Document:

EX-10.17 1999 STOCK OPTION PLAN

 

EXHIBIT 10.17

CUMBERLAND PHARMACEUTICALS INC.

1999 STOCK OPTION PLAN

     WHEREAS, Cumberland Pharmaceuticals Inc. (the “Company”) desires to establish a plan through
which the Company may award options to purchase the common stock of the Company, or the right to
receive compensation due to the increase in the value of the common stock of the Company, to
directors, officers, employees, and consultants of the Company and its affiliates;

     WHEREAS, the Company desires to grant options that qualify as “incentive stock options” within
the meaning of section 422 of the Internal Revenue Code of 1986, and options that are not so
qualified; and

     WHEREAS, the Company intends that this stock option plan and the methods granted hereunder (i)
qualify as “performance-based compensation” described in section 162(m)(4)(C) of the Code, and (ii)
conform to the provisions of Rule 16b-3 of the Securities Exchange Act of 1934, as amended;

     NOW, THEREFORE, the Company hereby establishes the Cumberland Pharmaceuticals Inc. 1999 Stock
Option Plan (the “Plan”), effective on the date of its adoption by the Board of Directors of the
Company:

ARTICLE I. DEFINITIONS

     1.1 Affiliate. A “parent corporation,” as defined in section 424(e) of the Code, or
“subsidiary corporation,” as defined in Section 424(f) of the Code, of the Company.

     1.2 Agreement. A written agreement (including any amendment or supplement thereto)
between the Company or Affiliate and a Participant specifying the terms and conditions of an Option
granted to such Participant.

     1.3 Board. The Board of Directors of the Company.

     1.4 Code. The Internal Revenue Code of 1986, as amended.

     1.5 Committee. A committee composed of individuals who are designated by the Board as
the “compensation committee” or are otherwise designated to administer the Plan.

     1.6 Company. Cumberland Pharmaceuticals Inc. and its successors.

     1.7 Date of Exercise. The date that the Company accepts tender of the Option exercise
price of an Incentive Option or Nonqualified Option, or accepts an election to exercise rights
under an SAR.

     1.8 Exchange Act. The Securities Exchange Act of 1934, as amended.

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     1.9 Fair Market Value. On any given date, Fair Market Value shall be the mean between
the closing bid and the asked price of the Stock on the National Associations of Securities Dealers
Automated Quotations System (“NASDAQ”), or if no such quotation is listed on NASDAQ, the Fair
Market Value as determined and fixed by the Board; provided that in the case of Incentive Options,
Fair Market Value shall in no event be less than 100% of the fair market value of the stock on the
date of grant of such option.

     1.10 Incentive Option. The right that is granted hereunder to a participant to
purchase from the Company a stated number of shares of Stock at the price set forth in an Agreement
and that is subject to certain provisions herein and to “incentive stock options” that are
described in Section 422 of the Code. An Incentive Option, or a portion thereof, shall not be
invalid for failure to qualify under Section 422 of the Code, but shall be treated as a
Nonqualified Option to the extent that it does not satisfy such conditions.

     1.11 Nonqualified Option. The right that is granted hereunder to a Participant to
purchase from the Company a stated number of shares of Stock at the price set forth in an
Agreement, but is not subject to the conditions of an Incentive Option.

     1.12 Option. The right that is granted hereunder to a Participant under the terms of
an Incentive Option, a Nonqualified Option or an SAR.

     1.13 Participant. A Board member, employee, consultant or advisor of the Company or of
an Affiliate who: either satisfies the requirements of Article IV and is selected by the Committee
to receive an Option, or receives an Option pursuant to a grant specified in this Plan.

     1.14 Plan. The Cumberland Pharmaceuticals Inc. 1999 Stock Option Plan.

     1.15 SAR. A right to receive compensation hereunder calculated by reference to the
increase in the value of a certain number of shares of Stock from the date of an award, as
described in Section 4.5. An SAR is an unfunded, unsecured promise of the Company to the
Participant. Unless otherwise stated in an Agreement, or unless the Committee in its discretion
honors the exercise of an SAR by issuing Stock, the holder of an SAR has no beneficial rights of
Stock ownership or to receive shares of Stock.

     1.16 Stock. The common stock of the Company.

     1.17 Ten Percent Shareholder. An individual who owns more than 10% of the total
combined voting power of all classes of stock of the Company or an Affiliate at the time he is
granted an Incentive Option. For the purpose of determining if an individual is a Ten Percent
Shareholder, he shall be deemed to own any voting stock owned (directly or indirectly) by or for
his brothers and sisters (whether by whole or half blood), spouse, ancestors or lineal descendants
and shall be considered to own proportionately any voting stock owned (directly or indirectly) by
or for a corporation, partnership, estate or trust of which such individual is a shareholder,
partner or beneficiary.

ARTICLE II. PURPOSE OF PLAN

     The purpose of the Plan is to provide a performance incentive and to encourage stock ownership by
officers, directors, consultants and advisors of the Company and its Affiliates, and to align the
interests of such individuals with those of the Company, its Affiliates and its shareholders. It is
intended that Participants may acquire or increase their proprietary interests in the Company and
be encouraged to remain

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in the employ or directorship of the Company or of its Affiliates. The proceeds received by the
Company from the sale of Stock pursuant to this Plan may be used for general corporate purposes.

ARTICLE III. ADMINISTRATION

     3.1 Administration of Plan. The Plan shall be administered by the Committee. The
express grant in the Plan of any specific power to the Committee shall not be construed as limiting
any power or authority of the Committee. Any decision made or action taken by the Committee to
administer the Plan shall be final and conclusive. No member of the Committee shall be liable for
any act done in good faith with respect to this Plan or any Agreement or Option. The Company shall
bear all expenses of Plan administration. In addition to all other authority vested with the
Committee under the Plan, the Committee shall have complete authority to:

	 	(a)	 	Interpret all provisions of this Plan;
	 
	 	(b)	 	Prescribe the form of any Agreement and notice and manner for executing or
giving the same;
	 
	 	(c)	 	Make amendments to all Agreements;
	 
	 	(d)	 	Adopt, amend, and rescind rules for Plan administration; and
	 
	 	(e)	 	Make all determinations it deems advisable for the administration of this Plan.

     3.2 Authority to Grant Options. The Committee shall have authority to grant Options
upon such terms the Committee deems appropriate and that are not inconsistent with the provisions
of this Plan. Such terms may include conditions on the exercise of all or any part of an Option.

     3.3 Persons Subject to Section 16(b). Notwithstanding anything in the Plan to the
contrary, the Committee, in its absolute discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to participants who are officers and
directors subject to Section 16(b) of the Exchange Act, without so restricting, limiting or
conditioning the Plan with respect to other Participants.

ARTICLE IV. ELIGIBILITY AND LIMITATIONS ON GRANTS

     4.1 Participation. The Committee may from time to time designate directors, employees,
consultants and advisors to whom Options are to be granted and who are eligible to become
Participants. Such designation shall specify the number of shares of Stock, if any, subject to each
Option. All Options granted under this Plan shall be evidenced by Agreements which shall be subject
to applicable provisions of this Plan or such other provisions as the Committee may adopt that are
not inconsistent with the Plan.

     4.2 Grant of Options. An Option shall be deemed to be granted to a Participant at the
time that the Committee designates in a writing that is adopted by the Committee as the grant of an
Option, and that makes reference to the name of the Participant and the number of shares of Stock
that are subject to the Option. Accordingly, an Option may be deemed to be granted prior to the
approval of this Plan by the shareholders of the Company and prior to the time that an Agreement is
executed by the Participant and the Company.

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     4.3 Limitations on Grants. A person who is not an employee of the Company or an
Affiliate is not eligible to receive an Incentive Option.

     4.4 Limitation on Incentive Options. To the extent that the aggregate Fair Market
Value of Stock with respect to which Incentive Options are exercisable for the first time by a
Participant during any calendar year (under all incentive stock option plans of the Company and its
Affiliates) exceeds $100,000 (or the amount specified in Section 422 of the Code), determined as of
the date an Incentive Option is granted, such Options shall be treated as Nonqualified Options.
This provision shall be applied by taking Incentive Options into account in the order in which they
were granted.

     4.5 Stock Appreciation Rights. The Committee may grant an SAR to a Participant either
in tandem with the grant of an Incentive Option or a Nonqualified Option, or as an award that is
separate from any other Option granted under the Plan. Subject to the terms of an Agreement, a
Participant who receives an SAR shall have the right, upon written request, to surrender any
exercisable Incentive Option or Nonqualified Option, or portion thereof, in exchange for cash,
whole shares of Stock, or a combination thereof, as determined by the Committee, with a value equal
to the excess of the Fair Market Value, as of the date of such request, of one share of Stock over
the Fair Market Value of the Stock on the Date of Grant (or such other value specified in the
Agreement), multiplied by the number of shares covered by the SAR or portion thereof to be
surrendered. In the case of any SAR which is granted in connection with an Incentive Stock Option,
such SAR shall be exercisable only when the Fair Market Value of the Stock exceeds the price
specified therefor in the SAR or portion thereof to be surrendered. In the event of the exercise of
any SAR granted hereunder, the number of shares reserved for issuance under the Plan shall be
reduced only to the extent that shares of Stock are actually issued in connection with the exercise
of such SAR. Additional terms and conditions governing any such SARs may from time to time be
prescribed by the Committee in its sole discretion.

ARTICLE V. STOCK SUBJECT TO PLAN

     5.1 Source of Shares. Upon the exercise of an Incentive Option or Nonqualified Option,
the Company shall deliver to the Participant authorized but unissued Stock.

     5.2 Maximum Number of Shares. The maximum aggregate number of shares of Stock that may
be issued under the Plan pursuant to the exercise of Incentive Options and Nonqualified Options, or
with respect to which SARs may be exercised, is 5,000,000, subject to increases and adjustments as
provided in this Article V and Article VIII hereof.

     5.3 Forfeitures. If any Option granted hereunder expires or terminates for any reason
without having been exercised in full, the unpurchased shares subject thereto shall again be
available for issuance under this Plan.

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ARTICLE VI. EXERCISE OF OPTIONS

     6.1 Exercise Price. The exercise price of an Incentive Option shall be not less than
100% of the Fair Market Value of a share of Stock on the date the Incentive Option is granted. In
the case of a Ten Percent Shareholder, however, the exercise price of an Incentive Option shall not
be less than 110% of the Fair Market Value of a share of Stock on the date the Incentive Option is
granted. The exercise price of a Nonqualified Option or an SAR shall be the price determined by the
Committee at the time the Nonqualified Option or SAR is granted. If the exercise price of an Option
is changed after the date it is granted, such change shall be deemed to be a termination of the
existing Option and the issuance of a new Option.

     6.2 Right to Exercise. An Option shall be exercisable on the date of grant or any
other date established by the Committee or provided for in the agreement; provided, however, that
Options granted to officers or directors subject to Section 16 of the Exchange Act must not be
exercisable until at least six months after the Option is granted. A Participant must exercise an
Incentive Option while he is an employee of the Company or an Affiliate or within the periods that
may be specified in the Agreement after termination of employment, death, disability, or a “change
of control” (as defined in any change of control agreement to which the Company and any such
Participant are parties).

     6.3 Maximum Exercise Period. The maximum period in which an Option may be exercised
shall be determined by the Committee on the date of grant except that no Incentive Option shall be
exercisable after the expiration of 10 years (five years in the case of Incentive Options granted
to a Ten Percent Shareholder) from the date it was granted. The terms of any Option may provide
that it is exercisable for a shorter period. All Incentive Options shall terminate on the date that
the Participant’s employment with the Company terminates, except as otherwise provided in the
Agreement with respect to termination of employment, death, disability or a “change of control” (as
defined in any change of control agreement to which the Company and any such Participant are
parties).

     6.4 Transferability. Any Option granted under this Plan shall not be transferable
except by will or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the Participant only by the Participant; provided, however, that any Nonqualified
Option granted under this Plan may be transferable to the extent provided in an Agreement. No right
or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation
or liability of such Participant.

     6.5 Employee Status. The Committee shall determine the extent to which a leave of
absence for military or government service, illness, temporary disability, or other reasons shall
be treated as a termination or interruption of employment for purposes of determining questions of
forfeiture and exercise of an Option after termination of employment; provided, however, that if
the period treated as employment with respect to an Incentive Plan exceeds 90 days, such Option
shall be deemed a Nonqualified Option.

ARTICLE VII. METHOD OF EXERCISE

     7.1 Exercise. An Option granted hereunder shall be deemed to have been exercised on
the Date of Exercise. Subject to the provisions of Articles VI, VIII and IX, an Option may be
exercised in whole or in part at such times and in compliance with such requirements as the
Committee shall determine.

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     7.2 Payment. Unless otherwise provided by the Agreement, payment of the Option price
shall be made in cash or to the extent approved by the Committee, Stock that was acquired prior to
the exercise of the Option, other consideration acceptable to the Committee, or a combination
thereof.

     7.3 Federal Withholding Tax Requirements. Upon exercise of a Nonqualified Option or an
SAR by a Participant who is an employee of the Company or an Affiliate, the Participant shall, upon
notification of the amount due and prior to or concurrently with the delivery of the certificates
representing the shares, pay to the Company amounts necessary to satisfy applicable federal, state
and local withholding tax requirements or shall otherwise make arrangements satisfactory to the
Company for such requirements. Such withholding requirements shall not apply to the exercise of an
Incentive Option, or to a disqualifying disposition of Stock that is acquired with an Incentive
Option, unless the Committee gives the Participant notice that withholding described in this
Section is required.

     7.4 Shareholder Rights. No Participant shall have any rights as a stockholder with
respect to shares subject to his Option prior to the Date of Exercise of such Option. No
Participant shall acquire rights as a stockholder through the grant or exercise of an SAR, except
to the extent which the Committee, in its sole discretion, issues Stock to the Participant as
payment upon the exercise of the SAR.

     7.5 Issuance and Delivery of Shares. Shares of Stock issued pursuant to the exercise
of Options hereunder shall be delivered to Participants by the Company as soon as administratively
feasible after a Participant exercises an Option hereunder and executes any applicable shareholder
agreement or agreement described in Section 9.2 that the Company requires at the time of exercise.

ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES

     8.1 Adjustments to Shares. The maximum number of shares of stock with respect to which
Options hereunder may be granted and which are the subject of outstanding Options shall be adjusted
as the Committee determines (in its sole discretion) to be appropriate, in the event that:

	 	(a)	 	the Company or an Affiliate effects one or more stock dividends, stock splits,
reverse stock splits, subdivisions, consolidations, capitalization issue, rights issue
or other similar events;
	 
	 	(b)	 	the Company or an Affiliate engages in a transaction to which section 424 of
the Code applies; or
	 
	 	(c)	 	there occurs any other event which in the judgment of the Committee
necessitates such action;

provided, however, that if an event described in paragraph (a) or (b) occurs, the Committee shall
make adjustments to the limits on Options specified in Section 4.3 that are proportionate to the
modifications of the Stock that are on account of such corporate changes. Notwithstanding the
foregoing, the Committee may not modify the Plan or the terms of any Options then outstanding or to
be granted hereunder to provide for the issuance under the Plan of a different class of stock or
kind of securities.

     8.2 Substitution of Options on Merger or Acquisition. The Committee may grant Options in
substitution for stock awards, stock options, stock appreciation rights or similar awards held by
an individual who becomes an employee of the Company or an Affiliate in connection with a
transaction to which Section

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424(a) of the Code applies. The terms of such substituted Options shall be determined by the
Committee in its sole discretion, subject only to the limitations of Article V.

     8.3 Effect of Certain Transactions. Upon a merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation of the Company, as a result of which
the shareholders of the Company receive cash, stock or other property in exchange for their shares
of Stock (but not a public offering of Stock by the Company), and the Company is not the surviving
entity, any Option granted hereunder shall terminate, provided that the Participant may have the
right immediately prior to any such merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation to exercise his Options in whole or in part, pursuant to
the vesting Schedule set forth in the applicable Agreement unless otherwise designated by the
Committee or unless the Committee elects to convert all Options hereunder into options to purchase
stock of an acquiring corporation. Provided, however, that, notwithstanding the foregoing, a
portion of the acceleration of exercisability of Options shall not occur with respect to any holder
to the extent that such portion of acceleration would cause the grantee or holder of such Option to
be liable for the payment of taxes pursuant to Section 4999 of the Code. If the Committee so elects
to convert the Options, the amount and price of such converted options shall be determined by
adjusting the amount and price of the Options granted hereunder in the same proportion as used for
determining the number of shares of stock of the acquiring corporation the holders of the Stock
receive in such merger, consolidation, acquisition of property or stock, separation or
reorganization, and the vesting schedule set forth in the Agreement shall continue to apply to the
converted options.

     8.4 No Adjustment Upon Certain Issuances. The issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class, for cash or
property, or for labor or services rendered, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, outstanding Options.

     8.5 Fractional Shares. Only whole shares of Stock may be acquired through the exercise
of an Option. Any amounts tendered in the exercise of an Option remaining after the maximum number
of whole shares have been purchased will be returned to the Participant.

ARTICLE IX. COMPLIANCE WITH LAW AND APPROVAL OF

REGULATORY BODIES

     9.1 General. No option shall be exercisable, no Stock shall be issued, no certificates
for shares of Stock shall be delivered, and no payment shall be made under this Plan except in
compliance with all federal or state laws and regulations (including, without limitation,
withholding tax requirements), federal and state securities laws and regulations and the rules of
all securities exchanges or self-regulatory organizations on which the Company’s shares may be
listed. The Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any certificate issued to evidence shares of Stock for which an Option is exercised may
bear such legends and statements as the Committee upon advice of counsel may deem advisable to
assure compliance with federal or state laws and regulations. No Options shall be exercisable, no
Stock shall be issued, no certificate for shares shall be delivered and no payment shall be made
under this Plan until the Company has obtained such consent or approval as the Committee may deem
advisable from any regulatory bodies having jurisdiction over such matters.

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     9.2 Representations by Participants. As a condition to the exercise of an Option, the
Company may require a Participant to represent and warrant the time of any such exercise that the
shares are being purchased only for investment and without any present intention to sell or
distribute such shares, if, in the opinion of counsel for the Company, such representation is
required by any relevant provision of the laws referred to in Section 9.1. At the option of the
Company, a stop transfer order against any shares of stock may be placed on the official stock
books and records of the Company, and a legend indicating that the stock may not be pledged, sold
or otherwise transferred unless an opinion of counsel was provided (concurred in by counsel for the
Company) and stating that such transfer is not in violation of any applicable law or regulation may
be stamped on the stock certificate in order to assure exemption from registration. The Committee
may also require such other action or agreement by the Participants as may from time to time be
necessary to comply with federal or state securities laws. This provision shall not obligate the
Company or any Affiliate to undertake registration of Options or stock hereunder.

ARTICLE X. GENERAL PROVISIONS

     10.1 Effect on Employment. Neither the adoption of this Plan, its operation, nor any
documents describing or referring to this Plan (or any part thereof) shall confer upon any employee
any right to continue in the employ of the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.

     10.2 Unfunded Plan. The Plan, insofar as it provides for grants, shall be unfunded,
and the Company shall not be required to segregate any assets that may at any time be represented
by grants under this Plan. Any liability of the Company to any person with respect to any grant
under this Plan shall be based solely upon contractual obligations that may be created hereunder.
No such obligation of the Company shall be deemed to be secured by any pledge of, or other
encumbrance on, any property of the Company.

     10.3 Rules of Construction. Headings are given to the articles and sections of this
Plan solely as a convenience to facilitate reference. The masculine gender when used herein refers
to both masculine and feminine. The reference to any statute, regulation or other provision of law
shall be construed to refer to any amendment to or successor of such provision of law.

     10.4 Governing Law. The laws of the State of Tennessee shall apply to all matters
arising under this Plan, to the extent that federal law does not apply.

     10.5 Compliance With Section 16 of the Exchange Act. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any
provision of this Plan or action by Committee fails to so comply, it shall be deemed null and void
to the extent permitted by law and deemed advisable by the Committee.

     10.6 Amendment. The Board may amend or terminate this Plan at any time; provided,
however, an amendment that would have a material adverse effect on the rights of a Participant
under an outstanding Option is not valid with respect to such Option without the Participant’s
consent, except as necessary for Incentive Options to maintain qualification under the Code; and
provided, further, that the shareholders of the Company must approve, in general meeting prior to
the effective date of adoption, any amendment that:

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	 	(a)	 	changes the number of shares in the aggregate which may be issued pursuant to Options
granted under the Plan or the maximum number of shares with respect to which any
individual may receive Options in any calendar year, except pursuant to Article VIII;
	 
	 	(b)	 	changes the Participants (or class or Participants) eligible to receive Options
under the Plan;
	 
	 	(c)	 	increases the period during which Options may be granted or exercised;
	 
	 	(d)	 	reduces the exercise price of outstanding Incentive Options or reduces the
price at which future Incentive Options may be granted;
	 
	 	(e)	 	alters the basis for determining a Participant’s entitlement to and the terms
of Stock to be provided and for the adjustment thereof upon the occurrence of any event
specified in Section 8.1 hereof; or
	 
	 	(f)	 	alters the Plan so that Options intended to qualify as Incentive Options under
the Code would not do so, or changes the provisions of this Section 10.6.

     Notwithstanding the foregoing, shareholder approval shall not be required for minor amendments
to the Plan pursuant to Section 3.1 hereof intended to benefit the administration of the Plan, for
amendments necessitated by changes in legislation governing the Plan, or for amendments that the
Committee deems necessary to obtain or maintain favorable tax, exchange control or regulatory
treatment of the Plan for future Participants or for Participating Companies (as defined in
Schedule A hereto).

     10.7 Duration of Incentive Options. No Incentive Option may be granted under this Plan
more than 10 years after the earlier of the date that the Plan is adopted by the Board or the date
that the Plan is approved by shareholders as provided in Section 10.8. Incentive Options granted
before such date shall remain valid in accordance with their terms.

     10.8 Effective Date of Plan. This Plan shall be effective on the date of its adoption
by the Board, and Options may be granted hereunder at any time after such adoption; provided,
however, that the effectiveness of this Plan will be retroactively revoked if it is not approved by
the shareholders of the Company in a manner that satisfies Treasury Regulation Section 1.422-5
within 12 months of the date that the Board took action to adopt the Plan. All Options granted
under the Plan will become void immediately following the 12-month anniversary of the date the
Board adopted the Plan if such approval by shareholders has not yet been obtained.

9EX-10.20 FORM OF INDEMNIFICATION AGREEMENT

 

EXHIBIT 10.20

INDEMNIFICATION AND HOLD HARMLESS AGREEMENT

     THIS INDEMNIFICATION AND HOLD HARMLESS AGREEMENT (this “Agreement”) is made as of March
               , 2007, by and between Cumberland Pharmaceuticals Inc., a Tennessee corporation (the
“Company”), and                      (“Indemnitee”).

     WHEREAS, in order to incentivize Indemnitee to serve, or to continue to serve, as a director
of the Company (in any such case, the “Service”), the Company has agreed to indemnify Indemnitee as
set forth below;

     NOW, THEREFORE, in consideration of the foregoing and certain other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:

     1. Indemnification. Effective as of the original date of Indemnitee’s beginning
Service, the Company shall indemnify Indemnitee and hold Indemnitee harmless if Indemnitee is a
party or is threatened to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or investigative, and in any
appeal in such action, suit or proceeding, and in any inquiry or investigation that could lead to
such an action, suit or proceeding, against any and all liabilities, obligations (whether known or
unknown, or due or to become due or otherwise), judgments, fines, fees, penalties, interest
obligations, deficiencies, other actual losses (for example, verifiable lost income related to time
spent defending such claim or action) and reasonable expenses (including, without limitation
amounts paid in settlement, interest, court costs, costs of investigators, reasonable fees and
expenses of attorneys, accountants, financial advisors and other experts) incurred or suffered by
Indemnitee in connection with such action, suit or proceeding arising out of or pertaining to any
actual or alleged action or omission which arises out of or relates to the fact that Indemnitee is
or was serving as a director or officer of the Company or at the request of the Company as a
director, officer, trustee, employee, or agent of or in any other capacity for another corporation,
partnership, joint venture, trust or other enterprise, to the fullest extent permitted by then
applicable law and the Company’s Charter and Bylaws, each as amended (but in the case of any such
amendment, only to the extent that such amendment permits the Company to provide the same or
broader indemnification rights than permitted prior thereto) (each such liability, obligation,
judgment, fine, fee, penalty, interest obligation, deficiency, other actual losses, and reasonable
expenses being referred to herein as a “Loss,” and collectively, as “Losses”).

     2. Payment. Any Loss incurred by Indemnitee shall be paid in full by the Company on
a regular, monthly basis. This indemnity applies even if Indemnitee caused the Loss through his or
her negligence, strict liability or other fault; however, if any Losses for which Indemnitee
received payment from the Company under this Agreement are determined by final judicial decision
from which there is no further right to appeal, to have been caused by Indemnitee under
circumstances with respect to which indemnification is not permitted by applicable law or this
Agreement (any such Loss, a “Non-Indemnification Loss”), Indemnitee shall repay to the Company such
Losses paid on behalf of Indemnitee hereunder.

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     3. Term. The indemnification rights provided hereby to Indemnitee shall continue
even though he may have ceased to be a director, officer, trustee, employee, or agent of or in any
other capacity for the applicable entity.

     4. Notice and Coverage Prior to Notice. Indemnitee shall give notice (the “Notice”)
to the Company within five days after actual receipt of service or summons related to any action
begun in respect of which indemnity may be sought hereunder or actual notice of assertion of a
claim with respect to which he seeks indemnification; provided, however, that Indemnitee’s failure
to give such notice to the Company within such time shall not relieve the Company from any of its
obligations under Section 1 of this Agreement except to the extent the Company has been materially
prejudiced by Indemnitee’s failure to give such notice within such time period. Upon receipt of the
Notice, the Company shall assume the defense of such action, whereupon Indemnitee shall not be
liable for any reasonable fees or expenses of counsel for Indemnitee or any other Losses incurred
thereafter with respect to the matters set forth in the Notice and the Company shall reimburse
Indemnitee for all reasonable expenses related to the action or claim incurred by Indemnitee prior
to Indemnitee’s giving of the Notice.

     5. Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition to any
rights that Indemnitee may have under the Company’s governance documents (e.g. Charter, Bylaws,
etc.) (the “Governance Documents”), applicable law or otherwise and shall survive any termination,
resignation, death or other dismissal of Indemnitee. No amendment or alteration of the Company’s
Governance Documents shall adversely affect Indemnitee’s rights under the Governance Documents or
this Agreement.

     6. Insurance. To the extent the Company maintains, at its expense, an insurance
policy or policies providing liability insurance with respect to the acts or omissions covered by
this Agreement, Indemnitee shall be covered by such policy or policies, in accordance with its or
their terms, to the maximum extent of the coverage available thereunder.

     7. Payment. The Company shall not be liable to Indemnitee under this Agreement to
make any payment in connection with any claim against Indemnitee to the extent Indemnitee has
otherwise actually received, and is entitled to retain, payment (under any insurance policy or
otherwise) of the amounts otherwise indemnifiable hereunder.

     8. Enforceability. The indemnification contained in this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns (including any direct or indirect successor by purchase, merger, consolidation,
liquidation or otherwise to all or substantially all of the business and/or assets of the Company),
spouses, heirs and personal and legal representatives.

     9. Binding Obligation. If this Agreement or any portion hereof shall be found to be
invalid on any ground by any court of competent jurisdiction, then the Company shall nevertheless
indemnify and hold harmless Indemnitee, as to costs, charges and expenses (including court costs
and attorneys’ fees), judgments, fines, penalties and amounts paid in settlement with respect to
any action, suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, and in any appeal in such action, suit or proceeding, and in any inquiry or
investigation that could lead to such an action, suit or proceeding, to the full extent permitted
by any applicable portion of this Agreement that shall not have been invalidated and to the fullest
extent permitted by applicable law.

Page 2

 

     10. Governing Law; Venue. This Agreement shall be construed in accordance with and
governed by the laws of the State of Tennessee, without regard to the principles of conflicts of
laws. The parties agree that any litigation directly or indirectly relating to this Agreement must
be brought before and determined by a court of competent jurisdiction within Davidson County,
Tennessee, and the parties hereby agree to waive any rights to object to, and hereby agree to
submit to, the jurisdiction of such courts.

     11. Right to Sue; Attorneys’ Fees and Costs. If a claim by Indemnitee for payment of
Losses hereunder is not paid in full by the Company within forty-five (45) days after a written
claim has been delivered to the Company, Indemnitee may at any time thereafter bring suit against
the Company to recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, Indemnitee shall be entitled to be paid also the reasonable costs and expenses of
prosecuting such suit. In any suit brought by Indemnitee to enforce any right hereunder (including,
without limitation, the right to indemnification), the burden of proving that Indemnitee is not
entitled to such right shall be borne by the Company. If a claim by the Company for repayment of
any Non-Indemnification Losses previously paid on behalf of Indemnitee hereunder is not repaid in
full to the Company within forty-five (45) days after such ruling has been delivered to Indemnitee,
the Company may at any time thereafter bring suit against Indemnitee to recover the unpaid amount.

     12. Amendment. This Agreement may be amended, modified or supplemented only by a
written instrument executed by each of the parties hereto.

     13. Facsimile and Counterpart Signature. This Agreement may be executed by facsimile
signature and in one or more counterparts, each of which shall for all purposes be deemed an
original and all of which shall constitute the same instrument.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	COMPANY	 	 
	 
	 	 	 	 	 	 
	 	 	CUMBERLAND PHARMACEUTICALS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	INDEMNITEE	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[Insert Name]	 	 

Page 3

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