NEURO-HITECH,
INC.
DIRECTOR
AND OFFICER INDEMNIFICATION AGREEMENT
This
Director and Officer Indemnification Agreement, dated as of
August 22, 2007 (this “AGREEMENT”), is made by and
between Neuro-Hitech, Inc., a Delaware corporation (the
“COMPANY”), and Gary Shearman (the
“INDEMNITEE”).
RECITALS:
A.
Section
141 of the Delaware General Corporation Law provides that the
business and affairs of a corporation shall be managed by or
under the direction of its board of directors.
B.
By
virtue of the managerial prerogatives vested in the directors
and officers of a Delaware corporation, directors and officers
act as fiduciaries of the corporation and its
stockholders.
C.
Thus,
it is critically important to the Company and its stockholders
that the Company be able to attract and retain the most
capable persons reasonably available to serve as directors and
officers of the Company.
D.
In
recognition of the need for corporations to be able to induce
capable and responsible persons to accept positions in
corporate management, Delaware law authorizes (and in some
instances requires) corporations to indemnify their directors
and officers, and further authorizes corporations to purchase
and maintain insurance for the benefit of their directors and
officers.
E.
The
Delaware courts have recognized that indemnification by a
corporation serves the dual policies of (1) allowing corporate
officials to resist unjustified lawsuits, secure in the
knowledge that, if vindicated, the corporation will bear the
expense of litigation, and (2) encouraging capable women
and men to serve as corporate directors and officers, secure
in the knowledge that the corporation will absorb the costs of
defending their honesty and integrity.
F.
The
number of lawsuits challenging the judgment and actions of
directors and officers of Delaware corporations, the costs of
defending those lawsuits and the threat to personal assets
have all materially increased over the past several years,
chilling the willingness of capable women and men to undertake
the responsibilities imposed on corporate directors and
officers.
G.
Recent
federal legislation and rules adopted by the Securities and
Exchange Commission and the national securities exchanges have
exposed such directors and officers to new and substantially
broadened civil liabilities.
H.
Under
Delaware law, a director’s or officer’s right to
be reimbursed for the costs of defense of criminal actions,
whether such claims are asserted under state or federal law,
does not depend upon the merits of the claims asserted against
the director or officer and is separate and distinct from any
right to indemnification the director may be able to
establish.
I.
Indemnitee
is, or will be, a director and/or officer of the Company and
his or her willingness to serve in such capacity is
predicated, in substantial part, upon the Company’s
willingness to indemnify him or her in accordance with the
principles reflected above, to the fullest extent permitted by
the laws of the State of Delaware, and upon the other
undertakings set forth in this Agreement.
J.
Therefore,
in recognition of the need to provide Indemnitee with
substantial protection against personal liability, in order to
procure Indemnitee’s continued service as a director
and/or officer of the Company and to enhance
Indemnitee’s ability to serve the Company in an
effective manner, and in order to provide such protection
pursuant to express contract rights (intended to be
enforceable irrespective of, among other things, any amendment
to the Company’s certificate of incorporation or bylaws
(collectively, the “CONSTITUENT DOCUMENTS”), any
change in the composition of the Company’s Board of
Directors (the “BOARD”) or any
change−in−control or business combination
transaction relating to the Company), the Company wishes to
provide in this Agreement for the indemnification and
advancement of Expenses to Indemnitee on the terms, and
subject to the conditions, set forth in this
Agreement.
K.
In
light of the considerations referred to in the preceding
recitals, it is the Company’s intention and desire that
the provisions of this Agreement be construed liberally,
subject to their express terms, to maximize the protections to
be provided to Indemnitee hereunder.
AGREEMENT:
NOW,
THEREFORE, the parties hereby 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 with initial capital letters:
(a)
“CHANGE
IN CONTROL” shall have occurred at such time, if any, as
Incumbent Directors cease for any reason to constitute a
majority of Directors. For purposes of this Section 1(a),
“INCUMBENT DIRECTORS” means the individuals who,
as of the date hereof, are Directors of the Company and any
individual becoming a Director subsequent to the date hereof
whose election, nomination for election by the Company’s
stockholders, or appointment, was approved by a vote of at
least a majority of the then Incumbent Directors (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination); PROVIDED,
HOWEVER, that an individual shall not be an Incumbent Director
if such individual’s election or appointment to the
Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a−12(c) of the
Securities Exchange Act of 1934, as amended) with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board.
(b)
“CLAIM”
means (i) any threatened, asserted, pending or completed
claim, demand, action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, investigative or other,
and whether made pursuant to federal, state or other law; and
(ii) any inquiry or investigation, whether made, instituted or
conducted by the Company or any other Person, including,
without limitation, any federal, state or other governmental
entity, that Indemnitee reasonably determines might lead to
the institution of any such claim, demand, action, suit or
proceeding. For the avoidance of doubt, the Company intends
indemnity to be provided hereunder in respect of acts or
failure to act prior to, on or after the date
hereof.
(c)
“CONTROLLED
AFFILIATE” means any corporation, limited liability
company, partnership, joint venture, trust or other entity or
enterprise, whether or not for profit, that is directly or
indirectly controlled by the Company. For purposes of this
definition, “CONTROL” means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of an entity or
enterprise, whether through the ownership of voting
securities, through other voting rights, by contract or
otherwise; PROVIDED that direct or indirect beneficial
ownership of capital stock or other interests in an entity or
enterprise entitling the holder to cast 15% or more of the
total number of votes generally entitled to be cast in the
election of directors (or persons performing comparable
functions) of such entity or enterprise shall be deemed to
constitute control for purposes of this
definition.
(d)
“DISINTERESTED
DIRECTOR” means a director of the Company who is not and
was not a party to the Claim in respect of which
indemnification is sought by Indemnitee.
(e)
“EXPENSES”
means attorneys’ and experts’ fees and expenses
and all other costs and expenses paid or payable 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
(including on appeal), any Claim.
(f)
“INDEMNIFIABLE
CLAIM” means any Claim based upon, arising out of or
resulting from (i) any actual, alleged or suspected act or
failure to act by Indemnitee in his or her capacity as a
director, officer, employee or agent of the Company or as a
director, officer, employee, member, manager, trustee or agent
of any other corporation, limited liability company,
partnership, joint venture, trust or other entity or
enterprise, whether or not for profit, as to which Indemnitee
is or was serving at the request of the Company, (ii) any
actual, alleged or suspected act or failure to act by
Indemnitee in respect of any business, transaction,
communication, filing, disclosure or other activity of the
Company or any other entity or enterprise referred to in
clause (i) of this sentence, or (iii) Indemnitee’s
status as a current or former director, officer, employee or
agent of the Company or as a current or former director,
officer, employee, member, manager, trustee or agent of the
Company or any other entity or enterprise referred to in
clause (i) of this sentence or any actual, alleged or
suspected act or failure to act by Indemnitee in connection
with any obligation or restriction imposed upon Indemnitee by
reason of such status. In addition to any service at the
actual request of the Company, for purposes of this Agreement,
Indemnitee shall be deemed to be serving or to have served at
the request of the Company as a director, officer, employee,
member, manager, trustee or agent of another entity or
enterprise if Indemnitee is or was serving as a director,
officer, employee, member, manager, agent, trustee or other
fiduciary of such entity or enterprise and (i) such entity or
enterprise is or at the time of such service was a Controlled
Affiliate, (ii) such entity or enterprise is or at the time of
such service was an employee benefit plan (or related trust)
sponsored or maintained by the Company or a Controlled
Affiliate, or (iii) the Company or a Controlled Affiliate (by
action of the Board, any committee thereof or the
Company’s Chief Executive Officer (“CEO”)
(other than as the CEO him or herself)) caused or authorized
Indemnitee to be nominated, elected, appointed, designated,
employed, engaged or selected to serve in such
capacity.
(g)
“INDEMNIFIABLE
LOSSES” means any and all Losses relating to, arising
out of or resulting from any Indemnifiable Claim; PROVIDED,
HOWEVER, that Indemnifiable Losses shall not include Losses
incurred by Indemnitee in respect of any Indemnifiable Claim
(or any matter or issue therein) as to which Indemnitee shall
have been adjudged liable to the Company, unless and only to
the extent that the Delaware Court of Chancery or the court in
which such Indemnifiable Claim was brought shall have
determined upon application that, despite the adjudication of
liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to
indemnification for such Expenses as the court shall deem
proper.
(h)
“INDEPENDENT
COUNSEL” means a nationally recognized law firm, or a
member of a nationally recognized law firm, that is
experienced in matters of Delaware corporate law and neither
presently is, nor in the past five years has been, retained to
represent: (i) the Company (or any subsidiary) or Indemnitee
in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this
Agreement, or of other indemnitees under similar
indemnification agreements) or (ii) any other named (or, as to
a threatened matter, reasonably likely to be named) party to
the Indemnifiable Claim giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the
term “Independent Counsel” shall not include any
person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to
determine Indemnitee’s rights under this
Agreement.
(i)
“LOSSES”
means any and all Expenses, damages, losses, liabilities,
judgments, fines, penalties (whether civil, criminal or other)
and amounts paid or payable in settlement, including, without
limitation, all interest, assessments and other charges paid
or payable in connection with or in respect of any of the
foregoing.
(j)
“PERSON”
means any individual, entity or group, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended.
(k)
“STANDARD
OF CONDUCT” means the standard for conduct by Indemnitee
that is a condition precedent to indemnification of Indemnitee
hereunder against Indemnifiable Losses relating to, arising
out of or resulting from an Indemnifiable Claim. The Standard
of Conduct is (i) good faith and reasonable belief by
Indemnitee that his action was in or not opposed to the best
interests of the Company and, with respect to any criminal
action or proceeding, that Indemnitee had no reasonable cause
to believe that his conduct was unlawful, or (ii) any other
applicable standard of conduct that may hereafter be
substituted under Section 145(a) or (b) of the Delaware
General Corporation Law or any successor to such
provision(s).
2.
INDEMNIFICATION
OBLIGATION. Subject only to Section 7 and to the proviso in
this Section, the Company shall indemnify, defend and hold
harmless Indemnitee, to the fullest extent permitted or
required by the laws of the State of Delaware in effect on the
date hereof or as such laws may from time to time hereafter be
amended to increase the scope of such permitted
indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; PROVIDED, HOWEVER, that, except as
provided in Section 5, Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with
(i) any Claim initiated by Indemnitee against the Company or
any director or officer of the Company unless the Company has
joined in or consented to the initiation of such Claim, or
(ii) the purchase and sale by Indemnitee of securities in
violation of Section 16(b) of the Securities Exchange Act of
1934, as amended. The Company acknowledges that the foregoing
obligation may be broader than that now provided by applicable
law and the Company’s Constituent Documents and intends
that it be interpreted consistently with this Section and the
recitals to this Agreement.
3.
ADVANCEMENT
OF EXPENSES. Indemnitee shall have the right to advancement by
the Company prior to the final disposition of any
Indemnifiable Claim of any and all actual and reasonable
Expenses relating to, arising out of or resulting from any
Indemnifiable Claim paid or incurred by Indemnitee. Without
limiting the generality or effect of any other provision
hereof, Indemnitee’s right to such advancement is not
subject to the satisfaction of any Standard of Conduct.
Without limiting the generality or effect of the foregoing,
within five business days after any request by Indemnitee that
is accompanied by supporting documentation for specific
reasonable Expenses to be reimbursed or advanced, the Company
shall, in accordance with such request (but without
duplication), (a) pay such Expenses on behalf of Indemnitee,
(b) advance to Indemnitee funds in an amount sufficient to pay
such Expenses, or (c) reimburse Indemnitee for such Expenses;
PROVIDED that Indemnitee shall repay, without interest, any
amounts actually advanced to Indemnitee that, at the final
disposition of the Indemnifiable Claim to which the advance
related, were in excess of amounts paid or payable by
Indemnitee in respect of Expenses relating to, arising out of
or resulting from such Indemnifiable Claim. In connection with
any such payment, advancement or reimbursement, at the request
of the Company, Indemnitee shall execute and deliver to the
Company an undertaking, which need not be secured and shall be
accepted without reference to Indemnitee’s ability to
repay the Expenses, by or on behalf of the Indemnitee, to
repay any amounts paid, advanced or reimbursed by the Company
in respect of Expenses relating to, arising out of or
resulting from any Indemnifiable Claim in respect of which it
shall have been determined, following the final disposition of
such Indemnifiable Claim and in accordance with Section 7,
that Indemnitee is not entitled to indemnification
hereunder.
4.
INDEMNIFICATION
FOR ADDITIONAL EXPENSES. Without limiting the generality or
effect of the foregoing, the Company shall indemnify and hold
harmless Indemnitee against and, if requested by Indemnitee,
shall reimburse Indemnitee for, or advance to Indemnitee,
within five business days of such request accompanied by
supporting documentation for specific Expenses to be
reimbursed or advanced, any and all actual and reasonable
Expenses paid or incurred by Indemnitee in connection with any
Claim made, instituted or conducted by Indemnitee for (a)
indemnification or reimbursement or advance payment of
Expenses by the Company under any provision of this Agreement,
or under any other agreement or provision of the Constituent
Documents now or hereafter in effect relati
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