Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is made as of September 14,
2004, by and between Entropin, Inc., a Delaware corporation (the “Company”), and
                            , a director/officer of the Company (the
“Indemnitee”).

 

RECITALS

 

The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers, controlling persons and key
employees, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance. The Company and Indemnitee
further recognize the substantial increase in corporate litigation in general,
subjecting directors, officers, controlling persons and key employees to
expensive litigation risks at the same time as the availability and coverage of
liability insurance has been severely limited. The current protection available
to Indemnitee may not be adequate under the present circumstances, and
Indemnitee and agents of the Company may not be willing to continue to serve as
agents of the Company without additional protection. The Company desires to
attract and retain the services of highly qualified individuals, such as
Indemnitee, and to indemnify its directors, officers, controlling persons and
key employees so as to provide them with the maximum protection permitted by
law.

 

AGREEMENT

 

In consideration of the mutual promises made in this Agreement, and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
Company and Indemnitee hereby agree as follows:

 

1. Indemnification.

 

(a) Third Party Proceedings. The Company shall indemnify each Indemnitee (and
each person who controls Indemnitee who may be liable within the meaning of
Section 15 of the Securities Act of 1933, as amended (the “Securities Act”), or
Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) to the fullest extent permitted by law if Indemnitee is, was or becomes a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company): (i) by
reason of the fact that Indemnitee is or was or may be deemed to be a director,
officer, controlling person, fiduciary, employee or agent of the Company, or any
subsidiary of the Company; (ii) by reason of any action or inaction on the part
of Indemnitee while a director, officer, controlling person, stockholder,
fiduciary, employee or agent of the Company; or (iii) by reason of the fact that
Indemnitee is or was or may be deemed to be serving at the request of the
Company as a director, officer, controlling person, fiduciary, employee or agent
of another corporation, partnership, limited liability company, joint venture,
trust or other enterprise, or by reason of any action or inaction on the part of
such Indemnitee while serving in such capacity. Indemnification shall include,
without limitation, any and all losses, claims, damages, expenses

--------------------------------------------------------------------------------

and liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit, proceeding or any claim asserted) under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise or which relate directly or indirectly to the registration,
purchase, sale or ownership of any securities of the Company or to any fiduciary
obligation owed with respect thereto or as a direct or indirect result of any
claim made by any stockholder of the Company against an Indemnitee and arising
out of or related to any round of financing of the Company, or made by a third
party against an Indemnitee based on any misstatement or omission of a material
fact by the Company in violation of any duty of disclosure imposed on the
Company by federal or state securities or common laws, against any and all
expenses (including attorneys’ fees and all other costs, expenses and
obligations incurred in connection with investigating, defending a witness in or
participating in (including on appeal), or preparing to defend, be a witness in
or participate in, any such action, suit, proceeding, alternative dispute
resolution mechanism, hearing, inquiry or investigation), judgments, fines and,
to the fullest extent permitted by law, amounts paid in settlement (if, and only
if, such settlement is approved in advance by the Company, which approval shall
not be unreasonably withheld) actually and reasonably incurred by Indemnitee in
connection with such action, suit or proceeding and any federal, state, local or
foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt
of any payments under this Agreement (collectively, “Expenses”), including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, if Indemnitee acted in good faith and in a manner
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 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 Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that Indemnitee’s conduct was
unlawful.

 

(b) Proceedings By or in the Right of the Company. The Company shall indemnify
Indemnitee if Indemnitee was or is a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding 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 Indemnitee is or was or may be deemed to be a
director, officer, controlling person, stockholder, fiduciary, employee or agent
of the Company, or any subsidiary of the Company, by reason of any action or
inaction on the part of Indemnitee while a director, officer, controlling
person, stockholder, fiduciary, employee or agent or by reason of the fact that
Indemnitee is or was or may be deemed to be serving at the request of the
Company as a director, officer, controlling person, fiduciary, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against Expenses and, to the fullest extent permitted by law, amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld), in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best

 

-2-

--------------------------------------------------------------------------------

interests of the Company and its stockholders; provided, however that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee’s duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.

 

(c) Mandatory Payment of Expenses. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against Expenses
actually and reasonably incurred by Indemnitee in connection therewith.

 

2. No Employment Rights. Nothing contained in this Agreement is intended to
create in Indemnitee any right to employment by the Company.

 

3. Expenses; Indemnification Procedure.

 

(a) Advancement of Expenses. The Company shall advance all Expenses incurred by
Indemnitee in connection with the investigation, defense, settlement or appeal
of any civil or criminal action, suit or proceeding referred to in Section l(a)
or Section 1(b) (including amounts actually paid in settlement of any such
action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby.

 

(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent
to his, her or its right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee’s power.

 

(c) Procedure. Any indemnification and advances provided for in Section 1 and
this Section 3 shall be made no later than 20 days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company’s Certificate of Incorporation (the
“Certificate”) or Bylaws providing for indemnification, is not paid in full by
the Company within 20 days after a written request for payment thereof has first
been received by the Company, 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 11 of this Agreement, 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

 

-3-

--------------------------------------------------------------------------------

any action, suit or proceeding in advance of its final disposition) that
Indemnitee has not met the standards of conduct which make it permissible under
applicable law or this Agreement for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company,
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties’ intention that if the Company contests Indemnitee’s
right to indemnification, the question of Indemnitee’s right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.

 

(d) Notice to Insurers. If, at the time of the receipt of a notice of a claim
pursuant to Section 3(b), the Company has director and officer liability
insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.

 

(e) Selection of Counsel. In the event the Company shall be obligated under
Section 3(a) to pay the expenses of any proceeding against Indemnitee, the
Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, which approval shall not be
unreasonably withheld or delayed, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ counsel in any such
proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the
expense of the Company.

 

4. Additional Indemnification Rights; Nonexclusivity.

 

(a) Scope. Notwithstanding any other provision of this Agreement, the Company
hereby agrees to indemnify the Indemnitee to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically authorized by
the other provisions of this Agreement, the Company’s Certificate, its Bylaws or
by statute. In the event of any change, after the date of this Agreement, in any
applicable law, statute, or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,

 

-4-

--------------------------------------------------------------------------------

controlling person, stockholder, fiduciary, employee or agent, such changes
shall be deemed to be within the purview of Indemnitee’s rights and the
Company’s obligations under this Agreement. In the event of any change in any
applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
controlling person, stockholder, fiduciary, employee or agent, such changes, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement shall have no effect on this Agreement or the parties’ rights and
obligations hereunder.

 

(b) Nonexclusivity. The indemnification provided by this Agreement shall not be
deemed exclusive of any rights to which Indemnitee may be entitled under the
Company’s Certificate, its Bylaws, any agreement, any vote of stockholders or
disinterested members of the Company’s Board of Directors, the General
Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee’s official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he or she may have ceased to serve in any such
capacity at the time of any action, suit or other covered proceeding.

 

5. Partial Indemnification. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred in the
investigation, defense, appeal or settlement of any civil or criminal action,
suit or proceeding, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion of such expenses,
judgments, fines or penalties to which Indemnitee is entitled.

 

6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in
certain instances, Federal law or public policy may override applicable state
law and prohibit the Company from indemnifying its officers, controlling
persons, stockholders, fiduciaries, employees or agents under this Agreement or
otherwise. For example, the Company and Indemnitee acknowledge that the
Securities and Exchange Commission (the “SEC”) has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company’s right under public policy to indemnify
Indemnitee.

 

7. Officer and Director Liability Insurance. The Company shall, from time to
time, make the good faith determination whether or not it is practicable for the
Company to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the officers and directors of the Company with
coverage for losses from wrongful acts, or to ensure the Company’s performance
of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the

 

-5-

--------------------------------------------------------------------------------

Company’s directors, if Indemnitee is a director. Notwithstanding the foregoing,
the Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a parent or subsidiary of the
Company.

 

8. Severability. Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company’s inability, pursuant to court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.

 

9. Exceptions. Any other provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement:

 

(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;

 

(b) Lack of Good Faith; Frivolous Claims. To indemnify an Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding initiated by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was either frivolous or not made in good faith.

 

(c) Fraud. To indemnify an Indemnitee if a final decision by a court having
jurisdiction in the matter shall determine that the Indemnitee has committed
fraud on the Company;

 

(d) Insured Claims. To indemnify Indemnitee for expenses or liabilities of any
type whatsoever (including, but not limited to, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) to the extent such expenses
or liabilities have been paid directly to Indemnitee by an insurance carrier
under a policy of officers’ and directors’ liability insurance maintained by the
Company; or

 

(e) Claims under Section 16(b). To indemnify Indemnitee for expenses or the
payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.

 

-6-

--------------------------------------------------------------------------------

10. Construction of Certain Phrases.

 

(a) For purposes of this Agreement, references to the “Company” shall include,
in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and controlling persons, stockholders,
fiduciaries, employees or agents, so that if Indemnitee is or was a director,
officer, controlling person, stockholder, fiduciary, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, controlling person, stockholder, fiduciary,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.

 

(b) For purposes of this Agreement, references to “other enterprises” shall
include employee benefit plans; references to “fines” shall include any excise
taxes assessed on Indemnitee with respect to an employee benefit plan; and
references to “serving at the request of the Company” shall include any service
as a director, officer, administrator, fiduciary, employee or agent of the
Company which imposes duties on, or involves services by, such director,
officer, administrator, fiduciary, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan, Indemnitee
shall be deemed to have acted in a manner “not opposed to the best interests of
the Company” as referred to in this Agreement.

 

11. Attorneys’ Fees. In the event that any action is instituted by Indemnitee
under this Agreement to enforce or interpret any of the terms hereof, Indemnitee
shall be entitled to be paid all court costs and expenses, including reasonable
attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a
part of such action, the court of competent jurisdiction determines that each of
the material assertions made by Indemnitee as a basis for such action were not
made in good faith, or were frivolous or fraudulent, or that such
indemnification was unlawful. In the event of an action instituted by or in the
name of the Company under this Agreement or to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all court costs
and expenses, including attorneys’ fees, incurred by Indemnitee in defense of
such action (including with respect to Indemnitee’s counterclaims and
cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee’s material defenses to such action were made
in bad faith or were frivolous.

 

12. Miscellaneous.

 

(a) Governing Law. This Agreement and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflict of law.

 

-7-

--------------------------------------------------------------------------------

(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
shall be effective unless in writing signed by the parties to this Agreement.
The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

 

(c) Construction. This Agreement is the result of negotiations between and has
been reviewed by each of the parties hereto and their respective counsel, if
any; accordingly, this Agreement shall be deemed to be the product of all of the
parties hereto, and no ambiguity shall be construed in favor of or against any
one of the parties hereto.

 

(d) Notices. Any notice, demand or request required or permitted to be given
under this Agreement shall be in writing and shall be deemed sufficient when
delivered personally or sent by fax or 48 hours after being sent by
nationally-recognized courier or deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party’s address or fax number as set forth below or as subsequently
modified by written notice.

 

(e) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.

 

(f) Successors and Assigns. This Agreement shall be binding upon the Company and
its successors and assigns, and inure to the benefit of Indemnitee and
Indemnitee’s heirs, legal representatives and assigns.

 

(g) Subrogation. In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.

 

[Signature Page Follows]

 

-8-

--------------------------------------------------------------------------------

The parties hereto have executed this Agreement as of the day and year set forth
on the first page of this Agreement.

 

ENTROPIN, INC.

By:

 

 

--------------------------------------------------------------------------------

Name:

  Thomas G. Tachovsky

Title:

  President and Chief Executive Officer

Address:

  45926 Oasis Street     Indio, CA 92201

Fax:

  760-775-1224

 

AGREED TO AND ACCEPTED:

 

By:

 

 

--------------------------------------------------------------------------------

Name:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

 

Address:

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Fax Number:

 

 

--------------------------------------------------------------------------------

 

-9-