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D is corrent because corporations have the power to properly indemnify their directors or officers for expenses incurred in defending suits against them for conduct undertaken in their official and representative capacity on behalf of the corporation. However, in shareholder derivative suits, normally no indemnification is permitted where the director or officer has been adjudged to be liable for negligence in the performance of his duty to the corporation. However, if the court in which the action or suit was brought determines that, despite the adjudication of liability, the director or officer is fairly and reasonably entitled to indemnification under the circumstances, then indemnification may be permitted regardless of the fact that the Articles of Incorporation do not provide therefor.
A is incorrect because under indemnification, Fairwell is entitled to expenses, judgments, fines, and amounts actually paid and reasonably incurred by him, which include reasonable attorney’s fees.
B is incorrect because in shareholder derivative suits, normally no indemnification is permitted where the director or officer has been adjudged to be liable for negligence in the performance of his duty to the corporation. However, indemnification may be permitted under certain circumstances.
C is incorrect because the court in which the action or suit was brought may determine that, despite the adjudication of liability, the director or officer is fairly and reasonably entitled to indemnification under the circumstances.