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EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made as of the
____ day of ___________, 1996, by and between TRUSTED INFORMATION SYSTEMS,
INC., a Delaware corporation (the "Corporation"), and ______________________
("Indemnitee"), a director and/or executive officer of the Corporation.
RECITALS
A. WHEREAS, it is essential to the Corporation to retain and
attract as directors and executive officers of the Corporation the most
capable persons available; and
B. WHEREAS, the substantial increase in corporate litigation
subjects directors and executive officers to expensive litigation risks at the
same time that the availability of directors' and officers' liability
insurance has been severely limited; and
C. WHEREAS, it is the express policy of the Corporation to
indemnify directors and executive officers of the Corporation so as to provide
them with the maximum possible protection permitted by law; and
D. Indemnitee does not regard the protection available under the
Delaware General Corporation Law or the Corporation's Bylaws as adequate in
the present circumstances, and may not be willing to serve as a director or
executive officer without adequate protection, and the Corporation desires
Indemnitee to serve in such capacity.
AGREEMENTS
NOW THEREFORE, the Corporation and Indemnitee do hereby agree as
follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to
serve as a director and/or an executive officer of the Corporation for so long
as he is duly elected or appointed or until such time as he tenders his
resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened,
pending or completed action, suit, investigation or proceeding, and any appeal
thereof, whether brought by or in the right of the Corporation or otherwise
and whether civil, criminal, administrative or investigative, and/or any
inquiry or investigation, in which Indemnitee may be or may have been involved
as a party or otherwise, or that Indemnitee in good faith believes might lead
to the institution of any such proceeding, by reason of the fact that
Indemnitee is or was a director or executive officer of the Corporation, by
reason of any action taken by him or of any inaction on his part while acting
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as such a director or executive officer, or by reason of the fact that he 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; in each case whether or not he is acting or serving in any
such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
(b) The term "Expenses" shall include, without limitation,
expenses, costs and obligations, paid or incurred, of investigations, judicial
or administrative proceedings or appeals, amounts paid in settlement by or on
behalf of Indemnitee, attorneys' fees and disbursements and any expenses
reasonably and actually incurred in establishing a right to indemnification
under Section 8 of this Agreement including, without limitation, those
incurred in investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend with respect to any claim, issue
or matter relating thereto or in connection therewith, but shall not include
the amount of judgments, fines or penalties against Indemnitee.
(c) A "Change in Control" shall be deemed to have occurred if,
after the date hereof, there is any transaction or series of transactions
within any twelve (12)-month period, including, without limitation, a merger,
consolidation or exchange of securities, in which the holders of all of the
Corporation's outstanding voting securities immediately prior to the
consummation of such transaction or the first transaction of such series of
transactions do not own, directly or indirectly, a majority of the combined
voting power of the Corporation's outstanding securities upon consummation of
such transaction or series of such transactions.
(d) The term "Independent Legal Counsel" shall include any
attorney or firm of attorneys, selected in accordance with Section 5 hereof,
who shall not have otherwise performed services for the Corporation or the
Indemnitee within the five years prior to the date of selection (other than
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other Indemnitees under similar indemnity agreements).
(e) References to "other enterprise" shall include employee
benefit plans; references to "fines" shall include any excise tax assessed
with respect to any employee benefit plan; references to "serving at the
request of the Corporation" shall include any service as a director, executive
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, executive 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 he reasonably believed to
be in the interests 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 Agreement.
3. Indemnity in Third-Party Proceedings. The Corporation shall
indemnify Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(other than a Proceeding by or in the right of the Corporation to procure a
judgment in its favor) by reason of the fact that Indemnitee is or was a
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director or executive officer 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 all Expenses, judgments, fines and penalties actually and reasonably
incurred by Indemnitee in connection with the defense or settlement of such
Proceeding, but only if he acted in good faith and in a manner which he
reasonably believed to be (in the case of conduct in his official capacity) in
the best interests of the Corporation or (in all other cases) not opposed to
the best interests of the Corporation, and, in the case of a criminal action
or proceeding, in addition, had no reasonable cause to believe that his
conduct was unlawful. The termination of any such Proceeding by judgment,
order of court, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation (or that Indemnitee did
not meet any other particular standard of conduct or have any other particular
belief or that a court has determined that indemnification is not permitted by
applicable law), and with respect to any criminal proceeding, that such person
had reasonable cause to believe that his conduct was unlawful.
4. Indemnitee in Proceedings by or in the Right of the
Corporation. The Corporation shall indemnify Indemnitee in accordance with
the provisions of this Section 4 if Indemnitee is a party to or threatened to
be made a party to any Proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that Indemnitee is or
was a director or executive officer 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 all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding, but only if he
acted in good faith and in a manner which he reasonably believed to be (in the
case of conduct in his official capacity) in the best interests of the
Corporation or (in all other cases) not opposed to the best interests of the
Corporation, except that no indemnification for Expenses shall be made under
this Section 4, in respect of any Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Corporation, unless and only to the extent
that any court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper. Notwithstanding
the foregoing, Indemnitee shall have no right to indemnification for Expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended.
5. Change in Control. The Corporation agrees that in the event of
a Change in Control, and with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnification and payment of Expenses
under this Agreement or any other agreement to which the Corporation and
Indemnitee are parties or the Corporation's Bylaws now or hereafter in effect
relating to indemnification of Directors and/or Officers of the Corporation,
the Corporation shall seek legal advice only from the Independent Legal
Counsel selected by Indemnitee and approved
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by the Corporation (which approval shall not be unreasonably withheld). Such
counsel, among other things, shall render its written opinion to the
Corporation and Indemnitee as to whether and to what extent the Indemnitee
would be permitted to be indemnified under applicable law. The Corporation
agrees to pay the reasonable fees of the Independent Legal Counsel referred to
above and to indemnify fully such counsel against any and all expenses
(including attorney's fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
6. Indemnification Prohibited. Notwithstanding the provisions of
Sections 3 and 4, no indemnification shall be made in connection with any
Proceeding charging improper personal benefit to the Indemnitee, whether or
not involving action in his official capacity, in which he was adjudged liable
on the basis that personal benefit was improperly received by him.
7. Indemnification of Expenses of Successful Party.
Notwithstanding any other provision of this Agreement whatsoever, to the
extent that Indemnitee has been successful on the merits or otherwise
(including a settlement) in defense of any Proceeding or in defense of any
claim, issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses reasonably and actually
incurred in connection therewith.
8. Advance of Expenses. Expenses incurred by the Indemnitee
pursuant to Sections 3 and 4 in any Proceeding shall be paid by the
Corporation in advance as soon as practicable but not later than three
business days after receipt of the written request of the Indemnitee provided
that Indemnitee shall (i) affirm in such written request that he acted in good
faith and in a manner which he reasonably believed to be (in the case of
conduct in his official capacity) in the best interests of the Corporation or
(in all other cases) not opposed to the best interests of the Corporation and
(ii) undertake to repay such amount to the extent that it is ultimately
determined that Indemnitee is not entitled to indemnification, and further
provided that a determination has been made that the facts then known would
not preclude indemnification pursuant to the terms of this Agreement.
9. Right of Indemnitee to Indemnification Upon Application;
Procedure Upon Application.
(a) Any indemnification under Sections 3 and 4 shall be made
as soon as practicable but in any event no later than 30 days after receipt by
the Corporation of the written request of Indemnitee.
(b) The right of indemnification or advances as provided by
this Agreement shall be enforceable by Indemnitee in any court of competent
jurisdiction. The burden of proving that indemnification or advances are not
appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, Independent Legal Counsel, or
stockholders) to have made a determination prior to the commencement of such
action that indemnification or advances are proper in the circumstances
because Indemnitee has
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met the applicable standard of conduct, nor an actual determination by the
Corporation (including its Board of Directors, Independent Legal Counsel, or
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has
not met the applicable standard of conduct. Indemnitee's expenses reasonably
incurred in connection with successfully establishing Indemnitee's right to
indemnification or advances, in whole or in part, in any such Proceeding shall
also be indemnified by the Corporation.
(c) The Corporation shall not be liable under this Agreement
to make any payment in connection with any claim made against Indemnitee to
the extent Indemnitee has otherwise actually received payment or is entitled
to receive payment (under any insurance policy, Bylaw or otherwise) of the
amounts otherwise indemnifiable hereunder.
10. Indemnification Hereunder Not Exclusive.
(a) Notwithstanding any other provision of this Agreement, the
Corporation hereby agrees to indemnify the Indemnitee to the full extent
permitted by law, whether or not such indemnification is specifically
authorized by the other provisions of this Agreement, the Corporation's
Certificate of Incorporation, Bylaws, or by statute. In the event of any
changes, after the date of this Agreement, in any applicable law, statute, or
rule which expand the right of a Delaware corporation to indemnify its
directors or executive officers, such changes shall be deemed within the
purview of the Indemnitee's rights, and Corporation's obligations, under this
Agreement. In the event of any changes in any applicable law, statute, or
rule which narrow the right of a Delaware corporation to indemnify a member of
its board of directors, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may be entitled
under the Certificate of Incorporation, the Bylaws, any agreement, any vote of
shareholders or disinterested directors, the laws of the State of Delaware, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
11. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for some or
a portion of the Expenses, judgments, fines or penalties actually and
reasonably incurred by him in the investigation, defense, appeal or settlement
of any Proceeding but not, however, for the total amount thereof, the
Corporation shall nevertheless indemnify Indemnitee for the portion of such
Expenses, judgments, fines or penalties to which Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the extent
that Indemnitee has been successful on the merits or otherwise in defense of
any or all claims, issues or matters relating in whole or in part to an
indemnifiable event, occurrence or matter hereunder, including dismissal
without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection with such defenses.
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12. Effect of Federal Law. Both the Company and the Indemnitee
acknowledge that in certain instances, federal law will override Delaware law
and prohibit the Corporation from indemnifying its officers and directors.
For example, the Corporation and Indemnitee acknowledge that the Securities
and Exchange Commission has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws, and
federal law prohibits indemnification for certain violations of the Employee
Retirement Income Security Act.
13. Liability Insurance.
(a) The Corporation shall from time to time make the good
faith determination whether or not it is practicable for the Corporation to
obtain and maintain a policy or policies of insurance with reputable insurance
companies providing the officers and directors with coverage for losses from
wrongful acts, or to ensure the Corporation's performance of its
indemnification obligations under this Agreement. Among other considerations,
the Corporation will weigh the costs of obtaining such insurance against the
protection afforded by such coverage.
(b) Indemnitee hereby releases the Corporation and its
respective authorized representatives from any claims for indemnification
hereunder if and to the extent that Indemnitee receives proceeds from any
liability insurance policy or other third-party source in payment or
reimbursement for such claims. Indemnitee hereby agrees to assign to the
Corporation all proceeds Indemnitee receives under any such insurance policy
or third-party agreement to the extent of the amount of indemnification made
to Indemnitee under the terms of this Agreement. Finally, Indemnitee shall
cause each insurance policy or other third-party agreement by which the
Indemnitee may be entitled to payment or reimbursement to provide that the
insurance company or the third-party agreement by which the Indemnitee may be
entitled to payment or reimbursement to provide that the insurance company or
the third party waives all right of recovery by way of subrogation against the
Corporation in connection with any claim for indemnification under this
Agreement. If such waiver of subrogation cannot be obtained except with the
payment of additional sums in premiums or otherwise, the Indemnitee shall
notify the Corporation of this fact. The Corporation shall then have ten (10)
days after receiving such notice to agree to pay such additional sums. If a
waiver of subrogation rights is not obtainable at any price of if the
Corporation shall fail to agree to pay such additional sums, Indemnitee shall
be relieved of the obligation to obtain the waiver of subrogation rights with
respect to any particular insurance policy or third-party agreement.
14. Saving Clause. Nothing in this Agreement is intended to
require or shall be construed as requiring the Corporation to do or fail to do
any act in violation of applicable law. The provisions of this Agreement
(including any provision within a single section, paragraph or sentence) shall
be severable in accordance with this Section 14. If this Agreement or any
portion thereof shall be invalidated on any ground by any court of competent
jurisdiction, the
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Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments,
fines and penalties with respect to any Proceeding to the full extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated or by any other applicable law, and this Agreement shall remain
enforceable to the fullest extent permitted by law.
15. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if delivered personally or
sent by telex, federal express, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may have
given notice pursuant to this Section 15:
To the Corporation:
------------------
Trusted Information Systems, Inc.
0000 Xxxxxxxxxx Xxxx (Xx. 00)
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, President
With a copy to:
--------------
Piper & Marbury L.L.P.
0000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx, Xx., Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) on the date delivered, if delivered personally; or (b)
three (3) business days after being sent, if sent by telex, federal express,
or registered or certified mail.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
17. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to its rules of conflicts of laws.
18. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties and their
respective successors and assigns (including any direct or indirect successors
by purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Corporation), spouses, heirs, and personal
and legal representatives. The Corporation shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all or a substantial part, of the business
and/or assets of the Corporation, by written agreement in form and substance
satisfactory to the Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to
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perform if no such succession had taken place. This Agreement shall continue
in effect regardless of whether Indemnitee continues to serve as a director
and/or executive officer of the Corporation or of any other enterprise.
19. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees and disbursements, incurred by Indemnitee
with respect to such action, unless as a part of such action, a court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the
Corporation under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including attorneys' fees and disbursements, incurred by Indemnitee
in defense of such action (including with respect to Indemnitee's
counterclaims and crossclaims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to
such action were made in bad faith or were frivolous.
20. Subsequent Instruments and Acts. The parties hereto agree that
they will execute any further instruments and perform any acts that may become
necessary from time to time to carry out the terms of this Agreement.
21. Limitations Period. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Corporation or any
affiliate of the Corporation against Indemnitee, Indemnitee's spouse, heirs,
executors or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any claim or cause
of action of the Corporation or its affiliates shall be extinguished and
demand released unless asserted by the timely filing of a legal action within
such two-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action such shorter
period shall govern.
22. Pronouns. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
23. Entire Agreement; Amendments. This Agreement, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings by and between such parties. The parties, upon mutual consent,
may amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the parties hereto.
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed and signed as of the day and year first above written.
TRUSTED INFORMATION SYSTEMS, INC.
By:
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Xxxxxxx X. Xxxxxx
President
INDEMNITEE:
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Name:
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