In Brady v. i2 Technologies, Inc., download file, the Chancery Court interprets several agreements which provided for advancement and indemnification. It interpreted the integration clause of a later agreement in such a way that it continued to allow the advancement of fees for officers and directors.
The court clarified the distinction between advancement and indemnification. The court emphasized that advancement is a summary proceeding, and that advancement in essence is an option to borrow that is triggered upon the initiation of a lawsuit or a proceeding, and its value lies in the free access to capital required to maintain a rigorous defense.
By contrast, indemnification can exist without any rights to advancement, and the right to advancement is completely separate from the right to indemnification. It is quite possible, moreover, that one could be entitled to advancement but ultimately not entitled to indemnification. Importantly, during an advancement proceeding, the issue of indemnification should not be addressed.
The court discussed the integration clause at issue as expressing the intent of the parties to have a complete agreement. The corollary of the merger doctrine embodied by an integration clause, is the parole evidence rule which prevents the enforcement of an earlier agreement that is inconsistent with the integrated agreement. This bar does not, however, preclude enforcement of earlier agreements that are collateral to, are not inconsistent with, and do not vary or contradict the expressed or implied terms of obligations of the integrated agreement that contains the merger clause. To be collateral, the earlier agreement must be one that the parties might naturally make separately, or where the integrated agreement merely modifies the earlier agreement in some respect