Document type: Toolkit Practice area: Corporate — Corporate Governance Jurisdiction: Delaware framework, adaptable Last reviewed: 5 September 2026

Tool 1 — Bylaw article

ARTICLE [__] — INDEMNIFICATION AND ADVANCEMENT

Section 1. Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by law as it presently exists or may hereafter be amended, any person (a "Covered Person") who was or is made or is threatened to be made a party to, or is otherwise involved in (including as a witness), any threatened, pending, or completed action, suit, arbitration, alternative dispute resolution mechanism, inquiry, hearing, investigation, or other proceeding, whether civil, criminal, administrative, arbitrative, or investigative, and whether formal or informal (a "Proceeding"), by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, manager, employee, trustee, fiduciary, or agent of any other entity, against all liability, loss, judgments, fines, excise taxes, penalties, amounts paid in settlement, and Expenses reasonably incurred.

Section 2. Right to Advancement. The Corporation shall pay the Expenses incurred by a Covered Person in defending any Proceeding in advance of its final disposition, within twenty (20) days after receipt of a statement requesting such advance. Such advancement shall be unconditional except that the Covered Person shall deliver an undertaking to repay all amounts advanced if it shall ultimately be determined that such person is not entitled to be indemnified. Such undertaking shall be unsecured, shall bear no interest, and shall be accepted without reference to the Covered Person's ability to repay. Advancement is not conditioned on any determination, on the Corporation's view of the merits, or on any prior determination of entitlement.

Section 3. Enforcement; Fees on Fees. If a claim under Section 1 or 2 is not paid in full within twenty (20) days, the Covered Person may bring suit. In any such suit, the Corporation shall bear the burden of proving that the Covered Person is not entitled, and, if the Covered Person is successful in whole or in part, the Corporation shall indemnify and advance the Expenses of prosecuting or defending such suit.

Section 4. Non-Exclusivity. The rights conferred are not exclusive of any other right.

Section 5. Vesting; No Retroactive Impairment. The rights conferred by this Article shall vest at the time of the act or omission that is the subject of a Proceeding, and no amendment, repeal, or modification of this Article shall eliminate or impair any right with respect to any act or omission occurring prior to such amendment, repeal, or modification.

Section 6. Survival. The rights conferred shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of heirs, executors, and administrators.

Section 7. Insurance. The Corporation shall maintain insurance, at its expense, to protect Covered Persons, including "Side A" coverage.

Section 8. Others. The Corporation may grant rights to employees and agents to the extent authorized by the Board.

Annotations.

  • "Threatened to be made a party to, or is otherwise involved in (including as a witness)" — without this, a person subpoenaed in an investigation pays their own fees, and that is frequently the most expensive phase.
  • "Investigation" in the definition of Proceeding is essential and is missing from many older bylaws.
  • Section 2's unconditional language and twenty-day payment period convert advancement from a negotiation into an obligation.
  • Section 3's burden-shifting and fees-on-fees language is what makes the right enforceable by someone who is spending money they may not have.
  • Section 5 is the Schoon response. Without it, a company can amend the bylaws after learning of conduct.
  • Section 8 is deliberate: rights for directors and officers are mandatory; rights for employees and agents are permissive, which is the usual allocation.

Tool 2 — Individual indemnification agreement, key provisions

1. Indemnification. The Company shall indemnify Indemnitee to the fullest extent permitted by law, and to the fullest extent permitted by the Company's certificate of incorporation and bylaws as in effect on the date hereof or as thereafter amended to expand such rights, in each case without regard to any subsequent amendment that would narrow such rights.

2. Advancement. The Company shall advance Expenses within twenty (20) days of a written request, which need only include the amount and a statement that Expenses were incurred. No other documentation is required as a condition of payment, provided that Indemnitee shall deliver invoices, with privileged and work-product information redacted, within a reasonable period thereafter.

3. Presumption. In any determination or proceeding, Indemnitee shall be presumed entitled to indemnification and advancement, and the Company shall bear the burden of overcoming that presumption by clear and convincing evidence. The termination of any Proceeding by judgment, order, settlement, conviction, or plea of nolo contendere shall not, of itself, create a presumption that Indemnitee did not meet any applicable standard.

4. Deemed Approval. If a determination of entitlement is not made within forty-five (45) days after a request, the determination shall be deemed made in Indemnitee's favor, and Indemnitee shall be entitled to indemnification absent a knowing misstatement in the request.

5. Fees on Fees. The Company shall indemnify and advance Indemnitee's Expenses in any proceeding to enforce this Agreement, regardless of the outcome, unless the court determines that each of Indemnitee's material claims was made in bad faith or was frivolous.

6. No Amendment. This Agreement may not be amended except by a writing signed by both parties, and shall not be affected by any amendment to the certificate of incorporation or bylaws.

7. Survival. This Agreement shall continue until the expiration of all applicable statutes of limitation for any Proceeding, and shall survive any change of control of the Company.

8. Insurance. The Company shall maintain D&O insurance, including Side A coverage, in amounts not less than $[__], shall provide copies of the policies upon request, shall give notice of any Proceeding to the insurers, and shall notify Indemnitee promptly of any cancellation, non-renewal, or material change.

9. Primacy. [Where applicable:] The Company acknowledges that Indemnitee may have rights from [Sponsor]. The Company is the indemnitor of first resort; its obligations are primary and any obligation of [Sponsor] is secondary and excess; the Company irrevocably waives any right of contribution or subrogation against [Sponsor]; and no advancement by [Sponsor] shall affect the Company's obligations.

Annotations.

  • Paragraph 3's presumption and paragraph 4's deemed approval are the two most valuable negotiated terms and the two companies resist most. They convert delay into entitlement.
  • Paragraph 5's "regardless of the outcome" is aggressive; the fallback is "if successful in whole or in part."
  • Paragraph 6 is the whole reason to have an agreement. A bylaw can be amended by the board; a contract cannot.
  • Paragraph 9 belongs in every portfolio company agreement where a sponsor designates directors.

Tool 3 — Undertaking

UNDERTAKING

The undersigned, [Name], hereby undertakes to repay to [Company] any and all amounts advanced by the Company on account of Expenses incurred in connection with [describe the Proceeding], if and to the extent it shall ultimately be determined by a final, non-appealable adjudication that the undersigned is not entitled to be indemnified by the Company for such Expenses under the Company's certificate of incorporation, bylaws, the Indemnification Agreement dated [__], applicable law, or otherwise.

This Undertaking is given pursuant to Section [__] of the Company's bylaws, is unsecured, and is given without reference to the undersigned's financial ability to make repayment.

Dated: ______ ____________________ [Name]

Annotations.

  • Keep it to one paragraph. An undertaking with conditions, representations, or covenants is a negotiation the individual does not need.
  • "Final, non-appealable adjudication" avoids a company arguing that a preliminary ruling triggers repayment.
  • Sign and deliver it with the demand. Withholding it is the only thing that can defeat an otherwise clear right.

Tool 4 — Advancement demand letter

[Date] — By email and courier

[Company], Attention: General Counsel and Corporate Secretary

Re: Demand for advancement of expenses — [Proceeding]

I represent [Name], who served as [title] of the Company from [date] to [date].

1. The Proceeding. On [date], [describe: the Company filed a complaint / a subpoena was served / an investigation was opened], asserting [claims]. A copy is enclosed.

2. The right. Article [], Section [] of the Company's bylaws, as in effect on the dates of the conduct alleged (copy enclosed), provides that the Company shall advance Expenses incurred by an officer in defending any Proceeding in advance of final disposition, upon delivery of an undertaking. [If applicable: Section [] of the Indemnification Agreement dated [] so provides.]

3. "By reason of the fact." The claims arise from [describe] undertaken by [Name] in [his/her/their] capacity as [title]. The nexus is therefore present, and Delaware law does not withhold advancement because a claimant alleges that the corporate position was misused.

4. The undertaking. Enclosed, executed.

5. Demand. [Name] demands advancement of Expenses of $[__] incurred to date, and on an ongoing basis. We propose the invoice and payment protocol enclosed as Exhibit A.

6. Response. Please respond by [date, 10–15 business days]. If the Company does not advance, [Name] will seek relief and will seek the Expenses of doing so under Section [__].

All rights reserved.

Annotation. Note what is absent: any discussion of the merits. Engaging the merits invites the company to do the same and slows a proceeding whose only value is speed.

Tool 5 — Advancement administration protocol

1. Submission. Indemnitee shall submit invoices monthly, within thirty days of receipt from counsel, in a format showing date, timekeeper, hours, rate, and a task description with privileged and work-product content redacted.

2. Payment. The Company shall pay each invoice within twenty-five (25) days of submission.

3. Objections. The Company may object to specific entries within ten (10) days of submission, identifying each entry and stating the basis. The Company shall pay all amounts not specifically objected to within the period in paragraph 2, notwithstanding any objection.

4. Resolution. Objections not resolved within twenty days shall be submitted to [special master / agreed neutral], whose determination shall be final. Fees of the neutral shall be borne [by the Company / as the neutral determines].

5. Allocation. Expenses attributable to claims the parties agree are not covered shall be billed to a separate matter. For work reasonably attributable to both covered and uncovered matters, [__]% shall be treated as covered, subject to true-up [semi-annually].

6. Affirmative claims. Expenses incurred in prosecuting Indemnitee's affirmative claims are not advanceable and shall be separately billed.

7. Reporting. The Company shall provide a statement of cumulative amounts advanced [quarterly], and shall notify Indemnitee if applicable insurance limits are within [25]% of exhaustion.

8. No waiver. Payment does not waive the Company's right to seek repayment if entitlement is ultimately not established.

Annotation. Paragraph 3 is the operative provision. In its absence the pattern is: the company objects to a few entries, withholds the whole invoice, the indemnitee moves to enforce, and the court orders payment plus fees. Repeat quarterly.

Tool 6 — Standing subsidiary designation resolution

RESOLVED, that each employee, officer, or director of the Corporation who serves, or has served, as a director, officer, manager, trustee, fiduciary, or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, or other enterprise, in connection with such person's service to the Corporation, is hereby designated as serving, and shall be deemed to have served, at the request of the Corporation within the meaning of Article [__] of the Bylaws, Section 145 of the General Corporation Law, and any indemnification agreement;

RESOLVED FURTHER, that the Secretary shall maintain a schedule of such designations, updated not less than annually, and shall record each new designation promptly upon such service commencing.

Annotation. The "at the request of the corporation" formulation is a statutory and contractual predicate that is routinely satisfied in fact and routinely undocumented. The schedule is the document that answers the question five years later, when the individual has left and nobody remembers the arrangement.

Tool 7 — Merger agreement survival covenant

Section [__]. Indemnification; D&O Insurance.

(a) Survival. For a period of six (6) years after the Effective Time, the Surviving Corporation shall maintain in its organizational documents provisions with respect to indemnification, advancement, and exculpation no less favorable than those in the Company's organizational documents as of the date hereof, and shall not amend, repeal, or modify such provisions in any manner that would adversely affect the rights of individuals who were directors or officers prior to the Effective Time.

(b) Assumption. Parent and the Surviving Corporation jointly and severally assume all obligations under existing indemnification agreements, which shall survive and continue in full force.

(c) Tail Insurance. Prior to the Effective Time, the Company shall purchase a prepaid "tail" directors' and officers' liability insurance policy with a claims period of six (6) years covering acts or omissions occurring at or prior to the Effective Time, on terms no less favorable than the Company's existing policy; provided that the Company shall not be required to pay a premium exceeding [300]% of the current annual premium, and if the cost exceeds that amount, the Company shall purchase the maximum coverage available for such amount.

(d) Third-Party Beneficiaries. The provisions of this Section are intended for the benefit of, and shall be enforceable by, each indemnified person and their heirs and representatives, and are in addition to any other rights such persons may have.

(e) Successors. If Parent or the Surviving Corporation consolidates, merges, or transfers substantially all of its assets, proper provision shall be made so that the successor assumes these obligations.

Annotations.

  • Paragraph (c)'s "prior to the Effective Time" is the critical timing. A tail bound after closing depends on the buyer's performance; a tail bound before closing is a purchased asset.
  • The premium cap multiple matters. Set too low, the obligation lapses and the individuals hold a covenant against a company the buyer now controls.
  • Paragraph (d) is not boilerplate. Without it, the individuals cannot enforce the covenant, and the target — the only other party — no longer exists.

Tool 8 — Determination resolution (at resolution, where success is not established)

WHEREAS, [Name] has requested indemnification in connection with [Proceeding], which was resolved on [date] by [describe];

WHEREAS, the Board has determined that [Name] was not "successful on the merits or otherwise" as to [specify claims], and that a determination is therefore required;

WHEREAS, the directors acting on this matter are disinterested with respect to the Proceeding, and have reviewed [the record described on Exhibit A] and received the advice of [independent counsel];

RESOLVED, that the Board determines that [Name] acted in good faith and in a manner [he/she/they] reasonably believed to be in or not opposed to the best interests of the Corporation [and, with respect to any criminal matter, had no reasonable cause to believe the conduct was unlawful], and that indemnification is therefore [permitted and approved / not permitted] with respect to [specify];

RESOLVED FURTHER, that the Secretary record this determination and the materials on which it was based.

Annotation. Companies skip this step constantly and then cannot demonstrate that the determination was ever made. It takes one meeting. Identify who is disinterested, assemble the record, take advice, decide claim by claim, and minute it.

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