PROTALEX, INC.
INDEMNIFICATION
AGREEMENT
This Indemnification Agreement (this “
Agreement” ) is effective as of ________, 20__ by and
between Protalex, Inc., a Delaware corporation (the “
Company” ), and the indemnitees listed on the
signature pages hereto (individually, as “ Indemnitee
,” and, collectively, the “ Indemnitees
”).
A. The
Company and Indemnitees recognize the substantial increase in
corporate litigation in general, which subjects directors,
officers, employees, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of
liability insurance has been severely limited.
B. The
Indemnitees do not regard the current protection available as
adequate under the present circumstances, and Indemnitees and other
directors, officers, employees, agents and fiduciaries of the
Company may not be willing to serve in such capacities without
additional protection.
C. The
Company (i) desires to attract and retain the involvement of highly
qualified individuals and entities, such as Indemnitees, to serve
the Company and, in part, in order to induce each Indemnitee to be
involved with the Company and (ii) wishes to provide for the
indemnification and advancing of expenses to each Indemnitee to the
maximum extent permitted by law.
D. Indemnitees
include one or more directors of the Company who are
representatives of Fund Indemnitors (as defined in Section 4)
(individually, as “ Director ” and,
collectively, the “ Directors
”). Each such Director who is a representative of
Fund Indemnitor (as defined in Section 4) may have certain rights
to indemnification and/or insurance provided by such Fund
Indemnitor and/or certain of its affiliates which the parties
hereto intend to be secondary to the primary obligation of the
Company to indemnify each such Director as provided herein, with
the Company’s acknowledgement and agreement to the foregoing
being a material condition to this Agreement.
E. In
view of the considerations set forth above, the Company desires
that each Indemnitee be indemnified by the Company as set forth
herein.
NOW, THEREFORE , the Company and each Indemnitee hereby agree
as follows:
1.
Indemnification .
(a) Third Party
Proceedings . The Company shall indemnify each
Indemnitee if such Indemnitee is or was a party or is threatened to
be made a party to any threatened, pending or completed action,
suit, proceeding or any alternative dispute resolution mechanism,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company) by reason of the
fact that such Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or any subsidiary of the
Company, or by reason of the fact that such Indemnitee is or was
serving at the request of the Company as a director, officer,
employee, agent or fiduciary of another corporation, partnership,
joint venture, trust or other enterprise, against any and all
expenses (including attorneys’ fees and all other costs,
expenses and obligations incurred in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute
resolution mechanism, hearing, inquiry or investigation),
judgments, fines and penalties actually and reasonably incurred in
connection with, and amounts actually paid in settlement of (if
such settlement is approved in advance by the Company, which
approval will not be unreasonably withheld), (and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result
of the actual or deemed receipt of any payments under this
Agreement) actually and reasonably incurred by such Indemnitee in
connection with such action, suit or proceeding if such Indemnitee
acted in good faith and in a manner such Indemnitee reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe such Indemnitee’s conduct
was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that an Indemnitee did not act in good
faith and in a manner which such Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that such Indemnitee’s conduct was
unlawful.
(b) Proceedings By or
in the Right of the Company . The Company shall
indemnify an Indemnitee if such Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or any alternative dispute
resolution mechanism, whether civil, criminal, administrative or
investigative, by or in the right of the Company or any subsidiary
of the Company to procure a judgment in its favor by reason of the
fact that such Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or any subsidiary of the
Company, or by reason of the fact that such Indemnitee is or was
serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys’ fees) and, to the fullest extent permitted by law,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Indemnitee in connection with the
defense or settlement of such action, suit or proceeding if such
Indemnitee acted in good faith and in a manner such Indemnitee
reasonably believed to be in or not opposed to the best interests
of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such Indemnitee
shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or
such other court shall deem proper.
(c) Reviewing
Party . Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) and (b) shall be
subject to the condition that the Reviewing Party (as described in
Section 11(e) hereof) shall not have determined (in a written
opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(e) hereof is involved) that an Indemnitee
would not be permitted to be indemnified under applicable law, and
(ii) each Indemnitee acknowledges and agrees that the
obligation of the Company to make an advance payment of expenses to
such Indemnitee pursuant to Section 2(a) (an “Expense
Advance”) shall be subject to the condition that, if, when
and to the extent that the Reviewing Party determines that such
Indemnitee would not be permitted to be so indemnified under
applicable law, the Company shall be entitled to be reimbursed by
such Indemnitee (who hereby agrees to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if such
Indemnitee has commenced or thereafter commences legal proceedings
in a court of competent jurisdiction to secure a determination that
such Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that such Indemnitee
would not be permitted to be indemnified under applicable law shall
not be binding and such Indemnitee shall not be required to
reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which
all rights of appeal therefrom have been exhausted or
lapsed). An Indemnitee’s obligation to reimburse
the Company for any Expense Advance shall be unsecured and no
interest shall be charged thereon. If there has not been
a Change in Control (as defined in Section 11(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if
there has been such a Change in Control (other than a Change in
Control which has been approved by a majority of the
Company’s Board of Directors who were directors immediately
prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(e)
hereof. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that an
Indemnitee substantively would not be permitted to be indemnified
in whole or in part under applicable law, such Indemnitee shall
have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by
the Reviewing Party or any aspect thereof, including the legal or
factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be conclusive
and binding on the Company and such Indemnitee.
(d) Contribution
. If the indemnification provided for in Section 1(a) or (b)
above for any reason is held by a court of competent jurisdiction
to be unavailable to an Indemnitee in respect of any losses,
claims, damages, expenses or liabilities referred to therein, then
the Company, in lieu of indemnifying such Indemnitee thereunder,
shall contribute to the amount paid or payable by such Indemnitee
as a result of such losses, claims, damages, expenses or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Indemnitee, 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 Indemnitee
in connection with the action or inaction which resulted in such
losses, claims, damages, expenses or liabilities, as well as any
other relevant equitable considerations. The relative
fault of the Company and the Indemnitee 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 Indemnitee and the parties’ relative
intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and
the Indemnitee agree that it would not be just and equitable if
contribution pursuant to this Section 1(d) were determined by pro
rata or per capita allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to herein.
(e) Change in
Control . The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control
which has been approved by a majority of the Company’s Board
of Directors who were directors immediately prior to such Change in
Control) then, with respect to all matters thereafter arising
concerning the rights of an Indemnitee to payments of expenses
under this Agreement or any other agreement or under the
Company’s Certificate of Incorporation (the “
Certificate ”), or Bylaws as now or hereafter in
effect, Independent Legal Counsel (as defined in Section 11(d)
hereof) shall be selected by the Indemnitee and approved by the
Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall
render its written opinion to the Company and the Indemnitee as to
whether and to what extent such Indemnitee would be permitted to be
indemnified under applicable law. The Company agrees to
abide by such opinion and to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify
such counsel against any and all expenses (including
attorneys’ fees), claims, liabilities and damages arising out
of or relating to this Agreement or its engagement pursuant
hereto.
(f)
Mandatory Payment of Expenses . To the extent
that an Indemnitee has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
Subsections (a) and (b) of this Section 1, or in defense
of any claim, issue or matter therein, such Indemnitee shall be
indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such Indemnitee in connection
therewith.
2. Expenses;
Indemnification Procedure .
(a) Advancement of
Expenses . The Company shall advance all expenses
incurred by an Indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action, suit
or proceeding referenced in Section 1(a) or (b) hereof (but
not amounts actually paid in settlement of any such action, suit or
proceeding). Each Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall
ultimately be determined that such Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The
advances to be made hereunder shall be paid by the Company to the
Indemnitee within thirty (30) days following delivery of a
written request therefor by such Indemnitee to the
Company.
(b)
Notice/Cooperation by Indemnitee . An Indemnitee
shall, as a condition precedent to his right to be indemnified
under this Agreement, give the Company notice in writing as soon as
practicable of any claim made against such Indemnitee for which
indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to
the President of the Company at the address shown on the signature
page of this Agreement (or such other address as the Company shall
designate in writing to such Indemnitee). In addition,
the Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within
such Indemnitee’s power.
(c) Procedure
. Any indemnification and advances provided for in
Section 1 and this Section 2 shall be made no later than
thirty (30) days after receipt of the written request of an
Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company’s Certificate
or Bylaws providing for indemnification, is not paid in full by the
Company within thirty (30) days after a written request for payment
thereof has first been received by the Company, the Indemnitee may,
but need not, at any time thereafter bring an action against the
Company to recover the unpaid amount of the claim and, subject to
Section 13 of this Agreement, such Indemnitee shall also be
entitled to be paid for the expenses (including attorneys’
fees) of bringing such action. It shall be a defense to
any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any action, suit or
proceeding in advance of its final disposition) that such
Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify such
Indemnitee for the amount claimed. However,
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