An association may indemnify certain officers, directors, employees, agents, and similar persons for covered losses, and may advance or reimburse expenses if stated conditions are met.
§783. Indemnification of officers, directors, and employees A. An association may indemnify any person who was or is party or is threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including any action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the association or is or was serving at the request of the association as a director, officer, employee, or agent of another business, corporation, partnership, joint venture, or other enterprise, against expenses, including attorney fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the association, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; however, in case of actions by or in the right of the association, the indemnity shall be limited to expenses, including attorneys' fees, actually and reasonably incurred in connection with the defense or settlement of such action and no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the association. B. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. A person may, with the approval of the commissioner, be so indemnified or reimbursed for: (1) Amounts paid in compromise or settlement of any action, suit, or proceeding, including reasonable expenses, fines, and penalties incurred in connection therewith, or (2) reasonable expenses incurred in connection with a criminal or civil action, suit, or proceeding in which such person has been adjudicated guilty, negligent, or liable, if it shall be determined by the board of directors and by the commissioner that such person was acting in good faith and in what he believed to be the best interests of the association and without knowledge that the action was illegal, and if such indemnification or reimbursement is approved at an annual or special meeting of the members or stockholders by a majority of the votes eligible to be cast. C. Amounts paid to the association, whether pursuant to judgment or settlement by any person within the meaning of this Section shall not be indemnified or reimbursed in any case. D. An association may pay for or reimburse the reasonable expenses incurred by a person authorized to be reimbursed under this Section who is a party to a proceeding in advance of final disposition of the proceeding if: (1) The person furnishes the association a written affidavit of his good faith belief that he has met the standard of conduct described in Subsection A; (2) The person furnishes the association a written agreement, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct; and (3) As a condition precedent to any advance or reimbursement of the expenses to which reference is made in this Subsection, the board of directors shall, by resolution, attest that to the best of their knowledge and information, the conduct of the party to be reimbursed met the standard of conduct described in Subsection A of this Section. Acts 1970, No. 234, §1; Acts 1983, No. 675, §1; Acts 1988, No. 597, §1, eff. July 14, 1988.