Directors and officers commonly require individual indemnification agreements in addition to charter and bylaw provisions.
Why. Bylaws can be amended by a later board or by shareholders; a contract cannot be amended unilaterally. Directors joining a board in a contested situation insist on this.
Terms beyond the statutory floor. Mandatory rather than permissive indemnification to the fullest extent permitted; mandatory advancement on an undertaking that need not be secured; a presumption of entitlement with the burden on the company to rebut; a defined procedure with deadlines and a determination by independent counsel; partial indemnification; and fees on fees for enforcing the agreement.
Change of control provisions requiring that the determination be made by independent counsel selected before the change.
Insurance covenant to maintain coverage at defined levels and to purchase run-off coverage on a change of control, with the individual as an intended beneficiary.
Priority. Where the individual is also indemnified by a sponsor that appointed them, a provision making the company’s obligation primary and the sponsor’s secondary.
Survival after the individual leaves office, for prior service.
Limits. Statutory prohibitions on indemnifying for conduct not in good faith, and public policy limits on indemnifying certain penalties.