INDEMNIFICATION
AGREEMENT
THIS
INDEMNIFICATION AGREEMENT (the “Agreement” ) is
made and entered into as of
, 200___ between Cornerstone BioPharma Holdings, Inc., a Delaware
corporation (the “Company” ), and
( “Indemnitee” ).
WHEREAS, the
Company desires to attract and retain highly qualified individuals,
such as Indemnitee, to serve the Company; and
WHEREAS, highly
competent persons have become more reluctant to serve corporations
as directors or in other capacities 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 the
corporation; and
WHEREAS, the
Company and Indemnitee recognize the significant risk of claims and
actions against a director that may arise from such
director’s services to and activities on behalf of the
Company; and
WHEREAS, the
Company and Indemnitee recognize that directors, officers, and
other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming
litigation relating to, among other things, matters that
traditionally would have been brought only against the Company or
business enterprise itself; and
WHEREAS, the
Company and Indemnitee further recognize that although the Company
may also maintain liability insurance for the Company’s
officers and directors, such insurance often provides for coverage
of limited scope, and that competent and experienced persons are
often unable or unwilling to serve as officers or directors unless
they are protected by comprehensive liability insurance or
indemnification; and
WHEREAS, the
Company and Indemnitee recognize that Indemnitee may be entitled to
indemnification pursuant to the General Corporation Law of the
State of Delaware ( “DGCL” ) which expressly
provides that the indemnification provisions set forth therein are
not exclusive, and thereby contemplates that contracts may be
entered into between the Company and members of the board of
directors of the Company (the “Board” ),
officers and other persons with respect to indemnification;
and
WHEREAS, the
uncertainties relating to such insurance and to indemnification
have increased the difficulty of attracting and retaining such
persons; and
WHEREAS, the Board
has determined that the increased difficulty in attracting and
retaining such persons is detrimental to 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, and to advance expenses on behalf of,
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, this
Agreement is a supplement to and in furtherance of the Bylaws of
the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefor, nor to diminish or abrogate
any rights of Indemnitee thereunder; and
WHEREAS,
Indemnitee does not regard the protection available under the
Company’s Bylaws and insurance as adequate in the present
circumstances, and may not be willing to serve as a director
without adequate protection, and the Company desires Indemnitee to
serve in such capacity; 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 he be so indemnified.
NOW, THEREFORE, in
consideration of Indemnitee’s agreement to serve or continue
to serve as an officer or director of the Company after the date
hereof, the parties hereto agree as follows.
1.
Indemnity of Indemnitee . The Company hereby agrees to hold
harmless and indemnify Indemnitee to the fullest extent permitted
by law, as such may be amended from time to time. In furtherance of
the foregoing indemnification, and without limiting the generality
thereof, the Company agrees as follows.
(a)
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 1(a) if, by reason
of his Corporate Status (as hereinafter defined), the Indemnitee
is, or is threatened to be made, a party to or participant in any
Proceeding (as hereinafter defined) other than a Proceeding by or
in the right of the Company. Pursuant to this
Section 1(a) , Indemnitee shall be indemnified against
all Expenses (as hereinafter defined), judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by
him, or on his behalf, in connection with such Proceeding or any
claim, issue or matter therein, if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company, and with
respect to any criminal Proceeding, had no reasonable cause to
believe the Indemnitee’s conduct was unlawful. Indemnitee
shall not enter into any settlement in connection with a Proceeding
without ten (10) days prior notice to the Company.
(b)
Proceedings by or in the Right of the Company . Indemnitee
shall be entitled to the rights of indemnification provided in this
Section 1(b) if, by reason of his Corporate Status, the
Indemnitee is, or is threatened to be made, a party to or
participant in any Proceeding brought by or in the right of the
Company. Pursuant to this Section 1(b) , Indemnitee
shall be indemnified against all Expenses actually and reasonably
incurred by the Indemnitee, or on the Indemnitee’s behalf, in
connection with such Proceeding if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in
or not opposed to the best
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interests of
the Company; provided, however, if applicable law so provides, no
indemnification against such Expenses 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
unless and to the extent that the Court of Chancery of the State of
Delaware shall determine that such indemnification may be
made.
(c)
Indemnification for Expenses 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 his
Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, he shall be indemnified to the
maximum extent permitted by law, as such may be amended from time
to time, against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith. If 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 against all Expenses actually and reasonably incurred by
him or on his behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this Section 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.
(a) Whether
or not the indemnification provided in Section 1 hereof
is available, in respect of any threatened, pending or completed
action, suit or proceeding in which the Company is jointly liable
with Indemnitee (or would be if joined in such action, suit or
proceeding), the Company shall contribute to the amount of expenses
(including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred and paid or
payable by Indemnitee in proportion to the relative benefits
received by the Company and all officers, directors or employees of
the Company, other than Indemnitee, who are jointly liable with
Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand,
from the transaction from which such action, suit or proceeding
arose; provided, however, that the proportion determined on the
basis of relative benefit may, to the extent necessary to conform
to law, be further adjusted by reference to the relative fault of
the Company and all officers, directors or employees of the Company
other than Indemnitee who are jointly liable with Indemnitee (or
would be if joined in such action, suit or proceeding), on the one
hand, and Indemnitee, on the other hand, in connection with the
events that resulted in such expenses, judgments, fines or
settlement amounts, as well as any other equitable considerations
which applicable law may require to be considered. The relative
fault of the Company and all officers, directors or employees of
the Company, other than Indemnitee, who are jointly liable with
Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand,
shall be determined by reference to, among other things, the degree
to which their actions were motivated by intent to gain personal
profit or advantage, the degree to which their liability is primary
or secondary and the degree to which their conduct is active or
passive.
(b) The
Company hereby agrees to fully indemnify and hold Indemnitee
harmless from any claims of contribution which may be brought by
officers, directors or employees of the Company, other than
Indemnitee, who may be jointly liable with Indemnitee.
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3.
Indemnification for Expenses of a Witness . Notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in. any
Proceeding to which Indemnitee is not a party, he shall be
indemnified against all Expenses actually and reasonably incurred
by him or on his behalf in connection therewith.
4.
Advancement of Expenses . Notwithstanding any other
provision of this Agreement, the Company shall advance all Expenses
incurred by or on behalf of Indemnitee in connection with any
Proceeding by reason of Indemnitee’s Corporate Status within
thirty (30) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or
advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall
include or be preceded or accompanied by an undertaking by or on
behalf of Indemnitee to repay any Expenses advanced if it shall
ultimately be determined that Indemnitee is not entitled to be
indemnified against such Expenses. Any advances and undertakings to
repay pursuant to this Section 4 shall be unsecured and
interest free. Notwithstanding the foregoing, the obligation of the
Company to advance Expenses pursuant to this Section 4
shall be subject to the condition that, if, when and to the extent
that the Company determines that Indemnitee would not be permitted
to be indemnified under applicable law, the Company shall be
entitled to be reimbursed, within thirty (30) days of such
determination, by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under
applicable law, any determination made by the Company that
Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any advance of Expenses until
a final judicial determination is made with respect thereto (and as
to which all rights of appeal therefrom have been exhausted or
lapsed). If it is finally judicially determined that Indemnitee is
not entitled to be indemnified, then the amount required to repay
Expenses shall bear interest at the prime rate of interest of Bank
of America, N.A. as of the date of such final judicial
determination plus three percent (3.0%) from the date such Expenses
were advanced until paid.
5.
Procedures and Presumptions for Determination of Entitlement to
Indemnification . It is the intent of this Agreement to secure
for Indemnitee rights of indemnity that are as favorable as may be
permitted under the DGCL and public policy of the State of
Delaware. Accordingly, the parties agree that the following
procedures and presumptions shall apply in the event of any
question as to whether Indemnitee is entitled to indemnification
under this Agreement.
(a) To
obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification. Any failure
of Indemnitee to provide such notice to the Company shall not,
however, relieve the Company of any liability or obligation which
it may have to Indemnitee under this Agreement or otherwise unless
and only to the extent such failure actually causes an adverse
impact on the Company.
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(b) Upon
written request by Indemnitee for indemnification pursuant to the
first sentence of Section 5(a) hereof, a determination,
if required by applicable law, with respect to Indemnitee’s
entitlement thereto shall be made in the specific case by one of
the following four methods, which shall be at the election of the
Board of the Company: (i) by a majority vote of the
Disinterested Directors (as defined in Section 12
below), even though less than a quorum; (ii) by a committee of
Disinterested Directors designated by a majority vote of the
Disinterested Directors, even though less than a quorum;
(iii) by Independent Counsel (as defined in Section 12
below) in a written opinion to the Board, a copy of which shall be
delivered to the Indemnitee, if (A) there are no Disinterested
Directors or if the Disinterested Directors so direct, or
(B) a Change of Control (as hereinafter defined) shall have
occurred and Indemnitee so requests; or (iv) if so directed by
the Board, by the stockholders of the Company.
(c) If
the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Section 5(b) hereof,
the Independent Counsel shall be selected as provided in this
Section 5(c) . The Independent Counsel shall be
selected by the Board, but only an Independent Counsel to which
Indemnitee does not reasonably object. Within ten (10) days
after such written notice of selection shall have been given, the
Indemnitee shall deliver to the Company, as the case may be, a
written objection to such selection; provided, however, that such
objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of
“Independent Counsel” as defined in
Section 12 of this Agreement, and the objection
shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so
selected shall act as Independent Counsel. If a written objection
is made and substantiated, the Independent Counsel selected may not
serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is without
merit. If, within twenty (20) days after submission by
Indemnitee of a written request for indemnification pursuant to
Section 5(a) hereof, no Independent Counsel shall have
been selected and not objected to, either the Company or Indemnitee
may petition the Court of Chancery of the State of Delaware or
other court of competent jurisdiction for resolution of any
objection which shall have been made by the Indemnitee to the
Company’s selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the
court or by such other person as the court shall designate, and the
person with respect to whom all objections are so resolved or the
person so appointed shall act as Independent Counsel under
Section 5(b) hereof. The Company shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to
Section 5(b) hereof, and the Company shall pay all
reasonable fees and expenses incident to the procedures of this
Section 5(c) , regardless of the manner in which such
Independent Counsel was selected or appointed.
(d) For
purposes of this Section 5 , “Change in
Control” means a change in control of the Company of a
nature that would be
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