Item 6. Indemnification of Directors and Officers.
The Company is a Utah corporation. Section 16-10a-902 of the Utah Revised Business Corporation Act (the “Revised Act”) provides that a corporation may indemnify any individual who was, is, or is threatened to be made a named defendant or respondent (a “Party”) in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (a “Proceeding”), because he or she is or was a director of the corporation or, while a director of the corporation, is or was serving at its request as a director, officer, partner, trustee, employee, fiduciary or agent of another corporation or other person or of an employee benefit plan (an “Indemnifiable Director”), against any obligation incurred with respect to a Proceeding, including any judgment, settlement, penalty or fine, or reasonable expenses (including attorneys’ fees), incurred in the Proceeding if his or her conduct was in good faith and he or she reasonably believed that his or her conduct was in, or not opposed to, the best interests of the corporation, and, in the case of any criminal Proceeding, he or she had no reasonable cause to believe such conduct was unlawful; provided, however, that pursuant to Subsection 902: (i) indemnification under Section 902 in connection with a Proceeding by or in the right of the corporation is limited to payment of reasonable expenses (including attorneys’ fees) incurred in connection with the Proceeding and (ii) the corporation may not indemnify an Indemnifiable Director in connection with a Proceeding by or in the right of the corporation in which the Indemnifiable Director was adjudged liable to the corporation, or in connection with any other Proceeding charging that the Indemnifiable Director derived an improper personal benefit, whether or not involving action in his or her official capacity, in which Proceeding he or she was adjudged liable on the basis that he or she derived an improper personal benefit.
Section 16-10a-903 of the Revised Act provides that, unless limited by its articles of incorporation, a corporation shall indemnify an Indemnifiable Director who was successful, on the merits or otherwise, in the defense of any Proceeding, or in the defense of any claim, issue or matter in the Proceeding, to which he or she was a Party because he or she is or was an Indemnifiable Director of the corporation, against reasonable expenses (including attorneys’ fees) incurred in connection with the Proceeding or claim with respect to which he or she has been successful.
In addition to the indemnification provided by Sections 902 and 903, Section 16-10a-905 of the Revised Act provides that, unless otherwise limited by a corporation’s articles of incorporation, an Indemnifiable Director may apply for indemnification to the court conducting the Proceeding or to another court of competent jurisdiction.
Section 16-10a-904 of the Revised Act provides that a corporation may pay for or reimburse the reasonable expenses (including attorneys’ fees) incurred by an Indemnifiable Director who is a Party to a Proceeding in advance of the final disposition of the Proceeding, upon the satisfaction of certain conditions.
Section 16-10a-907 of the Revised Act provides that, unless a corporation’s articles of incorporation provide otherwise, (i) an officer of the corporation is entitled to mandatory indemnification under Section 903 and is entitled to apply for court-ordered indemnification under Section 905, in each case to the same extent as an Indemnifiable Director, (ii) the corporation may indemnify and advance expenses to an officer, employee, fiduciary or agent of the corporation to the same extent as an Indemnifiable Director, and (iii) a corporation may also indemnify and advance expenses to an officer, employee, fiduciary or agent who is not an Indemnifiable Director to a greater extent than the right of indemnification granted to an Indemnifiable Director, if not inconsistent with public policy, and if provided for by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.
The Company’s Amended and Restated Bylaws (the “Bylaws”) provide that, subject to the limitations described below, the Company shall indemnify any individual made a Party to a proceeding because the
Indemnifiable Director is or was a director of the Company, against liability incurred in the proceeding, but only if the Company has authorized the payment in accordance with the Revised Act and a determination has been made in accordance with the procedures set forth in such provision that the Indemnifiable Director conducted himself in good faith; that the Indemnifiable Director reasonably believed that the Indemnifiable Director’s conduct, if in the Indemnifiable Director’s official capacity with the Company, was in its best interests and that the Indemnifiable Director’s conduct, in all other cases, was at least not opposed to the Company's best interests; and that the Indemnifiable Director had no reasonable cause to believe the Indemnifiable Director’s conduct was unlawful in the case of any criminal proceeding. Notwithstanding the foregoing, the Bylaws state that the Company shall not indemnify a director in connection with a proceeding by or in the right of the Company in which the director was adjudged liable to the Company or in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director’s official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by the director. Indemnification permitted under the Bylaws in connection with a proceeding by or in the right of the Company is limited to reasonable expenses incurred in connection with the proceeding. If a determination is made, using the procedures set forth in the Revised Act, that the Indemnifiable Director has satisfied the requirements listed in the Bylaws and if an authorization of payment is made, using the procedures and standards set forth in the Revised Act, then the Company shall pay for or reimburse the reasonable expenses incurred by an Indemnifiable Director who is a Party to a proceeding in advance of the final disposition of the proceeding if the Indemnifiable Director furnishes the Company a written affirmation of the Indemnifiable Director’s good faith belief that the Indemnifiable Director has satisfied the standard of conduct described in the Bylaws, furnishes the Company a written undertaking, executed personally or on the Indemnifiable Director’s behalf, to repay the advance if it is ultimately determined that the Indemnifiable Director did not meet the standard of conduct (which undertaking must be an unlimited general obligation of the Indemnifiable Director, but need not be secured and may be accepted without reference to financial ability to make repayment); and if a determination is made that the facts then known of those making the determination would not preclude indemnification under the Bylaws. The Bylaws further state that the Company shall indemnify a director or officer of the Company who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director or officer was a Party because the director or officer is or was a director or officer of the Company against reasonable expenses incurred by the director or officer in connection with the proceeding. The Bylaws also state that a director or officer of the Company who is or was a Party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. The court may order indemnification if it determines that the director or officer is entitled to mandatory indemnification as provided in the Bylaws and applicable law, in which case the court shall also order the Company to pay the reasonable expenses incurred by the director or officer to obtain court-ordered indemnification. The court may also order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director or officer met the applicable standard of conduct set forth in the Bylaws and applicable law. The Bylaws also state that an officer, employee, or agent of the Company shall have the same indemnification rights provided to a director under the Bylaws. The Board of Directors of the Company may also indemnify and advance expenses to any officer, employee, or agent of the Company, to any extent consistent with public policy as determined by the general or specific purpose of the Board of Directors of the Company.
Utah law permits director liability to be eliminated in accordance with Section 16-10a-841 of the Revised Act, which provides that the liability of a director to the corporation or its shareholders for monetary damages for any action taken or any failure to take any action, as a director, may be limited or eliminated by the corporation except for liability for (i) the amount of financial benefit received by a director to which he or she is not entitled; (ii) an intentional infliction of harm on the corporation or its shareholders; (iii) a violation of Section 16-10a-842 of the Revised Act, which prohibits unlawful distributions by a corporation to its shareholders; or (iv) an intentional violation of criminal law. Such a provision may appear either in a corporation’s articles of incorporation or bylaws; however, to be effective, such a provision must be approved by the corporation’s shareholders.
The Amended and Restated Articles of Incorporation of the Company provide that the liability of the Company’s directors to the Company and its shareholders is limited to the fullest extent permitted by Utah law for monetary damages for any action taken or any failure to take any action as a director.
The Bylaws provide that the Company may purchase and maintain insurance on behalf of any person who is or was one of the Company’s directors, officers, employees, fiduciaries or agents, or is or was serving at its request as a director, officer, partner, trustee, employee, fiduciary or agent of another corporation, other person, or of an employee benefit plan, against any liability asserted against him or her or incurred by him or her in such capacity or arising out of his or her status in such capacity, whether or not the Company would have the power to indemnify him or her against such liability under the indemnification provisions of the Bylaws or the laws of the State of Utah, as the same are amended or modified. The Company maintains insurance from commercial carriers against certain liabilities that may be incurred by its directors and officers.