TITLE 7

Corporations, Associations, and Partnerships

CHAPTER 7-6

Rhode Island Nonprofit Corporation Act

SECTION 7-6-6



   § 7-6-6  Indemnification. –

(a) As used in this section:



   (1) "Director" means any person who is or was a director of

the corporation and any person who, while a director of the corporation, is or

was serving at the request of the corporation as a director, officer, partner,

trustee, employee, or agent of another foreign or domestic corporation,

partnership, joint venture, trust, other enterprise, or employee benefit plan.



   (2) "Corporation" includes:



   (i) Any corporation whether foreign or domestic, and whether

a nonprofit or a for profit corporation all of the profits of which go to a

nonprofit corporation; and



   (ii) Any domestic or foreign predecessory entity of the

corporation in a merger, consolidation, or other transaction in which the

predecessor's existence ceased upon consummation of the transaction.



   (3) "Expenses" include attorneys' fees.



   (4) "Official capacity" means:



   (i) When used with respect to a director, the office of

director in the corporation.



   (ii) When used with respect to a person other than a

director, as contemplated in subsection (i), the elective or appointive office

in the corporation held by the officer or the employment or agency relationship

undertaken by the employee or agent on behalf of the corporation, but in each

case does not include service for any other foreign or domestic corporation or

any partnership, joint venture, trust, other enterprise, or employee benefit

plan.



   (5) "Party" includes a person who was, is, or is threatened

to be made, a named defendant or respondent in a proceeding.



   (6) "Proceeding" means any threatened, pending, or completed

action, suit, or proceeding, whether civil, criminal, administrative, or

investigative.



   (b)(1) A corporation has power to indemnify any person made a

party to any proceeding by reason of the fact that that person is or was a

director if:



   (i) He or she conducted himself or herself in good faith; and



   (ii) He or she reasonably believed:



   (A) In the case of conduct in his or her official capacity

with the corporation, that his or her conduct was in its best interests, and



   (B) In all other cases, that his or her conduct was at least

not opposed to its best interests; and



   (iii) In the case of any criminal proceeding, he or she had

no reasonable cause to believe his or her conduct was unlawful.



   (2) Indemnification may be made against judgments, penalties,

fines, settlements, and reasonable expenses actually incurred by the person in

connection with the proceeding; except that if the proceeding was by or in the

right of the corporation, indemnification may be made only against the

reasonable expenses and shall not be made in respect of any proceeding in which

the person has been adjudged to be liable to the corporation. The termination

of any proceeding by judgment, order, settlement, conviction, or upon a plea of

nolo contendere or its equivalent, is not, of itself, determinative that the

person did not meet the requisite standard of conduct set forth in this

subsection.



   (c) A director is not indemnified under subsection (b) in

respect of any proceeding charging improper personal benefit to him or her,

whether or not involving action in his or her official capacity, in which he or

she has been adjudged to be liable on the basis that personal benefit was

improperly received by him or her.



   (d)(1) Unless limited by the articles of incorporation,



   (i) A director who is wholly successful, on the merits or

otherwise, in the defense of any proceeding referred to in subsection (b) is

indemnified against reasonable expenses incurred by the director in connection

with the proceeding; and



   (ii) A court of appropriate jurisdiction, upon application of

a director and any notice that the court requires, has authority to order

indemnification in the following circumstances:



   (A) If it determines a director is entitled to reimbursement

under paragraph (i), the court shall order indemnification, in which case the

director is also entitled to recover the expenses of securing the

reimbursement; or



   (B) If it determines that the director is fairly and

reasonably entitled to indemnification in view of all the relevant

circumstances, whether or not the director has met the standard of conduct

described in subsection (b) or has been adjudged liable in the circumstances

described in subsection (c), the court may order any indemnification that the

it deems proper, except that indemnification with respect to any proceeding by

or in the right of the corporation or in which liability has been adjudged in

the circumstances described in subsection (c) is limited to expenses.



   (2) A court of appropriate jurisdiction may be the same court

in which the proceeding involving the director's liability took place.



   (e)(1) No indemnification under subsection (b) shall be made

by the corporation 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 decribed in

subsection (b). The determination shall be made:



   (i) By the board of directors by a majority vote of a quorum

consisting of directors not at the time parties to the proceeding;



   (ii) If a quorum cannot be obtained, then by a majority vote

of a committee of the board, duly designated to act in the matter by a majority

vote of the full board (in which designation directors who are parties may

participate), consisting solely of two (2) or more directors not at the time

parties to the proceeding;



   (iii) By special legal counsel, selected by the board of

directors or a committee of the board by vote as described in

subsection(e)(1)(i) or (e)(1)(ii) of this section, or, if the requisite quorum

of the full board cannot be obtained for the vote and the committee cannot be

established, by a majority vote of the full board (in which selection directors

who are parties may participate); or



   (iv) By the members.



   (2) Authorization of indemnification and determination as to

reasonableness of expenses shall be made in the same manner as the

determination that indemnification is permissible, except that if the

determination that indemnification is permissible is made by special legal

counsel, authorization of indemnification and determination as to

reasonableness of expenses shall be made in a manner specified in subdivision

(e)(1)(iii) for the selection of counsel. Directors who are parties to the

proceeding shall not, as members, vote on the subject matter under this

subsection.



   (f) Reasonable expenses incurred by a director who is a party

to a proceeding may be paid or reimbursed by the corporation in advance of the

final disposition of the proceedings upon receipt by the corporation of:



   (1) A written affirmation by the director of the director's

good faith belief that the director has met the standard of conduct necessary

for indemnification by the corporation as authorized in this section; and



   (2) A written undertaking by or on behalf of the director to

repay the amount if it is ultimately determined that the director has not met

the standard of conduct, and after a determination that the facts then known to

those making the determination would not preclude indemnification under this

section. The undertaking required by this subdivision is an unlimited general

obligation of the director but need not be secured and may be accepted without

reference to financial ability to make repayment. Determinations and

authorizations of payments under this subsection shall be made in the manner

specified in subsection (e).



   (g) The indemnification provided by this section is not

deemed exclusive of any other rights to which those seeking indemnification are

entitled under any bylaw, agreement, vote of members or disinterested

directors, or otherwise, both as to action in his or her official capacity and

as to action in another capacity while holding office, and continues as to a

person who ceases to be a director, officer, partner, trustee, employee, or

agent and inures to the benefit of the heirs, executors, and administrators of

the person. Nothing contained in this section limits the corporation's power to

pay or reimburse expenses incurred by a director in connection with his or her

appearance as a witness in a proceeding at a time when he or she has not been

named a defendant or respondent in the proceeding.



   (h) For purposes of this section, the corporation is deemed

to have requested a director to service an employee benefit plan whenever the

performance by the director of the director's duties to the corporation also

imposes duties on, or otherwise involves services by, the director to the plan

or participants or beneficiaries of the plan; excise taxes assessed on a

director regarding an employee benefit plan pursuant to applicable law are

deemed "fines"; and action taken or omitted by the director regarding an

employee benefit plan in the performance of the director's duties for a purpose

reasonably believed by the director to be in the interest of the participants

and beneficiaries of the plan are deemed to be for a purpose which is not

opposed to the best interests of the corporation.



   (i) Unless limited by the articles of incorporation:



   (1) An officer of the corporation is indemnified to the same

extent provided in subsection (d) for a director and is entitled to the same

extent as a director to seek indemnification pursuant to the provisions of

subsection (d);



   (2) A corporation has the power to indemnify and to advance

expenses to an officer, employee, or agent of the corporation to the same

extent that it may indemnify and advance expenses to directors pursuant to this

section; and



   (3) A corporation, in addition, has the power to indemnify

and to advance expenses to an officer, employee, or agent who is not a director

to any further extent, consistent with law, that is provided by its articles of

incorporation, bylaws, general or specific action of its board of directors, or

contract.



   (j) A corporation has power to purchase and maintain

insurance on behalf of any person who is or was a director, officer, employee,

or agent of the corporation, or who, while a director, officer, employee, or

agent of the corporation, is or was serving at the request of the corporation

as a director, officer, partner, trustee, employee, or agent of another foreign

or domestic corporation, partnership, joint venture, trust, other enterprise,

or employee benefit plan, against any liability asserted against the director

and incurred by the director in any capacity or arising out of the director's

status as director, whether or not the corporation would have the power to

indemnify the director against liability under the provisions of this section.



   (k) Any indemnification of, or advance of expenses to, a

director in accordance with this section, if arising out of a proceeding by or

in the right of the corporation, shall be reported, in writing, to the members

with or before the notice of the next members' meeting.



History of Section.

(P.L. 1984, ch. 380, § 1; P.L. 1984, ch. 444, § 1; P.L. 1987, ch.

472, § 1.)