Flashcards Studio

Orchid Labs, Inc. was sued after its chief financial officer, Morgan, announced revenue numbers that later proved overstated. Morgan was named in three claims. First, a securities-fraud claim by investors was dismissed on the merits because the court found that Morgan reasonably relied on the controller's reports. Second, a customer misrepresentation claim settled for $300,000 with no admission of wrongdoing. Third, in a derivative claim, the court found that Morgan ignored repeated internal warnings and ordered Morgan to pay $500,000 to Orchid.
Before judgment, Orchid advanced Morgan's legal fees after Morgan signed a written promise to repay any amounts for which indemnification was unavailable. After the case, Morgan asked Orchid to indemnify all fees, the settlement, and the derivative judgment. The articles contain a standard indemnification provision but no special expansion beyond the corporation statute.
For which amounts, if any, must or may Orchid indemnify Morgan? Discuss.