and amends and restates that

certain Investor Rights Agreement dated September 26, 2001, among the Company

and the parties thereto as amended as of December 7, 2001 (the "Prior

Agreement"). Vertex, CFF and the Purchasers are sometimes referred to herein as

the "Holders."

 

                                    Recitals

 

     WHEREAS, the Company and certain of the Purchasers have entered into a

Series C Convertible Preferred Stock and Warrant Purchase Agreement of even date

herewith (the "Purchase Agreement");

 

     WHEREAS, the execution and delivery of this Agreement is a condition to the

consummation of the transactions contemplated by the Purchase Agreement;

 

     WHEREAS, the parties to the Prior Agreement desire to amend and restate the

Prior Agreement in its entirety so as to read in its entirety as set forth

herein;

 

     WHEREAS, the undersigned parties represent the necessary voting power

required to amend the Prior Agreement pursuant to Section 7(g) thereof; and

 

     WHEREAS, the Company, Vertex, CFF and the Purchasers desire to provide for

certain arrangements with respect to (i) the registration of shares of capital

stock of the Company under the Securities Act (as defined below), (ii)

percentage maintenance rights with respect to certain issuances of securities of

the Company, and (iii) certain covenants of the Company and other parties

hereto.

 

     NOW, THEREFORE, in consideration of the mutual promises and covenants

contained in this Agreement, the parties hereto agree as follows:

 

     1. Certain Definitions.

 

     As used in this Agreement, the following terms shall have the following

respective meanings:

<PAGE>

               "Board of Directors" means the Board of Directors of the Company.

 

               "Commission" means the Securities and Exchange Commission, or any

other federal agency at the time administering the Securities Act.

 

               "Common Stock" means the common stock, $.01 par value per share,

of the Company.

 

               "Exchange Act" means the Securities Exchange Act of 1934, as

amended, or any successor federal statute, and the rules and regulations of the

Commission issued under such Act, as they each may, from time to time, be in

effect.

 

               "Initiating Holders" means the Stockholders initiating a request

for registration pursuant to Section 2.1(a) or 2.1(b), as the case may be.

 

               "Initial Public Offering" means the initial underwritten public

offering of shares of Common Stock pursuant to an effective Registration

Statement.

 

               "Prospectus" means the prospectus included in any Registration

Statement, as amended or supplemented by an amendment or prospectus supplement,

including post-effective amendments, and all material incorporated by reference

or deemed to be incorporated by reference in such Prospectus.

 

               "Purchaser Warrants" means the warrants to purchase shares of the

Series C Convertible Preferred Stock issued to certain of the Purchasers

pursuant to the terms of the Purchase Agreement and warrants to purchase shares

of the Series B Convertible Preferred Stock held by certain of the Purchasers.

 

               "Registration Expenses" means the expenses described in Section

2.4.

 

               "Registrable Shares" means (i) the shares of Common Stock issued

or issuable upon conversion of the Shares, (ii) any shares of Common Stock, and

any shares of Common Stock issued or issuable upon the conversion or exercise of

any other securities of the Company, now owned or hereafter acquired by the

Purchasers, Vertex, the Vertex Officers or CFF and (iii) any other shares of

Common Stock issued in respect of such shares (because of stock splits, stock

dividends, reclassifications, recapitalizations, or similar events); provided,

however, that shares of Common Stock which are Registrable Shares shall cease to

be Registrable Shares upon the earlier of:

 

               (i) any sale pursuant to a Registration Statement or Rule 144

under the Securities Act,

 

               (ii) any sale in any manner to a person or entity which, by

virtue of Section 5 of this Agreement, is not entitled to the rights provided by

this Agreement; or

 

 

                                       2

<PAGE>

               (iii) as to the beneficial owner of such Registrable Shares, at

such time after the Closing of the Company's Initial Public Offering when such

beneficial owner is able to sell all of his or its Registrable Shares in a

three-month period pursuant to Rule 144 under the Securities Act (without giving

effect to Rule 144(k) thereunder); provided that, notwithstanding this clause

(iii), such Registrable Shares shall continue to be Registrable Shares at any

time during the term hereof that such beneficial owner is subject to any "market

stand off" "lock up" or similar type of obligation with respect to any of the

Company's securities (and such shares have not been previously sold in a sale

under clause (i) or (ii) above).

 

               Wherever reference is made in this Agreement to a request or

consent of holders of a certain percentage of Registrable Shares, the

determination of such percentage shall include shares of Common Stock issuable

upon conversion or exercise of convertible securities and warrants convertible

into or exercisable for the Shares even if such conversion or exercise has not

been effected.

 

               "Registration Statement" means a registration statement filed by

the Company with the Commission for a public offering and sale of securities of

the Company (other than a registration statement on Form S-8 or Form S-4, or

their successors, or any other form for a similar limited purpose, or any

registration statement covering only securities proposed to be issued in

exchange for securities or assets of another corporation).

 

               "Securities Act" means the Securities Act of 1933, as amended, or

any successor federal statute, and the rules and regulations of the Commission

issued under such Act, as they each may, from time to time, be in effect.

 

               "Selling Stockholder" means any Stockholder owning Registrable

Shares included in a Registration Statement.

 

               "Series B Director" means a director of the Company elected by

the holders of the outstanding Series B Convertible Preferred Stock in

accordance with the terms of the Company's Certificate of Incorporation, as in

effect from time to time (the "Charter"), and subject to that certain Amended

and Restated Stockholders' Voting Agreement dated as of even date herewith by

and among the Company, the Purchasers and Vertex (each as defined therein) (the

"Voting Agreement").

 

               "Series C Director" means a director of the Company elected by

the holders of a majority of the outstanding shares of Series C Convertible

Preferred Stock in accordance with the terms of the Charter and subject to the

Voting Agreement.

 

               "Series B Convertible Preferred Stock" means the Company's Series

B Convertible Preferred Stock, $.01 par value per share.

 

 

                                       3

<PAGE>

               "Series C Convertible Preferred Stock" means the Company's Series

C Convertible Preferred Stock, $.01 par value per share.

 

               "Shares" means shares of Series B Convertible Preferred Stock and

Series C Convertible Preferred Stock issued to the Purchasers and issuable upon

exercise of the Purchaser Warrants.

 

               "Stockholders" means the Purchasers, Vertex, the Vertex Officers,

CFF and any persons or entities to whom the rights granted under this Agreement

are transferred by any Purchasers, their successors or assigns pursuant to

Section 5 hereof.

 

               "Triggering Public Offering" means either (i) a public offering

of the Company's Common Stock which triggers mandatory conversion into Common

Stock of all of the Company's outstanding preferred stock, $.01 par value per

share, which is convertible into Common Stock (the "Convertible Preferred

Stock") pursuant to the terms of the Charter or in connection with which all of

the outstanding shares of Convertible Preferred Stock are otherwise converted

into shares of Common Stock, or (ii) an Initial Public Offering consented to by

the holders of a majority of the Registrable Shares.

 

     2. Registration Rights.

 

          2.1 Required Registrations.

 

               (a) At any time after the earlier of (x) two years from the date

hereof or (y) six months after the closing of the Initial Public Offering, a

Stockholder or Stockholders may request, in writing, that the Company effect the

registration on Form S-1 or Form S-2 (or any successor form) of Registrable

Shares owned by such Stockholder or Stockholders having an aggregate value of at

least $20,000,000 (based on the then current market price or fair value of the

Common Stock as determined in good faith by the Board of Directors).

 

               (b) At any time after the Company becomes eligible to file a

Registration Statement on Form S-3 (or any successor form relating to secondary

offerings), a Stockholder or Stockholders holding Registrable Shares may

request, in writing, that the Company effect the registration on Form S-3 (or

its successor form), of Registrable Shares having an aggregate value of at least

$10,000,000 (based on the then current public market price of the Common Stock).

 

               (c) Upon receipt of any request for registration pursuant to this

Section 2, the Company shall promptly give written notice of such proposed

registration to all other Stockholders. Such Stockholders shall have the right,

by giving written notice to the Company within 30 days after the Company

provides its notice, to elect to have included in such registration such of

their Registrable Shares as such Stockholders may request in such notice of

election, subject in the case of an underwritten offering to the approval of the

managing underwriter as provided in Section 2.1(d) below. Thereupon, the Company

shall, as expeditiously as possible, use its reasonable best efforts to effect

 

 

                                        4

<PAGE>

the registration on an appropriate registration form of all Registrable Shares

which the Company has been requested to so register (provided, however, that in

the case of a registration requested under Section 2.1(b), the Company will only

be obligated to effect such registration on Form S-3 (or any successor form)).

 

               (d) If the Initiating Holders intend to distribute the

Registrable Shares covered by their request by means of an underwriting, they

shall so advise the Company as a part of their request made pursuant to Section

2.1(a) or (b), as the case may be, and the Company shall include such

information in its written notice referred to in Section 2.1(c). The right of

any other Stockholder to include its Registrable Shares in such registration

pursuant to Section 2.1(a) or (b), as the case may be, shall be conditioned upon

such other Stockholder's participation in such underwriting on the terms set

forth herein. If the Company desires that any officers or directors of the

Company holding securities of the Company be included in any registration for an

underwritten offering requested pursuant to this Section 2.1(d), the Company may

include the securities of such officers and directors in such registration and

underwriting on the terms set forth herein. The Company shall (together with all

Stockholders, officers and directors proposing to distribute their securities

through such underwriting) enter into an underwriting agreement in customary

form (including, without limitation, customary indemnification and contribution

provisions on the part of the Company) with the managing underwriter; provided

that such underwriting agreement shall not provide for indemnification or

contribution obligations on the part of Stockholders materially greater than the

obligations of the Stockholders pursuant to Section 2.5. Notwithstanding any

other provision of this Section 2.1(d), if the managing underwriter advises the

Company that the inclusion of all shares requested to be registered would

adversely affect the offering, the securities of the Company held by officers or

directors of the Company (other than Registrable Shares) shall be excluded from

such registration and underwriting to the extent deemed advisable by the

managing underwriter, and if a further limitation of the number of shares is

required, the number of shares that may be included in such registration and

underwriting shall be allocated among all holders of Registrable Shares

requesting registration in proportion, as nearly as practicable, to the

respective number of Registrable Shares held by them at the time of the request

for registration made by the Initiating Holders pursuant to Section 2.1(a) or

(b), as the case may be. If any holder of Registrable Shares, officer or

director who has requested inclusion in such registration as provided above

disapproves of the terms of the underwriting, such person may elect to withdraw

therefrom by written notice to the Company, and the securities so withdrawn

shall also be withdrawn from registration. If the managing underwriter has not

limited the number of Registrable Shares or other securities to be underwritten,

the Company may include securities for its own account in such registration if

the managing underwriter so agrees and if the number of Registrable Shares and

other securities which would otherwise have been included in such registration

and underwriting will not thereby be limited.

 

               (e) The Initiating Holders shall have the right to select the

managing underwriter(s) for any underwritten offering requested pursuant to

Section 2.1(a) or (b), subject to the approval of the Company, which approval

will not be unreasonably withheld, conditioned or delayed.

 

 

                                       5

<PAGE>

               (f) The Company shall not be required to effect more than three

registrations pursuant to Section 2.1(a) in total, or in any 12-month period

more than two registrations pursuant to Section 2.1(b). In addition, the Company

shall not be required to effect any Registration Statement hereunder (other than

on Form S-3 or any successor form relating to secondary offerings) within six

months after the effective date of the Registration Statement relating to the

Initial Public Offering or within three months after the effective date of any

other Registration Statement relating to an underwritten public offering. For

purposes of this Section 2.1(f), a Registration Statement shall not be counted

until such time as such Registration Statement has been declared effective by

the Commission (unless the Initiating Holders withdraw their request for such

registration (other than as a result of information concerning the business or

financial condition of the Company which is made known to the Stockholders after

the date on which such registration was requested) and elect not to pay the

Registration Expenses therefor pursuant to Section 2.4). For purposes of this

Section 2.1(f), a Registration Statement shall not be counted if, as a result of

an exercise of the underwriter's cut-back provisions, less than seventy-five

percent (75%) of the total number of Registrable Shares that Stockholders have

requested to be included in such Registration Statement are so included.

 

               (g) If at the time of any request to register Registrable Shares

by Initiating Holders pursuant to this Section 2.1, the Company is engaged or

has plans to engage in a registered public offering or is engaged in any other

activity which, in the good faith determination of the Board of Directors, would

be adversely affected by the requested registration, then the Company may at its

option direct that such request be delayed for a period not in excess of 90 days

from the date of such request, such right to delay a request to be exercised by

the Company not more than once in any 12-month period.

 

          2.2 Incidental Registration.

 

               (a) During the period from 180 days following the Initial Public

Offering to five (5) years following the Triggering Public Offering, whenever

the Company proposes to file a Registration Statement (other than a Registration

Statement filed pursuant to Section 2.1), it will, prior to such filing, give

written notice to all Stockholders of its intention to do so. Upon the written

request of a Stockholder or Stockholders given within 20 days after the Company

provides such notice (which request shall state the intended method of

disposition of such Registrable Shares), the Company shall use its reasonable

best efforts to cause all Registrable Shares which the Company has been

requested by such Stockholder or Stockholders to register to be registered under

the Securities Act to the extent necessary to permit their sale or other

disposition in accordance with the intended methods of distribution specified in

the request of such Stockholder or Stockholders, subject to Section 2.2(b)

below; provided that the Company shall have the right to postpone or withdraw

any registration effected pursuant to this Section 2.2 without obligation to any

Stockholder.

 

 

                                        6

<PAGE>

               (b) If the registration for which the Company gives notice

pursuant to Section 2.2(a) is a registered public offering involving an

underwriting, the Company shall so advise the Stockholders as a part of the

written notice given pursuant to Section 2.2(a). In such event, the right of any

Stockholder to include its Registrable Shares in such registration pursuant to

this Section 2.2 shall be conditioned upon such Stockholder's participation in

such underwriting on the terms set forth herein. All Stockholders proposing to

distribute their securities through such underwriting shall enter into an

underwriting agreement in customary form with the underwriter or underwriters

selected for the underwriting by the Company. Notwithstanding any other

provision of this Section 2.2, if the managing underwriter determines that the

inclusion of all shares requested to be registered would adversely affect the

offering, the Company may limit the number of Registrable Shares to be included

in the registration and underwriting. The Company shall so advise all holders of

Registrable Shares requesting registration, and the number of shares that are

entitled to be included in the registration and underwriting shall be allocated

in the following manner: the securities of the Company held by holders other

than Registrable Shares held by Stockholders shall be excluded from such

registration and underwriting to the extent deemed advisable by the managing

underwriter; and, if a further limitation on the number of shares is required,

the number of shares that may be included in such registration and underwriting

shall be allocated among all Stockholders requesting registration in proportion,

as nearly as practicable, to the respective number of Registrable Shares which

they held at the time the Company gives the notice specified in Section 2.2(a),

provided that the number of Registrable Shares permitted to be included therein

shall in any event be at least fifty percent (50%) of the securities included

therein (based on aggregate market values). If any Stockholder would thus be

entitled to include more securities than such holder requested to be registered,

the excess shall be allocated among other requesting Stockholders pro rata in

the manner described in the preceding sentence. If any holder of Registrable

Shares or any officer or director disapproves of the terms of any such

underwriting, such person may elect to withdraw therefrom by written notice to

the Company, and any Registrable Shares or other securities excluded or

withdrawn from such underwriting shall be withdrawn from such registration.

 

          2.3 Registration Procedures.

 

               (a) If and whenever the Company is required by the provisions of

this Agreement to use its reasonable best efforts to effect the registration of

any Registrable Shares under the Securities Act, the Company shall:

 

                    (i) file with the Commission a Registration Statement with

respect to such Registrable Shares and use its reasonable best efforts to cause

such Registration Statement to become effective as soon as possible;

 

                    (ii) as expeditiously as possible prepare and file with the

Commission any amendments and supplements to such Registration Statement and the

Prospectus included in such Registration Statement as may be necessary to comply

with the provisions of the Securities Act (including the anti-fraud provisions

thereof) and

 

 

                                       7

<PAGE>

to keep such Registration Statement effective for 12 months from the effective

date or such lesser period until all such Registrable Shares are sold;

 

                    (iii) as expeditiously as possible furnish to each Selling

Stockholder such reasonable numbers of copies of the Prospectus, including any

preliminary Prospectus, in conformity with the requirements of the Securities

Act, and such other documents as such Selling Stockholder may reasonably request

in order to facilitate the public sale or other disposition of the Registrable

Shares owned by such Selling Stockholder;

 

                    (iv) as expeditiously as possible use its reasonable best

efforts to register or qualify such Registrable Shares covered by such

Registration Statement under the securities or Blue Sky laws of such states as

the Selling Stockholders shall reasonably request, and do any and all other acts

and things that may reasonably be necessary or desirable to enable the Selling

Stockholders to consummate the public sale or other disposition in such states

of such Registrable Shares owned by the Selling Stockholders; provided, however,

that the Company shall not be required in connection with this paragraph (iv) to

qualify as a foreign corporation or execute a general consent to service of

process in any jurisdiction unless the Company is already subject to such

jurisdiction;

 

                    (v) as expeditiously as possible, use its reasonable best

efforts to cause all such Registrable Shares to be listed on each securities

exchange or automated quotation system on which similar securities issued by the

Company are then listed;

 

                    (vi) promptly provide a transfer agent and registrar for all

such Registrable Shares not later than the effective date of such Registration

Statement;

 

                     (vii) promptly make available for inspection by the Selling

Stockholders, any managing underwriter participating in any disposition pursuant

to such Registration Statement, and any attorney or accountant or other agent

retained by any such underwriter or selected by the Selling Stockholders, all

financial and other records, pertinent corporate documents and properties of the

Company and cause the Company's officers, directors, employees and independent

accountants to supply all information reasonably requested by any such seller,

underwriter, attorney, accountant or agent in connection with such Registration

Statement;

 

                    (viii) as expeditiously as possible, notify each Selling

Stockholder, promptly after it shall receive notice thereof, of the time when

such Registration Statement has become effective or a supplement to any

Prospectus forming a part of such Registration Statement has been filed;

 

                    (ix) as expeditiously as possible following the

effectiveness of such Registration Statement, notify each seller of such

Registrable

 

 

                                       8

<PAGE>

Shares of any request by the Commission for the amending or supplementing of

such Registration Statement or any Prospectus forming part of such Registration

Statement;

 

                    (x) use its reasonable best efforts to furnish, on the date

that such Registrable Shares are delivered to the underwriters for sale, if such

securities are being sold through underwriters, (1) an opinion, dated as of such

date, of the counsel representing the Company for the purposes of such

registration, in form and substance as is customarily given to underwriters in

an underwritten public offering, addressed to the underwriters, and (2) a

letter, dated as of such date, from the independent certified public accountants

of the Company, in form and substance as is customarily given by independent

certified public accountants to underwriters in an underwritten public offering,

addressed to the underwriters; and

 

                    (xi) execute and deliver such instruments and take such

other actions as the Holders of the Registrable Shares covered by such

Registration Statement may reasonably request in order to facilitate the

effectiveness of such Registration Statement and qualification or compliance

under applicable Blue Sky laws, and the disposition of the shares covered by

such Registration Statement.

 

               (b) If the Company has delivered a Prospectus to the Selling

Stockholders and after having done so such Prospectus is amended to comply with

the requirements of the Securities Act, the Company shall promptly notify the

Selling Stockholders and, if requested, the Selling Stockholders shall

immediately cease making offers of Registrable Shares pursuant to such

Prospectus and return all such Prospectuses to the Company. The Company shall

promptly provide the Selling Stockholders with revised Prospectuses and,

following receipt of the revised Prospectuses, the Selling Stockholders shall be

free to resume making offers of the Registrable Shares pursuant to the revised

Prospectuses.

 

               (c) In the event that, in the judgment of the Company, it is

advisable to suspend use of a Prospectus included in a Registration Statement

due to pending material developments or other events that have not yet been

publicly disclosed and as to which the Company believes public disclosure would

be detrimental to the Company, the Company shall notify all Selling Stockholders

to such effect, and, upon receipt of such notice, each such Selling Stockholder

shall immediately discontinue any sales of Registrable Shares pursuant to such

Registration Statement until such Selling Stockholder has received copies of a

supplemented or amended Prospectus or until such Selling Stockholder is advised

in writing by the Company that the then current Prospectus may be used and has

received copies of any additional or supplemental filings that are incorporated

or deemed incorporated by reference in such Prospectus. Notwithstanding anything

to the contrary herein, the Company shall not exercise its rights under this

Section 2.3(c) to suspend sales of Registrable Shares for a period in excess of

60 consecutive days and not more than twice in any 365-day period.

 

          2.4 Allocation of Expenses. The Company will pay all Registration

Expenses for all registrations under this Agreement; provided, however, that if

a registration under Section 2.1 is withdrawn at the request of the Initiating

Holders (other

 

 

                                        9

<PAGE>

than as a result of: (i) information concerning the business or financial

condition of the Company which is made known to the Stockholders after the date

on which such registration was requested or (ii) the exclusion, in accordance

with Sections 2.1(d) or 2.2(b), of a portion of the Registrable Shares sought to

be registered by such Initiating Holders that reduces the total number of

Registrable Shares being registered to less than seventy-five percent (75%) of

the number of Registrable Shares originally requested to be registered) and if

the Initiating Holders elect not to have such registration counted as a

registration requested under Section 2.1, the requesting Stockholders shall pay

the Registration Expenses of such registration pro rata in accordance with the

number of their Registrable Shares included in such registration. For purposes

of this Section, the term "Registration Expenses" shall mean all expenses

incurred by the Company in complying with this Agreement, including, without

limitation, all registration and filing fees, listing fees for an exchange or

automated quotation system, printing expenses, fees and expenses of counsel for

the Company and the fees and expenses of one legal counsel selected by the

Selling Stockholders to represent the Selling Stockholders, state Blue Sky fees

and expenses, and the expense of any special audits incident to or required by

any such registration, but excluding underwriting discounts, selling commissions

and the fees and expenses of Selling Stockholders' own counsel (other than the

counsel selected to represent all Selling Stockholders).

 

          2.5 Indemnification and Contribution.

 

               (a) In the event of any registration of any of the Registrable

Shares under the Securities Act pursuant to this Agreement, the Company will

indemnify and hold harmless each Selling Stockholder, each underwriter of such

Registrable Shares, and each other person, if any, who controls such Selling

Stockholder or underwriter within the meaning of the Securities Act or the

Exchange Act against any losses, claims, damages or liabilities, joint or

several, to which such Selling Stockholder, underwriter or controlling person

may become subject under the Securities Act, the Exchange Act, state securities

or Blue Sky laws or otherwise, insofar as such losses, claims, damages or

liabilities (or actions in respect thereof) arise out of or are based upon any

untrue statement or alleged untrue statement of any material fact contained in

any Registration Statement under which such Registrable Shares were registered

under the Securities Act, any Prospectus contained in such Registration

Statement, or any amendment or supplement to such Registration Statement or

Prospectus, or arise out of or are based upon the omission or alleged omission

to state a material fact required to be stated therein or necessary to make the

statements therein in light of the circumstances under which they were made, not

misleading, or any violation or alleged violation by the Company of the

Securities Act, the Exchange Act, any state securities or Blue Sky laws or any

rule or regulation promulgated under the Securities Act, the Exchange Act or any

state securities or Blue Sky laws in connection with the Registration Statement

or the offering contemplated thereby; and the Company will reimburse each such

Selling Stockholder, underwriter and controlling person for any legal or any

other expenses reasonably incurred by such Selling Stockholder, underwriter or

controlling person in connection with investigating or defending against any

such loss, claim, damage, liability or action; provided, however, that the

Company will not be liable in any such case to the extent that any such loss,

claim, damage or liability arises out of or is based upon any untrue

 

 

                                       10

<PAGE>

statement or omission made in such Registration Statement, Prospectus, or any

such amendment or supplement, in reliance upon and in conformity with

information furnished to the Company, in writing, by or on behalf of such

Selling Stockholder, underwriter or controlling person specifically for use in

the preparation thereof.

 

               (b) In the event of any registration of any of the Registrable

Shares under the Securities Act pursuant to this Agreement, each Selling

Stockholder, severally and not jointly, will indemnify and hold harmless the

Company, each of its directors and officers, each underwriter (if any), each

other Selling Stockholder and each person, if any, who controls the Company, any

of the other Selling Stockholders or any such underwriter within the meaning of

the Securities Act or the Exchange Act, against any losses, claims, damages or

liabilities, joint or several, to which the Company, such directors and

officers, underwriter or controlling person may become subject under the

Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,

insofar as such losses, claims, damages or liabilities (or actions in respect

thereof) arise out of or are based upon any untrue statement or alleged untrue

statement of a material fact contained in any Registration Statement under which

such Registrable Shares were registered under the Securities Act, any Prospectus

contained in such Registration Statement, or any amendment or supplement to such

Registration Statement or Prospectus, or arise out of or are based upon any

omission or alleged omission to state a material fact required to be stated

therein or necessary to make the statements therein not misleading, if and to

the extent (and only to the extent) that the statement or omission was made in

reliance upon and in conformity with information relating to such Selling

Stockholder furnished in writing to the Company by such Selling Stockholder

specifically for use in connection with the preparation of such Registration

Statement, Prospectus, amendment or supplement; provided, however, that the

obligations of a Selling Stockholder hereunder shall be limited to an amount

equal to the net proceeds to such Selling Stockholder of Registrable Shares sold

in connection with such registration.

 

               (c) Each party entitled to indemnification under this Section 2.5

(the "Indemnified Party") shall give notice to the party required to provide

indemnification (the "Indemnifying Party") promptly after such Indemnified Party

has actual knowledge of any claim as to which indemnity may be sought, and shall

permit the Indemnifying Party to assume the defense of any such claim or any

litigation resulting therefrom; provided, that counsel for the Indemnifying

Party, who shall conduct the defense of such claim or litigation, shall be

approved by the Indemnified Party (whose approval shall not be unreasonably

withheld); and, provided, further, that the failure of any Indemnified Party to

give notice as provided herein shall not relieve the Indemnifying Party of its

obligations under this Section 2.5 except to the extent that the Indemnifying

Party is adversely affected by such failure. The Indemnified Party may

participate in such defense at such party's expense; provided, however, that the

Indemnifying Party shall pay such expense if representation of such Indemnified

Party by the counsel retained by the Indemnifying Party would be inappropriate

due to actual or potential differing interests between the Indemnified Party and

any other party represented by such counsel in such proceeding; provided further

that in no event shall the Indemnifying Party be required to pay the expenses of

more than one law firm in any proceeding or series of related proceedings in the

same jurisdiction as counsel for all

 

 

                                       11

<PAGE>

Indemnified Parties. The Indemnifying Party also shall be responsible for the

expenses of such defense if the Indemnifying Party does not elect to assume such

defense. No Indemnifying Party, in the defense of any such claim or litigation

shall, except with the consent of each Indemnified Party, consent to entry of

any judgment or enter into any settlement which does not include as an

unconditional term thereof the giving by the claimant or plaintiff to such

Indemnified Party of a release from all liability in respect of such claim or

litigation, and no Indemnified Party shall consent to entry of any judgment or

settle such claim or litigation without the prior written consent of the

Indemnifying Party, which consent shall not be unreasonably withheld.

 

               (d) In order to provide for just and equitable contribution in

circumstances in which the indemnification provided for in this Section 2.5 is

due in accordance with its terms but for any reason is held to be unavailable to

an Indemnified Party in respect to any losses, claims, damages and liabilities

referred to herein, then the Indemnifying Party shall, in lieu of indemnifying

such Indemnified Party, contribute to the amount paid or payable by such

Indemnified Party as a result of such losses, claims, damages or liabilities to

which such party may be subject in such proportion as is appropriate to reflect

the relative fault of the Company on the one hand and the Selling Stockholders

on the other in connection with the statements or omissions which resulted in

such losses, claims, damages or liabilities, as well as any other relevant

equitable considerations. The relative fault of the Company and