Exhibit 10.01
DIRECTOR AND EXECUTIVE OFFICER
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of September ___, 2004, between NeoPharm,
Inc., a Delaware corporation (the "Company"), and _______________ (the
"Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors and executive officers the most capable persons available;
WHEREAS, Indemnitee is a director or executive officer of the
Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and executive
officers of public companies in today's environment;
WHEREAS, the By-laws of the Company require the Company to indemnify
and advance expenses to its directors and officers to the maximum extent and
in the manner permitted by law and the Indemnitee has been serving and
continues to serve as a director and/or executive officer of the Company in
part in reliance on such By-laws; and
WHEREAS, both the Company and Indemnitee further recognize the
increasing difficulty in obtaining directors' and officers' liability
insurance, the increases in the cost of such insurance and the general
reductions in the coverage of such insurance;
WHEREAS, the current difficulty in obtaining adequate director and
officer liability insurance coverage at a reasonable cost has increased the
risk that the Company will be unable to retain and attract as directors and
executive officers the most capable persons available;
WHEREAS, the Board of Directors of the Company has determined that
the inability of the Company to retain and attract as directors and executive
officers the most capable persons would be detrimental to the interests of the
Company and that the Company therefore should seek to assure such persons that
indemnification will be available in the future; and
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's
continued service to the Company in an effective manner and Indemnitee's
reliance on the aforesaid By-laws, and in part to provide Indemnitee with
specific contractual assurance that the protection promised by such By-laws
will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of such By-laws or any change in the composition of
the Company's Board of Directors or acquisition transaction relating to the
Company), the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the fullest
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies.
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement:
(a) Change in Control: shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company
representing 30% or more of the total voting power represented by the
Company's then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company and any
new director whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of
transactions) of all or substantially all the Company's assets.
(b) Claim: any threatened, asserted, pending or completed
action, suit or proceeding, or any inquiry or investigation, and any
appeal thereof, whether instituted by the Company or any other party,
that Indemnitee in good faith believes might lead to the institution
of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other, including any arbitration or
alternative dispute resolution mechanism.
(c) Common Shares: the shares of common stock of the Company
which vote generally in the election of directors.
(d) Expenses: include attorneys' fees and all other costs,
expenses and obligations (including, without limitation, experts'
fees, court costs, retainers, transcript fees, duplicating, printing
and binding costs) paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing to investigate, defend, be a witness in or
participate in, any Claim relating to any Indemnifiable Event.
(e) Indemnifiable Amounts: any and all Expenses, damages,
judgments, fines, penalties, ERISA excise taxes and amounts paid in
settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses,
judgments, fines, penalties, excise taxes or amounts paid in
settlement) arising out of or resulting from any Claim relating to an
Indemnifiable Event.
(f) Indemnifiable Event: any event or occurrence, whether
occurring prior to, on or after the date of this Agreement, related
to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or is or was serving or agreed to
serve at the request of the Company, as a director, officer,
employee, trustee, agent or fiduciary of another corporation,
partnership, limited liability company, joint venture, employee
benefit plan, trust or other entity or enterprise, or by reason of
anything done or not done by Indemnitee in any such capacity.
(g) Independent Legal Counsel: an attorney or firm of
attorneys, selected in accordance with the provisions of Section 3,
who shall not have otherwise performed services for the Company or
Indemnitee within the last three years (other than with respect to
matters concerning the rights of Indemnitee under this Agreement, or
of other indemnitees under similar indemnity agreements).
(h) Reviewing Party: any appropriate person or body
consisting of a member or members of the Company's Board of Directors
or any other person or body appointed by the Board who is not a party
to the particular Claim for which Indemnitee is seeking
indemnification, or Independent Legal Counsel.
(i) Voting Securities: any securities of the Company which
vote generally in the election of directors.
2. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is or becomes a party to or
witness or other participant in, or is threatened to be made a party
to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee to the fullest extent permitted by law as soon
as practicable but in any event no later than sixty days after
written demand is presented to the Company, against any and all
Indemnifiable Amounts.
(b) If so requested by Indemnitee, the Company shall advance
(within two business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance"). The Company shall, in accordance
with such request (but without duplication) either (i) pay such
Expenses on behalf of Indemnitee, or (ii) reimburse Indemnitee for
such Expenses. Indemnitee's right to an Expense Advance is absolute
and shall not be subject to any prior determination by the Reviewing
Party that Indemnitee has satisfied any applicable standard of
conduct for indemnification.
(c) Notwithstanding anything in this Agreement to the
contrary, Indemnitee shall not be entitled to indemnification or an
Expense Advance pursuant to this Agreement in connection with any
Claim initiated by Indemnitee unless (i) the Company has joined in or
the Company's Board of Directors has authorized or consented to the
initiation of such Claim or (ii) the Claim is to enforce Indemnitee's
rights under this Agreement.
(d) Notwithstanding the foregoing, (i) the obligations of
the Company under Section 2(a) shall be subject to the condition that
the Reviewing Party shall not have determined (in a written opinion,
in any case in which the Independent Legal Counsel referred to in
Section 3 hereof is involved) that Indemnitee would not be permitted
to be indemnified under applicable law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 2(a) shall
be subject to the condition that, if, when and to the extent that the
Reviewing Party determines that Indemnitee would not be permitted to
be so indemnified under applicable law, the Company shall be entitled
to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (it being understood
and agreed that the foregoing agreement by Indemnitee shall be deemed
to satisfy any requirement that Indemnitee provide the Company with
an undertaking to repay any Expense Advance if it is ultimately
determined that Indemnitee is not entitled to indemnification under
applicable law); provided, however, that if Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee
shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's undertaking to repay such Expense
Advances shall be unsecured and interest-free. If there has not been
a Change in Control, the Reviewing Party shall be selected by the
Board of Directors, and if there has been such a Change in Control
(other than a Change in Control which has been approved by a majority
of the Company's Board of Directors who were directors immediately
prior to such Change in Control), the Reviewing Party shall be
determined in accordance with Section 3 hereof. If there has been no
determination by the Reviewing Party within thirty days or if the
Reviewing Party determines that Indemnitee substantively would not be
permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any court
of competent jurisdiction in which venue is proper seeking an initial
determination by the court or challenging any such determination by
the Reviewing Party or any aspect thereof, including the legal or
factual bases therefor, and the Company hereby consents to service of
process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the
Company and Indemnitee.
3. Change in Control. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and Expense Advances under this Agreement or any other agreement or Company
By-law now or hereafter in effect relating to Claims for Indemnifiable Events,
in addition to those rights available to the Indemnitee under any Company
By-law, the Company shall seek legal advice only from Independent Legal
Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld). Such counsel, among other things, shall
render its written opinion to the Company and Indemnitee as to whether and to
what extent the Indemnitee would be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
4. Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee, shall advance such Expenses to Indemnitee subject to and in
accordance with Section 2(b), which are incurred by Indemnitee in connection
with any action brought by Indemnitee for (i) indemnification or an Expense
Advance by the Company under this Agreement or any other agreement or Company
By-law now or hereafter in effect relating to Claims for Indemnifiable Events
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, Expense
Advance or insurance recovery, as the case may be.
5. Partial Indemnity, Etc. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for a portion of
the Expenses, or other Indemnifiable Amounts in respect of a Claim but not,
however, for the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the extent
that Indemnitee has been successful on the merits or otherwise in defense of
any or all Claims relating in whole or in part to an Indemnifiable Event or in
defense of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
6. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the Reviewing Party or court shall presume that the
Indemnitee has satisfied the applicable standard of conduct and is entitled to
indemnification, and the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
7. Reliance as Safe Harbor. For purposes of this Agreement,
Indemnitee shall be deemed to have acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Company if Indemnitee's actions or omissions to act are taken in good faith
reliance upon the records of the Company, including its financial statements,
or upon information, opinions, reports or statements furnished to Indemnitee
by the officers or employees of the Company in the course of their duties, or
by committees of the Company's Board of Directors, or by any other person
(including legal counsel, accountants and financial advisors) as to matters
Indemnitee reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Company. In addition, the knowledge and/or actions, or failures
to act, of any director, officer, agent or employee of the Company shall not
be imputed to Indemnitee for purposes of determining the right to indemnity
hereunder.
8. No Presumptions. For purposes of this Agreement, the termination
of any claim, action, suit or proceeding, by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief
or that a court has determined that indemnification is not permitted by
applicable law. In addition, neither the failure of the Reviewing Party to
have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual determination
by the Reviewing Party that Indemnitee has not met such standard of conduct or
did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under applicable law shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief.
9. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the Company
By-laws or the laws of the state of Delaware or otherwise. To the extent that
a change in the laws of the state of Delaware (whether by statute or judicial
decision) permits greater indemnification by agreement than would be afforded
currently under the Company By-laws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
10. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
11. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two-year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
12. Amendments, Etc. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
13. 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 papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
14. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law or otherwise) of the amounts otherwise
indemnifiable hereunder.
15. Binding Effect, Etc. 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 or otherwise to all or substantially all of
the business and/or assets of the Company, spouses, heirs, executors and
personal and legal representatives. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as an executive officer or
director of the Company or of any other enterprise at the Company's request.
16. Survival of Indemnification. The indemnification and advancement
of expenses and other rights of the Indemnitee pursuant to this Agreement
shall continue after the Indemnitee has ceased to be a director or officer of
the Company and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators.
17. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within
a single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect,
and the validity and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the fullest extent permitted by law.
18. Additional Acts, Etc.. If for the validation of any of the
provisions in this Agreement any act, resolution, approval or other procedure
is required, the Company undertakes to cause such act, resolution, approval or
other procedure to be affected or adopted in a manner that will enable the
Company to fulfill its obligations under this Agreement.
19. Specific Performance. The parties recognize that if any provision
of this Agreement is violated by the Company, Indemnitee may be without an
adequate remedy at law. Accordingly, in the event of any such violation,
Indemnitee shall be entitled, if Indemnitee so elects, to institute
proceedings, either in law or at equity, to obtain damages, to enforce
specific performance, to enjoin such violation, or to obtain any relief or any
combination of the foregoing as Indemnitee may elect to pursue.
20. Counterparts. This Agreement may be executed in counterparts,
each of which shall for all purposes be deemed to be an original but all of
which together shall constitute one and the same agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.
21. Headings. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation thereof.
22. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in such state without giving effect to
the principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ___day of _____________, 2004.
NEOPHARM, INC.
By
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Name:
Title:
--------------------------------
[Indemnitee]
