Bank Directors Seminar, Coeur d'Alene, ID, September 15-17, 2019

DIRECTOR PROTECTION

Situation:  On advice of counsel, your bank reports the ongoing results of internal investigations relating to your CEO’s stroke, the concerns about false accounts, and insider trading  Three days later, and the day after you retired from the board, you are served with summons and complaint filed by several shareholders alleging that you breached your fiduciary duties and are personally liable  As a regular director, what do you do?

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DIRECTOR PROTECTION CONCEPTS • Indemnity : recompense for loss or injury; older usage applies to loss or injury caused by third parties, but newer usage applies to any loss or injury, even first party; not include defense • Hold harmless : absolution from liability; some states conflate with indemnity • Exculpation : eliminates money damages but not liability or other remedies • Duty to defend : provide and fund continuing defense • Advancement of expenses : fund continuing defense

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