Exhibit 10.1
Entrust Technologies Inc.
SERIES B COMMON STOCK PURCHASE AGREEMENT
dated December 31, 1996
Table of Contents
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Page No.
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1. Authorization and Sale of Shares........................................ 1
1.1 Authorization............................................. 1
1.2 Sale of Shares............................................ 1
1.3 Use of Proceeds........................................... 1
2. The Closing............................................................. 2
3. Representations of the Company.......................................... 2
3.1 Organization and Standing................................. 2
3.2 Capitalization............................................ 2
3.3 Subsidiaries, etc. ....................................... 3
3.4 Stockholder List and Agreements........................... 3
3.5 Issuance of Shares........................................ 4
3.6 Authority for Agreement................................... 4
3.7 Governmental Consents..................................... 4
3.8 Litigation................................................ 5
3.9 Financial Statements...................................... 5
3.10 Absence of Liabilities.................................... 5
3.11 Taxes..................................................... 6
3.12 Property and Assets....................................... 6
3.13 Intellectual Property .................................... 6
3.14 Material Contracts and Obligations........................ 7
3.15 Completeness of Assets.................................... 7
3.16 Employees................................................. 8
3.17 Leases.................................................... 8
3.18 Compliance................................................ 8
3.19 Employees................................................. 8
3.20 ERISA..................................................... 9
3.21 Outstanding Debt; No Default.............................. 9
3.22 Offering of Purchased Shares.............................. 9
3.23 Holding Company Status.................................... 9
3.24 Investment Company Status................................. 10
3.25 Disclosure................................................ 10
3.26 Environmental Compliance.................................. 10
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3.27 Representation of NTL..................................... 10
4. Representations of the Purchasers....................................... 11
4.1 Investment................................................ 11
4.2 Authority................................................. 11
4.3 Experience................................................ 11
4.4 Accredited Investor Status................................ 11
5. Conditions to the Obligations of the Purchasers......................... 11
5.1 Accuracy of Representations and Warranties................ 11
5.2 Performance............................................... 12
5.3 Opinion of Counsel........................................ 12
5.4 Ancillary Agreements...................................... 13
5.5 Certificates and Documents................................ 14
5.6 Compliance Certificate.................................... 14
5.7 Other Matters............................................. 14
5.8 Proceeds.................................................. 14
6. Conditions to the Obligations of the Company............................ 14
6.1 Accuracy of Representations and Warranties................ 15
6.2 Compliance with Securities Laws........................... 15
6.3 Stockholders' Agreement................................... 15
6.4 Registration Rights Agreement............................. 15
6.5 Additional Agreements..................................... 15
7. Covenants of the Company................................................ 15
7.1 Inspection and Observation................................ 15
7.2 Financial Statements and Other Information................ 15
7.3 Termination of Covenants.................................. 16
7.4 Corporate Existence, Licenses and Permits;
Maintenance of Properties................................. 16
7.5 Taxes..................................................... 17
7.6 Insurance................................................. 17
7.7 Books and Accounts........................................ 17
7.8 Compliance with Environmental Laws........................ 18
7.9 Conflict.................................................. 18
7.10 Special Board Approval.................................... 18
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7.11 Non-Competition and Non-Solicitation...................... 19
7.12 Further Assurances........................................ 19
8. Transfer of Shares...................................................... 20
8.1 Restricted Shares......................................... 20
8.2 Requirements for Transfer................................. 20
8.3 Legend.................................................... 21
8.4 Rule 144A Information..................................... 21
9. Miscellaneous........................................................... 21
9.1 Successors and Assigns.................................... 21
9.2 Confidentiality........................................... 21
9.3 Survival of Representations and Warranties................ 22
9.4 Expenses.................................................. 22
9.5 Notices................................................... 22
9.6 Brokers................................................... 23
9.7 Entire Agreement.......................................... 23
9.8 Amendments and Waivers.................................... 23
9.9 Counterparts.............................................. 24
9.10 Section Headings.......................................... 24
9.11 Severability.............................................. 24
9.12 Governing Law............................................. 24
EXHIBITS
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Exhibit A - List of Purchasers
Exhibit B - Articles of Amendment and Restatement
Exhibit C - Exceptions of Representations
Exhibit D - List of Stockholders
Exhibit E - Jurisdictions of Foreign Qualification
Exhibit F - Stockholders' Agreement
Exhibit G - Registration Rights Agreement
Exhibit H - Additional Agreements
Exhibit I - List of Individuals Subject to Section 7.11(b) Restrictions
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SERIES B COMMON STOCK PURCHASE 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"), and the
individuals and entities listed on Exhibit A hereto (the "Purchasers").
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WHEREAS, the Entrust Business (as defined below), has operated as a
division of Northern Telecom Limited ("NTL"), and its subsidiaries
(collectively, "Nortel") and the Company was created to acquire from Nortel,
rights in and to Nortel assets relating to the Entrust Business, including
without limitation Entrust licenses, executory contracts for distributing and
licensing to customers the Entrust products and other related assets, the
services of the Nortel employees and contractors involved in the Entrust
Business and certain equipment, inventory and other related assets of the
Entrust Business.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
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1.1 Authorization. The Company has, or before the Closing (as
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defined in Section 2) will have, duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of 257,500 shares of its Series B Common Stock,
$.01 par value per share (the "Series B Common Stock"), having the rights,
restrictions, privileges and preferences set forth in the Articles of Amendment
and Restatement to the Charter attached hereto as Exhibit B (the "Articles of
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Amendment and Restatement"). The Company has, or before the Closing will have,
adopted and filed the Articles of Amendment and Restatement with the State
Department of Assessments and Taxation of the State of Maryland.
1.2 Sale of Shares. Subject to the terms and conditions of this
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Agreement, at the Closing the Company will sell and issue to each of the
Purchasers, and each of the Purchasers will purchase, the number of shares of
Series B Common Stock set forth opposite such Purchaser's name on Exhibit A for
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the purchase price of $100 per share. The shares of Series B Common Stock being
sold under this Agreement are referred to as the "Shares." The Company's
agreement with each of the Purchasers is a separate agreement, and the sale of
Shares to each of the Purchasers is a separate sale.
1.3 Use of Proceeds. The Company will use a portion of the net
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proceeds from the sale of the Shares for working capital and other general
corporate
purposes, including product development, research, expansion of the Company's
sales and marketing efforts, increased hiring of personnel and capital
expenditures as well as $8.0 million of the net proceeds to repay an unsecured
promissory note (the "Note") issued to Northern Telecom Inc., a Delaware
corporation ("NTI").
2. The Closing. The closing ("Closing") of the sale and purchase of the
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Shares under this Agreement shall take place at the offices of Northern Telecom
Limited, a Canadian corporation ("NTL"), 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxx at 10:00 a.m. on December 31, 1996. At the Closing, the Company shall
deliver to each of the Purchasers a certificate for the number of Shares being
purchased by such Purchaser, registered in the name of such Purchaser, against
payment to the Company of the purchase price therefor, by wire transfer, check,
or other method acceptable to the Company. The date of the Closing is
hereinafter referred to as the "Closing Date." If at the Closing any of the
conditions specified in Section 5 shall not have been fulfilled, each of the
Purchasers shall, at his or its election, be relieved of all of his or its
obligations under this Agreement without thereby waiving any other rights he or
it may have by reason of such failure or such non-fulfillment.
3. Representations of the Company. Subject to and except as disclosed by
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the Company in Exhibit C hereto, the Company hereby represents and warrants to
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each of the Purchasers as follows:
3.1 Organization and Standing. Each of the Company and its majority-
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owned subsidiary, Entrust Technologies Limited, a corporation incorporated under
the laws of Ontario, Canada (the "Canadian Subsidiary"), is a corporation duly
organized, validly existing and, in the case of the Company, in good standing
under the laws of its respective jurisdiction of incorporation and has full
corporate power and authority to conduct its business as presently conducted and
as proposed to be conducted by it and, in the case of the Company, to enter into
and perform this Agreement and to carry out the transactions contemplated by
this Agreement. Each of the Company and the Canadian Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the failure to so qualify would have a material
adverse effect on the business, assets or financial condition of the Company and
the Canadian Subsidiary, taken as a whole (a "Material Adverse Effect"). The
Company has furnished to the Special Purchaser Counsel true and complete copies
of its Articles of Incorporation and By-laws, each as amended to date and
presently in effect.
3.2 Capitalization. The authorized capital stock of the Company
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(immediately prior to the Closing) consists of (a) 5,000,000 shares of Series A
Common Stock, $.01 par value per share, of which 507,500 shares are issued and
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outstanding (the "Series A Common Stock"), (b) 257,500 shares of Series B Common
Stock, $.01 par value per share, none of which shares are issued and
outstanding, (c) 500,000 shares of Special Voting Stock, $.01 par value per
share, of which 192,500 shares are issued and outstanding (the "Special Voting
Stock"), and (d) 500,000 shares of Preferred Stock, $.01 par value per share,
none of which shares are issued or outstanding (such shares of capital stock of
the Company referred to in clauses (a), (b), (c) and (d) of this sentence being
collectively referred to herein as the "Company Capital Stock"). The authorized
capital stock of the Canadian Subsidiary (immediately prior to the Closing)
consists of (a) an unlimited number of common shares, without par value per
share, of which 100,000 shares are issued and outstanding (the "Canadian Common
Shares"), (b) an unlimited number of exchangeable shares, without par value per
share, of which 192,500 shares are issued and outstanding (the "Exchangeable
Shares"), and (c) an unlimited number of special shares, without par value per
share, of which no shares are issued and outstanding (the "Special Shares"),
which, together with the Canadian Common Shares and the Exchangeable Shares, are
referred to herein as the "Canadian Capital Stock"). All of the issued and
outstanding shares of Company Capital Stock and Canadian Capital Stock
(together, the "Entrust Capital Stock") have been duly authorized and validly
issued, are fully paid and nonassessable. Except as set forth in Exhibit C
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hereto pursuant to the terms of the Entrust Capital Stock, (a) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of Entrust Capital Stock is authorized or
outstanding, (b) neither the Company nor the Canadian Subsidiary has any
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company or the Canadian Subsidiary, as the case may be, and (c) neither the
Company nor the Canadian Subsidiary has any obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of Entrust Capital
Stock have been offered, issued and sold by the Company or the Canadian
Subsidiary, as the case may be, in compliance with applicable Federal, Canadian,
state and provincial securities laws.
3.3 Subsidiaries, etc. Except for the Canadian Subsidiary, the
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Company has no subsidiaries and does not own or control, directly or indirectly,
any shares of capital stock of any other corporation or any interest in any
partnership, joint venture or other non-corporate business enterprise.
3.4 Stockholder List and Agreements. Attached as Exhibit D is a true
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and complete list of the stockholders of the Company and the Canadian
Subsidiary, showing the number of shares of Entrust Capital Stock held by each
stockholder as of
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the date of this Agreement. Except as provided in Exhibit C, there are no
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agreements, written or oral, between the Company or the Canadian Subsidiary, on
the one hand, and any holder of Entrust Capital Stock, or, to the Company's
knowledge, among any holders of Entrust Capital Stock, relating to the
acquisition (including without limitation rights of first refusal or pre-emptive
rights), disposition, registration under the Securities Act of 1933, as amended
(the "Securities Act"), or voting of the Entrust Capital Stock.
3.5 Issuance of Shares. The issuance, sale and delivery of the
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Shares in accordance with this Agreement, and the issuance and delivery of the
shares of Series A Common Stock issuable upon conversion of the Shares, have
been, or will be on or prior to the Closing, duly authorized by all necessary
corporate action on the part of the Company, and all such shares have been duly
reserved for issuance. The Shares when so issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement, and the
shares of Series A Common Stock issuable upon conversion of the Shares, when
issued upon such conversion, will be duly and validly issued, fully paid and
non-assessable.
3.6 Authority for Agreement. The execution, delivery and performance
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by the Company of this Agreement and all other agreements required to be
executed by the Company on or prior to the Closing pursuant to Section 5.4 (the
"Ancillary Agreements"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms. The execution of and performance of the transactions contemplated by this
Agreement and the Ancillary Agreements and compliance with their provisions by
the Company will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or require a consent or waiver under, its Articles
of Incorporation or By-laws (each as amended to date) or any material indenture,
lease, agreement or other instrument to which the Company or the Canadian
Subsidiary is a party or by which either corporation or any of its respective
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company or the Canadian Subsidiary.
3.7 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Shares, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, except for
filing, if any, required pursuant to
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applicable state securities or blue sky laws, which filings will be made within
the required statutory or regulatory periods, and any filing pursuant to
Regulation D under the Securities Act, which filing, if made, will be effected
within 15 days of the Closing. Based on the representations made by each of the
Purchasers in Section 4 of this Agreement, the offer and sale of the Shares to
each of the Purchasers will be in compliance with applicable Federal and state
securities laws.
3.8 Litigation. There is no action, suit or proceeding, or
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governmental inquiry or investigation, pending, or, to the Company's knowledge,
any threat thereof, against the Company or the Canadian Subsidiary, which
questions the validity of this Agreement or the right of the Company to enter
into it, or which might result, either individually or in the aggregate, in a
Material Adverse Effect, nor is there any litigation pending, or, to the
Company's knowledge, any basis therefor or threat thereof, against the Company
or the Canadian Subsidiary by reason of the proposed activities of the Company
or the Canadian Subsidiary.
3.9 Financial Statements. The Company has furnished to each of the
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Purchasers a complete and correct copy of the audited statement of net assets of
the Secure Networks Division (the "Division") of NTL and its subsidiaries
(collectively, "Nortel") as at June 30, 1996, December 31, 1995 and December 31,
1994, and the statement of revenues and direct costs and expenses for the six-
month period ended June 30, 1996 and each of the two years in the period ended
December 31, 1995 (collectively, the "Financial Statements"). The Financial
Statements are complete and correct, present fairly the financial condition and
results of operations of the Division, as at the dates and for the periods
indicated, and have been prepared from the books, records and accounts of the
Division on the basis of established accounting methods, policies, practices and
procedures and the judgments and estimation methodologies used by Nortel and the
Division, in accordance with generally accepted accounting principles in the
United States. There have been no material adverse changes in the condition,
financial or other, of the Division or of the Company and its Canadian
Subsidiary since June 30, 1996.
3.10 Absence of Liabilities. Except as disclosed in Exhibit C, the
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Division did not have, at June 30, 1996, any liabilities of any type which in
the aggregate exceeded $50,000, whether absolute or contingent, which were not
fully reflected on the Financial Statements. Except as set forth in Exhibit C,
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(a) from June 30, 1996 through December 31, 1996 (the "Formation Date"), the
date on which certain assets and liabilities of the Division were transferred to
the Company and the Canadian Subsidiary (the business conducted by the Division
prior to the Formation Date and by the Company and the Canadian Subsidiary on
and after the Formation Date to design, develop, market and license automated
public key infrastructure software and encryption hardware products being
referred to herein as the "Entrust
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Business"), the Division did not incur or otherwise become subject to any of the
liabilities or obligations referred to in the preceding sentence except in the
ordinary course of business and (b) since the Formation Date, the Company has
not incurred or otherwise become subject to any such liabilities or obligations
except in the ordinary course of business.
3.11 Taxes. Each of the Company and the Canadian Subsidiary has filed
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or has obtained presently effective extensions with respect to all Federal,
state, provincial, county, local and foreign tax returns which are required to
be filed by it, such returns are true and correct and all taxes shown thereon to
be due have been timely paid with exceptions not material to the Company and the
Canadian Subsidiary, taken as a whole. United States federal and Canadian
income tax returns of the Company have not been audited by the Internal Revenue
Service or Revenue Canada, as the case may be, and no controversy with respect
to taxes of any type is pending or, to the Company's knowledge, threatened.
Neither the Company nor any of its stockholders has ever filed (a) an election
pursuant to Section 1362 of the United States Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S Corporation or (b) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations.
3.12 Property and Assets. Each of the Company and the Canadian
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Subsidiary has good title to all of its material properties and assets, and none
of such properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance other than those the material terms of
which are described in the Financial Statements or in Exhibit C.
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3.13 Intellectual Property. Set forth on Exhibit C is a true and
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complete list of all patents, patent applications, trademarks, service marks,
trademark and service xxxx applications, trade names, copyright registrations
and licenses presently used by the Entrust Business or necessary for the conduct
of the Entrust Business, as well as any agreement under which the Company or the
Canadian Subsidiary has access to any confidential information used by the
Company or the Canadian Subsidiary, as the case may be, in its business (the
"Intellectual Property Rights"). The Intellectual Property Rights include in all
material respects the rights necessary for the conduct of the Entrust Business
as presently conducted. Either the Company or the Canadian Subsidiary owns
(subject to the limitations set forth in the respective Additional Agreements),
or has the right to use by license under the agreements or otherwise upon the
terms described in Exhibit C, all of the Intellectual
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Property Rights, and, except as set forth in Exhibit C, has taken all actions
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reasonably necessary to protect the Intellectual Property Rights. To the
Company's knowledge, the business conducted by the Company and the Canadian
Subsidiary does not and will not cause either the Company or the Canadian
Subsidiary to infringe or violate
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any of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other intellectual property rights of any other
person or entity, and neither the Company nor any of its affiliates has received
notice of any such infringement or violation or any claim thereof. To the
Company's knowledge, no person is infringing any of the Intellectual Property
Rights. The Company is not aware that any employee is obligated under any
contract (including any license, covenant or commitment of any nature), or
subject to any judgment, decree or order of any court or administrative agency,
that would conflict or interfere with (a) the performance of such employee's
duties as an officer, employee or director of the Company or the Canadian
Subsidiary, (b) the use of such employee's best efforts to promote the interests
of the Company or the Canadian Subsidiary or (c) the conduct of the Entrust
Business. No other person or entity (including without limitation any present or
former employee of, or, to the Company's knowledge, any prior employer of any
employee of the Company or the Canadian Subsidiary or any of their respective
affiliates), has any right to or interest in any inventions, improvements,
discoveries or other confidential information utilized by either the Company or
the Canadian Subsidiary in its business.
3.14 Material Contracts and Obligations. Exhibit C sets forth a list
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of all material agreements or commitments of any nature to which the Company or
the Canadian Subsidiary is a party or by which either of such corporations is
bound, including without limitation (a) each agreement which requires future
expenditures by the Company or the Canadian Subsidiary in excess of $50,000 or
which might result in payments to the Company or the Canadian Subsidiary in
excess of $50,000, (b) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase and
similar plans and arrangements, and distributor and sales representative
agreements, (c) any agreement with any stockholder, officer or director of the
Company or the Canadian Subsidiary, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and regulations promulgated
under the Securities Act), including without limitation any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person or
entity and (d) any agreement relating to the Intellectual Property Rights. The
Company has delivered to the Special Purchaser Counsel copies of such of the
foregoing agreements as such counsel has requested. All of such agreements and
contracts are valid, binding and in full force and effect.
3.15 Completeness of Assets. Except as otherwise set forth on Exhibit
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C or in the Additional Agreements, Nortel is the exclusive owner of each of the
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assets (the "Business Assets") transferred to the Company pursuant to the
Additional Agreements. Except as otherwise set forth on Exhibit C, the assets
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being transferred to, or the rights which are being granted or made available
to, the
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Company as part of the Business Assets include all material leases, contracts,
machinery and equipment, intellectual property rights and other items and rights
used by Nortel in the operation of the Entrust Business by Nortel in the
ordinary course as presently being conducted; provided, however, that certain
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items (the "Excluded Assets"), a true and complete list of which is set forth on
the schedules to the Additional Agreements will not be transferred to the
Company, in which event the services associated with certain items shall be made
available to the Company in accordance with the terms and conditions of such
Additional Agreements Except as disclosed on Exhibit C, the Business Assets
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constitute all assets owned or leased by Nortel on the date hereof from which
revenues are included within the Financial Statements provided to the
Purchasers. Except as set forth on Exhibit C, the transfer of the Business
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Assets and conveyance of rights with respect thereto does not require the
consent by any third party that has not already been obtained nor does such
transfer or conveyance cause or with the passage of time will cause, a default
under any contract, agreement or other instrument being transferred or conveyed.
3.16 Employees. No employee ("Employee") of Nortel necessary for the
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operation of the Entrust Business has provided notice to the Company or Nortel
of his or her intention to terminate his or her relationship with the Company
subsequent to the consummation of the transactions contemplated by this
Agreement. To the knowledge of the Company, all employees necessary to operate
the Entrust Business are willing to be employed by the Company.
3.17 Leases. The Company and the Canadian Subsidiary enjoys peaceful
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and undisturbed possession of all leases necessary in any material respect for
the operation of its respective properties and assets. All such leases are
valid and subsisting and are in full force and effect.
3.18 Compliance. Each of the Company and the Canadian Subsidiary has,
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in all material respects, complied with all laws, regulations and orders
applicable to its business and has all material permits and licenses required
thereby. To the Company's knowledge, no employee of the Company or the Canadian
Subsidiary is in violation of any term of any contract or covenant (either with
the Company, the Canadian Subsidiary or another entity) relating to employment,
patents, proprietary information disclosure, non-competition or non-
solicitation.
3.19 Employees. All employees of the Company or the Canadian
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Subsidiary whose employment responsibility requires access to confidential or
proprietary information have executed and delivered nondisclosure and assignment
of invention agreements, and all of such agreements are in full force and
effect. None of the employees of the Company or the Canadian Subsidiary is
represented by any labor union, and there is no labor strike or other labor
trouble pending with
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respect to the Company or the Canadian Subsidiary, as the case may be
(including, without limitation, any organizational drive), or, to the Company's
knowledge, threatened. The events contemplated by the Agreement (either alone or
together with any other event) will not (i) entitle any employee to severance
pay or other similar payments and (ii) materially increase the amount of cash
compensation or result in any payments becoming due to any employee.
3.20 ERISA. Neither the Company nor any entity required to be
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aggregated with the Company under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended, has or otherwise contributes to or
participates in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974 other than a medical benefit plan with respect to
which the Company has made all required contributions and has complied with all
applicable laws. Neither the Company nor any Subsidiary has any liability
(contingent or otherwise) with respect to retiree medical or death benefits.
Neither the Company, nor the Canadian Subsidiary nor any other person, including
any fiduciary, has engaged in any transaction prohibited by Section 4975 of the
Internal Revenue Code of 1986, as amended, or Section 406 of ERISA which could
subject the Company, the Canadian Subsidiary or any entity that the Company or
the Canadian Subsidiary has an obligation to indemnify to any tax or penalty
imposed under Section 4975 of the Internal Revenue Code of 1986, as amended, or
Section 502 of ERISA. The transactions contemplated by this Agreement will not
involve any transaction prohibited by Section 406 of ERISA or in Section 4975 of
the Internal Revenue Code of 1986, as amended.
3.21 Outstanding Debt; No Default. Neither the Company nor the
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Canadian Subsidiary has outstanding any indebtedness except as set forth in the
Financial Statements or as evidenced by the Note.
3.22 Offering of Purchased Shares. Neither the Company nor any other
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agent acting on the Company's behalf has taken or will take any action which
would subject the issuance or sale of the Shares to the provisions of Section 5
of the Securities Act, or to the registration or qualification requirements of
any securities or Blue Sky law of any applicable jurisdiction. The Company has
not authorized or employed any agent, broker or dealer in connection with the
offering or sale of the Shares or any similar security of the Company, other
than Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ").
3.23 Holding Company Status. Neither the Company nor the Canadian
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Subsidiary is a "holding company," or a Subsidiary or affiliate of a "holding
company," or a "subsidiary company" of a "holding company," or a "public
utility,"
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within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or a "public utility" within the meaning of the Federal Power Act, as
amended.
3.24 Investment Company Status. Neither the Company nor the Canadian
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Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
3.25 Disclosure. Neither this Agreement nor any other document,
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certificate or instrument furnished to the Purchasers by or on behalf of the
Company when taken in conjunction with any supplemental or revised information
furnished to the Purchasers in writing prior to the date hereof in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in the light of the circumstances under which made, not misleading
except that with respect to any projected financial information, the Company's
representation is limited to that such information was prepared in good faith
and the assumptions made in preparing such projections were reasonable as of the
date of such projections. Except as relates to events of general economic nature
that do not relate specifically to the Company, there is no fact peculiar to the
Company or the Canadian Subsidiary and known to the Company which has a Material
Adverse Effect or in the future may (so far as the Company can now reasonably
foresee) have a Material Adverse Effect, which has not been set forth in this
Agreement or in the other documents described herein and furnished to the
Purchasers by or on behalf of the Company prior to the date of the Closing in
connection with the transactions contemplated hereby.
3.26 Environmental Compliance. Neither the Company nor the Canadian
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Subsidiary is in violation, or alleged to be in violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("XXXX"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "Environmental Laws"), which
violation would have a Material Adverse Effect.
3.27 Representations of NTL. NTL hereby joins, jointly and severally,
----------------------
in the representations and warranties of the Company set forth in Sections 3.7,
3.8, 3.9, 3.10, 3.11, 3.13, 3.14, 3.15, 3.16 and 3.18 above, as if directly made
by NTL.
-10-
4. Representations of the Purchasers. Each of the Purchasers severally
---------------------------------
represents and warrants to the Company as follows:
4.1 Investment. Such Purchaser is acquiring the Shares, and the
----------
shares of Series A Common Stock into which the Shares may be converted, for his
or its own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
4.2 Authority. Such Purchaser has full power and authority to enter
---------
into and to perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.3 Experience. Such Purchaser has carefully reviewed the
----------
representations concerning the Company contained in this Agreement, has read the
Company's Confidential Private Placement Memorandum, dated November 1996 (the
"Memorandum"), and has made detailed inquiry concerning the Company, its
business and its personnel; the officers of the Company have made available to
such Purchaser any and all written information which he or it has requested and
have answered to such Purchaser's satisfaction all inquiries made by such
Purchaser; and such Purchaser has sufficient knowledge and experience in
investing in companies similar to the Company so as to be able to evaluate the
risks and merits of its investment in the Company and is able financially to
bear the risks thereof.
4.4 Accredited Investor Status. Such Purchaser is an "accredited
--------------------------
investor" as defined in Rule 501(a) under the Securities Act.
5. Conditions to the Obligations of the Purchasers. The obligation of
-----------------------------------------------
each of the Purchasers to purchase Shares at the Closing is subject to the
fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before the Closing:
5.1 Accuracy of Representations and Warranties. Each representation
------------------------------------------
and warranty contained in Section 3 shall be true on and as of the Closing Date
with the same effect as though such representation and warranty had been made on
and as of that date.
-11-
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Closing.
5.3 Opinion of Counsel. Each Purchaser shall have received an
------------------
opinion from Xxxx and Xxxx, counsel for the Company, dated the Closing Date,
addressed to the Purchasers, and satisfactory in form and substance to each
Purchaser, to the effect that:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland and has
full corporate power and authority to conduct its business as presently
conducted, to enter into and perform this Agreement and to carry out the
transactions contemplated by this Agreement. The Company is duly qualified to do
business and in good standing in the jurisdictions set forth on Exhibit E
---------
attached hereto.
(b) Except for changes contemplated by this Agreement, the
authorized capital stock of the Company is as described in Section 3.2 of this
Agreement and, to such counsel's knowledge, the other representations and
warranties contained in Section 3.2 are true and correct (other than the last
sentence thereof, as to which an opinion need only be expressed that no
registration was required for the offer, issuance and sale of such capital stock
under applicable Federal and state securities laws), except that no opinion need
be expressed with respect to the Canadian Capital Stock or the Canadian
Subsidiary. The rights, preferences and privileges of, and restrictions on, the
Series B Common Stock are as stated in the Articles of Amendment and Restatement
and are valid under the provisions of the General Corporation Law of the State
of Maryland.
(c) The Shares, and the shares of Series A Common Stock issuable
upon conversion of the Shares, have been duly authorized and reserved for
issuance by all necessary corporate action on the part of the Company; and the
Shares, when issued, sold and delivered against payment therefor in accordance
with the provisions of this Agreement, and the shares of Series A Common Stock
issuable upon conversion of the Shares, when issued upon such conversion, will
be duly and validly issued, fully paid and non-assessable.
(d) The execution and delivery by the Company of this Agreement
and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action and this Agreement and the Ancillary Agreements have been duly
executed and delivered by the Company. This Agreement and the Ancillary
Agreements (other than Sections 6 and 7 of the Registration Rights Agreement (as
-12-
defined below), as to which no opinion need be expressed) constitute the valid
and binding obligations of the Company, enforceable in accordance with their
respective terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, reorganization or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies. The execution and delivery of this Agreement and
the Ancillary Agreements and the offer, issue and sale of the Shares hereunder
will not conflict with, or result in any breach of any of the terms, conditions,
or provisions of, or constitute a default under, the Articles of Incorporation
or By-laws of the Company, any applicable law or statute, or any decree,
judgment or order specifically naming the Company and known to such counsel.
(e) Except as obtained and in effect at the Closing, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration, or filing with, any governmental authority (other than
filings required to be made after the Closing under applicable federal and state
securities laws) is required on the part of the Company in connection with the
execution and delivery of this Agreement, or the offer, issue, sale and delivery
of the Shares, or shares of Series A Common Stock issuable upon conversion of
the Shares, or the other transactions to be consummated at the Closing pursuant
to this Agreement.
(f) Based on the representations of each of the Purchasers in Section
4, the offer, issuance and sale of the Shares pursuant to this Agreement are
exempt from registration under the Securities Act.
(g) To such counsel's knowledge, there is no action, suit or
proceeding, or governmental inquiry or investigation, pending or threatened
against the Company.
5.4 Ancillary Agreements.
--------------------
(a) The Stockholders' Agreement attached hereto as Exhibit F (the
---------
"Stockholders' Agreement") shall have been executed and delivered by the
Company, NTL, NTI and each of the Purchasers. All such action shall have been
taken as may be necessary to elect a Board of Directors of the Company,
effective upon the Closing, in accordance with the Stockholders' Agreement.
(b) The Registration Rights Agreement attached hereto as Exhibit G
---------
(the "Registration Rights Agreement") shall have been executed and delivered by
the Company and each of the Purchasers.
-13-
(c) The Additional Agreements attached hereto as Exhibit H (the
---------
"Additional Agreements") shall have been executed and delivered by each of the
other parties named therein.
5.5 Certificates and Documents. The Company shall have delivered to the
--------------------------
Special Purchaser Counsel:
(a) The Articles of Incorporation of the Company, as amended and in
effect as of the Closing Date (including the Articles of Amendment and
Restatement), certified by the Secretary of State of the State of Maryland;
(b) Certificates, as of the most recent practicable dates, as to the
corporate good standing of the Company issued by the Secretary of State of the
State of Maryland and the Secretaries of State of each of the jurisdictions
listed on Exhibit E attached hereto;
---------
(c) By-laws of the Company, certified by its Secretary or Assistant
Secretary as of the Closing Date; and
(d) Resolutions of the Board of Directors of the Company (the "Board
of Directors"), authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
or Assistant Secretary of the Company as of the Closing Date.
5.6 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchasers a certificate, executed by the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1, 5.2, 5.4 and 5.5 of this Agreement.
5.7 Other Matters. All corporate and other proceedings in connection
-------------
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and Special Purchaser Counsel, and the
Purchasers and Special Purchaser Counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.8 Proceeds. The Company shall have received at least $20,000,000
--------
from the sale and issuance of the Shares to the Purchasers.
6. Conditions to the Obligations of the Company. The obligations of the
--------------------------------------------
Company under Section 1.2 of this Agreement are subject to fulfillment, or the
waiver, of the following conditions on or before the Closing:
-14-
6.1 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the Purchasers contained in Section 4 shall be true on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of that date.
6.2 Compliance with Securities Laws. The Company shall be satisfied
-------------------------------
that the offer and sale to the Purchasers shall be qualified or exempt from
registration or qualification under all applicable federal and state securities
laws.
6.3 Stockholders' Agreement. The Stockholders' Agreement shall have
-----------------------
been executed and delivered by each of the Purchasers.
6.4 Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
shall have been executed and delivered by each of the Purchasers.
6.5 Additional Agreements. The Additional Agreements shall have been
---------------------
executed and delivered by each of the parties thereto other than the Company.
7. Covenants of the Company.
------------------------
7.1 Inspection and Observation. The Company shall permit each Purchaser,
--------------------------
or any authorized representative thereof, to visit and inspect the properties of
the Company, including its corporate and financial records, and to discuss its
business and finances with officers of the Company, during normal business hours
following reasonable notice and as often as may be reasonably requested.
7.2 Financial Statements and Other Information.
------------------------------------------
(a) The Company shall deliver to each Purchaser:
(i) prior to the beginning of each budget year, an annual
budget of the Company;
(ii) within 120 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as at the end of such year and
audited statements of income, stockholders' equity and of cash flows of the
Company for such year, certified by certified public accountants of established
national reputation selected by the Company, and prepared in accordance with
United States generally accepted accounting principles;
(iii) within 45 days after the end of each fiscal quarter of the
Company, an unaudited balance sheet of the Company as at the end of such
quarter,
-15-
and unaudited statements of income, stockholders' equity and of cash flows of
the Company for such fiscal quarter and for the current fiscal year to the end
of such fiscal quarter;
(iv) promptly upon receipt thereof, any report, so-called
"management letter," and any other communication submitted to the Company by its
independent public accountants relating to the business, prospects or financial
condition of the Company; and
(v) with reasonable promptness, such material information as the
Company delivers to the Board of Directors of the Company.
(b) So long as any Purchaser owns Shares having an aggregate value of
at least U.S. $1,000,000, the Company shall deliver to such Purchaser, promptly
upon transmission thereof, copies of Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q and any current Reports on Form 8-K, in definitive form
which it files or which it is or may be required to file with the Securities and
Exchange Commission.
(c) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (iii) of paragraph (a) shall be
accompanied by a certificate of the Chief Financial Officer of the Company
stating that such statements have been prepared in accordance with United States
generally accepted accounting principles consistently applied (except as noted)
and fairly present the financial condition and results of operations of the
Company at the date thereof and for the periods covered thereby.
7.3 Termination of Covenants. The covenants of the Company contained
------------------------
in Sections 7.1 and 7.2 shall terminate, and be of no further force or effect,
upon the earlier of (a) the effective date of a registration statement filed by
the Company under the Securities Act relating to a Qualified Initial Public
Offering (as that term is defined in the Company's Articles of Amendment and
Restatement) or (b) when the Company first becomes subject to the periodic
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
7.4 Corporate Existence, Licenses and Permits; Maintenance of
---------------------------------------------------------
Properties. So long as any Shares shall remain outstanding, the Company will at
----------
all times do or cause to be done all things necessary to maintain, preserve and
renew its existence as a corporation organized under the laws of a state of the
United States of America, preserve and keep in force and effect, and cause each
of the Canadian Subsidiary, any other corporation in which the Company owns or
controls, directly or
-16-
indirectly, the majority of the capital stock, and any other partnership, joint
venture or other non-corporate business enterprise in which the Company owns,
directly or indirectly, the majority equity interest (individually, a
"Subsidiary" and collectively, the "Subsidiaries") its Subsidiaries to preserve
and keep in force and effect, all licenses and permits necessary and material to
the conduct of the business of the Company and its consolidated Subsidiaries,
taken as a whole, and to maintain and keep, and cause each of its Subsidiaries
to maintain and keep, its and their respective properties in good repair,
working order and condition (except for normal wear and tear), and from time to
time to make all needful and proper repairs, renewals and replacements,
including without limitation all trade name and trademark registration renewals,
so that any business material to the Company carried on in connection therewith
may be properly and advantageously conducted at all times. In furtherance of the
foregoing, the Company shall also take commercially reasonable steps to protect
its Intellectual Property Rights. In addition to the foregoing, it is agreed
that, if at any time requested by the directors elected by the Purchasers, the
Company shall pursue any claims which it might have under the indemnification
provisions extended by Nortel to the Company pursuant to the Additional
Agreements or otherwise enforce its rights under the Additional Agreements.
7.5 Taxes. So long as any Shares shall remain outstanding, the
-----
Company will duly pay and discharge, and cause each of its Subsidiaries duly to
pay and discharge, all taxes, assessments and governmental charges upon or
against the Company or its Subsidiaries or their respective properties, in each
case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and the Company and its Subsidiaries shall have set
aside on their books adequate reserves with respect thereto.
7.6 Insurance. So long as any Shares shall remain outstanding, the
---------
Company will apply for and continue in force, or cause to be applied for and
continued in force, adequate insurance covering the respective risks of the
Company and its Subsidiaries of such types and in such amounts and with such
deductibles as are customary for other corporations engaged in similar lines of
business and with good and responsible insurance companies.
7.7 Books and Accounts. So long as any Shares shall remain outstanding,
------------------
the Company will, and will cause each Subsidiary to, maintain proper books of
record and account in which full, true and correct entries shall be made of its
transactions and set aside on its books from its earnings for each fiscal year
all such proper reserves as in each case shall be required in accordance with
generally accepted accounting principles.
-17-
7.8 Compliance with Environmental Laws. So long as any Shares shall
----------------------------------
remain outstanding, the Company will not, and will not permit any Subsidiary to,
except in compliance with applicable Environmental Laws, or in the event of any
noncompliance with applicable Environmental Laws, only to the extent which such
noncompliance would not have a material adverse effect on the business,
operations or financial condition of the Company, individually, or of the
Company and its Subsidiaries, taken as a whole, (a) use any of the property of
the Company or any Subsidiary or any portion thereof for the handling,
processing, storage or disposal of hazardous substances, (b) cause or permit to
be located on any of the property any underground tank or other underground
storage receptacle for hazardous substances, (c) generate any hazardous
substances on any of the property, (d) conduct any activity on the property or
use any property in any manner so as to cause a release (i.e., releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) or threatened release of hazardous
substances on, upon or into the property or (e) otherwise conduct any activity
on the property or use any property in any manner that would violate any
Environmental Law or bring such property in violation of any Environmental Law.]
7.9 Conflict. So long as any Shares shall remain outstanding, the
--------
Company will not permit any action to be taken by the Company or its
subsidiaries that constitutes a conflict of interest between the Company or any
of its subsidiaries on one hand and Nortel or any other party on the other
without the consent of a majority of the directors of the Company which are not
nominated by the party with a conflict, provided, however, (i) effectuation of
transactions contemplated by the Additional Agreements in accordance with their
respective terms or (ii) arrangements in the ordinary course not exceeding
$500,000 in any single issuance shall not be deemed to constitute a conflict of
interest hereunder.
7.10 Special Board Approval. So long as any Shares shall remain
----------------------
outstanding, the Company shall not, and shall cause each of its Subsidiaries not
to, without the approval of a majority of the Board of Directors, including at
least one director appointed by the Purchasers, of the Company:
(a) Enter into any sale, disposition, license or other transfer of
assets of the Company, in one or more related transactions, having an
aggregate value of $1,000,000 or more other than in the ordinary course of
business;
(b) Transfer any material assets from the Canadian Subsidiary or
any other Subsidiary of the Company; or
-18-
(c) Enter into or guarantee any indebtedness in aggregate
principal excess amount of $1,000,000 or more except for trade
accounts arising out of the ordinary course of business.
7.11 Non-Competition and Non-Solicitation.
------------------------------------
(a) For a period of three years from the date hereof, Nortel agrees
that it, directly or through any affiliate, will not establish or engage in any
business substantially similar to the Entrust Business provided, however, that
-------- -------
nothing herein shall (i) restrict or prevent Nortel or any of its affiliates
from being a distributor, reseller or otherwise maintaining a strategic
relationship with the Company; (ii) restrict the access to intellectual property
which Nortel may have pursuant to any Additional Agreement for internal use; or
(iii) limit Nortel or any affiliate from selling hardware or software products
bundling software with functionality corresponding to that of products of the
Company, if that functionality is incidental to such products of Nortel or its
affiliates.
(b) For a period of two years from the date hereof, Nortel agrees that
it shall not hire any of the persons set forth on Exhibit I attached hereto,
---------
unless (i) such person shall first have been involuntarily terminated by the
Company or (ii) such person shall have ceased to be an employee of the Company
for a period of not less than four months.
(c) For a period of two years from the date hereof, Nortel agrees that
it will not solicit or interfere with, or endeavor to entice away, any person
employed by the Company, or any person who otherwise performs services on a
regular basis for the Company, provided, however, that the regular recruitment
-------- -------
program or general advertising by Nortel shall not be deemed solicitation for
the purposes of this clause (c).
7.12 Further Assurances.
------------------
(a) Nortel shall from time to time and at all times hereafter make,
do, execute or cause or procure to be made, done and executed such further acts,
deeds, conveyances, consents and assurances, without further consideration,
which may reasonably be required to effect the transactions contemplated by the
Additional Agreements and to fully vest in the Company the Entrust Assets,
including the Intellectual Property, to the full extent of Nortel's legal
capacity to do so.
(b) For the period continuing 270 days from the Closing Date, any
third party costs associated with such actions that Nortel or the Company may be
required to take hereunder shall be borne up to a maximum of $75,000 by the
-19-
Company and the remainder by Nortel. Each party shall pay its own costs and
expenses incurred in connection with such activities.
(c) Notwithstanding the provisions of Section 7.12(b), Nortel shall
deliver, at its expense and within 30 days of the Closing Date, opinions of
counsel (which may include inside counsel of NTL and NTI), which opinions shall
be reasonably acceptable to Xxxxx Xxxxxxxxxx, Special Purchaser Counsel,
generally to the effect that the execution and delivery of the Nortel Agreements
(as defined below) by NTL and NTI, as the case may be, and the consummation of
the transactions contemplated thereby, have been duly authorized by all
necessary corporate action and the Nortel Agreements have been duly executed and
delivered by NTL and NTI, as the case may be, and that the Nortel Agreements
constitute the valid and binding obligations of NTL and NTI, as the case may be,
enforceable in accordance with their respective terms. For purposes of this
paragraph, the "Nortel Agreements" shall mean the Stock Purchase Agreement and
each of the Additional Agreements (other than the Support Agreement).
8. Transfer of Shares.
------------------
8.1 Restricted Shares. "Restricted Shares" means (a) the Shares, (b)
-----------------
the shares of Series A Common Stock issued or issuable upon conversion of the
Shares, and (c) any other shares of capital stock of the Company issued in
respect of such shares (as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
-------- -------
that shares of Series A Common Stock which are Restricted Shares shall cease to
be Restricted Shares (a) upon any sale pursuant to the Registration Rights
Agreement, Section 4(1) of the Securities Act or Rule 144 under the Securities
Act or, (b) at such time as they become eligible for sale under Rule 144(k)
under the Securities Act.
8.2 Requirements for Transfer.
-------------------------
(a) Restricted Shares shall not be sold or transferred unless either
(i) they first shall have been registered under the Securities Act, or (ii) the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or transfer
is exempt from the registration requirements of the Securities Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for a transfer (i) by any Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the
-20-
transferee agrees in writing to be subject to the terms of this Section 8 to the
same extent as if he were an original Purchaser hereunder, (ii) to any trust
beneficiary, in the case of any Purchaser that is a trust, (iii) to any member,
in the case of any Purchaser that is a limited liability company or (iv) made in
accordance with Rule 144 under the Securities Act.
8.3 Legend. Each certificate representing Restricted Shares shall
------
bear a legend substantially in the following form:
"The shares represented by this certificate have not been 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 foregoing legend shall be removed from the certificates representing
any Restricted Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
8.4 Rule 144A Information. The Company shall, at all times during
---------------------
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under
the Exchange Act, upon the written request of any Purchaser, provide in writing
to such Purchaser and to any prospective transferee of any Restricted Shares of
such Purchaser the information concerning the Company described in Rule
144A(d)(4) under the Securities Act ("Rule 144A Information"). The Company's
obligations under this Section 8.4 shall at all times be contingent upon receipt
from the prospective transferee of Restricted Shares of a written agreement to
take all reasonable precautions to safeguard the Rule 144A Information from
disclosure to anyone other than persons who will assist such transferee in
evaluating the purchase of any Restricted Shares.
9. Miscellaneous.
-------------
9.1 Successors and Assigns. This Agreement, and the rights and
----------------------
obligations of each Purchaser hereunder, may be assigned by such Purchaser to
any person or entity to which Shares are transferred by such Purchaser, and such
transferee shall be deemed a "Purchaser" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company.
-21-
9.2 Confidentiality. Each Purchaser agrees that he or it will keep
---------------
confidential and will not disclose or divulge or use any confidential,
proprietary or secret information which such Purchaser may obtain from the
Company pursuant to the Memorandum or financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this Agreement,
or pursuant to visitation or inspection rights granted hereunder, unless such
information is known, or until such information becomes known, to the public;
provided, however, that a Purchaser may disclose such information (a) to its
-------- -------
attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (b) to any prospective purchaser of any Shares from such Purchaser as
long as such prospective purchaser agrees in writing to be bound by the
provisions of this Section or (c) to any affiliate of such Purchaser or to a
partner, beneficiary, member, shareholder or subsidiary of such Purchaser who
agrees in writing to be bound by the provisions of this Agreement.
9.3 Survival of Representations and Warranties. All agreements,
------------------------------------------
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
9.4 Expenses. The Company shall pay, at the Closing, (i) the
--------
reasonable costs and expenses of Xxxxx Xxxxxxxxxx, the Special Purchaser
Counsel, in connection with the preparation of this Agreement and the other
agreement contemplated hereby and the closing of the transactions contemplated
hereby, up to a maximum of $85,000 and (ii) the reasonable itemized out-of-
pocket costs and expenses of each Purchaser, up to an aggregate maximum for all
Purchasers of $20,000.
9.5 Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be deemed
delivered (a) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (b) 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: President, 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; or
If to a Purchaser, at his or its address set forth on Exhibit A, or at such
---------
other address or addresses as may have been furnished to the Company in writing
by such
-22-
Purchaser, with a copy to Xxxxxxx Xxxxxxxx, Esq., Xxxxx Xxxxxxxxxx, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
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 9.5.
9.6 Brokers. Each Purchaser (a) represents and warrants to the other
-------
parties hereto that he or it has retained no finder or broker in connection with
the transactions contemplated by this Agreement, and (b) will indemnify and save
the other parties harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders' fees or commissions, or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any statement or representation
alleged to have been made by such indemnifying party. The Company (a)
represents and warrants to the other parties hereto that except for its
retention of DLJ, it has retained no finder or broker in connection with the
transactions contemplated by this Agreement and (b) will indemnify and save the
other parties harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders' fees or commissions, or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any statement or representation
alleged to have been made by such indemnifying party.
9.7 Entire Agreement. This Agreement and the Ancillary Agreements
----------------
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
9.8 Amendments and Waivers. Except as otherwise expressly set forth
----------------------
in this Agreement, any term 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), with the written consent of
the Company and Purchasers holding at least two-thirds of the shares of Series A
Common Stock issued or issuable upon conversion of the Shares. Any amendment or
waiver effected in accordance with this Section 9.8 shall be binding upon each
holder of any Shares (including shares of Series A Common Stock into which such
Shares have been converted), each future holder of all such securities and the
-23-
Company. No waivers of or exceptions to any term, condition or provision of
this Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.
9.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
9.10 Section Headings. The section headings are for the convenience
----------------
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
9.11 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
9.12 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Maryland, without giving
effect to conflict-of-laws principles.
-24-
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
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 X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. 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
-26-
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 X. Xxxxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title:
-27-
