Document:

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 days of the Company’s receipt of notice from Stambaugh of any
claim by a taxing authority that, if successful, would require the payment by
the Company of the Gross-Up Payment.  In
the event that the Accounting Firm is serving as an accountant or auditor for
the individual, entity or group (other than the Company) effecting the change
of control resulting in an Excise Tax, the Company shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder).  All fees and expenses
of the Accounting Firm shall be borne solely by the Company.

 

2

 

(d)                                  Any
Gross-Up Payment, as determined pursuant to this Section 1, shall be paid
by the Company to  the applicable taxing
authority on behalf of Stambaugh within five days of the receipt of the
Accounting Firm’s determination. As a result of the uncertainty in the
application of Section 280G of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that a Gross-Up
Payment which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required
to be made hereunder.  In the event that
the Company exhausts its remedies pursuant to paragraph 1(b) and Stambaugh
thereafter is required to make payments to taxing authorities in excess of that
determined originally by the Accounting Firm, 
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of Stambaugh. 
Accordingly, the Company will pay on a grossed up basis any additional
amounts required so that the effect of such payments is cash neutral to
Stambaugh.

 

(e)                                  Without
limitation on the foregoing provisions of this paragraph 1(b), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either 
direct Stambaugh to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Stambaugh agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs
Stambaugh to pay such claim and sue for a refund (which the Company shall only
so direct if applicable law permits the advancement referred to in this
proviso), the Company shall advance the amount of such payment to Stambaugh, on
an interest-free basis and shall indemnify and hold Stambaugh harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed by any taxing authority with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Stambaugh with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount.  Further, the Company’s
control of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Stambaugh shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

(f)                                    If,
after the receipt by Stambaugh of an amount advanced by the Company pursuant to
paragraph 1(e), Stambaugh becomes entitled to receive any refund with respect
to such claim related to an advanced payment, Stambaugh shall (subject to the
Company’s complying with the requirements of paragraph 1(e)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).  If, after the receipt by Stambaugh of an
amount advanced by the Company pursuant to paragraph 1(e), a determination is
made that Stambaugh shall not be entitled to any refund with respect to such
claim and the Company does not notify Stambaugh in writing of its intent to
contest such denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

3

 

2.                                       No Condition Precedent.  The continued employment of Stambaugh  is not a condition precedent to the
indemnification provisions of paragraph 1. 
In the event of termination, with or without cause, the agreements and
promises contained in paragraph 1 will survive a termination of employment.

 

4.                                       Miscellaneous.

 

(a)                                  Construction.                       The
language of this Agreement has been negotiated between the parties and shall be
construed simply, according to its plain meaning, and not strictly for or
against either party regardless of the source of draftsmanship.

 

(b)                                 Counterparts.  This Agreement may be executed in
counterparts, and each counterpart, once executed, shall have the efficacy of a
signed original.  True and correct copies
of signed counterparts may be used in place of originals for any purpose.  Signatures transmitted electronically or via
facsimile shall be deemed to be original signatures.

 

(c)                                  Attorneys’
Fees And Costs.  In the event of
future litigation in connection with or concerning the subject matter of this
Agreement or any breach of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred by that party, including
actual attorneys fees, expert and consultant fees, and costs in addition to any
other relief to which it may be entitled. 
The parties further agree that the prevailing party shall be entitled to
recover all costs, including actual attorney’s fees and costs, of collecting
any costs and expenses awarded pursuant to the prior provision.

 

(d)                                 Independent
Legal Advice.  The parties
acknowledge that they have been advised by their own independently selected
counsel and other advisors in connection with this Agreement and enter into
this Agreement solely on the basis of that advice and on the basis of their own
independent investigation of all of the facts, laws, and circumstances material
to this Agreement or any provision hereof and not in any manner or to any
degree based upon any statement or omission by any other party and/or their
counsel.

 

(e)                                  Authority
To Execute Agreement.  Each person
whose signature appears hereon represents, warrants and guarantees that he has
been duly authorized and has full authority to execute this Agreement on behalf
of the party on whose behalf this Agreement is executed.

 

(f)                                    Binding
Agreement.  This Agreement shall be
binding upon the parties and their successors in interest and assigns.

 

(g)                                 No
Modification.  No term of this
Agreement shall be modified, waived, or changed except by an instrument in
writing signed by both parties.

 

(h)                                 Severability.  If for any reason any clause or provision of
this Agreement should be held unenforceable, invalid or in violation of law by
any court or other tribunal, then the remaining clauses and provisions hereof
shall nevertheless remain in full force and effect.

 

4

 

BY
EXECUTING THIS AGREEMENT, EACH OF THE PARTIES ACKNOWLEDGES THAT IT OR HE HAS
READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ITS TERMS AND PROVISIONS.

 

IN WITNESS WHEREOF, the parties have entered into
and delivered this Agreement as of the Effective Date.

 

	
  MAXIM PHARMACEUTICALS, INC.

  	
  LARRY G. STAMBAUGH

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/F.
  Duwaine Townsen

  	
   

  	
  By:

  	
  /s/Larry G.
  Stambaugh

  	
   

  
	
   

  	
  F. Duwaine
  Townsen

  Lead Independent Director of

  the Board of Directors

  	
   

  	
  Larry G.
  Stambaugh

  
							

 

5Exhibit 10.3

Amendment
to Employment 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.                                     The
Company and Stambaugh previously entered into that certain Employment Agreement
dated as of December 3, 2004 (the “Employment
Agreement”).  Pursuant to Section 6.3
of the Employment Agreement, Stambaugh is entitled to receive continuation of
his annual base salary plus health care insurance coverage for a period of three
(3) years from the date of his employment termination if the Company
terminates Stambaugh’s employment other than for cause pursuant to Section 6.2
of the Employment Agreement prior to the expiration of the Term of the
Employment Agreement.

 

C.                                     The
parties to this agreement have determined that it is in the best interest of
the Company and to its shareholders to modify the Employment Agreement as
follows:

 

Agreement

 

1.                                       The
Company and Stambaugh hereby agree that, as of the Effective Date, Section 6.3
of the Employment Agreement is hereby amended to provide that “two (2) years”
shall be substituted for the phrase “three (3) years”; i.e., in the
event Stambaugh’s employment with the Company is terminated by the Company
prior to the Term of the Employment Agreement other than for cause pursuant to Section 6.2
of the Employment Agreement, Stambaugh shall be entitled to receive
continuation of his annual base salary plus health insurance coverage for a
period of two (2) years from the date of his employment termination
instead of three (3) years.

 

2.                                       Stambaugh
hereby agrees that he shall make himself available at all times between the
Effective Date hereof and March 31, 2006 to serve on a full-time basis,
and to use his best efforts in serving, as the Company’s President and Chief
Executive Officer at his current annualized salary of $405,000 through September 30,
2005 and $450,000 thereafter and with his current bonus program
opportunities.  Stambaugh’s foregoing
agreement and commitment shall automatically terminate in the event that the
Company terminates Stambaugh’s employment with the Company other than for cause
pursuant to Section 6.2 of the Employment Agreement prior to March 31,
2006.

 

3.                                       Miscellaneous Provisions

 

(a)                                  Construction.  The language of this Agreement has been
negotiated between the parties and shall be construed simply, according to its
plain meaning, and not strictly for or against either party regardless of the
source of draftsmanship.

 

 

(b)                                 Counterparts.  This Agreement may be executed in
counterparts, and each counterpart, once executed, shall have the efficacy of a
signed original.  True and correct copies
of signed counterparts may be used in place of originals for any purpose.  Signatures transmitted electronically or via
facsimile shall be deemed to be original signatures.

 

(c)                                  Attorneys’
Fees And Costs.  In the event of
future litigation in connection with or concerning the subject matter of this
Agreement or any breach of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred by that party, including
actual attorneys fees, expert and consultant fees, and costs in addition to any
other relief to which it may be entitled. 
The parties further agree that the prevailing party shall be entitled to
recover all costs, including actual attorney’s fees and costs, of collecting
any costs and expenses awarded pursuant to the prior provision.

 

(d)                                 Independent
Legal Advice.  The parties
acknowledge that they have been advised by their own independently selected
counsel and other advisors in connection with this Agreement and enter into
this Agreement solely on the basis of that advice and on the basis of their own
independent investigation of all of the facts, laws, and circumstances material
to this Agreement or any provision hereof and not in any manner or to any
degree based upon any statement or omission by any other party and/or their
counsel.

 

(e)                                  Authority
To Execute Agreement.  Each person
whose signature appears hereon represents, warrants and guarantees that he has
been duly authorized and has full authority to execute this Agreement on behalf
of the party on whose behalf this Agreement is executed.

 

(f)                                    Binding
Agreement.  This Agreement shall be
binding upon the parties and their successors in interest and assigns.

 

(g)                                 No
Modification.  No term of this
Agreement shall be modified, waived, or changed except by an instrument in
writing signed by both parties.

 

(h)                                 Severability.  If for any reason any clause or provision of
this Agreement should be held unenforceable, invalid or in violation of law by
any court or other tribunal, then the remaining clauses and provisions hereof
shall nevertheless remain in full force and effect.

 

2

 

BY
EXECUTING THIS AGREEMENT, EACH OF THE PARTIES ACKNOWLEDGES THAT IT OR HE HAS
READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ITS TERMS AND PROVISIONS.

 

IN WITNESS WHEREOF, the parties have entered
into and delivered this Agreement as of the Effective Date.

 

 

	
  MAXIM PHARMACEUTICALS, INC.

  	
  LARRY G. STAMBAUGH

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ F.
  Duwaine Townsen

  	
   

  	
  By:

  	
  /s/ Larry G.
  Stambaugh

  	
   

  
	
   

  	
  F. Duwaine
  Townsen

  Lead Independent Director of

  the Board of Directors

  	
   

  	
  Larry G.
  Stambaugh

  
						

 

3

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