501A.715 - INDEMNIFICATION.

        501A.715  INDEMNIFICATION.         1.  Definitions.  As used in this section, all of the      following apply:         a.  "Official capacity" means any of the following:         (1)  With respect to a director, the position of director in a      cooperative.         (2)  With respect to a person other than a director, the elective      or appointive office or position held by the person, member of a      committee of the board, the employment relationship undertaken by an      employee of the cooperative, or the scope of the services provided by      members of the cooperative who provide services to the cooperative.         (3)  With respect to a director, chief executive officer, member,      or employee of the cooperative who, while a director, chief executive      officer, or member or employee of the cooperative, is or was serving      at the request of the cooperative or whose duties in that position      involve or involved service as a governor, director, manager,      officer, member, partner, trustee, employee, or agent of another      organization or employee benefit plan, the position of that person as      a governor, director, manager, officer, member, partner, trustee,      employee, or agent, as the case may be, of the other organization or      employee benefit plan.         b.  "Predecessor entity" includes a domestic cooperative or      foreign cooperative that was the predecessor of the cooperative      referred to in this section in a merger or other transaction in which      the predecessor entity's existence ceased upon consummation of the      transaction.         c.  "Proceeding" means a threatened, pending, or completed      civil, criminal, administrative, arbitration, or investigative      proceeding, including a proceeding by or in the right of the      cooperative.         d.  "Special legal counsel" means counsel who has not      represented the cooperative or a related organization, or a director,      manager, member of a committee of the board, or employee whose      indemnification is in issue.         2.  Indemnification.         a.  Subject to the provisions of subsection 4, a cooperative      shall indemnify a person made or threatened to be made a party to a      proceeding by reason of the former or present official capacity of      the person against judgments, penalties, and fines, including,      without limitation, excise taxes assessed against the person with      respect to an employee benefit plan, settlements, and reasonable      expenses, including attorney fees and disbursements incurred by the      person in connection with the proceeding, if, with respect to the      acts or omissions of the person complained of in the proceeding, any      of the following applies:         (1)  All of the following apply:         (a)  The person has not been indemnified by another organization      or employee benefit plan for the same judgments, penalties, fines,      including, without limitation, excise taxes assessed against the      person with respect to an employee benefit plan, settlements, and      reasonable expenses, including attorney fees and disbursements      incurred by the person in connection with the proceeding with respect      to the same acts or omissions.         (b)  The person acted in good faith.         (c)  The person has not received an improper personal benefit.         (d)  The person has not committed an act for which liability can      be eliminated or limited under section 501A.714.         (e)  In the case of a criminal proceeding, the person had no      reasonable cause to believe the conduct was unlawful.         (2) (a)  In the case of an act or omission occurring in the      official capacity described in subsection 1, paragraph "a",      subparagraph (1) or (2), the person reasonably believed that the      conduct was in the best interests of the cooperative.         (b)  In the case of an act or omission occurring in the official      capacity described in subsection 1, paragraph "a", subparagraph      (3), the person reasonably believed that the conduct was not opposed      to the best interests of the cooperative.         If the person's acts or omissions complained of in the proceeding      relate to conduct as a director, officer, trustee, employee, or agent      of an employee benefit plan, the conduct is not considered to be      opposed to the best interests of the cooperative if the person      reasonably believed that the conduct was in the best interests of the      participants or beneficiaries of the employee benefit plan.         b.  The termination of a proceeding by judgment, order,      settlement, conviction, or upon a plea of nolo contendere or its      equivalent does not, of itself, establish that the person did not      meet the criteria set forth in this subsection.         3.  Advances.  Subject to the provisions of subsection 4, if a      person is made or threatened to be made a party to a proceeding, the      person is entitled, upon written request to the cooperative, to      payment or reimbursement by the cooperative of reasonable expenses,      including attorney fees and disbursements incurred by the person in      advance of the final disposition of the proceeding, as follows:         a.  Upon receipt by the cooperative of a written affirmation      by the person of a good-faith belief that the criteria for      indemnification set forth in subsection 2 have been satisfied, and a      written undertaking by the person to repay all amounts paid or      reimbursed by the cooperative, if it is ultimately determined that      the criteria for indemnification have not been satisfied.         b.  After a determination that the facts then known to those      making the determination would not preclude indemnification under      this section.         The written undertaking required by this subsection is an      unlimited general obligation of the person making it, but need not be      secured and shall be accepted without reference to financial ability      to make the repayment.         4.  Prohibition or limit on indemnification or advances.  The      articles or bylaws either may prohibit indemnification or advances of      expenses otherwise required by this section or may impose conditions      on indemnification or advances of expenses in addition to the      conditions contained in subsection 2 or 3, including, without      limitation, monetary limits on indemnification or advances of      expenses if the conditions apply equally to all persons or to all      persons within a given class.  A prohibition or limit on      indemnification or advances of expenses shall not apply to or affect      the right of a person to indemnification or advances of expenses with      respect to any acts or omissions of the person occurring before the      effective date of a provision in the articles or the date of adoption      of a provision in the bylaws establishing the prohibition or limit on      indemnification or advances of expenses.         5.  Reimbursement to witnesses.  This section does not      require, or limit the ability of, a cooperative to reimburse      expenses, including attorney fees and disbursements incurred by a      person in connection with an appearance as a witness in a proceeding      at a time when the person has not been made or threatened to be made      a party to a proceeding.         6.  Determination of eligibility.         a.  All determinations whether indemnification of a person is      required because the criteria set forth in subsection 2 have been      satisfied and whether a person is entitled to payment or      reimbursement of expenses in advance of the final disposition of a      proceeding as provided in subsection 3 must be made as follows:         (1)  By the board by a majority of a quorum, if the directors who      are, at the time, parties to the proceeding are not counted for      determining either a majority or the presence of a quorum.         (2)  If a quorum under subparagraph (1) cannot be obtained, by a      majority of a committee of the board consisting solely of two or more      directors not at the time parties to the proceeding duly designated      to act in the matter by a majority of the full board, including      directors who are parties.         (3)  If a determination is not made under subparagraph (1) or (2),      by special legal counsel selected either by a majority of the board      or a committee by vote under subparagraph (1) or (2), or if the      requisite quorum of the full board cannot be obtained and the      committee cannot be established, by a majority of the full board,      including directors who are parties.         (4)  If a determination is not made under subparagraphs (1)      through (3), by the affirmative vote of the members, but the      membership interests held by parties to the proceeding must not be      counted in determining the presence of a quorum and are not      considered to be present and entitled to vote on the determination.         (5)  If an adverse determination is made under subparagraphs (1)      through (4) or paragraph "b" or if a determination is not made      under subparagraphs (1) through (4) or paragraph "b" within sixty      days either after the later to occur of the termination of a      proceeding or a written request for indemnification to the      cooperative, or a written request for an advance of expenses, as the      case may be, by a court in this state, which may be the same court in      which the proceeding involving the person's liability took place upon      application of the person and any notice the court requires.  The      person seeking indemnification or payment or reimbursement of      expenses under this subparagraph has the burden of establishing that      the person is entitled to indemnification or payment or reimbursement      of expenses.         b.  With respect to a person who is not, and was not at the      time of the act or omission complained of in the proceedings, a      director, chief executive officer, or person possessing, directly or      indirectly, the power to direct or cause the direction of the      management or policies of the cooperative, the determination whether      indemnification of this person is required because the criteria set      forth in subsection 2 have been satisfied and whether such person is      entitled to payment or reimbursement of expenses in advance of the      final disposition of a proceeding as provided in subsection 3 may be      made by an annually appointed committee of the board, having at least      one member who is a director.  The committee shall report at least      annually to the board concerning its actions.         7.  Insurance.  A cooperative may purchase and maintain      insurance on behalf of a person in that person's official capacity      against any liability asserted against and incurred by the person in      or arising from that capacity, whether or not the cooperative would      have been required to indemnify the person against the liability      under the provisions of this section.         8.  Disclosure.  A cooperative that indemnifies or advances      expenses to a person in accordance with this section in connection      with a proceeding by or on behalf of the cooperative shall report to      the members in writing the amount of the indemnification or advance      and to whom and on whose behalf it was paid not later than the next      meeting of members.         9.  Indemnification of other persons.  Nothing in this section      must be construed to limit the power of the cooperative to indemnify      persons other than a director, chief executive officer, member,      employee, or member of a committee of the board of the cooperative by      contract or otherwise.  
         Section History: Recent Form
         2005 Acts, ch 135, §49; 2006 Acts, ch 1010, §130; 2006 Acts, ch      1030, §56, 85, 89         Referred to in § 501A.711