美国优先股法律模板之Model Indemnification Agreement Clean.docx
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美国优先股法律模板之ModelIndemnificationAgreementClean
MODELINDEMNIFICATIONAGREEMENT
INTRODUCTION
Thisagreementcanbeusedforbothofficersanddirectorsofthecorporation.Insomecases,adirectorwillserveasanomineeofoneoragroupofinvestors(e.g.,anindividualventurecapitalistservingasanomineeofaventurecapitalfund).Someventurecapitalfundswillrequestthatthefund,andnotjusttheirdirectorrepresentative,becoveredbytheindemnificationagreement.Oftenthattakestheformofindemnificationrightscoveringliabilityarisingbyvirtueof"corporatestatus"(wheretheinvestorisactingasanagentofthecorporation).SeeFascianav.ElectronicDataSystems,No.19753(Del.Ch.Feb.27,2003).Totheextentaventurecapitalfundseeksindemnificationforthefunditself,wehaveprovidedbracketedlanguageinSection1(d)forthedraftspersontoconsider.Theworkinggrouphasnottakenapositionastowhetherinvestorindemnificationis"market."
Section145oftheDelawareGeneralCorporationLaw(“Section145”)isthestatutoryauthorityforindemnificationofdirectors,officers,employeesandagentsofthecorporation.Section145(a)permits(butdoesnotrequire)indemnificationofexpenses(includingattorneys’fees)aswellasjudgmentsandamountspaidinsettlementinthird-partyactions(i.e.,actionsnotbroughtbyorintherightofthecorporation)iftheapplicablestandardismet.Section145(b)permits(butdoesnotrequire)indemnificationofexpenses(includingattorneys’fees)butnotjudgmentsandamountspaidinsettlementinderivativeactions(i.e.,actionsbroughtbyorintherightofthecorporation)iftheapplicablestandardismet.Thus,Section145drawsabasicdistinctionbetweenthird-partyandderivativeactions.Section145(c)requiresindemnificationofexpenses(includingattorneys’fees)iftheindemniteeissuccessfulonthemeritsorotherwiseinaproceedingreferredtoinSection145(a)or(b).Section145(d)setsforthrequirementsfordeterminingwhetherindemnificationispermittedunderSection145(a)or(b).Section145(e)permitsadvancementofexpensesbeforefinaldispositionofaproceedingsubjecttocertainconditions.Section145(f)providesthatthestatutoryrightsandproceduresregardingindemnificationarenotexclusive,thuspermittingindemnificationunderbylaws,agreementsandothercircumstancesbeyondthelimitsspecifiedinSection145.Section145(g)allowsacorporationtoobtaindirectors’andofficers’liabilityinsurance(“D&Oinsurance”).Sections145(h)through(k)addressvariousotheraspectsofindemnification,includingprovisionsrelatingtosurvivorshipoftheobligationsoftheindemnifyingcorporation,survivorshipofrightstoindemnificationuponceasingtobeadirector,officer,employeeoragentandtheexclusivejurisdictionoftheDelawareCourtofChanceryoverindemnificationproceedings.
Section102(b)(7)oftheDelawareGeneralCorporationLawistheotherrelevantstatutoryauthorityrelatingtotheprotectionofdirectorsfrommonetaryliability.Section102(b)(7)allowsinclusionofaprovisioninthecertificateofincorporationthateliminatesorlimits(i.e.,caps)thepersonalliabilityofdirectorstothecorporationoritsstockholdersformonetarydamagesforbreachoffiduciaryduty.Thestatute,however,prohibitslimitationsondirectorliability(i)forbreachofadirector’sdutyofloyalty,(ii)foractsoromissionsnotingoodfaithorinvolvingintentionalmisconductorknowingviolationoflaw,(iii)forwillfulornegligentconductinpayingdividendsorrepurchasingstockoutofotherthanlawfullyavailablefunds,or(iv)foranytransactionfromwhichadirectorderivesanimproperpersonalbenefit.Inessence,Section102(b)(7)allowsacorporationtoprotectitsdirectorsfrommonetaryliabilityfordutyofcareviolations
Asnotedabove,Section145(f)providesthatstatutoryindemnificationrightsarenotexclusiveofindemnificationrightsthatmaybeprovidedbyabylawprovision,agreementorotherwise.Asdiscussedbelow,althoughSection145(f)couldbereadbroadlytoallowacorporationtograntbycontractindemnificationrightsbeyondthosepermittedbySection145,casesandcommentatorssuggestthatcontractualindemnificationrightsmaybeheldunenforceableiftheyviolateotherstatutes(includingSection145),courtdecisionsorpublicpolicy.Asaresult,theenforceabilityofcontractsthatpurporttograntindemnificationrightsbeyondthosepermittedbySection145isatbestunclear.(Forfurtherdiscussion,seecommentunderSection2below.)
Anindemnificationagreementmayserveseveralpurposes.First,andmostimportantly,itmayprovidemoresecureprotectionthanaprovisioninacertificateofincorporationorbylawbecauseitcannotbeamendedwithouttheapprovaloftheindemnitee.Second,itcanbeusedtomakemandatoryindemnificationthatispermissiveunderSection145,tospecifyvariousproceduresandpresumptionsthatmakeindemnificationmorefavorabletotheindemniteethanisprovidedbySection145andtoperhapsprovideforindemnificationrightsthatgobeyondthosethatareexpresslyprovidedbySection145.WhilesuchprovisionscouldalsobeincludedintheCertificateofIncorporationorbylaws,anagreementpermitsdifferentrightstobegrantedtospecificdirectors,officers,employeesandagents,ratherthaninaonesizefitsallapproach.
Somecompanieschoosetoprovidemandatoryindemnificationfordirectors(i.e.,thecompanyisrequiredtoindemnifyadirectoriftheapplicableconditionsaremet)anddiscretionaryindemnificationforofficers(i.e.,indemnificationisatthediscretionofthecompanyeveniftheapplicableconditionsaremet).Withrespecttoindemnificationofdirectors,asdiscussedinthecommentunderSection6(b),theremaybenodisinteresteddirectorstoconsiderapprovalofdiscretionaryindemnificationfordirectors.Accordingly,absentmandatoryindemnificationaboarddecisiontoindemnifyitselfmaynotbesubjecttothecourtdeferenceunderthebusinessjudgmentrule.Withrespecttoindemnificationofofficers,theremaybesituations(e.g.,terminationofemployment,sexualharassment)wheremandatoryindemnificationofofficerswouldexposetheCompanytothepossibilityoffundingthedefenseoflitigationeitherbroughtbytheCompanyorinwhichtheCompanywantstodistanceitselffromtheactivitiesoftheofficerinquestion.Careshouldbetakentoanticipatesuchsituations.
Alsonotethatifthecompanydecidestoindemnifydirectorsbutnotofficers,theindemnificationagreementshouldmakeitclearthatanemployeedirectorisindemnifiedonlyinhisorhercapacityasadirector.
Section145(g)specificallyauthorizesacorporationtoobtainD&OinsurancefordirectorsandofficersforliabilityassertedagainsttheminsuchcapacityorarisingoutofsuchstatuswhetherornotthecorporationhasthepowertoindemnifysuchpersonsagainstsuchliabilityunderSection145.
D&Oinsurancecoverageisimportantforseveralreasons.First,eventhoughindemnificationmaybepermittedunderSection145,thecorporationmaybeunwillingorunabletoindemnifytheindividual.Theformersituationmayariseafterachangeincorporatecontrolwherethecorporationisunwillingtoindemnifytheindividual.Thismaybethecase,forexample,ifthedirectoristhesubjectoflitigationresultingfromeffortstopreventthechangeincontrol.Alternative,acorporationmaybeunabletoprovideindemnificationbecauseitisinsolvent.UnderChapter11oftheBankruptcyCode,forexample,indemnificationclaimsbydirectorsorofficerswouldgenerallybetreatedasunsecuredclaimspayableonlytotheextentthatotherunsecuredclaimsarepayableaspartofanapprovedplanofreorganization.
Second,D&OinsurancemayinsureagainstliabilitieswhereindemnificationisnotallowedunderSection145.Thisoccursmostfrequentlyinthecontextofderivativeactionsandsecuritieslawactions.Inparticular,Section145(g)permitsacorporationtoobtaininsurancefor(i)judgmentsoramountspaidinsettlementinderivativeactions,and(ii)forexpensesincurredwhenadirectorhasbeenadjudgedliableinsomerespects,eventhoughindemnificationundersuchcircumstanceswouldnotbeallowedunderSection145(b).Inaddition,aD&OinsurancepolicymayinsureagainstliabilitiesundertheSecuritiesActof1933,asamended(the“1933Act”)andtheSecuritiesExchangeActof1934,asamended(the“1934Act”),eventhoughtheSecuritiesandExchangeCommission(“SEC”)hastakenthepositionthatindemnificationforliabilitiesunderSection11ofthe1933Actareagainstpublicpolicyandcourtshaveheldthatindemnificationforviolationsofthe1933andthe1934Actarecontrarytothepublicpolicyincertaincircumstances.(SeecommentunderSection1(a)oftheAgreement.)Asaresult,D&Oinsurancemaybeparticularlyimportantforpubliclyheldcompanieswherethereisgreaterriskofliabilityforderivativeactionsandsecuritieslawclaims.
However,D&Oinsurancepoliciesgenerallycontainanumberofqualificationsandlimitationsthatnarrowthescopeofcoverage.Inparticular,D&Oinsurancecoverageislimitedbyapplicableinsurancelawaswellaspublicpolicyconsiderations.Inaddition,D&Oinsurancepolicesgenerallyexcludecertainconductfromcoverage,includingshort-swingprofitliabilityunderSection16(b)ofthe1934Act,unauthorizedremuneration,personalprofittowhichtheinsuredindividualisnotlegallyentitled,claimsarisingoutofcontestsforcorporatecontrolandclaimsbroughtbycorporationsagainsttheirowndirectorsandofficers.
INDEMNIFICATIONAGREEMENT
THISINDEMNIFICATIONAGREEMENT(the“Agreement