casemark/director-indemnification

Director Indemnification Agreement

Drafts a binding indemnification agreement providing maximum permissible protection to a corporate director, including expense advancement, indemnification procedures, and D&O insurance coordination.

Prerequisites

1. Corporate documents — certificate of incorporation, bylaws, prior indemnification agreements, board resolutions
2. D&O insurance — current coverage terms, limits, carriers
3. Party information — corporation legal name (matching articles), state of incorporation, director name and title(s)
4. Scope — subsidiary/JV/benefit-plan service, appointment date, retroactive coverage needs

Gather Before Drafting

| Item | Why | |------|-----| | Corporation legal name + entity type | Must match articles exactly | | State of incorporation | Governs permissible indemnification scope | | Director name + all titles | Coverage across all capacities | | Related-entity service | Subsidiary/JV/benefit-plan board seats | | Effective date | May predate agreement for retroactive coverage | | Board authorization | Required for enforceability | | Existing indemnification provisions | Consistency with bylaws/articles |

Document Structure

INDEMNIFICATION AGREEMENT
Parties / Effective Date

RECITALS
- Governing docs authorize indemnification
- Directors face personal liability exposure
- Contractual assurance needed to attract/retain directors
- Director relies on agreement to serve
- Board determined agreement serves corporate purpose

ARTICLE I — DEFINITIONS
ARTICLE II — INDEMNIFICATION
ARTICLE III — ADVANCEMENT OF EXPENSES
ARTICLE IV — DETERMINATION PROCEDURES
ARTICLE V — NOTICE AND DEFENSE
ARTICLE VI — NON-EXCLUSIVITY AND VESTED RIGHTS
ARTICLE VII — D&O INSURANCE
ARTICLE VIII — CONTRIBUTION
ARTICLE IX — GENERAL PROVISIONS
SIGNATURES

Key Definitions

| Term | Scope | |------|-------| | Expenses | Attorneys' fees, court costs, transcripts, expert/witness fees, travel, duplicating, postage — plus judgments, fines, penalties, ERISA excise taxes, settlement amounts | | Proceeding | Any threatened/pending/completed action, suit, arbitration, ADR, investigation, inquiry, admin hearing — derivative, third-party, civil, criminal, administrative, investigative; includes informal regulatory inquiries | | Official Capacity | Director/officer/employee/agent of company; service at company's request for subsidiaries, JVs, trusts, benefit plans |

Core Articles

Art. II — Indemnification

• Indemnify to maximum extent permitted under state of incorporation
• Trigger: director made/threatened to be made party "by reason of" official capacity
• Conduct standard: good faith + reasonable belief action in/not opposed to company's best interests; criminal matters require no reasonable cause to believe conduct unlawful
• Derivative suits: expenses only (not settlement) unless court-approved

Art. III — Advancement of Expenses

• Mandatory advancement within 30 days of written request + documentation
• Director executes undertaking to repay if ultimately not entitled (unsecured, no financial-ability requirement)
• Advancement independent of indemnification determination
• Cannot deny advancement based on preliminary conduct finding

Art. IV — Determination Procedures

Priority order:

1. Majority of disinterested directors (even if less than quorum)
2. Committee of disinterested directors
3. Independent legal counsel written opinion (no relationship within 5 years)
4. Shareholder vote (excluding party-director shares)

Safeguards:

• Determination within 60 days of request
• Presumption director met standard; rebuttal requires clear and convincing evidence
• Failure to determine in 60 days = deemed approved
• Director may seek judicial determination; company bears burden of proof
• Company advances expenses for enforcement proceedings

Art. V — Notice and Defense

• Director notifies company promptly on service; late notice excused unless material adverse effect on defense
• Company may assume defense with director-approved counsel (consent not unreasonably withheld)
• Conflict of interest triggers separate counsel at company expense
• No settlement without company consent unless unconditional release + no liability admission

Art. VI — Non-Exclusivity and Vested Rights

• Non-exclusive — supplements bylaws, articles, other agreements, law
• Survival: continues after director ceases service; inures to heirs/executors
• Anti-diminishment: no amendment adversely affects rights for prior acts

Art. VII — D&O Insurance

• Agreement is primary; insurance is excess
• Rights not contingent on insurance availability
• Company covers director under D&O policies to same extent as any other director/officer
• Director entitled to insurance proceeds before company

Art. VIII — Contribution

• If indemnification unavailable, company contributes in fair proportion (relative benefit and fault)
• Expenses paid before judgments/fines/settlements
• Partial indemnification: indemnify to maximum extent permitted by law

Art. IX — General Provisions

| Provision | Standard | |-----------|----------| | Governing law | State of incorporation (no conflicts-of-law) | | Jurisdiction | Exclusive — state of incorporation or federal courts therein | | Term | Later of 10 years after cessation of service or final termination of covered proceedings | | Successor obligation | Survives merger/consolidation/asset transfer; successor must assume | | Severability | Reform invalid provisions to minimum extent necessary | | Fee-shifting | Director recovers expenses for successful enforcement | | Amendment | Written instrument signed by both parties | | Notices | Written; personal delivery, confirmed email, overnight courier, or certified mail | | Counterparts | Multiple; electronic signatures valid |

Signatures

• Corporation: authorized officer (CEO/President/Secretary), printed name, title, date, representation of authority
• Director: printed name, signature, date

Drafting Checklist

• [ ] Verify state statute — Delaware permits broadest indemnification; other states may limit scope
• [ ] Draft to maximum permissible scope; do not self-limit below statutory ceiling
• [ ] Confirm consistency with existing bylaws/articles indemnification provisions
• [ ] Include undertaking to repay — statutory requirement in most states
• [ ] Apply presumption in favor of indemnification with clear-and-convincing-evidence rebuttal standard
• [ ] For public companies, add board-authorization representations
• [ ] Use defined terms consistently (capitalized) after first definition
• [ ] Review uploaded governance documents for company-specific conventions