EXHIBIT 10.01
DIGITAL CERTIFICATES INTERNATIONAL, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
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This Series A Preferred Stock Purchase Agreement is made as of April 18,
1995, by and between Digital Certificates International, Inc. (the "COMPANY"),
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RSA Data Security, Inc., a Delaware corporation ("RSA"), and the purchasers
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listed on Exhibit A (collectively referenced as the "PURCHASERS" and
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individually as a "PURCHASER").
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1
Sale of Preferred Stock
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Subject to the terms and conditions hereof, the Company will sell and issue
to the Purchasers, and the Purchasers, severally and not jointly, will purchase
from the Company, the number of shares of the Company's Series A Preferred Stock
(the "PREFERRED STOCK") set forth opposite each Purchaser's name on Exhibit A,
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at a price of One Dollar and Twenty Cents ($1.20) per share.
2
Closing; Delivery
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2.1 Closings. The closings of the purchase and sale of the Preferred Stock
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hereunder shall take place at such time or times as elected by the Company as
set forth below. Each such closing is hereafter referenced as a "Closing". The
Company shall schedule closings as it deems appropriate until such time as Four
Million Three Hundred Six Thousand Eight Hundred Eighty-Three (4,306,883) shares
of Preferred Stock have been sold or until December 31, 1995 whichever shall
first occur. A majority of the holders of the Preferred Stock may approve an
extension of such date. Each such closing shall be held at the offices of the
Company or such other place as the Purchasers and the Company shall mutually
agree.
2.2 Delivery. At each Closing, the Company shall deliver to each Purchaser
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a certificate representing the Preferred Stock which such Purchaser is
purchasing at such Closing against delivery to the Company by such Purchaser of
a bank check or bank wire (or other check acceptable to the Company) payable to
the Company's order or by delivery of evidences of indebtedness of the Company
for cancellation by the Company, all in the aggregate amount of the purchase
price of such Preferred Stock.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 2
3
Representations and Warranties of the Company
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The Company and where specifically indicated RSA, hereby jointly and
severally (only in those cases in which a representation or warranty is made as
to the same matter by both the Company and RSA) represent and warrant to each
Purchaser that all of the statements made below in this Section 3 are true and
correct in all respects upon each Closing. These representations and warranties
are subject to the exceptions set forth on Exhibit B (the "SCHEDULE OF
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EXCEPTIONS") furnished to each Purchaser, specifically identifying the relevant
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Section hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder.
3.1 Organization and Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to own and operate its properties and
assets, to execute and deliver this Agreement, the Registration Rights Agreement
attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"), the
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Stockholders Agreement attached hereto as Exhibit D (the "STOCKHOLDERS
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AGREEMENT"), the OEM Master License Agreement attached hereto as Exhibit M (the
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"OEM AGREEMENT"), the Non-Compete and Non-Solicitation Agreement attached as
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Exhibit N (the "NON-COMPETE AGREEMENT"), the Assignment attached as Exhibit I
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(the "ASSIGNMENT"), and to carry on its business as now conducted and as
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proposed to be conducted in the Business Plan (Version 2.0) dated November, 1994
and attached hereto as Exhibit E, heretofore furnished to each Purchaser
("BUSINESS PLAN"). This Agreement, the Registration Rights Agreement, the
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Stockholders Agreement, the OEM Agreement, the Non-Compete Agreement and the
Assignment are collectively referenced hereinafter as the "AGREEMENTS". The
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Company is not required to be qualified as a foreign corporation in any
jurisdiction except California; provided, however, that the Company need not be
qualified in any jurisdiction in which a failure to qualify would not have a
material and adverse effect on its operations or financial condition. The
Company is duly qualified as a foreign corporation in California.
3.2 Capitalization. The authorized capital stock of the Company consists
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of Fifteen Million Nine Hundred Forty Thousand Two Hundred Seventeen
(15,940,217) shares of Common Stock and Six Million Eight Hundred Fifty-Six
Thousand Eight Hundred Eighty-Four (6,856,884) shares of Preferred Stock, none
of such Common or Preferred will be issued and outstanding prior to the first
Closing. The Preferred Stock has the rights, preferences, privileges and
restrictions set forth in the Certificate of Incorporation
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 3
("CERTIFICATE") of the Company in the form of Exhibit F. The Company has
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reserved Six Million Eight Hundred Fifty-Six Thousand Eight Hundred Eighty-Four
(6,856,884) shares of Common Stock for issuance upon conversion of the Preferred
Stock. The Company has adopted a 1995 Stock Option Plan (the "PLAN") under which
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Two Million One Hundred Forty-Five Thousand (2,145,000) shares of Common Stock
are available for sale pursuant to stock options to employees, officers,
directors, advisory board members and consultants. Copies of the Plan and form
of option agreement have been delivered to counsel for Purchasers. There are no
other preemptive rights, options, warrants, conversion privileges or other
rights or agreements presently outstanding for the purchase or acquisition from
the Company of any of its authorized but unissued stock, other than the rights
created by this Agreement. The list of the Company's security holders attached
as Exhibit G is a true, correct and complete list of the owners and number of
shares held by each owner, of record and, to the best knowledge of the Company,
beneficially, of all outstanding securities of the Company as of the first
Closing. The list of the Company's option holders attached hereto as Exhibit G
is a true, correct and complete list of all option holders of the Company, the
number of shares under option to each such person, the exercise price per share
for all shares subject to option and the vesting schedule for each option. All
outstanding securities of the Company were issued in compliance with applicable
federal and state securities laws.
3.3 Subsidiaries. The Company has no subsidiaries and does not otherwise
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own or control, directly or indirectly, any equity interest in any corporation,
association, joint venture, partnership or other business entity.
3.4 Authorization. All corporate action on the part of the Company, its
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officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred Stock sold to the Purchasers
hereunder (and the shares of Common Stock issuable upon conversion of such
Preferred Stock) and the performance of all of the Company's obligations
thereunder has been taken. The Agreements, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Preferred Stock sold to the Purchasers hereunder, when
payment therefor has been received by the Company, will be validly issued, full
paid and nonassessable; the shares of Common Stock issuable upon conversion of
such Preferred Stock have been duly and validly reserved and, when issued in
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 4
compliance with the provisions of the Certificate, will be validly issued, full
paid and nonassessable; and such Preferred Stock and such shares of Common Stock
will be free of any liens or encumbrances, other than those created by or
imposed upon the holders thereof through no action of the Company; provided,
however, that such Preferred Stock (and the shares of Common Stock issuable upon
conversion thereof) may be subject to restrictions on transfer under state and
federal securities laws as set forth herein and under the Stockholders Agreement
and Registration Rights Agreement. The sale of Preferred Stock hereunder and
its conversion into Common Stock are not subject to any preemptive rights or
rights of first refusal.
3.5 Governmental Consent, Etc. No consent, approval or authorization of or
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designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of Preferred Stock hereunder
or the shares of Common Stock issuable upon conversion of such Preferred Stock,
or the consummation of any other transaction contemplated hereby, except, if
required, the filing of Form D with the Securities and Exchange Commission and
qualifications or filings under applicable state blue sky laws, which
qualifications, if required, will have been obtained and will be effective on
the Closing, and any such filings will be made within the time prescribed.
3.6 Proprietary Rights. The Company and RSA hereby represent and warrant
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that the Company possesses and has good, valid and marketable title, free and
clear of all security interests, liens, claims, charges, encumbrances or any
other defects in title of any nature whatsoever to, or has the valid,
enforceable right to use (pursuant to written agreements, true and correct
copies of which have been submitted to counsel for Purchasers), all trademarks,
trademark rights, trade names, trade name rights, licenses, franchises, service
marks, patents, patent applications, copyrights, inventions, discoveries,
improvements, processes, trade secrets, formulae, proprietary rights or data,
shop rights, ideas or know-how necessary to conduct its business as now being
conducted or as proposed to be conducted in the Business Plan, without conflict
with or infringement upon any valid rights of others and the lack of which could
materially and adversely affect the operations or condition, financial or
otherwise, of the Company. The Company has caused all present and past executive
officers, directors, employees, consultants and other agents of the Company, and
shall use its best efforts to cause all future officers, directors, employees,
consultants and other agents of the Company, to execute proprietary information
agreements substantially in the form of Exhibit H. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing,
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 5
nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase of "off the shelf" or standard
products. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity. None of the
Company's employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of the Agreements, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed
to be conducted in the Business Plan, will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which RSA, the Company or any employee of
the Company is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned to
the Company.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 6
3.7 Labor Matters. The Company: (i) is not bound by or subject to any
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collective bargaining agreement with respect to any of its employees nor has any
labor union requested or, to the best knowledge of the Company, sought to
represent any of the employees, representatives or agents of the Company, (ii)
does not have any current labor problems or disputes, pending or threatened,
(iii) does not have in effect any "employee pension benefit plans" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974) or
employee benefit or similar plans qualified under Section 401 of the Internal
Revenue Code of 1986, as amended, and (iv) does not maintain, has not in the
past maintained and is not and has not been a contributor to any multi-employer
plan or single employer plan, as defined in Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended, for the employees of the
Company or any trade or business (whether or not incorporated) which, together
with the Company, would be deemed to be a "single employer" within the meaning
of such Section 4001. The Company has complied in all material respects with all
laws relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, collective bargaining and payment of Social
Security and other taxes.
3.8 Certain Transactions. The Company is not indebted, directly or
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indirectly, to any of its officers or directors, or to their respective
immediate family, in any amount whatsoever, except for salaries and fees accrued
in the ordinary course of business; none of said officers or directors or
members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship
except RSA Data Security, Inc., or any firm or corporation which competes with
the Company (except with respect to any interest in less than five percent (5%)
of the stock of any corporation whose stock is publicly traded). No officer,
director or stockholder, or any member of their immediate families, is, directly
or indirectly, interested in any material contract with the Company. The Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
3.9 Voting Arrangements. Except as set forth in this Agreement and the
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Stockholders Agreement, to the best knowledge of the Company, there are no
outstanding stockholder agreements, purchase agreements, voting trusts, proxies
or other arrangements or understandings, either written or oral, among the
stockholders of the Company relating to either the voting or the disposition of
their respective shares.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 7
3.10 Compliance with Other Instruments, None Burdensome, Etc. The
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Company is not in violation of any term of its Certificate of Incorporation or
Bylaws, as amended and in effect on and as of each Closing. The Company is not
in violation in any respect of any term or provision of any mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to it where such violation would
adversely affect the Company, its operations or financial condition. The
execution, delivery and performance of and compliance with this Agreement, and
the issuance of the Preferred Stock sold hereunder and the shares of Common
Stock issuable upon conversion of such Preferred Stock, have not resulted and
will not result in any violation of or conflict with, or constitute a material
default under, any mortgage, indebtedness, indenture, contract, agreement,
instrument, judgment or decree, order, statute, rule or regulation applicable to
it, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company; and there is no such
term or provision which adversely affects the Company, its operations or
financial condition as presently conducted or as contemplated to be conducted.
The Company and, to the best knowledge of the Company, its officers, directors
and key employees, are not parties to any mortgage, indebtedness, indenture,
contract, agreement, instrument, judgment, decree or order restricting its
ability to enter or compete in any line of business or market.
3.11 Litigation, Etc. The Company and RSA hereby represent and warrant
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that there are no actions, suits, proceedings or investigations pending against
the Company or its properties, before any court or governmental agency (nor, to
the best knowledge of the Company or RSA, is there any reasonable basis therefor
or threat thereof), which, either in any case or in the aggregate, might result
in any material adverse change in the business or financial condition of the
Company, or in any material impairment of the right or ability of the Company to
carry on its business as now conducted or as proposed to be conducted in the
Business Plan or in any material liability on the part of the Company, or any
change in the current equity ownership of the Company, and none which questions
the validity of this Agreement or any action taken or to be taken in connection
herewith. The foregoing includes, without limiting its generality, actions
pending or threatened (or any basis therefor known to the Company or RSA)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers or third parties or their
obligations under any agreements with prior employers or the execution and
delivery of the Assignment.
3.12 Financial Statements.
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Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 8
3.12.1 Attached hereto as Exhibit J is the Company's pro forma
unaudited balance sheet as of the first Closing (the "BALANCE SHEET").
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3.12.2 The Company has no debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Balance Sheet,
except for those (i) that may have been incurred after the date thereof and (ii)
that are not required by generally accepted accounting principles to be included
in a balance sheet or the notes thereto. All debts, liabilities and obligations
incurred after the date of the Balance Sheet were incurred in the ordinary
course of business and are usual and normal in amount, both individually and in
the aggregate.
3.12.3 The Balance Sheet was prepared according to generally
accepted accounting principles consistently applied to the extent they apply to
pro forma balance sheets and presents fairly the financial position of the
Company, except that it does not contain all of the footnotes required by
generally accepted accounting principles.
3.13 Material Liabilities. The Company has no liabilities which are,
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individually or in the aggregate, material to the financial condition or
operating results of the Company which have not been disclosed on the Balance
Sheet.
3.14 Taxes. The Company has prepared and filed all federal, state and
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local income, withholding, sales, real property, personal property and other tax
returns that are required to be filed by it and has paid or made provision for
the payment of all taxes that have become due pursuant to such returns. None of
such returns has been audited by any state or federal agency. No deficiency
assessment or proposed adjustment of the Company's federal, state and or local
taxes is pending, and the Company has no knowledge of any proposed liability for
any tax to be imposed upon the Company for which there is not an adequate
reserve reflected in the Balance Sheet.
3.15 Title. The Company and RSA hereby represent and warrant that the
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Company has good and marketable title to its property and assets. Such
properties and assets are not subject to any material liens, mortgages, pledges,
encumbrances or charges of any kind, except (a) as reflected in the Company's
Balance Sheet, (b) for liens for current taxes not yet delinquent, (c) for liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (d)
for liens in respect of pledges or deposits under workers'
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 9
compensation laws or similar legislation or (e) for minor defects in title, none
of which individually or in the aggregate materially interferes with the use of
such property. All leases, if any, pursuant to which the Company leases real or
personal property are in good standing and are valid and effective in accordance
with their respective terms, assuming due execution by the other parties to such
agreements, and, to the best knowledge of the Company, there exists no default
or other occurrence or condition which could result in a material default or
termination of any thereof.
3.16 Agreements; Action.
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3.16.1 Except for agreements explicitly contemplated hereby,
indemnity agreements, agreements with RSA copies of which have been provided to
counsel for the Purchasers, and agreements between the Company and its employees
with respect to the sale of the Company's Common Stock, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or any affiliate thereof.
3.16.2 There are no agreements, understandings, instruments,
contacts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $10,000 (other than obligations of, or payments to, the
Company arising from purchase and sale agreements entered into in the ordinary
course of business), except agreements assigned to the Company by RSA copies of
which have been provided to counsel for Purchasers, or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company (other than licenses arising from the purchase of "off the shelf" or
other standard products), except agreements with RSA copies of which have been
provided to Company for Purchasers, or (iii) provisions restricting or affecting
the development, manufacture or distribution of the Company's product or
service, except agreements with RSA copies of which have been provided to
Company for Purchasers or (iv) indemnification by the Company with respect to
infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale agreement entered into in the ordinary course of
business), except agreements with RSA copies of which have been provided to
counsel for Purchasers.
3.16.3 The Company has not (i) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness or other obligations incurred in the
ordinary course of business or as disclosed in the Balance Sheet) individually
in excess of $10,000 or,
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 10
in the case of indebtedness and/or liabilities individually less than $10,000,
in excess of $25,000 in the aggregate, (ii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) after the date
of the Balance Sheet sold, exchanged or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in the ordinary course of
business.
3.17 Compliance with Laws; Permits. To its knowledge, the Company is not
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in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties,
prospects or financial condition of the Company and believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted.
3.18 Environmental and Safety Laws. To its knowledge, the Company is not
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in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.19 Offering Valid. Assuming the accuracy of the representations and
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warranties of the Purchasers contained in Section 4 hereof, the offer, sale and
issuance of the Preferred Stock and the Common Stock issued upon conversion
thereof (the "Conversion Shares") will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Preferred Stock to any person or
persons so as to bring the sale of such Preferred Stock by the Company within
the registration provisions of the Securities Act.
3.20 Full Disclosure. The Agreements, the Exhibits hereto and all other
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documents delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 11
transactions contemplated hereby or thereby are complete and accurate, taken as
a whole do not contain any untrue statement of a material fact nor, to the
Company's knowledge, omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading. Notwithstanding the
foregoing, the Business Plan provided to the Purchasers was prepared by the
management of the Company in a good faith effort to describe the Company's
proposed business and product and the markets therefor. The assumptions applied
in preparing the Business Plan appeared reasonable to management as of the date
thereof. To the Company's knowledge, there are no facts which (individually or
in the aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Company that have not been
set forth in the Agreements, the Exhibits hereto or in other documents delivered
to Purchasers or their attorneys or agents in connection herewith.
3.21 Qualified Small Business. The Company represents and warrants to the
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Purchasers that, to the best of its knowledge, the Preferred Stock should
qualify as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "Code") as of the date hereof.
The Company will use reasonable efforts to comply with the reporting and
recordkeeping requirements of Section 1202 of the Code and any regulations
promulgated thereunder.
3.22 Section 83(b) Elections. To the Company's knowledge, all elections
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and notices permitted by Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws have been timely filed by all
employees who have purchased shares of the Company's Common Stock under
agreements that provide for the vesting of such shares.
3.23 Real Property Holding Corporation. The Company is not a real
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property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3.24 Insurance. The Company has or will obtain promptly following the
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Closing insurance policies with coverage customary for companies similarly
situated to the Company.
3.25 Future Business. RSA represents and warrants that it has no present
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intention of entering the escrowed key repository business.
3.26 Certain Consents. RSA represents and warrants that it has obtained
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all necessary third party consents to the assignment of the
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 12
contracts assigned by RSA to the Company pursuant to the provisions of the
Assignment Agreement between RSA and the Company dated April 12, 1995.
4
Representations and Warranties of Purchasers
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Each Purchaser, as of the date each Purchaser closes, hereby, severally and
not jointly, represents and warrants to the Company with respect to its purchase
of the Preferred Stock hereunder that:
4.1 Experience. Purchaser has substantial experience in evaluating and
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investing in private placement transactions so that Purchaser is capable of
evaluating the merits and risks of an investment in the Company and has the
capacity to protect its own interests in connection with the purchase of the
Preferred Stock. Purchaser understands that the investment to be made in
connection with the acquisition of Preferred Stock is speculative and involves
significant risk. Purchaser has the ability to bear the economic risk of this
investment and can afford a complete loss of the purchase price.
4.2 Investment. Purchaser is acquiring the Preferred Stock and the
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underlying Common Stock to be issued on conversion thereof for investment for
its own account, and not with the view to, or for resale in connection with, any
"distribution" of all or any portion thereof within the meaning of the
Securities Act. Purchaser understands that the Preferred Stock to be purchased
hereunder and the underlying Common Stock to be issued on conversion thereof
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of Purchaser's investment intent
and the accuracy of Purchaser's representations as expressed herein. If other
than an individual, Purchaser (other than Bessemer Venture Partners DCI) also
represents that it has not been organized solely for the purpose of acquiring
the Preferred Stock.
4.3 Rule 144. Purchaser acknowledges that the Preferred Stock being
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purchased hereunder and the underlying Common Stock to be issued on conversion
thereof must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement, subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 13
certain current public information about the Company, the resale occurring
after the expiration of minimum holding periods after a party has purchased and
paid for the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations (except as provided in Rule 144(k)).
4.4 No Public Market. Purchaser understands that no public market now
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exists for any of the securities issued by the Company, that the Company has
made no assurances that a public market will ever exist for the Preferred Stock
being acquired hereunder or the Common Stock issuable on conversion thereof and
that, even if such a public market exists at some future time, the Company may
not then be satisfying the current public information requirements of Rule 144.
4.5 Access to Data. Purchaser has received and reviewed the Company's
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Business Plan and Balance Sheet. In addition (but without limiting the effect of
the Company's representations and warranties contained in this Agreement),
Purchaser and its representatives have met with representatives of the Company
and thereby have had the opportunity to request information and ask questions
of, and receive answers from, said representatives concerning the Company and
the terms and conditions of this transaction, as well as to obtain any
additional information requested by Purchaser. Any questions raised by Purchaser
or its representatives concerning this transaction have been answered to the
satisfaction of Purchaser. Purchaser's decision to purchase the Preferred Stock
is based on the answers to such questions as Purchaser and its representatives
have raised concerning the transaction and on its own evaluation of the risks
and merits of the purchase and the Company's proposed business activities.
4.6 Authorization. This Agreement when executed and delivered by Purchaser
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will constitute a valid and legally binding obligation of Purchaser, enforceable
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
5
Conditions to Closing of Purchasers
-----------------------------------
Purchasers' obligations to purchase the Preferred Stock at the Closing are,
at the option of each such Purchaser, subject to the fulfillment as of the
Closing of the following conditions:
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 14
5.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Company and RSA in Section 3 hereof shall be true and correct in all
material respects as of the date of this Agreement, and shall be true and
correct in all material respects on each Closing, with the same force and effect
as if they had been made on and as of said date.
5.2 Performance. The Company shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing;
provided, however, that the obligations of the Purchasers shall not be
conditional upon the issuance by the Company of the Preferred Stock to any
Purchaser listed on Exhibit A which has not performed or tendered the
performance of its obligations under this Agreement required to be performed on
or prior to the Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Preferred Stock pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of the Closing.
5.4 Minimum Investment. The Purchasers shall have purchased at the first
------------------
Closing an aggregate of at least Two Million Five Hundred Fifty Thousand
(2,550,000) shares of Preferred Stock.
5.5 Stock Certificates. The Company shall have delivered to each Purchaser
------------------
a certificate for the Preferred Stock purchased by such Purchaser.
5.6 Stockholders Agreement. The Company, RSA and the Purchasers shall have
----------------------
executed and delivered the Stockholders Agreement in the form of Exhibit D
hereto.
5.7 Registration Rights Agreement. The Company, RSA and the Purchasers
-----------------------------
shall have executed and delivered the Registration Rights Agreement in the form
of Exhibit C hereto.
5.8 Assignment Agreement. The Company and RSA shall have executed and
--------------------
delivered the Assignment Agreement in the form of Exhibit I hereto.
5.9 OEM Master License Agreement. The Company and RSA shall have executed
----------------------------
and delivered the OEM Master License Agreement in the form of Exhibit M hereto.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 15
5.10 Non-Compete Agreement. The Company and RSA shall have executed and
---------------------
delivered the Non-Compete and Non-Solicitation Agreement in the form of Exhibit
N hereto.
5.11 Ameritech Agreement. The Company shall have executed and delivered
-------------------
an agreement with Ameritech Development Corp. containing substantially the
provisions set forth on Exhibit O hereto.
5.12 Opinion of Company's Counsel. Each Purchaser shall have received
----------------------------
from counsel to the Company an opinion addressed to it, dated as of the Closing,
in substantially the form of Exhibit K.
5.13 Company Compliance Certificate. Each of the Company and RSA
------------------------------
respectively, shall have delivered to each Purchaser a certificate of the
Company and RSA, respectively, in the form of Exhibits L(1) and L(2), executed
by the President of the Company, and the President of RSA, respectively, dated
as of the Closing, certifying, as applicable, to the fulfillment of the
conditions specified in Sections 5.1, 5.2, 5.3 and 5.5 of this Agreement, and
stating that there has been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of the Business Plan.
6
Conditions to Closing of Company
--------------------------------
The Company's obligation to sell and issue the Preferred Stock to the
Purchasers at a Closing is, at the option of the Company, subject to the
fulfillment of the following conditions:
6.1 Representations. The representations and warranties made by
---------------
Purchasers in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing, with the same force and effect as if they had been made on and as
of said date.
6.2 Blue Sky. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred Stock and the Common Stock
issuable upon conversion of the Preferred Stock.
6.3 Stockholders Agreement. The Company, RSA and the Purchasers shall
----------------------
have executed and delivered the Stockholders Agreement in the form of Exhibit D
hereto.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 16
6.4 Registration Rights Agreement. The Company, RSA and the Purchasers
-----------------------------
shall have executed and delivered the Registration Rights Agreement in the form
of Exhibit C hereto.
6.5 Payment of Purchase Price. Each Purchaser shall have delivered to
-------------------------
the Company the purchase price for the Preferred Stock.
6.6 Minimum Investment. The Purchasers shall have purchased at the
------------------
Closing an aggregate of at least Two Million Five Hundred Fifty Thousand
(2,550,000) shares of Preferred Stock.
7
Affirmative Covenants of the Company and the Purchasers
-------------------------------------------------------
The Company and each Purchaser, where indicated below, hereby covenant and
agree as follows:
7.1 Financial Information. As long as a Purchaser holds Preferred Stock
---------------------
convertible into at least 50,000 shares of Common Stock or 50,000 shares of
Common Stock issued upon conversion of the Preferred Stock, or a combination of
such Preferred Stock or Common Stock, as adjusted for recapitalizations, stock
splits, stock dividends and the like, the Company will provide the following
reports to such Purchaser:
7.1.1 As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days thereafter, consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, all certified by
independent public accountants of national standing selected by the Company
together with a copy of the auditor's letter to management of required
communications.
7.1.2 As soon as practicable after the end of the first (1st),
second (2nd) and third (3rd) quarterly accounting periods in each fiscal year of
the Company, and in any event within thirty (30) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such quarterly period, and consolidated statements of income and consolidated
statements of cash flows of the Company and its subsidiaries, if any, for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles (other than for accompanying notes),
all in reasonable detail and signed, subject to changes resulting from year-end
audit adjustments, by the principal financial or accounting officer of the
Company.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 17
7.1.3 Contemporaneously with delivery to holders of Common Stock, a
copy of each report of the Company delivered to holders of Common Stock.
7.2 Additional Information. As long as a Purchaser holds Preferred Stock
----------------------
convertible into at least 50,000 shares of Common Stock or 50,000 shares of
Common Stock issued upon conversion of the Preferred Stock, or a combination of
such Preferred Stock or Common Stock, as adjusted for recapitalizations, stock
splits, stock dividends and the like, the Company will provide the following
reports to such Purchaser as soon as practicable after the end of each month,
and in any event within thirty (30) days thereafter, unaudited consolidated
balance sheets of the Company as at the end of such month, unaudited
consolidated statements of income, and, if prepared for the Company's Board of
Directors or officers, unaudited consolidated statements of cash flow for each
month and for the current fiscal year to date. Such financial statements shall
be prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail
and signed, subject to year-end audit adjustments, by the principal financial or
accounting officer of the Company.
7.3 Forecasts and Operating Plan. As long as a Purchaser holds Preferred
----------------------------
Stock convertible into at least 50,000 shares of Common Stock or 50,000 shares
of Common Stock issued upon conversion of the Preferred Stock, or a combination
of such Preferred Stock and Common Stock, as adjusted for recapitalizations,
stock splits, stock dividends and the like, the Company will provide the
following report to such Purchaser:
7.3.1 Within thirty (30) days before the end of each fiscal year, a
projected monthly income, cash flow and balance sheet statement for the ensuing
twelve (12) months.
7.3.2 Thirty (30) days before the end of each fiscal year, a
comprehensive operating plan, including the annual budget, which must be
presented to the Board of Directors for approval.
7.4 Termination of Covenants. The covenants set forth in Sections 7.1,
------------------------
7.2 and 7.3 shall terminate and be of no further force or effect when the
Company has registered a class of securities under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 ACT"). In addition,
--------
notwithstanding anything to the contrary in this Section 7, the Company shall
have no obligation to deliver any information pursuant to the provisions of
Section 7.3 to any Purchaser or stockholder whom the Board of Directors
reasonably
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 18
determines directly or indirectly competes with the Company or any of its
affiliated entities.
7.5 Confidentiality.
---------------
7.5.1 Each Purchaser shall keep confidential and not disclose or
deliver to third parties and not use for such Purchasers own purposes all
information and financial statements delivered under Section 7.1, 7.2 and 7.3 or
otherwise received by such Purchaser as a Director of the Company or as a holder
of securities issued under this Agreement, and, in addition, any and all other
information identified in writing as proprietary to the Company or Confidential
(the "INFORMATION"). At the request of the Company, any person designated
-----------
by each Purchaser to receive Information shall execute an agreement
acknowledging that such person shall be bound by the obligations set forth in
this Section 7.5, but subject to the exceptions set forth in subsection 7.5.2
below. This Section 7.5, and subsections 7.5.2 and 7.5.3 below, shall survive
termination or expiration of this Agreement.
7.5.2 The obligation of confidentiality and restrictions on use
imposed upon each Purchaser by this Section 7.5 shall not apply to any
Information that such Purchaser can demonstrate was:
7.5.2.1 in the public domain before the date of this
Agreement or subsequently came into the public domain other than through any
disclosure or delivery thereof by such Purchaser; or
7.5.2.2 lawfully received by such Purchaser or any of its
affiliates without a binder of confidentiality from a source other than the
Company; or
7.5.2.3 disclosed without restriction by, or with the prior
written approval of, the Company.
7.5.3 Notwithstanding anything to the contrary contained in this
Section 7.5, any Purchaser may disclose or deliver any such Information to the
extent such Purchaser shall have been advised by counsel that such disclosure or
delivery is necessary for that Purchaser to comply with any law or regulation or
to enforce any provision of this Agreement; provided, however, that such
Purchaser shall give the Company reasonable advance notice of any such proposed
disclosure or delivery, shall use its reasonable best efforts to secure from any
person obtaining access to the Information pursuant to this Section 7.5.3 an
agreement in writing to be bound by the provisions of this Section 7.5 and shall
advise the Company in writing of the manner of such disclosure.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 19
7.5.4 Injunctive Remedy. Each Purchaser agrees that rmedies at law
-----------------
may be inadequate to protect against breach of this Section 7.5 and hereby
agrees to the granting of injunctive relief in favor of the Company without
proof of actual damages for any breach of this Section 7.5.
7.6 Key Man Insurance. The Company shall obtain not later than ninety
-----------------
days (90) after the date of this agreement and keep in effect for a period of
two (2) years from the date of the Closing, term life insurance in the amount of
One Million Dollars ($1,000,000) on the life of D. Xxxxx Xxxxxx, with proceeds
payable to the Company. Within ninety (90) days after employing a new Chief
Executive Officer, the Company shall obtain and keep in effect for a period of
ten (10) years from the date of employment of such Chief Executive Officer, term
life insurance in the amount of One Million Dollars ($1,000,000) on the life of
such Chief Executive Officer with the proceeds payable to the Company.
7.7 Directors' Expenses. The Company shall reimburse reasonable
-------------------
out-of-pocket expenses incurred by Directors in attending Board of Directors'
meetings.
7.8 Certain Board Approval. The Company agrees that it will obtain the
----------------------
Board of Directors' prior approval before entering into any agreement with RSA
which is outside the ordinary course of the Company's business and provides for
payments to or by the Company in excess of Twenty-Five Thousand Dollars
($25,000).
7.9 Reserved Shares. The Company agrees to reserve sufficient shares of
---------------
Common Stock for issuance upon conversion of the Preferred Stock.
8
Restrictions on Transferability of Securities;
----------------------------------------------
Registration Rights; Compliance with Securities Act
---------------------------------------------------
The Preferred Stock being purchased hereunder and the Common Stock issuable
upon conversion of such Preferred Stock shall not be sold, assigned, transferred
or pledged except in accordance with the Registration Rights Agreement and the
Stockholders Agreement. Nothing in this Agreement prohibits a Purchaser from
selling, assigning, transferring or pledging such stock to an affiliate of such
Purchaser, whether foreign, domestic or otherwise.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 20
9
Purchasers' Right of First Refusal
----------------------------------
The Company hereby grants to each Purchaser the right of first refusal to
purchase, pro rata, all or any part of any New Securities (as defined in Section
9.1) which the Company may, from time to time, propose to sell and issue. Each
Purchaser's pro rata share, for purposes of this right of first refusal, is the
ratio (assuming, for purposes of calculating such ratio, complete conversion of
all outstanding shares of Preferred Stock and complete conversion of all
outstanding convertible securities of the Company other than the Preferred
Stock) of the number of shares of Common Stock then held by such Purchaser to
the total number of shares of Common Stock of the Company. This right of first
refusal shall be subject to the following provisions:
9.1 "NEW SECURITIES" shall mean any shares of Common Stock or Preferred
--------------
Stock of the Company, whether now authorized or not, and rights, options or
warrants to purchase said Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into Preferred Stock;
provided that "New Securities" does not include (i) the first Four Million Three
Hundred Six Thousand Eight Hundred Eighty-Three (4,306,883) shares of Series A
Preferred Stock issued by the Company, (ii) shares of Common Stock issuable upon
conversion of any Preferred Stock, (iii) shares of Common Stock issuable upon
conversion or exercise of securities outstanding on the date hereof, (iv)
securities offered to the public generally pursuant to a registration statement,
(v) securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all of the assets or other
reorganization whereby the Company or its shareholders immediately prior to such
transaction owns not less than fifty-one percent (51%) of the voting power of
such corporation or the surviving entity, (vi) up to 2,395,000 shares of the
Company's Common Stock (and related warrants or options exercisable for Common
Stock) issued to employees, officers and directors of the Company, consultants
to the Company, members of advisory boards of the Company, entities of strategic
significance to the Company, or lenders to the Company, (vii) any security if
Purchasers holding a majority of the outstanding Preferred Stock purchased
hereunder (or the shares of Common Stock issued upon conversion thereof, or any
combination of such Preferred Stock and such shares of Common Stock) consent in
writing that the right of first refusal shall not apply to such securities,
(viii) stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
rights of first refusal established by this Section 9.1 applied with respect to
the initial sale or grant by the Company of such rights or
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 21
agreements or was not applicable, and (ix) stock issued in connection with any
stock split, stock dividend or recapitalization by the Company.
9.2 In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser written notice of its intention,
describing the type of New Securities and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have twenty (20) days
from the date of receipt of any such notice to agree to purchase up to the
Purchaser's pro rata share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased. Each Purchaser
shall have a right of overallotment such that if any Purchaser fails to exercise
his right hereunder to purchase his pro rata portion of New Securities, the
other Purchasers may purchase the nonpurchasing Purchaser's portion on a pro
rata basis, within ten (10) days from the date such nonpurchasing Purchaser
fails to exercise his right hereunder to purchase his pro rata share of New
Securities.
9.3 In the event that Purchasers fail to exercise in full the right of
first refusal within said twenty (20) plus ten (10) day period, the Company
shall have one hundred eighty (180) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within ninety (90) days from the date of said agreement) to
sell the New Securities respecting which the Purchasers' option was not
exercised, at a price and upon terms no more favorable to the buyers of such
securities then specified in the Company's notice to Purchasers. In the event
the Company has not sold the New Securities or entered into an agreement to sell
the New Securities within said one hundred eighty (180) day period (or sold and
issued New Securities in accordance with the foregoing within ninety (90) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities, without first offering such securities to each Purchaser in
the manner provided above.
9.4 The right of first refusal granted under this Agreement shall expire
upon the closing of the first public offering of the Common Stock of the Company
to the general public which is effected pursuant to a registration statement
filed with, and declared effective by, the Commission under the Securities Act.
9.5 The right of first refusal hereunder is only assignable, in whole or
in part, by a Purchaser to any affiliate of such Purchaser or to an assignee
purchasing at least fifty percent (50%) of the outstanding Preferred Stock
purchased hereunder by such Purchaser.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 22
Any assignment of rights hereunder shall not affect a Purchaser's rights based
on Preferred Stock or Common Stock Purchaser continues to hold.
10
Purchasers' Right of Co-Sale
----------------------------
10.1 Sales By RSA Data Security, Inc.
--------------------------------
10.1.1 Should RSA ("PRINCIPAL SHAREHOLDER") receive a bona fide
---------------------
offer (the "PURCHASE OFFER") from any person or entity ("OFFEROR"), to purchase
-------------- -------
from said Principal Shareholder Common Stock or Preferred Stock (collectively
"CAPITAL STOCK"), of the Company now owned or hereafter acquired by the
-------------
Principal Shareholder upon specific terms and conditions (including a specified
purchase price payable in cash or other property), then said Principal
Shareholder shall promptly notify the Purchasers of the terms and conditions of
such Purchase Offer (for purposes of this Section 10.1 only, the Principal
Shareholder proposing to sell shares pursuant to this Section shall be
referenced as the "SELLING PRINCIPAL SHAREHOLDER").
-----------------------------
10.1.2 Each of the Purchasers shall have the right, exercisable
upon written notice to the Selling Principal Shareholder within ten (10)
business days after receipt of the notice of the Purchase Offer referenced in
Section 10.1.1 above, to participate in the Selling Principal Shareholder's sale
of the Capital Stock pursuant to the specified terms and conditions of such
Purchase Offer. To the extent one or more of the Purchasers exercises such right
of participation in accordance with the terms and conditions set forth below,
the number of shares of Capital Stock which the Selling Principal Shareholder
may sell pursuant to such Purchase Offer shall be correspondingly reduced. The
right of participation of each of the Purchasers shall be subject to the
following terms and conditions:
10.1.2.1 Each of the Purchasers may sell all or any part of
that number of shares of Common Stock (or Preferred Stock convertible into such
number of shares of Common Stock) of the Company equal to the product obtained
by multiplying (i) the maximum aggregate number of shares of Common Stock
covered by the Purchase Offer by (ii) a fraction, the numerator of which is the
number of shares of Common Stock of the Company at the time owned by the
Purchaser (assuming for such purpose conversion of the Preferred Stock) and the
denominator of which is the combined number of shares of Common Stock of the
Company at the time owned by the Selling Principal Shareholder and the
Purchasers (assuming for such purpose conversion of the Preferred Stock).
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 23
10.1.2.2 To the extent one or more of the Purchasers elect
not to sell the full number of shares said Purchasers are entitled to sell
pursuant to Section 10.1.2.1 above, the Selling Principal Shareholder's right to
participate in the sale shall be increased by a corresponding number of shares.
10.1.2.3 Each of the Purchasers may effect its
participation in the sale by delivering to a closing agent acceptable to such
Purchasers and Selling Principal Shareholder ("AGENT") for transfer to the
-----
Offeror one or more certificates, properly endorsed for transfer, which
represent (i) the number of shares of Common Stock which the Purchaser elects to
sell pursuant to this Section 10.1.2 or (ii) that number of shares of Preferred
Stock which is at such time convertible into the number of shares of Common
Stock which the Purchaser elects to sell pursuant to this Section 10.1.2;
provided, however, that if the Offeror objects to the delivery of Preferred
Stock in lieu of Common Stock, the participating Purchaser or Purchasers may
convert and deliver Common Stock as provided in subparagraph (i) above.
10.1.3 The stock certificates which the Purchasers deliver to Agent
pursuant to Section 10.1.2 shall be transferred by the Agent to the buyer
thereof in consummation of the sale of the stock pursuant to the terms and
conditions specified in the Section 10.1.1 notice to the Purchasers. Selling
Principal Shareholder agrees to cause the buyer thereof to make payment therefor
to Agent and Agent shall promptly thereafter remit to each Purchaser that
portion of the sale proceeds to which the Purchaser is entitled by reason of
said Purchaser's participation in such sale.
10.1.4 The exercise or non-exercise of the rights of the Purchasers
hereunder to participate in one or more sales of stock made by any Principal
Shareholder shall not adversely affect their rights to participate in subsequent
stock sales by any Principal Shareholder.
10.1.5 The participation rights of the Purchasers contained in this
Section 10 shall not pertain or apply to any pledge of Company Common Stock made
by a Principal Shareholder which creates a mere security interest, nor shall
such rights pertain or apply to any sales or transfers of Company Common Stock
to shareholders of the Principal Shareholder or affiliates of the Principal
Shareholder or its shareholders, provided such shareholders or affiliates shall
furnish the Purchasers with a written agreement agreeing to be bound by and
comply with all the provisions of this Section 10 applicable to the Principal
Shareholder.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 24
10.2 Prohibited Transfers.
--------------------
10.2.1 In the event a Selling Principal Shareholder should sell any
Common Stock of the Company in contravention of the participation rights of the
Purchasers under this Section 10 (a "PROHIBITED TRANSFER"), the Purchasers shall
-------------------
have the put option provided below.
10.2.2 In the event a Prohibited Transfer occurs, the Purchasers
shall have the option to sell to the Principal Shareholder effecting the
Prohibited Transfer a number of shares of stock of the Company (either directly
or through delivery of convertible Preferred Stock purchased hereunder) equal to
the number of shares such Purchaser would have had the right to sell in the
Prohibited Transfer on the following terms and conditions:
10.2.2.1 The price per share at which the shares are to be
sold to the Principal Shareholder shall be equal to the price per share paid by
the buyer to the Principal Shareholder in the Prohibited Transfer.
10.2.2.2 The Purchasers shall deliver to the Principal
Shareholder, within ninety (90) days after they have received notice from the
Principal Shareholder or otherwise become aware of the Prohibited Transfer, the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer.
10.2.2.3 The Principal Shareholder shall, upon receipt of
the certificates for the repurchased shares, pay the aggregate purchase price
therefor, by certified check or bank draft made payable to the order of the
Purchaser exercising the put option.
10.3 Legended Certificates.
---------------------
10.3.1 Each certificate representing shares of the Common Stock of
the Company now or hereafter owned by the Principal Shareholder shall be
endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF SECTION 10
OF THAT CERTAIN PREFERRED STOCK PURCHASE AGREEMENT, DATED APRIL
17, 1995, AMONG THE COMPANY, THE HOLDER OF THIS CERTIFICATE,
CERTAIN INVESTORS IN PREFERRED STOCK OF THE COMPANY AND OTHER
PRINCIPAL SHAREHOLDERS AS SET FORTH THEREIN. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 25
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE COMPANY.
10.3.2 The Section 10.3.1 legend shall be removed upon termination
of this Section 10 in accordance with the provisions of Section 10.4.
10.4 Termination of Right. The rights of each Purchaser under this
--------------------
Section 10 and the correlative obligations of the Principal Shareholders with
respect to such Purchaser shall terminate at such time as that Purchaser shall
no longer be the owner of any shares of capital stock of the Company. Unless
sooner terminated in accordance with the preceding sentence, this Section 10
shall terminate upon the first to occur of the following events:
10.4.1 the liquidation or dissolution of the Company;
10.4.2 the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company; or
10.4.3 the registration of a class of the Company's securities
under Section 12 of the 1934 Act.
11
Indemnification
---------------
11.1 Indemnification. RSA shall indemnify, hold harmless, reimburse
---------------
and defend each Purchaser against any loss, liability or other damages,
including reasonable costs of investigation, interest, penalties and attorneys'
and accountants' fees incurred in connection with, or arising from, or
attributable to (i) the lawsuit identified as RSA Data Security, Inc. v. Cylink
---------------------------------
Corporation, et al. (Santa Xxxxx County Superior Court Case No. CV 740794), (ii)
------------------
the lawsuit identified as Cylink Corporation v. RSA Data Security, Inc. and
-------------------------------------------------
Related Cross Actions (United States District Court, Northern District of
---------------------
California, Oakland Division, Xxxx Xx. X 00 00000 XX), (xxx) the lawsuit
identified as Schlafly v. Public Key Partners and RSA Data Security, Inc.,
-------------------------------------------
(United States District Court, Northern District of California, San Xxxx
Division, Case No. C 94 20512 SW (PVT), (iv) the failure of the Company to have
good and marketable title free (except as described in the Assignment (defined
below)) from all security interests, liens, claims, charges, encumbrances, or
any other defects in title of any nature whatsoever to all assets and other
interests transferred to the Company by RSA pursuant to the Assignment of even
date herewith between the Company and RSA (the "Assignment"), (v) any
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 26
claim, suit or proceeding on the basis of infringement of any intellectual
property right delivered to the Company pursuant to the Assignment or any claim
that RSA had no right to transfer and assign such right and (vi) the failure of
the assets and other rights transferred to DCI pursuant to the Assignment to be
sufficient for the Company to conduct the certification business described in
the Business Plan.
11.2 Purchase Option; Limit on Liability. In lieu of the payment of any
-----------------------------------
amounts pursuant to Section 11.1 above, RSA may elect, within ninety days after
the initial claim for indemnification is made by a Purchaser at its sole option,
to purchase from any Purchaser claiming indemnification hereunder the shares of
Preferred Stock (or equivalent shares of Common Stock received upon conversion
thereof) acquired by such Purchaser pursuant to this Agreement at their
aggregate fair market value, but only if the aggregate indemnification claim can
reasonably be expected to exceed One Million Five Hundred Thousand Dollars
($1,500,000.00). The fair market value of such shares shall be agreed upon by
RSA and such Purchaser within thirty (30) days (the "INITIAL PERIOD") after
--------------
RSA's election to purchase shares hereunder. In the event RSA and such Purchaser
are unable to reach an agreement during the Initial Period, the determination of
fair market value shall be made pursuant to the appraisal procedure set forth in
Section 11.3 below. Upon the purchase of any such shares, RSA shall have no
further liability hereunder to any such selling Purchaser. Notwithstanding
anything herein to the contrary, RSA shall have no indemnification liability to
any Purchaser under this Section 11 in excess of the aggregate purchase price
paid by such Purchaser for the shares of Preferred Stock acquired by such
Purchaser pursuant to this Agreement. The preceding sentence is not to be
construed as a limitation on the fair market value to be paid by RSA to a
Purchaser in the event RSA elects to acquire a Purchaser's shares pursuant to
this Section 11.2
11.3 Appraisal Procedure. Any appraisal pursuant to this Section 11
-------------------
shall be conducted by three (3) independent appraisers, one of whom shall be
appointed by RSA, the second by the Purchaser and the third selected by the
first two (2) appraisers so selected, and, if such appraisers cannot in good
faith agree upon the fair market value, such fair market value shall be the
median of the appraisers' individual valuations. Fair market value determined
under this Section 11 shall be inclusive of an amount representing the value of
the goodwill of the Company, shall be calculated as of the date the claim for
indemnification was initially made and shall be exclusive of any diminution or
decrease in the fair market value as a result of the occurrence of the events
for which indemnification is being claimed. The cost of any such appraisal shall
be borne fifty percent (50%) by
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 27
the Purchaser and fifty percent (50%) by RSA. Each Purchaser and RSA agree to
use their respective reasonable best efforts to commence the appraisal procedure
as soon as practicable after the expiration of the Initial Period. Should any
party fail or refuse to appoint an appraiser within thirty (30) days after
expiration of the Initial Period, the appraiser appointed by the other party
shall be the sole appraiser and such appraisal shall be binding on all parties
hereto and their successors and assigns. Each appraiser appointed hereunder must
be unaffiliated with and independent of the person appointing such appraiser.
Each appraiser must have reasonable professional qualifications as an appraiser
for the appraisal to be prepared hereunder.
12
Miscellaneous
-------------
12.1 Governing Laws. This Agreement shall be governed by and construed
--------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
12.2 Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
12.3 Severability. If any provision of this Agreement, or the
------------
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible, the economic,
business and other purposes of the void or unenforceable provision.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 28
12.4 Entire Agreement. This Agreement, the exhibits hereto, the
----------------
documents referenced herein and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
12.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original as against any party whose
signature appears thereon, and all of which together shall constitute one and
the same instrument.
12.6 Finder's Fees. The parties hereto each represent to every other
-------------
party that such party neither is, nor will be, obligated for any finder's or
broker's fee or commission in connection with the transactions contemplated
herein. Each party agrees to indemnify and to hold harmless all other parties
from any liability for any commission or compensation in the nature of a
finder's or broker's fee (and the costs and expenses of defending against such
liability or asserted liability) for which such indemnifying party, its
employees, agents or representatives is responsible.
12.7 Expenses. The Company and each Purchaser shall pay all costs and
--------
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. In this regard, the Company shall pay Tomlinson,
Zisko, Morosoli & Maser up to an aggregate of Sixty Thousand Dollars ($60,000)
of its and RSA's legal fees in addition to all expenses related thereto for
legal work performed in connection with the formation of the Company and the
negotiation, execution, delivery and performance of this Agreement. The Company
shall reimburse Cooley, Godward, Xxxxxx, Xxxxxxxxx & Xxxxx, counsel to
Purchasers, up to Thirty-Five Thousand Dollars ($35,000) of its legal fees and
expenses for legal work performed in connection with the negotiation, execution,
delivery and performance of this Agreement. The Company shall reimburse Xxxxxxx,
Xxxxx & Xxxxxx, counsel to Visa International Service Association, up to Ten
Thousand Dollars ($10,000) of its legal fees and expenses for legal work
performed in connection with the negotiation, execution, delivery and
performance of this Agreement.
12.8 Public Announcements. The Company, RSA and each Purchaser agree not
--------------------
to issue any press release or make any public statement with respect to the
transactions contemplated by this Agreement or the identity of any of the
Purchasers without the prior approval of all of
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 29
the Purchasers both as to the making of such release or statement and as to the
form and content thereof, except to the extent that such party is advised by
counsel, in good faith, that such release or statement is required as a matter
of law.
12.9 Other Remedies. Any and all remedies herein expressly conferred
--------------
upon a party shall be deemed cumulative with, and not exclusive of, any other
remedy conferred hereby or by law on such party, and the exercise of any one
remedy shall not preclude the exercise of any other.
12.10 Amendment and Waivers. Any term or provision of this Agreement may
---------------------
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or succeeding breach or default.
12.11 Survival of Agreements. All covenants, agreements, representations
----------------------
and warranties made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. The
representations, warranties, covenants and agreements of the Company contained
in or made pursuant to this Agreement shall survive the execution and delivery
of this Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers.
12.12 Attorneys' Fees. Should suit be brought to enforce or interpret
---------------
any part of this Agreement, the prevailing party shall be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including, without limitation, costs, expenses
and fees on any appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment. A party not entitled to recover its costs shall not be entitled to
recover attorneys' fees. No sum for attorneys' fees shall be counted in
calculating the amount of a judgment for purposes of determining if a party is
entitled to recover costs or attorneys' fees.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 30
12.13 Notices. Whenever any party hereto desires or is required to give
-------
any notice, demand or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
Company: Digital Certificates International, Inc.
c/o RSA Data Security, Inc.
000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
Attn: President
If to Company,
with a copy to: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxxxx Xxxxx Morosoli & Maser
000 Xxxx Xxxx Xxxx, Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Purchasers: At the address(es) set forth on
Exhibit A hereto
Such communications shall be effective when they are received by the
addressee thereof; but if sent by certified mail in the manner set forth above,
they shall be effective five (5) days after being deposited in the United States
mail. Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
12.14 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. A reference in this Agreement to any
Section shall include a reference to every Section the number of which begins
with the number of the Section to which reference is specifically made (e.g., a
----
reference to Section 5.8 shall include a reference to Sections 5.8.1 and
5.8.1.1). The titles and headings herein are for reference purposes only and
shall not in any manner limit the construction of this Agreement which shall be
considered as a whole. A reference to a Schedule, Exhibit or Section means a
Schedule, Exhibit or Section of this Agreement, unless the context expressly
otherwise requires.
12.15 Purchaser Investigation. Each Purchaser acknowledges that it is not
-----------------------
relying upon any person, firm or corporation (other than the Company, its
officers and directors) in making its investment or decision to invest in the
Company. Each of the Purchasers, severally
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 31
and not jointly, represents to each of the other Purchasers that it has been
solely responsible for its own "due-diligence" investigation of the Company and
its management and business, and for its own analysis of the merits and risks of
this investment. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents or employees of any
such Purchaser, shall be liable to any other Purchaser for any actions taken in
connection with the purchase of Preferred Stock in accordance with the terms of
this Agreement.
12.16 No Endorsement. Purchasers understand that no federal or state
--------------
securities administrator has made any finding or determination relating to the
fairness of investment in the Company or purchase of the Preferred Stock
hereunder and that no federal or state securities administrator has recommended
or endorsed the offering of securities by the Company hereunder.
12.17 California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
12.18 Pronouns. All pronouns and any variations thereof shall be deemed
--------
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
12.19 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby, and to carry into effect the intents and purposes of
this Agreement.
12.20 Absence of Third Party Beneficiary Rights. No provisions of this
-----------------------------------------
Agreement are intended nor shall be interpreted to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder or partner of any party hereto, or any other
person, unless specifically provided otherwise herein and, except as so
provided, all provisions hereof shall be personal solely between the parties to
this Agreement.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 32
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 33
IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of the
date first above written.
COMPANY:
Digital Certificates International, Inc.
c/o RSA Data Security, Inc.
000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
DIGITAL CERTIFICATES INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxx
----------------------------------
Name: Xxxxx Xxxxx
--------------------------------
Title: Chairman of the Board
-------------------------------
RSA:
RSA Data Security, Inc.
000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
RSA DATA SECURITY, INC.
By: /s/ D. Xxxxx Xxxxxx
----------------------------------
Name: D. Xxxxx Xxxxxx
--------------------------------
Title: ______________________________
PURCHASERS:
Bessemer Venture Partners DCI
0000 Xxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
BESSEMER VENTURE PARTNERS DCI
By: Bessemer Venture Partners III L.P.
Managing General Partner
By: Deer III & Co.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 34
Name: Xxxxxx X. Xxxxxxxx
--------------------------------
Title: Partner
Mitsubishi Corporation
0-0, Xxxxxxxxxx 0-Xxxxx,
Xxxxxxx-xx, Xxxxx 000-00
Xxxxx
MITSUBISHI CORPORATION
By: /s/ Mitsubishi Corporation
----------------------------------
Name: Yukihiro Kayama
Title: Senior Assistant to Managing Director
Information Systems and Services Group
Security Dynamics Technologies, Inc.
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
SECURITY DYNAMICS TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx Xx.
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx Xx.
--------------------------------
Title: President and CEO
-------------------------------
Intel Corporation
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
INTEL CORPORATION
By: /s/ Xxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxx
--------------------------------
Title: Vice President and Treasurer
-------------------------------
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 35
Ameritech Development Corporation
00 Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxx 00000
AMERITECH DEVELOPMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
----------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President - Venture Capital
GC&H Investments
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
GC&H INVESTMENTS
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
--------------------------------
Title: Executive Partner
-------------------------------
VISA International Service Association
c/o Xxxxxx Xxxxxxxxxxxx
Legal Department
VISA
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxx Xxxx, XX 00000
VISA INTERNATIONAL SERVICE ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------
Title: Vice President
-------------------------------
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 36
Xxxxxxx Security Corporation L.L.C.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
XXXXXXX SECURITY CORPORATION L.L.C.
By: /s/ Addison X. Xxxxxxx
----------------------------------
Name: Addison X. Xxxxxxx
--------------------------------
Title: ______________________________
First TZMM Investment Partnership
c/x Xxxxxxxxx Xxxxx Morosoli & Maser
000 Xxxx Xxxx Xxxx, 0xx Xxxxx
Xxxx Xxxx, XX 00000
FIRST TZMM INVESTMENT PARTNERSHIP
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxxxx
--------------------------------
Title: Partner
-------------------------------
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 37
EXHIBIT A
LIST OF PURCHASERS
------------------
Purchaser Shares
--------- ----------
Bessemer Venture Partners DCI 850,000
Visa International Service Association 850,000
Intel Corporation 850,000
Xxxxxxx Security Corporation L.L.C. 425,000
Ameritech Development Corporation 425,000
Mitsubishi Corporation 425,000/*/
Security Dynamics Technologies, Inc. 425,000
GC&H Investments 33,333
First TZMM Investment Partnership 23,550
----------
TOTAL 4,306,883
__________
/*/ It is understood that such shares will be purchased by Mitsubishi
International at a closing to be held as soon as practicable after the date
hereof upon receipt of all necessary executed closing documents.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 38
EXHIBIT B
COMPANY'S SCHEDULE OF EXCEPTIONS
--------------------------------
The following exceptions to the representations and warranties of the Company
and RSA are exceptions to all representations and warranties in Section 3, the
section references below are for reference purposes only.
3.1 As of the date hereof, the Company has not qualified to do business as a
foreign corporation in California. The Company agrees to use its best efforts
to qualify as a foreign corporation in California as soon as practicable after
the date hereof.
3.6 The Company and RSA are parties to the following agreements:
13. Assignment from RSA to the Company relating to the assignment of
certain technology and other assets to the Company ("ASSIGNMENT").
----------
14. Master OEM Agreement from RSA to the Company relating to certain
rights to TIPEM.
15. Non-Compete and Non-Solicitation Agreement whereby RSA agrees not to
compete in certain fields and RSA and the Company agree not to solicit each
other's employees.
16. RSA is assigning to the Company all of the contracts set forth on
Exhibit E to the Assignment.
17. RSA has obtained all required consents except the consent to the
assignment to the Company of (i) the Commercial Hierarchy Certifier Agreement
between RSA and Apple Computer, Inc. dated November 5, 1993, (ii) certain
sections of that certain Technology Software License Agreement between RSA and
Microsoft Corporation dated May 24, 1991, and (iii) certain sections of that
certain Second Encryption Software License Agreement between RSA and Apple
Computer, Inc. dated as of September 25, 1990. RSA agrees to use its best
efforts to obtain such consents as soon as practicable after the date hereof.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 39
3.8 The Company has agreements with its shareholders, officers and directors
as follows:
18. The agreements listed under Section 3.6 above.
19. The Company has entered an Indemnity Agreement with each of its
directors.
20. The Company has entered a Founders Subscription Agreement with RSA
whereby RSA purchased 4,000,000 shares of the Company's Common Stock.
21. The Company has entered Subscription Agreements with D. Xxxxx
Xxxxxx, a Director, and Xxxxxx Xxxxxx, a member of its Advisory Committee and
Kairdos L.L.C., in which D. Xxxxx Xxxxxx is Manager and a member and Xxxxxxx
Xxxxxxxxx, a Director of the Company, is a member.
22. The Company has entered a Registration Rights Agreement in the form
of Exhibit C hereto, to which certain directors and shareholders of the Company
---------
are parties.
23. The Company has entered a Stockholders Agreement in the form of
Exhibit D hereto to which certain directors and shareholders of the Company are
---------
parties.
24. The Company has entered in an engagement letter with Xxxxxxxxx Xxxxx
Morosoli & Maser. Xxxxxxx Xxxxxxxxx, a Director of the Company, is a partner in
Xxxxxxxxx Xxxxx Morosoli & Maser.
25. The Company has entered into a Subscription and Repurchase Agreement
with Bessemer Venture Partners DCI. Xxxxx Xxxxx, a Director of the Company, is
an affiliate of Bessemer Venture Partners IV.
26. The Company has entered a Subscription and Repurchase Agreement with
TZM Investment Fund whereby TZM Investment Fund acquired 80,000 shares of the
Common Stock of the Company. Xxxxxxx Xxxxxxxxx, a Director of the Company, is a
partner in TZM Investment Fund.
27. The Company intends to offer its services to its shareholders and
the Company already may have commenced negotiation of contracts with some or all
of its shareholders.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 40
11. As a result of his position as an officer, director and stockholder
of both RSA and the Company, D. Xxxxx Xxxxxx may be deemed to have an interest
in any contract between the Company and RSA.
3.10 RSA has obtained all required consents except the consent to the
assignment to the Company of (i) the Commercial Hierarchy Certifier Agreement
between RSA and Apple Computer, Inc. dated November 5, 1993, (ii) certain
sections of that certain Technology Software License Agreement between RSA and
Microsoft Corporation dated May 24, 1991, and (iii) certain sections of that
certain Second Encryption Software License Agreement between RSA and Apple
Computer, Inc. dated as of September 25, 1990. RSA agrees to use its best
efforts to obtain such consents as soon as practicable after the date hereof.
3.11 RSA is party to the following litigation:
3.11.1 RSA Data Security, Inc. v. Cylink Corporation, et al.
-----------------------------------------------------
(Arbitration), Xxxxx Xxxxx Xxxxxx Xxxxxxxx Xxxxx Xxxx Xx. XX 000000.
3.11.2 Cylink Corporation v. RSA Data Security, Inc. and Related
---------------------------------------------------------
Cross-Action, (Patent Litigation), United States District Court, Northern
------------
District of California, Oakland Division, Xxxx Xx. X 00 00000 XX.
3.11.3 Schlafly v. Public Key Partners and RSA Data Security, Inc.,
-----------------------------------------------------------
United States District Court, Northern District of California, San Xxxx
Division, Case No. C 94 20512 SW (PVT).
3.15 At present, the Company shares space with RSA. A space sharing or
sublease arrangement will be entered after the First Closing hereunder.
3.16.1 The Company has appointed as its general legal counsel the law
firm of Xxxxxxxxx Xxxxx Morosoli & Maser of which Xxxxxxx Xxxxxxxxx, a Director,
is a general partner.
3.16.2 See the contracts listed on Exhibit E to the Assignment.
3.20 The Business Plan was prepared in November 1994. Since that time RSA has
conducted the Company's business in the ordinary course. The Business Plan
assumed investment in October 1994 which did not occur. Section X of the
Business Plan is superseded in its entirety by the Transaction Documents.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 41
3.26 As of the date hereof, RSA has not obtained consent to the assignment to
the Company of (i) the Commercial Hierarchy Certifier Agreement between RSA and
Apple Computer, Inc. dated November 5, 1993, (ii) certain sections of that
certain Technology Software License Agreement between RSA and Microsoft
Corporation dated May 24, 1991, and (iii) certain sections of that certain
Second Encryption Software License Agreement between RSA and Apple Computer,
Inc. dated as of September 25, 1990. RSA agrees to use its best efforts to
obtain such consents as soon as practicable after the date hereof.
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 55
EXHIBIT O
AMERITECH AGREEMENT TERMS
-------------------------
(a) Ameritech Development Corporation, a Purchaser ("Ameritech"), is
subject to certain "line of business" restrictions under the Modification of
Final Judgment in the United States vs. AT &T, Civil Action 82-0192 (D.D.C.) (as
-----------------------
the same may be modified from time to time, the "MFJ"). Ameritech shall have
the right to require the Company to repurchase all of the Series A Preferred
Stock, Common Stock, and other securities of the Company owned beneficially or
of record by Ameritech (collectively, the "Ameritech Securities") subject to the
conditions of this paragraph (a) as follows:
(i) If a court of competent jurisdiction or the United States Department
of Justice ("the D.O.J.") determines that (x) the original purchase
of the Ameritech Securities was a violation of, or (y) the
continuing ownership by Ameritech of the Ameritech Securities will
violate the line of business restrictions of the MFJ to which
Ameritech is subject and orders that Ameritech divest the Ameritech
Securities or, in the case of the D.O.J., advises Ameritech that it
intends to seek such divestiture, or counsel to Ameritech advises
Ameritech that the divestiture of the Ameritech Securities is
advisable under the MFJ, then Ameritech shall have the right to
require the Company to purchase the Ameritech Securities at a
purchase price which shall equal the fair market value of the
Ameritech Securities (as determined pursuant to the paragraph (b)
below) on the date of such judicial order to determination, unless
such purchase would violate any provision of the General Corporation
Law of the State of Delaware or the corporate laws of any other
State applicable to the Company at such time. If the Company is
obligated to purchase Ameritech Securities it will issue a note for
the purchase price bearing interest at the annual rate of two
percent above the rate of interest announced at such time by the
First National Bank of Chicago as its prime commercial lending rate,
compounded annually. The interest on such note will be payable
quarterly and the principal of such note will mature and be payable
on the earlier of (i) two years from the date of the note, (ii) 90
days after all shares
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 56
of the Company's Preferred Stock have been converted to Common
Stock, (iii) the date on which cash dividends are paid on the
Preferred Shares or Common Stock, (iv) the date on which the Company
is acquired by a third party, whether through a sale of assets, sale
of capital stock, merger, consolidation or otherwise or (v) the
consummation of an underwritten public offering by the Company of
any of its securities.
(ii) For a period of 60 days prior to exercising its right to require the
Company to repurchase Ameritech Securities, Ameritech shall have the
right to sell the Ameritech Securities to a third party; provided,
--------
however, that the Company shall have a right of first refusal to
-------
purchase the Ameritech Securities. in the event that Ameritech
reaches general agreement with a third party regarding the sale of
the Ameritech Securities within such 60 day period, Ameritech will
give the Company written notice describing the price and general
terms of the proposed sale (the "Sale Notice"). The Company may
elect to purchase all (but not less than all) of the Ameritech
Securities for the same price and upon the same terms and conditions
as set forth in the Sale Notice by giving written notice of such
election to Ameritech within 15 days after receiving the sale
Notice. The closing of the purchase of the Ameritech Securities by
the Company pursuant to this subsection (ii) shall take place
promptly (and in any event within 15 days) following the Company's
delivery of written notice to the Purchaser.
(b) The fair market value of the Ameritech Securities shall be
determined by a nationally known venture capitalist or investment banker
mutually agreeable to the Company and the Ameritech. The costs of such appraisal
shall be borne equally by the Company and Ameritech.
(c) The rights granted to Ameritech under this Section __ are personal
to Ameritech and may not be assigned to any other party other than its
stockholders and affiliates which acquire the Ameritech Securities in compliance
with this agreement.
(d) Termination. The provisions of this Section __ shall terminate and
-----------
have no further force and effect upon the first to occur of:
(i) The occurrence of both (1) the consummation of the first
underwritten public offering by the Company of any of its equity
securities, the aggregate market value of which on the
Digital Certificates International, Inc.
Series A Preferred Stock Purchase Agreement
Page 57
date of such offering shall be at least $10,000,000; and (2) the
availability to the original purchaser of the Ameritech Securities of the
resale provisions of Rule 144(k) promulgated under the Act or any then
equivalent regulation; or
(ii) The termination of ownership by the original purchaser of the
Ameritech Securities and its affiliates of all of the Ameritech
Securities.
