Item 6. Indemnification of Directors and Officers.
Subsection (a) of Section 14-2-851 of the Georgia Business Corporation Code (“GBCC”) provides that a corporation may indemnify an individual who is party to a proceeding because he or she is or was a director against liability incurred in the proceeding if: (1) such individual conducted himself or herself in good faith; and (2) such individual reasonably believed (A) in the case of conduct in his or her official capacity, that such conduct was in the best interests of the corporation, (B) in all other cases, that such conduct was at least not opposed to the best interests of the corporation, and (C) in the case of any criminal proceeding, that the individual had no reasonable cause to believe that such conduct was unlawful. Subsection (c) of Section 14-2-851 of the GBCC provides that 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 standard of conduct described in Section 14-2-851 of the
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GBCC. Subsection (d) of Section 14-2-851 of the GBCC provides that a corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct, or in connection with any proceeding with respect to conduct for which he or she was adjudged liable on the basis that personal benefit was improperly received by him or her, whether or not involving action in his or her official capacity. Notwithstanding the foregoing, pursuant to Section 14-2-854 of the GBCC, a court may order a corporation to indemnify a director if such court determines, in view of all the relevant circumstances, that it is fair and reasonable to indemnify or advance expenses to the director, even if the director has not met the relevant standard of conduct set forth in subsections (a) and (b) of Section 14-2-851 of the GBCC, failed to comply with Section 14-2-853 of the GBCC, or was adjudged liable in a proceeding referred to in paragraph (1) or (2) of subsection (d) of Section 14-2-851 of the GBCC but if the director was adjudged so liable, the indemnification shall be limited to reasonable expenses incurred in connection with the proceeding.
Section 14-2-852 of the GBCC provides that a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding.
Section 14-2-857 of the GBCC provides that a corporation may indemnify and advance expenses to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation to the same extent as a director. If the officer is not a director (or if the officer is a director but the sole basis on which he or she is made a party to the proceeding is an act or omission solely as an officer), the corporation may also indemnify and advance expenses to such officer to such further extent as may be provided by the articles of incorporation or the bylaws of the corporation, by a resolution of the board of directors of the corporation, or by contract, except for liability arising out of conduct that constitutes: (a) the appropriation, in violation of their duties, of any business opportunity of the corporation; (b) acts or omissions which involve intentional misconduct or a knowing violation of law; (c) the types of liability set forth in Section 14-2-832 of the GBCC; or (d) receipt of an improper personal benefit. An officer of a corporation who is not a director is entitled to mandatory indemnification under Section 14-2-852 of the GBCC and may apply to a court under Section 14-2-854 of the GBCC for indemnification or advances, in each case to the same extent to which a director may be entitled to indemnification under those provisions. Finally, a corporation may also indemnify an employee or agent who is not a director to the extent that, consistent with public policy, may be provided by its articles of incorporation or bylaws, by general or specific action by its board of directors or by contract.
Article VII of the Articles of Incorporation of Regional Health provides that no director shall be liable to Regional Health or its shareholders for monetary damages for any action taken, or any failure to take any action, as a director, except liability: (a) for any appropriation, in violation of his or her duties, of any business opportunity of Regional Health; (b) for acts or omissions which involve intentional misconduct or a knowing violation of law; (c) for the types of liability set forth in the GBCC or any successor law; or (d) for any transaction from which the director received an improper benefit.
Article IX of the Bylaws of Regional Health provides that Regional Health shall indemnify an individual (or such person’s estate or personal representative, as applicable) who is a party to a proceeding because he or she is or was a director or officer, respectively, of Regional Health or who, while a director or officer of Regional Health, is or was serving at the Regional Health’s request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity for any liability incurred in such proceeding. Regional Health’s Bylaws further provide that Regional Health may indemnify and advance expenses to any employee or agent to the same extent and subject to the same conditions that a Georgia corporation could indemnify and advance expenses to its directors and officers. Notwithstanding the foregoing, Article IX of Regional Health’s Bylaws provides that Regional Health shall not indemnify such individual for any liability incurred in a proceeding in which the individual is adjudged liable to Regional Health or is subjected to injunctive relief in favor of Regional Health: (a) for any appropriation, in violation of his or her duties, of any business opportunity of Regional Health; (b) for acts or omissions which involve intentional misconduct or a knowing violation of law; (c) for the types of liability set forth in the GBCC or any successor law; or (d) for any transaction from which such individual received an improper benefit.
Article IX of Regional Health’s Bylaws further provides that, before final disposition of a proceeding, and subject to the director or officer delivering a written affirmation of his or her good faith belief that his or her conduct
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may be indemnified and an undertaking to repay the advanced funds if he or she is not entitled to indemnification, Regional Health shall advance funds to pay for or reimburse the expenses incurred in defense of such proceeding. A determination as to reasonableness of expenses for a specific proceeding may be made: (a) if there are two (2) or more disinterested directors, by the Board of Directors by a majority vote of all disinterested directors (which shall constitute a quorum) or by a majority of the members of a committee of two (2) or more disinterested directors appointed by such a vote; or (b) by certain shareholders, provided that shares owned by or voted under the control of a director or officer who at the time does not qualify as a disinterested director or disinterested officer may not be voted for this purpose.
The rights of indemnification provided in Article IX of Regional Health’s Bylaws are in addition to the power of Regional Health to purchase and maintain insurance on behalf of any director, officer, employee or agent against any liability asserted against or incurred by him or her in that capacity or arising out of his or her status as such, regardless of whether Regional Health would have the power to indemnify or advance expenses to him or her against the same liability under the Bylaws of Regional Health or otherwise.
Regional Health’s Bylaws further provide that any amendment, modification or rescission to Article IX that would diminish the right of indemnification or advancement of expenses of any indemnified person thereunder shall, as to such indemnified person, apply only to proceedings based on actions or omissions occurring after such amendment. Any indemnified person shall, as to any proceeding based on actions or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification or advancement of expenses under Article IX as in effect prior to such amendment. To the extent that the GBCC is amended to permit a Georgia corporation to provide its directors and officers greater rights to indemnification or advancement of expenses than those set forth in Regional Health’s Bylaws, Article IX provides that it shall be deemed amended to require such greater rights.