(a) Except as otherwise provided in this section, a corporation may indemnify an individual who is a party to a proceeding because the individual is a director against liability incurred in the proceeding if:

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Terms Used In Alabama Code 10A-2A-8.51

  • certificate of incorporation: as used in this chapter is synonymous to the term "certificate of formation" used in Chapter 1. See Alabama Code 10A-2A-1.40
  • Conviction: A judgement of guilt against a criminal defendant.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • 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
  • Nolo contendere: No contest-has the same effect as a plea of guilty, as far as the criminal sentence is concerned, but may not be considered as an admission of guilt for any other purpose.
  • Plea: In a criminal case, the defendant's statement pleading "guilty" or "not guilty" in answer to the charges, a declaration made in open court.
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(1)

(i) the director conducted himself or herself in good faith; and
(ii) the director reasonably believed:

(A) in the case of conduct in an official capacity, that his or her conduct was in the best interests of the corporation; and
(B) in all other cases, that his or her conduct was at least not opposed to the best interests of the corporation; and
(iii) in the case of any criminal proceeding, the director had no reasonable cause to believe his or her conduct was unlawful; or
(2) the director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the certificate of incorporation (as authorized by Section 10A-2A-2.02(b)(5)).
(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 the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (a)(1)(ii)(B).
(c) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.
(d) Unless ordered by a court under Section 10A-2A-8.54(a)(3), a corporation may not indemnify a director:

(1) in connection with a proceeding by or in the right of the corporation, except for expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under subsection (a); or
(2) in connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis of receiving a financial benefit to which he or she was not entitled, regardless of whether it involved action in the director’s official capacity.
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