INVESTOR RIGHTS AGREEMENT

 

<PAGE>

                                                                    Exhibit 10.2

 

                                                                  EXECUTION COPY

 

                               NOVARTIS PHARMA AG

 

                                        AND

 

                          ALNYLAM PHARMACEUTICALS, INC.

 

                            INVESTOR RIGHTS AGREEMENT

<PAGE>

                                TABLE OF CONTENTS

 

<TABLE>

<CAPTION>

                                                                             PAGE

                                                                            ----

<S>                                                                          <C>

1.     DEFINITIONS........................................................      3

2.     OBLIGATIONS OF THE COMPANY.........................................      7

4.     FURNISH INFORMATION................................................      8

5.     EXPENSES OF DEMAND REGISTRATION....................................      9

6.     COMPANY REGISTRATION EXPENSES......................................      9

7.     UNDERWRITING REQUIREMENTS; COMPANY REGISTRATION....................      9

8.     DELAY OF REGISTRATION..............................................     10

9.     INDEMNIFICATION....................................................     10

10.    REGISTRATIONS ON FORM S-3..........................................     13

11.    UNDERWRITING REQUIREMENTS; REGISTRATIONS ON FORM S-3...............     14

12.    TRANSFER OF REGISTRATION RIGHTS....................................     15

13.    MERGERS, ETC.......................................................     15

14.    STAND-OFF AGREEMENT................................................     15

15.    FUTURE EVENTS......................................................     15

16.    TERMINATION........................................................     16

17.    SUBSCRIPTION RIGHTS................................................     16

18.    STANDSTILL.........................................................     20

19.    ANNUAL ADJUSTMENT..................................................     22

20.    SHARE REPURCHASES..................................................     23

21.    MERGERS, CONSOLIDATIONS OR REORGANIZATIONS.........................     24

22.    NOTICES............................................................     24

23.    MISCELLANEOUS......................................................     25

</TABLE>

 

 

                                       -2-

<PAGE>

          THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is entered into as

of September 6, 2005 by and between Alnylam Pharmaceuticals, Inc., a Delaware

corporation (the "Company"), and Novartis Pharma AG, a corporation organized

under the laws of Switzerland (the "Investor").

 

 

          WHEREAS, the Company proposes to issue and sell to the Investor shares

of its Common Stock, par value $.01 per share (the "Common Stock"), pursuant to

the Stock Purchase Agreement of even date herewith (the "Purchase Agreement");

and

 

          WHEREAS, as a condition to consummating the transactions contemplated

by the Purchase Agreement, the Investor and the Company have agreed upon

registration rights and certain other rights and covenants as set forth herein.

 

          NOW, THEREFORE, in consideration of the premises and mutual agreements

hereinafter set forth, and for other valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties hereto agree as

follows:

 

          1. DEFINITIONS. As used in this Agreement, the following terms shall

have the following meanings:

 

          (a) The term "Adjusted Outstanding Securities" has the meaning set

forth in Section 19(a).

 

          (b) The term "Adjustment Price" has the meaning set forth in Section

19(c).

 

          (c) The term "Adjustment Securities" has the meaning set forth in

Section 19(a).

 

          (d) The term "Acquisition Proposal" has the meaning set forth in

Section 18(e).

 

          (e) The term "Affiliate" means, with respect to any Person, any other

Person that directly or indirectly, controls, is controlled by or is under

common control with such Person. For the purposes of this definition, "control"

(including with correlative meanings, the terms "controlled by" and "under

common control with") shall mean the possession, directly or indirectly, of the

power to direct or cause the direction of the management and policies of such

Person, whether through the ownership of voting securities or by contract or

otherwise.

 

          (f) The term "Annual Election" has the meaning set forth in Section

19(b).

 

          (g) The term "Annual Notice" has the meaning set forth in Section

19(a).

 

          (h) The term "Business Day" shall mean a day other than a Saturday,

Sunday or other day on which commercial banks in Cambridge, Massachusetts are

authorized or required by law to close.

 

          (i) The term "Cash Offering" has the meaning set forth in Section

17(a).

 

 

                                       -3-

<PAGE>

          (j) The term "Common Stock" shall have the meaning set forth in the

recitals to this Agreement.

 

          (k) The term "Company Sale" means a (i) merger or consolidation in

which (A) the Company is a constituent party, or (B) a subsidiary of the Company

is a constituent party and the Company issues shares of its capital stock

pursuant to such merger or consolidation, except in the case of either clause

(A) or (B) any such merger or consolidation involving the Company or a

subsidiary of the Company in which the shares of capital stock of the Company

outstanding immediately prior to such merger or consolidation continue to

represent, or are converted into or exchanged for shares of capital stock which

represent, immediately following such merger or consolidation, more than 50% by

voting power of the capital stock of (1) the surviving or resulting corporation

or (2) if the surviving or resulting corporation is a wholly owned subsidiary of

another corporation immediately following such merger or consolidation, the

parent corporation of such surviving or resulting corporation; (ii) the sale,

lease, transfer, exclusive license or other disposition, in a single transaction

or series of related transactions, by the Company or a subsidiary of the Company

of all or substantially all the assets of the Company and the subsidiaries of

the Company taken as a whole (except where such sale, lease, transfer, exclusive

license or other disposition is to a wholly owned subsidiary of the Company); or

(iii) the sale or transfer, in a single transaction or series of related

transactions, by the stockholders of the Company of more than 50% by voting

power of the then-outstanding capital stock of the Company to any person or

entity or group of affiliated persons or entities.

 

          (l) The term "Effectiveness Period" has the meaning set forth in

Section 3(a).

 

          (m) The term "Employee Shares" has the meaning set forth in Section

17(b).

 

          (n) The term "Exchange Act" means the Securities Exchange Act of 1934,

as amended.

 

          (o) The term "First Closing Date" has the meaning set forth in Section

17(h).

 

          (p) The term "Holder" means the Investor for so long as it owns

Registrable Shares and any Person(s) to whom the Investor transfers Registrable

Shares in accordance with Section 12.

 

          (q) The term "Independent Appraiser" means a nationally recognized

investment banking firm, valuation firm or firm of independent certified public

accountants of recognized standing that is experienced in the business of

appraising biotechnology companies, and that is not an Affiliate of the Company

or the Investor.

 

          (r) The term "Investor's Adjusted Ownership Percentage" has the

meaning set forth in Section 19(a).

 

          (s) The term "Investor's Ownership Percentage" has the meaning set

forth in Section 17(a).

 

          (t) The term "M & A Transaction" has the meaning set forth in Section

17(b).

 

 

                                       -4-

<PAGE>

          (u) The term "Market Price" has the meaning set forth in Section

17(d).

 

          (v) The term "Net Increase in Shares" has the meaning set forth in

Section 19(a).

 

          (w) The term "New Securities" has the meaning set forth in Section

17(b).

 

          (x) The term "Non-Cash Offering" has the meaning set forth in Section

17(a).

 

          (y) The term "Notices" has the meaning set forth in Section 23.

 

          (z) The term "Notice of Acceptance" has the meaning set forth in

Section 17(e).

 

          (aa) The term "Offer" has the meaning set forth in Section 17(c).

 

          (bb) The term "Offer Period" has the meaning set forth in Section

17(c).

 

          (cc) The term "Offered Securities has the meaning set forth in Section

17(a).

 

          (dd) The term "Offering" has the meaning set forth in Section 17(a).

 

          (ee) The term "Person" means any individual, corporation, association,

partnership, joint venture, trust, estate, limited liability company, limited

partnership, joint stock company, unincorporated organization or government or

any agency or political subdivision.

 

           (ff) The term "Post-M & A Offered Securities" has the meaning set

forth in Section 17(k).

 

          (gg) The term "Purchase Agreement" shall have the meaning set forth in

the recitals to this Agreement.

 

          (hh) The term "Reduction in Outstanding Shares" has the meaning set

forth in Section 20(a).

 

          (ii) The terms "register," "registered," and "registration" refer to a

registration effected by preparing and filing a registration statement in

compliance with the Securities Act and the declaration or ordering of

effectiveness of such registration statement.

 

          (jj) The term "Registrable Shares" means (1) the Common Stock

purchased by the Investor pursuant to the Purchase Agreement, (2) any Common

Stock purchased or otherwise acquired by the Investor or its Affiliates (or its

permitted transferees) after the date hereof, whether pursuant to Section 17 or

19 hereof or otherwise (or Common Stock issuable with respect to other

securities so purchased or otherwise acquired), and (3) any Common Stock of the

Company issued as a dividend or other distribution with respect to, or in

exchange or in replacement of, such Common Stock after the date hereof;

provided, however, that shares of Common Stock which are Registrable Shares

shall cease to be Registrable Shares (i) upon any sale pursuant to a

registration statement or Rule 144 under the Securities Act, (ii) upon any sale

 

 

                                       -5-

<PAGE>

in any manner to a person or entity which is not entitled, pursuant to Section

12, to the rights under this Agreement or (iii) at such time as the Holder

thereof is eligible to sell all such Registrable Shares pursuant to Rule 144(k)

under the Securities Act.

 

          (kk) The term "Repurchase Notice" has the meaning set forth in Section

20(a).

 

          (ll) The term "Repurchase Price" has the meaning set forth in Section

20(b).

 

          (mm) The term "Research Collaboration and License Agreement" means

that certain Research Collaboration and License Agreement between the Company

and Novartis Institutes for BioMedical Research, Inc. to be dated as of the date

of the First Closing (as defined in the Purchase Agreement).

 

          (nn) The term "Rule 144" means Rule 144 promulgated under the

Securities Act.

 

          (oo) The term "SEC" means the Securities and Exchange Commission.

 

          (pp) The term "Second Closing Date" has the meaning set forth in

Section 17(i).

 

          (qq) The term "Second Closing Notice" has the meaning set forth in

Section 17(i).

 

           (rr) The term "Second Market Price" has the meaning set forth in

Section 17(j).

 

          (ss) The term "Securities Act" means the Securities Act of 1933, as

amended.

 

          (tt) The term "Standstill Period" has the meaning set forth in Section

18(a).

 

          (uu) The term "Subsequent Registration" has the meaning set forth in

Section 10(c).

 

          (vv) The term "Unpurchased Securities" has the meaning set forth in

Section 17(i).

 

          (ww) The term "Unpurchased Securities Price" has the meaning set forth

in Section 17(j).

 

          2. COMPANY REGISTRATION. If at any time the Company proposes to

register any of its Common Stock under the Securities Act in connection with the

public offering of such securities for its own account or for the accounts of

shareholders other than Holders (other than a registration statement covering

shares that were acquired in connection with an offering pursuant to Rule 144A

under the Securities Act), solely for cash on a form that would also permit the

registration of the Registrable Shares, the Company shall, each such time,

promptly give each Holder written notice of such determination. Upon the written

request of any Holder given within thirty (30) days after giving of any such

notice by the Company, the Company shall,

 

 

                                       -6-

<PAGE>

subject to the limitations set forth in Section 7, use its best efforts to cause

to be registered under the Securities Act all of the Registrable Shares that

each such Holder has requested be registered; provided, that the Company shall

have the right to postpone or withdraw any registration statement relating to an

offering in which the Holders are eligible to participate under this Section 2

without any liability or obligation to the Holders under this Section 2.

 

          3. OBLIGATIONS OF THE COMPANY. Whenever required under Section 2 or

Section 10 to use its best efforts to effect the registration of any Registrable

Shares, the Company shall, as expeditiously as reasonably possible:

 

           (a) Prepare and file with the SEC a registration statement with

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

registration statement to become and remain effective for twelve (12) months

from the effective date or such lesser period until the distribution thereof has

been completed (the "Effectiveness Period").

 

          (b) Prepare and file with the SEC such amendments and supplements to

such registration statement and the prospectus used in connection with such

registration statement as may be necessary to comply with the provisions of the

Securities Act with respect to the disposition of all securities covered by such

registration statement.

 

          (c) Furnish to the selling Holders such reasonable numbers of copies

of a prospectus, including a preliminary prospectus, in conformity with the

requirements of the Securities Act, and such other documents as they may

reasonably request in order to facilitate the disposition of such Registrable

Shares owned by them.

 

           (d) Use its best efforts to register and qualify the Registrable

Shares covered by such registration statement under such other securities or

Blue Sky laws of such states as shall be reasonably appropriate for the

distribution of the securities covered by the registration statement, provided

that the Company shall not be required in connection therewith or as a condition

thereto to qualify to do business, to amend its certificate of incorporation or

bylaws in a manner that the Board of Directors of the Company determines is

inadvisable or to file a general consent to service of process in any such

states or jurisdictions, and further provided that (anything in this Agreement

to the contrary notwithstanding with respect to the bearing of expenses) if any

jurisdiction in which the securities shall be qualified shall require that

expenses incurred in connection with the qualification of the securities in that

jurisdiction be borne by selling shareholders, then such expenses shall be

payable by selling shareholders pro rata, to the extent required by such

jurisdiction.

 

          (e) Provide a transfer agent for the Common Stock no later than the

effective date of the first registration of any Registrable Shares.

 

          (f) Otherwise use its best efforts to comply with all applicable rules

and regulations of the SEC.

 

          (g) Use its commercially reasonable efforts either (i) to cause all

such Registrable Shares to be listed on a national securities exchange (if such

securities are not already so listed) and on each additional national securities

exchange on which similar securities issued by the Company are then listed, if

the listing of such securities is then permitted under the

 

 

                                       -7-

<PAGE>

rules of such exchange, or (ii) to secure designation of all such Registrable

Shares as a NASDAQ "national market system security" within the meaning of Rule

11Aa2-1 of the Exchange Act Rules.

 

          (h) Enter into such customary agreements (including an underwriting

agreement in customary form) and take such other actions as the selling Holders

of Registrable Shares shall reasonably request in order to expedite or

facilitate the disposition of such Registrable Shares.

 

          (i) Make available for inspection by any selling Holder of Registrable

Shares, by any managing underwriter participating in any disposition to be

effected pursuant to such registration statement and by any attorney, accountant

or other agent retained by any such selling Holder or any such underwriter, all

pertinent financial and other records and pertinent corporate documents and

properties of the Company, and cause all of the Company's officers, directors

and employees to supply all information reasonably requested by any such selling

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

registration statement.

 

          (j) Use every reasonable effort to prevent the issuance of any stop

order suspending the effectiveness of such registration statement or of any

order preventing or suspending the use of any preliminary prospectus and, if any

such order is issued, to obtain the lifting thereof at the earliest reasonable

time.

 

          (k) Notify each selling Holder of Registrable Shares of any request by

the SEC for the amending of such registration statement.

 

          (l) (A) Include in such registration statement and prospectus any

information or disclosure related to a Holder as a selling stockholder

thereunder reasonably requested by such Holder as may be necessary in the

opinion of counsel to such Holder to ensure compliance with applicable

securities laws and (B) consider in good faith whether or not to include in such

registration statement and prospectus any information or disclosure not related

to a Holder as a selling stockholder thereunder reasonably requested by such

Holder as may be necessary in the opinion of counsel to such Holder to ensure

compliance with applicable securities laws.

 

If the Company has delivered a prospectus to the selling Holders of Registrable

Shares 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 Holders of Registrable Shares and, if requested, the selling Holders of

Registrable Shares shall immediately cease making offers of Registrable Shares

and return all prospectuses to the Company. The Company shall promptly provide

the selling Holders of Registrable Shares with revised prospectuses and,

following receipt of the revised prospectuses, the selling Holders of

Registrable Shares shall be free to resume making offers of the Registrable

Shares.

 

          4. FURNISH INFORMATION. It shall be a condition precedent to the

obligations of the Company to take any action pursuant to this Agreement with

respect to the registration of any Holder's Registrable Shares that such Holder

shall take such actions and furnish to the Company such information regarding

itself, the Registrable Shares held by it, and the intended method of

disposition of such securities, as may then be customarily provided by selling

 

 

                                      -8-

<PAGE>

stockholders as the Company shall reasonably request and as shall be required in

connection with any registration, qualification or compliance referred to in

this Agreement, including, without limitation (i) in connection with an

underwritten offering, enter into an appropriate underwriting agreement

containing terms and provisions then customary in agreements of that nature,

(ii) enter into such custody agreements, powers of attorney and related

documents at such time and on such terms and conditions as may then be

customarily required in connection with such offering and (iii) distribute the

Registrable Shares only in accordance with and in the manner of the distribution

contemplated by the applicable registration statement and prospectus. In

addition, the Holders shall promptly notify the Company of any request by the

SEC or any state securities commission or agency for additional information or

for such registration statement or prospectus to be amended or supplemented.

 

          5. EXPENSES OF DEMAND REGISTRATION. All expenses incurred in

connection with any registration pursuant to Section 10, including, without

limitation, all registration and qualification fees, printers' and accounting

fees, fees and disbursements of counsel for the Company, shall be borne by the

Company. Notwithstanding the foregoing, expenses to be borne by the Company in

connection with any registration pursuant to Section 10 shall exclude

underwriters' discounts and commissions and the fees and disbursements of

attorneys (other than the reasonable fees and disbursements of one special

counsel for the selling Holders collectively), accountants and other agents of

the Holders.

 

          6. COMPANY REGISTRATION EXPENSES. All expenses incurred in connection

with any registration pursuant to Section 2, including, without limitation, any

additional registration and qualification fees and any additional fees and

disbursements of counsel to the Company that result from the inclusion of

securities held by the selling Holders in such registration, shall be borne by

the Company. Notwithstanding the foregoing, expenses to be borne by the Company

in connection with any registration pursuant to Section 2 shall exclude

underwriters' discounts and commissions and the fees and disbursements of

attorneys (other than the reasonable fees and disbursements of one special

counsel for the selling Holders collectively), accountants and other agents of

the Holders.

 

          7. UNDERWRITING REQUIREMENTS; COMPANY REGISTRATION.

 

          (a) In connection with any offering under Section 2 involving an

underwriting of shares being issued by the Company, the Company shall not be

required to include any Holder's Registrable Shares in such underwriting unless

such Holder accepts the terms of the underwriting as agreed upon between the

Company and the underwriters selected by it (and enters into an underwriting

agreement with the underwriters on customary terms), and then only in such

quantity as will not, in the reasonable opinion of the underwriters, jeopardize

the success of the offering by the Company. If the total amount of securities

that all Holders and other persons having contractual registration rights

request to be included in an underwritten offering under Section 2 exceeds the

amount of securities that the underwriters reasonably believe compatible with

the success of the offering, no securities of any shareholder except (i)

securities included in such underwritten offering pursuant to the exercise of

contractual registration rights and (ii) Registrable Shares of Holders shall be

included in such offering unless all Registrable Shares and all shares of other

persons having contractual registration rights which the Holders and the holders

of shares having contractual registration rights have requested to be included

are

 

 

                                      -9-

<PAGE>

included, and the Company shall only be required to include in the offering so

many of the Registrable Shares of the Holders as the underwriters reasonably

believe will not jeopardize the success of the offering (the Registrable Shares

so included to be apportioned pro rata among the selling Holders and the holders

of other shares seeking registration under other registration rights agreements

with the Company according to the total amount of Registrable Shares owned by

such selling Holders and the holders of other shares seeking registration under

other registration rights agreements with the Company, or in such other

proportions as shall mutually be agreed to by such selling Holders).

 

          (b) In connection with any underwritings of shares to be registered

under Section 2, the Company shall have the right to designate the managing

underwriter or underwriters.

 

          8. DELAY OF REGISTRATION. No Holder shall have any right to take any

action to restrain, enjoin, or otherwise delay any registration as the result of

any controversy that might arise with respect to the interpretation or

implementation of this Agreement.

 

          9. INDEMNIFICATION. In the event any Registrable Shares are included

in a registration statement under this Agreement:

 

          (a) To the extent permitted by law, the Company will indemnify and

hold harmless each Holder owning Registrable Shares included in a registration

statement pursuant to this Agreement, any underwriter (as defined in the

Securities Act) for it, and each person, if any, who controls any such Holder or

underwriter within the meaning of the Securities Act, against any losses,

claims, damages or liabilities, joint or several, to which they may become

subject under the Securities Act or otherwise, insofar as such losses, claims,

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

on (i) any untrue or alleged untrue statement of any material fact contained in

such registration statement, including, without limitation, any preliminary

prospectus or final prospectus contained therein or any amendments or

supplements thereto, (ii) the omission or alleged omission to state therein a

material fact required to be stated therein, or necessary to make the statements

therein not misleading or (iii) any violation by the Company of any rule or

regulation promulgated under the Securities Act applicable to the Company and

relating to action or inaction required of the Company in connection with any

such registration; and will promptly reimburse each such Holder, underwriter, or

controlling person for any legal or other expenses reasonably incurred by them

in connection with investigating or defending any such loss, claim, damage,

liability, or action, provided, however, that the indemnity agreement contained

in this Section 9(a) shall not apply to amounts paid in settlement of any such

loss, claim, damage, liability or action if such settlement does not include a

release of the Company from all liability in respect of such claim and is

effected without the consent of the Company (which consent shall not be

unreasonably withheld or delayed) nor shall the Company be liable in any such

case for any such loss, claim, damage, liability or action to the extent that it

(i) arises out of or is based upon an untrue statement or alleged untrue

statement or omission or alleged omission made in connection with such

registration statement, preliminary prospectus, final prospectus, or amendments

or supplements thereto, in reliance upon and in conformity with written

information furnished to the Company expressly for use in connection with such

registration by or on behalf of any such Holder, underwriter or controlling

person, (ii) is caused by the failure of a Holder to deliver, at or prior to

written confirmation of the sale of

 

 

                                      -10-

<PAGE>

such securities to such Person, a copy of the final prospectus relating to such

Registrable Shares, as then amended or supplemented, in connection with a

purchase, if the Company had previously furnished copies thereof to such Holder

or (iii) is caused by such Holder's disposition of Registrable Shares during any

period during which such Holder is obligated to discontinue any disposition of

Registrable Shares under Section 15.

 

          (b) To the extent permitted by law, each Holder owning Registrable

Shares included in a registration statement pursuant to this Agreement will

indemnify and hold harmless the Company, each of its directors and officers,

each underwriter (within the meaning of the Securities Act), if any, for the

Company, and each person, if any, who controls the Company or any underwriter

within the meaning of the Securities Act, against any losses, claims, damages or

liabilities to which the Company or any such director, officer, controlling

person or underwriter may become subject, under the Securities Act or otherwise,

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

thereto) arise out of or are based on (i) any untrue statement or alleged untrue

statement of any material fact contained in such registration statement,

including any preliminary prospectus or final prospectus contained therein or

any amendments or supplements thereto or (ii) the omission or alleged omission

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

make the statements therein not misleading, in each case to the extent, but only

to the extent, that such untrue statement or alleged untrue statement or

omission or alleged omission was made in reliance upon and in conformity with

written information relating to and furnished to the Company by such Holder

expressly for use in connection with such registration; and will promptly

reimburse the Company or any such director, officer, controlling person or

underwriter for any legal or other expenses reasonably incurred by them in

connection with investigating or defending any such loss, claim, damage,

liability or action; provided, however, that the indemnity agreement contained

in this Section 9(b) shall not apply to amounts paid in settlement of any such

loss, claim, damage, liability or action if such settlement does not include a

release of such Holder from all liability in respect of such claim and is

effected without the consent of such Holder (which consent shall not be

unreasonably withheld or delayed) and, provided, further, that no Holder shall

have any liability under this Section 9(b) in excess of the net proceeds

actually received by such Holder in the relevant public offering.

 

          (c) Promptly after receipt by an indemnified party under this Section

9 of notice of the commencement of any action, such indemnified party will, if a

claim in respect thereof is to be made against any indemnifying party under this

Section 9, notify the indemnifying party in writing of the commencement thereof

and the indemnifying party shall have the right to participate in, and, to the

extent the indemnifying party so desires, jointly with any other indemnifying

party similarly noticed, to assume the defense thereof with counsel mutually

satisfactory to the indemnifying parties. The failure to notify an indemnifying

party promptly of the commencement of any such action, if prejudicial to his

ability to defend such action, shall relieve such indemnifying party of any

liability to the indemnified party under this Section 9, but the omission so to

notify the indemnifying party will not relieve him of any liability that he may

have to any indemnified party otherwise than under this Section 9.

 

          (d) If the indemnification provided for in this Section 9 is required

by its terms but is for any reason held to be unavailable to or otherwise

insufficient to hold harmless an indemnified party under Section 9(a) or Section

9(b) in respect of any losses, claims, damages,

 

 

                                      -11-

<PAGE>

liabilities or expenses referred to herein, then each applicable indemnifying

party shall contribute to the amount paid or payable by such indemnified party

as a result of any losses, claims, damages, liabilities or expenses referred to

herein (i) in such proportion as is appropriate to reflect the relative benefits

received by the Company and the selling Holders from the offering of securities

or (ii) if the allocation provided by clause (i) above is not permitted by

applicable law, in such proportion as is appropriate to reflect not only the

relative benefits referred to in clause (i) above but also the relative fault of

the Company and the selling Holders in connection with the statements or

omissions described in such Section 9(a) or Section 9(b) which resulted in such

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

equitable considerations. The respective relative benefits received by the

Company and the selling Holders shall be deemed to be in the same proportion as

the total price paid to the Company and the selling Holders, respectively, for

the securities sold by them in the offering. The relative fault of the Company

and the selling Holders shall be determined by reference to, among other things,

whether the untrue or alleged untrue statement of a material fact or the

omission or alleged omission to state a material fact relates to information

supplied by the Company or the selling Holders and the parties' relative intent,

knowledge, access to information and opportunity to correct or prevent such

statement or omission. The amount paid or payable by a party as a result of the

losses, claims, damages, liabilities and expenses referred to above shall be

deemed to include, subject to the limitations set forth in this Section 9, any

legal or other fees or expenses reasonably incurred by such party in connection

with investigating or defending any action or claim. The provisions set forth in

Section 9(c) with respect to notice of commencement of any action shall apply if

a claim for contribution is to be made under this Section 9(d); provided,

however, that no additional notice shall be required with respect to any action

for which notice has been given under Section 9(c) for purposes of

indemnification. The Company and the selling Holders agree that it would not be

just and equitable if contribution pursuant to this Section 9 were determined

solely by pro rata allocation or by any other method of allocation which does

not take account of the equitable considerations referred to in this paragraph.

Notwithstanding the provisions of this Section 9(d), no Holder shall be required

to contribute an amount in excess of the net proceeds actually received by such

Holder in the relevant public offering. No person guilty of fraudulent

misrepresentation (within the meaning of Section 11(f) of the Securities Act)

shall be entitled to contribution from any person who was not guilty of such

fraudulent misrepresentation.

 

          (e) Notwithstanding the foregoing, to the extent that the provisions

on indemnification contained in the underwriting agreements entered into among

the Holders, the Company and the underwriters in connection with an underwritten

public offering are in conflict with the foregoing provisions, the provisions in

the underw