N.J. Stat. § 17:9A-250

Current through L. 2024, c. 87.

Section 17:9A-250 - Action against directors, managers, officers or employees; indemnification

A. As used in this section

(1) "Corporate agent" means any person who is or was a director, officer, employee or agent of the indemnifying bank or of any constituent banking institution or corporation absorbed by the indemnifying bank in a consolidation or merger or created by or owned by the indemnifying bank and any person who is or was a director, officer, trustee, employee or agent of any other enterprise, serving as such at the request of the indemnifying bank, or of any constituent banking institution or corporation or the legal representative of any such director, officer, trustee, employee or agent;

(2) "Other enterprise" means any domestic or foreign corporation, other than the indemnifying bank, and any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, whether or not for profit, served by a corporate agent;

(3) "Expenses" means reasonable costs, disbursements and counsel fees;

(4) "Liabilities" means amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties;

(5) "Proceeding" means any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding;

(6) "Bank" includes savings bank and capital stock savings bank;

(7) "Directors" includes directors of a bank and capital stock savings bank and managers of a savings bank.

B. Any bank of this State shall have the power to indemnify a corporate agent against his expenses and liabilities in connection with any proceeding involving the corporate agent by reason of his being or having been such a corporate agent, other than a proceeding by or in the right of the bank, if

(1) Such corporate agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the bank;

(2) With respect to any criminal proceeding, such corporate agent had no reasonable cause to believe his conduct was unlawful.

The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that such corporate agent did not meet the applicable standards of conduct set forth in subdivisions (1) and (2) of this subsection.

C. Any bank of this State shall have the power to indemnify a corporate agent against his expenses in connection with any proceeding by or in the right of the bank to procure a judgment in its favor which involves the corporate agent by reason of his being or having been such corporate agent, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the bank. However, in such proceeding no indemnification shall be provided in respect of any claim, issue or matter as to which such corporate agent shall have been adjudged to be liable to the bank, unless and only to the extent that the Superior Court or other court in which such proceeding was brought shall determine upon application that despite the adjudication of liability, but in view of all circumstances of the case, such corporate agent is fairly and reasonably entitled to indemnity for such expenses as the Superior Court or other court shall deem proper.

D. Any bank of this State shall indemnify a corporate agent against expenses to the extent that such corporate agent has been successful on the merits or otherwise in any proceeding referred to in subsections B and C of this section or in defense of any claim, issue or matter therein.

E. Any indemnification under subsection B of this section, and, unless ordered by a court, under subsection C of this section, may be made by the bank only as authorized in a specific case upon a determination that indemnification is proper in the circumstances because the corporate agent met the applicable standard of conduct set forth in subsection B of this section or subsection C of this section. Unless otherwise provided in the certificate of incorporation or bylaws, the determination shall be made

(a) By the board of directors or a committee thereof acting by a quorum consisting of directors who were not parties to or otherwise involved in, the proceeding; or

(b) If such a quorum is not obtainable, or, even if obtainable and that quorum of the board of directors or committee by a majority vote of the disinterested directors so directs, by independent legal counsel in a written opinion, that independent legal counsel to be designated by the board of directors; or

(c) By the stockholders, if the certificate of incorporation or bylaws or a resolution of the board of directors or of the stockholders so directs, in the case of a bank which is not a savings bank, and by the commission, in the case of a savings bank.

F. Expenses incurred by a corporate agent in connection with a proceeding may be paid by the bank in advance of the final disposition of the proceeding, if authorized by the board of directors, upon receipt of an undertaking by or on behalf of the corporate agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified as provided in this section.

(1) If a bank upon application of a corporate agent has failed or refused to provide indemnification as required under subsection D of this section or permitted under subsections B, C and F of this section, a corporate agent may apply to a court for an award of indemnification by the bank, and such court

(2) May award indemnification to the extent authorized under subsections B and C of this section and shall award indemnification to the extent required under subsection D of this section, notwithstanding any contrary determination which may have been made under subsection E of this section; and

(3) May allow reasonable expenses to the extent authorized by, and subject to the provisions of, subsection F of this section, if the court shall find that the corporate agent has by his pleadings or during the course of the proceeding raised genuine issues of fact or law.

(4) Application for such indemnification may be made

(a) In the civil action in which the expenses were or are to be incurred or other amounts were or are to be paid; or

(b) To the Superior Court in a separate proceeding. If the application is for indemnification arising out of a civil action, it shall set forth reasonable cause for the failure to make application for such relief in the action or proceeding in which the expenses were or are to be incurred or other amounts were or are to be paid.

(5) The application shall set forth the disposition of any previous application for indemnification and shall be made in such manner and form as may be required by the applicable rules of court or, in the absence thereof, by direction of the court to which it is made. Such application shall be upon notice to the bank. The court may also direct that notice shall be given at the expense of the bank to the stockholders of a bank other than a savings bank and such other persons as it may designate in such manner as it may require.

H. The indemnification and advancement of expenses provided by or granted pursuant to the other subsections of this section shall not exclude any other rights, including the right to be indemnified against liabilities and expenses incurred in proceedings by or in the right of the bank, to which a corporate agent may be entitled under a certificate of incorporation, bylaw, agreement, vote of stockholders of a bank other than a savings bank, or otherwise; provided that no indemnification shall be made to or on behalf of a corporate agent if a judgment or other final adjudication adverse to the corporate agent establishes that his acts or omissions (a) were in breach of his duty of loyalty to the bank or its stockholders, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by the corporate agent of an improper personal benefit. As used in this subsection, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the bank, other than a savings bank, or its stockholders or the savings bank or its depositors in connection with a matter in which he has a material conflict of interest.

I. Any bank of this State shall have the power to purchase and maintain insurance on behalf of any corporate agent against any expenses incurred in any proceeding and any liabilities asserted against him by reason of his being or having been a corporate agent, whether or not the bank would have the power to indemnify him against those expenses and liabilities under the provisions of this section. The bank may purchase such insurance from, or such insurance may be reinsured in whole or in part by, an insurer owned by or otherwise affiliated with the bank, whether or not such insurer does business with other insureds.

J. The powers granted by this section may be exercised by a bank notwithstanding the absence of any provision in its certificate of incorporation or bylaws authorizing the exercise of such powers.

K. Except as required by subsection D of this section, no indemnification shall be made or expenses advanced by a corporation under this section, and none shall be ordered by the Superior Court or other court, if that action would be inconsistent with a provision of the certificate of incorporation, a bylaw, a resolution of the board of directors or of the stockholders, or an agreement or other proper corporate action, in effect at the time of the accrual of the alleged cause of action asserted in the proceeding, which prohibits, limits or otherwise conditions the exercise of indemnification powers by the corporation or the rights of indemnification to which a corporate agent may be entitled.

N.J.S. § 17:9A-250

L.This section does not limit a bank's power to pay or reimburse expenses incurred by a corporate agent in connection with the corporate agent's appearance as a witness in a proceeding at a time when the corporate agent has not been made a party to the proceeding.L. 1948, c.67, s.250, amended 1953, c.17, s.37; 1970, c.165, s.10; 1985, c.528, s.12; 1987, c.35, s.10; 1989, c.17, s.7.