COURT OF CHANCERY OF THE S AM G LASSCOCK III V ICE C HANCELLOR STATE OF DELAWARE C OURT OF C HANCERY C OURTHOUSE 34 T HE C IRCLE G EORGETOWN , D ELAWARE 19947 Date Submitted: September 26, 2014 Date Decided: September 26, 2014 Seth D. Rigrodsky, Esquire Brian D. Long, Esquire Gina M. Serra, Esquire Jeremy J. Riley, Esquire Rigrodsky & Long, P.A. 2 Righter Parkway, Suite 120 Wilmington, DE 19803 Donald J. Wolfe, Jr., Esquire Kevin R. Shannon, Esquire Christopher N. Kelly, Esquire Potter Anderson & Corroon LLP 1313 N. Market Street Hercules Plaza, 6th Floor Wilmington, Delaware 19899-0951 Kurt M. Heyman, Esquire Patricia L. Enerio, Esquire Dawn Kurtz Crompton, Esquire Proctor Heyman LLP 300 Delaware Ave., Suite 200 Wilmington, Delaware 19801

Re: In re Cornerstone Therapeutics Inc. Stockholder Lit igation , Consolidated Civil Action No. 8922-VCG

Dear Counsel: In a recent Memorandum Opinion 1 I denied Motions to Dismiss brought by Defendants Christopher Codeanne, Michael Enright, J ames A. Harper, Michael Heffernan, Laura Shawver, Craig Collard, and Robert Stephan (collectively, the “Director Defendants”), finding that, since entire fairness applied to the transaction

1 In re Cornerstone Therapeutics Inc. S’holder Litig. , 2014 WL 4418169 (Del. Ch. Sept. 10, 2014).2

at issue in this litigation ab initio , under the holding of Emerald Partners II 2 the

Director Defendants must await a determination of e ntire fairness at trial before this Court may consider whether they are exculpated from liability by a Section 102(b)(7) provision. 3 On September 23, 2014, the Director Defendants mo ved for an interlocutory appeal of that decision under Dela ware Supreme Court Rule 42. I heard Plaintiffs’ oral response to the application on September 26, 2014. A Rule 42 interlocutory appeal may be certified by this Court only when the appealed decision (1) “determines a substantial iss ue,” (2) “establishes a legal right,” and (3) meets one or more criteria further enumerated in the Rule, including that the decision falls under any of the criteria f or certification of questions of law

set forth in Rule 41. 4 Here, all three requirements of Rule 42 are met. In opposing the application for interlocutory appeal, Plaintiff s argue that my decision in the Memorandum Opinion to decline to consider the Direc tor Defendants’ exculpation from liability at the motion-to-dismiss stage does not raise a substantial issue, as it merely concerns the timing of when the exculpation provision will be considered. However, my determination, if reversed, could lead to the dismissal of the Director Defendants from this litigation, and thus constitut es a substantial issue in the course of this litigation. Further, my ruling in t he Memorandum Opinion

2 Emerald Partners v. Berlin ( Emerald Partners II ), 787 A.2d 85 (Del. 2001). 3 In re Cornerstone Therapeutics , 2014 WL 4418169, at *12. 4 Supr. Ct. R. 42(b).3

establishes a legal right in that it necessitates t he Director Defendants be held as parties to the litigation, unable to assert their S ection 102(b)(7) defense, at least

until a determination of entire fairness at trial. Finally, my ruling satisfies the criteria enumerated in Rule 42(b)(i) by meeting the “[c]onflicting decisions” qualification for certification of questions of law set forth in Rule 41(b)(ii); 5 the Director Defendants accurately point out that decis ions of this Court are conflicting on the determinative question of law: when dealing with a transaction subject to

entire fairness review ab initio , whether breach of duty on the part of facially disinterested directors “who negotiated with the co ntroller or otherwise facilitated the transaction needs to be specifically pled; and whether an exculpation provision adopted pursuant to Section 102(b)(7) must be ignor ed at the motion-to-dismiss stage, to await consideration after the transaction has been reviewed for entire

fairness at trial.” 6 The legal test aside, Plaintiffs argue that inter locutory appeal is

5 Supr. Ct. R. 41(b)(ii). 6 In re Cornerstone Therapeutics , 2014 WL 4418169, at *5. Compare DiRienzo v. Lichtenstein , 2013 WL 5503034, at *10–11 (Del. Ch. Sept. 30, 2013 ) (“To burden the Special Committee with proving entire fairness, [plaintiff] must allege su fficiently that the committee members breached a non-exculpated fiduciary duty. This inquiry neces sarily requires consideration of the Company’s 102(b)(7) provision.”), and In re S. Peru Copper Corp. S’holder Derivative Litig. , 52 A.3d 761, 787 n.72 (Del Ch. 2011) (dismissing disin terested directors on summary judgment based on a Section 102(b)(7) provision because “[t] he entire fairness standard ill suits the inquiry whether disinterested directors who approve a self- dealing transaction and are protected by an exculpatory charter provision authorized by 8 Del. C. § 102(b)(7) can be held liable for breach of fiduciary duties. Unless there are facts suggestin g that the directors consciously approved an unfair transaction, the bad faith preference for so me other interest than that of the company and the stockholders that is critical to disloyalty is absent. The fact that the transaction is found to be unfair is of course relevant, but hardly sufficient , to that separate, individualized inquiry.”), with In re Orchard Enterprises, Inc. S’holder Litig. , 88 A.3d 1, 38 (Del. Ch. 2014) (“[W]hen a case4

nonetheless not warranted here because resolution o f the appeal, even in the Director Defendants’ favor, would not terminate thi s litigation, but would have the effect of interrupting the parties’ progress toward trial. I do not find this argument persuasive, however; I have not entered a stay in t he proceedings and thus the parties may proceed to trial concurrent with the Su preme Court’s consideration of this appeal, should the Court elect to entertain it

. For the foregoing reasons, the Director Defendants ’ Application for Certification of Interlocutory Appeal is granted. An appropriate Order accompanies this Opinion. Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III

involves a controlling stockholder with entire fair ness as the standard of review, and when there is evidence of procedural and substantive unfairnes s, a court cannot summarily apply Section 102(b)(7) on a motion for summary judgment to dismi ss facially independent and disinterested directors. Under those circumstances, it is not po ssible to hold as a matter of law that the ‘factual basis for [the] claim solely implicates a violation of the duty of care.’ Rath er, ‘the inherently interested nature of [the transaction becomes] inex tricably intertwined with issues of loyalty.’ The court must conduct a trial, determine whether t he transaction was entirely fair, and if not, ‘identify the breach or breaches of fiduciary duty upon which liability for damages will be predicated in the ratio decidendi of its determination that entire fairness has not been established.’ Only then can the court conduct the director-by-director analysis necessary to determine who is exculpated from liability.” (citat ions omitted)).5

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE CORNERSTONE THERAPEUTICS INC. STOCKHOLDER LITIGATION ) ) ) CONSOLIDATED Civil Action No. 8922-VCG

ORDER GRANTING LEAVE TO APPEAL FROM INTERLOCUTORY

ORDER This 26th day of September, 2014, the Defendants ha ving made application pursuant to Rule 42 of the Supreme Court for an ord er certifying an appeal from the interlocutory order of this Court, dated Septem ber 10, 2014; and the Court having found that such order determines substantial issues and establishes legal rights and that the following criteria of Supreme C ourt Rule 42(b) apply: 42(b)(i); IT IS SO ORDERED that the Court’s order of Septembe r 10, 2014, is hereby certified to the Supreme Court of the State of Delaware for disposition in

accordance with Rule 42 of that Court.

Dated: September 26, 2014 /s/ Sam Glasscock I II Vice Chancellor