Okla. Stat. tit. 18 § 1031

Current through Laws 2024, c. 453.

Section 1031 - Indemnification of officers, directors, employees and agents - Insurance

A. A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorney fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the conduct was unlawful.

B. A corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses, including attorney fees, actually and reasonably incurred by the person in connection with the defense or settlement of an action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which the person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper.

C.

1. To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in subsection A or B of this section, or in defense of any claim, issue, or matter therein, the person shall be indemnified against expenses, including attorney fees, actually and reasonably incurred by the person in connection therewith.

2. The corporation may indemnify any other person who is not a present or former director or officer of the corporation against expenses including attorney fees actually and reasonably incurred by the person to the extent he or she has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in subsections A and B of this section, or in defense of any claim, issue, or matter therein.

D. Any indemnification under the provisions of subsection A or B of this section, unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsection A or B of this section. This determination shall be made, with respect to a person who is a director or officer of the corporation at the time of the determination:

1. By a majority vote of the directors who are not parties to the action, suit, or proceeding, even though less than a quorum;

2. By a committee of directors designated by a majority vote of directors, even though less than a quorum;

3. If there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or

4. By the shareholders.

E. Expenses including attorney fees incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit, or proceeding may be paid by the corporation in advance of the final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation as authorized by the provisions of this section. Expenses including attorney fees incurred by former directors or officers or other employees and agents or persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be paid upon the terms and conditions, if any, as the corporation deems appropriate.

F. The indemnification and advancement of expenses provided by or granted pursuant to the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in the person's official capacity and as to action in another capacity while holding an office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or the bylaw after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

G.

1. A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against the person and incurred by the person in any such capacity, or arising out of the person's status as such, whether or not the corporation would have the power to indemnify the person against liability under the provisions of this section. For purposes of this subsection, "insurance" shall include any insurance provided directly or indirectly, including under any fronting or reinsurance arrangement, by or through a captive insurance company organized and licensed in compliance with the laws of any jurisdiction, including any captive insurance company licensed under the Oklahoma Captive Insurance Company Act within Title 36 of the Oklahoma Insurance Code, provided that the terms of any such captive insurance shall:

a. exclude from coverage and provide that the insurer shall not make any payment for loss in connection with any claim made against any person arising out of, based upon, or attributable to any:

(1) personal profit or other financial advantage to which such person was not legally entitled, or

(2) deliberate criminal or deliberate fraudulent act of such person,

if the conditions of division (1) or (2) of this subparagraph are established by a final, non- appealable adjudication in the underlying proceeding in respect of such claim, which shall not include an action or proceeding initiated by the insurer or the insured to determine coverage under the policy, unless and only to the extent such person is entitled to be indemnified under this section,

b. require that any determination to make a payment under such insurance in respect of a claim against a current director or officer of the corporation shall be made by an independent claims administrator or in accordance with the provisions of paragraphs 1 through 4 of subsection D of this section, and

c. require that, before any payment under such insurance in connection with any dismissal or compromise of any action, suit, or proceeding brought by or in the right of a corporation as to which notice is required to be given to shareholders, such corporation shall include in such notice that a payment is proposed to be made under such insurance in connection with such dismissal or compromise.

2. For purposes of paragraph 1 of this subsection, the conduct of an insured person shall not be imputed to any other insured person.

3. The exclusions in paragraph 1 of this subsection shall permit a captive insurance policy to cover directors and officers for certain liabilities that are non-exculpable under paragraph 7 of subsection B of Section 1006 of this title.

4. Any corporation that establishes or maintains a captive insurance company that provides insurance under this subsection shall not, solely by virtue thereof, be subject to the provisions of Title 36 of the Oklahoma Insurance Code.

5. Nothing in this subsection shall be construed to prevent a foreign corporation from organizing a captive insurer under the Oklahoma Captive Insurance Company Act for the purpose of insuring the same risks described in this section.

6. Any corporation that establishes a captive insurance company may include in the insurance policy limitations or exclusions that are in addition to those prescribed by a statute or regulation.

H. For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation, including any constituent of a constituent, absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees, or agents, so that any person who is or was a director, officer, employee, or agent of a constituent corporation, or is or was serving at the request of a constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under the provisions of this section with respect to the resulting or surviving corporation as the person would have with respect to the constituent corporation if its separate existence had continued.

I. For purposes of this section, references to "other enterprises" shall include, but are not limited to, employee benefit plans; references to "fines" shall include, but are not limited to, any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include, but are not limited to, any service as a director, officer, employee, or agent of the corporation which imposes duties on, or involves services, by the director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner the person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section.

J. The indemnification and advancement of expenses provided by or granted pursuant to this section, unless otherwise provided when authorized or ratified, shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person.

K. The district court is vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise. The court may summarily determine a corporation's obligation to advance expenses including attorney fees.

Okla. Stat. tit. 18, § 1031

Amended by Laws 2024 , c. 120, s. 17, eff. 11/1/2024.

Amended by Laws 2017 , c. 323, s. 6, eff. 11/1/2017.

Added by Laws 1986, c. 292, § 31, eff. 11/1/1986; Amended by Laws 1987, c. 183, § 2, eff. 11/1/1987; Amended by Laws 1998, c. 422, § 5, eff. 11/1/1998.