In Thompson v. The Williams Companies, Inc.,  2007 WL 2215953 (Del. Ch., July 31, 2007), read opinion here, the Chancery Court rejected claims that conditions imposed on a non-officer, non-director employee as prerequisites to advancement  were contrary to public policy in Delaware, and rather found that they were neither arbitrary nor in violation of the implied duty of good faith and fair dealing. The court allowed the conditions primarily because the bylaws granting the advancement right expressly permitted the board to establish whatever conditions in its discretion it deemed appropriate before granting advancement rights. The court reasoned that the security required by the board was rationally related to protecting the interests of the corporation. By contrast, the court used an example of demanding security in an amount 5 times greater than the amount advanced, as a condition that would have been clearly arbitrary.

 The court distinguished this restricted advancement right with the more common, broader advancement provisions as discussed in Delaware Supreme Court decisions such as Tafeen (summarized here on this blog.) By using the search function in the right margin, one can find many advancement decisions summarized on this blog, but a key theme that ties this case in with others is that the court used basic contract interpretation principles to interpret the bylaw that  was at issue in this case.