EXHIBIT 4.1
COMMON STOCK ISSUANCE AGREEMENT
THIS COMMON STOCK ISSUANCE AGREEMENT (the "Agreement") is entered into
as of March 28, 2002 ("Effective Date") by and between ZixIt Corporation, a
Texas corporation (the "Company"), and Tumbleweed Communications Corp.
("Tumbleweed").
RECITALS
WHEREAS, the Board of Directors of the Company has authorized the
issuance of shares of its Common Stock, par value $.01 per share, to Tumbleweed
in exchange for the licenses granted under the Patent License Agreement, dated
as of March 28, 2002 ("Patent License Agreement");
WHEREAS, Tumbleweed desires to acquire such shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue the shares to Tumbleweed on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO ISSUE.
1.1 AUTHORIZATION OF SHARES. At or prior to the Effective Date, the
Company shall have authorized the issuance to Tumbleweed of the Shares as
hereinafter defined.
1.2 ISSUANCE AND DELIVERY. Subject to the terms and conditions hereof,
and in consideration for the execution of the Patent License Agreement by
Tumbleweed concurrent herewith, the Company hereby agrees to issue to Tumbleweed
116,833 shares of the Company's common stock. These shares are the "Shares"
under this Agreement. ZixIt shall deliver to Tumbleweed (or its designee)
certificates representing the Shares within five business days of the Effective
Date. The Shares shall be deemed to have been issued as of the Effective Date.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Tumbleweed as follows as
of the date hereof:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Patent License Agreement; to carry out the provisions of
this Agreement and the Patent License Agreement and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased)
makes such qualification necessary, except for those jurisdictions in which
failure to do so would not have a material adverse effect on the Company or its
business.
2.2 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Patent License Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, sale, issuance and delivery of the Shares pursuant hereto. This
Agreement and the Patent License Agreement, when executed and delivered, and
assuming due authorization, execution and delivery thereof by Tumbleweed, will
be valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and (ii) general principles of equity that
restrict the availability of equitable remedies. The issuance of the Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with. The Shares have been duly
authorized and are validly issued, fully paid and non-assessable.
2.3 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed with
the Securities and Exchange Commission (the "SEC"), and Tumbleweed has had
access to true and complete copies of, all forms, reports, schedules, statements
and other documents required to be filed by it and its Subsidiaries since
January 1, 2000 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the Securities Act of 1933, as amended (the "Securities
Act") (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents). As of their respective dates, the
Company SEC Documents, including, without limitation, any financial statements
or schedules included therein (the "Financial Statements") (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The Company SEC
Documents include all the documents that the Company was required to file with
the SEC since January 1, 2000. The Financial Statements have been prepared from,
and are in accordance with, the books and records of the Company and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and present fairly the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein.
2.4 PATENTS AND TRADEMARKS. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of any patents, trademarks or service
marks of any third party and without any infringement of any other third
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party intellectual property rights. Other than for communications from
Tumbleweed, the Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, nor does the
Company know of any basis for such claim. The Company is not aware of any
infringement or violation by a third party of any of the Company's patents,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as proposed to be
conducted. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company, except for inventions that have
been assigned to the Company.
2.5 OFFERING VALID. Assuming the accuracy of the representations and
warranties of Tumbleweed contained in Section 3.2 hereof, the issuance of the
Shares will be exempt from the registration requirements of the Securities Act.
Neither the Company nor any agent on its behalf has solicited or will solicit
any offers to sell or has offered to sell or will offer to sell all or any part
of the Shares to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act.
3. REPRESENTATIONS AND WARRANTIES OF TUMBLEWEED. Tumbleweed hereby
represents and warrants to the Company as follows:
3.1 REQUISITE POWER AND AUTHORITY. Tumbleweed has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Patent License Agreement and to carry out their provisions.
All action on Tumbleweed's part required for the lawful execution and delivery
of this Agreement and the Patent License Agreement have been or will be
effectively taken prior to the Effective Date. Upon their execution and
delivery, this Agreement and the Patent License Agreement will be valid and
binding obligations of Tumbleweed, enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, and (ii) general principles of equity that restrict the
availability of equitable remedies.
3.2 INVESTMENT REPRESENTATIONS. Tumbleweed represents and warrants that
it is acquiring the Shares for its account only and not with a view to any
"distribution" thereof within the meaning of the Securities Act. Tumbleweed
understands that the Shares have not been registered under the Securities Act.
Tumbleweed also understands that Shares are being offered pursuant to an
exemption from registration based in part upon Tumbleweed's representations
contained in the Agreement. Tumbleweed hereby represents and warrants as
follows:
(a) TUMBLEWEED BEARS ECONOMIC RISK. Tumbleweed has substantial
experience in evaluating and investing in transactions in companies similar to
the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Tumbleweed must bear the economic risk of this investment
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indefinitely unless the Shares are registered pursuant to the Securities Act, or
an exemption from registration is available. Tumbleweed also understands that
there is no assurance that any exemption from registration under the Securities
Act will be available for resale of the Shares and that, even if available, such
exemption may not allow Tumbleweed to transfer all or any portion of the Shares
under the circumstances, in the amounts or at the times, Tumbleweed might
propose.
(b) TUMBLEWEED CAN PROTECT ITS INTERESTS. Tumbleweed represents that by
reason of its, or of its management's, business or financial experience,
Tumbleweed has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Tumbleweed is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement. Tumbleweed also represents Tumbleweed has not
been organized for the purpose of acquiring the Shares.
3.3 RULE 144. Tumbleweed acknowledges and agrees that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Tumbleweed
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
3.4 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Shares shall be endorsed with the legends
substantially in the form set forth below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
4. REGISTRATION OF SHARES.
4.1 SHELF REGISTRATION. The Company shall use its commercially
reasonable best efforts to effect, as soon as practicable, the registration
under the Securities Act of all of the Shares. The registration statement shall
be filed pursuant to Rule 415 under the Securities Act permitting the continuous
resale of the Shares from time to time thereunder for the period specified in
4.3(a) below. The Company shall file the registration statement under this
section with the SEC no later than fifteen (15) days following the Effective
Date. The parties acknowledge that this Agreement will be filed as an exhibit to
the registration statement(s) pertaining to the Shares.
4.2 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 4.1
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shall be borne by the Company, except for commissions incurred by Tumbleweed in
connection with the resale of the Shares, which will be borne by Tumbleweed.
4.3 OBLIGATIONS OF THE COMPANY. The Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to the Shares and use all commercially reasonable best efforts to cause such
registration statement to become effective, and to keep such registration
statement continuously effective for two years from the later of the Effective
Date, unless Tumbleweed shall have earlier completed the distribution of all of
the Shares pursuant to the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Shares.
(c) Furnish to Tumbleweed copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Shares.
(d) Use all commercially reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by Tumbleweed, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) Notify Tumbleweed at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(f) Provide Tumbleweed the same opinion of ZixIt's legal counsel that
is filed as an exhibit to the registration statement relating to the Shares.
4.4 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless Tumbleweed, each of
its directors, its officers, and legal counsel and each person, if any, who
controls Tumbleweed within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities (joint or several) to which Tumbleweed
or any such director, officer, legal counsel, or controlling person, may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or
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alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse any legal or other expenses reasonably incurred by
Tumbleweed or any such director, officer, legal counsel, or controlling person,
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 4.4(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly by Tumbleweed for use in connection with such
registration.
(b) Tumbleweed will indemnify and hold harmless the Company, each of
its directors, its officers, and legal counsel and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, legal counsel, or controlling person, may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished expressly by Tumbleweed for
use in connection with such registration; and Tumbleweed will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, legal counsel, or controlling person, in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 4.4(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of Tumbleweed,
which consent shall not be unreasonably withheld; provided further, that in no
event shall any indemnity under this Section 4.4(b) exceed the net proceeds from
the resale of the Shares received by Tumbleweed.
(c) Promptly after receipt by an indemnified party under this Section
4.4 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 4.4, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section
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4.4, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.4.
(d) If the indemnification provided for in this Section 4.4 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided that in no event shall any contribution by Tumbleweed hereunder exceed
the proceeds from the resale of the Shares received by Tumbleweed.
(e) The obligations of the Company and Tumbleweed under this Section
4.4 shall survive completion of any offering of the Shares in a registration
statement and the termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
5.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Tumbleweed and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. The rights and obligations of Tumbleweed
hereunder are personal to Tumbleweed and may not be assigned by Tumbleweed
without the prior written consent of the Company, except in connection with an
assignment of Tumbleweed's rights under the Patent License Agreement. Subject to
the foregoing, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies,
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obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
5.4 ENTIRE AGREEMENT. This Agreement, the Patent License Agreement and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
5.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the written consent of the Company and Tumbleweed (or their permitted
successors or assigns).
5.7 NOTICES. All notices required or permitted by this Agreement to be
given to a Party shall be in writing and shall be deemed to be duly given if
hand delivered or sent by overnight courier or mailed by certified or registered
mail, return receipt requested; provided that a copy is also sent by facsimile
transmission, as follows:
If to Tumbleweed:
Tumbleweed Communications Corp.
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
If to Company:
ZixIt Corporation
0000 X. Xxxxxxx Xxxxxx
Xxxxx 0000, XX 36
Xxxxxx, Xxxxx 00000-0000
Attention: General Counsel
Facsimile: (000) 000-0000
Either Party may change the address to which such notice and
communications shall be sent by written notice to the other Party, provided that
any notice of change of address shall be effective only upon receipt.
5.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such
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prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
5.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.11 LIQUIDATED DAMAGES. If, notwithstanding the Company's use of its
commercially reasonable best efforts to effect the registration of the Shares
described in Section 4.1 above, the registration statement is not declared
effective by the Securities and Exchange Commission by the first year
anniversary of the Effective Date, then the Company will promptly pay to
Tumbleweed $300,000 in cash as liquidated damages.
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Issuance Agreement as of the Effective Date.
ZIXIT CORPORATION TUMBLEWEED
COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
---------------------- -------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxxxxx
---------------------- -------------------------
Title: S.V.P. Title: Vice President
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