Article XV is a promise the Nonprofit makes to those who lead it. If your honest work draws a lawsuit, you will not have to face it alone. That promise has nothing to do with lawyers and everything to do with the mission. Institutions fail when the people inside them start protecting themselves instead of the work they came to do. No one should have to choose between doing the right thing and protecting their family. Help with legal costs can arrive while a matter is still unfolding, not only after it ends. But the promise has a limit: It shields honest service—and nothing else.
Section 15.1 Indemnification Scope
Every Director and Corporate Officer is a Covered Person. The Board of Directors may designate another Official Representative as a Covered Person by Board Resolution. Qualifying indemnification covers legal costs and other amounts arising from service performed in good faith to the extent permitted by Pennsylvania law, including supplementary coverage authorized by 15 Pa.C.S. § 5746. Every right remains subject to nonwaivable law and this Article’s standards, authorization requirements, exclusions, and repayment rules. The Member and any Acting Member are Covered Persons in that capacity only through insurance, except when exercising powers of the Board of Directors. The Nonprofit makes no other indemnification payment or advance to them in that capacity. Their protection comes from directors-and-officers or similar insurance that names the Statutory Member by title, and the Independent Review Panel handles related notices and claims.
A Covered Person’s heirs, executors, administrators, and legal representatives may enforce derivative rights under this Article where permitted by law, but do not become Covered Persons solely through that capacity. The Nonprofit may cover reasonable witness expenses arising from qualifying service even when the Covered Person is not a named party.
Indemnification may cover some claims, issues, or matters in a proceeding without covering all of them. The Nonprofit shall limit payment to amounts reasonably attributable to matters qualifying for indemnification. Covered amounts may include expenses, judgments, penalties, fines, and settlements as permitted by law.
Section 15.2 Third-Party Proceedings
The Nonprofit shall indemnify an eligible Covered Person in a third-party proceeding as permitted by 15 Pa.C.S. § 5741. Indemnification may cover expenses, judgments, fines, and settlements actually and reasonably incurred.
The Covered Person must have acted in good faith and reasonably believed the conduct served or did not oppose the Nonprofit’s best interests. In a criminal proceeding, the Covered Person must also have lacked reasonable cause to believe the conduct was unlawful.
Section 15.3 Derivative Proceedings
In proceedings brought by or for the Nonprofit, indemnification covers only reasonable defense or settlement expenses. Covered expenses must have been actually incurred.
No indemnification is permitted for a claim on which the Covered Person is adjudged liable to the Nonprofit. A court may allow indemnification when it determines that payment is fair and proper under applicable law.
Section 15.4 Mandatory Indemnification
The Nonprofit shall indemnify a Covered Person who successfully defends any covered proceeding, claim, issue, or matter. This mandatory protection applies whether success occurs on the merits or otherwise.
The protection provides at least the indemnification required by Pennsylvania law. It does not limit broader indemnification available to a Director under this Article.
Section 15.5 Eligibility Determinations
Except after a successful defense, eligibility requires a written determination that all applicable legal standards are satisfied. The determination must address good faith, best interests, and every other required standard.
Authorization shall follow the Chain of Authority to the extent permitted by Pennsylvania law. If no authorized Director body can act, the Independent Review Panel, or Independent Counsel when the Panel cannot act, shall obtain an opinion from a qualified, licensed, conflict-free attorney.
The requesting Covered Person shall not select reviewers, deliberate, or participate in the decision. A favorable determination makes indemnification mandatory when the governing provisions otherwise require it.
A Covered Person seeking indemnification or expense advancement shall notify the Nonprofit in writing as soon as reasonably practicable. Delay does not impair the right unless it materially prejudices the Nonprofit’s ability to defend or respond. The Nonprofit may participate in or assume the defense at its expense when permitted by law.
Section 15.6 Advancement of Expenses
The Nonprofit may advance expenses before final disposition after receiving the recipient’s written repayment undertaking. The undertaking must require repayment of every advance if the recipient is ultimately found ineligible.
The recipient must also provide a written good-faith affirmation of eligibility and satisfy any lawful conditions imposed by the Board of Directors. An expense advance does not determine final eligibility.
Section 15.7 Prohibited Indemnification
The Nonprofit shall not provide indemnification or expense advancement for willful misconduct, recklessness, self-dealing, improper personal benefit, fraud, dishonesty, or knowing legal violations. The same prohibition applies to bad-faith abandonment of fiduciary duty and any liability, tax, penalty, or conduct that applicable law excludes.
Allegations alone do not establish prohibited conduct or justify denying protection. Denial or recovery requires a final written eligibility determination or a final order from a court of competent jurisdiction. Mandatory indemnification following a successful defense remains available when required by law.
Section 15.8 Insurance, Records, and Continuing Rights
The Nonprofit may purchase directors-and-officers insurance and other lawful coverage, including protection broader than direct indemnification when permitted by law. Every insurance and indemnification decision shall be documented and disclosed only as law, privilege, strategy, confidentiality, and privacy permit.
At least every two years, the Board of Directors shall review whether the Nonprofit should obtain or maintain directors-and-officers liability insurance. If coverage exists, the review must address its amount and scope. The Board of Directors shall consider the Nonprofit’s resources and risk exposure.
Lawful indemnification rights are nonexclusive, and amendments shall not retroactively eliminate protection for prior conduct unless permitted by law. Every indemnification, advancement, and insurance decision remains subject to Pennsylvania law and the Nonprofit’s charitable and fiduciary obligations. Any nonwaivable legal restriction controls.
End of Article XV. Return to the TOC