CHAPTER 7.5. INDEMNIFICATION OF DIRECTORS
IC 27-1-7.5
Chapter 7.5. Indemnification of Directors
IC 27-1-7.5-1
"Corporation" defined
Sec. 1. As used in this chapter, "corporation" has the meaning setforth in IC 27-1-2-3. The term also includes any domestic or foreignpredecessor entity of a corporation in a merger or other transactionin which the predecessor's existence ceased upon consummation ofthe transaction.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-2
"Director" defined
Sec. 2. As used in this chapter, "director" means an individualwho is or was a director of a corporation or an individual who, whilea director of a corporation, is or was serving at the corporation'srequest as a director, officer, partner, trustee, employee, or agent ofanother foreign or domestic corporation, partnership, joint venture,trust, employee benefit plan, or other enterprise, whether for profitor not. A director is considered to be serving an employee benefitplan at the corporation's request if the director's duties to thecorporation also impose duties on, or otherwise involve services by,the director to the plan or to participants in or beneficiaries of theplan. The term includes, unless the context requires otherwise, theestate or personal representative of a director.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-3
"Expenses" defined
Sec. 3. As used in this chapter, "expenses" includes counsel fees.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-4
"Liability" defined
Sec. 4. As used in this chapter, "liability" means the obligation topay a judgment, settlement, penalty, fine (including an excise taxassessed with respect to an employee benefit plan), or reasonableexpenses incurred with respect to a proceeding.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-5
"Official capacity" defined
Sec. 5. (a) As used in this chapter, "official capacity" means:
(1) when used with respect to a director, the office of directorin a corporation; and
(2) when used with respect to an individual other than adirector, as contemplated in section 13 of this chapter, the officein a corporation held by the officer or the employment oragency relationship undertaken by the employee or agent on
behalf of the corporation.
(b) The term does not include service for any other foreign ordomestic corporation or any partnership, joint venture, trust,employee benefit plan, or other enterprise, whether for profit or not.
As added by P.L.266-1987, SEC.6. Amended by P.L.5-1988,SEC.141.
IC 27-1-7.5-6
"Party" defined
Sec. 6. As used in this chapter, "party" includes an individual whowas, is, or is threatened to be made a named defendant or respondentin a proceeding.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-7
"Proceeding" defined
Sec. 7. As used in this chapter, "proceeding" means anythreatened, pending, or completed action, suit, or proceeding,whether civil, criminal, administrative, or investigative and whetherformal or informal.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-8
Conditional indemnification of director against liability
Sec. 8. (a) A corporation may indemnify an individual made aparty to a proceeding because the individual is or was a directoragainst liability incurred in the proceeding if:
(1) the individual's conduct was in good faith;
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacitywith the corporation, that the individual's conduct was in itsbest interests; and
(B) in all other cases, that the individual's conduct was atleast not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conductwas lawful; or
(B) had no reasonable cause to believe the individual'sconduct was unlawful.
(b) A director's conduct with respect to an employee benefit planfor a purpose the director reasonably believed to be in the interestsof the participants in and beneficiaries of the plan is conduct thatsatisfies the requirement of subsection (a)(2).
(c) The termination of a proceeding by judgment, order,settlement, conviction, or upon a plea of nolo contendere or itsequivalent is not, of itself, determinative that the director did notmeet the standard of conduct described in this section.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-9 Mandatory indemnification of director for expenses incurred insuccessful defense
Sec. 9. Unless limited by its articles of incorporation, acorporation shall indemnify a director who was wholly successful,on the merits or otherwise, in the defense of any proceeding to whichthe director was a party because the director is or was a director ofthe corporation against reasonable expenses incurred by the directorin connection with the proceeding.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-10
Advancement of expenses before final disposition; conditions
Sec. 10. (a) A corporation may pay for or reimburse thereasonable expenses incurred by a director who is a party to aproceeding in advance of final disposition of the proceeding if:
(1) the director furnishes the corporation a written affirmationof the director's good faith belief that the director has met thestandard of conduct described in section 8 of this chapter;
(2) the director furnishes the corporation a written undertaking,executed personally or on the director's behalf, to repay theadvance if it is ultimately determined that the director did notmeet the standard of conduct; and
(3) a determination is made that the facts then known to thosemaking the determination would not preclude indemnificationunder this chapter.
(b) The undertaking required by subsection (a)(2) must be anunlimited general obligation of the director but need not be securedand may be accepted without reference to financial ability to makerepayment.
(c) Determinations and authorizations of payments under thissection shall be made in the manner specified in section 12 of thischapter.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-11
Court ordered indemnification; determination
Sec. 11. Unless a corporation's articles of incorporation provideotherwise, a director of the corporation who is a party to aproceeding may apply for indemnification to the court conducting theproceeding or to another court of competent jurisdiction. On receiptof an application, the court, after giving any notice the courtconsiders necessary, may order indemnification if it determines that:
(1) the director is entitled to mandatory indemnification undersection 9 of this chapter, in which case the court shall also orderthe corporation to pay the director's reasonable expensesincurred to obtain court ordered indemnification; or
(2) the director is fairly and reasonably entitled toindemnification in view of all the relevant circumstances,whether or not the director met the standard of conduct set forthin section 8 of this chapter.As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-12
Determination of permissible indemnification; authorization ofindemnification and evaluation as to reasonableness of expenses
Sec. 12. (a) A corporation may not indemnify a director undersection 8 of this chapter unless authorized in the specific case aftera determination has been made that indemnification of the directoris permissible in the circumstances because the director has met thestandard of conduct set forth in section 8 of this chapter.
(b) The determination shall be made by any one (1) of thefollowing procedures:
(1) By the board of directors by majority vote of a quorumconsisting of directors not at the time parties to the proceeding.
(2) If a quorum cannot be obtained under subdivision (1), bymajority vote of a committee duly designated by the board ofdirectors (in which designation directors who are parties mayparticipate), consisting solely of two (2) or more directors notat the time parties to the proceeding.
(3) By special legal counsel:
(A) selected by the board of directors or its committee in themanner prescribed in subdivision (1) or (2); or
(B) if a quorum of the board of directors cannot be obtainedunder subdivision (1) and a committee cannot be designatedunder subdivision (2), selected by majority vote of the fullboard of directors (in which selection directors who areparties may participate).
(c) Authorization of indemnification and evaluation as toreasonableness of expenses shall be made in the same manner as thedetermination that indemnification is permissible, except that if thedetermination is made by special legal counsel, authorization ofindemnification and evaluation as to reasonableness of expensesshall be made by those entitled under subsection (b)(3) to selectcounsel.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-13
Indemnification of corporate employees other than directors
Sec. 13. The following apply unless a corporation's articles ofincorporation provide otherwise:
(1) An officer of the corporation, whether or not a director, isentitled to mandatory indemnification under section 9 of thischapter and is entitled to apply for court orderedindemnification under section 11 of this chapter, in each case tothe same extent as a director.
(2) The corporation may indemnify and advance expenses underthis chapter to an officer, employee, or agent of the corporation,whether or not a director, to the same extent as to a director.
(3) A corporation may also indemnify and advance expenses toan officer, employee, or agent, whether or not a director, to the
extent, consistent with public policy, that may be provided byits articles of incorporation, bylaws, general or specific actionof its board of directors, or contract.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-14
Liability insurance purchased and maintained by corporation
Sec. 14. A corporation may purchase and maintain insurance onbehalf of an individual who is or was a director, officer, employee,or agent of the corporation, or who, while a director, officer,employee, or agent of the corporation, is or was serving at therequest of the corporation as a director, officer, partner, trustee,employee, or agent of another foreign or domestic corporation,partnership, joint venture, trust, employee benefit plan, or otherenterprise, against liability asserted against or incurred by theindividual in that capacity or arising from the individual's status asa director, officer, employee, or agent, whether or not the corporationwould have power to indemnify the individual against the sameliability under section 8 or 9 of this chapter.
As added by P.L.266-1987, SEC.6.
IC 27-1-7.5-15
Limitation of remedies; effect of chapter
Sec. 15. (a) The indemnification and advance for expensesprovided for or authorized by this chapter does not exclude any otherrights to indemnification and advance for expenses that a person mayhave under:
(1) a corporation's articles of incorporation or bylaws;
(2) a resolution of the board of directors or of the shareholdersof a stock company, or members or shareholders of a mutualcompany qualified to elect directors; or
(3) any other authorization, whenever adopted, after notice, bya majority vote of all the voting shares then issued andoutstanding of a stock company or of all the members orpolicyholders of a mutual company authorized to electdirectors.
(b) If the articles of incorporation, bylaws, resolutions of theboard of directors or of the shareholders, or other duly adoptedauthorization of indemnification or advance for expenses limitindemnification or advance for expenses, indemnification andadvance for expenses are valid only to the extent consistent with thearticles, bylaws, resolution of the board of directors or of theshareholders, members, or directors or other duly adoptedauthorization of indemnification or advance for expenses.
(c) This chapter does not limit a corporation's power to pay orreimburse expenses incurred by a director, officer, employee, oragent in connection with the person's appearance as a witness in aproceeding at a time when the person has not been made a nameddefendant or respondent to the proceeding.
As added by P.L.266-1987, SEC.6.