A mutual holding company shall
indemnify its directors, officers, and employees in accordance with the
following requirements:
(a) Definitions and rules of construction.
(1) Definitions for purposes of this section.
(i) Action means any judicial or administrative
proceeding, or threatened proceeding, whether civil, criminal, or
otherwise, including any appeal or other proceeding for review;
(ii) Court includes, without limitation, any
court to which or in which any appeal or any proceeding for review
is brought.
(iii) Final judgment means a judgment, decree,
or order which is not appealable or as to which the period for appeal
has expired with no appeal taken.
(iv) Settlement includes entry of a judgment by consent or confession or a plea
of guilty or nolo contendere.
(2) References in this section to any individual
or other person, including any mutual holding company, shall include
legal representatives, successors, and assigns thereof.
(b) General. Subject
to paragraphs (c) and (g) of this section, a mutual holding company
shall indemnify any person against whom an action is brought or threatened
because that person is or was a director, officer, or employee of
the mutual holding company, for:
(1) Any amount for which that person becomes
liable under a judgment if such action; and
(2) Reasonable costs and expenses, including
reasonable attorney’s fees, actually paid or incurred by that person
in defending or settling such action, or in enforcing his or her rights
under this section if he or she attains a favorable judgment in such
enforcement action.
(c) Requirements. Indemnification shall be
made to such period under paragraph (b) of this section only if:
(1) Final judgment on the
merits is in his or her favor; or
(2) In case of:
(i) Settlement,
(ii) Final judgment
against him or her, or
(iii) Final judgment in his or her favor, other than on the merits,
if a majority of the disinterested directors of the mutual holding
company determine that he or she was acting in good faith within the
scope of his or her employment or authority as he or she could reasonably
have perceived it under the circumstances and for a purpose he or
she could reasonably have believed under the circumstances was in
the best interests of the mutual holding company or its members.
However, no indemnification shall be made unless the
mutual holding company gives the Board at least 60 days’ notice of
its intention to make such indemnification. Such notice shall state
the facts on which the action arose, the terms of any settlement,
and any disposition of the action by a court. Such notice, a copy
thereof, and a certified copy of the resolution containing the required
determination by the board of directors shall be sent to the appropriate
Reserve Bank, who shall promptly acknowledge receipt thereof. The
notice period shall run from the date of such receipt. No such indemnification
shall be made if the Board advises the mutual holding company in writing,
within such notice period, of its objection to the indemnification.
(d) Insurance. A mutual holding company may obtain insurance to protect it and
its directors, officers, and employees from potential losses arising
from claims against any of them for alleged wrongful acts, or wrongful
acts, committed in their capacity as directors, officers, or employees.
However, no mutual holding company may obtain insurance which provides
for payment of losses of any individual incurred as a consequence
of his or her willful or criminal misconduct.
(e) Payment of expenses. If a majority of the
directors of a mutual holding company concludes that, in connection
with an action, any person ultimately may become entitled to indemnification
under this section, the directors may authorize payment of reasonable
costs and expenses, including reasonable attorneys’ fees,
arising from the defense or settlement of such action. Nothing in
this paragraph shall prevent the directors of a mutual holding company
from imposing such conditions on a payment of expenses as they deem
warranted and in the interests of the mutual holding company. Before
making advance payment of expenses under this paragraph, the mutual
holding company shall obtain an agreement that the mutual holding
company will be repaid if the person on whose behalf payment is made
is later determined not to be entitled to such indemnification.
(f) Exclusiveness
of provisions. No mutual holding company shall indemnify any
person referred to in paragraph (b) of this section or obtain insurance
referred to in paragraph (d) of the section other than in accordance
with this section. However, a mutual holding company which has a bylaw
in effect relating to indemnification of its personnel shall be governed
solely by that bylaw, except that its authority to obtain insurance
shall be governed by paragraph (d) of this section.
(g) The indemnification provided for in paragraph (b) of this section
is subject to and qualified by 12 U.S.C. 1821(k).
