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Investment syndicate funds acquisition of Content Technologies from Baltimore

January 24, 2002,
by volcanic

Investment syndicate funds acquisition of Content Technologies from Baltimore - Combined company will be clear leader in content security market

January, 24, 2002

A syndicate of venture capital funds, led by Kennet Capital and Cazenove Private Equity, has agreed to fund the acquisition of the Content Technologies business from Baltimore Technologies plc. The purchase will be made by Clearswift, a private UK-based company backed by venture firm Amadeus Capital Partners, who is also participating in the investment. Jointly the syndicate, which also includes Bank of America Equity Partners, has agreed to invest £22 million in Clearswift in order to build the world's leading policy-based content security software company. The acquisition of Content Technologies has been agreed for a consideration to Baltimore of £12 million in cash plus £8.5 million in loan notes and shares.

The merged Clearswift and Content Technologies will have a customer base of over 11,000 companies and will be in the vanguard of the rapidly growing market for content policy management software, according to IDC the fastest-growing segment of the content security software market. Operating under the Clearswift name, the company will be run by an exceptionally experienced management team, which has been recruited out of the industry by Clearswift CEO Don Taylor, former vice president at Tumbleweed Communications.

Commenting on the investment, Tod Bensen of Cazenove Private Equity said, "We have known Content Technologies since well before it was bought by Baltimore and have long been convinced of the opportunity represented by content security. Similarly we have been monitoring Clearswift since Amadeus made its original investment. The combined company will have the management, technology and scale to lead in its sector and respond to the strong demand each company has been seeing for its products."

Content security software provides more effective perimeter protection against email- and Web-based network threats than anti-virus solutions alone. More important, it also ensures protection from legal liability due to inappropriate use of email or the Web, prevents leakage of sensitive corporate information, and limits loss of employee productivity.

"Content security has clearly risen to the top of the corporate agenda. It's no longer just about anti-virus protection, but about applying comprehensive policies to use of email communications and the Internet," said David Carratt, managing director of Kennet Capital, "This divestiture is clearly indicative of the type of deal opportunities that exist for technology investors in today's market environment."

CEO Don Taylor was attracted into Clearswift in early 2001 by Amadeus Capital Partners, who provided the initial funding to pursue this market opportunity. Amadeus' Richard Anton, who joined the board of Clearswift, soon identified the natural fit with Content Technologies and took the lead in pulling together an investment syndicate to fund the acquisition. He said, "Clearswift has achieved all its targets since our first investment and is a company with outstanding management and technology. This merger with a similarly high calibre company brings exceptional synergies for future growth in a worldwide market."

Content Technologies' MIMEsweeper product is the world's most recognised brand in advanced email filtering and scanning. Don Taylor, who will run the combined company, said, "We are putting these companies together because they have complementary products, channels, geographic presence and management. Combined under the Clearswift banner, we are well-positioned to exploit our leadership position in this high-growth market."

In addition to the syndicate's investment, Baltimore Technologies has agreed to retain a substantial stake in the combined business. For Bijan Khezri, CEO of Baltimore, the rationale is clear: "We believe this merger creates a world-class company, and we want both our shareholders and Content Technologies' employees to benefit from the value created by this transaction."

Kennet Capital and Cazenove Private Equity will appoint non-executive directors to the Clearswift board. Content Technologies' founder, David Guyatt, who is investing personally in Clearswift, has also agreed to join the board.

Together the companies will be able to exploit numerous product and commercial synergies. The company will have best-of-breed email filtering products for NT, Unix and Linux platforms. Clearswift will be able to provide Content Technologies' customers with advanced policy management options and the ability to manage distributed policy management servers. Both companies see new communications channels such as Instant Messaging and SMS as opportunities for the future. The companies will pool R&D resources and share existing libraries of software code to accelerate the development of new functionality and products.

About Cazenove Private Equity

Cazenove Private Equity (CPE) is a division of Cazenove Group plc, a leading independent investment bank. CPE was established in April 2000 with the objective of producing superior returns for its investors. Its first fund, the Cazenove New Europe Access Fund (CNEAF), raised £234 million from a combination of leading European institutional investors and Cazenove itself. CNEAF invests in unquoted companies in the UK and continental Europe in the technology, media, telecommunications and Internet sectors. The focus is on second and third round pre-IPO financings and the fund seeks to be a partner of choice for both leading European technology companies and their early stage investors.

About Kennet Capital

Kennet Capital is the early-stage venture capital firm of Broadview, a leading global M&A advisor and private equity investor focused exclusively on the IT, communications and media industries. With $275 million under management, Kennet Capital places a strong emphasis on companies in networking and communications technologies, semiconductor IP, Internet infrastructure and enterprise software. Kennet Capital Limited seeks to leverage the collective intellectual capital of the entire Broadview organization to the benefit of portfolio companies.

About Amadeus Capital Partners

Amadeus is a specialist venture capital firm backing new technologies. Founded in 1997, the firm manages £285 million and has backed 37 companies in the UK and continental Europe, covering computer hardware and software, mobile and fixed communications technologies and new media. Amadeus has established a reputation among entrepreneurs for silicon valley-style, hands on assistance and 'door opening', and among investors for proving that early stage technology investing can be profitable in the long term.

About Clearswift

Clearswift, based in Reading, UK, attracted first round funding led by
Amadeus last year. The company's products include Clearswift ES, an enterprise platform for managing email filtering and Web access policies in complex organisations, including large corporate and government departments. In addition, Clearswift markets MailGuard, an award winning email security product for small and medium enterprises. With Amadeus' help last year, Clearswift attracted Andy De Mari, a serial entrepreneur who founded the NASDAQ quoted company ISOCOR, as non-executive Chairman, and Don Taylor, who had previously run the international operations of Tumbleweed Communications, as CEO.

About Content Technologies

Content Technologies, which was acquired by Baltimore in 2000, launched their MIMEsweeper solution in 1995. Today the company's product set includes MAILsweeper for SMTP, SECRETsweeper, MAILsweeper for Microsoft Exchange, WEBsweeper, MIMEsweeper for Domino and e-Sweeper. MIMEsweeper is the world's leading family of e-mail, web, and intranet content security solutions used by over 10 million people to protect their networks and business from e-mail and web-based threats that include the circulation of inappropriate images and text, spam and oversize files that can cause degradation in network service, loss and corruption of data, breaches of confidentiality, as well as viruses, 'worms' and malicious downloadable code.

About Baltimore Technologies

Baltimore Technologies offers a wide variety of PKI products and services, access control and authorization management solutions, wireless e-security solutions, cryptographic toolkits, content security products, security applications, and hardware cryptographic devices. In addition, our global professional services organization offers consulting, training, and deployment support for customers worldwide.