Exhibit 10.4
STOCKHOLDERS' AGREEMENT
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This Agreement dated as of December 31, 1996, is entered into by and
among Entrust Technologies Inc., a Maryland corporation (the "Company"),
Northern Telecom Inc., a Delaware corporation ("NTI"), Northern Telecom Limited,
a Canadian corporation ("NTL"), and the individuals and entities listed on
Exhibit A hereto (the "Purchasers"). The Purchasers, NTI and NTL are sometimes
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collectively referred to herein as the "Stockholders."
Recitals
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A. The Purchasers are acquiring an aggregate of 257,500 shares of the
Company's Series B Common Stock, $.01 par value per share (the "Series B Common
Stock"), pursuant to the Series B Common Stock Purchase Agreement of even date
herewith (the "Purchase Agreement").
B. It is a condition to the obligation of the Purchasers under the
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and be bound by the provisions
hereof.
C. As used in this Agreement, the term "Shares" shall include all
shares of the Company's Series A Common Stock, $.01 par value per share (the
"Series A Common Stock"), Series B Common Stock, Special Voting Stock, $.01 par
value per share (the "Special Voting Stock"), and Preferred Stock, $.01 par
value per share (the "Preferred Stock"), as well as the Exchangeable Shares of
Entrust Technologies Limited, an Ontario corporation (the "Canadian
Subsidiary"), (the "Exchangeable Shares"), outstanding, whether now owned or
hereafter acquired by the Stockholders. Other terms used as defined terms and
not otherwise defined in this Agreement shall have the meanings set forth in the
Articles of Amendment and Restatement of the Company (as amended, the "Articles
of Restatement"). For purposes of calculating any Purchaser's ownership of
Shares, all shares of Series B Common Stock convertible into Series A Common
Stock shall be deemed to have been converted into Series A Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and the consummation of the sale and purchase of Series B Common Stock
pursuant to the Purchase Agreement, and for other valuable consideration, it is
agreed as follows:
1. Restrictions on Transfer.
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1.1 Any sale, transfer or other disposition of any Shares
by a Stockholder, other than according to the terms of this Agreement, shall be
void and
transfer no right, title, or interest in or to any of such Shares to the
purported transferee.
1.2 An original copy of this Agreement, duly executed by
each of the parties hereto, shall be delivered to the Secretary of the Company
and maintained at the principal executive office of the Company and made
available for inspection by any person requesting it.
2. Transfers Not Subject to Restrictions. Any Stockholder may
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sell, transfer or otherwise dispose of any of his Shares (i) to any current or
former limited or general partner of such Stockholder, in the case of any
Stockholder that is a partnership; (ii) to any trust beneficiary, in the case of
any Stockholder that is a trust; (iii) to any member in the case of any
Stockholder that is a limited liability company, or (iv) to any current security
holder of such Stockholder, or any transferee who acquires substantially all of
the assets of such Stockholder, or any transferee controlled by, controlling or
under common control with such Stockholder, in the case of any Stockholder that
is a corporation; provided, however, that any such transferee under clauses (i)
through (iv) of this Section 2 shall agree in writing with the Company and the
other Stockholders, as a condition precedent to such transfer, to be bound by
all of the provisions of the Agreement to the same extent as if such transferee
were the Stockholder transferring such Shares.
3. Offer of Sale; Notice of Proposed Sale. If any Stockholder
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desires to sell, transfer or otherwise dispose (but excluding any exchange or
redemption effected in accordance with the terms of the Share Exchange Agreement
of even date hereof) of any of his Shares, or of any interest in such Shares,
whether voluntarily or by operation of law, in any transaction other than
pursuant to Section 2 of this Agreement, such Stockholder (the "Selling
Stockholder") shall first deliver written notice of his desire to do so (the
"Notice") to the Company and each of the other Stockholders, in the manner
prescribed in Section 11.4 of this Agreement. The Notice must specify: (i) the
name and address of the party to which the Selling Stockholder proposes to sell,
transfer or otherwise dispose of the Shares or an interest in the Shares (the
"Offeror"), (ii) the number of Shares the Selling Stockholder proposes to sell,
transfer or otherwise dispose of (the "Offered Stock"), (iii) the consideration
per Share to be delivered to the Selling Stockholder for the proposed sale,
transfer or disposition, and (iv) all other material terms and conditions of the
proposed transaction.
4. Stockholders' Option to Purchase.
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4.1 Subject to Section 6.1, each Stockholder shall have an
option, exercisable for a period of 15 days from the date of delivery of the
Notice, to purchase, on a pro rata basis according to the number of Shares owned
by such Stockholder, the Offered Stock for the consideration per share and on
the terms and
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conditions set forth in the Notice. Such option shall be exercised by delivery
of written notice to the Secretary of the Company.
4.2 In the event options to purchase have been exercised by
the Stockholders with respect to some but not all of the Offered Stock, those
Stockholders who have exercised their options within the 15-day period specified
in Section 4.1 shall have an additional option, for a period of five days next
succeeding the expiration of such 15-day period (the "20-day period"), to
purchase all or any part of the balance of such Shares on the terms and
conditions set forth in the Notice, which option shall be exercised by the
delivery of written notice to the Secretary of the Company. In the event there
are two or more such Stockholders that choose to exercise the last-mentioned
option for a total number of Shares in excess of the number available, the
Shares available for each such Stockholder's option shall be allocated to such
Stockholder pro rata based on the number of Shares owned by the Stockholders so
electing.
4.3 If the options to purchase the Offered Stock are
exercised by the Stockholders, the Secretary of the Company shall immediately
notify all of the exercising Stockholders of that fact. The closing of the
purchase of the Offered Stock shall take place at the offices of the Company on
the later of (i) the date twenty days after the expiration of such 15-day or
20-day period or (ii) the date that the Company consummates its purchase of
Offered Stock under Section 5.2 hereof.
4.4 In the event the Stockholders do not exercise their
option within such 15-day or 20-day period with respect to all of the Offered
Stock, the Secretary of the Company shall, by the last day of such period, give
written notice of that fact to the Company (the "Company Notice"). The Company
Notice shall specify the number of shares of Offered Stock not proposed to be
purchased by the Stockholders (the "Remaining Stock").
4.5 To the extent that the consideration proposed to be
paid by the Offeror for the Offered Stock consists of property other than cash
or a promissory note, the consideration required to be paid by the Stockholders
and/or the Company exercising their options or option under Sections 4 and 5
hereof may consist of cash equal to the value of such property, as determined in
good faith by agreement of the Selling Stockholder and the Stockholders and/or
the Company acquiring such Offered Stock.
4.6 Notwithstanding anything to the contrary herein,
neither any of the Stockholders nor the Company shall have any right to purchase
any of the Offered Stock hereunder unless the Stockholders and/or the Company
exercise their options or option to purchase all of the Offered Stock.
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5. Company's Option to Purchase.
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5.1 Subject to Section 6, the Company shall have an option,
exercisable for a period of 15 days following delivery of the Company Notice, to
purchase all of the Remaining Stock for the consideration per share and on the
terms and conditions specified in the Notice. Such option shall be exercised by
delivery of written notice to the Secretary of the Company.
5.2 In the event the Company duly exercises its option to
purchase all of the Remaining Stock, the closing of such purchase shall take
place at the offices of the Company twenty days after the date of receipt of
such notice to the Secretary of the Company.
6. Failure to Fully Exercise Options. If the Stockholders and the
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Company do not exercise their options to purchase all of the Offered Stock
within the periods described in this Agreement (the "Option Period"), then all
options of the Stockholders and the Company to purchase the Offered Stock,
whether exercised or not, shall terminate. The Selling Stockholder shall then be
entitled to sell to the Offeror, according to the terms set forth in the Notice,
the Offered Stock. The closing of such sale must take place not later than 60
days after the expiration of the Option Period. If the Selling Stockholder
wishes to sell, transfer or otherwise dispose of any such shares of Offered
Stock at a price per share which differs from that set forth in the Notice, upon
terms different from those previously offered to the Company and the other
Stockholders, or more than 60 days after the expiration of the Option Period, as
a condition precedent to such transaction, such shares of Offered Stock must
first be offered to the other Stockholders and the Company on the same terms and
conditions as given the Offeror, and in accordance with the procedures and time
periods set forth above.
7. Right of First Refusal.
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7.1 The Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any shares of its Series A Common Stock, (ii) any shares of its Special
Voting Stock, (iii) any other equity securities of the Company, including,
without limitation, shares of Preferred Stock, (iv) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any equity securities of
the Company, or (v) any debt securities convertible into capital stock of the
Company (collectively, the "Offered Securities"), unless in each such case the
Company shall have first complied with this Agreement. The Company shall deliver
to each Purchaser a written notice of any proposed or intended issuance, sale or
exchange of Offered Securities (the "Offer"), which Offer shall (i) identify and
describe the Offered Securities, (ii) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (iii) identify the
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persons or entities to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (iv) offer to issue and sell to or
exchange with such Purchaser (A) such portion of the Offered Securities as the
aggregate number of Shares then held by such Purchaser bears to the total number
of Shares (the "Basic Amount"), and (B) any additional portion of the Offered
Securities as such Purchaser shall indicate it will purchase or acquire should
the other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount"). Each Purchaser shall have the right, for a period
of 15 days following delivery of the Offer, to purchase or acquire, at a price
and upon the other terms specified in the Offer, the number or amount of Offered
Securities described above. The Offer by its term shall remain open and
irrevocable for such 15-day period.
7.2 The amount of the Offered Securities available to the
Purchasers as a class shall be the sum of the Basic Amounts of all the
Purchasers (the "Available Purchaser Securities").
7.3 To accept an Offer, in whole or in part, a Purchaser
must deliver a written notice to the Company prior to the end of the 15-day
period of the Offer, setting forth the portion of the Purchaser's Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount (if any) that
such Purchaser elects to purchase (the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Purchasers are less than the Available Purchaser
Securities, then each Purchaser who has set forth Undersubscription Amounts in
its Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, all Undersubscription Amounts it has subscribed for;
provided, however, that should the Undersubscription Amounts subscribed for
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exceed the difference between the Available Purchaser Securities and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"), each
Purchaser who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Purchaser bears to the total
Undersubscription Amounts subscribed for by all Purchasers, subject to rounding
by the Board of Directors to the extent it reasonably deems necessary.
7.4 In the event that Notices of Acceptance are not given
by the Purchasers in respect of all the Available Purchaser Securities, the
Company shall have 90 days from the expiration of the period set forth in
Section 7.1 above to issue, sell or exchange (i) all or any part of such
Available Purchaser Securities as to which a Notice of Acceptance has not been
given by the Purchasers and (ii) any remaining Offered Securities (collectively,
the "Saleable Securities"), but only to the offerees or purchasers described in
the Offer and only upon terms and conditions (including, without limitation,
unit prices and interest rates) which are not more favorable, in the aggregate,
to the acquiring person or persons or less favorable to the Company than those
set forth in the Offer.
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7.5 In the event the Company shall propose to sell less
than all the Saleable Securities (any such sale to be in the manner and on the
terms specified in Section 7.4 above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 7.3 above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 7.3 above
prior to such reduction) and (ii) the denominator of which shall be the amount
of all Offered Securities. In the event that any Purchaser so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Purchasers in accordance with Section 7.1 above.
7.6 Upon the closing of the issuance, sale or exchange of
all or less than all the Saleable Securities, the Purchasers shall acquire from
the Company, and the Company shall issue to the Purchasers, the number or amount
of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 7.4 above if the Purchasers have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Purchasers of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel.
7.7 Any Offered Securities not acquired by the Purchasers
or other persons in accordance with Section 7.3 above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the procedures
specified in this Agreement.
7.8 The rights of the Purchasers under this Section 7 shall
not apply to:
(a) Series A Common Stock or Special Voting Stock
issued as a stock dividend to holders of Series A
Common Stock or Special Voting Stock, as the case
may be, or upon any subdivision or combination of
shares of Series A Common Stock or Special Voting
Stock, as the case may be;
(b) the issuance of any shares of Series A Common Stock
upon conversion of (i) outstanding Shares or (ii)
outstanding shares of Preferred Stock convertible
into Series A
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Common Stock;
(c) the issuance of any shares of Series A Common Stock
upon the exchange of Exchangeable Shares, pursuant
to the Share Exchange Agreement of even date
herewith between the Company and the Canadian
Subsidiary;
(d) shares of Series A Common Stock, or options
exercisable therefor, including options outstanding
on the date of this Agreement, issuable to
officers, directors, consultants and employees of
the Company and any subsidiary pursuant to any
plan, agreement or arrangement approved by a vote
of not less than 75% of the Board of Directors of
the Company, including without limitation the
Company's 1996 Stock Incentive Plan;
(e) securities issued solely in consideration for the
acquisition (whether by merger or otherwise) by the
Company or any of its subsidiaries of all or
substantially all of the stock or assets of any
other entity;
(f) securities issued to a strategic partner, joint
venturer, supplier or customer in an arrangement
approved by a vote of not less than 75% of the
Board of Directors of the Company; or
(g) shares of Series A Common Stock sold by the Company
in an underwritten public offering pursuant to an
effective registration statement under the
Securities Act of 1933, as amended.
8. Voting of Shares.
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8.1 Except as provided in Subsection B.3.(b) of Article IV
of the Articles of Restatement, in any and all elections of directors of the
Company (whether at a meeting or by written consent in lieu of a meeting), each
Purchaser shall vote or cause to be voted all Shares, which carry voting rights
(including voting rights which arise by reason of default), owned by him, or
over which he has voting control, and otherwise use his best efforts, so as to
fix the number of directors of the Company at seven and to elect (i) so long as
Nortel holds any shares, four members designated by NTI and NTL (collectively,
"Nortel"), (ii) one member designated by the Company, (iii) one member
designated by the Purchasers other than Olympus Growth Fund II, L.P. (by action
of the holders of a majority of the shares of Series B Common Stock held by all
such Purchasers) and (iv) so long as Olympus holds at least 49,500 Shares
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(as adjusted for any stock splits, stock dividend or recapitalization), one
member designated by Olympus Growth Fund II, L.P., or, if Olympus ceases to hold
such number of Shares, by all the Purchasers.
8.2 The Company shall provide the Purchasers including
Olympus Growth Fund II, L.P. with 20 days prior written notice of any intended
mailing of a notice to Purchasers for a meeting at which directors are to be
elected and shall notify the Stockholders including Olympus Growth Fund, II,
L.P. of the person designated by the Company as a nominee for election as a
director, which notice shall provide that, if any party shall fail to designate
a nominee as provided herein, the then incumbent directors or director
previously designated by such party shall be deemed to have been designated
hereunder. Nortel, Olympus Growth Fund II, L.P. and the Purchasers shall give
written notice to all other parties to this Agreement, no later than 10 days
prior to such mailing, of the persons designated by Nortel, Olympus Growth Fund
II, L.P. or the Purchasers, as the case may be, as nominees for election as
directors. The Company agrees to nominate and recommend for election as
directors only the individuals designated, or to be designated, pursuant to this
Section 8. If Nortel, Olympus Growth Fund II, L.P. or the Purchasers shall fail
to give notice to the Company as provided above, it shall be deemed that the
designees of Nortel, Olympus Growth Fund II, L.P. or the Purchasers, as the case
may be, then serving as directors shall be their designees for reelection.
8.3 Except for director's bad faith or wilful misconduct,
(i) the Purchasers (other than Olympus Growth Fund II, L.P.) shall not vote to
remove any director designated by the Company, Olympus Growth Fund II, L.P. or
Nortel, (ii) Nortel shall not vote to remove any director designated by the
Company, Olympus Growth Fund II, L.P. or the Purchasers (other than Olympus
Growth Fund II, L.P.), (iii) the Company shall not vote to remove any director
designated by Nortel, Olympus Growth Fund II, L.P., or the Purchasers, (other
than Olympus Growth Fund II, L.P.), and (iv) Olympus Growth Fund II, L.P. shall
not vote to remove any director designated by the Company, the Purchasers (other
than Olympus Growth Fund II, L.P.) or Nortel.
8.4 If, prior to the occurrence of an Automatic Conversion
Event (as defined in Subsection B.5.(a) of Article IV of the Articles of
Restatement), the Purchasers exercise the Triggering Event Option (as defined in
Subsection B.3.(b)(ii) of such Article IV), then the provisions of this Section
8 will terminate.
9. Restrictive Legends. All certificates representing Shares owned
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or hereafter acquired by the Purchasers or any transferee of the Purchasers
bound by this Agreement shall have affixed thereto a legend substantially in the
following form:
"The shares represented by this certificate have not been
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registered under the Securities Act of 1933, as amended, and
may not be offered, sold, or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the Company
is obtained to the effect that such registration is not
required.
The Company has authority to issue stock of more than one
class. The Company will furnish without charge to each
Purchaser who so requests the designations and any preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption of the stock of each class which the
Company is authorized to issue.
The Company has authority to issue a preferred class of stock
in series. The Company will furnish without charge to each
Purchaser who so requests the differences in the relative
rights and preferences between the shares of each series to the
extent they have been set, and the authority of the board of
directors to set the relative rights and preferences of
subsequent series.
The shares of stock represented by this certificate are subject
to certain voting agreements as set forth in a Stockholders'
Agreement by and among the registered owner of this
certificate, the Company, and certain other Stockholders of the
Company, a copy of which is available for inspection at the
offices of the Secretary of the Company."
10. Management Rights. The Company hereby agrees that, if any
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Purchaser shall not have its representative elected to the Board of Directors of
the Company in accordance with the provisions of Section 8 above, (i) the
Company will notify such Purchaser, concurrently with notice given to members of
the Board of Directors of the Company, of all meetings of the Board of
Directors, and, as soon as available, will provide to such Purchaser all
reports, financial statements or other information distributed to the Board of
Directors of the Company, (ii) the Company will permit a person designated by
such Purchaser to attend all such meetings of the Board of Directors as an
observer and to participate as an elected member with all rights of an elected
member, voting excepted, and (iii) the Company will permit a person designated
by such Purchaser, at the Company's expense, to visit and inspect any of the
properties of the Company and its subsidiaries and to discuss the affairs,
finances and accounts of the Company and its subsidiaries with the principal
officers and the
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auditors of the Company, all at such reasonable times during business hours and
as often as such Purchaser may reasonably request.
11. Sharing Agreement.
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11.1 If (x) a Change in Control (as defined in Article 5 of the
Amendment and Restatement to the Company's Articles of Incorporation (the
"Articles")) occurs at a price per share of less than $100 (as adjusted to
reflect any stock split, stock dividend or recapitalization) or (y) an
Infringement Liquidation (as defined below in Section 11.2) occurs, and Nortel,
immediately prior to that Change of Control or Infringement Liquidation as the
case may be, owns a majority of the voting power of the then outstanding capital
stock of the Company (including shares of Special Voting Stock and Series A
Common Stock on a fully-diluted basis), Nortel and its transferees, if any, on
the one hand, and the holders of Series B Common Stock immediately prior to such
Change in Control, on the other hand, will share any net proceeds resulting from
such Change in Control or Infringement Liquidation as the case may be, in the
following manner: (a) the first $26.0 million of net proceeds distributable to
such holders under the Articles will be allocated to the holders of Series B
Common Stock immediately prior to such Change in Control, (b) then net proceeds
in excess of $26.0 million but less than $52.0 million distributable to such
holders under the Articles will be allocated 90.0% to Nortel and its
transferees, if any, and 10.0% to the holders of Series B Common Stock and (c)
then net proceeds in excess of $52.0 million distributable to such holders
immediately prior to such Change in Control under the Articles will be allocated
pro-rata to Nortel and its transferees, if any, and the Series B Common Stock on
the basis of their fully-diluted ownership of the Series A Common Stock.
11.2 The parties hereby agree that upon the occurrence of an event,
or a series of events, (a "Infringement Liquidation") relating to any action,
suit, proceeding, claim, demand, judgment or assessment relating to the
infringement by the Company, or its subsidiaries of any patent, trade secret,
trademark or copyright of any person with respect to any of the Entrust Assets
(collectively, as such term is defined in both (i) the NTL-ETL Transfer
Agreement, of even date hereof, between NTL and the Canadian Subsidiary and (ii)
the NTI-ETI Transfer Agreement of the even date hereof, between NTI and the
Company), which such event, or series of events taken together, has a
substantial adverse effect on the Company so as to make it impractical for the
Company to continue to conduct the Entrust Business (as defined in the Purchase
Agreement), then, unless otherwise agreed by the holders of a majority of the
then outstanding shares of the Class B Common Stock, the parties shall take all
such actions as may be necessary to cause the liquidation of the Company as soon
as practical after such Infringement Liquidation.
11.3 The parties agree that the foregoing allocation of proceeds
shall be made in accordance with the provisions of this Section notwithstanding
any other
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rights to such proceeds that the parties might have under the Articles or
applicable provisions of the Maryland General Corporation Law, and the parties
hereby waive any right to such proceeds except as provided herein.
12. Approval of Share Transfers.
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12.1 Transfers by Nortel. Without limiting the application of
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any other provisions of this Agreement, Nortel shall not sell, transfer or
otherwise dispose (but excluding any exchange or redemption effected in
accordance with the terms of the Share Exchange Agreement of even date herewith
or any transfer permitted pursuant to Section 2 above so long as such exchange,
redemption or transfer shall not result in Nortel's ceasing to own a majority
voting power of the then outstanding capital stock of the Company (including
shares of Special Voting Stock and Series A Common Stock on a fully-diluted
basis) of Shares, nor shall the Company effect any transaction, which would
result in Nortel's ceasing to own majority voting power of the then outstanding
capital stock of the Company (including shares of Special Voting Stock and
Series A Common Stock on a fully-diluted basis) without the prior approval by
the holders of a majority of the then outstanding shares of Class B Common
Stock.
12.2 Transfer of Rights. Any transferee to whom capitalized
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Shares are transferred by any party hereto, whether voluntarily or by operation
of law, shall be bound by the obligations imposed upon the transferor under this
Agreement, and shall be entitled to the rights granted to the transferor under
this Agreement, to the same extent as if such transferee were a party hereto.
13. Termination of Agreement. This Agreement shall terminate upon the
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occurrence of an Automatic Conversion Event (as defined in Subsection B.5.(a) of
Article IV of the Articles of Restatement).
14. General.
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14.1 Severability. The provisions of this Agreement are
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severable, so that the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other term or
provision of this Agreement, which shall remain in full force and effect.
14.2 Specific Performance. In addition to any and all other
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remedies that may be available at law in the event of any breach of this
Agreement, each Purchaser shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
14.3 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of Maryland, without giving
effect to conflict-of-laws principles.
14.4 Notices. All notices, requests, consents, and other
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communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at Entrust Technologies Inc., 0 Xxxxxxxxxxxxx
Xxxxxxxx, Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, Attention: Corporate Secretary, or at
such other address or addresses as may have been furnished in writing by the
Company to the Purchasers, with a copy to Xxxx X. Xxxxxxx, Esq., Xxxx and Xxxx,
00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000;
If to NTL, at Northern Telecom Limited, 0000 Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, Attention: President, or at such other
address or addresses as may have been furnished in writing by NTL to the
Purchasers, with a copy to Xxxx X. Xxxxxxx, Esq., Xxxx and Xxxx, 00 Xxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000;
If to NTI, at Northern Telecom Inc., 0000 Xxxxxxxx Xxxx., Xxxxxxxxxx,
Xxxxx 00000, Attention: President, Enterprise Networks, or at such other address
or addresses as may have been furnished in writing by NTI to the Purchasers,
with a copy to Xxxx X. Xxxxxxx, Esq., Xxxx and Xxxx, 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000; or
If to a Purchaser, at his or its address set forth on Exhibit A or at
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such other address or addresses as may have been furnished to the Company in
writing by such Purchaser, with a copy to Xxxxxxx Xxxxxxxx, Esq., Xxxxx
Xxxxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section 11.4.
14.5 Complete Agreement; Amendments. This Agreement constitutes
------------------------------
the full and complete agreement of the parties hereto with respect to the
subject matter hereof. No amendment, modification or termination of any
provision of this
-12-
Agreement shall be valid unless in writing and signed by (i) the Company, (ii)
NTL, (iii) NTI and (iv) Purchasers holding a majority of the shares of the
Series B Common Stock held by all of the Purchasers.
14.6 Pronouns. Whenever the content may require, any pronouns
--------
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
14.7 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall constitute one Agreement binding on all the
parties hereto.
14.8 Captions. Captions of sections have been added only for
--------
convenience and shall not be deemed to be a part of this Agreement.
-13-
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
COMPANY:
ENTRUST TECHNOLOGIES INC.
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: President
NORTHERN TELECOM LIMITED
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and Chief
Financial Officer
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President and
Deputy General Counsel
NORTHERN TELECOM INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Financial Officer
PURCHASERS:
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: RSM Corporation, its managing
general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
-00-
XXXXXXX XXXXXX XXXX XX, X.X.
By: OGP II, L.P., its general partner
By: RSM Corporation, its managing
general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
ORCHID & CO., nominee for
X. Xxxx Price Threshold Fund III, L.P.
By: X. Xxxx Price Threshold Fund
Associates, Inc., General Partner
By: /s/ Xxxxxxx 0. Xxxxxxx
Name: Xxxxxxx 0. Xxxxxxx
Title: President
SOCIETE GENERALE INVESTMENT CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS TRUSTEE OF THE
MULTI-MARKET SPECIAL INVESTMENT
TRUST FUND OF XXXXXX GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
-15-
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS TRUSTEE OF THE
COMMINGLED PENSION TRUST FUND
(MULTI-MARKET SPECIAL INVESTMENT
FUND II) OF XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS INVESTMENT MANAGER
AND AGENT FOR THE XXXXXX X. XXXXX
FOUNDATION (MULTI-MARKET ACCOUNT)
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ Xxxxxx Xxxxxx, Xx.
Name: Xxxxxx Xxxxxx, Xx.
Title:
-16-
STOCKHOLDER AGREEMENT AND WAIVER
--------------------------------
THIS Agreement and Waiver (this "Agreement") dated as of January 31, 1997
is entered into by and among Entrust Technologies Inc., a Maryland corporation
(the "Company"), and the persons whose signatures are set forth below.
WHEREAS, the Company has entered into a Series B Common Stock Purchase
Agreement, dated as of December 31, 1996 (the "Series B Common Stock Purchase
Agreement"), with the parties whose names are set forth on Exhibit A thereto
---------
(the "Purchasers"); and
WHEREAS, in connection with the execution of the Series B Common Stock
Purchase Agreement, the Company has entered into a Registration Rights
Agreement, dated as of December 31, 1996, with the Purchasers (the "Registration
Rights Agreement"); and
WHEREAS, Section 15(c) of the Registration Rights Agreement provides that
the Registration Rights Agreement may not be amended, and no provision thereof
may be waived, without the written consent of the Company and the holders of at
least two-thirds of the Registrable Shares (as defined in the Registration
Rights Agreement); and
WHEREAS, the persons whose signatures are set forth below represent the
Company and the holders of at least two-thirds of the Registrable Shares; and
WHEREAS, in connection with the execution of the Series B Common Stock
Purchase Agreement, the Company has entered into a Stockholders' Agreement,
dated as of December 31, 1996, with Northern Telecom Inc., a Delaware
corporation ("NTI"), Northern Telecom Limited, a Canadian corporation ("NTL"),
and the Purchasers (the "Stockholders' Agreement"); and
WHEREAS, Section 14.5 of the Stockholders' Agreement provides that the
Stockholders' Agreement may not be amended, modified or terminated without the
written consent of the Company, NTI, NTL and Purchasers holding a majority of
the shares of the Series B Common Stock held by all of the Purchasers; and
WHEREAS, the persons whose signatures are set forth below represent the
Company, NTI, NTL and Purchasers holding a majority of the shares of the Series
B Common Stock held by all of the Purchasers; and
WHEREAS, the Company shall not issue any shares of capital stock without
complying with the right of first refusal set forth in Section 7 of the
Stockholders'
-17-
Agreement; and
WHEREAS, the Company is entering into a Series B Non-Voting Common
Stock Purchase Agreement of even date herewith (the "Series B Non-Voting Common
Stock Purchase Agreement") with Societe Generale Investment Corporation
("Societe Generale") providing for the sale of an aggregate of 2,500 shares (the
"Series B Non-Voting Shares") of Series B Non-Voting Common Stock, $.01 par
value per share, of the Company (the "Series B Non-Voting Common Stock"); and
WHEREAS, the Purchasers desire to waive the right of first refusal set
forth in Section 7 of the Stockholders' Agreement with respect to the Series B
Non-Voting Shares; and
WHEREAS, Societe Generale intends to exchange 36,448 shares (the
"Series B Exchange Shares") of Series B Common Stock, $.01 par value per share,
of the Company (the "Series B Common Stock") for 36,448 shares of Series B
Non-Voting Common Stock (the "Series B Non-Voting Exchange Shares"); and
WHEREAS, Societe Generale shall not transfer the Series B Exchange
Shares without complying with the provisions of Sections 3 through 6 of the
Stockholders' Agreement and the Company shall not issue any Series B Non-Voting
Exchange Shares without complying with the right of first refusal set forth in
Section 7 of the Stockholders' Agreement; and
WHEREAS, the Company and the Purchasers desire to waive their rights
set forth in Sections 3 through 7 of the Stockholders' Agreement with respect to
the Series B Exchange Shares and the Series B Non-Voting Exchange Shares; and
WHEREAS, the Purchasers desire to provide the holder of Series B
Non-Voting Common Stock with rights under the Registration Rights Agreement and
the Stockholders' Agreement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the undersigned do hereby agree with each other as follows:
1. Amendments to the Stockholders' Agreement. The undersigned do
-----------------------------------------
hereby consent to and approve the following amendments to the Stockholders'
Agreement;
(a) The following clause is hereby inserted in the first sentence
of Section C of the Recitals following the phrase "Series B Common Stock,":
"Series B Non-Voting Common Stock, $.01 par value per share (the
"Series B Non-Voting Common Stock"),";
-18-
(b) The following clause is hereby inserted at the end of the last
sentence of Section C of the Recitals:
"and all shares of Series 13 Non-Voting Common Stock exchangeable into
Series B Common Stock shall be deemed to have been exchanged into
Series B Common Stock and such shares of Series B Common Stock
converted into Series A Common Stock";
(c) The clause following the phrase "(i) any shares of its Series A
Common Stock," in the first sentence of Section 7.1 is hereby deleted in its
entirety and the following clause is inserted in lieu thereof:
"(ii) any shares of its Series B Non-Voting Common Stock, (iii) any
shares of its Special Voting Stock, (iv) any other equity securities
of the Company, including, without limitation, shares of Preferred
Stock, (v) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any equity securities of the Company, or
(vi) any debt securities convertible into capital stock of the Company
(collectively, the "Offered Securities"), unless in each such case
the Company shall have first complied with this Agreement."; and
(d) Section 11.1 is hereby deleted in its entirety and the following
Section 11.1 is inserted in lieu thereof:
"11.1 If (x) a Change in Control (as defined in Article 5 of the
Amendment and Restatement to the Company's Articles of Incorporation
(as amended, the "Articles")) occurs at a price per share of less than
$100 (as adjusted to reflect any stock split, stock dividend or
recapitalization) or (y) an Infringement Liquidation (as defined below
in Section 11.2) occurs, and Nortel, immediately prior to that Change
of Control or Infringement Liquidation, as the case may be, owns a
majority of the voting power of the then outstanding capital stock of
the Company (including shares of Special Voting Stock and Series A
Common Stock on a fully-diluted basis), Nortel and its transferees, if
any, on the one hand, and the holders of Series B Common Stock and
Series B Non-Voting Common Stock immediately prior to such Change in
Control, on the other hand, will share any net proceeds resulting from
such Change in Control or Infringement Liquidation as the case may be,
in the following manner: (a) the first $26.0 million of net proceeds
distributable to such holders under the Articles will be allocated to
the holders of Series B Common Stock and Series B Non-Voting Common
Stock pro rata in accordance with their interests
-19-
immediately prior to such Change in Control, (b) then net proceeds in
excess of $26.0 million but less than $52.0 million distributable to
such holders under the Articles will be allocated 90.0% to Nortel and
its transferees, if any, and 10.0% to the holders of Series B Common
Stock and Series B Non-Voting Common Stock pro rata in accordance with
their interests, and (c) then net proceeds in excess of $52.0 million
distributable to such holders immediately prior to such Change in
Control under the Articles will be allocated pro-rata to Nortel and
its transferees, if any, the Series B Common Stock on the basis of
their fully-diluted ownership of the Series A Common Stock, and the
Series B Non-Voting Common Stock on the basis of their fully-diluted
ownership of the Series A Common Stock had each such share of Series B
Non-Voting Common Stock been exchanged for Series B Common Stock
pursuant to Article IV.E.4. of the Articles immediately prior to such
allocation.".
2. Amendments to the Registration Rights Agreement. The undersigned do
-----------------------------------------------
hereby consent to and approve the following amendments to the Registration
Rights Agreement:
(a) The following clause is inserted as a definition in Section 1:
"Series B Non-Voting Common Stock" means the Series B Non-Voting
--------------------------------
Common Stock, $.01 par value per share, of the Company";
(b) The following clause is inserted as a definition in Section 1:
"Series B Non-Voting Common Stock Purchase Agreement" means the Series
---------------------------------------------------
B Non-Voting Common Stock Purchase Agreement dated as of January __,
1997 entered into by and between the Company and Societe Generale
Investment Corporation"; and
(c) The definition of "Shares" in Section 1 is hereby deleted in its
------
entirety and the following new definition of "Shares" is inserted in lieu
------
thereof:
"Shares" means (i) the shares of Series B Common Stock specified in
Subsection 1.2 of the Purchase Agreement, and (ii) the shares of
Series B Common Stock issued or issuable upon exchange of the shares
of Series B Non-Voting Common Stock specified in Subsection 1.2 of the
Series B Non-Voting Stock Purchase Agreement.".
3. Waiver of Right of First Refusal. Each of the undersigned does hereby
--------------------------------
(i) acknowledge that this Agreement satisfies all notice requirements under
-20-
the Stockholders' Agreement, including without limitation the notice provisions
set forth in Sections 3 through 7 of the Stockholders' Agreement, with respect
to (A) the sale of the Series B Non-Voting Shares pursuant to the Series B Non-
Voting Common Stock Purchase Agreement (the "Series B Non-Voting Common Stock
Offering") and (B) the transfer by Societe Generale of the Series B Exchange
Shares, and the issuance by the Company of the Series B Non-Voting Exchange
Shares (the "Series B Exchange Shares Issuance"), and (ii) waive, for purposes
of the Series B Non-Voting Common Stock Offering and the Series B Exchange
Shares Issuance only, the undersigned's right, pursuant to Sections 3 through 7
of the Stockholders' Agreement, to purchase or acquire any portion of the Series
B Non-Voting Shares, the Series B Exchange Shares or the Series B Non-Voting
Exchange Shares, as the case may be.
4. Amendment Only. In all other respects, each of the Registration Rights
--------------
Agreement and the Stockholders' Agreement shall remain in full force and effect.
5. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one in the same instrument.
-21-
EXECUTED as of the date first above written.
ENTRUST TECHNOLOGIES INC.
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: President
NORTHERN TELECOM LIMITED
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Financial Officer
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President and
Deputy General Counsel
NORTHERN TELECOM INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Financial
Officer
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: RSM Corporation, its managing
general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
-00-
XXXXXXX XXXXXX XXXX XX, X.X.
By: OGP II, L.P., its general partner
By: RSM Corporation, its managing
general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
ORCHID & CO., nominee for
X. Xxxx Price Threshold Fund III,
L.P.
By: X. Xxxx Price Threshold Fund
Associates, Inc., General Partner
By: /s/ Xxxxxxx 0. Xxxxxxx
Name: Xxxxxxx 0. Xxxxxxx
Title: President
SOCIETE GENERALE INVESTMENT
CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS TRUSTEE OF THE
MULTI-MARKET SPECIAL INVESTMENT
TRUST FUND OF XXXXXX GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
-23-
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS TRUSTEE OF THE
COMMINGLED PENSION TRUST FUND
(MULTI-MARKET SPECIAL INVESTMENT
FUND II) OF XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
XXXXXX GUARANTY TRUST COMPANY OF
NEW YORK, AS INVESTMENT MANAGER
AND AGENT FOR THE XXXXXX X. XXXXX
FOUNDATION (MULTI-MARKET ACCOUNT)
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ Xxxxxx Xxxxxx, Xx.
Name: Xxxxxx Xxxxxx, Xx.
Title:
-24-
