--- name: director-indemnification title: Director Indemnification Agreement description: Drafts indemnification agreements between corporations and directors covering expense advancement, indemnification determinations, D&O insurance coordination, and successor obligations. Use when drafting director indemnification agreements, expense advancement provisions, or D&O indemnity contracts. author: CaseMark author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/director-indemnification license: Apache-2.0 version: 0.1.0 execution_mode: open jurisdiction: us practice: corporate language: en tags: [agreement, drafting, transactional] --- # 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