The Vermont Statutes Online

Title 11C: Mututal Benefit Enterprises

Chapter 009: Indemnification

• § 901. Article definitions

  In this article:

  (1) “Enterprise” includes any enterprise or foreign predecessor entity of an enterprise in a merger or other transaction in which the predecessor’s existence ceased upon the consummation of the transaction.

  (2) “Director” means an individual who is or was a director of an enterprise or an individual who, while a director of an enterprise, is or was serving at the enterprise’s request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic enterprise, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director is considered to be serving an employee benefit plan at the enterprise’s request if the director’s duties to the enterprise also impose duties on or otherwise involve services by the director to the plan or to participants in or beneficiaries of the plan. “Director” includes, unless the context requires otherwise, the estate or personal representative of a director.

  (3) “Expenses” means the reasonable costs incurred in connection with a proceeding, including reasonable attorney’s fees.

  (4) “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding.

  (5) “Official capacity” means:

  (A) When used with respect to a director, the office of director in an enterprise.

  (B) When used with respect to an individual other than a director, as contemplated in section 907 of this title, the office in an enterprise held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the enterprise. “Official capacity” does not include service for any other foreign or domestic corporation or any enterprise or any partnership, joint venture, trust, employee benefit plan, or other enterprise.

  (6) “Party” includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding.

  (7) “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal.

  (8) “Special legal counsel” means counsel that has never been an employee of the enterprise and who has not and whose firm has not performed legal services for the enterprise pertaining to the matter for which indemnification is sought for a period of at least two years before retention as special counsel. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 902. Authority to indemnify

  (a) Except as provided in subsection (d) of this section, an enterprise may indemnify an individual made a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if:

  (1) the director conducted himself or herself in good faith; and

  (2) the director reasonably believed:

  (A) in the case of conduct in the director’s official capacity with the enterprise, that the director’s conduct was in its best interests; and

  (B) in all other cases, that the director’s conduct was at least not opposed to its best interests; and

  (3) in the case of any proceeding brought by a governmental entity, the director had no reasonable cause to believe his or her conduct was unlawful, and the director is not finally found to have engaged in a reckless or intentional unlawful act.

  (b) A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subdivision (a)(2)(B) of this section.

  (c) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section.

  (d) An enterprise may not indemnify a director under this section:

  (1) in connection with a proceeding by or in the right of the enterprise in which the director was adjudged liable to the enterprise; or

  (2) in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director’s official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by the director.

  (e) Indemnification permitted under this section in connection with a proceeding by or in the right of the enterprise is limited to reasonable expenses incurred in connection with the proceeding. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 903. Mandatory indemnification

  Unless limited by its articles of organization, an enterprise shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the director is or was a director of the enterprise against reasonable expenses incurred by the director in connection with the proceeding. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 904. Advance for expenses

  (a) An enterprise may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if:

  (1) the director furnishes the enterprise a written affirmation of his or her good faith belief that the director has met the standard of conduct described in section 902 of this title;

  (2) the director furnishes the enterprise a written undertaking, executed personally or on the director’s behalf, to repay the advance if it is ultimately determined that the director did not meet the standard of conduct; and

  (3) a determination is made that the facts then known to those making the determination would not preclude indemnification under this article.

  (b) The undertaking required by subdivision (a)(2) of this section shall be an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment.

  (c) Determinations and authorizations of payments under this section shall be made in the manner specified in section 906 of this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 905. Court-ordered indemnification

  A director of the enterprise who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court after giving any notice the court considers necessary may order indemnification if it determines:

  (1) the director is entitled to mandatory indemnification under section 903 of this title, in which case the court shall also order the enterprise to pay the director’s reasonable expenses incurred to obtain court-ordered indemnification; or

  (2) the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director met the standard of conduct set forth in section 902 of this title or was adjudged liable as described in subsection 902(d), of this title but if the director was adjudged so liable the director’s indemnification is limited to reasonable expenses incurred. (Added 2011, No. 84 (Adj. Sess.), § 1; eff. April 20, 2012.)

• § 906. Determination and authorization of indemnification

  (a) Except as provided in section 904 of this title, an enterprise may not indemnify a director under section 902 of this title prior to the final resolution of a proceeding, whether by judgment, order, settlement, conviction, plea, or otherwise and unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in section 902 of this title.

  (b) The determination required by subsection (a) of this section, in accordance with the terms of section 902 of this title, shall be made:

  (1) by the board of directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding;

  (2) if a quorum cannot be obtained under subdivision (1) of this subsection, by majority vote of a committee duly designated by the board of directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding;

  (3) by written opinion of special legal counsel:

  (A) selected by the board of directors or its committee in the manner prescribed in subdivision (1) or (2) of this subsection; or

  (B) if a quorum of the board of directors cannot be obtained under subdivision (1) of this subsection and a committee cannot be designated under subdivision (2) of this subsection, selected by majority vote of the full board of directors (in which selection directors who are parties may participate); or

  (4) by the members, but voting power exercised by or under the control of directors who are at the time parties to the proceeding may not be voted on the determination.

  (c) Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subdivision (b)(3) of this section to select counsel. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 907. Indemnification of officers, employees, and agents

  Unless an enterprise’s articles of organization limit indemnification of an officer, employee, or agent of the enterprise:

  (1) an officer of the enterprise who is not a director is entitled to mandatory indemnification under section 903 of this title and is entitled to apply for court-ordered indemnification under section 905 of this title, in each case to the same extent as a director;

  (2) the enterprise may indemnify and advance expenses under this article to an officer, employee, or agent of the enterprise who is not a director to the same extent as a director. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 908. Insurance

  An enterprise may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the enterprise or who, while a director, officer, employee, or agent of the enterprise, is or was serving at the request of the enterprise as a director, officer, partner, trustee, employee, or agent of another foreign or domestic enterprise, partnership, joint venture, trust, employee benefit plan, or other enterprise against liability asserted against or incurred by him or her in that capacity or arising from his or her status as a director, officer, employee, or agent, whether or not the enterprise would have power to indemnify him or her against the same liability under section 902 or 903 of this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 909. Application of article

  (a) A provision treating an enterprise’s indemnification of or advance for expenses to directors that is contained in its articles of organization, bylaws, a resolution of its members or board of directors, or in a contract or otherwise is valid only if and to the extent the provision is consistent with this article. If articles of organization limit indemnification or advance for expenses, indemnification and advance for expenses are valid only to the extent consistent with the articles.

  (b) This article does not limit an enterprise’s power to pay or reimburse expenses incurred by a director in connection with the director’s appearance as a witness in a proceeding at a time when the director has not been made a named defendant or respondent to the proceeding. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)