INDEMNIFICATION
AGREEMENT
INDEMNIFICATION AGREEMENT (this “ Agreement
”) dated as of May 26, 2004 by and between
Sucampo Pharmaceuticals, Inc. (the “ Company ”),
a Delaware corporation, and Michael J. Jeffries (“
Indemnitee ”):
WHEREAS ,
competent persons are reluctant to serve a corporation as a
director or in another capacity unless they are provided with
adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising
out of their service to and activities on behalf of
corporations;
WHEREAS ,
the Board of Directors of the Company has determined that the
ability to attract and retain such persons is in the best interests
of the Company’s stockholders and that the Company should act
to assure such persons that there will be increased certainty of
such protection in the future; and
WHEREAS ,
it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve
or continue to serve the Company free from undue concern that they
will not be so indemnified; and
WHEREAS ,
Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition
that Indemnitee be so indemnified;
NOW,
THEREFORE , in consideration of the premises, the mutual
agreements herein set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1.
Definitions . For purposes of this Agreement the following
terms shall have the meanings set forth below:
(a)
“Board” shall mean the Board of Directors of the
Company.
(b)
“Change of Control” shall mean any of the
following events:
(i) Unless
approved by the affirmative vote of at least two-thirds of those
members of the Board who are in office immediately prior to the
event(s) and who are not employees of the Company:
(A) the merger or
consolidation of the Company with, or the sale of all or
substantially all of the assets of the Company to, any person or
entity or group of associated persons or entities; or
(B) the
acquisition of direct or indirect beneficial ownership in the
aggregate of securities of the Company representing [20] %
or more of the total combined voting power of the Company’s
then issued and outstanding securities by any person or entity, or
group of associated
persons or
entities acting in concert, not affiliated (within the meaning of
the Securities Act of 1933) with the Company as of the date of this
Agreement; or
(C) approval by
the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; or
(i) A change in
the composition of the Board at any time during any consecutive
24-month period such that the “Continuing Directors”
cease for any reason to constitute at least a [ 70 ]%
majority of the Board. For purposes of this clause (ii),
“Continuing Directors” means those members of the Board
who either:
(A) were members
of the Board at the beginning of such consecutive 24-month period;
or
(B) were elected
by, or on the nomination or recommendation of, at least a
two-thirds majority (consisting of at least five directors) of the
then-existing Board.
(c)
“Corporate Status” describes the status of a
person who is or was a director, officer, employee, agent or
fiduciary of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the express written request
of the Company.
(d)
“Disinterested Director” means a director of the
Company who is not and was not a party to the Proceeding in respect
of which indemnification is sought by Indemnitee.
(e)
“Enterprise” shall mean the Company and any
other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise of which Indemnitee is or was
serving at the express written request of the Company as a
director, officer, employee, agent or fiduciary.
(f)
“Expenses” shall include all reasonable
attorneys’ fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, being or preparing
to be a witness in a Proceeding.
(g)
“Good Faith” shall mean Indemnitee having acted
in good faith and in a manner Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with
respect to any criminal Proceeding, having had no reasonable cause
to believe Indemnitee’s conduct was unlawful.
(h)
“Independent Counsel” means a law firm, or a
member of a law firm, that is experienced in matters of corporation
law and neither presently is, nor in the past five years
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has been,
retained to represent: (i) the Company or Indemnitee in any
matter material to either such party or (ii) any other party
to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “
Independent Counsel ” shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(i)
“Proceeding” includes any action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or completed
proceeding whether civil, criminal, administrative or
investigative, other than one initiated by Indemnitee. For purposes
of the foregoing sentence, a “ Proceeding ”
shall not be deemed to have been initiated by Indemnitee where
Indemnitee seeks pursuant to Section 9 of this Agreement to
enforce Indemnitee’s rights under this Agreement.
2. Term
of Agreement . This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date
that Indemnitee has ceased to serve as a director, officer,
employee, agent or fiduciary of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which Indemnitee served at the express
written request of the Company or (b) the final termination of
all pending Proceedings in respect of which Indemnitee is granted
rights of indemnification or advancement of expenses hereunder and
of any proceeding commenced by Indemnitee pursuant to
Section 9 of this Agreement relating thereto. In addition, no
legal action shall be brought and no cause of action shall be
asserted by or in the right of the Company against Indemnitee,
Indemnitee’s estate, spouse, heirs, executors or personal or
legal representatives after the expiration of five (5) years
from the date of accrual of such cause of action, and any claim or
cause of action of the Company shall be extinguished and deemed
released unless asserted by the timely filing of a legal action
within such five (5) year period; PROVIDED, HOWEVER, that if
any shorter period of limitations is otherwise applicable to any
such cause of action, such shorter period shall govern.
3.
Services by Indemnitee, Notice of Proceedings .
(a)
Services . Indemnitee agrees to serve as a director of the
Company. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or any
obligation imposed by operation of law).
(b)
Notice of Proceeding . Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other
document relating to any Proceeding or matter that may be subject
to indemnification or advancement of Expenses covered
hereunder.
(a)
In General . In connection with any Proceeding, the Company
shall indemnify and advance Expenses to Indemnitee as provided in
this Agreement and to the fullest
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extent
permitted by applicable law in effect on the date hereof and to
such greater extent as applicable law may thereafter from time to
time permit.
(b)
Proceedings Other Than Proceedings by or in the Right of the
Company . Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4(b) if, by reason of
Indemnitee’s Corporate Status, Indemnitee is, or is
threatened to be made, a party to any Proceeding, other than a
Proceeding by or in the right of the Company. Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and
amounts paid in settlements actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee
acted in Good Faith including without limitation, any and all
losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action,
suit, proceeding or any claim asserted) under the Securities Act of
1933, the Securities Exchange Act of 1934, as amended (the
“Exchange Act of 1934”) or other federal or state
statutory law or regulation, at common law or otherwise or which
relate directly or indirectly to the registration, purchase, sale
or ownership of any securities of the Company or to any fiduciary
obligation owed with respect thereto or as a direct or indirect
result of any Proceeding or any claim, issue or matter therein made
by any stockholder of the Company against Indemnitee and arising
out of or related to any round of financing of the Company
(including but not limited to Proceedings or any claims, issues or
matters therein regarding non- participation, or non-pro rata
participation, in such round by such stockholder), or made by a
third party against Indemnitee based on any misstatement or
omission of a material fact by the Company in violation of any duty
of disclosure imposed on the Company by federal or state securities
or common laws.
(c)
Proceedings by or in the Right of the Company . Indemnitee
shall be entitled to the rights of indemnification provided in this
Section 4(c) if, by reason of Indemnitee’s Corporate Status,
Indemnitee is or is threatened to be made a party to any Proceeding
brought by or in the right of the Company to procure a judgment in
its favor. Indemnitee shall be indemnified against Expenses,
judgments, penalties and amounts paid in settlement, actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf
in connection with such Proceeding if Indemnitee acted in Good
Faith. Notwithstanding the foregoing, no such indemnification shall
be made in respect of any claim, issue or matter in such Proceeding
as to which Indemnitee shall have been adjudged to be liable to the
Company if applicable law prohibits such indemnification;
provided , however , that, if applicable law so
permits, indemnification shall nevertheless be made by the Company
in such event if and only to the extent that the Court of Chancery
of the State of Delaware, or the court in which such Proceeding
shall have been brought or is pending, shall determine.
(d)
Indemnification of a Party Who is Wholly or Partly
Successful . Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of
Indemnitee’s Corporate Status, a party to and is successful,
on the merits or otherwise, in any Proceeding, Indemnitee shall be
indemnified to the maximum extent permitted by law against all
Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith. If
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Indemnitee is
not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims,
issues or matters in such Proceeding, the Company shall indemnify
Indemnitee to the maximum extent permitted by law, against all
Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with each successfully
resolved claim, issue or matter. For purposes of this Section 4(d)
and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such
claim, issue or matter, so long as there has been no finding
(either adjudicated or pursuant to Section 6) that Indemnitee
did not act in Good Faith.
(e)
Indemnification for Expenses of a Witness . Notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee is, by reason of Indemnitee’s Corporate Status, a
witness in any Proceeding, Indemnitee shall be indemnified against
all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection therewith.
(f)
Assumption of Defense and Settlement . Notwithstanding any
other provision of this Agreement, with respect to any such
Proceeding as to which the Indemnitee gives notice to the Company
of the commencement thereof:
(1) the Company
will be entitled to participate therein at its own
expense;
(2) the Company,
jointly with any other indemnifying party similarly notified, shall
be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnitee. If the Company assumes the defense
of the Indemnitee, it shall notify the Indemnitee, and after the
Indemnitee receives such notice, the Company shall not be liable to
the Indemnitee under this Agreement for any Expenses incurred by
the Indemnitee after the date such notice was received. The
Indemnitee shall be entitled to employ Indemnitee’s own
counsel at Indemnitee’s own expense. Nevertheless, the
Company shall pay for Indemnitee’s own counsel if
(1) the Company agrees to do the same, (2) the Indemnitee
shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee regarding the
defense of such action, or (3) the Company shall not in fact
have employed counsel to assume the defense of the Proceeding. The
Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which
the Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and the Indemnitee
regarding the defense of such Proceeding; and
(3) the Company
shall not be liable to the Indemnitee under this Agreement for any
amounts paid in settlement of any Proceeding unless the Company
consents to such settlement. The Company shall not settle any
Proceeding in any manner that would impose a
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