2006 Minnesota Statutes

317A.521 INDEMNIFICATION.
    Subdivision 1. Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" includes a domestic or foreign corporation that was the predecessor of the
corporation referred to in this section in a merger, consolidation, or other transaction in which the
predecessor's existence ended upon completion of the transaction.
(c) "Official capacity" means:
(1) with respect to a director, the position of director in a corporation;
(2) with respect to a person other than a director, the elective or appointive office or
position held by an officer, member of a committee of the board, or the employment relationship
undertaken by an employee of the corporation; and
(3) with respect to a director, officer, or employee of the corporation who, while a director,
officer, or employee of the corporation, is or was serving at the request of the corporation or
whose duties in that position involve or involved service as a director, officer, partner, trustee,
employee, or agent of another organization or employee benefit plan, the position of that person
as a director, officer, partner, trustee, employee, or agent, as the case may be, of the other
organization or employee benefit plan.
(d) "Proceeding" means a threatened, pending, or completed civil, criminal, administrative,
arbitration, or investigative proceeding, including a proceeding by or in the right of the
corporation.
(e) "Special legal counsel" means counsel who has not represented the corporation or a
related organization, or a director, officer, member of a committee of the board, or employee
whose indemnification is in issue.
    Subd. 2. Indemnification mandatory; standard. (a) Subject to subdivision 4, a corporation
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, fines, including,
without limitation, excise taxes assessed against the person with respect to an employee benefit
plan, settlements, and reasonable expenses, including attorneys 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, the person:
(1) has not been indemnified by another organization or employee benefit plan for the same
liability described in the preceding paragraph with respect to the same acts or omissions;
(2) acted in good faith;
(3) received no improper personal benefit and section 317A.255, if applicable, has been
satisfied;
(4) in the case of a criminal proceeding, did not have reasonable cause to believe the
conduct was unlawful; and
(5) in the case of acts or omissions occurring in the official capacity described in subdivision
1, paragraph (c), clause (1) or (2), reasonably believed that the conduct was in the best interests of
the corporation, or in the case of acts or omissions occurring in the official capacity described in
subdivision 1, paragraph (c), clause (3), reasonably believed that the conduct was not opposed
to the best interests of the corporation. 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 corporation
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 in this subdivision.
    Subd. 3. Advances. Subject to subdivision 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 corporation, to payment
or reimbursement by the corporation of reasonable expenses, including attorneys fees and
disbursements, incurred by the person in advance of the final disposition of the proceeding:
(1) upon receipt by the corporation of a written affirmation by the person of a good faith
belief that the criteria for indemnification in subdivision 2 have been satisfied and a written
undertaking by the person to repay the amounts paid or reimbursed by the corporation, if it is
determined that the criteria for indemnification have not been satisfied; and
(2) 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 clause (1) is an unlimited general obligation of the
person making it, but need not be secured and must be accepted without reference to financial
ability to make the repayment.
    Subd. 4. Prohibition or limit on indemnification or advances. The articles or bylaws
may prohibit indemnification or advances of expenses required by this section or may impose
conditions on indemnification or advances of expenses in addition to the conditions contained
in subdivisions 2 and 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 may not apply to or affect the right
of a person to indemnification or advances of expenses with respect to 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.
    Subd. 5. Reimbursement to witnesses. This section does not require, or limit the ability of,
a corporation to reimburse expenses, including attorneys 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.
    Subd. 6. Determination of eligibility. (a) Determinations as to whether indemnification of a
person is required because the criteria set forth in subdivision 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 under subdivision 3 must be made:
(1) by the board by a majority of a quorum; directors who are at the time parties to the
proceeding are not counted for determining a majority or the presence of a quorum;
(2) if a quorum under clause (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 clause (1) or (2), by special legal counsel, selected
either by a majority of the board or a committee by vote under clause (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 clauses (1) to (3), by the members with voting
rights, other than members who are parties to the proceeding; or
(5) if an adverse determination is made under clauses (1) to (4) or under paragraph (b), or if
no determination is made under clauses (1) to (4) or under paragraph (b) within 60 days after
the termination of a proceeding or after a request for an advance of expenses, by a court in this
state, which may be the court in which the proceeding involving the person's liability took place,
upon application of the person and notice the court requires.
(b) With respect to a person who is not, and was not at the time of the acts or omissions
complained of in the proceedings, a director, officer, or person having, directly or indirectly,
the power to direct or cause the direction of the management or policies of the corporation,
the determination whether indemnification of this person is required because the criteria in
subdivision 2 have been satisfied and whether this person is entitled to payment or reimbursement
of expenses in advance of the final disposition of a proceeding under subdivision 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.
    Subd. 7. Insurance. A corporation may buy and maintain insurance on behalf of a person in
that person's official capacity against liability asserted against and incurred by the person in or
arising from that capacity, whether or not the corporation would have been required to indemnify
the person against the liability under this section.
    Subd. 8. Disclosure. A corporation with members with voting rights that indemnifies or
advances expenses to a person under this section in connection with a proceeding by or on behalf
of the corporation 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.
    Subd. 9. Indemnification of other persons. This section does not limit the power of a
corporation to indemnify other persons.
History: 1989 c 304 s 83