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Indemnification is, generally speaking, a reimbursement by a company of its Ds&Os for expenses or losses they have incurred in connection with litigation or other proceedings relating to their service to the company.
Section 145(a) of the DGCL empowers a corporation to indemnify its directors against expenses, judgments, fines, and amounts paid in settlement incurred in connection with actions other than those brought by or in the right of the corporation, subject to a determination that the indemnitee has met the requisite ...
A director and officer indemnification agreement is a contract that allows executives to protect themselves from claims made against them while performing job.
The indemnity may cover liability incurred by the director to any person other than the company or an associated company. This may include both legal costs and the financial costs of an adverse judgement. But the indemnity must not cover liabilities to the company or to any associated company (subsection (2)).
Directors of Delaware corporations are subject to the fiduciary duties of care and loyalty (which include the subsidiary duties of good faith, oversight and disclosure). - Duty of care. Care requires informed, deliberative deci- sion-making based on all material information reasonably available. - Duty of loyalty.
In the agreement, the company agrees to reimburse the director or officer for losses incurred in legal proceedings related to their service as a director or officer and to advance funds to the director or officer to pay expenses as they are incurred.