Indemnification Agreement (Updated July 2020) (NVCA)

This sample document is the work product of a national coalition of attorneys who specialize in venture capital financings, working under the auspices of the NVCA. This document is intended to serve as a starting point only, and should be tailored to meet your specific requirements. This document should not be construed as legal advice for any particular facts or circumstances. Note that this sample document presents an array of (often mutually exclusive) options with respect to particular deal provisions.

MODEL INDEMNIFICATION AGREEMENT

Preliminary Notes

This agreement can be used for both officers and directors of the corporation.  In some cases, a director will serve as a nominee of one or a group of investors (e.g., an individual venture capitalist serving as a nominee of a venture capital fund).  Because venture capital funds with director nominees may be named as parties or otherwise incur expenses in connection with litigation against their director nominees, some venture capital funds will request that the fund, and not just their director representative, be covered by the indemnification agreement.  To the extent a venture capital fund seeks indemnification for the fund itself, Section 1(d) contains bracketed optional language for the draftsperson to consider.  The working group has not taken a position as to whether investor indemnification is “market.”

Section 145 of the Delaware General Corporation Law (“Section 145”) is the statutory authority for indemnification of directors, officers, employees and agents of the corporation.  Section 145(a) permits (but does not require) indemnification of expenses (including attorneys’ fees) as well as judgments and amounts paid in settlement in third-party actions (i.e., actions not brought by or in the right of the corporation) if the applicable standard is met.  Section 145(b) permits (but does not require) indemnification of expenses (including attorney fees) but not judgments and amounts paid in settlement in derivative actions (i.e., actions brought by or in the right of the corporation) if the applicable standard is met.  Thus, Section 145 draws a basic distinction between third-party and derivative actions.  Section 145(c) requires indemnification of expenses (including attorney fees) if the indemnitee is successful on the merits or otherwise in a proceeding referred to in Section 145(a) or (b).  Section 145(d) sets forth requirements for determining whether indemnification is permitted under Section 145(a) or (b).  Section 145I permits advancement of expenses before final disposition of a proceeding subject to certain conditions.  Section 145(f) provides that the statutory rights and procedures regarding indemnification are not exclusive, thus permitting indemnification under bylaws, agreements and other circumstances beyond the limits specified in Section 145.  Section 145(g) allows a corporation to obtain directors’ and officers’ liability insurance (“D&O insurance”).  Sections 145(h) through (k) address various other aspects of indemnification, including provisions relating to survivorship of the obligations of the indemnifying corporation, survivorship of rights to indemnification upon ceasing to be a director, officer, employee or agent and the exclusive jurisdiction of the Delaware Court of Chancery over indemnification proceedings. 

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