Arizona Laws 10-3855. Determination and authorization of indemnification
A. A corporation may not indemnify a director under section 10-3851 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 10-3851.
Terms Used In Arizona Laws 10-3855
- Board of directors: means the group of persons vested with the management of the affairs of the corporation irrespective of the name by which the group is designated and includes the governing body or bodies of a water users' association if the articles of incorporation of the water users' association provide for a governing body or bodies denominated other than as a board of directors. See Arizona Laws 10-140
- Director: means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity. See Arizona Laws 10-3850
- Expenses: include attorney fees and other costs and expenses reasonably related to a proceeding. See Arizona Laws 10-3850
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Liability: means the obligation to pay a judgment, settlement, penalty or fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses actually incurred with respect to a proceeding and includes obligations and expenses that have not yet been paid by the indemnified persons but that have been or may be incurred. See Arizona Laws 10-3850
- Member: means , without regard to what a person is called in the articles of incorporation or bylaws, any person or persons who, pursuant to a provision of a corporation's articles of incorporation or bylaws, have the right to vote for the election of a director or directors. See Arizona Laws 10-3140
- Proceeding: means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal. See Arizona Laws 10-3850
- Vote: includes authorization by written ballot and written consent. See Arizona Laws 10-3140
B. The determination shall be made either:
1. By the board of directors by a majority vote of the directors not at the time parties to the proceeding.
2. By special legal counsel:
(a) Selected by majority vote of the disinterested directors.
(b) If there are no disinterested directors, selected by majority vote of the board of directors.
3. By the members, but directors who are at the time parties to the proceeding may not vote on the determination.
C. Neither special legal counsel nor any member has any liability whatsoever for a determination made pursuant to this section. In voting pursuant to subsection B of this section, directors shall discharge their duty in accordance with section 10-3830.
D. 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 subsection B, paragraph 2 of this section to select counsel.