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e-CFR
Data is current as of January 28, 2008

Title 12:
Banks and Banking
PART 545—FEDERAL SAVINGS
ASSOCIATIONS—OPERATIONS

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§ 545.121   Indemnification of directors, officers
and employees.

A Federal savings association 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. The term “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. The term “court” includes, without limitation, any
court to which or in which any appeal or any proceeding for review is
brought.

(iii) Final judgment. The term “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. The term “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 association, shall include legal representatives,
successors, and assigns thereof.

(b) General. Subject to paragraphs (c) and (g) of this section,
a savings association 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 association, 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 savings association
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 savings association or its members.

However, no indemnification shall be made unless the association gives
the Office 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 Regional Director, 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 OTS advises the association in
writing, within such notice period, of his or her objection thereto.

(d) Insurance. A savings association 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 savings association may obtain insurance which
provides for payment of losses of any person incurred as a consequence of
his or her willful or criminal misconduct.

(e) Payment of expenses. If a majority of the directors of a
savings association 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 (e) shall prevent
the directors of a savings association from imposing such conditions on a
payment of expenses as they deem warranted and in the interests of the
savings association. Before making advance payment of expenses under this
paragraph (e), the savings association shall obtain an agreement that the
savings association 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 savings association 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, an association 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).

[54 FR 49492, Nov. 30, 1989, as amended at 56 FR 59866, Nov. 26, 1991;
60 FR 66717, Dec. 26, 1995]

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