SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-17995
ZIXIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2216818
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
2711 NORTH HASKELL AVENUE
SUITE 2850, LB 36
DALLAS, TEXAS 75204-2911
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 515-7300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT OCTOBER 31, 2000
-------------------------------------- -------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE 16,587,113
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INDEX
PART I-FINANCIAL INFORMATION
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at September 30, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended September 30, 2000 and 1999 and for
the cumulative period from January 1, 1999 through
September 30, 2000 4
Condensed Consolidated Statement of Stockholders' Equity and
Comprehensive Net Loss for the nine months ended September 30, 2000 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999 and for the
cumulative period from January 1, 1999 through September 30, 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17
PART II-OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
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ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
September 30, 2000 December 31, 1999
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 30,282 $ 6,598
Marketable securities 30,022 33,186
Due from sale of discontinued operations -- 581
Other current assets 2,041 3,030
------------------ ------------------
Total current assets 62,345 43,395
Property and equipment, net 20,767 21,006
Goodwill, net 1,202 2,122
------------------ ------------------
$ 84,314 $ 66,523
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,032 $ 2,481
Liabilities related to discontinued operations 1,116 1,148
------------------ ------------------
Total current liabilities 4,148 3,629
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none outstanding -- --
Common stock, $.01 par value, 175,000,000 shares 189 176
authorized; 18,879,013 issued, 16,587,113
outstanding in 2000 and 17,629,929 issued,
15,338,029 outstanding in 1999
Additional capital 174,556 114,740
Unearned stock-based compensation (15,594) (10,496)
Treasury stock, at cost (11,314) (11,314)
Accumulated other comprehensive loss (911) --
Accumulated deficit (net of deficit accumulated during
the development stage of $70,900 at September 30, 2000
and $34,352 at December 31, 1999) (66,760) (30,212)
------------------ ------------------
Total stockholders' equity 80,166 62,894
------------------ ------------------
$ 84,314 $ 66,523
================== ==================
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See accompanying notes.
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Cumulative During
Three Months Nine Months Development Stage
Ended September 30 Ended September 30 (From January 1, 1999
------------------------ ------------------------ Through
2000 1999 2000 1999 September 30, 2000)
---------- ---------- ---------- ---------- ---------------------
Revenues $ 99 $ -- $ 287 $ -- $ 386
Research and development expenses (2,346) (5,112) (6,762) (19,177) (30,310)
Operating costs and general corporate expenses (14,799) (7,310) (32,681) (10,585) (49,377)
Investment income 1,024 837 2,234 2,874 5,767
---------- ---------- ---------- ---------- -------------------
Loss from continuing operations before income taxes (16,022) (11,585) (36,922) (26,888) (73,534)
Income tax benefit -- 65 -- 185 807
---------- ---------- ---------- ---------- -------------------
Loss from continuing operations (16,022) (11,520) (36,922) (26,703) (72,727)
Discontinued operations 66 210 374 608 1,827
---------- ---------- ---------- ---------- -------------------
Net loss $ (15,956) $ (11,310) $ (36,548) $ (26,095) $ (70,900)
========== ========== ========== ========== ===================
Basic and diluted earnings (loss) per common share:
Continuing operations $ (0.97) $ (0.75) $ (2.30) $ (1.75)
Discontinued operations 0.01 0.01 0.03 0.04
---------- ---------- ---------- ----------
Net loss $ (0.96) $ (0.74) $ (2.27) $ (1.71)
========== ========== ========== ==========
Weighted average shares outstanding 16,572 15,282 16,081 15,219
========== ========== ========== ==========
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See accompanying notes.
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE NET LOSS
(In thousands, except share data)
(Unaudited)
Unearned
stock-
based
Common Stock Additional compen-
Shares Amount capital sation
--------------- --------------- --------------- ---------------
Balance, December 31, 1999 17,629,929 $ 176 $ 114,740 $ (10,496)
Stock issued in private
placement, net of
issuance costs 916,667 9 43,785 --
Exercise of stock options
for cash 332,417 4 2,242 --
Unearned employee
stock-based
compensation -- -- 12,323 (12,323)
Unearned stock-
based compensation
for service providers -- -- 1,470 (1,470)
Amortization of
unearned stock-
based compensation -- -- -- 8,695
Other -- -- (4) --
Comprehensive net loss:
Net loss -- -- -- --
Unrealized loss on
marketable securities -- -- -- --
Comprehensive net loss -- -- -- --
--------------- --------------- --------------- ---------------
Balance, September 30, 2000 18,879,013 $ 189 $ 174,556 $ (15,594)
=============== =============== =============== ===============
Accumulated
other Total
Treasury comprehensive Accumulated stockholders'
stock loss deficit equity
--------------- --------------- --------------- ---------------
Balance, December 31, 1999 $ (11,314) $ -- $ (30,212) $ 62,894
Stock issued in private
placement, net of
issuance costs -- -- -- 43,794
Exercise of stock options
for cash -- -- -- 2,246
Unearned employee
stock-based
compensation -- -- -- --
Unearned stock-
based compensation
for service providers -- -- -- --
Amortization of
unearned stock-
based compensation -- -- -- 8,695
Other -- -- -- (4)
Comprehensive net loss:
Net loss -- -- (36,548) (36,548)
Unrealized loss on
marketable securities -- (911) -- (911)
---------------
Comprehensive net loss -- -- -- (37,459)
--------------- --------------- --------------- ---------------
Balance, September 30, 2000 $ (11,314) $ (911) $ (66,760) $ 80,166
=============== =============== =============== ===============
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See accompanying notes.
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Cumulative During
Nine Months Development Stage
Ended September 30 (From January 1, 1999
------------------------ Through
2000 1999 September 30, 2000)
---------- ---------- ------------------
Cash flows from operating activities:
Loss from continuing operations $ (36,922) $ (26,703) $ (72,727)
Adjustments to reconcile loss from continuing operations
to net cash used by operating activities:
Depreciation and amortization 7,238 1,446 10,714
Stock-based compensation 8,695 10,477 21,010
Changes in assets and liabilities, excluding divestiture of
businesses:
Other current assets 78 (560) (865)
Current liabilities 291 2,324 417
---------- ---------- ---------------
Net cash used by continuing operations (20,620) (13,016) (41,451)
Net cash provided (used) by discontinued operations 342 (1,907) (1,513)
---------- ---------- ---------------
Net cash used by operating activities (20,278) (14,923) (42,964)
Cash flows from investing activities:
Purchases of property and equipment, net (5,819) (17,147) (28,984)
Purchases of marketable securities (22,000) (119,015) (141,150)
Sales and maturities of marketable securities 25,164 96,243 138,057
Purchase of Anacom Communications -- -- (2,500)
Investing activities of discontinued operations 581 5,304 5,885
---------- ---------- ---------------
Net cash used by investing activities (2,074) (34,615) (28,692)
Cash flows from financing activities:
Proceeds from private placement of common stock, net of issuance 43,794 -- 43,794
costs
Proceeds from exercise of stock options 2,246 1,264 3,867
---------- ---------- ---------------
Net cash provided by financing activities 46,040 1,264 47,661
Effect of exchange rate changes on cash and cash equivalents
(4) (11) (15)
---------- ---------- ---------------
Increase (decrease) in cash and cash equivalents 23,684 (48,285) (24,010)
Cash and cash equivalents, beginning of period 6,598 54,292 54,292
---------- ---------- ---------------
Cash and cash equivalents, end of period $ 30,282 $ 6,007 $ 30,282
========== ========== ===============
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See accompanying notes.
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements, which should be read in conjunction with the audited consolidated financial statements included in the Company's 1999 Annual Report to Shareholders on Form 10-K, are unaudited but have been prepared in the ordinary course of business for the purpose of providing information with respect to the interim periods. The Condensed Consolidated Balance Sheet at December 31, 1999 was derived from the audited Consolidated Balance Sheet at that date which is not presented herein. Management of the Company believes that all adjustments necessary for a fair presentation for such periods have been included and are of a normal recurring nature. The results of operations for the nine-month period ended September 30, 2000 are not necessarily indicative of the results to be expected for the full year.
During 1998, the Company sold all of its operating businesses and, accordingly, the assets and liabilities, operating results and cash flows of these businesses have been classified as discontinued operations in the accompanying financial statements.
Since January 1999, the Company has been developing a digital signature and encryption technology and is developing a series of products and services that enhance privacy, security and convenience over the Internet. To date, the Company has not earned any revenues from these products and services. ZixMail(TM), which was first commercially released in March 2000, is a user friendly, secure document delivery, private email and message tracking service that enables Internet users worldwide to easily send and receive encrypted and digitally signed communications without changing their existing email systems or addresses. The Company released enhanced versions of ZixMail in July and September of 2000, which include integration with Microsoft(R) Outlook(R), spell checking, hyperlink support and rich-text formatting features, and the ability to send secure messages to recipients who are not ZixMail users.
Also, in July 2000, the Company opened ZixIt's new Internet secure-messaging portal -- SecureDelivery.com(TM). The architecture of the SecureDelivery.com portal allows for interoperability between encryption formats and allows for the delivery of messages to recipients through secure (SSL) browsers, secure email and other modes of communication. Currently available services include sending secure and authenticated messages from Microsoft(R) Outlook(R) and the SecureDelivery.com Web message form and delivering those messages to authenticated recipients over secure browser connections. Also, current ZixMail users can route messages to any email address through SecureDelivery.com, even though the recipient is not a ZixMail user. In the future, SecureDelivery.com is expected to enable users to also manage incoming secure messages from other sources, including Lotus(R) Notes(R)and branded
Web-based email compose forms, and in other encryption formats, such as S/MIME (X.509) and PGP(R). When completed, SecureDelivery.com will forward these incoming messages directly to the recipient, based on recipient selected encryption options. |
To reach a larger customer base for its secure-messaging products and services than it can reach through its direct sales and marketing efforts and to assist the Company in promoting its secure-messaging services, the Company is pursuing collaborative relationships with third parties that possess large existing email user bases. To date, the Company has entered into agreements of this type with Yahoo! Inc. and Entrust Technologies, Inc. ("Entrust"). Under the Yahoo! agreement, signed in August 2000, the Company will provide Yahoo!(R) Mail (http://mail.yahoo.com) users with the option to send encrypted email messages through the Company's SecureDelivery.com messaging portal. Under a Marketing and Distribution Agreement with Entrust, entered into in November 2000, Entrust will modify its Entrust/Express(R) product to provide Entrust/Express users the option of using the SecureDelivery service as a mechanism for providing secure email when the intended message recipient does not have an Entrust certificate. Entrust intends to market the modified product and the Company and Entrust will share the related use fees and advertising revenues.
ZixCharge(TM), which has not been commercially released, is a shopping portal and payment authorization system designed to enable consumers to purchase goods and services over the Internet without being required to provide personal and charge card information to Internet merchants. See Note 4, "Litigation."
Successful development of a development stage enterprise, particularly Internet related businesses, is costly and highly competitive. The Company's growth depends on the timely development and market acceptance of its new products and services. A development stage enterprise involves risks and uncertainties, and there are no assurances that the Company will be successful in its efforts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risks and Uncertainties." The accompanying statements of operations and cash flows include cumulative totals of the Company's results during the development stage.
The amount presented for basic and diluted loss per common share has been computed based upon the weighted average number of common shares outstanding for the period. The two presentations are equal in amounts because the assumed exercise of common stock equivalents would be antidilutive, since a net loss was reported for each period presented.
2. STOCKHOLDERS' EQUITY
Private Placement of Equity Securities
In May 2000, the Company sold, in a private placement, certain newly issued equity securities to an investor group led by H. Wayne Huizenga and received cash totalling $44,000,000 in three installments. In exchange, the Company issued to the investor group 916,667 shares of its common stock valued at $48.00 per share, ten-year warrants to purchase 916,667 shares of the Company's common stock at $57.60 per share and four-year warrants to purchase 1,222,223 shares of the Company's common stock at $12.00 per share. The four-year warrants were reallocated from options previously held by David P. Cook, the Company's president and chief executive officer, and are not exercisable until May 1, 2001. In May 2000, subsequent to the completion of the private placement, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission covering the public resale of the shares of common stock and the shares underlying the warrants issued to the investor group.
Purchase of Anacom Communications
In October 1999, the Company purchased all of the outstanding shares of Anacom Communications, Inc., a privately-held provider of real-time transaction processing services to Internet merchants. Consideration consisted of a cash payment of $2,500,000, primarily recorded as goodwill, and common stock, valued at a minimum of $7,500,000, to be delivered in two annual installments beginning October 2000, assuming continued employment by the former owners. The minimum value of the common stock issuable pursuant to the purchase agreement of $7,500,000 is treated as compensation for financial accounting purposes and is being charged to operating costs and general corporate expenses over two years with a corresponding increase in stockholders' equity. Financial accounting rules require the minimum number of common shares issuable be revalued on each subsequent reporting date until performance is complete with a cumulative catch up adjustment recognized for any changes in their intrinsic value in excess of $7,500,000. Based on the Company's common stock price of $39.63 per share at December 31, 1999, $46.06 per share at June 30, 2000, and $30.50 per share at September 30, 2000, the intrinsic value of these shares on those dates was $7,529,000, $8,750,000 and $5,793,000 (less than the minimum $7,500,000), respectively. Accordingly, the Company's results of operations for the three months and nine months ended September 30, 2000 include non-cash charges of $469,000 and $2,813,000, respectively, for amortization of the market value of the common shares issuable. Unearned stock-based compensation, not yet charged to income, is $3,750,000 based on the minimum value of these shares at September 30, 2000. The Company's results of operations for the remainder of 2000 and 2001 could be materially impacted as a result of any future increases in the price of the Company's common stock; however, there would be no impact on the Company's cash flows or total stockholders' equity. The number of shares to be delivered, set at a minimum of 190,000 shares, may be increased should the market value of the common stock be less than $39.48 at the time of delivery. However, if additional consideration is required, the Company may elect to pay cash rather than issue additional shares of common stock.
In October 2000, 83,663 shares were delivered to the former owners, which included 13,382 shares in excess of the minimum.
Third Party Stock Options
The Company has agreements with three service providers whereby the Company granted options to purchase up to 200,000 shares of the Company's common stock at a weighted average exercise price of $38.78 per share. These options vest over periods of up to 42 months and have expiration dates ranging from four to eight years. On the dates of grant, these options had an estimated fair value aggregating $6,703,000 using the Black-Scholes option valuation model. Financial accounting rules require these options to be revalued on each subsequent reporting date until the options are vested or until performance is complete with a cumulative catch up adjustment recognized for any changes in their fair value. Based on the Company's common stock price of $39.63 per share at December 31, 1999, $46.06 per share at June 30, 2000 and $30.50 per share at September 30, 2000, the fair value of these options on those dates was $4,617,000, $7,031,000 and $5,382,000, respectively. Accordingly, the Company's results of operations for the three months and nine months ended September 30, 2000 include non-cash charges of $139,000 and $1,491,000 respectively, for amortization of the fair value of these options over their respective service or vesting periods. Unearned stock-based compensation, not yet charged to income, is $3,086,000 based on the fair value of these options at September 30, 2000. The Company's future results of operations could be materially impacted by a change in valuation of these third party stock options as a result of future increases or decreases in the price of the Company's common stock; however, there would be no impact on the Company's cash flows or total stockholders' equity.
Reallocated Options to Employees and Director
During 2000, David P. Cook reallocated options to acquire 657,127 shares of the Company's common stock, including 252,500 shares reallocated in November 2000, to certain of the Company's employees and a director. These reallocated options have a five year term, vest from April 2001 to April 2003 and have exercise prices ranging from $7.00 to $13.75 per share as compared to Mr. Cook's exercise price of $7.00 per share. Non-cash compensation expense of $16,964,000 will be recognized over the vesting periods ($1,684,000 and $3,762,000 for the three months and nine months ended September 30, 2000, respectively), representing the intrinsic value of the reallocated options based upon the difference between the fair market value of the Company's common stock on the dates the options were reallocated and the option exercise prices.
Lante Common Stock
In November 1999, the Company received a fully vested option to acquire up to 400,000 shares of Lante Corporation's ("Lante") common stock at $7.00 per share in accordance with a cashless exercise formula. The option was valued at $1,872,000 on the date of grant, using the Black-Scholes option valuation model, and was included in other current assets at December 31, 1999. In the first quarter of 2000, the Company exercised its option to acquire shares of Lante common stock, and Lante disputed approximately 130,000 of the approximately 322,000 shares that the Company believed it was entitled to receive under the cashless exercise formula. Separately, in September 2000, Lante exercised an option to acquire approximately 140,000 shares of the Company's common stock. The Company withheld the delivery of these shares pending the resolution of its arbitration claims. Lante has asserted an arbitration claim against the Company for the value of the undelivered shares.
The fair market value of the Company's undisputed shares of Lante common stock held on September 30, 2000 is $961,000 ($5.00 per share) and is included in other current assets. An unrealized loss on these shares of $911,000 is included in other comprehensive loss as a component of stockholders' equity.
3. COMMITMENTS
In the third quarter of 2000, the Company entered into an agreement with Yahoo! Inc. to provide Yahoo! Mail users, beginning in the fourth quarter of 2000, with the option to send encrypted email messages through the Company's
SecureDelivery.com messaging portal. The Company has minimum future commitments to Yahoo! under this agreement totaling $5,700,000, payable in seven quarterly installments over the next two years. In addition, the Company will pay Yahoo! a specified portion of revenues earned by the Company which are associated with Yahoo! users.
4. LITIGATION
On December 30, 1999, the Company and ZixCharge.com, Inc. ("ZixCharge"), a wholly-owned subsidiary of the Company, filed a lawsuit against Visa U.S.A., Inc. and Visa International Service Association (collectively "Visa") in the 192nd Judicial District Court of Dallas County, Texas. The suit alleges that Visa undertook a series of actions that interfered with the Company's business relationships and disparaged the Company, its products, its management and its stockholders. The suit alleges that Visa intentionally set out to destroy the Company's ability to market its ZixCharge shopping portal and payment authorization system, which competed against the MasterCard and Visa-owned Secure Electronic Transaction system. The suit, which is in the discovery phase, seeks monetary damages and such other relief as the court deems appropriate. The resolution of the lawsuit could have a material effect on the Company's ability to market the ZixCharge system.
The Company is involved in legal proceedings that arise in the ordinary course of business, however in the opinion of management, the outcome of these pending legal proceedings will not have a material adverse affect on the Company's consolidated financial statements.
5. SUBSEQUENT EVENTS
In November 2000, the Company entered into an Enterprise and CA Services Agreement with Entrust whereby the Company will issue to Entrust $3,400,000 of the Company's common stock in exchange for licenses to use certain software packages, technical support and the right to issue a specified number of Entrust digital identification certificates to users of ZixIt's SecureDelivery and ZixMail products. These certificates, when issued and when
coupled with S/MIME enabled software, will enable SecureDelivery users to send and to receive S/MIME formatted messages in conjunction with their usage of the SecureDelivery service. The certificates may also possibly be used in future applications involving the use of digital signatures over the Internet. The shares of common stock to be received by Entrust are accompanied by registration rights and are subject to transfer restrictions which lapse in four equal quarterly installments ending in December 2001. If the aggregate value of the shares on the dates the restrictions lapse is less than $3,400,000, the Company is obligated to fund such deficiency in December 2001 by electing to pay cash or issue additional shares of stock valued at the then fair market value of the Company's common stock. Additionally, in the Marketing and Distribution Agreement with Entrust as discussed in Note 1, the Company has agreed to issue to Entrust $400,000 of the Company's common stock for the integration of the SecureDelivery service option into the Entrust/Express(R) product. |
Separately, the Company has agreed in principle to purchase approximately 9% of the equity ownership of Maptuit Corporation ("Maptuit") for $3,000,000 in cash in a transaction expected to be completed by the end of November 2000. The Company has also agreed in principle to invest $2,000,000 (payable in Company stock or cash) as part of Maptuit's next round of equity financing, which is expected to occur in the first half of 2001. Maptuit, an early stage company , is a privately-held Internet ASP (application service provider) that supplies wireline and wireless Internet location-based services. Built upon a comprehensive database of the street network of North America, Maptuit provides address matching, route generation, step-by-step directions, map rendering, and real-cost proximity searching services. Jeff Papows, the Company's chairman of the board, serves as the president and chief executive officer of Maptuit and currently holds a minority interest in Maptuit.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Historically, the Company operated in one industry segment, the provision of systems and solutions for the intelligent transportation, electronic security and other markets through the design, manufacturing, installation and support of hardware and software products utilizing the Company's wireless data and security technologies. The businesses comprising this industry segment were sold during 1998 and 1997 and have been classified as discontinued operations in the Condensed Consolidated Financial Statements.
Since January 1999, the Company has been developing a digital signature and encryption technology and is developing a series of products and services that enhance privacy, security and convenience over the Internet. To date, the Company has not earned any revenues from these products and services. ZixMail(TM), which was first commercially released in March 2000, is a user friendly, secure document delivery, private email and message tracking service that enables Internet users worldwide to easily send and receive encrypted and digitally signed communications without changing their existing email systems or addresses. The Company released enhanced versions of ZixMail in July and September of 2000, which include integration with Microsoft(R) Outlook(R), spell checking, hyperlink support and rich-text formatting features, and the ability to send secure messages to recipients who are not ZixMail users.
Also, in July 2000, the Company opened ZixIt's new Internet secure-messaging portal -- SecureDelivery.com(TM). The architecture of the SecureDelivery.com portal allows for interoperability between encryption formats and allows for the delivery of messages to recipients through secure (SSL) browsers, secure email and other modes of communication. Currently available services include sending secure and authenticated messages from Microsoft(R) Outlook(R) and the SecureDelivery.com Web message form and delivering those messages to authenticated recipients over secure browser connections. Also, current ZixMail users can route messages to any email address through SecureDelivery.com, even though the recipient is not a ZixMail user. In the future, SecureDelivery.com is expected to enable users to manage incoming secure messages received from other sources as well, including Lotus(R) Notes(R) and branded Web-based email compose forms, and in other encryption formats, such as
S/MIME (X.509) and PGP(R). When completed, SecureDelivery.com will forward these incoming messages directly to the recipient, based on recipient selected encryption options. |
To reach a larger customer base for its secure-messaging products and services than it can reach through its direct sales and marketing efforts and to assist the Company in promoting its secure-messaging services, the Company is pursuing collaborative relationships with third parties that possess large existing email user bases. To date, the Company has entered into agreements of this type with Yahoo! Inc. and Entrust Technologies, Inc. ("Entrust"). Under the Yahoo! agreement, signed in August 2000, the Company will provide Yahoo!(R) Mail (http://mail.yahoo.com) users with the option to send encrypted email messages through the Company's SecureDelivery.com messaging portal. Under a Marketing and Distribution Agreement with Entrust, entered into in November 2000, Entrust will modify its Entrust/Express(R) product to provide Entrust/Express users the option of using the SecureDelivery service as a mechanism for providing secure email when the intended message recipient does not have an Entrust certificate. Entrust intends to market the modified product and the Company and Entrust will share the related use fees and advertising revenues.
The foundation of the Company's business model for ZixMail and SecureDelivery.com centers around the financial leverage expected to be generated by revenues that are believed to be predominantly recurring in nature and an efficient cost structure for data center operations, the core of which is expected to remain relatively stable, regardless of the number of users. Revenue streams are projected to consist of recurring subscription fees, variable usage fees for certain services provided by the Company, and income earned by the Company from click-through promotional programs, banner advertising placed with the Company by third-parties, and branding purchased by corporate customers for promotional purposes. New business is expected to be generated from the Company's own direct sales efforts, its affiliate marketing programs, and the promotional efforts of its strategic
marketing partners. In January 2001 the Company plans to begin charging for its products and services. Presently, the Company's cash burn rate from operations averages approximately $2,500,000 per month. As a result, revenue levels necessary to achieve a cash-flow break-even are expected to be rather modest, even as the Company expands its sales and marketing reach and begins to incur certain variable costs such as credit card fees and the costs associated with the Company's affiliate marketing program and the Company's strategic marketing partnerships. If the Company is able to maintain its targets for such costs, and if it is successful in tapping the growing demand for security in email communications, it is possible that the Company could anticipate the potential for attaining positive cash flow from operations sometime in the next nine to eighteen months. In connection with this paragraph, see the "safe harbor" statement under "Risks and Uncertainties" below.
ZixCharge(TM), which has not been commercially released, is a shopping portal and payment authorization system designed to enable consumers to purchase goods and services over the Internet without being required to provide personal and charge card information to Internet merchants. As described in Note 4 to the Condensed Consolidated Financial Statements, the Company has initiated litigation against Visa. The litigation alleges that Visa set out to destroy the Company's ability to market ZixCharge.
Additionally, in October 1999, the Company purchased all of the outstanding shares of Anacom Communications, Inc. ("Anacom"), a privately-held provider of real-time transaction processing services to Internet merchants.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Revenues
Revenues in the third quarter and first nine months of 2000 are attributable to Anacom. The Company is not currently charging for the use of its ZixMail or SecureDelivery.com products or services. The Company plans to begin charging for its ZixMail and SecureDelivery.com products and services in January 2001.
Research and development expenses
Research and development expenses decreased from $5,112,000 and $19,177,000 for the three months and nine months ended September 30, 1999 to $2,346,000 and $6,762,000 for the corresponding periods in 2000. Expenses in 1999 include a non-cash credit of $1,418,000 and a non-cash charge of $6,387,000 in the three month and nine month periods, respectively, for amortization of the fair-value of stock options granted to Lante Corporation, a third party Internet services company that assisted the Company with its development efforts. In 2000, employee compensation costs increased but were more than offset by a reduction in third party consulting expenditures as a result of hiring additional technical personnel to support the development of the Company's various Internet products.
Operating costs and general corporate expenses
Operating costs and general corporate expenses increased from $7,310,000 and $10,585,000 for the three months and nine months ended September 30, 1999 to $14,799,000 and $32,681,000 for the corresponding periods in 2000. The increase between years is primarily due to higher expenses for marketing, advertising, expanded lease facilities, depreciation of property and equipment and personnel relating to establishing the Company's Internet related businesses. The three month and nine month periods in 2000 include discretionary advertising costs of $6,712,000 and $9,147,000, respectively, primarily for various print media and online advertising with various sites, including Yahoo!, Lycos and McAfee.com. In addition, expenses in 2000 include non-cash charges of $2,697,000 and $8,693,000 in the three month and nine month periods, respectively, for stock-based compensation resulting from the issuance of certain equity securities. See Note 2 to the Condensed Consolidated Financial Statements for a discussion regarding the accounting for these equity securities and their potential impact on the Company's future operating results. The Company recognized a non-recurring, non-cash expense of $3,335,000 in the third quarter of 1999 relating to stock options granted in January 1999 to certain of the Company's outside directors under a plan that was approved by the shareholders in September 1999. In the near term, the Company plans to build out its sales and marketing staff to support an increased marketing effort. Additionally, new categories of costs will begin to be
incurred such as credit card fees and the costs associated with the Company's affiliate marketing program and the Company's strategic marketing partnerships.
Investment income
Investment income increased from $837,000 and decreased from $2,874,000 for the three months and nine months ended September 30, 1999 to $1,024,000 and $2,234,000 for the corresponding periods in 2000. The change in the nine month periods is primarily due to a decrease in invested cash and marketable securities partially offset by an increase in interest rates.
Income tax benefit
The income tax benefit on the loss from continuing operations in 2000 and 1999 is different from the U.S. statutory rate of 34%, primarily due to unbenefitted U.S. losses. The Company fully reserves its deferred tax assets due to the uncertainty of future taxable income from the Company's new business initiatives.
Loss from continuing operations
As a result of the foregoing, the Company experienced losses from continuing operations of $16,022,000 and $36,922,000 for the three months and nine months ended September 30, 2000, respectively, as compared to losses of $11,520,000 and $26,703,000 for the corresponding periods in 1999.
DISCONTINUED OPERATIONS
The Company recorded a gain of $66,000 and $374,000 for the three months and nine months ended September 30, 2000, respectively, compared to a gain of $210,000 and $608,000 for the corresponding periods in 1999, primarily due to a reduction in estimated future costs for various indemnification issues associated with the disposal of its operating businesses in 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's principal source of liquidity is its net working capital position of $58,197,000, including cash and marketable securities of $60,304,000. The Company plans to invest its excess cash primarily in short-term, high-grade U.S. corporate debt securities or U.S. government and agency securities. The Company's first nine months 2000 loss from continuing operations included significant non-cash expenses for stock-based compensation and depreciation and amortization aggregating $15,933,000. Net cash used by continuing operations in the first nine months of 2000 was $20,620,000, primarily representing development and start-up costs relating to the Company's Internet related businesses, including payments for discretionary advertising costs of $8,278,000. The Company plans to begin charging for its products and services in January 2001. Additionally, in the first nine months of 2000, the Company invested $5,819,000 in property and equipment, primarily for additional computer equipment associated with its secure data center. The Company's near-term liquidity will be negatively impacted as the Company continues its development stage activities, particularly with regards to discretionary marketing and advertising costs, or incurs costs associated with forming additional strategic alliances, if any are concluded. See also Note 3 to the Condensed Consolidated Financial Statements regarding a minimum commitment to Yahoo! Inc. totalling $5,700,000, payable over the next two years, and Note 5 regarding the issuance of $3,800,000 of common stock to Entrust and a pending $5,000,000 investment in Maptuit Corporation.
In May 2000, the Company sold, in a private placement, certain newly issued equity securities to an investor group led by H. Wayne Huizenga and received cash totalling $44,000,000 in three installments. In exchange, the Company issued to the investor group 916,667 shares of its common stock valued at $48.00 per share, ten-year warrants to purchase 916,667 shares of the Company's common stock at $57.60 per share and four-year warrants to purchase 1,222,223 shares of the Company's common stock at $12.00 per share. The four-year warrants were reallocated from options previously held by David P. Cook, the Company's president and chief executive officer, and are not exercisable until May 1, 2001.
The Company believes its existing net working capital position will be sufficient to meet near-term anticipated needs. The Company currently has no existing borrowings or credit facilities. Acquisitions, if any, would be financed by the most attractive alternative available, which could be cash or the issuance of debt or equity securities.
RISKS AND UNCERTAINTIES
The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this Quarterly Report on Form 10-Q contain statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "estimate," "anticipate," "predict," "believe," "plan" and similar expressions and variations thereof are intended to identify forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. These risks and uncertainties include, but are not limited to, the following:
LIMITED OPERATING HISTORY
The Company has only a limited operating history in the Internet arena on which to base an evaluation of its business and prospects. The Company's prospects must be considered in light of the risks and uncertainties encountered by other Internet companies in the early stages of development. These risks and uncertainties are often more pronounced for companies in new and rapidly evolving markets, particularly Internet related businesses.
PRODUCT DEVELOPMENT AND MARKET ACCEPTANCE
The Company's products and services are targeted at the new and rapidly evolving markets for secure Internet communications and e-commerce. Although the competitive environment in these markets has yet to fully develop, the Company anticipates that it will be intensely competitive, subject to rapid change and significantly affected by new products and service introductions and other market activities of industry participants. The Company's success will depend on many factors, including, but not limited to, the following:
o The Company must be able to successfully and timely develop its products and services. The commercial version of ZixMail was first released in March 2000 and enhanced versions were released in July and September of 2000. The Company's new Internet secure-messaging portal - SecureDelivery.com -- was first opened at the end of July 2000. The Company is not currently charging for use of its ZixMail or SecureDelivery.com products or services. ZixCharge has not been commercially released.
o The Company must be able to achieve broad market acceptance for its products and services. There are currently no known Internet secure-messaging products or services, such as ZixMail and SecureDelivery.com, that currently operate at the scale that the Company would require, at its current expenditure levels and proposed pricing, to become profitable from its secure-messaging operations. To reach a larger customer base for its secure-messaging products and services than it can reach through its direct sales and marketing efforts and to assist the Company in promoting its secure-messaging services, the Company is pursuing additional collaborative relationships with third parties that possess large existing email user bases. There is no assurance that the Company will be successful in entering into a sufficient number of these relationships, or that if entered into, they will significantly assist the Company in obtaining large numbers of ZixMail or SecureDelivery.com users. Moreover, in any event, there is no assurance that enough paying users or enough advertising revenue will be ultimately obtained to enable the Company to operate profitably.
o Since the commercial version of ZixCharge has not yet been released, there are currently no consumers or merchants using ZixCharge. The success of ZixCharge will depend on (1) the Company's ability to obtain, as users, large numbers of consumers who desire to shop privately over the Internet and its ability to obtain large numbers of merchants that will permit them to do so using ZixCharge, and (2) whether sufficient profit can be generated from potential sources of revenue. To obtain access to large numbers of consumers and merchants, the Company began seeking collaborative relationships with companies that have large existing credit card user
bases to assist the Company in promoting ZixCharge. In this regard, initial efforts were focused on banking institutions. As described in Note 4 to the Condensed Consolidated Financial Statements, the Company has initiated litigation against Visa. The litigation alleges that Visa set out to destroy the Company's ability to market ZixCharge. The Company now believes it is unlikely that any Visa member banks will enter into any ZixCharge related collaborative relationship until the Visa litigation is resolved. Moreover, the resolution of this litigation could have a material effect on the Company's ability to market the ZixCharge system.
There is no assurance that the Company will be successful in entering into collaborative relationships pertaining to ZixCharge, or that if entered into, they will significantly assist the Company in obtaining large numbers of ZixCharge users. Moreover, in any event, there is no assurance that the Company will be successful in obtaining a critical mass of consumers as ZixCharge users or obtaining a critical mass of merchants that will allow consumers to use ZixCharge or that sufficient profit can be generated from the ZixCharge operations. If the Company is unable to obtain the necessary critical mass or generate sufficient profit, the Company may decide not to commercially introduce ZixCharge or to discontinue it, if introduced.
REVENUES
The Company currently has no significant revenues.
COMPETITION AND TECHNOLOGICAL CHANGE
The Company is a new entrant into the rapidly evolving secure Internet communications and e-commerce markets. The Company will be competing with larger companies that have access to greater capital, research and development, marketing, distribution and other resources than the Company. In addition, the Internet arena is characterized by extensive research efforts and rapid product development and technological change that could render the Company's products and services obsolete or noncompetitive. The Company's failure to develop and introduce new products and services successfully on a timely basis and to achieve market acceptance for those products and services could have a significant adverse effect on its business, financial condition and results of operations. The Company may decide, at any time, to delay, discontinue or not initiate the development and release of any one or more of its planned or contemplated products and services.
SECURITY INTERRUPTIONS AND SECURITY BREACHES
The Company's business depends on the uninterrupted operation of its secure data center. The Company must protect this center from loss, damage or interruption caused by fire, power loss, telecommunications failure or other events beyond its control. Any damage or failure that causes interruptions in the Company's secure data center operations could materially harm its business, financial condition and results of operations.
In addition, the Company's ability to issue digitally-signed certified time-stamps and public key encryption codes in connection with its ZixMail service and deliver messages through its SecureDelivery.com messaging portal depends on the efficient operation of the Internet connections between customers and the Company's data center. The Company depends on Internet service providers efficiently operating these connections. These providers have experienced periodic operational problems or outages in the past. Any of these problems or outages could adversely affect customer satisfaction.
Furthermore, it is critical that the Company's facilities and infrastructure remain secure and the markets perceive them to be secure. Despite the Company's security measures, its infrastructure may be vulnerable to physical break-ins, computer viruses, attacks by hackers or similar disruptive problems. It is possible that the Company may have to use additional resources to address these problems. Messages sent through the Company's SecureDelivery.com messaging portal will reside, for a user-specified period of time, in the Company's data center facilities. Also, the Company's planned ZixCharge business will retain certain confidential customer information at the Company's data center facilities. Any physical or electronic break-ins or other security breaches or compromises of this information could expose the Company to significant liability, and customers could be reluctant to use its Internet related products and services.
KEY PERSONNEL
The Company depends on the performance of its senior management team and other key employees, particularly highly skilled technical and sales and marketing personnel. The Company's success also depends on its ability to attract, retain and motivate these individuals. There is intense competition for these personnel, and the Company faces a tight employment market in general. There are no agreements with any of the Company's personnel that prevent them from leaving ZixIt at any time. In addition, the Company does not maintain key person life insurance for any of its personnel. The loss of the services of any of the Company's key employees or its failure to attract, retain and motivate key employees could harm its business.
UNKNOWN DEFECTS OR ERRORS IN PRODUCTS OR SERVICES
Any of ZixMail, the SecureDelivery.com messaging portal or ZixCharge could contain undetected defects or errors. Despite the Company's testing, defects or errors may occur, which could result in loss of or delay in revenues, failure to achieve market acceptance, diversion of development resources, injury to the Company's reputation, litigation claims, increased insurance costs or increased service and warranty costs. Any of these could harm the Company's business.
CRYPTOGRAPHY TECHNOLOGY
The Company's products and services employ, and future products and services may employ, public key cryptography technology. With public key cryptography technology, a user has a public key and a private key, which are used to encrypt and decrypt messages. The security afforded by this technology depends, in large measure, on the integrity of a user's private key, which is dependent, in part, on the application of certain mathematical principles. The integrity of a user's private key is predicated on the assumption that it is difficult to mathematically derive a user's private key from the user's related public key. Should methods be developed that make it easier to derive a user's private key, the security of encryption products using public key cryptography technology would be reduced or eliminated and such products could become unmarketable. This could require the Company to make significant changes to its products, which could damage its reputation and otherwise hurt its business. Moreover, there have been public reports of the successful decryption of certain encrypted messages. This, or related, publicity could affect public perception of the security afforded by public key cryptography technology, which could harm the Company's business.
GOVERNMENT REGULATION
Exports of software products using encryption technology are generally restricted by the U.S. government. Although the Company has obtained U.S. government approval to export its ZixMail product to almost all countries in the world, the list of countries to which ZixMail cannot be exported could be revised in the future. Furthermore, some foreign countries impose restrictions on the use of software products using encryption technology, such as the ZixMail product. Failure to obtain the required governmental approvals would preclude the Company from selling the ZixMail product in international markets.
LACK OF STANDARDS
There is no assurance that the Company's products and services will become generally accepted standards or that they will be compatible with any standards that become generally accepted.
INTELLECTUAL PROPERTY RIGHTS
The Company may have to defend its intellectual property rights or defend against claims that the Company is infringing the rights of others. Intellectual property litigation and controversies are disruptive and expensive. Infringement claims could require the Company to develop non-infringing products or enter into royalty or licensing arrangements. Royalty or licensing arrangements, if required, may not be obtainable on terms acceptable to the Company. The Company's business could be significantly harmed if it is not able to develop or
license the necessary technology. Furthermore, it is possible that others may independently develop substantially equivalent intellectual property, thus enabling them to effectively compete against the Company.
SALES OF BUSINESSES
The Company disposed of its remaining operating businesses in 1998 and 1997. In selling those businesses, the Company agreed to provide customary indemnification to the purchasers of those businesses for breaches of representations and warranties, covenants and other specified matters. Although the Company believes that it has adequately provided for future costs associated with these indemnification obligations, indemnifiable claims could exceed the Company's estimates.
STOCK PRICE
The market price of the Company's common stock has fluctuated significantly in the past and is likely to fluctuate in the future. Also, the market prices of securities of other Internet related companies have been highly volatile.
OTHER UNANTICIPATED RISKS AND UNCERTAINTIES
There are no assurances that the Company will be successful or that it will not encounter other, and even unanticipated, risks. The Company discusses other operating, financial or legal risks or uncertainties in its other periodic SEC filings. The Company is, of course, also subject to general economic risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended September 30, 2000, the Company did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company's 1999 Annual Report to Shareholders on Form 10-K.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on September 20, 2000. At this meeting, the shareholders elected as directors of the Company, David P. Cook, H. Wayne Huizenga, Michael E. Keane, James S. Marston, Jeffrey P. Papows, Antonio R. Sanchez, Jr. and Dr. Ben G. Streetman. The tabulation of votes with respect to the election of directors is as follows:
Nominee Shares For Shares Withheld ------- ---------- --------------- David P. Cook 15,041,468 304,411 H. Wayne Huizenga 15,245,315 100,564 Michael E. Keane 15,248,526 97,353 James S. Marston 15,248,280 97,599 Jeffrey P. Papows 15,239,210 106,669 Antonio R. Sanchez, Jr. 15,251,315 94,564 Dr. Ben G. Streetman 15,249,360 96,519 |
The shareholders voted to increase the number of shares of common stock available for grant under the 1995 Long-Term Incentive Plan from 1,000,000 to 1,825,000 shares. The tabulation of votes with respect to the change in the number of shares available for grant is as follows:
For 14,284,367 Against 1,021,782 Abstain 39,730 |
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.
DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation, together with all amendments thereto (filed as Exhibit 3.1 to the Company's Form 10-K for the year ended December 31, 1998, and incorporated herein by reference). Articles of Amendment to Articles of Incorporation, dated September 14, 1999 (filed as Exhibit 3.2 to the Company's Form 10-Q for the quarterly period ended September 30, 1999, and incorporated herein by reference). Articles of Amendment to Articles of Incorporation, dated October 12, 1999 (filed as Exhibit 3.3 to the Company's Form 10-Q for the quarterly period ended September 30, 1999, and incorporated herein by reference).
3.2 Restated Bylaws of ZixIt Corporation, dated September 14, 1999 (filed as Exhibit 3.2 to the Company's Form 10-Q for the quarterly period ended March 31, 2000, and incorporated herein by reference).
*10.1 Distribution Agreement, dated August 17, 2000, between Yahoo! Inc. and the Company (excluding the exhibits). The Company agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any of the exhibits referred to but not included in the Distribution Agreement filed with the SEC.
*10.2 Letter Agreement, dated October 18, 2000, between the Company and Jeffrey P. Papows.
*10.3 1995 Long-Term Incentive Plan of the Company (Amended and Restated as of September 20, 2000).
*10.4 Marketing and Distribution Agreement, effective November 6, 2000, between the Company and Entrust Technologies, Inc. (excluding the schedules). The Company agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any of the schedules referred to but not included in the Marketing and Distribution Agreement filed with the SEC.
*10.5 Enterprise and CA Services Agreement, effective November 6, 2000, between the Company and Entrust Technologies, Inc. (excluding the schedules). The Company agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any of the schedules referred to but not included in the Enterprise and CA Services Agreement filed with the SEC.
*27.1 Financial Data Schedule.
b. Reports on Form 8-K
No reports of the Registrant on Form 8-K have been filed with the Securities and Exchange Commission during the three months ended September 30, 2000.
* Filed herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
ZIXIT CORPORATION
(Registrant)
Date: November 14, 2000 By: /s/ Steve M. York
-----------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
|
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Articles of Incorporation, together with all amendments
thereto (filed as Exhibit 3.1 to the Company's Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference). Articles of Amendment to Articles of
Incorporation, dated September 14, 1999 (filed as Exhibit 3.2
to the Company's Form 10-Q for the quarterly period ended
September 30, 1999, and incorporated herein by reference).
Articles of Amendment to Articles of Incorporation, dated
October 12, 1999 (filed as Exhibit 3.3 to the Company's Form
10-Q for the quarterly period ended September 30, 1999, and
incorporated herein by reference).
3.2 Restated Bylaws of ZixIt Corporation, dated September 14, 1999
(filed as Exhibit 3.2 to the Company's Form 10-Q for the
quarterly period ended March 31, 2000, and incorporated herein
by reference).
*10.1 Distribution Agreement, dated August 17, 2000, between Yahoo!
Inc. and the Company (excluding the exhibits). The Company
agrees to furnish supplementally to the Securities and
Exchange Commission upon request a copy of any of the exhibits
referred to but not included in the Distribution Agreement
filed with the SEC.
*10.2 Letter Agreement, dated October 18, 2000, between the Company
and Jeffrey P. Papows.
*10.3 1995 Long-Term Incentive Plan of the Company (Amended and
Restated as of September 20, 2000).
*10.4 Marketing and Distribution Agreement, effective November 6,
2000, between the Company and Entrust Technologies, Inc.
(excluding the schedules). The Company agrees to furnish
supplementally to the Securities and Exchange Commission upon
request a copy of any of the schedules referred to but not
included in the Marketing and Distribution Agreement filed
with the SEC.
*10.5 Enterprise and CA Services Agreement, effective November 6,
2000, between the Company and Entrust Technologies, Inc.
(excluding the schedules). The Company agrees to furnish
supplementally to the Securities and Exchange Commission upon
request a copy of any of the schedules referred to but not
included in the Enterprise and CA Services Agreement filed
with the SEC.
*27.1 Financial Data Schedule.
|
* Filed herewith.
EXHIBIT 10.1
CONFIDENTIAL
YAHOO! INC.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "AGREEMENT") is made as of this 17th day of August 2000 (the "EFFECTIVE DATE") between Yahoo! Inc., a Delaware corporation, with offices at 3420 Central Expressway, Santa Clara, CA 95051 ("YAHOO"), and ZixIt Corporation, a Texas corporation, with offices at 2711 North Haskell Avenue LB 36, Dallas, Texas 75204 ("ZIXIT").
RECITALS
A. WHEREAS, ZixIt provides an email encryption service and desires to offer such service to users directed from Yahoo's Web-based email service commonly referred to as "Yahoo! Mail;" and
B. WHEREAS, Yahoo desires to make the ZixIt service available to certain of its Yahoo! Mail users.
In consideration of the mutual promises contained herein, the parties agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise specified herein, capitalized terms used in this Agreement will have the meanings attributed to them in this Section 1.
"CPM" means cost per 1,000 Impressions.
"COMPOSE PAGE" means the Page on Yahoo Mail that is accessed by a personal computer where a user may compose an email message to be sent to a recipient at a particular email address.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 10.1.
"DELIVERY FAILURE EMAIL" the email sent by ZixIt to a Sender in the event that the email address of the intended recipient of an email of Sender is invalid and which will not contain any branding, links, advertising, offers, or promotions of ZixIt or any third party. The Delivery Failure Email will solely be in the form and consist of the message as mutually agreed upon by the parties. The Delivery Failure Emails will, at Yahoo's election and in Yahoo's sole discretion, be branded with Yahoo trademarks, logos, service marks, trade dress, slogans, etc, or other brand features.
"EMAIL" means an email composed by Sender that Sender elects to deliver to Recipient using the Secure Delivery Service.
"ENHANCEMENT" means any improvements, modifications, additional features or other changes to the Secure Delivery Service or other applicable services offered by ZixIt to its customers.
"IMPRESSIONS" means the number of times an advertisement is displayed.
"INTERNET" means the worldwide collection of computers, networks, infrastructure, connections and devices that can access, connect to, communicate with or transfer data to or from the worldwide collection of networks, including without limitation wireless networks, that is commonly referred to as the "Internet."
"LAUNCH DATE" means the first date on which the Secure Delivery Service is generally made available to users of Yahoo Mail.
"NET SALES" means the invoiced sales price of the Services, as applicable, billed to and collected from customers, less to the extent included in the invoiced sales price any sales, use, value-added and other direct taxes incurred.
"NOTIFICATION EMAIL" means the single email sent by ZixIt to a Sender which notifies Sender that the Recipient has received the Email once a Recipient has entered their Pass Phrase to access the decrypted version of the Email sent by Sender and which will not contain any branding, links, advertising, offers, or promotions of ZixIt or any third party. The Notification Email will solely be in the form and consist of the message as mutually agreed upon by the parties. The Notification Emails will, at Yahoo's election and in Yahoo's sole discretion, be branded with Yahoo trademarks, logos, service marks, trade dress, slogans, etc, or other brand features.
"PAGE" means any World Wide Web page (or, for on-line media other than Web sites, the equivalent unit of the relevant protocol).
"PASS PHRASE" means the phrase a Recipient is asked to submit to ZixIt as part of the Secure Retrieval Process which will be retained by ZixIt and used to identify the particular Recipient as a User that is entitled to access Emails sent to a particular email address of Recipient.
"RECIPIENT" the addressee(s) of an email that is sent by a Sender using the Secure Delivery Service.
"RECIPIENT EMAIL" means the email sent to the email address of Recipient of a Sender's email that will not contain any branding, links, advertising, offers, or promotions of ZixIt or any third party. The Recipient Email will solely be in the form and consist of the message as mutually agreed upon by the parties. The Recipient Emails will, at Yahoo's election and in Yahoo's sole discretion, be branded with Yahoo trademarks, logos, service marks, trade dress, slogans, etc, or other brand features.
"RETRIEVAL PAGE" means any Page that is viewed by a Recipient in order
to retrieve an email message sent by Sender (including, without limitation, any
Page viewed in connection with (i) the entry of the Pass Phrase by Recipient in
order to view the Email, (ii) the ZixIt Recipient Registration (to the extent
that such page will be viewed by a Recipient that may have not registered for a
Pass Phrase) and (iii) any Page at which a Recipient reads the email message
sent by Sender). Retrieval Pages will not (a) frame other Web sites, (b) contain
links, advertising, offers, or promotions of any * for any product or
service that is * , (c) contain links, advertising, offers, or
promotions of any third party for any product or service that is * or
(d) contain content or links in pop-up browser windows for ZixIt or any third
party. The Retrieval Pages will, at Yahoo's election and in Yahoo's sole
discretion, be co-branded with Yahoo trademarks, logos, service marks, trade
dress, slogans, etc, or other brand features.
"SECURE DELIVERY SERVICE" means the service offered by ZixIt and developed in accordance with Section 5 below, which allows a User to have email messages composed on Yahoo Mail sent to ZixIt for encryption and delivered to the intended recipient by a Secure Retrieval Process.
"SECURE RETRIEVAL PROCESS" means the process in which ZixIt sends a single Recipient Email to the email address of the intended recipient of a Sender's email that (1) notifies the Recipient that it has been sent an email message, (2) provides the Recipient with an url that links to a Retrieval Page at which the Recipient may (i) initiate the retrieval of the email message sent by Sender or (ii) register for a Pass Phrase in accordance with the ZixIt Recipient Registration if the Recipient does not already have a Pass Phrase.
"SENDER" a person who uses Yahoo Mail to compose and send email messages using the Secure Delivery Service.
"SERVICES" all products and services offered by or on behalf of ZixIt and ZixIt Affiliates.
"TRUSTE LICENSEE PROGRAM REQUIREMENTS" means the program requirements set forth in the Truste License Agreement that is located at http://www.truste.com and maintained by Truste, an independent privacy policy certification service.
"USERS" means users of the Secure Delivery Service, including the Sender and the Recipient.
"YAHOO AFFILIATE" means any company or any other entity worldwide, including, without limitation, corporations, partnerships, joint ventures, and limited liability companies, in which Yahoo or a subsidiary or holding company of Yahoo owns at least a * ownership, equity, or financial interest, or which owns at least a * ownership, equity, or financial interest in Yahoo.
* Confidential portion omitted and filed separately with the Commission.
"YAHOO BRAND FEATURES" means the trademarks, service marks, logos and other distinctive brand features of Yahoo that are used in or relate to its business and are listed in Exhibit B.
"YAHOO COMPETITOR" means the companies listed on Exhibit A, attached hereto, as amended by Yahoo from time to time with the approval of ZixIt, which will not be unreasonably withheld.
"YAHOO MAIL" means Yahoo's free, proprietary Web-based email system targeted at United States consumer users, currently available on the Internet at http://mail.yahoo.com and commonly known as Yahoo! Mail, excluding all co-branded versions of such email system unless, Yahoo, in its sole discretion, elects to include such versions and any business or enterprise email system.
"YAHOO PROPERTY" or "YAHOO PROPERTIES" means any or all of Yahoo's or Yahoo Affiliates' worldwide Internet properties, software, products, or services that are developed in whole or in part by or for Yahoo or Yahoo Affiliates and that are displayed on or which transfer data or communications to or from any device now known or later devised, including without limitation personal digital assistants and wireless devices.
"ZIXIT AFFILIATE" means any company or any other entity worldwide, including, without limitation, corporations, partnerships, joint ventures, and limited liability companies, in which ZixIt or a subsidiary or holding company of ZixIt owns at least a fifty percent (50%) ownership, equity, or financial interest, or which owns at least a fifty percent ownership, equity, or financial interest in ZixIt.
"ZIXIT BRAND FEATURES" means all trademarks, service marks, logos and other distinctive brand features of ZixIt that are described in Exhibit B and any other brand features that may be approved by ZixIt for use by Yahoo from time to time.
"ZIXIT COMPETITORS" means the list of companies set forth in Exhibit C, attached hereto, as amended by ZixIt from time to time with the approval of Yahoo, which will not be unreasonably withheld.
"ZIXIT RECIPIENT REGISTRATION" means the process by which a Recipient will be required to register a Pass Phrase with ZixIt that will be used to access the Email sent to Recipient from a Sender.
"ZIXIT SERVER" means the server(s), hosted and maintained by (or on behalf of) ZixIt, as part of the Secure Delivery Service.
"ZIXIT SITE" means the Internet site that is developed and maintained by or for ZixIt which hosts the Retrieval Pages and is currently located at the URL http://www.securedelivery.com and any successors thereto or replacements therefor.
SECTION 2. LICENSE GRANTS.
2.1 LICENSE TO YAHOO. Subject to the terms and conditions of this Agreement, ZixIt and the ZixIt Affiliates hereby grants to Yahoo a non-exclusive, worldwide license during the Term to use, reproduce and display the ZixIt Brand Features in connection with distributing, marketing, and promoting the Secure Delivery Service on the Yahoo Properties. Notwithstanding the foregoing, nothing in this Agreement is intended or may be construed to require Yahoo to market or promote the Secure Delivery Services.
2.2 SUBLICENSE. Yahoo will be entitled to sublicense (i) the rights set forth in Section 2.1 to Yahoo Affiliates and (ii) in connection with any mirror site, derivative site, or distribution arrangement concerning a Yahoo Property. The rights set forth in Section 2.1 may not be otherwise sublicensed, transferred or delegated.
2.3 LICENSE TO ZIXIT. Subject to the terms and conditions of this
Agreement, Yahoo hereby grants to ZixIt and the ZixIt Affiliates a
non-exclusive, nontransferable, nonsublicensable, worldwide license during the
Term to use, reproduce and display the Yahoo Brand Features on the ZixIt Site or
any other site approved in writing by Yahoo, solely in connection with the
marketing and promotion of the Secure Delivery Service on Yahoo Mail; provided
that in all cases each of ZixIt's use of the Yahoo Brand Features must be
pre-approved by Yahoo, in its sole discretion, and must comply with Yahoo's
Trademark Usage Guidelines set forth in Exhibit D, attached hereto. No Page in
which the Yahoo Logo appears will contain (a) any links, advertising, offers, or
promotions of * for any product or service that is * , or
(b) any links, advertising, offers, or promotions of any third party for any
product or service that is * .
SECTION 3. DISTRIBUTION OF THE SERVICE
3.1 GRANT OF RIGHTS. ZixIt hereby grants to Yahoo the right to offer the Secure Delivery Service to users of Yahoo Mail, in any media and by any means (including, without limitation, via the Internet), now known or later devised.
3.2 YAHOO'S OBLIGATIONS. Yahoo agrees to make the Secure Delivery Service available to users of Yahoo Mail who access their Yahoo Mail accounts using a personal computer as follows:
(a) Yahoo will make the Secure Delivery Service an option (a "Compose Page Option") on the Compose Page that users of Yahoo Mail may select to use by checking or clicking such option. The Compose Page Option for the Secure Delivery Service will be substantially in the form as set forth in Exhibit E, attached hereto;
* Confidential portion omitted and filed separately with the Commission.
(b) Yahoo reserves the right, in its sole discretion, to provide users of Yahoo Mail with such information relating to the Secure Delivery Service as Yahoo deems necessary or advisable as well as the option to cancel their selection of the Secure Delivery Service prior to sending their email to a ZixIt Server;
(c) Yahoo will have sole control over, and the right to redesign or modify, at any time, the appearance, size, design, layout, features, look-and-feel, content and other elements of any and all (i) Pages on Yahoo Mail; provided, however, that the size, appearance and location of the Compose Page Option for the Secure Delivery Service as set forth in Exhibit E, will not be modified in such a manner that materially affects the prominence of such option to users of Yahoo Mail; (ii) Pages of the Yahoo Properties on which the Secure Delivery Service may be displayed and (iii) Retrieval Pages;
(d) Yahoo will not be obligated to include the Secure Delivery Service in any version of Yahoo Mail that may be co-branded with a third party; and
(e) Yahoo will establish a mutually agreeable secure connection (the "Secure Connection") to the ZixIt Server for the transmission of Emails to ZixIt.
3.3 ZIXIT'S OBLIGATIONS. Subject to the terms and conditions of this Agreement, ZixIt will provide all users of Yahoo Mail who elect to use the Secure Delivery Service with the Secure Delivery Service as follows:
(a) ZixIt will not charge any Senders for use of the Secure Delivery Service as set forth herein or any Recipient for the retrieval of Emails as provided by the Secure Delivery Service as set forth herein;
(b) ZixIt will not charge Internet users to view the Retrieval Pages;
(c) ZixIt will obtain any export licenses or other approvals that may be required for Yahoo to make available the Secure Delivery Service and Enhancements and for Senders and Recipients to use the Secure Delivery Service;
(d) If Yahoo, chooses to upgrade the Secure Connection, ZixIt will likewise make any modifications and implement any upgrades necessary to maximize the performance capabilities of such upgrade to the Secure Connection; and
(e) ZixIt will provide the Recipients of any Email, on the Retrieval Page at which a Recipient is able to read the decrypted version of the Email sent by Sender, with the sole mail functionality of sending a reply email (the "Reply Email") message solely to the Sender ("Original Sender") of the Email, in such form and manner that is satisfactory to Yahoo, in its sole discretion. Similar to an Email, the Reply Email will provide the Original Sender with the sole mail functionality of sending a reply email to the Recipient, and such reply functionality will be incorporated in all subsequent uses of this reply functionality (collectively, the "Subsequent Replies"). The Reply Email and all Subsequent Replies will be delivered to the
applicable recipients using the Secure Retrieval Process and will be stored securely on the ZixIt Servers in accordance with this Agreement. The performance obligations of ZixIt under this Agreement with respect to Emails (including, without limitation those obligations set forth in Section 5.4 below), as applicable, will likewise apply to the Reply Emails and the Subsequent Replies, and ZixIt will be required to send a Notification Email, Recipient Email and Delivery Failure Email with respect to such Reply Emails and Subsequent Replies.
3.4 EXCLUSIVITY. *
3.5 * EXPANSION. Yahoo and ZixIt will use good faith efforts to discuss the possibility of ZixIt's providing the Secure Delivery Service to Yahoo's free proprietary Web-based email systems that are targeted at * . Each party acknowledges that they are not obligated to enter into any agreement regarding such * services and that neither party will be liable to the other for the failure to do so.
3.6 RIGHT OF FIRST PRESENTATION. *
3.7 INDEPENDENT DEVELOPMENT. Nothing in this Agreement is intended or may be construed to limit or prevent Yahoo's or Yahoo Affiliates' right or ability to create or have created an email encryption service and to provide such service to users of Yahoo Mail or any other Yahoo email system.
3.9 NONCOMPETITION. During the Term, ZixIt will not offer * .
3.10 ZIXIT GUARANTY OF AFFILIATES AND THIRD PARTY SUBCONTRACTORS. ZixIt will be responsible to Yahoo for all acts and omissions of ZixIt's and ZixIt Affiliates' employees, independent contractors, agents and employees, and other persons or entities performing any part of ZixIt's responsibilities under this Agreement for or on behalf of ZixIt. Any breach of this Agreement by any such persons or entities will be deemed to be a breach of this Agreement by ZixIt. In addition, ZixIt will provide Yahoo with the right to conduct technical audits of any ZixIt Affiliate that performs any part of ZixIt's responsibilities under this Agreement with one (1) business day's notice to ensure compliance with this Agreement.
SECTION 4. COMPENSATION
4.1 SET UP FEE. As a one-time setup fee for the engineering, design, consultation, and development of the Secure Delivery Service, ZixIt will pay to Yahoo a non-refundable, non-creditable fee of * on or before the Effective Date.
4.2 DISTRIBUTION FEE. In further consideration of Yahoo's performance under this Agreement, ZixIt will pay Yahoo * in installments of such amounts and on such dates as follows:
* Confidential portion omitted and filed separately with the Commission.
Date Payment Due Amount Paid to Yahoo
---------------- --------------------
* *
* *
* *
* *
* *
* *
* *
|
4.3 ADVERTISING PURCHASE. In further consideration of the advertising and promotional services provided by Yahoo, ZixIt will purchase * in advertising from Yahoo, which is * with Yahoo, pursuant to that certain Insertion Order dated as of the same date herewith between the same parties (the "Insertion Order") and attached hereto as Exhibit F. No Page on the ZixIt Site or any other Web site, in each case, linked to from any advertising run on the Yahoo Properties will contain (a) any links, advertising, offers, or promotions of * for * , or (b) any links, advertising, offers, or promotions of any third party for any product or service that is * .
4.4 COMMISSIONS. During the Term, ZixIt agrees to pay Yahoo a commission equal to * of the Net Sales of any Services sold by ZixIt and ZixIt Affiliates and of any and all fees, commissions, compensation or other payments received by ZixIt and ZixIt Affiliates from their authorized sellers for the sale of any Services: (i) to any person or entity who in connection with registering for such Services provides an email address that incorporates the domain name "@yahoo.com," or (ii) to any person or entity as a result of any link, advertisement, promotion or offer that may be located on any Retrieval Page with the prior written approval of Yahoo, in its sole discretion. Additionally, ZixIt agrees to pay to Yahoo a commission equal to * (a) of any Net Sales of any Services sold by ZixIt and ZixIt Affiliates from advertisements placed on the Retrieval Pages * , including, without limitation, affiliate marketing fee revenue or click-thru revenue ("Other Ads") and (b) of any and all fees, commissions, compensation or other payments received by ZixIt and ZixIt Affiliates from their authorized sellers for the sale of any Other Ads.
4.5 ADVERTISING REVENUE SHARE. ZixIt agrees to pay to Yahoo a portion of the * revenue received from all advertising displayed on the Retrieval Pages. Such advertising revenue will be shared as follows:
(a) for all advertising units displayed on the Retrieval Page (the "Ad Units") which are sold at a cost of * , ZixIt will be entitled to keep all revenue received from the purchase of such Ad Units.
* Confidential portion omitted and filed separately with the Commission.
(b) for each Ad Unit that is sold within the cost range of * ,
ZixIt will be entitled to keep an amount equal to * multiplied by the
* and ZixIt will pay to Yahoo * for such Ad Unit.
(c) for each Ad Unit that is sold at a cost equal to * , ZixIt will pay to Yahoo * of all * revenue due and payable from the sale of such Ad Unit.
ZixIt will not be required to share in any advertising revenue pursuant to this Section 4.5 that may be deemed as * run to promote * services or products.
4.6 SERVICE SALES REPORTS. Within thirty (30) days after the end of each calendar quarter, ZixIt will provide an applicable report to Yahoo in reasonably specific detail showing the: (i) the gross sales of the Services (broken down by the type of Service) and advertisements (other than those covered by Section 4.5) sold by ZixIt, ZixIt Affiliates and any of their authorized sellers during such quarter, (ii) the purchase date for such Services and advertisements, (iii) the calculation of the Net Sales from such gross sales, and (iv) the calculation of the commission payable from such Net Sales. ZixIt will keep complete and accurate records in sufficient detail to properly reflect all gross sales and Net Sales of Services and such advertisements to enable the commissions payable hereunder to be determined.
4.7 AD SALES REPORTS. Within thirty (30) days after the end of each calendar quarter, ZixIt will provide a report to Yahoo in reasonably specific detail showing the: (i) the gross sales of the Ad Units (broken down by CPM) sold by ZixIt, ZixIt Affiliates and any of their authorized sellers during such quarter, (ii) the purchase date for such Ad Units, and (iii) the calculation of the amount payable to Yahoo from such Ad Unit sales. ZixIt will keep complete and accurate records in sufficient detail to properly reflect all gross sales of Ad Units to enable the amount payable to Yahoo hereunder for the sale of Ad Units to be determined.
4.8 PAYMENTS. Commissions shown to have accrued by each commission report provided under Section 4.6 above and advertising revenue share amounts shown to have accrued by each ad sales report provided under Section 4.7 above, will be due and payable on the date each such report is due. Payments, in whole or in part, may be made in advance of such due date.
4.9 PAYMENT METHOD. All payments by ZixIt to Yahoo under this Agreement will be paid in United States dollars, and all such payments will be originated from a United States bank located in the United States and made by bank wire transfer in immediately available funds to Yahoo's main account at:
* Confidential portion omitted and filed separately with the Commission.
Yahoo's Bank Information:
Institution Name: * Institution Address: * ABA: * Beneficiary Name: * Beneficiary Account Number: * |
or such other account as specified by Yahoo. If ZixIt prefers to issue a check
to Yahoo as opposed to the wire transfer, ZixIt should mail such payments to:
Accounts Receivable, Yahoo, 3420 Central Expressway, Santa Clara, CA 95051 for
anticipated receipt on or before the date of the payment is due and payable.
4.9 AUDITS.
4.9.1 Upon * prior written notice by Yahoo and not more than * in each * , ZixIt will permit an independent certified public accounting firm of nationally recognized standing, selected by Yahoo and reasonably acceptable to ZixIt, at Yahoo's expense, to have access during normal business hours to such of the records of ZixIt, at such locations where such records reside, as may be reasonably necessary to verify the accuracy of the (a) commission reports, (b) ad sales reports or (c) any and all records that are relevant to any of the duties and responsibilities of ZixIt hereunder for any year ending not more than * prior to the date of such request. The accounting firm will disclose to Yahoo only whether the records are correct or not and the specific details concerning any discrepancies. No other information will be shared.
4.9.2 If such accounting firm concludes that additional commissions or advertising revenue share amounts were owed during such period, ZixIt will pay the additional commissions or advertising revenue share amounts within * of the date Yahoo delivers to ZixIt such accounting firm's written report so concluding. The fees charged by such accounting firm will be paid by Yahoo; provided, however, if the audit discloses that the commissions or advertising revenue share amounts payable by ZixIt for the audited period are * of the commissions or advertising revenue share amounts, as applicable, actually paid for such period, then ZixIt will pay the reasonable fees and expenses charged by such accounting firm.
SECTION 5. THE SECURE DELIVERY SERVICE.
5.1 DEVELOPMENT OF THE SECURE DELIVERY SERVICE. Promptly following the Execution Date, Yahoo and ZixIt will devote engineering resources to develop the Secure Delivery Services in accordance with specifications and timeframes to be mutually agreed upon by the parties. Yahoo and ZixIt will work together to conduct a series of beta tests of the Secure Delivery Service, and ZixIt will make commercially reasonable efforts to correct all problems that are revealed in the beta tests or that are identified by Yahoo. The Secure
* Confidential portion omitted and filed separately with the Commission.
Delivery Services will be launched only upon Yahoo's approval, in its sole discretion, of the beta test results, such approval to not be unreasonably withheld.
5.2 ENHANCEMENTS. ZixIt will provide Yahoo with reasonable prior notice
of any Enhancements (but in any event no later than when ZixIt notifies any
third party of such Enhancements) and will make Enhancements available to Yahoo
and users of the Enhancements at no extra charge during the Term, unless such
Enhancements are provided to other customers of ZixIt for a charge in which case
ZixIt will provide such Enhancements to Yahoo and users of the Enhancements at
* of ZixIt. If Yahoo decides, in its sole discretion, to add such
Enhancements to the Secure Delivery Service, ZixIt will cooperate with Yahoo and
provide all necessary technical assistance to Yahoo in order to allow Yahoo to
implement any such Enhancements so that they are available to users of Yahoo
Mail no later than when the Enhancements become available to other users of
ZixIt's products and services.
5.3 ACCESS TO ZIXIT SERVER BY YAHOO. During the Term, ZixIt will allow Yahoo access to ZixIt Servers as necessary to provide the Secure Delivery Service to Users.
5.4 PERFORMANCE OF ZIXIT. ZixIt represents and warrants that the Secure Delivery Service will perform in accordance with the following specifications:
(a) After Yahoo completes transmission of an Email (an "Accepted
Email") to any ZixIt Server, ZixIt will either (i) securely store the Accepted
Email and attempt initial delivery of a Recipient Email within an *
after the time the ZixIt Server receives the Accepted Email and will continue
to attempt delivery at reasonable intervals for up to * thereafter
until ZixIt has completed transmission thereof; provided, however, that if
ZixIt has not completed transmission of the Recipient Email after * of
the initial attempt ZixIt must deliver a Delivery Failure Email to Sender or
(ii) in the event that a delivery failure occurs with respect to such
Accepted Email, ZixIt will send a Delivery Failure Email to Sender within *
of receipt of the Accepted Email;
(b) All Recipient Emails, Delivery Failure Emails and Notification Emails will (i) be sent to the correct email addresses, (ii) contain accurate information and (iii) not include any content not expressly provided for in this Agreement;
(c) All access to Pages on the ZixIt Site used in connection with the receipt or provision of any personal information by a recipient, including, without limitation the Retrieval Pages, will be secured using the Secure Sockets Layer protocol;
(d) Every Recipient Email will contain the correct url that will link to the Retrieval Page at which the recipient may initiate the retrieval of the correct Email sent by Sender to Recipient;
* Confidential portion omitted and filed separately with the Commission.
(e) All Emails (i) will be stored on ZixIt Servers in encrypted form using encryption systems mutually agreeable to both parties such that no person other than the Recipient will have access to such Email, (ii) will be retrievable only by the intended Recipients and (iii) will be deleted no later than * after receipt of such Email by Zixit at a ZixIt Server;
(f) ZixIt will not change any cryptographic algorithms used in connection with the Secure Delivery Service without the prior written approval of Yahoo;
(g) No Emails and all message data contained therein will be lost and no data corruption will occur that would cause any Recipient to be unable to access Recipient's Email for * after receipt by such Email by ZixIt.
(h) The ZixIt Server is in operation and accessible by Yahoo 24 hours a day, 7 days a week, with a monthly average of * server uptime;
(i) The ZixIt Server, ZixIt Site, Retrieval Pages and ZixIt network
will be maintained to (a) handle * simultaneous HTTPS requests, (b)
have a minimum * uptime per calendar quarter of the Term (except for
planned downtime that may be required for system enhancements, upgrades or
preventative maintenance) and (c) handle the transmission of no less than
* email messages per * for the first * of this
Agreement, subject to the maximum capacity of the Secure Connection and any
upgrades thereto made by Yahoo and ZixIt ZixIt agrees to increase the capacity
of its system to handle more than * email messages per * as required
to handle the delivery of email messages from Yahoo to ZixIt.
(j) The Secure Delivery Service will perform to no less than the same standards and in accordance with the specifications developed by the parties pursuant to Section 5.1 above but in no event will the performance of the Secure Delivery Service be of a level (with respect to speed, scale, accuracy and otherwise) that is less than that provided by any leading provider of email encryption and delivery service;
(k) The Secure Delivery Services and Enhancements will permit law enforcement to obtain access to plaintext of encrypted data, so that the parties may comply with Title III of the Wiretap Act, the Communications Assistance to Law Enforcement Act, the Foreign Intelligence Surveillance Act, and any other federal, state and/or local laws, regulations, or requirements, including but not limited to court orders, requiring the parties to provide assistance to law enforcement acting under applicable legal authority, as may be applicable. Nothing in this Agreement is to be construed to concede that any or all of the foregoing statutes are applicable to ZixIt or Yahoo;
* Confidential portion omitted and filed separately with the Commission.
(l) ZixIt will not make available to Recipients of any Email, on any Retrieval Page or otherwise, any mail functionalities (such as by way of example only and without limitation, "send," "reply to all" or "forward" functions) other than the limited ability to send a reply email message solely to the Sender of the Email.
5.5 TECHNICAL SUPPORT. During the Term and upon Yahoo's request, ZixIt will provide to Yahoo, at no charge to Yahoo, technical support, including without limitation access to a group of engineers, database administrators and account managers contracted by or employed by ZixIt, to assist Yahoo in providing the Secure Delivery Service and any Enhancements to users of Yahoo Mail. ZixIt will also provide 24-hour access to a technical contact in the event of off-hour problems with the Secure Delivery Service.
5.6 CUSTOMER SUPPORT. ZixIt will handle all customer support inquiries regarding the Secure Delivery Service, including those that Yahoo refers to ZixIt after initial contact with Yahoo, at no cost to Yahoo. ZixIt will provide 24 hour customer service support for all inquiries regarding the Secure Delivery Services in accordance with customer service guidelines to be mutually agreed upon by the parties. ZixIt will provide the following customer service information on the ZixIt Site and Retrieval Pages in a manner mutually agreed to by the parties: (i) an email address and other contact information which may include an 800/888 phone number, and (ii) information/guidelines on ZixIt's policy regarding disputes. ZixIt agrees that 100% of all customer care requests will receive responses within twenty-four hours.
5.7 RESTRICTIONS UPON SOLICITATION OF USER DATA. At no time and under
no circumstance will ZixIt require, request or solicit, either directly or
indirectly, Users of the Secure Delivery Service (including all Enhancements
thereto) to register with or otherwise provide any personal information to ZixIt
as a part of using the Secure Delivery Service, except that which is minimally
necessary to provide the Secure Delivery Service. All information collected by
ZixIt in support of Users as a part of the Secure Delivery Service, other than
the Pass Phrase chosen by Recipients and their email addresses during the ZixIt
Recipient Registration, will be promptly deleted from ZixIt's internal records
upon the later of (a) * following first receipt of such information,
or (b) the end of the time required to sufficiently resolve or handle the User's
support issue(s). Notwithstanding the foregoing, ZixIt acknowledges and agrees
that it may not, and it may not authorize or encourage any third party to
employ, or assist any third party in employing, any device or technology to
monitor Users' use of the Secure Delivery Service or otherwise track any User's
use of any Yahoo Property. Neither ZixIt, nor any third party may copy, archive,
register, record or use, electronically or otherwise, the personally
identifiable information of Users who access the Secure Delivery Service, except
as necessary to provide the Secure Delivery Service to Users in accordance with
the terms and conditions of this Agreement. Further ZixIt will not gather
demographic information as part of the customer service process or any follow up
(a) beyond that required to respond to a User's specific support inquiry, (b)
concerning a User's use of the Yahoo's services, products, software, or Web
sites, or (c) on behalf of, or for transmission to, any third party, including
(without limitation) any Yahoo Competitor.
* Confidential portion omitted and filed separately with the Commission.
5.8 TARGETING. ZixIt agrees that it will not target advertisements, promotions, or marketing to Users based on the Users' use of the Secure Delivery Services. In addition, ZixIt agrees it will not identify Users, whether directly or indirectly, to any third party as customers of Yahoo.
SECTION 6. WARRANTIES; INDEMNIFICATION.
6.1 ZIXIT WARRANTIES. ZixIt represents and warrants to Yahoo that (a) ZixIt has the full power to enter into this Agreement and to perform its obligations hereunder; (b) that the ZixIt Brand Features are owned by or licensed to ZixIt; (c) ZixIt has not previously granted and will not grant any rights in the Secure Delivery Service or ZixIt Brand Features that are inconsistent with the rights and licenses granted to Yahoo herein; (d) the execution and delivery of this Agreement and the performance of ZixIt's obligations hereunder do not conflict with, or constitute a default under, any contractual obligation of ZixIt; and (e) ZixIt has no knowledge of any claim alleging, or any basis for any allegation, that the Secure Delivery Service or ZixIt Brand Features infringe or misappropriate any third party's rights.
6.2 PERFORMANCE WARRANTIES. ZixIt represents and warrants to Yahoo that the Secure Delivery Service (a) will perform as well as and with the same level of security as any similar service that is generally available and (b) that all aspects of the Secure Delivery Service will be in accordance with all applicable laws and regulations.
6.3 COMPLIANCE. ZixIt will ensure that the Secure Delivery Service and its performance under this Agreement complies with Title III of the Wiretap Act, the Communications Assistance to Law Enforcement Act, the Foreign Intelligence Surveillance Act, and any other federal, state and/or local laws, regulations, or requirements, including but not limited to court orders, requiring the parties to provide assistance to law enforcement acting under applicable legal authority.
6.4 ZIXIT INDEMNIFICATION. ZixIt, at its own expense, will indemnify, defend and hold harmless Yahoo, Yahoo Affiliates and their respective directors, trustees, officers, employees, representatives and agents and the successors and assigns of any of the foregoing (collectively, the "Indemnified Parties"), against any costs, liabilities, damages, and expenses (including, reasonable attorneys' fees and costs) arising out of any claim, suit, action, or other proceeding brought against any Indemnified Parties based on or arising out this Agreement, including but not limited to claims against the Indemnified Parties by law enforcement relating to Section 5.4(k) hereof and any allegation that the ZixIt Brand Features infringe any patent, copyright, trademark, trade secret or other proprietary or contractual rights, whether foreign or domestic, of any third party; provided, however, that in any such case: (x) Yahoo provides ZixIt with prompt notice of any such claim, and (y) Yahoo permits ZixIt to assume and control the defense of such claim at ZixIt's sole expense, with counsel chosen by ZixIt (which will be reasonably acceptable to Yahoo). In the event ZixIt elects to assume and control the defense of any such claim, Yahoo will have the right in its sole discretion, to be represented by independent counsel of Yahoo's own selection at its sole expense; provided, however, that the expenses of such independent counsel will be paid by ZixIt if representation
of Yahoo by counsel retained by ZixIt would be inappropriate due to actual or reasonably expected potential differing interests between Yahoo and any other party represented by counsel in such claim. ZixIt will not enter into any settlement or compromise of any such claim without Yahoo's prior written consent, which consent will not be unreasonably withheld.
6.5 YAHOO INDEMNITY. Subject to the provisions of Section 6.6, Yahoo will at its sole expense indemnify, defend and hold harmless ZixIt, ZixIt Affiliates and their respective directors, trustees, officers, employees, representatives and agents, and the successors and assigns of any of the foregoing from all claims, demands, liabilities, damages and expenses (including attorneys' fees and costs) arising out of any claim or allegation that any of the Yahoo Brand Features infringes any patent, copyright, trademark, trade secret or other proprietary or contractual rights, whether foreign or domestic, of any third party; provided, however, that in any such case: (x) ZixIt provides Yahoo with prompt notice of any such claim, and (y) ZixIt permits Yahoo to assume and control the defense of such claim at Yahoo's sole expense, with counsel chosen by Yahoo (which will be reasonably acceptable to ZixIt). In the event Yahoo elects to assume and control the defense of any such claim, ZixIt will have the right in its sole discretion, to be represented by independent counsel of ZixIt's own selection at its sole expense; provided, however, that the expenses of such independent counsel will be paid by Yahoo if representation of ZixIt by counsel retained by Yahoo would be inappropriate due to actual or reasonably expected potential differing interests between ZixIt and any other party represented by counsel in such claim. Yahoo will not enter into any settlement or compromise of any such claim without ZixIt's prior written consent, which consent will not be unreasonably withheld.
6.6 CERTAIN EXCEPTIONS. Yahoo will have no liability to ZixIt under Section 6.5 or otherwise for any action or claim alleging infringement or misappropriation based upon any use of the Yahoo Brand Features in a manner other than as authorized by this Agreement.
SECTION 7. LIMITATION OF LIABILITY.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY OR ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY OR LIMITATION OF LIABILITY:
(I) EXCEPT FOR INDEMNIFICATION AS PROVIDED IN SECTION 6, UNDER NO CIRCUMSTANCES WILL ZIXIT, YAHOO, OR ANY AFFILIATE BE LIABLE TO ANY OTHER PARTY FOR ANY LOST PROFITS OR LOST REVENUE WHETHER SUCH ARE CONSTRUED AS DIRECT OR CONSEQUENTIAL DAMAGES, OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS; AND
(II) EXCEPT FOR PAYMENTS AS PROVIDED IN SECTION 4 AND INDEMNIFICATION AS PROVIDED IN SECTION 6, NEITHER PARTY'S AGGREGATE LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT UNDER ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT OR OTHERWISE) WILL EXCEED AN AMOUNT EQUAL TO $500,000.
EACH PARTY ACKNOWLEDGES THAT THE MUTUAL PROMISES CONTAINED IN THIS SECTION 7 REFLECT THE ALLOCATION OF RISK SET FORTH IN THIS AGREEMENT AND THAT EACH PARTY WOULD NOT ENTER INTO THIS AGREEMENT WITHOUT THESE LIMITATIONS ON LIABILITY.
SECTION 8. TERM AND TERMINATION.
8.1 TERM. The term ("Term") of this Agreement will begin on the Effective Date and will, unless sooner terminated as provided below or as otherwise agreed, remain effective until the * anniversary of the Launch Date.
8.2 TERMINATION FOR CAUSE. Notwithstanding the foregoing, this
Agreement may be terminated by a party immediately upon notice to the other
party if the other party: (a) becomes insolvent; (b) files a petition in
bankruptcy; (c) makes an assignment for the benefit of its creditors; (d)
breaches in any material way Section 5.4 ("Performance of ZixIt"), 6.2
("Performance Warranties"), 5.8 ("Targeting"), 6.3 ("Compliance"), 10
("Confidential Information"), or 12 ("Privacy"), (e) fails to make any payments
when due under this Agreement or the Insertion Order which is not cured within
* after written notice by Yahoo of such breach, or (f) materially
breaches any of its obligations under this Agreement or the Insertion Order,
which breach is not remedied within * . For purposes of this Section
8.2, any breach by ZixIt of Sections 5.3 ("Access to ZixIt Server by Yahoo"),
5.6 ("Customer Support"), and 5.7 ("Solicitation of User Data"), will, without
limitation, be deemed a "material breach" of ZixIt's obligations.
8.3 EFFECT OF TERMINATION. Any termination pursuant to this Section 8 will be without any liability or obligation of the terminating party, other than with respect to any breach of this Agreement prior to termination. In addition to those provisions that state in their terms that they survive termination, Sections 5.6, 5.7, 5.8, 6, 7, 8.3, 9, 10, 11, 12, and 13 will survive the termination of the Term. The provisions of Section 4.9 ("Audits") will survive for a period of * following the termination of the Term. Accrued payment obligations and the obligation to report with regard to such obligations will survive. Upon any termination of the Term, each party will promptly return to the other, all copies in its possession of the Confidential Information of the other party.
* Confidential portion omitted and filed separately with the Commission.
SECTION 9. OWNERSHIP.
9.1 BY ZIXIT. Yahoo acknowledges and agrees that: (i) as between ZixIt on the one hand, and Yahoo on the other, ZixIt and ZixIt Affiliates or its suppliers own all right, title and interest in the ZixIt Brand Features; (ii) nothing in this Agreement will confer in Yahoo or an Affiliate any right of ownership in the ZixIt Brand Features.
9.2 BY YAHOO. ZixIt acknowledges and agrees that: (i) as between ZixIt on the one hand, and Yahoo and Yahoo Affiliates on the other, Yahoo or Yahoo Affiliates own all right, title and interest in any Yahoo Property, including without limitation Yahoo Mail, (except for the ZixIt Brand Features if found therein); and (ii) nothing in this Agreement will confer in ZixIt any license or right of ownership in the Yahoo Properties, or Yahoo Mail (except for ZixIt Brand Features, if found therein). No licenses are granted by Yahoo in this Agreement, except as expressly stated herein.
SECTION 10. CONFIDENTIAL INFORMATION.
10.1 CONFIDENTIAL INFORMATION. "Confidential Information" of a party means any information disclosed by that party to the other pursuant to this Agreement which is in written, machine readable or other tangible form and is marked "Confidential," "Proprietary" or in some other manner to indicate its confidential nature. Confidential Information may also include oral information disclosed by one party to the other pursuant to this Agreement, provided that such information is designated as confidential at the time of disclosure and is reduced to writing by the disclosing party within a reasonable time (not to exceed thirty (30) days) after its oral disclosure, and such writing is marked in a manner to indicate its confidential nature and delivered to the receiving party.
10.2 NONDISCLOSURE. Each party will treat as confidential all Confidential Information of the other party, will not use such Confidential Information except as set forth herein, and will use reasonable efforts not to disclose such Confidential Information to any third party. Without limiting the foregoing, each of the parties will use at least the same degree of care that it uses to prevent the disclosure of its own confidential information of like importance, but in no event less than reasonable care, to prevent the disclosure of Confidential Information disclosed to it by the other party under this Agreement. Each party will promptly notify the other party of any actual or suspected misuse or unauthorized disclosure of the other party's Confidential Information. Notwithstanding the above, neither party will have liability to the other with regard to any Confidential Information of the other which (a) was publicly disclosed or in the public domain at the time it was disclosed or has entered the public domain through no fault of the receiving party; (b) was known to the receiving party, without restriction, at the time of disclosure; (c) is disclosed with the prior written approval of the other party; (d) was independently developed by the receiving party without any use of the disclosing party's Confidential Information; (e) became known to the receiving party, without restriction, from a source other than the disclosing party, without breach of this Agreement by the receiving party and otherwise not in violation of the disclosing party's rights; or (f) is disclosed generally to third parties by the disclosing party without restrictions similar to those
contained in this Agreement. A party may disclose the Confidential Information of the other party (A) to those of its agents or employees who need to know such Confidential Information and who have agreed previously, either as a condition of employment or in order to obtain the Confidential Information, to be bound by terms substantially similar to those of this Section 10, or (B) to the extent required by the order or requirement of a court, administrative agency, or other governmental body; provided, however, that the receiving party will provide prompt notice thereof to the disclosing party to enable the disclosing party to seek a protective order or otherwise prevent or restrict such disclosure.
10.3 AGREEMENT TERMS. ZixIt and Yahoo will not disclose this Agreement or any of its terms to any third party except as required by law, rule or regulation and in accordance with the following. If this Agreement or any of its terms must be disclosed by ZixIt or Yahoo under any law, rule or regulation, the other party must (to the extent legally permitted) (i) give written notice of the intended disclosure at least five (5) days in advance of the date of disclosure, (ii) permit the party that seeks to prevent disclosure to redact portions of this Agreement to the fullest extent permitted under any applicable laws, rules and regulations, and (iii) permit the party that seeks to prevent disclosure to submit a request, to be agreed upon, that such portions and other provisions of this Agreement requested by the other party receive confidential treatment under the laws, rules and regulations of the body or tribunal to which disclosure is being made or otherwise be held in the strictest confidence to the fullest extent permitted under the laws, rules or regulations of any other applicable governing body. Notwithstanding the foregoing, each party may disclose this Agreement and its terms, in confidence, to its officers, directors, accountants, attorneys, actual and potential investors and financing sources without having to obtain the other party's consent, provided that each such person is bound by a written confidentiality agreement containing provisions no less restrictive than those contained herein or is otherwise bound by legal fiduciary obligations of confidentiality.
SECTION 11. PUBLIC ANNOUNCEMENTS; FILING WITH SEC.
11.1 PUBLIC ANNOUNCEMENTS. The parties will cooperate to create any and all appropriate public announcements relating to the relationship set forth in this Agreement. Subject to this Section 11.1, each party will have the right to issue press releases about the relationship between the parties; provided, however, that neither party will make any public announcement or other public communication regarding the existence or content of this Agreement or any relationship between the parties without the other party's prior written approval. Each party agrees to provide the other in advance with a written copy of each proposed press release or public announcement and to include changes required by the other party (or, if such changes are not made, to not issue the release). A party will use reasonable efforts to comment upon a proposed press release of the other party within five (5) business days after receipt of such proposal. No party may publish or otherwise disseminate a press release without the prior written approval of the other party. In no event will ZixIt imply or state to any person or entity that it is sponsored by, funded by, or in any way associated with Yahoo other than as expressly authorized by Yahoo pursuant to this Section 11.1.
11.2 FILINGS WITH THE SEC. In the event that either party elects to file this Agreement with the Securities and Exchange Commission (the "Filing Party"), the Filing Party will provide to the other party, no less than five (5) business days before the expected date of the filing (the "Filing Date"), a copy of the Agreement marked to show the sections on which the Filing Party plans to seek confidential treatment. The Filing Party agrees to expand its confidential treatment request to include those provisions of this Agreement reasonably indicated by the other party to the Filing Party before the Filing Date as terms on which the other party requests confidential treatment. Any failure to comply with the previous two sentences will be considered a material breach of this Agreement by the Filing Party.
SECTION 12. PRIVACY.
12.1 USER DATA, COMPLIANCE WITH PRIVACY AND USER DATA LAWS AND TRUSTE LICENSEE. All information and data provided to ZixIt on the ZixIt Site or otherwise collected by ZixIt relating to user activity on the ZixIt Site will be retained by and owned solely by ZixIt. ZixIt will not use personally identifying user information collected in connection with this Agreement for the transmission of "junk e-mail" or "SPAM" or any other unsolicited mass distribution of information. ZixIt agrees that it will not, without Yahoo's prior written consent: (a) require Users to register for or subscribe to any of ZixIt's or any other entity's services, mailing lists, or newsgroups, (b) require Users to provide any information about their use of any Yahoo product or service, (c) collect any information from a User without presenting them with the opportunity to opt in to the collection of the information after (1) informing them about how the information will be used and to whom it will be provided, and (2) affording them instructions about how to voluntarily remove themselves, or their information, from ZixIt's database at any time. ZixIt represents and warrants that the Secure Delivery Service, the Secure Retrieval Process and all activities concerning data collected by ZixIt during Users' use of the Secure Delivery Service (whether provided by Users or generated in connection with their use of the Secure Delivery Service or ZixIt's e-commerce services including the ZixIt Site), including but not limited to subsequent uses by ZixIt of this data, will comply with all applicable privacy and consumer protection laws of the United States and all applicable TrustE Licensee Program Requirements as well.
12.2 COMMUNICATION WITH USERS. ZixIt and ZixIt Affiliates may not communicate with users of the Secure Delivery Service (in their capacity as users of the Security Delivery Service), whether Sender or Recipient, in any manner other than by delivering such emails to Sender and Recipients as specified in this Agreement or in responding to a support question initiated by a User, subject to the restrictions outlined above.
SECTION 13. NOTICE; MISCELLANEOUS PROVISIONS.
13.1 NOTICES. Notices and demands of any kind that a party is required to serve or desires to serve upon the other will be sent in writing and will be deemed received on the day sent if transmitted via electronic mail, telegram, or confirmed facsimile (confirmed by concurrent written notice sent first class U.S. mail, postage prepaid to Yahoo or ZixIt at their
principal places of business with a copy to their respective general counsels), or if sent by U.S. mail or courier with return receipt requested, upon execution of the receipt, or within 5 days of the day sent if transmitted by any other method. Notices sent to either party will be directed to them at the address provided below. Either party may change its contact person for purposes of notice by sending the other party the name of its new designate in writing.
If to Yahoo:
Yahoo! Inc.
3420 Central Expressway, Suite 200
Santa Clara, CA 95051
Phone: *
Fax: *
Attn: *
Copy: *
If to ZixIt:
|
ZixIt Corporation.
2711 North Haskell Avenue LB 36, Suite 2850
Dallas, Texas 75204
Phone: * Fax: * Attn: * |
13.2 GOVERNING LAW. This Agreement will be governed by and construed under California law, without regard to the conflict of laws principles thereof. The parties hereby consent to venue in and the exclusive jurisdiction of the state and federal courts located in Santa Clara County, California.
13.3 ASSIGNMENT OR DELEGATION. Neither party may assign, delegate, or
otherwise transfer (whether by operation of law or otherwise) this Agreement or
any or all of its rights or obligations under this Agreement without an express
written and signed approval of an authorized representative of the other party.
Notwithstanding the foregoing, Yahoo may assign this Agreement without the
written consent of ZixIt to any third party which succeeds to or acquires all or
substantially all of the assets and business of the assigning party relating to
this Agreement. Any attempted assignment or delegation in contravention of this
Section 13.3 will be null and void. This Agreement will bind and inure to the
benefit of the parties, their successors, and permitted assigns or delegates.
13.4 RELATIONSHIP OF THE PARTIES. The parties acknowledge and agree that they are dealing with each other as independent contractors. Neither this Agreement, nor any terms and conditions contained in this Agreement may be construed as creating or constituting an employee-employer relationship, a partnership, a joint venture or an agency between ZixIt and
* Confidential portion omitted and filed separately with the Commission.
Yahoo. Neither ZixIt nor Yahoo may bind the other in contracts with third parties or make promises or representations on behalf of the other party without a signed written consent, and employees and agents of one party are not for any purpose employees or agents of the other. Neither party owes the other party or any third party any compensation for performing the actions contemplated by this Agreement, except as expressly set forth in this Agreement.
13.5 SEVERABILITY. If any provision or part of a provision in this Agreement is held to be illegal, invalid, or unenforceable by a court or other decision making authority of competent jurisdiction, then the remainder of the provision will be enforced so as to effect the intention of the parties, and the validity and enforceability of all other provisions in the Agreement will not be affected or impaired.
13.6 NO GENERAL WAIVER. Waiver of any one default will not waive subsequent defaults of the same or different kind, and no failure of either party to exercise or enforce any of its rights under this Agreement will act as a waiver of such rights.
13.7 FULL AND COMPLETE AGREEMENT. This Agreement and its Exhibits are the complete and exclusive agreement between the parties with respect to the subject matter contemplated by this Agreement, superseding and replacing any and all prior or contemporaneous agreements, communications, and understandings, both written and oral, regarding the subject matter of this Agreement, including without limitation the non-binding Letter of Intent between the parties dated August 4, 2000.
13.8 AMENDMENTS. Unless otherwise expressly provided herein, this Agreement may be amended, or any rights under it waived, only by a written agreement signed by authorized representatives of both parties.
13.9 HEADINGS FOR CONVENIENCE ONLY. The section headings used in this Agreement are intended for convenience only. They are not intended by either party to have any interpretive significance and may not be used in interpreting this Agreement.
13.10 COUNTERPARTS. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Notwithstanding the foregoing, the parties will deliver original execution copies of this Agreement to one another as soon as practicable following execution.
[REST OF PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
YAHOO! INC. ZIXIT CORPORATION
By: * By: *
-------------------------------------- ---------------------------
Title: * Title: *
----------------------------------- ------------------------
Address: 3420 Central Expressway Address: 2711 North Haskell
Santa Clara, CA 95051 Avenue
LB 36, Suite 2850
Dallas, Texas 75204
|
EXHIBIT 10.2
October 18, 2000
[ZIXIT LETTERHEAD]
VIA FEDERAL EXPRESS
Mr. Jeffrey P. Papows
Maptuit Corporation
35 Corporate Drive, 4th Floor
Burlington, Massachusetts 01803
Dear Jeff:
This letter memorializes the agreement you and ZixIt Corporation ("ZixIt" or the "Company") have reached regarding the additional ZixIt responsibilities you are assuming.
o You have agreed to serve as Chairman of the Board of Directors of ZixIt Corporation. In addition to the normal Chairman's duties, you will have direct responsibility for the sales and marketing management of the Company's products and services. The Company's sales and marketing personnel will report to you.
o The Company will pay to you $12,500 per month cash compensation. Additionally, the Company will pay your travel and other business related expenses that we have discussed.
o The Company will issue to you non-qualified options to acquire 175,000 shares of ZixIt common stock at an exercise price of $19.75 per share. The option grant will vest pro-rata and annually over two years, and the vesting of the options will accelerate upon a "change in control" of the Company. The options will have a five year term. The terms and conditions of the option grant will be set forth in an option agreement, which will be reviewed and approved by the Company's Board of Directors or its designee.
o Your responsibility for the sales and marketing management of the Company's products and services may be terminated by either you or the Company upon written notice with or without "cause." However, if the Company terminates without "cause," then the vesting of your options will automatically accelerate.
If this letter sets forth your understanding of our agreement, please so indicate by signing below and returning a copy of this letter to us for our files.
Very truly yours,
/s/ DAVID P. COOK David P. Cook Chairman & CEO |
AGREED AND ACCEPTED
/s/ Jeffrey P. Papows
---------------------
Jeffrey P. Papows
Date: 10/19/00
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|
EXHIBIT 10.3
ZIXIT CORPORATION
1995 LONG-TERM INCENTIVE PLAN
(AMENDED AND RESTATED AS OF SEPTEMBER 20, 2000)
Section 1. PURPOSE
The purpose of the ZixIt Corporation 1995 Long-Term Incentive Plan (hereinafter called the "Plan") is to advance the interests of ZixIt Corporation (hereinafter called the "Company") by strengthening the ability of the Company to attract, on its behalf and on behalf of its Subsidiaries (as hereinafter defined), and retain personnel of high caliber through encouraging a sense of proprietorship by means of stock ownership.
Section 2. DEFINITIONS
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time-to-time.
"Committee" shall mean a committee of the Board of Directors comprised of at least two directors or the entire Board of Directors, as the case may be. Members of the Committee shall be selected by the Board of Directors. To the extent necessary to comply with the requirements of Rule 16b-3, the Committee shall consist of two or more Non-employee Directors. Also, if the requirements of Section 162(m) of the Code are intended to be met, the Committee shall consist of two or more "outside directors" within the meaning of Section 162(m) of the Code.
"Common Stock" shall mean the Common Stock of the Company, par value $.01 per share.
"Date of Grant" shall mean the date on which an Option is granted pursuant to this Plan.
"Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive amounts due the Participant in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate.
"Effective Date" shall mean the first business day following the date of the 1995 annual meeting of the shareholders of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the closing sale price (or average of the quoted closing bid and asked prices if there is no closing sale price reported) of the Common Stock on the date specified as reported by the Nasdaq National Market, or by the principal national stock exchange on which the Common Stock is then listed. If there is no reported price information for such date, the Fair Market Value will be determined by the reported price information for Common Stock on the day nearest preceding such date.
"Incentive Stock Option" shall mean a stock option granted under Section 6 that is intended to meet the requirements of Section 422 of the Code (or any successor provision).
"Non-employee Director" shall have the meaning given such term in Rule 16b-3.
"Nonqualified Stock Option" shall mean a stock option granted under Section 6 that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Optionee" shall mean the person to whom an option is granted under the Plan or who has obtained the right to exercise an option in accordance with the provisions of the Plan.
"Plan Adoption Date" means the later of the date on which the Plan is adopted by the Board of Directors of the Company and by the shareholders of the Company in accordance with Rule 16b-3.
"Rule 16b-3" shall mean Rule 16b-3 of the rules and regulations under the Exchange Act as it may be amended from time-to-time and any successor provision to Rule 16b-3 under the Exchange Act.
"Subsidiary" shall mean any now existing or hereafter organized or acquired corporation or other entity of which more than fifty percent (50%) of the issued and outstanding voting stock or other economic interest is owned or controlled directly or indirectly by the Company or through one or more Subsidiaries of the Company.
Section 3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time-to-time deem advisable, and to construe, interpret, and administer the terms and provisions of the Plan and the agreements thereunder. The determinations and interpretations made by the Committee are final and conclusive.
Section 4. ELIGIBILITY
All employees and non-employee consultants and advisors, in each case, who, in the opinion of the Committee, in each case, have the capacity for contributing in a substantial measure to the successful performance of the Company are eligible to receive Options under the Plan.
Section 5. MAXIMUM AMOUNT AVAILABLE FOR OPTIONS
(a) The maximum number of shares of Common Stock in respect of which Options may be made under the Plan shall be a total of 1,825,000 shares of Common Stock. Of that amount, no participant may be granted Options for more than 400,000 shares of Common Stock in the aggregate during the term of the Plan. Options that expire, lapse, or are cancelled or forfeited nonetheless continue to count against the 400,000 share limit. Shares of Common Stock may be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market. In the event that an Option is terminated unexercised as to any shares of Common Stock covered thereby such shares shall thereafter be again available for award pursuant to the Plan.
(b) In the event that the Committee shall determine that any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar
corporate event affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee shall adjust appropriately any or all of (1) the number and kind of shares which thereafter may be optioned under the Plan and (2) the grant, exercise or conversion price and/or number of shares with respect to the Options and/or, if deemed appropriate, make provision for cash payment to a Participant; provided, however, that the number of shares subject to any Option shall always be a whole number.
Section 6. STOCK OPTIONS
(a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options shall be granted, the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option.
(b) The Committee shall have the authority to grant Incentive Stock Options, or to grant Nonqualified Stock Options, or to grant both types of options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with the Code and relevant regulations. Incentive Stock Options to purchase Common Stock may be granted to such employees of the Company or its Subsidiaries (including any director who is also an employee of the Company or one of its Subsidiaries) as shall be determined by the Committee. Nonqualified Stock Options to purchase Common Stock may be granted to such eligible participants as shall be determined by the Committee. Neither the Company nor any of its Subsidiaries or any of their respective directors, officers or employees, shall be liable to any Optionee or other person if it is determined for any reason by the Internal Revenue Service or any court having jurisdiction that any Incentive Stock Option granted hereunder does not qualify for tax treatment as an Incentive Stock Option under the then applicable provisions of the Code.
(c) The Committee shall, in its discretion, establish the exercise price at the time each Option is granted, which in the case of Nonqualified Stock Options shall not be less than 100% of the Fair Market Value of the Common Stock on the Date of Grant, or in the case of grants of Incentive Stock Options, shall not be less than 100% of the Fair Market Value of the Common Stock on the Date of Grant or such greater amount as may be prescribed by the Code.
(d) Exercise
(1) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable grant or thereafter; provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of ten years from the date of grant. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefore is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by exchanging shares of Common Stock owned by the Optionee (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Common Stock so tendered to the Company, valued as of the date of such tender, is at least equal to such option price.
If the shares to be purchased are covered by an effective
registration statement under the Securities Act of 1933, as amended,
any Option may be exercised by a broker-dealer acting on behalf of an
Optionee if (a) the broker-dealer has received from the Optionee
instructions signed by the Optionee requesting the Company to deliver
the shares of Common Stock subject to such option to the broker-dealer
on behalf of the Optionee and specifying the account into which such
shares should be deposited, (b) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise,
and (c) the broker-dealer and the Optionee have otherwise complied with
Section 220.3(e)(4) of Regulation T, 12 CFR Part 220, or any successor
provision.
(3) The Company, in its sole discretion, may lend money to an Optionee, guarantee a loan to an Optionee or otherwise assist an Optionee to obtain the cash necessary to exercise all or any portion of an Option granted under the Plan.
(4) The Company shall not be required to issue any fractional shares upon the exercise of any Options granted under this Plan. No Optionee nor an Optionee's legal representatives, legatees or distributees, as the case may be, will be, or will be deemed to be, a holder of any shares subject to an option unless and until said option has been exercised and the purchase price of the shares in respect of which the option has been exercised has been paid. Unless otherwise provided in the agreement applicable thereto, an Option shall not be exercisable except by the Optionee or by a person who has obtained the Optionee's rights under the Option by will or under the laws of descent and distribution or pursuant to a "qualified domestic relations order" as defined in the Code.
(5) Any Common Stock issued to a person subject to the provisions of Section 16(b) of the Exchange Act, as interpreted by the rules, regulations, and interpretations of the Securities and Exchange Commission thereunder, pursuant to the exercise of an Option granted under this Plan and intended to comply with the requirements of Rule 16b-3 shall not be transferred until at least 6 months have elapsed from the later of (i) the date of grant of such Option or (ii) the Plan Adoption Date to the date of disposition of the Common Stock underlying such option.
(e) No Incentive Stock Options granted pursuant to this Section 6 shall be exercisable (a) more than five years (or such other period of time as from time-to-time provided in the then-applicable provisions of the Code governing Incentive Stock Options) after the Date of Grant with respect to an Optionee who owns 10-Percent or more of the outstanding Common Stock (within the meaning of the Code), and (b) more than ten years after the Date of Grant with respect to all other Optionees. No Nonqualified Stock Options shall be exercisable more than ten years after the Date of Grant.
(f) In no event shall any Option granted to any employee who is classified as "non-exempt" under the Fair Labor Standards Act of 1938 be exercisable less than six months after the date of grant, except in the case of death, disability, retirement, a change in control or other circumstances permitted by regulations under the Worker Economic Opportunity Act ("WEOA"). Grants to such non-exempt employees shall not be based on preestablished performance criteria, except as specifically permitted under the WEOA. Non-exempt employees shall be notified of the terms of their Options in accordance with the WEOA, and exercise of such Options must be voluntary.
Section 7. GENERAL PROVISIONS
(a) The Company and its Subsidiaries shall have the right to deduct from all amounts paid to a Participant in cash (whether under the Plan or otherwise) any taxes required by law to be withheld in respect
of Option exercises under the Plan. However, if permitted by the Committee or
under the terms of the applicable agreement, the Participant may pay all or any
portion of the taxes required to be withheld by the Employer or paid by the
Participant with respect to such Common Stock by electing to have the Employer
withhold shares of Common Stock, or by delivering previously owned shares of
Common Stock, having a Fair Market Value equal to the amount required to be
withheld or paid. The Participant must make the foregoing election on or before
the date that the amount of tax to be withheld is determined ("Tax Date"). Any
such election is irrevocable and subject to disapproval by the Committee. If the
Participant is subject to the short-swing profits recapture provisions of
Section 16(b) of the Exchange Act, then the applicable agreement shall not
provide the Participant an election, or, if it does, any such election shall be
subject to the restrictions imposed by Rule 16b-3.
(b) Each Option hereunder shall be evidenced in writing, delivered to the Participant, and shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Option of the death, retirement, disability or other termination of employment of the Participant and the effect thereon, if any, of a change in control of the Company.
(c) Unless otherwise provided in the agreement applicable thereto, no Option shall be assignable or transferable except by will or under the laws of descent and distribution or pursuant to a "qualified domestic relations order" as defined in the Code, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant.
(d) No person shall have any claim or right to be granted an Option. Further, the Company and its Subsidiaries expressly reserve the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any agreement entered into with respect to an Option. Neither the Plan nor any Option granted hereunder is intended to confer upon any Participant any rights with respect to continuance of employment or other utilization of his or her services by the Company or by a Subsidiary, nor to interfere in any way with his or her right or that of his or her employer to terminate his or her employment or other services at any time (subject to the terms of any applicable contract). The conditions to apply to the exercise of an Option in the event an Participant ceases to be employed by the Company or a Subsidiary for any reason shall be determined by the Committee, and such conditions shall be specified in the written agreement evidencing the Option.
(e) Subject to the provisions of the applicable Option, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she has become the holder thereof.
(f) The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Texas (without giving effect to its conflicts of laws rules) and, to the extent applicable, federal law.
(g) The Plan was originally effective on April 21, 1995. No Options may be granted under the Plan after April 20, 2005; however, all previous Options issued that have not expired under their original terms or will not then expire at the time the Plan expires will remain outstanding.
(h) Restrictions on Issuance of Shares
(1) The Company shall not be obligated to sell or issue any
Shares upon the exercise of any Option granted under the Plan unless:
(i) the shares pertaining to such Option have been registered under
applicable federal and state securities laws or are exempt from such
registration;
(ii) the prior approval of such sale or issuance has been obtained from any state regulatory body having jurisdiction; and (iii) in the event the Common Stock has been listed on any exchange, the shares pertaining to such Option have been duly listed on such exchange in accordance with the procedure specified therefor. The Company shall be under no obligation to effect or obtain any listing, registration, qualification, consent or approval with respect to shares pertaining to any Option granted under the Plan. If the shares to be issued upon the exercise of any Option granted under the Plan are intended to be issued by the Company in reliance upon the exemptions from the registration requirements of applicable federal and state securities laws, the recipient of the Option, if so requested by the Company, shall furnish to the Company such evidence and representations, including an opinion of counsel, satisfactory to it, as the Company may reasonably request.
(2) The Company shall not be liable for damages due to a delay in the delivery or issuance of any stock certificates for any reason whatsoever, including, but not limited to, a delay caused by listing, registration or qualification of the shares of Common Stock pertaining to any Option granted under the Plan upon any securities exchange or under any federal or state law or the effecting or obtaining of any consent or approval of any governmental body.
(i) The Board of Directors or Committee may impose such other restrictions on the ownership and transfer of shares issued pursuant to this Plan as it deems desirable; any such restrictions shall be set forth in the applicable agreement.
(j) The Board of Directors may amend, abandon, suspend or terminate the Plan or any portion thereof at any time in such respects as it may deem advisable in its sole discretion, provided that no amendment shall be made without stockholder approval (including an increase in the maximum number of shares of Common Stock in respect of which Options may be made under the Plan) if such stockholder approval is necessary to comply with any tax or regulatory requirement or exchange listing rules, including for these purposes any approval requirement that is a prerequisite for exemptive relief under Section 16(b) of the Act.
(k) In order to preserve a Participant's rights under an Option in the
event of a change in control of the Company, the Committee in its discretion
may, at the time an Option is made or any time thereafter, take one or more of
the following actions: (i) provide for the acceleration of any time period
relating to the exercise of the Option, (ii) provide for the purchase of the
Option upon the Participant's request for an amount of cash or other property
that could have been received upon the exercise or realization of the Option had
the Option been currently exercisable or payable, (iii) adjust the terms of the
Option in a manner determined by the Committee to reflect the change in control,
(iv) cause the Option to be assumed, or new rights substituted therefor, by
another entity, or (v) make such other provision as the Committee may consider
equitable and in the best interests of the Company.
AMENDED AND RESTATED as of September 20, 2000.
ZIXIT CORPORATION
By: /s/ RONALD A. WOESSNER
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Its: V.P.
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EXHIBIT 10.4
MARKETING AND DISTRIBUTION AGREEMENT
MADE BETWEEN: AND:
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ENTRUST TECHNOLOGIES INC. ZIXIT CORPORATION
4975 Preston Park Blvd., Suite 400 2711 N. Haskell Avenue, Suite 2850, LB 36
Plano, Texas, U.S.A. 75093 Dallas, Texas, U.S.A. 75204
("ENTRUST") ("ZIXIT")
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AS OF THE 6TH DAY OF NOVEMBER, 2000 (THE "EFFECTIVE DATE"), THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
For the purposes of this Agreement, in addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them as follows:
(a) "AFFILIATE" of a Party means any corporation or other entity that a Party directly or indirectly controls. In this context, a Party "controls" a corporation or other entity if it owns fifty percent (50%) or more of the voting rights for the board of directors or other mechanism of control for the corporation or other entity.
(b) "AGREEMENT" means this Marketing and Distribution Agreement and the schedules attached hereto.
(c) "CONFIDENTIAL INFORMATION" means any business, marketing, technical, scientific or other information disclosed by either Party (including its Affiliates) which, at the time of disclosure is designated as confidential (or like designation), is disclosed in circumstances of confidence, or would be understood by the Parties (or its Affiliates), exercising reasonable business judgment, to be confidential.
(d) "ENTRUST/EXPRESS (WITH SECUREDELIVERY)" means the Entrust/Express product with additional functionality as described in Schedule B of this Agreement.
(e) "INTELLECTUAL PROPERTY RIGHTS (IPR)" means all rights in any invention, discovery, improvement, utility model, copyright, industrial design or mask work right, and all rights of whatsoever nature in computer software and data, Confidential Information, trade secrets or know-how, and all intangible rights or privileges of a nature similar to any of the foregoing, in every case in any part of the world and whether or not registered, and shall include all rights in any applications and granted registrations for any of the foregoing.
(f) "PARTIES" means Entrust and ZixIt; "PARTY" means Entrust or ZixIt.
(g) "ROYALTIES" means the royalty fees or advertising fees payable by a Party as set forth in Schedule A.
(h) "ZIXIT SECUREDELIVERY SERVICE" means the ZixIt service as set forth in Schedule E.
2. GRANT OF RIGHT
2.1 Subject to the terms and conditions of this Agreement, ZixIt hereby grants to Entrust and its Affiliates, for the term of the Agreement and any wind-down period in accordance with Article 15,
ZixIt Distribution Agreement 1 Nov 2000
a non-exclusive, non-transferable (except as permitted herein), worldwide right to market, sell and distribute the ZixIt SecureDelivery Service.
3. OBLIGATIONS OF ENTRUST
3.1 Entrust shall modify its Entrust/Express product to include the functionality as described in Schedule B. The Entrust/Express product and all modifications, enhancements and derivative works thereof, including all right, title and interest (and all Intellectual Proprietary Rights therein) remain the sole and exclusive property of Entrust and/or its third-party licensors. Within thirty (30) days after Entrust's written notification to ZixIt of the completion of the additional functionality, ZixIt shall pay to Entrust the Entrust/Express (with SecureDelivery) modification fee as set out in Schedule A.
3.2 Entrust may, at its discretion, market, sell and distribute the ZixIt SecureDelivery Service through its normal sales and distribution channels. The Parties may participate in joint marketing activities intended to generate sales opportunities for the ZixIt SecureDelivery Service. Each Party shall be responsible for its own costs related to any joint marketing activities. ZixIt shall provide to Entrust, at no charge, sufficient quantities of marketing literature in respect to its ZixIt SecureDelivery Service.
4. OBLIGATIONS OF ZIXIT
4.1 ZixIt shall meet the service level commitments for the ZixIt SecureDelivery Service as set forth in Schedule C. Failure by ZixIt to maintain such service level commitments shall be deemed a material breach of this Agreement and Entrust's obligations to pay Royalties shall terminate, subject to the notice and cure provisions of Section 12.2(b).
4.2 ZixIt shall be responsible for any and all damages, costs and expenses, incurred by Entrust and/or its Affiliates, arising from or related to the failure or non-performance of the ZixIt SecureDelivery Service, including but not limited to, ZixIt's breach of its service level commitments as set forth in Schedule C.
4.3 ZixIt shall provide first line support to customers of the ZixIt SecureDelivery Service as set forth in Schedule D.
4.4 ZixIt shall provide to Entrust (in a format specified by Entrust) (a) on a quarterly basis, a written report demonstrating ZixIt's performance relative to the service level commitments as set forth in Schedule C, and (b) as requested by Entrust, a written report describing any usage, draw-downs and any other information related to the ZixIt SecureDelivery Service.
4.5 ZixIt shall make its software engineers available to Entrust for consultation in regards to the ZixIt SecureDelivery Service.
5. FEES AND PAYMENT
5.1 Unless otherwise stated, all fees and Royalties exclude applicable taxes including, but not limited to, federal, state, provincial, use, value-added and local taxes (excluding taxes based upon a Party's net income). Each Party shall be responsible for collecting all applicable taxes from the other Party and for remitting such taxes to the appropriate authority.
5.2 Within sixty (60) days after the end of each calendar quarter, each Party shall send to the other Party a royalty report statement. Payment of Royalties, if any, shall be made within thirty (30)
ZixIt Distribution Agreement 2 Nov 2000
days of the end of the corresponding calendar quarter. A Party shall withhold any applicable withholding tax from payments made to the other Party pursuant to this Agreement. To assist the other Party in obtaining any tax credits for the amounts withheld, the paying Party shall promptly provide the other Party with such evidence as may be reasonably required by the applicable taxing authorities to establish that such withholding tax has been paid. Unpaid payments more than thirty (30) days overdue may be subject to an interest charge of one percent (1%) per month or the maximum rate legally permitted, whichever is less.
5.3 Each Party shall keep reasonable records relating to the Royalties ("Records") due to the other Party. A Party may, at its expense, appoint an independent auditor reasonably acceptable to the other Party and under appropriate non-disclosure conditions, to audit the Records not more than once per year to confirm the other Party's compliance with its Royalty obligations herein.
6. ADDITIONAL TERMS AND CONDITIONS
6.1 The rights granted under this Agreement are only as expressly set forth herein. No other right is or shall be deemed to be granted, whether by implication, estoppel, inference or otherwise, by or as a result of this Agreement or any conduct of either Party under this Agreement.
7. CONFIDENTIALITY
7.1 Each Party (and its Affiliates) shall maintain in confidence all Confidential Information, shall use such Confidential Information only for the purpose of exercising its rights and fulfilling its obligations under this Agreement, and shall not disclose any such Confidential Information to any third party (excluding Affiliates) except as expressly permitted hereunder or make any unauthorized use thereof. Each Party (and its Affiliates) shall treat such Confidential Information with the same degree of care against disclosure or unauthorized use that it affords to its own information of a similar nature, or a reasonable degree of care, whichever is greater. Each Party (and its Affiliates) further agrees not to remove or destroy any proprietary or confidentiality legends or markings placed upon any documents or other materials. Each Party shall be entitled to provide Confidential Information to subcontractors and contractors of that Party that have agreed to confidentiality obligations at least as protective as those contained herein.
7.2 Neither Party shall be bound by obligations restricting disclosure and use set forth in this Agreement with respect to Confidential Information, or any part thereof, that:
(a) was lawfully known or received by the receiving Party (and/or Affiliates) prior to disclosure;
(b) was lawfully in the public domain prior to its disclosure, or becomes publicly available other than through a breach of this Agreement;
(c) was disclosed to the receiving Party (and/or Affiliates) by a third party, provided such third party, or any other party from whom such third party receives such information, is not in breach of any confidentiality obligation in respect of such information; or
(d) is independently developed by the receiving Party (and/or Affiliates).
7.3 If the receiving Party is compelled pursuant to legal, judicial, or administrative proceedings, or otherwise required by law, to disclose Confidential Information of the disclosing Party (or any of its Affiliates), the receiving Party (or, if applicable, its Affiliates) shall use reasonable efforts to (i) seek confidential treatment for such Confidential Information, and (ii) provide prior notice to the disclosing Party (or, if applicable, its Affiliates) to allow the disclosing Party (or, if applicable, its Affiliates) to seek protective or other court orders.
ZixIt Distribution Agreement 3 Nov 2000
8. WARRANTIES
8.1 ZixIt represents and warrants to Entrust that (i) ZixIt has all necessary rights, licenses, and approvals to provide and conduct the ZixIt SecureDelivery Service contemplated herein, and (ii) the use, marketing, sale, offering for sale, distribution, importation or performance of the ZixIt SecureDelivery Service does not infringe any third party's Intellectual Property Right.
8.2 EACH PARTY MAKES NO OTHER REPRESENTATIONS AND GIVES NO WARRANTIES OR CONDITIONS, WHETHER EXPRESS, IMPLIED, STATUTORY, BY USAGE OF TRADE, OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES, AND CONDITIONS OF MERCHANTABILITY, NON-INFRINGEMENT, TITLE, SATISFACTORY QUALITY, OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNITY
9.1 ZixIt shall defend, indemnify and hold Entrust and its Affiliates harmless against any and all claims by third parties that arise as a result of (i) ZixIt SecureDelivery Service's infringement (or alleged infringement) upon, or misappropriation of, a third party's Canadian, United States or European patent, trademark, copyright, trade secret or other proprietary right, or, (ii) ZixIt's failure to comply with its obligations under the Schedules attached hereto, (a "Claim"), and ZixIt will pay any settlements and/or damages, costs, and expenses, including without limitation court costs and reasonable expert's fees and attorney's fees finally awarded by a court or arbitrator in any proceeding related to such Claim, provided, however, that Entrust (i) gives to ZixIt prompt written notice of each Claim threatened or received by Entrust, (ii) gives ZixIt the sole right to control and direct the investigation, defense, and settlement of such Claim, (iii) cooperates with ZixIt, at ZixIt's expense, in the defense and settlement of the Claim, and (iv) has not compromised or settled the Claim.
9.2 If (i) ZixIt becomes aware of an actual or potential Claim, or (ii) Entrust provides ZixIt with notice of an actual or potential Claim, ZixIt may (or in the case of an injunction against Entrust, shall), at ZixIt's sole option and expense:
(a) procure for Entrust the right to continue to use the ZixIt SecureDelivery Service;
(b) modify or replace the ZixIt SecureDelivery Service with a functionally equivalent or superior product or service so that Entrust's use of the ZixIt SecureDelivery Service as contemplated by this Agreement is non-infringing; or
(c) if (a) or (b) is not commercially reasonable, terminate this Agreement.
9.3 ZixIt shall have no liability related to any Claim if Entrust's use of the ZixIt SecureDelivery Service is outside the scope of the rights granted in this Agreement or in a manner or for a purpose other than that for which it was supplied, as contemplated in this Agreement.
9.4 THE PROVISIONS OF THIS ARTICLE 9 STATE THE SOLE AND EXCLUSIVE LIABILITY OF ZIXIT, AND THE SOLE AND EXCLUSIVE REMEDY OF ENTRUST WITH RESPECT TO ANY CLAIM OF THE NATURE DESCRIBED IN THIS ARTICLE 9 OR A CLAIM BY ENTRUST UNDER SECTION 8.1(II).
10. LIMITATION OF LIABILITY
10.1 IN NO EVENT SHALL ENTRUST OR ZIXIT (INCLUDING SUCH PARTY'S AFFILIATES, SUBCONTRACTORS, AGENTS, SUPPLIERS, DIRECTORS OR
ZixIt Distribution Agreement 4 Nov 2000
EMPLOYEES) BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, INDIRECT, RELIANCE OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOSS OF DATA, LOST SAVINGS OR OTHER SIMILAR PECUNIARY
LOSS) WHETHER ARISING FROM CONTRACT (INCLUDING FUNDAMENTAL BREACH),
TORT (INCLUDING NEGLIGENCE) OR ANY OTHER THEORY OF LIABILITY.
10.2 NOTWITHSTANDING THE FOREGOING, NO LIMITATION OF EITHER PARTY'S
LIABILITY SET FORTH IN THIS AGREEMENT SHALL APPLY TO (I) DAMAGES
ARISING FROM A PARTY'S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS, (II)
DAMAGES ARISING FROM A PARTY'S INFRINGEMENT OF THE OTHER PARTY'S
INTELLECTUAL PROPERTY RIGHTS, OR (III) CLAIMS FOR INJURY TO INDIVIDUALS
OR DAMAGE TO TANGIBLE PROPERTY CAUSED BY THE NEGLIGENCE OF SUCH PARTY
OR ITS EMPLOYEES, SUBCONTRACTORS OR AGENTS.
10.3 THE FOREGOING SHALL APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY STATED HEREIN AND EVEN IF A PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES.
11. INTELLECTUAL PROPERTY
11.1 Each Party and/or its licensors expressly retain all right, title, and
interest (including all Intellectual Property Rights) in the products
and services provided by such Party pursuant to this Agreement.
11.2 Neither Party shall remove any copyright, restrictive rights or other
proprietary notices that appear in or on any products or any other
materials provided by the other Party.
11.3 Unless expressly authorized by this Agreement, each Party shall not
decompile, disassemble, reverse engineer, modify, or in any other
manner attempt to determine any source code of or trade secret related
to any products and services provided by the other Party hereunder
except to the extent expressly permitted by applicable law,
notwithstanding a contractual obligation to the contrary.
12. TERM AND TERMINATION
12.1 This Agreement shall commence on the earlier of the Operational Date
(as such term is defined in II(a) of Schedule A) or June 1, 2001 (the
"Start Date"),and shall remain in effect for five (5) years from the
Start Date (the "Initial Term"). At the end of the Initial Term or at
the end of any Renewal Term, this Agreement shall automatically renew
for an additional one (1) year period (each such additional term a
"Renewal Term"), unless either Party notifies the other Party in
writing to the contrary at least sixty (60) days prior to the
expiration of the then-current term.
12.2 Without prejudice to any other rights or remedies at law, equity, or
otherwise of the Party so terminating, either Party may immediately
terminate this Agreement, and each Party's obligations to pay Royalties
shall terminate, by giving a notice to the other Party for the
following reasons:
(a) if the other Party has failed to return to full performance
after a Force Majeure Event as set forth in Section 16.4;
(b) if the other Party commits a material breach of this Agreement
and fails to remedy such material breach within thirty (30)
days after delivery of notice by the non-breaching Party
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ZixIt Distribution Agreement 5 Nov 2000
of the occurrence or existence of such breach or such longer
period as may be agreed to in writing by the non-breaching
Party; or
(c) if the other Party applies for or consents to the appointment
of a receiver, trustee, or liquidator for substantially all of
its assets or such a receiver, trustee, or liquidator is
appointed; or such Party has filed against it an involuntary
petition of bankruptcy that has not been dismissed within
thirty (30) days thereof, or files a voluntary petition of
bankruptcy, or a petition or answer seeking reorganization, or
an arrangement with creditors, or seeks to take advantage of
any other law relating to relief of debtors, or makes an
assignment for the benefit of creditors.
12.3 Entrust may, in its sole discretion, terminate this Agreement at any
time upon written notice to ZixIt, and Entrust's obligations to pay
Royalties shall terminate, if:
(a) the Parties are unable to agree on the modifications made to
the Entrust/Express (with SecureDelivery) product pursuant to
Schedule B;
(b) Entrust and/or its Affiliates cannot market, sell or
distribute the ZixIt SecureDelivery Service due to ZixIt's
failure to comply with its obligations under this Agreement
and/or the Schedules attached hereto;
(c) ZixIt materially changes the functionality of the ZixIt
SecureDelivery Service as set forth in Schedule E in a manner
unacceptable to Entrust; or
(d) ZixIt undergoes a Change of Control to a competitor of Entrust
(whether as a result of an equity transaction, asset purchase,
or any other form of merger or acquisition). The determination
as to whether an entity is a competitor of Entrust shall be at
Entrust's sole discretion. The term "Change of Control" means
if ZixIt engages in a merger, consolidation or sale, lease,
license, transfer, or other effective disposition of all or
substantially all of its assets and ZixIt or its shareholders
or affiliates immediately before such transaction beneficially
own, immediately after or as a result of such transaction,
equity securities of the surviving or acquiring corporation or
such corporation's parent corporation possessing less than
fifty one percent (51%) of the voting power of the surviving
or acquiring person or such person's parent corporation,
provided that a Change of Control shall not be deemed to occur
upon any public offering or series of such offerings of
securities of ZixIt that results in any such change in
beneficial ownership.
12.4 Upon termination or expiration of this Agreement (and any wind-down
period in accordance with Article 15), each Party at its own expense
shall, upon request by the other Party, promptly destroy or return to
such other Party all tangible material embodying any Confidential
Information of such other Party that has been provided hereunder,
together with all copies or other tangible embodiments made thereof by
or for such Party. Each Party's obligations pursuant to Article 7 with
respect to Confidential Information received from the other Party
pursuant hereto shall remain in effect for five (5) years after the
termination or expiration of this Agreement.
12.5 Articles 1, 4.2, 6.1, 7, 8, 9, 10, 11, 12, 15 and 16 of this Agreement
shall survive the termination or expiration of this Agreement. Any
payment obligations, and any provision plainly indicating it should
survive, shall survive the termination or expiration of this Agreement.
13. INSURANCE
13.1 ZixIt shall maintain, at its own expense, sufficient insurance to meet
its obligations under this Agreement. ZixIt shall, upon request,
furnish evidence of such insurance to Entrust.
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ZixIt Distribution Agreement 6 Nov 2000
14. ESCROW
Not applicable.
15. WIND-DOWN
15.1 After expiration or termination of this Agreement, Entrust may continue
to make available to its existing customers in effect at the time of
expiration or termination, and in accordance with the appropriate terms
and conditions of this Agreement as if they were still in effect, the
ZixIt SecureDelivery Service until such time as Entrust's agreements
with its existing customers terminate or expire. ZixIt shall provide
any transition assistance as may be reasonably requested by Entrust.
16. GENERAL
16.1 If any notice or other communication is required or permitted to be
given hereunder, such notice or communication shall be in writing and
(a) personally delivered, (b) sent by international air courier service
with confirmation of delivery requested, or (c) transmitted by fax with
transmittal confirmation as follows:
If to ZixIt: ZixIt Corporation
2711 N. Haskell Avenue, Suite 2850, LB 36
Dallas, Texas, U.S.A. 75204-2911
Attention: Legal Department, Fax: (214) 515-7385
If to Entrust: Entrust Technologies
750 Heron Road
Ottawa, Ontario K1V 1A7
Attention: Legal Department
All such notices or other communications shall be deemed to have been
given and received (a) upon receipt if personally delivered, (b) when
delivery is confirmed if sent by international air courier service, or
(c) the following business day if by fax.
16.2 The ZixIt SecureDelivery Service and related information may be subject
to export and import restrictions. Each Party shall comply with any
such export or import laws (including, without limitation, United
States and Canadian export laws).
16.3 The obligations of each Party under this Agreement shall be in every
case several and shall not be, or be construed to be, either joint or
joint and several. Nothing contained in this Agreement shall be deemed
to constitute either Party or any of its Affiliates the partner, agent,
franchisee, or legal representative of the other Party or to create any
fiduciary relationship for any purpose whatsoever. Except as otherwise
specifically provided in this Agreement, nothing in this Agreement
shall confer on either Party or any of its Affiliates any authority to
act for, bind, or create or assume any obligation or responsibility on
behalf of the other Party.
16.4 Other than as set forth in this Section 16.4, neither Party shall be
responsible for its failure to perform to the extent caused by a Force
Majeure Event (as defined below), provided that such Party gives the
other Party prompt written notice of the failure to perform and the
reason therefor and uses reasonable efforts to limit the delay
resulting from such nonperformance.
Upon the occurrence of a Force Majeure Event, the affected Party shall
use its best efforts to ameliorate the effects thereof, and to return
to full performance under this Agreement within thirty
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ZixIt Distribution Agreement 7 Nov 2000
(30) calendar days thereof. If the Party is unable to return to full
performance, the other Party may immediately terminate this Agreement
pursuant to Section 12.2(a).
A "Force Majeure Event" means unforeseen circumstances or causes
occurring beyond the control of a Party whose commercially reasonable
performance is delayed thereby. A Force Majeure Event may include,
without limitation, acts of God, wars, riots, embargoes, acts of civil
or military authorities, fires, floods, accidents, or strikes.
16.5 In the event that any provision of this Agreement is found to be
invalid, void or unenforceable, the Parties agree that unless such
provision materially affects the intent and purpose of this Agreement,
such invalidity, voidability or unenforceability shall not affect the
validity of this Agreement nor the remaining provisions herein.
16.6 This Agreement may be amended by the written consent of each Party at
the time of such amendment. Any provision of this Agreement may be
waived in writing by the Party benefiting from such provision. No such
waiver shall operate as a waiver of, or estoppel with respect to, any
other action. No failure to exercise, and no delay in exercising, any
right, remedy, or power hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, or power provided herein or by law
or at equity. The waiver of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or
condition itself.
16.7 Neither Party shall (and neither Party has any right to) assign, sell,
transfer, or otherwise dispose of, whether voluntarily, involuntarily,
by operation of law, or otherwise, this Agreement or any right or
obligation under this Agreement without the prior written consent of
the other Party, which shall not be unreasonably withheld. Any
purported assignment, sale, transfer, delegation or other disposition
in violation of this Section 16.7 shall be null and void.
Notwithstanding the foregoing, either Party may, without the consent of
the other Party, assign this Agreement together with all of its rights
and obligations under this Agreement (i) to a parent corporation of
Entrust or ZixIt, as the case may be, or to a wholly-owned or more than
majority-owned affiliate of a parent corporation of Entrust or ZixIt,
as the case may be, or (ii) as part of a sale, merger, or other
transfer of all or substantially all the shares or assets of the
business to which this Agreement relates; provided, however, that ZixIt
shall not make any such assignment to a competitor of Entrust as
provided in Section 12.3(d). Subject to the foregoing limits on
assignment and delegation, this Agreement shall be binding upon and
shall inure to the benefit of the Parties and their permitted assigns.
Either Party may use one or more Affiliates to perform its obligations
under this Agreement, provided that such use will not affect such
Party's obligations hereunder.
16.8 Each Party acknowledges that breach of this Agreement (or any provision
thereof) may cause irreparable harm to the non-breaching Party.
Therefore, in the event of a threatened or actual breach of this
Agreement, the non-breaching Party, in addition to any other rights or
remedies available to it at law or in equity, shall be entitled to seek
injunctions enjoining and restraining such threatened or actual breach.
16.9 Upon execution of this Agreement, the Parties shall reasonably
collaborate in an effort to issue a press release to announce their
relationship. Such press release may not be issued without the prior
consent of each Party. Notwithstanding the foregoing, neither Party
shall publish any other press announcement related to this Agreement or
disclose the terms and conditions of this Agreement to any customer or
any third party (excluding Affiliates) without prior written consent of
the other Party.
16.10 This Agreement shall be governed by the laws of the State of Texas,
U.S.A., without regard to its conflict of law principles. The
jurisdiction for any legal action shall be exclusively a state or
federal court in Dallas County, Texas, U.S.A. The application of the
United Nations Convention
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ZixIt Distribution Agreement 8 Nov 2000
on Contracts for the International Sale of Goods to this Agreement is
expressly excluded. The Parties waive any right to a jury trial with
respect to any action brought in connection with this Agreement.
16.11 This Agreement, together with the schedules hereto, which are hereby
incorporated herein by reference, constitute the entire agreement
between the Parties pertaining to the subject matter hereof and
supersede all previous communications, agreements, and understandings
between the Parties relating to the subject matter hereof. Neither
Party has entered into this Agreement in reliance upon any
representation, warranty, condition or undertaking of the other Party
that is not set out or referred to in this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
ENTRUST TECHNOLOGIES INC. ZIXIT CORPORATION By: /s/ RICHARD D. SPURR By: /s/ RONALD A. WOESSNER ------------------------------------- ----------------------------- Name: Richard D. Spurr Name: Ronald A. Woessner Title: Exec. V.P. Global Sales & Service Title: S.V.P. Date: 11/6/00 Date: 11/6/00 |
ZixIt Distribution Agreement 9 Nov 2000
EXHIBIT 10.5
[ENTRUST TECHNOLOGIES LOGO]
ENTERPRISE AND CA SERVICES AGREEMENT
This Enterprise and CA Services Agreement ("Agreement") is made between:
Entrust Technologies Inc. ZixIt Corporation
4975 Preston Park Blvd., Suite 400 2711 N. Haskell Ave., Suite 2850 LB 36
Plano, Texas, U.S.A. 75093 Dallas, Texas, U.S.A. 75204-2911
("Entrust") ("Customer")
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This Agreement shall be effective November 6, 2000 ("Effective Date"). Entrust and Customer agree that the following terms and conditions will apply to the licenses and services provided under this Agreement and Schedules attached hereto.
1. DEFINITIONS
(a) "AFFILIATE" of a party means any corporation or other entity that a party directly or indirectly controls. In this context, a party "controls" a corporation or other entity if it owns fifty percent (50%) or more of the voting rights for the board of directors or other mechanism of control for the corporation or other entity.
(b) "APPLICATION" means a single software product from a single vendor (either an Entrust product or a third party product) used by an individual or device which performs a single function such as word processing or electronic mail. For greater certainty, a utility or multi-function program shall be considered to consist of multiple Applications.
(c) "CA SERVICES" means those services described in Schedule C, (Section 2) which Customer may provide to CA Services Subscribers and CA Services Subscriber Users.
(d) "CA SERVICES AGREEMENT" means a written agreement between Customer and a CA Services Subscriber to provide CA Services.
(e) "CA SERVICES SOFTWARE" means the software listed in Schedule C, (Section 3).
(f) "CA SERVICES SUBSCRIBER" means an entity meeting the requirements of Schedule C, (Section 1) which entity must have entered into a CA Services Agreement with Customer. Such entity shall be a CA Service Subscriber only for so long as such entity continues to contract for and receive CA Services.
(g) "CA SERVICES SUBSCRIBER USER" in respect of a CA Service Subscriber (i)
that is not a government or government entity, means a customer,
supplier, or other such entity communicating with the CA Services
Subscriber in regard to the business of the CA Services Subscriber,
(ii) that is a government or government entity, means any employees
within the government or government entity, unless Entrust agrees
otherwise in writing.
(h) "CERTIFICATE LICENSE" means a right to use a digital certificate issued by the Entrust/Authority software (or any connector add-on to the Entrust/Authority software). The maximum number of digital certificates issued by the Entrust/Authority software for each type of digital certificate is set by a Licensing String.
(i) "CERTIFICATION AUTHORITY" means an entity or organization that (i) creates and signs digital certificates that contain among other things a subject's public key and other information that is intended to identify the subject, (ii) makes digital certificates available to facilitate verification of and communication with subjects named in such digital certificate, and (iii) creates and digitally signs certificate revocation lists and/or other forms of revocation information about digital certificates that have been revoked and which should no longer be used or relied upon.
(j) "CLIENT ACCESS LICENSE (CAL)" means a user contained in a Single Data Set who is authorized to sign on and utilize the getAccess software.
(k) "CLIENT SOFTWARE" means the Software listed under the heading "Client Software" in Schedule A for which the Enterprise has acquired the right to use under this Agreement in machine-readable object code form only and associated documentation.
(l) "CONFIDENTIAL INFORMATION" means any business, marketing, technical, scientific or other information disclosed by either party (including its Affiliates) which, at the time of disclosure is designated as confidential (or like designation), is disclosed in
U.S. CASP 5.4 1 October 24, 2000
circumstances of confidence, or would be understood by the parties (or its Affiliates), exercising reasonable business judgment, to be confidential.
(m) "ENTERPRISE" means, collectively, the Customer and Affiliates of Customer.
(n) "ENTRUST ENGINE" means a set of files included in an Entrust/Toolkit, which must be resident on the desktop or server to allow an Entrust-Ready Application to work. The set of files contains one or more functions that are compiled, linked and stored separately from the processes that use them. These files do not need to be compiled with the main application program. The operating system maps the engines, in the form of DLLs on the Windows platform or shared libraries on the unix platform, into the memory/address space of the calling application when the application is starting or while it is running.
(O) "ENTRUST-READY APPLICATION" means any computer program created by Customer using an Entrust/Toolkit that does not contain any of the executable object code modules provided with an Entrust/Toolkit that implement an Entrust API or any of the Entrust functions including, but not limited to, encryption, digital signature, and any key management function, and revisions and updates thereto.
(p) "INFRASTRUCTURE SOFTWARE" means the Software listed under the heading "Infrastructure Software" in Schedule A for which the Enterprise has acquired the right to use under this Agreement in machine-readable object code form only and associated documentation.
(q) "LICENSING STRING" means a series of computer-generated characters provided to Customer by Entrust for the purpose of setting the number of Certificate Licenses or User Identities for an item of Infrastructure Software.
(r) "SERVICES" means consulting, installation and training services provided by Entrust under the terms of this Agreement.
(s) "SINGLE DATA SET" means a unique collection of user names in a repository (eg. a database) which is supported by the getAccess software. Replication of the identical collection of user names in a separate repository for development, testing, back up and load balancing purposes shall be considered the same Single Data Set. In addition, the occurrence of the same users or a subset of such users in a separate directory (e.g., LDAP Directory) used in combination with the repository is considered the same Single Data Set.
(t) "SOFTWARE" means the Entrust computer software programs listed in Schedules A and C for which the Enterprise has acquired the right to use under this Agreement in machine-readable object code form only and associated documentation. If Enterprise elects to purchase Support, any Upgrades and Upissues provided to Enterprise pursuant to such Support shall be deemed to be Software for the purposes of this Agreement.
(u) "SUPPORT" means Software maintenance, Upgrade and Upissue services as set forth in Schedule B of this Agreement.
(v) "UPGRADE" means a subsequent release of existing Software, other than those reasonably designated as new products for which Entrust charges separately, which will generally contain new functionality and enhancements in addition to bug fixes. Upgrade releases will be designated by a change in the digit of the release number to the left of the decimal. e.g. 1.X to 2.Y.
(w) "UPISSUE" means a subsequent release of existing Software which will generally contain bug-fixes and which will generally not contain major, new functionality. Upissue releases will be designated by a change in the digit of the release number to the right of the decimal. e.g. X.1 to X.2.
(x) "USER IDENTITY" means an electronic identity utilized by the Entrust/Authority software for interaction with Client Software. The maximum number of electronic identities recognized by the Entrust/Authority software is set by a Licensing String.
2. ENTERPRISE AND CA SERVICES LICENSES
(a) INFRASTRUCTURE SOFTWARE LICENSES FOR ENTERPRISE USE. Subject to the terms and conditions of this Agreement, Entrust hereby grants to Enterprise and Enterprise accepts a non-exclusive, non-transferable, internal license to use and copy Infrastructure Software to the extent of the number of copies of Infrastructure Software licensed to Enterprise and to the extent of the number of User Identities and Certificate Licenses set by the Licensing String(s) delivered to Enterprise with or for that copy of Infrastructure Software for internal communications within the Enterprise and for communications between Enterprise and third parties concerning Enterprise business other than CA Services ("Enterprise Use"). If the number of permitted User Identities or Certificate Licenses for a copy of Infrastructure Software is not controlled using a Licensing String, Enterprise shall use such copy of Infrastructure Software to the extent of the number of User Identities and Certificate Licenses permitted for use with such copy of Infrastructure Software pursuant to this Agreement. Enterprise may only use Licensing Strings provided by Entrust and only in conjunction with the copy of Infrastructure Software for which it was delivered. Enterprise may not copy or alter a Licensing String.
U.S. CASP 5.4 2 October 24, 2000
If Customer licenses the getAccess software, Entrust hereby grants to Enterprise a non-exclusive, non-transferable, internal license for the number of Client Access Licenses acquired pursuant to this Agreement for use in a Single Data Set.
(b) CLIENT SOFTWARE LICENSES AND DISTRIBUTION RIGHT FOR ENTERPRISE USE.
Subject to the terms and conditions of this Agreement, Entrust hereby
grants to the Enterprise and the Enterprise accepts a non-exclusive,
non-transferable license to use and copy the number copies of Client
Software licensed herein solely for Enterprise Use. Enterprise may
distribute Client Software to third parties, provided, however, that:
(i) the Client Software is provided to a third party solely for
Enterprise Use; (ii) Entrust is identified as the source of the Client
Software; and (iii) the Client Software is licensed to third parties
pursuant to the terms and conditions of the shrink wrap license
agreement embedded in or included with the Client Software. Each copy
of Client Software provided to a third party pursuant to this
distribution right shall count as a copy of Client Software granted or
licensed to Enterprise herein. The maximum number of copies of Client
Software for distribution by Enterprise for Enterprise Use is limited
to those copies acquired by Enterprise under this Agreement for such
use.
(c) CERTIFICATE LICENSES, USER IDENTITIES AND DISTRIBUTION RIGHT FOR ENTERPRISE USE. Subject to the terms and conditions of this Agreement, Entrust grants to Enterprise a non-exclusive, non-transferable license to use the number of Certificate Licenses and User Identities licensed herein to Enterprise for Enterprise Use. A User Identity or Certificate License may not be assigned to more than one user, server or network node. Once a User Identity or Certificate License has been issued it may not be altered or re-deployed. Customer may license and distribute Certificate Licenses and User Identities to third parties solely for Enterprise Use. The maximum number of User Identities and Certificate Licenses for licensing and distribution by Customer for Enterprise Use is limited to those acquired by Customer under this Agreement for such use. The User Identities and Certificates Licenses licensed or distributed to third parties shall not contain any trademarks, tradenames, logos or any other designations of Entrust. All User Identities and Certificate Licenses distributed for Enterprise Use must be issued by Enterprise. Certificate Licenses must be time limited. A Certificate License which expires may not be renewed, instead, a new Certificate License must be issued. Each User Identity or Certificate License used or distributed shall count as one (1) User Identity or one (1) Certificate License granted or licensed herein.
(d) INFRASTRUCTURE SOFTWARE LICENSES FOR CA SERVICES. Subject to the terms and conditions of this Agreement, Entrust hereby grants to Customer and Customer accepts a non-exclusive, non-transferable, internal license to use and copy the Infrastructure Software to the extent of the number of copies of Infrastructure Software licensed to Customer and to the extent of the number of User Identities and Certificate Licenses set by the Licensing String(s) delivered to Customer with or for that copy of Infrastructure Software to provide CA Services to CA Services Subscribers and CA Services Subscriber Users. If the number of permitted User Identities or Certificate Licenses for a copy of Infrastructure Software is not controlled using a Licensing String, Customer shall use such copy of Infrastructure Software to the extent of the number of User Identities and Certificate Licenses permitted for use with such copy of Infrastructure Software pursuant to this Agreement. The maximum number of copies of Infrastructure Software for use by Customer for the provision of CA Services is limited to those acquired by Customer pursuant to this Agreement for such use. Customer shall only use Licensing Strings provided by Entrust and only in conjunction with the copy of Infrastructure Software for which such Licensing Strings were delivered. Customer shall not copy or alter a Licensing String and may not provide the Infrastructure Software to any CA Services Subscribers or any CA Services Subscriber Users.
(e) RIGHT TO DISTRIBUTE CA SERVICES SOFTWARE FOR CA SERVICES. Subject to the terms and conditions of this Agreement, Entrust grants to Customer a non-exclusive, non-transferable license to distribute CA Services Software to (i) CA Services Subscribers solely for use with the CA Services provided by Customer to such CA Services Subscribers, (ii) CA Services Subscriber Users solely for use with the CA Services provided by Customer to such CA Services Subscriber Users, and (iii) CA Services Subscribers for re-distribution by such CA Services Subscribers to CA Services Subscriber Users solely for use with the CA Services provided by Customer to such CA Services Subscriber Users. Such distribution rights are granted to Customer and CA Services Subscribers provided that; (i) Entrust is identified as the source of the CA Services Software, (ii) the CA Services Software is licensed to CA Services Subscribers and CA Services Subscriber Users pursuant to the terms and conditions of the shrink wrap license agreement embedded in or included with the CA Services Software. Customer shall give notice to CA Services Subscribers, prior to delivery, that the CA Services Software is for use only in conjunction with the CA Services. The maximum number of copies of CA Services Software for distribution by Customer for CA Services is limited to those acquired by Customer under this Agreement for such use. In the case of CA Services Software that is subject to a Restricted Use License (as described in Section 2(j)), Customer shall give notice of such restriction, prior to delivery, to each (i) CA
U.S. CASP 5.4 3 October 24, 2000
Services Subscriber, and (ii) CA Services Subscriber User, of the applicable restrictions. Each copy of CA Services Software distributed by Customer to (i) a CA Services Subscriber, or (ii) a CA Services Subscriber User, shall count as one (1) copy of CA Services Software licensed hereunder. Each copy of CA Services Software distributed to a CA Services Subscriber for further re-distribution to a CA Services Subscriber User shall count as one (1) copy of CA Services Software licensed hereunder.
(f) RIGHT TO DISTRIBUTE CERTIFICATE LICENSES AND USER IDENTITIES FOR CA
SERVICES. Subject to the terms and conditions of this Agreement,
Entrust grants to Customer a non-exclusive, non-transferable license to
license and distribute Certificate Licenses and User Identities to (i)
CA Services Subscribers, solely for use with the CA Services provided
by Customer to such CA Services Subscribers, (ii) CA Services
Subscriber Users, solely for use with the CA Services provided by
Customer to such CA Services Subscriber Users, and (iii) CA Services
Subscribers for re-distribution by such CA Services Subscribers to CA
Services Subscriber Users solely for use with the CA Services provided
by Customer to such CA Services Subscriber Users. The maximum number of
User Identities and Certificate Licenses for licensing and distribution
by Customer for CA Services is limited to those acquired by Customer
under this Agreement for such use. Each User Identity or Certificate
License distributed by Customer to (i) a CA Services Subscriber, or
(ii) a CA Services Subscriber User, shall count as one (1) User
Identity or one (1) Certificate License issued hereunder. A User
Identity or Certificate License licensed and/or distributed by Customer
for CA Services may not be assigned to more than one (1) user, server,
or network node. If any User Identity or Certificate License used in
the provision of the CA Services is subject to a Restricted Use License
(as described in Section 2(j)), Customer shall provide notice of such
restriction, prior to delivery, to each CA Services Subscriber and/or
CA Services Subscriber User, as the case may be. The User Identities
and Certificates licenses licensed and/or distributed to CA Services
Subscribers and/or CA Services Subscriber Users shall not contain any
trademarks, tradenames, logos, or any other designations of Entrust.
Each User Identity or Certificate License deployed to a CA Services
Subscriber for further redistribution to a CA Services Subscriber User
shall count as one (1) User Identity or one (1) Certificate License
issued hereunder. All User Identities and Certificate Licenses to be
used for the CA Services must be issued by Customer. Customer shall be
entitled to use Certificate Licenses and User Identities as required by
a copy of Infrastructure Software to enable the operation of such copy
of Infrastructure Software within any Certificate Authorities that
Customer is entitled, pursuant to this Agreement, to operate for the
provision of CA Services.
(g) RESTRICTIONS ON PROVISION OF CA SERVICES. In no event shall Customer provide CA Services in Japan, except Customer may distribute CA Services Software in Japan to employees of a non-Japanese CA Services Subscribers whose global corporate headquarters are not located in Japan.
(h) ENTRUST/TOOLKIT LICENSES. Subject to the terms and conditions of this Agreement, Entrust hereby grants and Customer accepts a non-exclusive, non-transferable, internal license to use and make copies of each Entrust/Toolkit for the purpose of developing Entrust-Ready Applications that are to be used with the Software. Entrust licenses to the Customer the non-exclusive right to use and make multiple copies of any Entrust APIs incorporated into Entrust-Ready Applications by way of an Entrust/Toolkit. Customer shall not otherwise sell, license, distribute or in any other manner commercially exploit any part of an Entrust/Toolkit (including the Entrust Engines). Customer shall not modify or distribute any part of an Entrust Engine, or any parts thereof. Any attempt to use information received as a part of an Entrust/Toolkit for any other purpose including, but not limited to, creation of an emulator of an item of Software constitutes a material breach of this Agreement.
(i) OTHER SOFTWARE LICENSES. For all Software for which licensing terms are not provided elsewhere in this Section 2, subject to the terms and conditions of this Agreement, Entrust hereby grants to the Enterprise and the Enterprise accepts a non-exclusive, non-transferable, internal license (i) to make the number of copies of such Software as licensed herein, and (ii) to use each copy of such Software as set forth in its documentation. Entrust/Access software is a third party product and if Enterprise has acquired a license to such software pursuant to this Agreement, the terms of such license shall be those terms and conditions contained in the shrink wrap license accompanying or embedded in such software.
(j) PROVISIONS COVERING ALL SOFTWARE. Enterprise does not acquire any rights, express or implied, in the Software, other than those rights specified in this Agreement. Enterprise may make additional copies of each item of Software, but only for back-up or archival reasons. Each permitted copy of all or part of an item of Software must include all copyright notices, restricted rights legends, proprietary markings and the like exactly as they appear on the copy delivered by Entrust to Enterprise. Enterprise may not host, time-share, rent, lease, sell, license, sublicense, assign, distribute or otherwise transfer an item of Software, except as provided in this Agreement. The Software and all modifications, enhancements and derivative works thereof, including all right, title and interest (and all intellectual proprietary rights therein) remain the sole and exclusive property of
U.S. CASP 5.4 4 October 24, 2000
Entrust and/or its third-party licensors. Any third party software included with the Software may be used only with the Software unless otherwise authorized in writing by Entrust. If third party software is subject to a separate license agreement, then such separate agreement shall apply to Enterprise's use of the third party software. Enterprise shall not copy, modify, adapt or merge copies of the Software except as provided in this Agreement. Enterprise shall not translate, reverse engineer, de-compile or disassemble the Software except to the extent that law explicitly prohibits this restriction notwithstanding a contractual restriction to the contrary. If Enterprise obtains User Identities under this Agreement that (i) have been bundled together with Client Software or CA Services Software, or (ii) are authorized for use with a specific number of Applications (in the case of a single Application, referred to as a Single Application Bundle (SAB)), such User Identities shall be restricted for use only with the Client Software or CA Services Software with which such User Identities were bundled or with the number of Applications for which such User Identities were authorized ("RESTRICTED USE LICENSE").
3. SUPPORT AND SERVICES
(a) SUPPORT. Entrust shall provide Support to Customer in accordance with the terms and conditions set forth in Schedule B. The fees for Support to be provided by Entrust to Customer are set forth in Schedule A. Customer shall provide CA Services Subscribers and CA Services Subscriber Users with support services.
(b) SERVICES. Upon Customer's request, Entrust will provide Services to Enterprise pursuant to a mutually agreed upon Statement of Work ("SOW").
4. PRICE AND PAYMENT
(a) PRICE. The fees for Software and Support are set forth in Schedule A. Unless otherwise stated, all fees excludes applicable federal, state, provincial, use, value-added and local taxes (excluding taxes based upon Entrust's net income) and the costs relating to the delivery of the Software. Customer shall pay to Entrust the amount of any such tax or additional costs.
(b) PAYMENT. Unless otherwise stated in Schedule A, all Software fees are payable on delivery and all Support fees are payable annually, in advance. All amounts payable under this Agreement shall be paid by the Customer to the invoicing Affiliate of Entrust within thirty (30) days of the date of invoice. Unpaid invoices more than thirty (30) days overdue may be subject to an interest charge of one percent (1%) per month or the maximum rate legally permitted, whichever is less.
5. ORDERS AND DELIVERY
(a) SOFTWARE ORDERS. Customer shall be entitled to order Software, User Identities and Certificate Licenses pursuant to a purchase order document accepted by Entrust. Such Software, User Identities and Certificate Licenses shall be deemed delivered pursuant to terms of this Agreement. A purchase order shall be in writing and identify the Software being ordered, the quantity of User Identities or Certificate Licenses required (if applicable) and the shipping and invoicing locations. Upon receipt of a new Licensing String, the Customer shall stop using and destroy the previous Licensing String for the Software. All terms and conditions on a purchase order document shall be of no contractual effect between the parties.
(b) DELIVERY. Entrust or one of its Affiliates shall deliver Customer's order, F.O.B. shipping point, to a location specified by the Customer within thirty (30) days of receipt of such order, subject to the receipt of all required documentation, including any required export and import permits. Thereafter, Customer shall be responsible for and bear all expenses (including taxes) related to making the permitted number of copies and distributing such copies as permitted in this Agreement. Customer will be the importer of record for the Software.
6. SOFTWARE WARRANTY
(a) SOFTWARE WARRANTY. Entrust warrants that (i) for a period of ninety
(90) days from the date of delivery, each item of Software will perform
in substantial accordance with the documentation delivered with such
Software, and (ii) at the time of delivery, Entrust shall have used
commercially reasonable efforts to cause the Software to be free of any
known computer virus or harmful, malicious, or hidden program, data, or
other computer instructions whose purpose is to disrupt, damage, or
interfere with the use of computer and telecommunications software or
hardware for their normal purposes.
(b) EXCEPTIONS TO WARRANTY. Notwithstanding the foregoing, Entrust shall have no obligation to fix errors in the Software caused by accident, misuse, abuse, improper operation, misapplication, or any other cause external to the Software, or if such repair service would constitute an excluded service pursuant to the Support provisions.
(c) REMEDY FOR BREACH OF WARRANTY. Except as specifically stated herein, Entrust's sole liability and the Enterprise's sole and exclusive remedy for breach of the provisions of this warranty section shall be, at Entrust's option, to (i) repair or replace the Software which does not meet Entrust's warranty and which is returned to Entrust, or (ii) take return of the Software and refund the price paid for the Software.
U.S. CASP 5.4 5 October 24, 2000
7. INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY INDEMNITY. Entrust shall defend Customer from any
claims by third parties that the Software furnished and used within the
scope of this Agreement infringes upon or misappropriates a Canadian,
United States or European patent, trademark, copyright, trade secret or
other proprietary right (a "Claim"), and will pay any damages,
settlements, costs, and expenses, including without limitation court
costs and reasonable attorney's fees, finally awarded against Customer
by a court or arbitrator in any proceeding related to such Claim,
provided, however, that the Customer (i) gives to Entrust prompt
written notice of each Claim threatened or received by the Customer,
(ii) gives to Entrust the sole right to control and direct the
investigation, defense and settlement of such Claim, and (iii) has not
compromised or settled the Claim.
(b) MITIGATION BY ENTRUST. If (i) Entrust becomes aware of an actual or potential Claim, or (ii) Customer provides Entrust with notice of an actual or potential Claim, Entrust may (or in the case of an injunction against Customer, shall), at Entrust's sole option and expense:
(i) procure for the Customer the right to continue to use the affected portion of the Software;
(ii) modify or replace the affected portion of the Software with functionally equivalent or superior software so that Customer's use is non-infringing; or
(iii) if (i) or (ii) are not commercially reasonable, take return of the affected portion of the Software and pay to Customer the cost of the affected portion of the Software depreciated over a three (3) year period from the date of acquisition on a straight line basis less any outstanding moneys owed on such affected portion of the Software.
(c) EXCEPTIONS TO INDEMNITY. Entrust shall have no liability, and shall be indemnified and held harmless by the Customer against any Claim in respect of any Software if:
(i) such Software is used by the Enterprise outside the scope or the license granted in this Agreement or in a manner or for a purpose other than that for which it was supplied, as contemplated by Entrust's documentation;
(ii) such Software is modified by the Enterprise without the written consent of Entrust;
(iii) such Software is used by the Enterprise in combination with other software not provided by Entrust and the infringement arises from such combination or the use thereof; or
(iv) the Claim relates to the use of any version of the Software other than the current, unaltered release, if such Claim would have been avoided by the use of a current unaltered release of the Software.
(d) LIMIT TO INDEMNITY. THE PROVISIONS OF THIS ARTICLE 7 STATE THE SOLE AND
EXCLUSIVE LIABILITY OF ENTRUST, AND THE SOLE AND EXCLUSIVE REMEDY OF
ENTERPRISE WITH RESPECT TO ANY CLAIM OF THE NATURE DESCRIBED HEREIN.
ENTRUST'S TOTAL CUMULATIVE LIABILITY TO ENTERPRISE FOR ANY CLAIM OR
INDEMNITY UNDER THIS ARTICLE 7 SHALL NOT EXCEED ONE MILLION
($1,000,000.00) U.S. DOLLARS.
8. LIMITATION OF LIABILITY
(a) NO OTHER WARRANTIES OR REMEDIES. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, ENTRUST DISCLAIMS ALL OTHER REPRESENTATIONS, WARRANTIES AND CONDITIONS, EITHER EXPRESS, IMPLIED, STATUTORY, BY USAGE OF TRADE OR OTHERWISE INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, TITLE, SATISFACTORY QUALITY OR FITNESS FOR A PARTICULAR PURPOSE.
(b) LIMITATION OF LIABILITY. IN NO EVENT SHALL ENTRUST OR ENTERPRISE (INCLUDING SUCH PARTY'S AFFILIATES, SUBCONTRACTORS, AGENTS, SUPPLIERS, DIRECTORS OR EMPLOYEES) BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, INDIRECT, RELIANCE OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOSS OF DATA, LOST SAVINGS OR OTHER SIMILAR PECUNIARY LOSS) WHETHER ARISING FROM CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT (INCLUDING NEGLIGENCE) OR ANY OTHER THEORY OF LIABILITY. EXCEPT ENTRUST'S INDEMNITY OBLIGATIONS IN SECTION 7, IN NO EVENT SHALL ENTRUST'S TOTAL CUMULATIVE LIABILITY PURSUANT TO THIS AGREEMENT EXCEED THE LICENSE FEES PAID BY CUSTOMER TO ENTRUST HEREIN.
U.S. CASP 5.4 6 October 24, 2000
(c) NOTWITHSTANDING THE FOREGOING, NO LIMITATION OF EITHER PARTY'S LIABILITY SET FORTH IN THIS AGREEMENT SHALL APPLY TO (I) DAMAGES ARISING FROM A PARTY'S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS, (II) DAMAGES ARISING FROM A PARTY'S INFRINGEMENT OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS, OR (III) CLAIMS FOR INJURY TO INDIVIDUALS OR DAMAGE TO TANGIBLE PROPERTY CAUSED BY THE NEGLIGENCE OF SUCH PARTY OR ITS EMPLOYEES, SUBCONTRACTORS OR AGENTS.
9. CONFIDENTIALITY
(a) TREATMENT OF CONFIDENTIAL INFORMATION. Enterprise acknowledges that the Software (and any information incorporated therein or related thereto) is the Confidential Information of Entrust. Enterprise shall not disclose the results of any benchmark tests of the Software to any third party without the prior written approval of Entrust. Each party (including its Affiliates) shall retain the Confidential Information of the other party (including its Affiliates) in confidence and shall use and disclose it solely for the purpose of, and in accordance with, this Agreement. Each party (including its Affiliates) shall only disclose Confidential Information of the other party (or any of its Affiliates) to those of its employees with a need to know such Confidential Information. Each party (including its Affiliates) shall use the same degree of care as it uses to protect its own confidential information of a similar nature, but no less than reasonable care, to prevent the unauthorized use or disclosure of the other party's (or any of its Affiliates) Confidential Information.
Neither party (or any of its Affiliates) shall be bound by any obligations restricting disclosure and use set forth in this Agreement with respect to Confidential Information of the other party (or any of its Affiliates), or any part thereof, which:
(i) was known to the receiving party (or any of its Affiliates) prior to disclosure;
(ii) was lawfully in the public domain prior to its disclosure, or becomes publicly available other than through a breach of this Agreement;
(iii) was disclosed to the receiving party (or any of its Affiliates) by a third party, provided that such third party is not in breach of any confidentiality obligation in respect of such information; or
(iv) is independently developed by the receiving party (or any of its Affiliates).
(b) If the receiving party (or any of its Affiliates) is compelled pursuant to legal, judicial, or administrative proceedings, or otherwise required by law, to disclose Confidential Information of the disclosing party (or any of its Affiliates), the receiving party (or, if applicable, its Affiliates) shall use reasonable efforts to (i) seek confidential treatment for such Confidential Information, and (ii) provide prior notice to the disclosing party (or, if applicable, its Affiliates) to allow the disclosing party (or, if applicable, its Affiliates) to seek protective or other court orders.
10. TERM AND TERMINATION
(a) TERM. This Agreement shall commence on the Effective Date and shall continue in effect unless terminated as set out herein.
(b) TERMINATION BY ENTRUST. Entrust may terminate this Agreement with notice if the Customer:
(i) assigns or attempts to assign this Agreement or any of the Customer's rights hereunder to a third party except in accordance with Section 11(h);
(ii) fails to correct a material breach of its obligations to Entrust within thirty (30) days after written notification from Entrust of such material breach;
(iii) files a bankruptcy petition or has such a petition filed involuntarily against it, becomes insolvent, makes an assignment for the benefit of creditors, consents to the appointment of a trustee, or if bankruptcy reorganization or insolvency proceedings are instituted by or against the Customer.
(c) TERMINATION BY CUSTOMER. Customer may terminate this Agreement with notice if Entrust:
(i) assigns or attempts to assign this Agreement or any of Entrust's obligations hereunder to a third party except in accordance with Section 11(h);
(ii) fails to correct a material breach of its obligations to Customer within thirty (30) days after written notification from the Customer of such material breach; or
(iii) files a bankruptcy petition or has such a petition filed voluntarily against it, becomes insolvent, makes an assignment for the benefit of creditors, consents to the appointment of a trustee, or if bankruptcy, reorganization or insolvency proceedings are instituted by or against Entrust.
U.S. CASP 5.4 7 October 24, 2000
(d) EFFECTS OF TERMINATION. In the event of such termination by Entrust, the Customer shall destroy or return immediately the Software and all copies thereof to Entrust. In the event of such termination by Customer, Customer shall be entitled to use the Software licensed prior to the date of termination provided that Customer complies with the terms of this Agreement in respect to the use of such Software.
(e) SURVIVAL. In addition to this Section, Sections 1, 6, 7, 8, 9 and 11 shall survive any termination or expiration of this Agreement. All payment obligations shall survive any termination or expiration of this Agreement.
11. GENERAL
(a) AUDIT RIGHTS. The Customer shall keep reasonable records relating to
(i) the number of copies of Software made, used or distributed by
Enterprise; and (ii) the number of User Identities and Certificate
Licenses issued, used or distributed by Enterprise. A chartered or
certified public accountant selected by Entrust may, upon reasonable
notice and during normal business hours, but no more often than once a
year, inspect the records of the Customer.
(b) U.S. GOVERNMENT END-USERS. The Software is a "commercial item" as that term is defined at 48 C.F.R. 2.101 (JAN 1998), consisting of "commercial computer software" and "commercial computer software documentation" as such terms are used in 48 C.F.R. 12.212 (SEPT 1995), and is provided to the U.S. Government only as a commercial end item. Government end users acquire the rights set out in this Agreement for the Software consistent with: (i) for acquisition by or on behalf of civilian agencies, the terms set forth in 48 C.F.R. 12.212 (SEPT 1995); or (ii) for acquisition by or on behalf of units of the Department of Defense, the terms set forth in 48 C.F.R. 227.7202.
(c) EXPORT RESTRICTIONS. The Software and related information is subject to export and import restrictions. Customer shall comply with any laws which may impact Customer's right to export, import or use the Software or related information (including, without limitation, United States and Canadian export laws). Customer shall not use the Software or related information for any purposes prohibited by export laws, including, without limitation, nuclear, chemical or biological weapons proliferation. Customer shall be responsible for procuring all required permissions for any subsequent export, import or use of the Software or related information.
(d) INCLUSION OF AFFILIATES. Each party warrants that it has the authority to bind its Affiliates to the provisions of this Agreement. Entrust may use one or more Affiliates to perform its obligations under this Agreement, provided that such use will not affect Entrust's obligations hereunder. Customer may extend the rights designated for Affiliates under this Agreement to its Affiliates, provided that any such Affiliates agree to comply with the obligations, and otherwise be subject to the terms and conditions, of this Agreement and that Customer shall cause each such Affiliate to comply with the terms and conditions of this Agreement to the full extent as if the Affiliate were a party hereto, and that any act or omission relating to this Agreement (including without limitation a breach hereof) by such Affiliate shall constitute an act or omission of Customer.
(e) NOTICE. Any notice to be given hereunder shall be given in writing by prepaid receipted mail, facsimile, or overnight courier, and shall be effective as follows (i) in the case of facsimile or courier, on the next business day, and (ii) in the case of receipted mail, five (5) business days following the date of deposit in the mail.
(f) FORCE MAJEURE. Neither party shall be deemed in default hereunder or liable for any loss or damage resulting from delays in performance or from failure to perform or comply with the terms of this Agreement due to any causes beyond its reasonable control, which causes include but are not limited to acts of God or the public enemy; riots and insurrections, war, accidents, fire, strikes and other labor difficulties (whether or not the party is in a position to concede to such demands), embargoes, judicial action, lack of or inability to obtain export permits or approvals, necessary labor, materials, energy, utilities, components or machinery, acts of civil or military authorities.
(g) WAIVER. The failure of a party to claim a breach of any term of this Agreement shall not constitute a waiver of such breach or the right of such party to enforce any subsequent breach of such term.
(h) ASSIGNMENT. Neither the Customer nor Entrust shall assign this Agreement, any interest herein or any rights hereunder without the prior written consent of the other party, except that:
(i) the Customer may assign this Agreement to any party which acquires all or substantially all of its related business by merger, sale of assets, or otherwise or to an Affiliate of Customer; and
(ii) Entrust may assign this Agreement to any party which acquires all or substantially all of its related business by merger, sale of assets, or otherwise or to an Affiliate of Entrust.
(i) SEVERABILITY. In the event that any provision of this Agreement is found to be invalid, void or
U.S. CASP 5.4 8 October 24, 2000
unenforceable, the parties agree that unless such provision materially affects the intent and purpose of this Agreement, such invalidity, voidability or unenforceability shall not affect the validity of this Agreement nor the remaining provisions herein.
(j) THIRD PARTY BENEFICIARIES. Customer hereby acknowledges that there may be third party beneficiaries to this Agreement. To the extent that this Agreement contains provisions that relate to the use of Software in which such third parties have an interest, such provisions are made expressly for the benefit of such third party beneficiaries and are enforceable by such third-party beneficiaries in addition to being enforceable by Entrust.
(k) GOVERNING LAW. This Agreement shall be governed by the laws of the State of Texas, U.S.A., without regard to its conflict of law principles. The jurisdiction for any legal action shall be exclusively a state or federal court in Dallas County, Texas, U.S.A. The application of the United Nations Convention on Contracts for the International Sale of Goods to this Agreement is expressly excluded.
(l) ENTIRE AGREEMENT. This Agreement and the Schedules hereto constitute the entire agreement between the parties on the subject matter hereof and supersede all prior agreements, communications and understandings of any nature whatsoever, oral or written including any shrink wrap license included with the Software. This Agreement may not be modified or waived orally and may be modified only in a writing signed by a duly authorized representative of both parties.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date.
ENTRUST TECHNOLOGIES INC. ZIXIT CORPORATION
By: /s/ RICHARD D. SPURR By: /s/ RONALD A. WOESSNER
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Name: Richard D. Spurr Name: Ronald A. Woessner
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Title: Exec. V.P. Global Sales & Service Title: S.V.P.
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Date: 11/6/00 Date: 11/6/00
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U.S. CASP 5.4 9 October 24, 2000
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 2000 |
| PERIOD START | JUL 01 2000 |
| PERIOD END | SEP 30 2000 |
| CASH | 30,282 |
| SECURITIES | 30,022 |
| RECEIVABLES | 0 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 62,345 |
| PP&E | 30,268 |
| DEPRECIATION | (9,501) |
| TOTAL ASSETS | 84,314 |
| CURRENT LIABILITIES | 4,148 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 189 |
| OTHER SE | 79,977 |
| TOTAL LIABILITY AND EQUITY | 84,314 |
| SALES | 0 |
| TOTAL REVENUES | 99 |
| CGS | 0 |
| TOTAL COSTS | 0 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | (16,022) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (16,022) |
| DISCONTINUED | 66 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (15,956) |
| EPS BASIC | (0.96) |
| EPS DILUTED | (0.96) |