When Indemnification is required. permitted. and Prohibited
11.01 (a) The Corporation shall indemnify a Director, Officer, committee member, employee or agent of the Corporation who was, is, or may be named defendant or respondent in any proceeding as a result of his or her actions or omissions within the scope of his or her official capacity in the Corporation. For the purpose of this article, an agent includes one who is or was serving at the request of the Corporation as a Director, Officer, partner, venturer, proprietor, trustee, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise. However, the Corporation shall indemnify a person only if he or she acts in good faith and reasonably believed that the conduct was in the Corporation's best interest. In a case of a criminal proceeding, the person may be indemnified only if he or she had no reasonable cause to believe that the conduct was unlawful. The Corporation shall not indemnify a person who is found liable to the Corporation or is found liable to another on the basis of improperly receiving a personal benefit. A person is conclusively considered to have been found liable in relation to any claim, issue, or matter if the person has been adjudged liable by a court of competent jurisdiction and all appeals have been exhausted.
(b) The termination of a proceeding by judgment, order, settlement, conviction or on a plea of a nolo contendere or its equivalent does not necessarily preclude indemnification by the Corporation.
(c) The Corporation shall pay or reimburse expenses incurred by a Director, Officer, member, committee member, employee, or agent of the Corporation in connection with the person appearance as a witness or other participation in a proceeding involving or affecting the Corporation when the person is not a named defendant or respondent in the proceeding.
(d) In addition to the situation otherwise described in this paragraph, the Corporation may indemnify a Director, Officer, member, committee member, employee or agent of the Corporation to the extent permitted by law. However, the Corporation shall not indemnify any person in any situation in which indemnification is prohibited by the terms of paragraph 11.01(a), above.
(e) Before the final disposition of a proceeding, the Corporation may pay indemnification expenses permitted by the By-Laws and authorized by the Corporation. However, the Corporation shall not pay indemnification expenses to a person before the final disposition of a proceeding if: the person is a named defendant or respondent in a proceeding brought by the Corporation or one or more members; or the person is alleged to have improperly received a personal benefit or permitted other willful or intentional misconduct.
(f) If the Corporation may indemnify a person under the By-Laws, the person may be indemnified against judgment, penalties, including excise and similar taxes, fines, settlements and reasonable expenses, including attorney's fees (actually incurred in connection with the proceeding), however, if the proceeding was brought by or on behalf of the Corporation, the indemnification is limited to reasonable expenses actually incurred by the person in connection with the proceedings.
Procedures Relating to Indemnification Payments
11.02. (a) Before the Corporation may pay any indemnification expenses (including attorney's fees), the Corporation shall specifically determine that indemnification is permissible, authorize indemnification, and determine that expenses to be reimbursed are reasonable, except as provided in paragraph 11.02(c), below. The Corporation may make these determinations and decisions by any one of the following procedures:
(1) Majority vote of a quorum consisting of Directors who, at the time of the vote, are not named defendants or respondents in the proceeding.
(2) If such a quorum cannot be obtained, by a majority vote of a committee of the Board, designated to act in the matter by a majority vote of all Directors, consisting solely of two or more Directors who at the time of the vote are not named defendants or respondents in the proceeding.
(3) Determination by special legal counsel selected by the Board by vote as provided in paragraph 11.02(a)(i) or 11.02(a)(ii), or if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all Directors.
(4) Majority vote of members, excluding Directors who are named defendants or respondents in the proceeding.
(b) The Corporation shall authorize indemnification and determine that expenses to be reimbursed are reasonable in the same manner that it determines whether indemnification is permissible. If the determination that indemnification is permissible is made by special legal counsel, authorization of indemnification an determination of reasonableness of expenses shall be made in the manner specified by paragraph 11.02(a)(3), above, governing the selection of special legal counsel. A provision contained in the Articles of Incorporation, the By-Laws, or a resolution of members of the Board that requires the indemnification permitted by paragraph 11.01, above, constitutes sufficient authorization of indemnification even though the provision may not have been adopted or authorized in the same manner as the determination that indemnification is permissible.
(c) The Corporation shall pay indemnification expenses before final disposition of a proceeding only after the Corporation determines that the facts then known would not preclude indemnification and the Corporation receives a written affirmation and undertaking from the person to be indemnified. The determination that the facts then known to those making the determination would not preclude indemnification and authorization of payment shall be made in the same manner as a determination that indemnification is permissible under paragraph 11.02(a), above. The person's written affirmation shall state that he or she has met the standard of conduct necessary for indemnification under the By-Laws. The written undertaking shall provide for repayment of the amount paid or reimbursed by the Corporation if it is ultimately determined that the person has not met the requirements for indemnification. The undertaking shall be an unlimited general obligation of the person, but it need not be secured and it may be accepted without reference to financial ability to make repayment.
(d) Any indemnification or advance of expenses shall be reported in writing to the members of the Corporation. The report shall be made with or before the notice or waiver of notice of the next membership meeting, or with or before the next submission to members of a consent to action without a meeting. In any case, the report shall be sent within the 12-month period immediately following the date of the indemnification or advance.
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