N.D. Cent. Code § 10-32.1-40

10-32.1-40. Indemnification and insurance

1. For purposes of this section, unless the context otherwise requires:

a. "Limited liability company" includes a domestic or foreign limited liability company

that was the predecessor of the limited liability company referred to in this section

in a merger or other transaction in which the existence of the predecessor ceased

upon consummation of the transaction.

b. "Official capacity" means:

(1) With respect to a member of a member-managed company, a manager of a

manager-managed company, or a governor of a board-managed company,

actions taken in that capacity;

(2) With respect to a person other than a member of a member-managed

company, a manager of a manager-managed company, or a governor of a

board-managed company:

(a) The elective or appointive office or position held by a manager or

officer, member of a committee of the board of governors;

(b) The employment relationship undertaken by an employee of the

limited liability company; or

(c) The scope of the services provided by members of the limited liability

company who provide services to the limited liability company; and

(3) With respect to a governor, manager, member, or employee of the limited

liability company who, while a member, governor, manager, or employee of

the limited liability company, is or was serving at the request of the limited

liability company or whose duties in that position involve or involved service

as a governor, director, manager, officer, member, partner, trustee,

employee, or agent of another organization or employee benefit plan, the

position of that person as a governor, director, manager, officer, member,

partner, trustee, employee, or agent, as the case may be, of the other

organization or employee benefit plan.

c. "Proceeding" means a threatened, pending, or completed civil, criminal,

administrative, arbitration, or investigative proceeding, including a proceeding by

or in the right of the limited liability company.

d. "Special legal counsel" means counsel who has not in the preceding five years:

(1) Represented the limited liability company or a related organization in a

capacity other than special legal counsel; or

(2) Represented a member, governor, manager, member of a committee of the

board of governors, or employee, or other person whose indemnification is

in issue.

2. With respect to indemnification:

a. Subject to the provisions of subsection 4, a limited liability company shall

indemnify a person made or threatened to be made a party to a proceeding by

reason of the former or present official capacity of the person against judgments,

penalties, fines, including, without limitation, excise taxes assessed against the

person with respect to an employee benefit plan, settlements, and reasonable

expenses, including attorney's fees and disbursements, incurred by the person in

connection with the proceeding, if, with respect to the acts or omissions of the

person complained of in the proceeding, the person:

(1) Has not been indemnified by another organization or employee benefit plan

for the same judgments, penalties, fines, including, without limitation, excise

taxes assessed against the person with respect to an employee benefit

plan, settlements, and reasonable expenses, including attorney's fees and

disbursements, incurred by the person in connection with the proceeding

with respect to the same acts or omissions;

(2) Acted in good faith;

(3) Received no improper personal benefit and complied with the duties stated

in sections 10-32.1-31 and 10-32.1-41, if applicable;

(4) In the case of a criminal proceeding, had no reasonable cause to believe the

conduct was unlawful; and
ey's fees and

disbursements, incurred by the person in connection with the proceeding

with respect to the same acts or omissions;

(2) Acted in good faith;

(3) Received no improper personal benefit and complied with the duties stated

in sections 10-32.1-31 and 10-32.1-41, if applicable;

(4) In the case of a criminal proceeding, had no reasonable cause to believe the

conduct was unlawful; and

(5) In the case of acts or omissions occurring in the official capacity described in

paragraph 1 or 2 of subdivision b of subsection 1, reasonably believed that

the conduct was in the best interests of the limited liability company, or in the

case of acts or omissions occurring in the official capacity described in

paragraph 3 of subdivision b of subsection 1, reasonably believed that the

conduct was not opposed to the best interests of the limited liability

company. If the acts or omissions of the person complained of in the

proceeding relate to conduct as a director, officer, trustee, employee, or

agent of an employee benefit plan, then the conduct is not considered to be

opposed to the best interests of the limited liability company if the person

reasonably believed that the conduct was in the best interests of the

participants or beneficiaries of the employee benefit plan.

b. The termination of a proceeding by judgment, order, settlement, conviction, or

upon a plea of nolo contendere or its equivalent does not, of itself, establish that

the person did not meet the criteria set forth in this subsection.

3. Subject to the provisions of subsection 4, if a person is made or threatened to be

made a party to a proceeding, then the person is entitled, upon written request to the

limited liability company, to payment or reimbursement by the limited liability company

of reasonable expenses, including attorney's fees and disbursements, incurred by the

person in advance of the final disposition of the proceeding:

a. Upon receipt by the limited liability company of a written affirmation by the person

of a good faith belief that the criteria for indemnification in subsection 2 have

been satisfied and a written undertaking by the person to repay all amounts so

paid or reimbursed by the limited liability company, if it is ultimately determined

that the criteria for indemnification have not been satisfied;

b. After a determination that the facts then known to those making the determination

would not preclude indemnification under this section; and

c. The written undertaking required by subdivision a is an unlimited general

obligation of the person making it, but need not be secured and shall be accepted

without reference to financial ability to make the repayment.

4. The articles of organization or the operating agreement either may prohibit

indemnification or advances of expenses otherwise required by this section or may

impose conditions on indemnification or advances of expenses in addition to the

conditions contained in subsections 2 and 3, including, without limitation, monetary

limits on indemnification or advances of expenses, if the conditions apply equally to all

persons or to all persons within a given class. A prohibition or limit on indemnification

or advances may not apply to or affect the right of a person to indemnification or

advances of expenses with respect to any acts or omissions of the person occurring

before the effective date of a provision in the articles of organization, a member control

agreement, or the date of adoption of a provision in the bylaws establishing the

prohibition or limit on indemnification or advances.

5. This section does not require, or limit the ability of, a limited liability company to

reimburse expenses, including attorney fees and disbursements, incurred by a person

in connection with an appearance as a witness in a proceeding at a time when the

person has not been made or threatened to be made a party to a proceeding.
blishing the

prohibition or limit on indemnification or advances.

5. This section does not require, or limit the ability of, a limited liability company to

reimburse expenses, including attorney fees and disbursements, incurred by a person

in connection with an appearance as a witness in a proceeding at a time when the

person has not been made or threatened to be made a party to a proceeding.

6. With respect to the determination of eligibility:

a. All determinations whether indemnification of a person is required because the

criteria in subsection 2 have been satisfied and whether a person is entitled to

payment or reimbursement of expenses in advance of the final disposition of a

proceeding as provided in subsection 3 must be made:

(1) In a board-managed limited liability company:

(a) By the board of governors by a majority of a quorum, provided that

governors who are, at the time, parties to the proceeding shall not be

counted for determining either a majority or the presence of a quorum;

(b) If a quorum under subparagraph a cannot be obtained, then by a

majority of a committee of the board of governors, consisting solely of

two or more governors not at the time parties to the proceeding, duly

designated to act in the matter by a majority of the full board of

governors including governors who are parties; and

(c) If a determination is not made under subparagraph a or b, then by

special legal counsel, selected either by a majority of the board of

governors or a committee by vote pursuant to subparagraph a or b or,

if the requisite quorum of the full board of governors cannot be

obtained and the committee cannot be established, then by a majority

of the full board of governors including governors who are parties.

(2) In all other cases, then by the affirmative vote of the members, subject to

subsection 4 of section 10-32.1-05 with each member having voting power

in proportion to the interest of the member in distributions of the limited

liability company before dissolution, but the membership interests held by

parties to the proceeding must not be counted in determining the presence

of a quorum and are not considered to be present and entitled to vote on the

determination; or

(3) If an adverse determination is made under subparagraphs a or b, or if no

determination is made under subparagraphs a or b then within sixty days

after:

(a) The later to occur of the termination of a proceeding or a written

request for indemnification to the limited liability company; or

(b) A written request for an advance of expenses, as the case may be, by

a court in this state, which may be the same court in which the

proceeding involving the liability of the person took place, upon

application of the person and any notice which the court requires. The

person seeking indemnification or payment or reimbursement of

expenses pursuant to this subdivision has the burden of establishing

that the person is entitled to indemnification or payment or

reimbursement of expenses.

b. With respect to a person who is not, and was not at the time of the acts or

omissions complained of in the proceedings, a member, governor, manager, or

person possessing, directly or indirectly, the power to direct or cause the direction

of the management or policies of the limited liability company, the determination

whether indemnification of this person is required because the criteria set forth in

subsection 2 have been satisfied and whether this person is entitled to payment

or reimbursement of expenses in advance of the final disposition of a proceeding

as provided in subsection 3 may be made:

(1) In a board-managed limited liability company, by an annually appointed

committee of the board of governors, having at least one member who is a

governor, which committee shall report at least annually to the board of

governors concerning its actions; and
ed to payment

or reimbursement of expenses in advance of the final disposition of a proceeding

as provided in subsection 3 may be made:

(1) In a board-managed limited liability company, by an annually appointed

committee of the board of governors, having at least one member who is a

governor, which committee shall report at least annually to the board of

governors concerning its actions; and

(2) In all other cases by a committee appointed annually by the members,

having at least one committee member who is a member of the limited

liability company, which committee shall report at least annually to the board

of governors concerning its actions.

7. A limited liability company may purchase and maintain insurance on behalf of a

member, manager, or governor of the company against liability asserted against or

incurred by the member, manager, or governor in that capacity or arising from that

status even if, under subsection 7 of section 10-32.1-13, the operating agreement

could not eliminate or limit the liability of a person to the company for the conduct

giving rise to the liability and whether or not the limited liability company would have

been required to indemnify the person against the liability under this section.

8. A limited liability company that indemnifies or advances expenses to a person

according to this section in connection with a proceeding by or on behalf of the limited

liability company shall report to the members in writing the amount of the

indemnification or advance and to whom and on whose behalf it was paid not later

than the next meeting of members.

9. Nothing in this section must be construed to limit the power of the limited liability

company to indemnify persons other than a governor, manager, member, employee, or

member of a committee of the board of the limited liability company, by contract or

otherwise.