Negotiate With Care: Recent Delaware Developments Relating to Indemnification and Advancement
In the first half of 2008, the Delaware Court of Chancery rendered a number of decisions addressing the indemnification and advancement rights of officers and directors under Delaware law. Two of those decisions—Schoon v. Troy Corporation and Jackson Walker L.L.P. v. Spira Footwear, Inc. —are particularly noteworthy from the perspective of a M&A lawyer. In Schoon, the Court found that a bylaw amendment eviscerated a former director’s right to mandatory advancement with respect to a proceeding commenced after the effectiveness of such amendment. In Jackson Walker, the Court determined that a law firm acting as local litigation counsel for a corporation was an agent of the corporation and thus was entitled to mandatory advancement of expenses under the corporation’s bylaws in connection with a suit brought by the corporation against the law firm. Each of those decisions has a direct bearing upon the negotiation of indemnification provisions in acquisition agreements and leads to certain practical lessons that should be considered by counsel when negotiating such provisions.