SENATE BILL NO. 32
AS AMENDED BY
SENATE AMENDMENT NO. 1 AND
HOUSE AMENDMENTS NO. 5 AND 6
AN ACT TO AMEND CHAPTER 9, TITLE 5 OF THE DELAWARE CODE RELATING TO THE FARMERS BANK.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fourths of all members elected to each House thereof concurring therein):
Section 1. Amend Chapter 9, Title 5 of the Delaware Code by adding thereto a new section, §935, to read as follows:
"§935. Indemnification of Farmers Bank Directors by the State
(a) Unless the amounts sought in indemnity are payable under a valid and enforceable insurance policy:
(I) The State shall indemnify any director who is not or was not an officer of the Farmers Bank who was or is a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Farmers Bank) by reason of the fact that he was or is a director of the Farmers Bank, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in the best interests of the Farmers Bank and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Farmers Bank, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The State shall indemnify any person who was or is a director, and who is not or was not an officer of the Farmers Bank, and who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Farmers Bank to procure a judgment in its favor by reason of the fact that he was or is a director of the
Farmers Bank against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit 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 corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(3) To the extent that a director who is not or
was not an officer of the Farmers Bank has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a)(1) and (2) or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
(b) Any indemnification under subsection (a) (unless ordered by court) shall be made by the State only as authorized in the specific case upon a determination that indemnification of the directors is proper in the circumstances because the Director has met the applicable standard of conduct set forth in subsection (a) of this section. Such determination shall be made by a vote of the members of the Farmers Bank Commission at least two-thirds of the members therein concurring.
(c) Unless such expenses are payable under a valid and enforceable insurance policy, and upon the recommendation of the Attorney General, reasonable expenses incurred by a director who is not or was not an officer of the Farmers Bank in defending a civil or criminal action, suit or proceeding shall be paid by the State in advance of the final disposition of such action, suit or proceeding in the specific case upon receipt of an undertaking by or on behalf of the director, to repay sudh amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized by this section.
(d) The indemnification provided by this section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under the Certificate of Incorporation or By-Laws of the Farmers Bank, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director of the Farmers Bank and shall inure to the benefit of the heirs, executors and administrators of such a person.
(e) No indemnity or payments shall be furnished pursuant to this Act:
(1) for any act or omission which occurred before July 1, 1976;
(2) in any amount in excess of $10,000,000.00 for any and all claims hereunder;
(3) for any action, suit or proceeding in any court whether in law or equity or otherwise brought after March 31, 1978;
(4) until the surplus capital account of the Farmers Bank has been used for indemnification up to the amount of $1,000,000, or, if the Farmers Bank has $1,000,000 or less in such account, until the entire such account has been used for indemnification.
(f) For purposes of this section 'director' shall mean any person who is a Director of the Farmers Bank at the time of the effective date of this section or any person who becomes a director of the Farmers Bank after the effective date of this section.
(g) No payment under this Act shall be approved unless the director seeking such payment shall agree that the State be subrogated, to the extent of such payment, to all rights of recovery of such director, and shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the State effectively to bring suit in the name of the State.
(h) This statute shall expire and become void on March 31, 1978 unless extended by further Act of the General Assembly.
(i) The Farmers Bank shall pay the State of Delaware a premium for the indemnity coverage provided by this Act at a rate that would be commensurate to that paid a private insurance carrier. The rate charged shall be determined by the Insurance Commissioner."
Approved April 28, 1977.