Exhibit 10.2
INDEMNIFICATION
AGREEMENT
THIS AGREEMENT (this “
Agreement ”) is made as of the 19th day of August,
2005 (the “ Effective Date ”) by and between
MAXIM PHARMACEUTICALS, INC., a Delaware corporation (the “
Company ”), and LARRY G. STAMBAUGH, an individual
(“ Stambaugh ”).
Background
A.
Stambaugh is currently the Chairman,
President and Chief Executive Officer of the Company, and has
served in these capacities since 1993.
B.
On or about August 19, 2005,
the Company entered into agreement with Stambaugh forgiving an
existing loan, then in default, on certain terms and
circumstances.
C.
The Compensation Committee of the
Company’s Board of Directors, together with the
Company’s full Board of Directors (other than Stambaugh) has
extensively reviewed and analyzed, among other matters and factors,
all related facts and circumstances to these agreements and/or
amendments, including the Company’s current needs, prospects
and contingency plans, and Stambaugh’s current assets and
liabilities, together with what is in the best interest of the
Company’s stockholders and creditors now and in the
future.
D.
In the context of the foregoing
background, the parties are entering into this Indemnification
Agreement on the following terms:
Agreement
1.
Indemnification for Excise
Tax .
(a)
In the event it shall be determined
that the Note Forgiveness, when considered in connection with any
other payment or distribution (hereinafter “ Payment
” or “ Payments ”) by the Company to or
for the benefit of Stambaugh, would be subject to Federal
and/or State Excise Tax imposed by Section 280G and
Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code” ) or similar State provision, or if
the Note Forgiveness causes any other payment or distribution by
the Company to Stambaugh to be subject to the Excise Tax imposed by
Section 280G or Section 4999 of the Code, or similar
State excise tax, if any, or any interest or penalties are
incurred by Stambaugh with respect to any such tax related
thereto (any such excise tax, or related taxes, together with any
such interest and penalties, are hereinafter collectively referred
to as the “Excise Tax” ), then Stambaugh shall
be entitled to receive an additional payment (a “Gross-Up
Payment” ) in an amount such that after payment by
Stambaugh of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation,
any income and employment taxes (and any interest and
penalties imposed with respect thereto), interest and the
additional 20% tax imposed under Code Section 280G and
Section 4999 or similar State provision, and Excise Tax
imposed upon the Gross-Up Payment, Stambaugh retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments such that it leaves him in a cash neutral
position.
(b)
Stambaugh shall notify the Company
in writing of any claim by a taxing authority that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
Stambaugh is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid. Stambaugh shall not pay such
claim prior to the expiration of the thirty-day period following
the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies
Stambaugh in writing prior to the expiration of such period that it
desires to contest such claim, Stambaugh shall:
(i)
give the Company any information
reasonably requested by the Company relating to such
claim;
(ii)
take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company;
(iii)
cooperate with the Company in good
faith in order effectively to contest such claim; and
(iv)
permit the Company to participate in
any proceedings relating to such claim;
provided , however , that the Company shall bear
and pay directly all costs and expenses (including additional
interest and penalties) incurred by Stambaugh in connection with
such contest and shall indemnify and hold Stambaugh harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(c)
All determinations required to be
made under this Section 1, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determinations, shall be made by a competent CPA firm selected by
the Company (the “Accounting Firm” ). In
making its calculations, the Accounting Firm agrees to use
Stambaugh’s marginal tax rate as determined by a competent
CPA selected by Stambaugh, and shall provide detailed supporting
calculations both to the Company and Stambaugh within fifteen
business
